SNF (Australia) Pty Ltd v BASF Australia Ltd [2019] FCA 425

Patents – appeal from decision of the delegate – lengthy trial and voluminous evidence – alternative dispute resolution mechanisms

The tailings dam patent saga continues.

First, in 2008, SNF sought revocation of Ciba’s (BASF’s predecessor in title) five innovation patents and Ciba cross-claimed for infringement. In 2011, Kenny J found the innovation patents valid and infringed: SNF (Australia) Pty Ltd v Ciba Speciality Chemicals Water Treatments Ltd [2011] FCA 452; (2011) 92 IPR 46.

Next, SNF appealed that decision to the Full Court of the Federal Court, where a majority dismissed the appeal: SNF (Australia) Pty Ltd v Ciba Speciality Chemicals Water Treatments Ltd [2012] FCAFC 95; (2012) 204 FCR 325. SNF then sought special leave to appeal to the High Court, which leave was refused.

Then in 2014, SNF filed an interlocutory application seeking to re-open the 2008 proceedings and Kenny J’s judgment therein on the basis that Ciba had failed to give proper discovery which, if it had been provided, would have enabled SNF to argue that the innovation patents were invalid by reason of secret use. That application was dismissed by Davies J in 2015: SNF (Australia) Pty Ltd v Ciba Specialty Chemicals Water Treatments Limited [2015] FCA 787; (2015) 114 IPR 231. SNF then sought leave to appeal that decision, but the Full Court of the Federal Court refused such leave: SNF (Australia) Pty Ltd v Ciba Speciality Chemicals Water Treatments Ltd [2016] FCAFC 88.

In the meantime, two of Ciba’s standard patent applications related to the innovation patents continued to be prosecuted through the patent office. SNF opposed the acceptance of the applications for grant on the basis that the claims lacked an inventive step and the inventions had been secretly used (SNF now having its chance to run the secret use case it could not against the innovation patents). In one of the patent office oppositions, some 38 declarations were filed by the parties.

SNF finally obtained some success, with the Delegate of the Commissioner observing in 2016: “The patent application is about flocculation – the use of a chemical to cause particles to clump together. The case brings to mind a word that looks a bit like flocculation: floccinauncinihilipilification (the estimation of a thing as valueless). For the reasons set out at length in the following pages, the invention lacks an inventive step but cannot be simply characterised as a thing of no value.

While various claims of the two standard patent applications were found by the Delegates to lack an inventive step, not all claims were found bad, there was no finding of secret use and Ciba was given an opportunity to amend. Accordingly, SNF appealed the two patent office decisions set out in SNF (Australia) Pty Ltd v Ciba Specialty Chemicals Water Treatments Limited [2016] APO 8; and SNF (Australia) Pty Ltd v Ciba Specialty Chemicals Water Treatments Limited [2016] APO 72. Unsurprisingly, Ciba (now BASF) cross-appealed.

Justice Beach was assigned the appeals in 2016. First of all, BASF amended the claims in dispute in such a way that all of the delegates’ concerns were met. That left SNF’s appeals to be determined as the amendments did not deal with its concerns.

His Honour’s reasons for judgment ran to 1,784 paragraphs. In the end, SNF failed in establishing lack of inventive step, secret use or lack of novelty for any of the claims. Rather than seek to address Justice Beach’s perspicacious and detailed consideration of the underlying technology, evidence and submissions, it is the last paragraph of the decision which has already gained some notoriety amongst practitioners and perhaps bears the most interest for them:

“Let me conclude with one final observation. The hearing of these appeals has not proceeded smoothly. The three weeks initially set aside for the hearing turned out to be inadequate. The hearing had to be adjourned over for a further week of evidence months later, and then further adjourned for several days of closing addresses. The substantial adjournments were necessary to accommodate the other significant commitments of counsel, witnesses and the Court. I make no criticism. It is what it is. But the sheer length, complexity and delays involved in these appeals does give cause to reflect on the following questions. Should appeals of this type be permitted to proceed as rehearings de novo allowing the parties to run any ground they like, whether raised before the delegate or not, and upon any evidence they choose, whether adduced or available to be adduced before the delegate or not? Or should they be permitted to proceed only upon the grounds and evidence led before the delegate with truly fresh evidence only being permitted in exceptional circumstances? Or should there be no appeal at all from the decision of the delegate, but only judicial review permitted demonstrating jurisdictional error? Or should there be an appeal for error of law only, and perhaps only with leave? Now these are policy questions, and legislative amendment would be necessary. But on any view it is not sufficient to tinker with the problem by fiddling with the standard of proof, which provided no real solution to deal with the length and complexity of what unfolded before me, notwithstanding the case management techniques available. But perhaps a more robust approach can be taken. One solution may be to put the parties on a chess clock to limit a hearing of the present type to 5 days rather than 5 weeks. And instead of 20 volumes of double-sided material as the standard length of a court book, this could be severely confined. Further, perhaps it is time for appellate courts to show some guidance in permitting short form reasons. Anyway, these reasons should not be further drawn out.”

Reading between the lines, one can appreciate a certain frustration arising from a failure of the “Raising the Bar Act” to address what was considered a central problem with the patent opposition system – the length of time and complexity of oppositions. Justice Beach’s perceptive comments fall into two categories: those which can be effected by the court’s internal procedures and those requiring legislation.

The former, as his Honour suggests, is likely to provide more immediate improvement. In this regard, some of the solutions identified by Justice Beach have indeed found favour in other jurisdictions, such as the “chess clock” attribution of time over a 5 day trial period. The chess clock procedure seems worth trying. Presumably the parties would need some input into the times fixed. Since the natural tendency would be for the parties to put opening bids, the court should be prepared to be robust. As the maxim reminds us, work tends to expand to fill the time allotted for it. Necessarily, the extent of evidence also would need to be reduced and agreement as to non or less contentious facts would be required to achieve such timelines in cases like this.

Justice Beach’s suggestion that the appellate court indicate that short form reasons should suffice is unlikely to address the length and complexity of opposition proceedings, but may bring about a quicker result in terms of the time it takes for judgment. While it may be noted that Beach J handed down this tome in just four months, it seems to us that the need to only provide short-form reasons would reasonably be expected to speed up the final determination of all matters in the Court.

As to documents, while 20 or so volumes may need to be available, a useful practice adopted by some prominent IP counsel has been to hand up a relatively small folder, say a few dozen pages, containing the documents which are actually going to be the subject of oral discussion.

But the Courts can only do so much and it will be interesting to see whether parliament will take up the invitation to revisit the patent opposition system, as suggested by his Honour.