NSI Dental Pty Ltd (ACN 108 218 104) v The Universityof Melbourne [2005] FCA 144 (28 February 2005)

FEDERAL COURT OF AUSTRALIA

NSI Dental Pty Ltd v The University of Melbourne [2005] FCA 144

PRACTICE AND PROCEDURE – patent dispute - application to amend particulars of invalidity – hearing date only weeks away – prejudice to respondent – relevance of principles of case management – application granted - hearing dates vacated

COSTS – indemnity costs

Minnesota Mining & Manufacturing Co v Tyco Electronics Pty Limited [2002] FCAFC 315 cited
Aktiebolaget Hassle v Alphapharm Pty Ltd [2002] HCA 59; [2002] 212 CLR 411 cited
Gambro Pty Limited v Fresenius Medical Care Australia Pty Limited [2004] FCA 323 cited
State of Queensland v J L Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 applied

NSI DENTAL PTY LTD (ACN 108 218 104) v THE UNIVERSITY OF MELBOURNE & ANOR

N1033 of 2004

TAMBERLIN J
SYDNEY
28 FEBRUARY 2005

BETWEEN:	NSI DENTAL PTY LTD ACN 108 218 104 APPLICANT
AND:	THE UNIVERSITY OF MELBOURNE FIRST RESPONDENT RECALDENT PTY LTD ACN 105 290 006 SECOND RESPONDENT
BETWEEN:	THE UNIVERSITY OF MELBOURNE FIRST CROSS CLAIMANT RECALDENT PTY LTD ACN 105 290 006 SECOND CROSS CLAIMANT
AND:	NSI DENTAL PTY LTD ACN 108 218 104 FIRST CROSS RESPONDENT TOPACAL PTY LTD ACN 058 515 656 SECOND CROSS RESPONDENT NZPH AUSTRALIA PTY LTD ACN 101 632 697 THIRD CROSS RESPONDENT PACIFIC BIOLINK PTY LTD ACN 075 264 112 FOURTH CROSS RESPONDENT PHOSCAL HOLDINGS PTY LTD ACN 091 503 374 FIFTH CROSS RESPONDENT
JUDGE:	TAMBERLIN J
DATE OF ORDER:	28 FEBRUARY 2005
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The application to amend the particulars of invalidity is granted.
2. The hearing dates be vacated.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

BETWEEN:	NSI DENTAL PTY LTD ACN 108 218 104 APPLICANT
AND:	THE UNIVERSITY OF MELBOURNE FIRST RESPONDENT RECALDENT PTY LTD ACN 105 290 006 SECOND RESPONDENT
BETWEEN:	THE UNIVERSITY OF MELBOURNE FIRST CROSS CLAIMANT RECALDENT PTY LTD ACN 105 290 006 SECOND CROSS CLAIMANT
AND:	NSI DENTAL PTY LTD ACN 108 218 104 FIRST CROSS RESPONDENT TOPACAL PTY LTD ACN 058 515 656 SECOND CROSS RESPONDENT NZPH AUSTRALIA PTY LTD ACN 101 632 697 THIRD CROSS RESPONDENT PACIFIC BIOLINK PTY LTD ACN 075 264 112 FOURTH CROSS RESPONDENT PHOSCAL HOLDINGS PTY LTD ACN 091 503 374 FIFTH CROSS RESPONDENT

1 The applicant on this Motion filed on 21 February 2005 seeks to amend the particulars of invalidity of what is known as the Complex Patent by introducing a new claim that there is no patentable invention because the invention lacks an inventive step when compared with the prior art base. The new particular reads as follows:

(i) the common general knowledge in Australia before the alleged priority date of the Complex Patent which included the amino acid sequence Ser(P)-Ser(P)-Ser(P)-Glu-Glu within casein and the function of that sequence in binding calcium phosphate; considered together with

(ii) a paper entitled ‘Calcium Phosphate Sequestering Phosphopeptide from Casein’ by R.E. Reeves and N.G. Latour (1958) 128 Science 472 which a skilled person in Australia could before the alleged priority date, be reasonably expected to have ascertained, understood and regarded as relevant to work in the relevant area;

(i) the common general knowledge in Australia before the alleged priority date of the Complex Patent which included adjusting conditions in which the complex is formed (such as by increasing pH); considered together with

(ii) a paper entitled "Anticariogenicity of Calcium Phosphate Complexes of Tryptic Casein Phosphopeptides in the Rat’ (1995) 74(6) J Dent Res 1272, which a skilled person in Australia could before the alleged priority date, be reasonably expected to have ascertained, understood and regarded as relevant to work in the relevant area; or

(iii) Patent WO87/07615, which specification became open to public inspection in the Patent Office, Canberra on 11 January 1988, and which a skilled person in Australia could before the alleged priority date, be reasonably expected to have ascertained, understood and regarded as relevant to work in the relevant area;

(ii) a paper entitled ‘Characterization of Phosphopeptide Derived from Bovine [beta]-casein: An Inhibitor to Intra-Intestinal Precipitation of Calcium Phosphate’, Biochimica et Biophysica acta, 1077 (1991) 413-415, which a skilled person in Australia could before the alleged priority date, be reasonably expected to have ascertained, understood and regarded as relevant to work in the relevant area."

2 The amended particulars of invalidity are sought to be filed in the proceeding in answer to an infringement claim brought by the respondents.

3 The hearing of the proceeding is scheduled to commence on Monday 21 March 2005, with ten hearing days having been set aside for the trial. The respondents were not provided with a draft of the Further Amended Particulars of invalidity until 17 February 2005, when a draft was provided to their solicitor.

4 The amendment sought is opposed by the respondents on the basis that the hearing date is only weeks away and if the proposal is permitted the respondents will suffer substantial irremediable prejudice in their preparation and generally. Alternatively, they say that in the event that the amendment is allowed, the hearing must be vacated to enable the amendments to be properly addressed and that a lengthy period of time will be required to carry out the proper and necessary investigations and preparation to ensure that the amended particulars are adequately dealt with. In the event of an adjournment, the respondents seek costs thrown away as a result of the amendment on an indemnity basis and submit that leave should be granted to tax and recover the costs forthwith.

5 The hearing dates were fixed in late 2004. The applicant filed an affidavit in support of the Motion sworn by its solicitor Mr Afaras on 21 February 2005. In that affidavit, Mr Afaras says that during the course of the second half of 2004 he conducted extensive searches to identify suitable qualified potential expert witnesses. Contact was made with all potential expert witnesses identified but none wished to become involved in the proceedings for reasons unrelated to the subject matter of the proceedings. It was not until 19 January 2005 that the applicant finally retained a suitably qualified expert to address the matters going to the validity of the patents in suit. The expert retained was Dr Mackinlay. After a number of meetings with Dr Mackinlay, the applicant came to the view that the ground of obviousness should be raised in relation to the Complex Patent. Mr Afaras then spoke with Freehills, solicitors for the respondents. It is said that in subsequent discussions with Dr Mackinlay the basis on which to plead the ground of obviousness was refined and particularised and this led to the furnishing of the draft amendments with the letter of 17 February 2005.

6 The proceedings were set down on the basis of an anticipated patent invalidity case to be brought by the applicant that, on its face, was narrow in scope. The first directions hearing was held on 16 July 2004 and the Court was requested to set down the hearing for five days on the premise that the applicant’s invalidity case would mostly concern construction issues. On 16 July 2004, the proceedings were expedited and the applicant was required to file and serve any Cross Claim with Particulars of invalidity before 6 August 2004.

7 Particulars of invalidity were filed on 6 August 2004 in which the applicant alleged lack of an inventive step in respect of the Complex Patent and two other patents. This claim was cast in broad terms.

8 On 7 September 2004, amended particulars of invalidity were filed by the applicant in which the claim of lack of an inventive step was removed. There was a directions hearing on 24 September 2004 at which the applicant stated that the scientific issues in the case were confined and that the invalidity case was substantially reduced in scope.

9 According to the respondents, the first suggestion of the possibility of a lack of an inventive step case being reintroduced by the applicant occurred on 2 February 2005, six weeks after the respondents had filed their evidence on infringement. Subsequently, beginning on 14 February 2004, the solicitors for the applicant provided copies of affidavits directed largely at establishing lack of inventive step with respect to the Complex Patent.

10 The first two respondents submit that the leave to amend should not be granted because it would cause irreparable prejudice. In substance, the prejudice claimed by the first two respondents is that the process of responding to a lack of inventive step case at this late stage would involve locating new witnesses with relevant expertise and carrying out extensive investigations. This has proved difficult in the past. The technology involved is highly specialised and narrow and there is an extremely limited but widely dispersed field of potential witnesses. Some of the potential witnesses were shown the Complex Patent after the amended particulars of invalidity was filed on 17 September 2004 which removed the lack of inventive step case.

11 The authorities indicate that evidence obtained from experts in relation to lack of inventive step is open to criticism and afforded less weight where the expert has seen the relevant patent prior to providing his or her evidence: cf Minnesota Mining & Manufacturing Co v Tyco Electronics Pty Limited [2002] FCAFC 315 at [45]; Aktiebolaget Hassle & Anor v Alphapharm Pty Limited [2002] HCA 59; (2002) 212 CLR 411 at [26]- [29]; Gambro Pty Limited & Anor v Fresenius Medical Care Australia Pty Limited [2004] FCA 323 at [395]- [396].

12 There is force in this submission. The respondents submit that as a result of the late application they have been deprived of the option of seeking the opinion of Professor Dawes and Professor Meyers, because they have previously been shown the Complex Patent and therefore their evidence would be open to attack on the basis that they would approach the question of obviousness with the benefit of hindsight. No doubt, given time, other experts could be approached, however, this would necessitate vacation of the hearing and an adjournment to enable the respondents to properly prepare their case.

13 The application to amend is opposed by the respondents but I am not persuaded that the prejudice which they claim and assert as a basis for refusing the application is irremediable given more time to meet the claim and the disadvantages pointed to by them do not outweigh the desirability of having all the important relevant issues resolved in this matter.

14 The facts of this case are distinguishable from those before the High Court in State of Queensland v J L Holdings Pty Ltd [1997] HCA 1; (1997) 189 CLR 146 but, having regard to the belated stage at which the application for amendment is made in the present case, I consider that the remarks of the Court in that case are apposite to the present circumstances. In that case, Dawson, Gaudron and McHugh JJ, after acknowledging the importance of efficient case management said at 154:

15 In this case, there is no suggestion that the proposed amendment is insubstantial or unarguable. I am satisfied that the amendments raise a matter in relation to which there would not be irreparable prejudice if an adjournment were to be granted.

16 I am persuaded, having regard to the evidence on this application, that the issues raised in relation to obviousness are complex in the extreme and that there is no way in which the respondents could be reasonably expected to meet the new case advanced by the applicants by the dates presently fixed if the amendment is allowed. I raised with the parties the possibility of using the available time to deal with issues raised on the present pleadings by perhaps separately litigating the question of obviousness now sought to be raised at a later time after the respondents have had a proper chance to properly prepare their response. However, from a practical point of view, in view of the need to avoid repetition and the interrelation of the issues, I do not think this course is possible in the present case.

17 Having regard to the history of this matter, in particular the raising of the broad obviousness point and then its removal from the pleadings and the belated attempt to restore it, albeit on a narrower basis, I am persuaded that the facts are sufficiently special to warrant the award of costs on an indemnity basis.

18 I am of the view that leave should be granted to rely on the amended particulars of invalidity. This will necessitate the vacation of the hearing dates and I order that those dates be vacated. I am satisfied on the evidence that this is a case where costs should be awarded in favour of the respondents to this application on an indemnity basis. I accept the submission of Counsel for the applicant that it is not practicable to determine what costs are thrown away until a later stage when the case has been heard and I therefore think that it is not appropriate to make an order that these costs can be taxed and recovered forthwith. The orders are that the application to amend the particulars of invalidity is granted. I vacate the hearing dates fixed for the hearing to commence on 21 March. I order the applicant to pay any costs that the respondents incur or have incurred which are thrown away as a consequence of the amendments to the particulars.

Counsel for the Applicant:	R Webb QC

Solicitor for the Applicant:	Spruson & Ferguson Lawyers

Counsel for the Respondent	A Bannon SC

Solicitor for the Respondent:	Freehills

Date of Hearing:	22 February 2005

Date of Judgment:	28 February 2005

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N1033 OF 2004

JUDGE:	TAMBERLIN J
DATE:	28 FEBRUARY 2005
PLACE:	SYDNEY

Federal Court of Australia

NSI Dental Pty Ltd (ACN 108 218 104) v The Universityof Melbourne [2005] FCA 144 (28 February 2005)