Federal Court of Australia

Vehicle Monitoring Systems Pty Limited v SARB Management Group Pty Ltd trading as Database Consultants Australia (No 9) [2023] FCA 632

ORDERS

THE COURT ORDERS THAT:

1.    The orders be in terms of the proposed orders (Tab 23 of the Court Book) as amended in accordance with the amendments summarised in para 86 of the reasons.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

BESANKO J:

Introduction

1    These reasons address various disputes between the parties to a proceeding about the orders to be made after a hearing on liability in relation to a claim for relief for the infringement of two patents and a cross-claim for a declaration of invalidity of the patents. I delivered reasons in the proceeding and the applicant (VMS) was directed to bring in draft minutes of order reflecting the conclusions in the reasons (Vehicle Monitoring Systems Pty Limited v SARB Management Group Pty Ltd trading as Database Consultants Australia (No 8) [2023] FCA 182 (VMS (No 8)).

2    The two patents in issue in the proceeding were as follows. The first patent was Australian Patent No. 2005243110 which bore the title “Method, apparatus and system for parking overstay detection” (the 110 Patent). The second patent was Australian Patent No. 2011204924 (the 924 Patent) and it had the same title. VMS’s case was that the first respondent (SARB) had directly, and indirectly, infringed claims in the 110 Patent and claims in the 924 Patent by its conduct in connection with vehicle detection sensors, systems and methods known as PinForce.

3    In VMS (No 8), I said that there were the three versions of SARB’s PinForce Sensors and PinForce Systems and I described them as follows:

4    … The First PinForce Sensor and First PinForce System was made, sold, used and kept by SARB and the subject of authorisation by SARB to local government councils to use, between approximately October 2007 and December 2016 (PinForce Version 1). Between approximately January 2016 and December 2016, PinForce Version 1 was progressively upgraded to the Third PinForce Sensor and Third PinForce System.

5    The Second PinForce Sensor and Second PinForce System was made, sold, used and kept by SARB and the subject of authorisation by SARB to local government councils to use, between approximately November 2014 and December 2016 (PinForce Version 2). Between approximately November and December 2016, PinForce Version 2 was progressively upgraded to the Third PinForce Sensor and Third PinForce System.

6    The Third PinForce Sensor and Third PinForce System was made, sold, used and kept by SARB and the subject of authorisation by SARB to local government councils to use from approximately December 2014 (PinForce Version 3).

The dates for each version are important.

4    As far as infringement was concerned, there were four issues defined by the pleadings and they were as follows. The first issue concerned the meaning of “wake-up signal” in a number of claims in the Patents and whether PinForce Version 1 and PinForce Version 2 used a wake-up signal. The second issue involved the construction of certain claims in the 110 Patent and whether the claims included a method or system wherein the determination of vehicle overstay was made by the data collection apparatus instead of the detection apparatus. The third issue involved a question as to SARB’s liability for infringements by use by others within the limitation period prescribed by the Patents Act 1990 (Cth) of six years (s 120(4)) in respect of PinForce Sensors and Systems sold by SARB prior to the commencement of the limitation period. There was also an issue as to whether VMS had authorised what would otherwise have been infringing conduct under a Deed of Release dated 18 June 2014. The fourth issue was whether SARB and the City of Melbourne were liable for additional damages under s 122 (1A) of the Patents Act for, or in relation to, their respective infringements.

5    It is convenient to note at this point that a person who authorises another person to exploit the invention which is the subject of a patent infringes the patent (Rescare Ltd v Anaesthetic Supplies Pty Ltd (1992) 25 IPR 119; (1992) 111 ALR 205) and a person who procures or joins in a common design with another to infringe a patent is liable with that other as a joint tortfeasor.

6    As I said in VMS (No 8), SARB admitted in its Amended Defence that, with respect to vehicle detection sensor units and one or more vehicle detection systems, it had since October 2007, made, sold or otherwise disposed of, offered to sell or otherwise dispose of, supplied, used, kept and authorised local government councils to use the PinForce Sensors and PinForce Systems in Australia and that in relation to the PinForce Sensors and PinForce Systems in one or more methods for identifying overstay of a vehicle in parking space, it had since approximately October 2007, used and authorised local government councils to use the PinForce Sensors and PinForce Systems in PinForce methods in Australia (emphasis added).

7    There were both written and oral submissions about the orders to be made following the reasons in VMS (No 8). VMS relied on three affidavits of its solicitor, Mr Andreas Piesiewicz, sworn on 14 April 2023, 2 May 2023 and 5 May 2023 respectively. SARB relied on an affidavit of its sole director, secretary and only shareholder, Mr Declan Ryan, affirmed on 24 April 2023 and an affidavit of Database Consultants Australia’s embedded systems solutions architect, Mr Duncan Smith, affirmed on 26 April 2023. The City of Melbourne relied on an affidavit of its solicitor, Ms Kellech Smith, sworn on 26 April 2023.

8    These reasons also deal with a related issue concerning confidential information and non-publication orders under s 37AF of the Federal Court of Australia Act 1976 (Cth).

The effect of SARB disposing of part of its business

9    At the time of trial, SARB conducted at least part of its business under the business name, Database Consultants Australia (DCA). That aspect of the business was responsible for the PinForce Sensors and Systems. That has changed. According to Mr Ryan, there was a company group restructure in May 2022 and a subsequent business transaction, said to be unrelated to this proceeding, whereby “various aspects” of the DCA business, previously carried out by SARB, were “formally taken over” by a company then known as DCA Cities Holdings Pty Ltd (DCACH) (recently renamed Orikan Group Pty Ltd, but for present purposes, I will continue to refer to it in these reasons as DCACH). The “various aspects” “taken over” include the ongoing maintenance, servicing, upgrades and other services and assistance provided to clients in relation to various parking technology products, previously provided by SARB and now provided by DCACH. Mr Smith’s affidavit also refers to these events and makes it clear that the “various parking technology products” included the PinForce systems.

10    Mr Ryan’s affidavit establishes that SARB is an indirect shareholder of 20% of the shares in DCACH. Prior to 27 February 2023, SARB was an indirect shareholder of 31% of the shares in DCACH.

11    The precise nature of the transaction whereby aspects of SARB’s business were transferred to DCACH is unclear. What I was told by counsel for SARB during the course of submissions was that all assets related to “the PinForce systems … the underground detection systems” were transferred and that SARB retained the data service business.

12    Both counsel referred to other proceedings in the Court and there was debate as to whether VMS’s solicitors in this proceeding should have known of the transfer or assignment earlier. That is not a dispute that I need to resolve. A Confirmatory Deed of Assignment of Trade Marks and Patents between SARB and DCACH was provided and it establishes that there is a Business Sale Agreement dated 31 May 2022 (which was not provided).

13    These developments were of concern to VMS which initially took the view that DCACH should be joined to the proceedings. DCACH offered an inter partes undertaking, but that was insufficient to overcome VMS’s concerns. Eventually, senior counsel for SARB offered an undertaking on behalf of DCACH and a related company, DCA Technologies Pty Ltd (recently renamed Orikan Australia Pty Ltd), to the Court as follows:

[the companies agree] to be bound by any findings and orders made in the proceedings against the first respondent that affect DCA Cities Holdings Pty Limited and DCA Technologies Pty Limited’s activities in relation to the PinForce version 3.

14    This undertaking was sufficient for VMS’s purposes and it indicated that it would not be making an application that DCACH be joined to the proceedings. However, the giving of the undertaking did not resolve all the issues arising from these developments since the trial. VMS submitted, correctly in my view, that DCACH (and DCA Technologies Pty Ltd) had only appeared before the Court by counsel who otherwise appeared for SARB to give the undertaking. DCACH has not made an application to protect its confidential information or presented submissions in opposition to the proposed orders for delivery up or made an application for a stay of the orders. It is the proper party to do those things and SARB has no ongoing interest in such matters, or, at least, it has not been clearly shown that it has a sufficient ongoing interest in these matters.

15    Counsel for SARB sought to overcome these difficulties by reference to two arguments and they were as follows.

16    First, counsel for SARB pointed to the fact that SARB holds 20% of the shares in DCACH and that is a sufficient interest to give SARB standing to seek, for example, a stay of the orders, including the orders for injunctions. I reject this argument. Not only does this argument seem to ignore the notion of separate corporate personality, but it could create a number of practical problems where shareholders hold different views as to the appropriate course of action.

17    Secondly, counsel for SARB pointed to the fact that both as a matter of fact (by reason of the undertaking DCACH and DCA Technologies Pty Ltd have given) and as a matter of law (by reason, according to the submission of counsel for SARB, of the law of privity and estoppel), DCACH has standing to seek, for example, an order for a stay. The second aspect of the argument was not developed in terms of how principles relating to privies, privity or estoppel operates in these circumstances and, in any event, it does not seem to me to add anything to the fact that an undertaking has been given. Is the fact of an undertaking sufficient? The answer to that question is no for the following reason. It is SARB that is opposing various orders and it is SARB that is seeking a stay. DCACH has not appeared and sought to protect the alleged confidential information or to oppose the orders for delivery up or sought an order for a stay. I do not consider this to be a mere matter of form. For example, on the evidence it is at least unclear who owns the confidential information which is discussed below at the present time. Furthermore, the status of the party or person seeking a stay and their interest in doing so should be clearly established on the evidence.

18    I propose to grant a temporary stay for six weeks. SARB and DCACH (and DCA Technologies Pty Ltd if appropriate) can consider their position and if the matter cannot be resolved by consent orders — I make it clear in this regard that I consider the case otherwise an appropriate case for a stay — bring the necessary application with appropriate disclosure.

The addition to the declarations sought by VMS

19    Both parties agree that declarations are appropriate and they agree that the declarations against SARB should include a declaration that SARB has infringed the particular Patent by authorising other persons to exploit the PinForce Version 1 and PinForce Version 2 (or the PinForce Version 3 as the case may be) and procuring, inducing or joining in a common design with other persons to exploit the PinForce Version 1 and PinForce Version 2 (or the PinForce Version 3 as the case may be).

20    VMS seeks the inclusion of the following in that particular declaration (which is found in paras 1(b), 2(b) and 5(b) of the proposed orders):

(including without limitation the local government authorities identified in Annexure A to these orders);

Annexure A to the proposed orders (Tab 23 of the Court Book) is a list of the names of 23 local government authorities. SARB opposes the inclusion of any reference to the names of the local government authorities.

21    The list of names is non-exhaustive and it is based on Annexure A of the Verified Product and Method Description (VPMD) provided by SARB pursuant to a Court order. I note that although said to be verified, Mr Smith, who verified the VPMD, was not able to verify Annexure A from his direct knowledge.

22    The background to the composition of Annexure A to the VPMD is set out in Vehicle Monitoring Systems Pty Limited v SARB Management Group Pty Ltd trading as Database Consultants Australia (No 4) [2020] FCA 819 (VMS (No 4)) as follows:

3    On 14 February 2020, following a case management hearing held on 4 February 2020, I made an order that SARB provide a product and method description in respect of its PinForce Sensors, Systems and Methods, pursuant to paras 6.14 – 6.15 of the Intellectual Property Practice Note (IP – 1) (the product and method description).

4    On 4 March 2020, SARB provided the product and method description in unverified form. It made a claim of confidentiality in respect of that document. The product and method description contains an annexure (Annexure A) which sets out certain information in relation to SARB’s supply of PinForce Sensors and Systems, including the clients to whom PinForce Sensors and Systems were supplied, the date of use of those sensors and systems, and the number of sensors supplied and in operation. On 10 March 2020, SARB provided VMS with a redacted, non-confidential version of the product and method description. Much of the information in Annexure A was redacted.

5    On 6 April 2020, I made an order that SARB provide VMS with a verified copy of the product and method description, incorporating certain amendments which SARB had made in response to queries raised by VMS. On 24 April 2020, SARB provided the verified version. On 27 April 2020, SARB provided VMS with a redacted, non-confidential version of the document.

23    One of the applications the Court considered in VMS (No 4) was an application that the VMS’s managing director, Mr Saxon Hill, be given access to the redacted information in Annexure A under an agreed confidentiality undertaking. That application was refused. In dealing with the application, Yates J made the following observations:

46    The redacted information in Annexure A does not include pricing information or the terms on which SARB has contracted with its clients. Further, there is evidence before me that at least some of the redacted information in Annexure A is available in the public domain, including from some local council websites. Prior to the commencement of this proceeding, and subsequently, Mr Hill collated information in the public domain to arrive at an estimate of the number of sensors supplied by SARB according to year and local council concerned.

47    SARB objects to Mr Hill being granted access to the redacted information. SARB says that the parking technology industry in Australia is very small and that VMS and SARB are long-standing commercial rivals, evident from the various legal disputes with which they have been involved against each other. They have competed on every significant tender released by Australian local councils for the past decade for the provision of in-ground parking detection sensors, and are likely to continue to compete for future tenders. Mr Hill is closely involved in VMS’s tenders. SARB argues that the redacted information in the verified product and method description is commercially sensitive and would give Mr Hill detail of SARB’s existing and former clients and contacts, which he could use in formulating VMS’s future marketing strategy and future tenders. SARB submits that the redacted information discloses the scale and size of its parking detection sensor business, its market penetration, and its geographical spread around Australia. It submits that it gives a clear indication of its customers’ purchasing behaviour; the number, version and age of sensors installed at particular sites; the longevity of SARB’s client relationships; and whether the relationship with a particular client is ongoing. It submits that this information could be used to identify potential clients requiring additional sensors and replacement sensors. The information could be used by VMS to inform its decisions about who to approach for future business, and how those approaches should be made. Thus, according to SARB, disclosure would cause “substantial detriment” to it and that it would “lose the benefit of its competitive advantage” against VMS.

…

52    Be that as it may, it seems to me that the present question of access must be considered by reference to Annexure A itself. It is a table of information that has been compiled for the purpose of SARB providing, under court order, a product and method description. I am satisfied that SARB has established that the unredacted version of Annexure A is prima facie confidential information. I do not think that this conclusion is gainsaid by the fact that some of the information can be searched for in, and obtained from, public sources. If all of it can be, then VMS is not disadvantaged by being Mr Hill being denied access to Annexure A at the present time.

24    His Honour expressed his conclusion with respect to these matters in the following way:

54    There may come a time when Annexure A, or similar information, should be provided to Mr Hill. But I am not persuaded that the time has arrived. An order has been made separating the determination of liability from the assessment of pecuniary relief. The information in Annexure A is more relevant to the latter issue than the former. It may be that the step of assessing pecuniary relief is never reached.

25    On 16 April 2021, the Court made the following order:

1.    Pursuant to s 37AF(1) of the Federal Court of Australia Act 1976 (Cth), and being necessary to prevent prejudice to the proper administration of justice (under s 37AG(1)(a)), and until the end of 14 days after the publication of reasons for judgment or further order (whichever is the earlier), the evidence identified in Column A of Annexure 1 not be published other than to the persons identified in Column B of Annexure 1.

26    One item of evidence identified in Column A of Annexure 1 to that order was the unredacted VPMD and the persons to whom it could be published were identified as SARB, the external legal advisers of the parties, three persons who were part of VMS’s external litigation funder (Balance Legal Capital LLP) and the two experts in the case, Messrs Harcourt and Spirovski. On 11 May 2021, a similar order was made in relation to transcript describing the operation of the sensors and systems.

27    It is important to distinguish between the issue of what information is disclosed and the issue of to whom the information is disclosed. Annexure A to the VPMD contains a list of 27 local government authorities who are described in the Annexure as “Clients”. It contains details of the relevant version of the PinForce System, Method and Sensor used and a commencement date and a cessation date or a reference to the fact that it is still in use. It contains a reference to the number of sensors in the case of a particular client and it has a column for notes which is used and provides further information in some cases. The 23 local government authorities shown in Annexure A to the proposed orders are all identified in Annexure A to the VPMD. The immediate issue in terms of the proposed orders relates to the confidentiality or otherwise of the names of the clients. There is a broader issue, which I will come back to, as to the confidentiality or otherwise of other information shown in Annexure A to the VPMD. If the information, or some of it, should remain confidential, there is then an issue as to whether Mr Hill should be included in the existing confidentiality club.

28    The Court’s power to make non-publication orders is contained in s 37AF of the Federal Court of Australia Act. Section 37AG sets out the grounds for making an order. The relevant ground in the case of this information is that the order is necessary to prevent prejudice to the proper administration of justice.

29    In essence, VMS submits that the information in Annexure A should be disclosed to it and that that is the normal course now that the quantum stage of the proceedings has been reached. It submits that the information is old and out of date. It submits that it would be considered a customer list only in a limited sense. VMS referred to authority and submitted that it was to the effect that the law does not presume that customer names are confidential. In Weldon & Co Services Pty Ltd v Harbinson [2000] NSWSC 272, Bryson J said (at [67]):

The identity of the plaintiff’s clients and related information including addresses, telephone and other contact numbers and the identities of the persons in each client’s organisation with whom to deal are, in some sense, confidential information. It is obvious from the nature of the work done in the plaintiff's practice that some degree of care and discretion must be used in making information about the identity of clients available to outsiders, and in letting anyone outside the organisation have the use of the information. The information is in no sense a secret or a trade secret; providing accountancy support services and preparing statutory and taxation returns for clients necessarily involves communicating to public authorities and others the fact that the plaintiff is engaged in work for the client; there is no element of secrecy, although confidentiality, to some degree, arises from the need to restrict distribution of information to proper occasions. A much higher degree of confidentiality attaches to information in detail about clients' affairs and business.

(See also [68]–[72] inclusive; Advanced Fuels Technology Pty Ltd v Blythe [2018] VSC 286 at [178]–[179].)

30    One of the grounds upon which SARB opposes the inclusion of the list of names in the orders (and seeks an extension of the non-publication order made on 16 April 2021) is that that information is confidential information. A good deal of evidence and submissions were directed to the extent to which the names in Annexure A to the proposed orders are in the public domain already or could be ascertained by a person conducting reasonable searches. Mr Hill carried out such searches as did Mr Piesiewicz. VMS produced a schedule identifying, by reference to affidavit evidence, 20 local government authorities out of the 27 named in Annexure A to the VPMD where the fact that they are clients of SARB is in the public domain or ascertainable by a person conducting reasonable searches. Mr Piesiewicz identifies four local government authorities named in Annexure A to the VPMD which SARB itself on its website discloses as its clients.

31    The dispute about which names were in the public domain seemed to come down to a dispute between 18 of the 23 names in Annexure A to the proposed orders being in the public domain (VMS’s case) as against 11 of such names being in the public domain (SARB’s case). I have considered the evidence and I conclude that VMS’s position is correct and that 18 names are already in the public domain.

32    SARB relies on evidence from Mr Ryan in opposition to the inclusion of Annexure A to the proposed orders. In his affidavit, he addresses the annexure to the proposed orders from para 38 onwards. It is important to note that in his evidence he does not always distinguish between the confidentiality of the names of the local government authorities on the one hand, and the confidentiality of the other information in Annexure A to the VPMD on the other. For example, in para 40 he expresses the opinion that the information contained in Annexure A to the unredacted VPMD, including the names of the clients mentioned therein, is not published by Data Consultants Australia (DCA) and he considers it to be highly confidential. He states that the document discloses the specific clients with whom DCA has or has had contractual relationships, the scale and size of DCA’s parking detection sensor business, its market penetration and its geographical spread around Australia. It seems to me that, at best, the names alone would only provide limited information with respect to the matters described, particularly in circumstances in which 18 names are already in the public domain.

33    Mr Ryan states that the parking technology industry in Australia is very small and he considers that the final orders made in this proceeding will be of interest to DCA’s commercial competitors in addition to VMS. Mr Ryan states that if Annexure A to the proposed orders is included, then DCA’s competitors would have access to a list of its clients and he believes it is likely they would review this list.

34    The important paragraph in his affidavit in respect of this issue is para 42 which is as follows:

I believe that this would cause substantial detriment to DCA’s business. Its competitors could use this information to their competitive advantage, for example, in formulating their future marketing strategies and in future tenders and discussions with prospective clients. If equivalent information were made publicly available by a competitor of DCA, DCA could use this information to identify which prospective clients to approach, how to approach them and how to compete more effectively with this competitor.

35    Mr Ryan also states that he understands that references to DCA’s clients may be published from time to time in “various disparate online locations”, as he calls them, and these references could be located through extensive searching. However, he considers the list in the form proposed to be annexed to the orders to be confidential as a whole as DCA would never publish a collective list of its clients, even if some of the names are publicly available from “disparate sources”. The matter of confidentiality is the fact that the publication of this information in this consolidated form has potential for significant harm to DCA’s competitive trading position.

36    Mr Ryan goes on to deal with the remainder of Annexure A to the unredacted VPMD and I will return to this issue.

37    In circumstances where 18 of the 23 names are in the public domain, I find it difficult to accept that disclosure of an additional five names to competitors would in any substantial way enable them to formulate future marketing strategies or tenders, or in any substantial way enable them to determine which clients to approach, how to approach them and how to compete more effectively with competitors. Nevertheless, I propose to err on the side of caution.

38    Aside from the confidentiality argument, SARB submits that there is sufficient particularity in the declarations without the need to indicate the names of the local government authorities which had been authorised to use one or more of the PinForce versions. SARB submits that there was no emphasis placed on Annexure A of the VPMD at the trial. SARB submits that there is no utility in including the names. The list is not exhaustive and SARB’s customer list is a matter for the quantum phase of the trial which SARB has asked to be stayed.

39    Although there is force in these submissions, I consider that the 18 names identified by VMS should be included in the proposed orders in the manner which VMS proposes. There is no dispute about the names and, although the list is not exhaustive, the 18 names should be included so that (in fiercely contested litigation) the declarations are as fulsome as is reasonably appropriate.

40    There was another basis advanced by VMS for rejecting confidentiality as a reason for not including Annexure A to the proposed orders and that is that SARB has no standing to assert confidentiality in the information. That is said to follow from the transfer of the DCA business from SARB to DCACH. That transfer means that SARB no longer has a sufficient interest in the information (see Heydon JD, Lemming MJ and Turner PG in Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (5th ed, LexisNexis Butterworths, 2015 [2014]) at [42-120]). I do not need to decide the point in relation to the 18 names because I have decided that they are not confidential.

41    It is convenient at this point to refer to the submissions with respect to the balance of the information in Annexure A to the VPMD. This is relevant to the order, if any, made with respect to this information.

42    SARB referred to its earlier submissions and said that not all of the information is in the public domain. As far as Annexure A to the VPMD is concerned, SARB’s case is that 14 of the 27 names are in the public domain. VMS’s case is that 20 of the 27 names are in the public domain.

43    Mr Ryan describes the balance of the information in Annexure A to the VPMD as highly confidential and “very commercially valuable”. He states that DCA has never made publicly available details such as the exact number of sensors provided by it and dates of its contracts and dates of upgrades.

44    Mr Ryan asserts that the remainder of Annexure A to the VPMD gives:

a clear indication of DCA’s clients’ purchasing behaviour (including initial installations, subsequent purchases, and renewal periods), the number, version and age of sensors installed at any particular client site, the longevity of DCA’s client relationships, and whether a relationship with a particular client is ongoing (or was ongoing as at 2020, which indicates that it is likely to still be ongoing)

45    Mr Ryan’s concern is that if the information is publicly available to a competitor, it could be used to identify the clients of the business that might require additional sensors, replacement sensors and which clients still had an ongoing relationship with the competitor. He states that this information could then be used as outlined in para 42 (see [34] above). SARB states that the relevant time for the disclosure of this information is at the quantum stage and that by reason of the appeal, that stage may never actually be reached. If the information should be disclosed, it should only be disclosed to Mr Hill.

46    VMS submits that Mr Ryan’s evidence is insufficient to establish confidentiality. Further, it submits that there is now an issue as to the ownership of the information. It submits that historical data cannot be confidential, in particular, past contracts which have expired.

47    Other than the 18 names, I am not persuaded on the evidence that confidentiality in Annexure A has been lost. However, there is a real issue about ownership of the confidential information and like the stay, I would only extend the non-publication order for six weeks to enable SARB/DCACH to take such action as they consider appropriate (see [17]–[18]).

The addition to the declarations sought by SARB

48    SARB seeks to have added to the declaration dealing with authorisation and joint tortfeasorship (paras 1(b), 2(b) and 5(b)) the following words:

by reason of, and at the time of, the sale and supply of Pinforce Version 1 and PinForce Version 2 to such persons (or Pinforce Version 3).

49    As I understand it, SARB submits that those words should be added as they reflect my decision with respect to issue number 2 in VMS (No 8).

50    The background to this issue is as follows.

51    As previously stated, SARB admitted in its Further Amended Defence that it authorised local government councils to use PinForce Sensors and PinForce Systems in Australia and the PinForce Sensors, Systems and Methods in Australia. SARB also pleaded in the Further Amended Defence that as to the PinForce Sensors and Systems and in response to the plea of infringement, the following:

10    …

(a)    says that, pursuant to section 120(4) of the Patents Act 1990 (Cth), the Applicant is statute-barred from pursuing any claim for the alleged infringement of the First Patent or the Second Patent arising from the supply or use of the PinForce Sensors and Systems which were sold or supplied by the First Respondent in Australia prior to 15 February 2013 (including in respect of allegations arising from the use of those PinForce Sensors and Systems after that date);

52    There is a similar plea in relation to the PinForce Methods (para 11(b)).

53    As I have said, infringement proceedings must be started within (relevantly) six years from the date on which the infringing act was done.

54    As I said in VMS (No 8), the relevant date in this case is 9 May 2013, not 15 February 2013.

55    In addition to the pleadings, the parties (VMS and SARB) filed a Position Statement and Responsive Position Statement respectively in the proceeding with respect to the First PinForce Sensor, System and Method, the Second PinForce Sensor, System and Method and the Third PinForce Sensor, System and Method.

56    The Position Statement and Responsive Position Statement with respect to the First PinForce Sensor, System and Method can, for present purposes, be taken as representative of the three versions.

57    With respect to the issue raised in paras 10(a) and 11(a) of the Further Amended Defence, the Position Statement and the Responsive Position Statement indicates that VMS will contend and SARB will dispute that each alleged act of authorisation is a separate act of infringement and a separate statutory tort. Relevant to this allegation it is said that VMS will contend and SARB will dispute that each use by a local council of a sensor or system on or after 9 May 2013 is an act of infringement that was authorised by SARB on the date of the use and that SARB is liable for each such infringing use as a joint tortfeasor, having regard to the ongoing relationship between SARB and each of its local council clients under contracts requiring SARB to provide the relevant local council with service, maintenance, firmware upgrade and/or other assistance (emphasis added). VMS further contends in the alternative and SARB disputes that each act of service, maintenance, firmware upgrade and/or other assistance provided by SARB after 9 May 2013 is an act of authorisation to use the claimed sensors, systems and methods.

58    As I understand these pleadings and statements, VMS’s case as to liability in relation to the sale or supply of the First PinForce Sensors and Systems before 9 May 2013 is that authorisation by SARB of use by local government authorities after that date arose first, because the initial authorisation (by sale or supply) was ongoing and secondly, because it resulted, that is, the authorisation from the acts of service, maintenance, firmware upgrade and/or other assistance provided by SARB after 9 May 2013. In the alternative, SARB was a joint tortfeasor within the limitation period by reason of the fact that it provided service, maintenance, firmware upgrade and/or other assistance with respect to the sale or supply of the PinForce Version 1 prior to 9 May 2013.

59    I rejected the first limb of the authorisation argument in VMS (No 8) at [181]–[183]. I rejected the second limb of the authorisation argument and the alleged basis for tortious liability in VMS (No 8) at [183]–[186] and, in that context, I said that acts of service, maintenance, firmware upgrade and/or other assistance do not give rise to a liability “assuming as I take it to be the case those acts were performed pursuant to lawfully binding contracts entered into before the beginning of the limitation period, because there would be no power to prevent the use and no procuring, inducing or acting in concert in the relevant sense” (at [186]). The premise of the arguments (as shown in the Position Statement and Responsive Position Statement) was that the acts of service, maintenance, firmware upgrade and/or other assistance were required to be performed under contracts entered into as part of the sale and supply.

60    The words that SARB seeks to insert in the declarations go further than my decision in that they would also apply to acts of sale or supply and subsequent authorisation or tortious liability within the limitation period. That may be a logical consequence of my decision, but goes further than the point that I was asked to rule on. I do not propose to go further than the point I was asked to rule on. I propose to add to the declarations in para 1 and 5 the following:

The First Respondent is not liable for or in respect of infringements by use by local government authorities of the First PinForce Sensors or Systems where such were sold or supplied prior to 9 May 2013 and the only acts of the First Respondent after that date were acts of service, maintenance, firmware upgrade and/or other assistance performed by the First Respondent pursuant to lawfully binding contracts entered into before 9 May 2013.

The costs orders as between VMS and the City of Melbourne

61    Paragraph 7 of the Amended Originating application in this proceeding made a claim for additional damages pursuant to s 122(1A) of the Patents Act against each respondent.

62    In relation to the claim against SARB, I held that an award of additional damages is appropriate with respect to infringements after the decision in Vehicle Monitoring Systems Pty Limited v SARB Management Group Pty Ltd (trading as Database Consultants Australia) (No 2) [2013] FCA 395; (2013) 101 IPR 496), but only insofar as the infringements involved the First PinForce Sensors and Systems and the Second PinForce Sensors and Systems. With respect to the City of Melbourne, I held that VMS was not entitled to an award of additional damages against it.

63    It is agreed between VMS and SARB that an order that SARB pay VMS’s costs of the Application and the Cross-Claim should be made. VMS seeks an order that the City of Melbourne pay VMS’s costs of the Application. It does not seek an order against the City of Melbourne in relation to the Cross-Claim to which the City of Melbourne was not a party. The Cross-Claim was brought by SARB. As I understand it, VMS accepts that it might be appropriate to allow a modest discount in relation to the costs order in its favour against the City of Melbourne to reflect the latter’s success with respect to the additional damages claim.

64    For its part, the City of Melbourne seeks an order against VMS that it pay its costs of and incidental to the relief sought in para 7 of the Amended Originating application (i.e., the claim for additional damages) with such costs to be assessed on a lump sum basis in an amount determined by the Registrar in accordance with GPN-COSTS and such directions as the Registrar considers appropriate. In other words, the City of Melbourne seeks an order that it gets its costs of the application for an award of additional damages and that it not be liable for any costs in relation to any other aspect of VMS’s Application.

65    The City of Melbourne submits in support of the orders it seeks that it did not adduce evidence or make submissions on any issue other than that of additional damages. It submits that the Court’s power to make different orders with respect to the results on different issues is undoubted. It relied on the decision of the Full Court of this Court in Probiotec Ltd v University of Melbourne [2008] FCAFC 5; (2008) 166 FCR 30 (Probiotec v University of Melbourne). In that case, the University of Melbourne claimed infringement of its patents by two groups of respondents. One group of respondents filed a Cross-Claim challenging the validity of the patents. The Probiotec respondents were not parties to the Cross-Claim and did not take any further steps in the infringement proceedings other than to comply with the orders for discovery. The Probiotec parties did not raise a separate and distinct defence from that of the other parties. The primary judge ordered that the Probiotec parties be jointly and severally responsible with the other respondents for the University of Melbourne’s costs. That order was set aside on appeal and, in lieu thereof, an order was made that the Probiotec parties pay 10% of the costs. Rares J said that such an order would have the effect that the Probiotec parties would pay approximately for the costs of preparing for, and conducting, a one day uncontested trial. The participation of the Probiotec parties required some work to be done in any event by the University of Melbourne to satisfy the Court that they were liable to the extent found. It was recognised that that method of assessment involved some imprecision, but that was unavoidable in the particular case before the Court (at [77]).

66    The City of Melbourne submitted that SARB was the “real actor in the litigation” and it was the supplier of the product to it.

67    VMS pointed to the following matters in support of the order that it sought. First, the City of Melbourne did not admit infringement. Secondly, the City of Melbourne also raised the limitation defence, the authorisation by VMS by reason of the Deed of Release defence and the double recovery defence (the nature of these defences is described in VMS (No 8) at [158]–[192]). Furthermore, the City of Melbourne raised a defence of innocent infringement under s 123 of the Patents Act.

68    This case bears some similarities to Probiotec v University of Melbourne in that it involved a 10 day hearing and it might have taken a day or thereabouts for VMS to establish its case against the City of Melbourne. Having said that, there are features of the City of Melbourne’s conduct in this case which suggests a greater level of involvement than that of the Probiotec parties in Probiotec v University of Melbourne. On the other hand, the failed claim for additional damages involved a number of affidavits being prepared by the City of Melbourne and was, in my opinion, sufficiently distinct to justify some departure from the general rule that costs follow the event (Les Laboratoires Servier v Apotex Pty Ltd [2016] FCAFC 27; (2016) 247 FCR 61 at [297]–[306]). I recognise that precision in the assessment is unlikely, but I consider substantial justice is achieved if the respective entitlements to costs are treated as cancelling each other out. It is appropriate that there be no order as to costs between VMS and the City of Melbourne. I do not consider the application by VMS for delivery up orders against the City of Melbourne, which was ultimately abandoned, or the defence of innocent infringement, which was not pressed, warrant any different orders.

Orders for delivery up, destruction of advertising material and notice of the orders to customers and potential customers

69    VMS seeks the following orders against SARB:

18.    Within 28 days, the First Respondent, or its nominated agent must:

(a)    deliver up to the Applicant all Pinforce Version 1, Pinforce Version 2, and Pinforce Version 3 and all apparatuses or systems for identifying overstay of a vehicle in a parking space referred to in Orders 7 and 8 above [sic], in its possession, custody, power or control; and

(b)    destroy any promotional, advertising and instructional materials pertaining to Pinforce Version 1, Pinforce Version 2, or Pinforce Version 3, and to all apparatuses or systems for identifying overstay of a vehicle in a parking space referred to in Orders 7 and 8 above [sic], in its possession, custody, power or control,

(c)    provide a copy of these orders to all persons or entities: (i) who are currently using Pinforce Version 1, Pinforce Version 2 or Pinforce Version 3; and (ii) with whom the First Respondent is currently in discussions about the prospective supply of Pinforce Version 1, Pinforce Version 2 or Pinforce Version 3,

and verify those matters by affidavit made by a responsible officer of the First Respondent with direct knowledge of the facts.

70    VMS also sought similar orders to the first two orders set out above against the City of Melbourne, but those orders were not pressed.

71    Unlike the position in the United Kingdom, there is no statutory power in the Patents Act which in terms empowers the Court to make an order for delivery up (see Terrell T, Terrell on the Law of Patents (19th ed, Sweet & Maxwell, 2020) at [21-159]). However, the existence of a power to make an order for delivery up is not disputed by SARB. The source of the power is s 122 of the Patents Act and s 23 of the Federal Court of Australia Act.

72    The key general principles are summarised by the learned authors of Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies at [28-045] in the following passage:

In patent cases orders were made for inquiry as to what infringing goods the defendant had and for the destruction of them in the presence of the plaintiff. The principle underlying such orders was explained by Cotton LJ in Vavasseur v Krupp as not denying to the defendant legal title to the infringing articles, but rather as assuming the property to be vested in the defendant and preventing use of the articles in derogation of the plaintiff's patent rights, which, while not giving title to the plaintiff, forbade the defendant to use or sell the articles in question. Use or sale would be forbidden by injunction and the order for delivery up, by removing from the defendant a source of temptation, operated in aid of the injunction. The court has a discretion to grant or refuse an order or to limit its extent, so that, for example, and consistently with principle, the defendant will usually not be deprived of the articles in question if by an adjustment or modification they may be rendered non-infringing; or if the term of the patent will shortly expire, or if it already has done so. Further, the ordinary order gives to the infringer the choice between delivery up and destruction. An order will not be made if the purpose for which it is sought is the punishment of the infringer rather than the protection of the patentee’s rights.

(Footnotes omitted.)

73    In Streetworx Pty Ltd v Artcraft Urban Group Pty Ltd (No 2) [2015] FCA 140; (2015) 322 ALR 557 (Streetworx), Beach J discussed a number of these principles. His Honour identified six reasons in that particular case for not making an order for delivery up and they were as follows:

(1)    the case was not one relating to counterfeit goods;

(2)    the case was not one where the goods could not conceivably be sold otherwise than by engaging in an act of infringement;

(3)    there is no principle which establishes that an infringing product cannot be modified to make it non-infringing, with the non-infringing product then lawfully used for supply;

(4)    an order for delivery up is only an adjunct to injunctive relief that is shown to be less than sufficient in the circumstances of the case and that had not been shown in that case;

(5)    the components of the infringing articles are the respondent’s property and an order for delivery up and destruction would not only produce unjustifiable economic waste, but it would be more than necessary to protect the applicant’s rights; and

(6)    relatedly to the previous point, an order for delivery up would even prevent the respondent from deconstructing the products and selling what was left as spare parts or for scrap.

74    In this respect, SARB relied on the affidavit evidence of Mr Duncan McLean Smith. Mr Smith gave some evidence about decommissioning the sensors and systems. He identifies the three devices that comprise the Third PinForce Sensors and Systems being the physical in-ground sensor unit (IGU), a transient middle tier (TMT) and an officer’s handheld device which is a smartphone supplied by DCA’s clients. Mr Smith states that removing IGUs is expensive and productive of inconvenience. I accept that evidence. In the case of the City of Melbourne, that organisation returned its TMTs to SARB. The system includes a central server which can be shut down by SARB.

75    Mr Smith expresses the opinion that the past and current PinForce Systems, the firmware in the IGUs and TMTs, and the software in the PinForce Sentinel app and on the central server, can be reprogrammed remotely such that the data collection apparatus is not making the determination of vehicle overstay. He expresses the opinion that it would be possible to alter remotely the functionality of the PinForce System so that the determination of vehicle overstay was done by “a single backend server hosted by DCA, rather than by the handheld device, as is currently the case for PinForce Version 3”. He explains how this could be done. He states that it would be done by updates to the app, being “rolled out” to each of the handheld units in the same way as any other app software update. It would not be necessary to update the firmware on the IGUs or the TMTs in order to make this type of change because the two devices are not involved in determining vehicle overstay in PinForce Version 3. He explains that this and any similar changes in functionality could be, and in practice, would be, achieved solely through software updates (or to the extent they involve the IGUs and TMTs, firmware updates) that is, without changing the physical hardware elements of the IGU, TMT or the smartphones on which the PinForce Sentinel app is installed. Mr Smith explains why he is confident that the alternative functionality is achievable. Mr Smith expresses the opinion that it would take more than four months for the software required for the change in functionality to be approved, written, tested and implemented for all DCA existing clients. This timeframe assumes that there are no unforeseen complications or delays with the testing and rollout.

76    It is not my task to provide an opinion as to what might or might not constitute an infringement of the patents. Nevertheless, some provisional assessment must be performed and it seems to me that the evidence establishes that the sensors and systems may be modified or varied so that they are non-infringing.

77    Although the parties have been engaged in disputes over an extended period, I cannot see any reason for concluding that the injunctions will not be effective. It seems to me then that considering the factors identified by Beach J in Streetworx, and leaving aside the issue of the transfer of a business from SARB to DCACH, the balance in this case is in favour of not making a delivery up order. I do not propose to make such an order. Should something new arise from an application to continue the stay, I consider the Court would retain jurisdiction to reconsider the question of a delivery up order.

78    The orders in para 18(b) and (c) should not be made. I do not consider that there is any need to make an order in relation to promotional, advertising or instructional material. The injunctions will operate and the order seems to impose an unnecessary burden on SARB.

79    I do not consider it appropriate to make the order in para 18(c). The person or entity receiving the order, including the order that it be served, may not understand the reason it has been served. There is nothing to prevent VMS from advising those in the market of the result of the case and every reason it might be thought for SARB to keep its customers fully informed.

The orders sought in relation to the quantum phase of the proceeding

80    As I will explain in the next section of these reasons, subject to clear proof of the proper party, this is an appropriate case for a stay of the injunctions and costs orders. SARB submits that that is also the case with the orders directed to the quantum phase of the proceeding. VMS submits that this is not the case and that some steps should be taken in the quantum phase of the proceeding and that the Court will always retain control of the steps and be able to control the work the parties are required to undertake. There is force in VMS’s submission, but ultimately, I am persuaded that the quantum steps should be stayed if the injunctions and costs orders are stayed. On the one hand, the work in connection with the preparation of affidavits by each respondent appears at first sight to be substantial and on the other, the appeal is limited to two fairly concise points suggesting it might be disposed of within a reasonably short timeframe.

81    In the circumstances, I would not extend the time periods from 28 to 90 days as sought by each of the respondents in paras 22 and 23. I would include a reference to 9 May 2013 as sought by each of the respondents in paras 22 and 23 as VMS has not identified any other conduct than that to which I have referred and rejected (see [58]–[60]). I would not make the order in para 24 relating to VMS making an election. That is an order that can be made at an appropriate time at a case management hearing during the quantum phase of the proceeding. VMS’s proposed additions to paras 22(d) and 23(d) are appropriate.

SARB’s application for a stay

82    SARB seeks an order staying the operation of the injunctions, the order for costs, the order for delivery up (if made) and any orders relating to the quantum phase of the proceedings.

83    The principles relevant to whether or not a stay is granted were conveniently summarised by Jagot J in Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth (No 2) [2010] FCA 1212; (2010) 88 IPR 633 as follows (at [15]):

(1)    “A successful party is presumed to be entitled to the benefits of the judgment obtained” (Advanced Building Systems v Ramset Fasteners (Aust) Pty Ltd (1997) 145 ALR 121 at 122).

(2)    An “applicant for a stay has the burden of persuading the court that it should be granted” (Advanced Building Systems at 122) but it is not necessary to show special or exceptional circumstances (Henderson v Amadio Pty Ltd (1996) 136 ALR 593 at 595 applying Alexander v Cambridge Credit Corp Ltd (1985) 2 NSWLR 685).

(3)    “The court, in the exercise of its discretion, will not hesitate to stay proceedings when it is necessary to preserve the subject matter or integrity of the litigation. Nor will the court hesitate to grant a stay where the refusal of a stay could create practical difficulties in terms of the relief which [the] court could grant” (Advanced Building Systems at 122).

(4)    It is relevant to consider whether “there is a real risk that it will not be possible for a successful appellant to be restored substantially to his former position if the judgment against him is executed” (Federal Commissioner of Taxation v Myer Emporium Ltd (No 1) (1986) 160 CLR 220 at 223).

(5)    Another relevant consideration is whether the proposed appeal is genuine and based on reasonable grounds (Henderson v Amadio Pty Ltd at 595).

(6)    Relevant also is the willingness or not of a party to give an undertaking as to damages. Hence, in Red Bull Australia Pty Limited v Sydneywide Distributors Pty Limited [2001] FCA 1750 at [10] Red Bull’s refusal to give such an undertaking, thereby exposing Sydneywide to irrecoverable loss if Sydneywide succeeded in its appeal, was described as “a factor which is clearly relevant to the exercise of the discretion to grant a stay”, however it proved insufficient to displace the presumption that Red Bull was entitled to the benefit of its judgment (at [20]).

84    As I have said, subject to the identification of the proper party, this is an appropriate case for a stay. The appeal is genuine and based on reasonable grounds. It is confined to two fairly concise points. Absent a stay, a business will be shut down and the subject matter of the appeal will not be preserved.

85    However, the stay will remain in place for six weeks. Within that time, SARB and DCACH will need to consider their position to the continuation of the stay at the request of the proper party as fully disclosed.

Conclusions

86    A summary of the changes to the proposed orders which are necessary is as follows:

(1)    Add to paras 1 and 5 the declaration referred to in para 60 of the reasons;

(2)    Add to paras 1(b), 2(b) and 5(b) the words sought by the applicant and Annexure A to include the names of the 18 councils identified by the applicant with details of the relevant PinForce version;

(3)    The second sentence of para 16 is to be deleted and in lieu thereof there be added: “There be no order for costs as between the applicant and the second respondent”;

(4)    Paragraphs 17, 18 and 19 are to be deleted;

(5)    All the suggested additions to para 22 be made except for the reference to 90 days;

(6)    All the suggested additions to para 23 (correcting 9th May 2023 to 9th May 2013) are to be made except for the reference to 90 days;

(7)    Paragraph 24 is to be deleted;

(8)    A stay of the injunctions, costs orders and the orders with respect to affidavits directed to quantum is to be granted for a period of six weeks;

(9)    Undertakings to be noted; and

(10)    References to internal paragraphs are to be corrected.

Associate:    

Dated:    16 June 2023