Intellectual Property Update - C.M.E. Blasting & Mining Equipment Ltd v Rock Tool Refurbishment Solutions Pty Ltd (No 2)

The applicant, CME Blasting & Mining Equipment Ltd, owns various patents concerning grinding apparatus which sharpen the teeth (buttons) on rock drill bits for mining equipment. In drilling operations, the buttons on the drill bits become flattened after continued use. Regular regrinding of the buttons enhances the drill-bit life, speeds up drilling and reduces drilling costs.

CME claims, among other things, that Rock Tool Refurbishment Solutions Pty Ltd (RTRS) has exploited a grinding machine that will infringe three of CME’s patents. By an interlocutory application, RTRS sought summary judgment of parts of the claims made against it insofar as they concern: infringement of “Patent 1”; claims against a third party (Ausharp); claims for conversion and detinue in relation to microprocessors which contain “CME software”; and claims for inducing other parties to breach their contracts with CME. Besanko J dismissed RTRS’s summary judgement application, for reasons we will explore below.

For its part, by way of cross-claim, RTRS has sought a declaration of non-infringement pursuant to section 125 of the Patents Act 1990 (Cth) in respect of a grinding machine it intends to exploit (the RTRS grinding machine). In answer to that, CME sought interlocutory orders requiring RTRS to provide documents concerning, and a sample of, the RTRS grinding machine. Justice Besanko also dismissed CME’s interlocutory application for those orders, which we will address first.

Non-infringement declarations – going behind the “full description”

Section 126(1)(a)(ii) of the Act provides that the court “must not make” the non-infringement declaration RTRS seeks unless, among other things, RTRS has “given the patentee [CME] full written particulars of the act done, or proposed to be done”. Justice Besanko noted that the dispute between the parties centres on whether CME has been provided with such “full written particulars” by RTRS.

Early in the litigation, RTRS provided CME with a document identifying four features of the RTRS Grinding Machine and details of each of those features (Particulars). Subsequently, it filed an affidavit from an independent expert witness, Mr Hunter, who considered the Particulars contained sufficient information to conclude none of CME’s patents were infringed. Mr Hunter was then provided with photographs, schematics and a video of the RTRS Grinding Machine and made another affidavit confirming he had not changed his mind. A director of RTRS filed an affidavit including those additional materials.

In answer, CME then filed an affidavit from another independent expert witness, Mr Van de Loo, who concluded that he did not have sufficient information to independently assess what components the RTRS grinding machine has, how those components are comprised and work together and how the machine operates. Mr Van de Loo then set out what further kinds of information he would require to make his own assessment.

CME argued, in part, that the Particulars and additional materials were “not a full description of the relevant machine but just a description of those parts that RTRS and its lawyers consider relevant”. As a result, CME filed its interlocutory application seeking such materials, including inspection of a prototype of the RTRS grinding machine.

Pausing here, one might ask: Why did CME want further information? If it can establish that it has not been provided with “full written particulars” of the RTRS grinding machine, then that will be a complete answer to RTRS’s cross-claim for a non-infringement declaration by operation of section 126(1)(a)(ii). Alternatively, if the Particulars and additional materials do not accurately reflect the RTRS grinding machine in a material way, it is difficult to see how RTRS could benefit from a non-infringement declaration – there would need to be unity between the machine the subject of the non-infringement declaration and that which was subsequently exploited for the declaration to have any bite pursuant to section 127 of the Act.

No doubt with such matters in mind, RRTS pointed out that the non-infringement declaration regime was amended by the Raising the Bar Act so as to focus on whether any product or process that falls within the written description could reasonably be taken to infringe the claims of the patent in issue. Justice Besanko agreed that the question of non-infringement is “circumscribed by the full written particulars” and the declaration “does not preclude the patentee from bringing an infringement action if it later turns out that the actual product, method or process is different to what is disclosed in the full written particulars.”

Justice Besanko also concluded that there was no requirement in section 126 to provide a prototype, sample or existing machine or product, if it existed – the requirement was only to give “full written particulars”. His Honour quoted, with apparent approval, Pumfrey J’s observation in Baxter Healthcare Corp v Abbott Laboratories [2006] EWHC 3185 (Pat) in respect the UK equivalent to section 126 of the Act: “What I am extremely uneasy about is the suggestion that the real world can be used to supplement either inadequacies in the product and process description on the one hand, or to supplement a proof of infringement, or a proof of non-infringement, by materials”.

Summary judgment of claims – dismissed but some hanging in the balance

RTRS sought an order pursuant to section 31A of the Federal Court of Australia Act for summary judgment of various claims made against it, as outlined above. The basis for the application was that CME had no reasonable prospect of successfully prosecuting those claims. Justice Besanko observed that, while the power to summarily dismiss pursuant to section 31A should not be lightly exercised, it was not necessary for RTRS to show that the CME’s case is “hopeless” or “bound to fail”. However, “where the technology is complex or the Court is not able to construe confidently the relevant claim, then summary determination may not be appropriate”.

The first of the claims sought to be summarily dismissed involved CME’s allegation that RTRS infringed “Patent 1”. CME claims that RTRS continued the business of Ausharp which supplied grinding cups and parts for use on CME’s grinding machines. The allegation is that the installation of those parts on CME’s grinding machines meant the CME machine ceased to exist and a new infringing grinding machine was made, alternatively the conduct of supplying those parts to customers who made the machines was an infringement pursuant to section 117 of the Act. No doubt the parties are carefully treading through the implications of the rights (if any) of purchasers to repair (and replace worn parts of) a patented machine in light of the High Court decision in Calidad. Perhaps the parties will visit the breadth (or limits) of section 117 – as to which we wait with bated breath!

Putting those matters to one side, CME has filed evidence of Mr Van de Loo to the effect that the CME grinding machines had all the integers of various claims of Patent 1. Notwithstanding that broad view, as to one particular integer, which requires the machine to control the feed pressure of the drive shaft during grinding based on the size of the connected grinding cup, he said could not determine whether there was such a feed pressure change. RRTS asserts CME could not, therefore, make out infringement of Patent 1. However, CME relies on other, lay, evidence to the effect that the CME grinding machines are designed to change feed pressure on the grinding cups. For that reason, Justice Besanko was satisfied that RTRS’s attempt at summary judgment of the infringement of Patent 1 claim should be dismissed.

As to RTRS’s attack on CME’s pleading regarding the former conduct of Ausharp (the company which RTRS apparently bought the business of), Justice Besanko was not convinced there was any problem, noting that those allegations explained how the second respondent (a director of RTRS and former employee of Ausharp) might have joint liability with RTRS, and in any event the Ausharp conduct was said to be continued by RTRS.

Next was RTRS’s attack on the claims by CME for conversion or detinue in respect of microprocessors in the possession of RTRS that contain CME software. In short, it appears that CME had supplied, through a distributor, a number of CME grinding machines to Ausharp each of which had a microprocessor with CME software on it. CME asserts that the supply was subject to terms which prohibited Ausharp from transferring the CME Software and that, upon Ausharp’s transfer of the CME grinding machine to RTRS, CME was entitled to the immediate return of the media on which the software was incorporated.

Justice Besanko identified some difficulties with CME’s conversion and detinue claims but not to the point of concluding they had no reasonable prospect of success. One difficulty arose in that an action in conversion or detinue does not lie in intangible property. But since CME puts its argument on the basis of a right to the microprocessor upon which the CME Software was incorporated, the case was considered to have some prospects of success. Having said that, Besanko J noted one further difficulty being that ownership of the microprocessor had already passed to Ausharp. Curiously, CME does not appear to have asserted any ownership of copyright in the CME software so as to rely on the conversion and detinue rights in section 116 of the Copyright Act 1968. It might have a stronger case if it can obtain and establish ownership of that copyright.

Finally, RTRS’s application for summary judgment of CME’s claim for inducing breach of contract was also dismissed. That claim concerns CME’s contention that purchasers of its grinding machines are subject to terms of sale that preclude the customers from purchasing non-genuine parts for the machines, and RTRS knows this and, by selling its grinding caps for use on the CME grinding machines to such customers, it has induced the breach of those contracts. Justice Besanko considered there was sufficient evidence on foot to establish that claim. We wonder if section 144(1) and (4) of the Act (void conditions) might provide an answer to this claim and wait to see if that will be raised at trial.

All in all, a pox on both houses, but perhaps CME weathered the pox better – with its some of its primary claims staying on foot and no doubt learning something useful about the limits of non-infringement declaration sought against it.