Upaid v Telstra – Here’s How We Deal With NPEs in Australia!

Upaid Systems Ltd is a ‘non-practising entity’ (NPE) – sometimes referred to as a ‘patent troll’ – which sued Australia’s largest telecommunications carrier, Telstra Corporation Ltd, back in August 2013 for the alleged infringement of two Australian patents relating to making online purchases of goods and/or services from mobile devices.  More specifically, Upaid alleges that various subscription operations performed in relation to Telstra’s MOG online music streaming service (formerly Bigpond Music) infringe its patents when conducted using a mobile device.

Some two-and-a-half years later, Justice Yates in the Federal Court of Australia has issued an interlocutory, i.e. provisional, decision comprising more than 500 paragraphs (Upaid Systems Ltd v Telstra Corporation Limited (No 3) [2016] FCA 227) in which Upaid’s various allegations of infringement are largely described in unflattering terms along a spectrum from ‘untenable’ to ‘confusing and embarrassing’!

Furthermore, even where the court has determined that Upaid may have some prospect of overcoming Telstra’s objections, it has found that Upaid’s corresponding case, even after all this time, still does not correctly or adequately identify details of Telstra’s alleged infringements.

It is not that Upaid has not been given ample opportunity to develop its case.  It has had multiple opportunities to address deficiencies identified by Telstra.  It has been granted access to internal documentation of how Telstra’s relevant operational and billing systems work.  It has even been given the opportunity to question Telstra employees on these factual matters.  Yet still the NPE is struggling even to outline an arguable case for infringement.

While the court has not yet completely killed-off Upaid’s case, in my view it certainly seems likely to have been mortally wounded.  While there remains a possibility of appeal (the time for either party to apply for leave has been extended until 12 April 2016), the recent judgment leaves Upaid with very little scope to make out a case with any reasonable prospects of success.  The court has all but struck out Upaid’s entire case in relation to one of the two Upaid patents at issue, and has offered only a limited opportunity for Upaid to try to rectify the deficiencies in its case in relation to the other.

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Tags: Australia, Federal Court practice, Infringement, Litigation, NPEs, Trolls

Australia – No Country for Troll’d Men (or Women)?

Upaid Systems Ltd v Telstra Corporation Limited [2013] FCA 1441 (23 December 2013)

Upaid Systems Ltd, a company which some regard as a patent troll, has stumbled at the first hurdle in its infringement case against Telstra (which I first reported back in August).  Specifically, a judge of the Federal Court of Australia has found that Upaid has failed to meet its obligations to provide an adequate statement of its case, i.e. to identify, with sufficient particularity, at least one instance of each type of infringement alleged to have been committed by Telstra.

The court has given Upaid until 28 February 2014 to file amended documents, stating its allegations in sufficient detail.

I have said before that I do not consider Australia to be a fertile hunting ground for patent trolls, because the patent litigation system in this country lacks a number of the characteristics that make the trolls’ enforcement-based business models so effective in the US.  And while Upaid may not qualify as a classic ‘troll’, the court’s finding that it has failed to plead its case adequately highlights some of the challenges that a true patent troll would face in Australia.

Two things are particularly notable about the court’s decision:

1. Upaid’s particulars were found to be inadequate despite what appears to have been a reasonable effort to describe specific examples of alleged infringement by Telstra, confirming that the court was not willing to ‘bend’ or relax the rules simply because the task of particularising the infringement case might be regarded as difficult; and
2. as a result of its failure, Upaid has been ordered to pay Telstra’s costs (i.e. necessary expenses and reasonable attorney fees) of its application to compel Upaid to provide an adequate statement of its case.

As a result, four months after commencing proceedings Upaid has yet to make any real progress in its infringement case against Telstra.  On the contrary, by the time it has paid its own legal bills, and the costs ordered in favour of Telstra, Upaid will certainly be out-of-pocket to the tune of at least some tens of thousands of dollars, and possibly more, just for dealing with this preliminary aspect of the case.  A true patent troll, hoping for a quick win in the form of a settlement at a cost below that of proceeding to trial, would have to be considering cutting its losses at this point.

Making this decision even more interesting – and the case worthy of watching from an international perspective – is that the two notable features listed above, i.e. a high standard for pleading a case of infringement, and fee-shifting, are both key elements of the Goodlatte Innovation Act 2013 which was recently passed by the US House of Representatives.

This case suggests that raising the requirements for pleading an infringement case can have a significant impact on the ability of patent trolls – and perhaps on inadequately-prepared non-practising entities (NPEs) in general – to bring unreasonable and disruptive lawsuits.

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Tags: Australia, Federal Court practice, Infringement, Litigation, Trolls

Federal Court Throws Self-Represented Litigant a Life-Line

Enviro Pak Pty Ltd v New Horticulture Pty Ltd [2013] FCA 306 (2 April 2013)
Enviro Pak Pty Ltd v New Horticulture Pty Ltd (No 2) [2013] FCA 624 (25 June 2013)

It is not common for the Federal Court of Australia to allow a corporation to be represented by a non-lawyer.  Nor is it common for the court to cede authority to an administrative decision-maker.  So when a judge of the Federal Court does both in the course of the same litigation, there is no avoiding the fact that the court is doing the beneficiary of these decisions a significant favour.

The dispute between Enviro Pak Pty Ltd and New Horticulture Pty Ltd (trading as Green Pack, which is how I shall refer to the company) relates to Australian registered design no. 304960, owned by Enviro Pak.  The registration protects the design of a corrugated paper coffee cup, which Enviro Pak claims to be unique in that the corrugations are aligned vertically, which in turn requires that the width of the corrugations increases from the bottom to the top of the cup (since the circumference of the base of the cup is smaller that that of the lip).  Notwithstanding this functional aspect of the design, it is important to keep in mind that a registered design protects only the visual appearance of the coffee cup, and not its functionality or associated benefits.

Enviro Pak is suing Green Pack, and its sole director and shareholder, for alleged infringement of the registered design.  Initially, Green Pack had legal representation, however the financial circumstances of the company appear to have resulted in termination of this representation in February 2013.  In the meantime, two applications challenging the validity of the registered design had been filed with the Designs Office at IP Australia.

While an individual (i.e. a ‘natural person’) is entitled to represent him- or herself in court, a corporation normally is not, and must be represented by a qualified legal practitioner.  Furthermore, the Designs Act 2003 is structured such that when proceedings are on-foot both in court, and at IP Australia, in relation to the same registered design, the Registrar of Designs is generally unable to proceed without permission from the court.  (The Patents Act 1990, incidentally, is similarly structured.)

This state of affairs creates potential difficulties for a party with financial limitations, once a court action has commenced.  In this case, however, the court has made exceptions for Green Pack.

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Tags: Designs, Federal Court practice, Litigation, Stay of proceedings

Shocking – Judge Compels Experts Actually to Assist the Court!

Britax Childcare Pty Ltd v Infa-Secure Pty Ltd [No 2] [2012] FCA 1018 (17 September 2012)

Infringement – expert evidence following Markman-style claim construction hearing – whether appropriate to appoint assessor or referee

Earlier this year Justice Middleton, in the Federal Court of Australia, broke new ground in this country by holding a hearing, and issuing a decision, purely on the issue of claim construction as a preliminary matter in patent infringement proceedings (see Federal Court Conducts Markman-Style Hearing in Hot Tub). 

This week, Justice Middleton has issued two further decisions in the patent infringement case brought by Britax Childcare Pty Ltd (‘Britax’) against Infa-Secure Pty Ltd (‘Infa-secure’).  In the first of these decisions, he has rejected efforts by Infa-Secure to have the court order that infringement issues be referred to an independent third party for assessment.  Instead, the two experts will be returning to the so-called ‘hot tub’ to provide joint evidence to the court, based upon a claim construction with which neither one of them wholly agrees.

If all goes to schedule with this plan, the parties will be back in court for three days in December, for a further hearing to decide whether or not Infa-Secure infringes Britax’s patents.

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Tags: Claim construction, Evidence, Federal Court practice, Infringement

Generic ABILIFY (Aripiprazole) Ban to be Reviewed

Generic Health Pty Ltd v Otsuka Pharmaceutical Co Ltd [2012] FCA 412 (23 April 2012)

Practice and procedure – interlocutory injunction – whether application for leave to appeal should be referred to a Full Court

Generic Health Pty Ltd will have the opportunity to appeal the decision of a single judge of the Federal Court of Australia granting a preliminary injunction preventing it from launching a generic version of the antipsychotic drug ABILIFY (see Australian Federal Court Blocks Generic ABILIFY (Aripiprazole)).

In general, any decision of a single judge of the Federal Court can be challenged by appeal to the Full Court – a panel of three judges.  In the case of a final ruling, i.e. after a full trial, any party to the proceedings automatically has the right to appeal.  However, a Full Court review of a preliminary judgement requires permission, i.e. ‘leave’ to appeal.

As a result, appealing a preliminary injunction is generally a two-step process – first the appellant must obtain leave to take the matter to a Full Bench of the court and then, if leave is granted, it is still necessary for the appeal proper to be heard.

In this case, Justice Katzmann has granted a request by Generic Health for its application for leave to be heard by a Full Bench of the court, and for the appeal itself to be heard either simultaneously, or immediately following the leave hearing.  Regular readers of this blog may recall that Justice Foster made a similar ruling in favour of Samsung last year (see Samsung Over First Hurdle in Bid To Overturn Apple Injunction).

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Tags: Appeal, Federal Court practice, Interlocutory injunction, Pharmaceuticals

Federal Court Conducts Markman-Style Hearing in Hot Tub

Britax Childcare Pty Ltd v Infa-Secure Pty Ltd [2012] FCA 467 (9 May 2012)

Claim construction – role of expert evidence – practice and procedure – concurrent testimony

Justice Middleton has issued a 413 paragraph (104 pages, not including Annexures) decision in a patent case involving child safety seats.  Not that there is anything unusual about lengthy decisions issuing from the Federal Court of Australia – this one is a minnow compared to the 1619 paragraphs penned by Justice French in the case of University of Western Australia v Gray (No 20) [2008] FCA 498.  Furthermore, the actual findings in this case will most likely be of interest only to those actually involved in the proceedings.

However, two things are notable about Justice Middleton’s decision.  Firstly, it addresses only one preliminary issue, namely ‘claim construction’, i.e. the question of how the patent claims asserted by the patent owner Britax Childcare should properly be interpreted.  Secondly, the hearing involved a rare instance of ‘hot-tubbing’ expert witnesses – which sounds entirely inappropriate, but actually is not, although it is a practice not without its critics.

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Tags: Claim construction, Evidence, Federal Court practice

No Summary Judgment on Question of ‘Best Method’

Expo-Net Danmark A/S v Buono-Net Australia Pty Ltd (No 2) [2011] FCA 710 (23 June 2011)

Validity – best method – criteria for assessing whether patent specification describes ‘the best method known to the applicant of performing the invention’

Procedure – summary judgment – whether patentee has ‘no reasonable prospects of success’ in defending an allegation of failure to describe best method

In this decision of the Federal Court, Justice Bennett was required to consider the criteria for assessing whether a patent specification describes the best method known to the applicant for performing the claimed invention, and whether it would be appropriate to grant summary judgment revoking a patent on the ground that the best method is not described.

Her Honour found that, in this case at least, determining whether the best method was described is a complex question that requires careful consideration of a range of relevant facts and conflicting evidence of the parties.  As such, it could not be said that the patentee had no reasonable prospect of success in defending the allegation that the best method known was not described, and summary judgment was not appropriate.

We find this decision interesting firstly for its discussion of the criteria for assessing whether the best method has been disclosed in a patent specification, and also for its demonstration of the difficulties inherent in obtaining summary judgment in patent cases, which almost invariably involve complex questions of fact and law.

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Tags: Australia, Best method/mode, Federal Court practice, Summary judgment, Validity

Dispute Over Claim Construction Fails to Limit Discovery

Siemens Water Technologies Corp v GE Betz Pty Ltd [2011] FCA 641 (2 June 2011)

Practice and Procedure – whether extent of discovery may be limited by reference to the parties’ contended claim construction

As many readers – and particularly those from common law jurisdictions – will be aware, ‘discovery’ (or ‘disclosure’) is the process by which the parties to a legal dispute are able to obtain relevant evidence from each other prior to the commencement of the main trial.

Discovery can be vital in patent infringement proceedings, because sometimes it is not possible to demonstrate that a particular accused product or process infringes a patent without access to technical information known only to the alleged infringer.  Often the patentee will seek discovery of a wide range of material, while the accused infringer will resist extensive discovery on the basis that much of what is being sought will not be relevant, and the patentee is merely engaging in a ‘fishing expedition’.

Of course, an apparatus or process will only be infringing if it falls within the scope of one or more claims of the patent.  Consequently it is possible, in principle at least, that the legitimate extent of discovery may depend upon the proper construction (i.e. interpretation) of the patent claims.  In Australia, disputes over claim construction are decided by the court during the main trial, and not at some preliminary stage (such as the ‘Markman hearings’ normally held for this purpose in the US).

So what happens if the parties disagree on the proper construction of the claims in the course of discovery?

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Tags: Australia, Claim construction, Discovery, Federal Court practice

Australian Federal Court Revokes Undefended Patent

Huawei Technologies Company Ltd v Al Amri [2011] FCA 503 (13 May 2011)

Practice and Procedure – whether default of respondent patent owner entitles applicant for revocation to summary judgement in favour

In stark contrast to the US Supreme Court’s holding that a US patent can only be invalidated on the basis of ‘clear and convincing evidence’ (see Newsflash - US Supreme Court Upholds 'Clear and Convincing' Standard), Justice Jessup in the Federal Court of Australia has recently ordered a patent be wholly revoked on the basis that the patent owner did not take steps to defend his patent.

The general principle under the Australian law is that, unlike in the US, a granted patent enjoys no presumption of validity.  There is no requirement for ‘clear and convincing evidence’ of invalidity in Australia – in an application for revocation of a patent the court is to apply the civil standard of the ‘balance of probabilities’, which is similar to the ‘preponderance of the evidence’ standard for which Microsoft argued in its dispute with i4i.

However, this decision shows that, in the absence of a defence by the patentee, an applicant for revocation may prevail in the absence of any evidence whatsoever.

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Tags: Australia, Federal Court practice, Revocation