Australian Mud Company Pty Ltd v Globaltech Corporation Pty Ltd [2022] FCA 445 (AMC v Globaltech)

The Federal Court has refused an application to stay proceedings to quantify compensation for patent infringement (quantum proceedings) pending the outcome of separate parallel proceedings challenging the validity of the infringed patent on new grounds. The case is significant as intellectual property cases are regularly bifurcated with liability determined separately from damages or an account of profits. A patentee may also bring consecutive infringement cases and therefore have two separate cases considering invalidity issues for the same patent running in parallel.

While the reasons for refusing a stay may be unique to the facts in issue, there are important lessons for alleged infringers where the patent in issue is or may in the future be subject to multiple infringement/revocation proceedings.

Facts

Australian Mud Company Pty Ltd (Australian Mud) and Globaltech Corporation Pty Ltd (Globaltech) had been in litigation since 2016. In the original case, Australian Mud alleged that Globaltech infringed its patent (AU 2010200162, the Patent) and, as expected, Globaltech cross-claimed to have the patent revoked (the 2016 Proceeding). The matter was bifurcated and on the question of liability, the patent was ultimately found valid and infringed. Globaltech exhausted all appeal avenues on liability (including an application for special leave to appeal to the High Court) and the matter was progressing towards a hearing on damages.

In November 2019, Australian Mud commenced new proceedings against Globaltech alleging that a different Globaltech device infringed the Patent (the 2019 Proceeding). A few months later, another party, Boart Longyear Australia Pty Ltd (Boart) filed an invalidity cross-claim in the 2019 proceedings on grounds that Globaltech had not pressed in the 2016 Proceedings.

In correspondence, Australian Mud agreed that in the 2019 Proceeding, Globaltech could rely on any invalidity finding arising from Boart’s cross-claim.

In the present case, Globaltech applied for a stay of the quantum hearing (arising from the 2016 Proceedings) on the basis that there was a reasonable prospect that the Boart cross-claim would succeed and the Patent would be revoked. Globaltech argued that if the Patent was revoked in the 2019 Proceedings, it would have a defence to the quantum claim by Australian Mud in the 2016 Proceedings. Conversely, if the court refused a stay, Globaltech’s ability to recover amounts paid to Australian Mud was less certain.

At this point, both parties had exchanged quantum evidence in chief and Australian Mud was yet to make an election between damages and an account of profits.

Outcome

Accepting that the Court’s power to grant a stay was wide and could be exercised having regard to the ‘interests of justice in the particular circumstances of the case’, Besanko J rejected Globaltech’s application for a stay for the following reasons:

  1. Australian Mud had a ‘substantial’ claim against Globaltech and already had to wait a considerable period of time for relief in the 2016 Proceedings.[1]
  2. Globaltech’s ability to meet any awarded sum was questionable and Globaltech had not offered security in support of its application.[2]
  3. Globaltech had delayed bringing its application for a stay for over a year and the parties had taken significant steps in the quantum proceedings.[3]
  4. While the Boart cross-claim did not seem hopeless, it was relevant that the lack of novelty invalidity ground (based on a deferred priority date) pressed by Boart had been first pressed and then abandoned by Globaltech in the 2016 Proceedings.[4]
  5. Australian Mud had been successful on liability and all appeal avenues were exhausted.[5]

In addition to the above reasons for rejecting the stay, there was a debate as to whether UK Supreme Court authority in Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46 (Virgin Atlantic Airways) applied in Australia. Globaltech relied on Virgin Atlantic Airways for the proposition that (1) a patent, once revoked was treated as never having existed; (2) a party who had unsuccessfully raised invalidity previously could raise the fact of the same patent’s revocation later in those proceedings; and (3) while a party may rely on a patent’s revocation as a defence in open liability or quantum proceedings, it was unclear whether it could be raised to reopen a final decision.[6]

Without deciding this argument, Besanko J cited this “substantial dispute” between the parties as to whether Virgin Atlantic Airways applied as another reason for refusing the stay.[7]

Where to from here?

While the judgment does not determine the applicability of Virgin Atlantic Airways in Australia, there are important procedural lessons to consider.

First, a party that seeks to benefit from a patent being invalidated in parallel proceedings (to avoid liability on damages) should make a stay application promptly and before the parties have taken substantive steps in the quantum proceedings. At the very least, this application should be made before evidence on quantum is filed.

Second, the party seeking the stay should be prepared to demonstrate its ability to meet any damages order that it may ultimately face.

If a patent is revoked in parallel proceedings, a party that has successfully stayed quantum proceedings will then be better placed to test the applicability of Virgin Atlantic Airways in Australia.

Given the application of Virgin Atlantic Airways remains unclear, parties who find themselves in circumstances where a patent is challenged on different validity grounds in parallel proceedings should also consider (if the timing of the parallel proceedings permit):

  1. applying to have parallel proceedings heard together; or
  2. applying to amend proceedings to include validity grounds raised in parallel proceedings,

and perhaps relying on this judgment to do so.

Last, as Globaltech’s abandonment of the relevant ground in the Boart cross-claim was a material consideration in refusing the stay, there is a clear tension between:

  1. the court’s expectation that the parties will not waste the court’s time by taking every point to trial regardless of prospects (consistent with the court tendency to award costs on an issues basis – ie denying costs recovery for unsuccessful parts of a case); and
  2. the potential for inconsistent parallel proceedings in relation to the same patent with inconsistent validity outcomes.

In grappling with this tension, Globaltech’s experience is a warning to the revoking party to carefully consider the revocation grounds to assert on commencement and any decision to abandon such grounds as the case develops.

As the parties await judgment in the liability trial for the 2019 Proceedings, we will update on any further developments.