Intellectual Property Law Update - Australian Mud Company Pty Ltd v Globaltech Corporation (No 3) [2022] FCA 1189

Intellectual Property
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M Marcus
C Cunliffe 2
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Patents – additional damages

The award of additional damages for patent infringement pursuant to section 122(1A) of the Patents Act 1990 (Cth) was, to the authors’ knowledge, first considered by Justice Bennett in Zetco Pty Ltd v Austworld Commodities Pty Ltd (No 2) [2011] FCA 848. In that case, Her Honour found Austworld infringed Zetco’s patent and that the patent was valid. However, her Honour observed that there must be “an additional element to infringing conduct to warrant additional damages” such as “flagrancy of infringement or … a calculated disregard of” the patentee’s rights. In refusing to award additional damages, her Honour concluded that it “cannot be said that the invalidity case was hopeless or improperly pursued. In my view, an unsuccessful defence of invalidity is not of itself sufficient to warrant the award of additional damages”.

Since Zetco, additional damages have rarely been claimed and even more rarely awarded in patent cases. The earliest example of an award of additional damages was in Pacific Enterprises (Aust) Pty Ltd v Bernen Pty Ltd [2014] FCA 1372; (2014) 109 IPR 481 where Pagone J found that the infringer had fragrantly copied the patentee’s device “even down to the ‘Aust Patent Pending’ mark”, with the same manufacturer, the same trade channel and same customer. Not only was there no attempt to work around the patent, validity of the patent was not in issue. Subsequent awards of additional damages have been, in the main, in the context of “counterfeiting” with no substantive assertion of patent invalidity (eg Truong Giang Corp v Quach [2015] FCA 1097; (2015) 114 IPR 498 per Wigney J).

We now turn to the present dispute, part of a long running war between Australian Mud Company Pty Ltd and Globaltech Corporation, this time over Globaltech’s “V6 Tool” and Australian Mud’s patent for a “Core Sample Orientation” system, used in mineral prospecting. Prior versions of Globaltech’s tool were the subject of an earlier dispute over the same patent, as determined in Australian Mud’s favour by Justice Besanko. Justice Rofe has stepped in to determine the outcome of this skirmish.

The question of infringement was limited to one feature of the two independent claims, namely the term “predetermined time intervals”. Gobaltech asserted that the V6 Tool operated in a different way to its earlier core orientation devices. One of Globaltech’s co-respondents (Boart Longyear Australia Pty Ltd) cross-claimed for revocation of the patent which turned only on the question whether the claims retained their priority date by reason of an asserted lack of fair basis. The questions of liability were ordered to be determined before issues of quantum of any pecuniary relief. While the construction, infringement, validity and accessorial liability reasons of her Honour are each worthy of discussion, the focus of this article is on additional damages.

Australian Mud also sued Globaltech and its co-respondents for additional damages for patent infringement pursuant to section 122(1A) of the Patents Act. The question whether Australian Mud was entitled to additional damages, but not the quantum of such additional damages, was also up for early determination.

No doubt Australian Mud was emboldened in obtaining an award of additional damages against Coretell Pty Ltd in Australian Mud Co Pty Ltd v Cortell Pty Ltd (No 4) [2015] FCA 1372 in circumstances where validity of the patent was in issue. While, on appeal, the Full Court held that the finding of flagrancy was affected by the primary judge’s mistaken view that Coretell commenced to infringe some years prior to the grant of the patent in issue, the Full Court observed that a finding of flagrancy “may still be open” and remitted the issue to the primary judge.

Having said that, Gobaltech equally likely took succour from Australian Mud’s more recent failure to obtain an award of additional damages against Globaltech in Australian Mud Company Pty Ltd v Globaltech Corporation Pty Ltd [2018] FCA 1839; (2019) 138 IPR 33 where Besanko J relevantly held:

The principal argument put by AMC in favour of an award of additional damages was that since late 2011, albeit in relation then to the Method and System Patents, Globaltech has known of AMC’s patent rights and has pressed on with their core orientation tools “working around”, or trying to work around those rights. It is in this respect that AMC relies on Mr Hejleh’s evidence that the only difference between the Orifinder v3A and the Orifinder v5 related to the software programming and there were no differences in the hardware. There are two answers to this argument. First, the construction issues in this case were not straightforward and, for the purposes of infringement, centred on the issue of a Synchronised Surface Timer, counting forwards and counting forwards or backwards. Secondly, the evidence of Dr Blake concerning the High Side Seeker tool and promotional website material (discussed below) raised a serious issue about the novelty of the invention.

In the present case, her Honour found the patent infringed by the V6 Tool, found the priority date attack failed and found that Australian Mud’s entitlement to an award of damages was enlivened. On the question of additional damages, her Honour observed that the Full Court in Oxworks Trading Pty Ltd v Gram Engineering Pty Ltd (2019) 154 IPR 215 at [72] had said that “it is not illegitimate, or flagrant, for a competitor to examine the disclosure of a patent and to attempt to work around the monopoly claimed in the claims”.

As to additional damages, Australian Mud contended the following four factors were relevant: “(a) the V6 Tool is the sixth iteration of Globaltech’s Orifinder device; (b) these proceedings are the third proceedings brought against Globaltech for the infringement of the Patent; (c) the V6 Tool was developed as a workaround of the Patent claims; and (d) the V6 Tool was launched whilst Globaltech was subject to a general form of permanent injunction which restrained infringement of the Patent claims.

In response, Globaltech and its fellow respondents contended that Globaltech had promptly ceased making the earlier version of the tool (V5), before being ordered to do so in the earlier proceeding and had made an earnest attempt to work around the patent with its V6 Tool. As to the co-respondents, Boart Longyear Australia was not a party to the earlier proceedings and the other respondents had not traded in the goods in Australia. Curiously, it does not appear that Globaltech raised the priority date invalidity argument run by Boart Longyear Australia as a basis upon which the Court should not award additional damages, or even referred to Bennett J’s decision in Zetco. Perhaps the fact that Besanko J had issued a certificate of validity for the patent in the earlier proceedings was a reason for it not raising this.

So, what made this case ripe for an award of additional damages against Globaltech when the same claim had failed in the previous proceeding heard by Besanko J? Her Honour held that the “position is different this time. The V6 Tool is another iteration, following four previous iterations, each found to infringe the Patent. Unlike the earlier proceedings, at the time Globaltech launched the V6 Tool, it had been found to engage in wrongful conduct and was subject to a general form injunction restraining it from infringing the claims of the Patent.”

But her Honour did not find that Globaltech ’s view that the V6 Tool was not an infringement was fanciful or that the tool did not involve a legitimate attempt at a work around. In those circumstances, one might have thought that, following Oxworks, Globaltech would have had a good basis to avoid additional damages. Indeed, there was no allegation of contempt of court in breaching the general form of injunction made against Globaltech by Besanko J.

The key to her Honour’s reasoning appears to reside in her observation that “it is not unjust to expect that Globaltech, if it was confident that the V6 Tool did not infringe the claims of the Patent, take some action, such as seeking a non-infringement declaration pursuant to s 125 of the Act, or providing a sample V6 Tool to AMC to demonstrate that it did not infringe. Globaltech did neither.” That is, in the specific circumstances of the case, where earlier tools had been found to infringe and there was a general injunction on foot, it was not enough for Globaltech to assume that its new V6 Tool was different enough not to infringe. It had to take further positive steps to ensure that was the case, which it did not. The authors note that there may have been good commercial reasons to bring its new tool to market rather than taking such steps, but it is not clear that Globaltech raised them. If there is an appeal (and history suggests there would be) no doubt a question will arise whether the matters above constitute a sufficient “additional element” to warrant the award of additional damages.

As to the fellow respondents, they were found to be liable for patent infringement. Her Honour further found that they were, for various reasons, also liable for additional damages. The primary reasons appear to be that the fellow respondents were alive to the risk of infringement and conducted no due diligence of their own as to whether there was any arguable case of non-infringement before supply commenced. Again, at least with respect to Boart Longyear Australia, it is somewhat surprising to the authors that the fact it was running an invalidity argument was apparently not raised as a basis upon which the Court ought not award additional damages.

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