TIMTECH CHEMICALS LIMITED V OSMOSE NEW ZEALAND LIMITED HC WN CIV 2010-485-2487

TIMTECH CHEMICALS LIMITED V OSMOSE NEW ZEALAND LIMITED HC WN CIV 2010-485-2487 16 May 2011IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYCIV 2010-485-2487UNDER The Patents Act 1953IN THE MATTER OF an appeal from the decision of AssistantCommissioner Popplewell dated 15November 2010 directing that patentapplication 543124 be sealedBETWEEN TIMTECH CHEMICALS LIMITEDAppellantAND OSMOSE NEW ZEALAND LIMITEDRespondentHearing: 10 May 2011Counsel: J A Hazel and C Barker for AppellantG F Arthur for RespondentJudgment: 16 May 2011JUDGMENT OF RONALD YOUNG J ON INTERLOCUTORY APPLICATION TO FILE FURTHER EVIDENCE ON APPEALIntroduction[1] On 15 November 2010 an Assistant Commissioner of Patents rejected theappellant‟s grounds of challenge to the respondent‟s patent application and, subject to the passage of the appeal period, ordered the patent be sealed.[2] In this appeal Timtech alleges the Assistant Commissioner erred in assessingeach of the appellant‟s grounds of opposition.[3] On 7 March 2011 (followed by an amended application on 21 March) the appellant sought leave from this Court to file further evidence in support of this appeal. The respondent opposes the application. This judgment is concerned with that application.Background[4] The respondent in its application for letters patent described its invention in this way:The present invention relates to a process for preserving wood and cellulosic products (e.g. reliant on a biocidal active or biocidal actives to prevent fungal decay and/or insect damage).Impregnation procedures for wood, lumber or timber ("timber") has usually involved an impregnation procedure where the active agent, or a precursor of an active agent, is carried in a liquid carrier. Sometimes the liquid carrier is water or water based. Sometimes the liquid carrier is an organic solvent or organic solvent based or maybe an inorganic solvent or inorganic solvent based.The well known LOSP procedure is a solvent based procedure which has the usual difficulties when handling solvent i.e. environment consideration in respect of emissions, flammability etc. The LOSP procedure however has an advantage in that it does not add moisture back into the timber. Excessive moisture uptake can affect dimensions of timber.Water based systems have been perceived as requiring a significant uptake of any water based treatment composition in order to provide the required penetration through to the core of the timber being treated. This has resulted in an increase of the moisture content of the timber which has an effect on the dimensional stability of the timber and may also require that the timber be redried prior to use.The present invention recognises an advantage to be obtained from the reliance upon a water based treatment composition that nonetheless meets standards of active ingredient penetration but which nonetheless, owing to a low uptake of water, still provides a dimensional stability of the timber preferably substantially at the dimensions prior to the treatment.[5] The respondent‟s application was accepted for grant in March 2008 and the appellant filed its notice of opposition on 28 July 2008 with an amended notice of opposition in September 2008. The evidence of the parties was filed in 2009 and early 2010 before the hearing in July 2010.[6] The procedure for opposition to the grant of a patent is set out in s 21 of the Patents Act 1953 and regulations 48 to 56 of the Patent Regulations 1954. The process of opposition requires a notice of opposition1 with an identification of the grounds of opposition.2 The notice must also identify all "specifications and otherpublications" relied upon by the opposer3 and contain a statement of oppositionwhich sets "out fully the nature of the opponents interest, the facts upon which herelies and the relief which he seeks".4[7] In reply the applicant is required to file a counterstatement which fully setsout the "grounds upon which the opposition is contested".5 There is provision for the exchange of evidence6 and after that exchange no further evidence is permitted except with leave.7 A hearing is then convened. Regulation 54(3) permits reference by parties to publications not notified if at least ten days notice is given both to the Assistant Commissioner hearing the case and to the other party.[8] Thus, by the time the opposition hearing is held the grounds of opposition, the documents and evidence relied upon to support the opposition and the response are clearly defined and known by the parties.[9] Timtech opposed the application before the Assistant Commissioner on four grounds:1 Patents Act 1953, s 21(1).2 Patents Act 1953, s 21(1)(a) to (k); Patents Regulations 1954, reg 48(1)(b).3 Patents Regulations 1953, reg 48(1)(a) and form 15.4 Patents Regulations 1953, reg 48(1)(c).5 Patents Regulations 1953, reg 49.6 Patents Regulations 1953, reg 50 and 51.7 Patents Regulations 1953, reg 52.(a) the invention had been previously published in New Zealand;(b) the invention was obvious;(c) that it was not an invention; and(d) the specification did not sufficiently and fairly describe the invention.[10] The appellant filed affidavits (or affirmations) from two witnesses, and the respondent also filed affidavits (or affirmations) from two witnesses.[11] As to "prior publication" the Assistant Commissioner considered an international patent and two internationally published papers. He concluded there had been no prior publication.[12] As to "obviousness" after identifying what the Commissioner considered to be the correct legal test, the Commissioner considered three further documents together with the material in [11]. The three new documents were US patents and a training guide relating to the forest industry training organisation. The Commissioner concluded these documents did not establish "obviousness".[13] As to whether the subject matter of the patent application was an invention the Commissioner concluded that the appellant had not established that what was involved was not an invention.[14] Finally, the Commissioner concluded that there was no evidence to supportthe appellant‟s claims that the specification lacked sufficiency or utility or that thespecification lacked particulars or the required details.[15] This appeal challenges each of the four grounds rejected by the Commissioner.This application[16] The appellant now wishes to file affidavits from eight deponents. Each of the affidavits contains "new" material in the sense that it was not seen by the Commissioner. The appellant says that the evidence of the eight witnesses relates to prior use, prior publication and obviousness. Most of the material relates to a prior use claim. An allegation of prior use was not a ground of opposition before the Commissioner nor is there a ground of appeal based on any prior use ruling. I will return to this aspect of the appellant‟s case later in my judgment.[17] As to the particular deponents whose evidence the appellant seeks leave to be read I reproduce the appellant‟s summary of the content of each witness‟ affidavit:Mr Denny10. Mr Denny gives evidence that he has searched records of Carter Holt Harvey Woodproducts and located documents pertaining to what the Appellant believes to be prior use of the claimed invention at a number of locations in New Zealand. His evidence exhibits those documents.11. That use to which those documents relate involves a series of „trials‟using preservative formulations to treat wood, being liquid and/or water based, having a biocidal and/or preservative action (including by use of boron), a glycol, and using pressure differentials.Mr Jermer12. Mr Jermer is an author of a paper titled "Preservative Treatments ofWindow Components with a Water-Based Borate Formulation"which was presented at the International Research Group of WoodProtection‟s 31st Annual Meeting, at Kona, Hawaii (14–19 May 2000). He has also held the position of secretariat or secretary-general of that group for many years. He gives evidence as to the availability of that paper (and others) in New Zealand.Mr Boyd13. Mr Boyd has until recently held the position of General Manager (Operations) in the Appellant. He gives evidence relating to efforts to locate evidence relevant to this proceeding (and the proceeding before the Assistance Commissioner of Patents), and the significance of the documents produced by Carter Holt Harvey Woodproducts (via Mr Denny).Mr Maynard14. Mr Maynard is the managing director of Mattersmiths Holdings Limited, a company which specialises in processes and chemicals related to the treatment of timber. He gives evidence as to his knowledge of and/or involvement in the Carter Holt Harvey trials (as per the evidence of Mr Denny noted above). He also gives evidence as to the meaning and significance of those documents and the trials to which they relate.15. Mr Maynard also gives evidence regarding the availability in New Zealand of documents which prior publish the claimed invention, and their relevance.Mr Brown16. Mr Brown was General Manager of Chemicca Limited. He gives evidence of the use in New Zealand of a preservative formulation known as Borosol during the 1990s. The Appellant says this amounts to prior use of the claimed invention.Ms Veber17. Ms Veber is the Library Manager at Baldwins Intellectual Property/Baldwins Law Limited (solicitors for the Appellant). She gives evidence as to the availability in New Zealand of a number of documents.Ms Prouse18. Ms Prouse is a Knowledge Advisor at Scion Research and gives evidence as to the availability in New Zealand of a document knownas American Wood Preservers‟ Association (AWPA) Standard C1-88.Professor Vinden19. Professor Vinden is a professional fellow in the Department of Forest and Ecosystem Science, University of Melbourne. Professor Vinden gives evidence of prior use and publication of the claimed invention, and views on select documents.[18] These affidavits together with their annexures consist of hundreds, perhaps more than a thousand pages, of material although some of the annexures are repetitive.Legal test for admission of evidence[19] Rule 22.34(1) of the High Court Rules provides that an appeal from a patent ruling is to be by way of rehearing. No further evidence is to be given at the appeal except with leave of the Court.8[20] I agree with the respondent that this approach to patent appeals is broadly similar to the approach generally for rehearing appeals.9 Although I note that r 20.16(3) provides that a Court may grant leave to file further evidence only if there are "special reasons" for hearing evidence. That test is not included in r 22.34(3).[21] These principles though can be appropriately extracted from the relevant authorities and the rules:(a) the evidence sought to be admitted should be new. "New" in this sense means that it could not with reasonable diligence have been discovered before the first hearing;10(b) the evidence must be relevant and likely to be of significance or importance in deciding the appeal;11(c) the High Court as an appellate court should avoid hearing a different case on appeal; thus a hearing before the Assistant Commissioner should not be reduced to a "dummy run";12(d) it must be overall in the interests of justice that the new evidence be admitted.8 High Court Rules, r 22.34(3).9 High Court Rules, r 20.18.10 Telecom Corporation of NZ Limited v CC [1991] 2 NZLR 557.11 Ibid.12 Ibid.[22] Finally, I accept the respondent‟s submission that what must also beconsidered is what function the Commissioner performs in a patent opposition hearing. As the respondent stresses neither the Commissioner, nor this Court on an appeal from the Commissioner is making a final assessment on the validity of the patent. The purpose of the opposition process is to remove those applications that clearly will not pass to grant. Substantially contended cases can be heard and resolved by patent revocation proceedings.13 The revocation process is still available to the appellant in this case irrespective of the success of this application or the substantive appeal.Is the evidence new?[23] I turn, therefore, to the first question "is the evidence proposed by the appellant new?" My conclusion is that for the most part the evidence is not "new".All of the material in the body of the affidavits and the annexures was in existence as at the date of the hearing of the patent opposition in July 2010 and most, if not all, could with reasonable diligence have been discovered.[24] The appellant‟s new evidence is primarily based on Mr Maynard‟s evidenceregarding prior use at Carter Holt Harvey and the consequential documents produced from this trial. Other documents said to illustrate prior publication are also part of the new evidence. Some are documents rejected by the Assistant Commissioner as evidence because of lack of proof of publication at the opposition hearing. Otherdocuments have been "discovered" by the appellant‟s current lawyers through searchand through expert witnesses.[25] For reasons I will identify, other than the prior use/prior publication evidence of Mr Maynard and those who obtained documents based on Mr Maynard‟s evidence none of the other evidence could possibly be considered "new".13 Patents Act 1953, s 41; High Court Rules, r 20.17–19.[26] It is impossible to know exactly what documents were obtained by theappellant‟s first lawyers. It may be that some or all of the documents now said to be new were known to them but they elected, for whatever reason, not to use them in the opposition. I note the principal‟s of the appellant say they were unaware of this evidence before the hearing.[27] In any event the claim that the appellant‟s previous lawyers may not have been "diligent" is not a basis for claiming the evidence is new. Clearly the appellant‟s current lawyers have, with diligence, been able to find these documents and they could, therefore, have been found by the appellant‟s previous lawyers.[28] The second aspect of lawyer diligence is the appellant‟s observations thatparticular witnesses, for example, Mr Brown, Mr Boyd and Mr Denney were notconsulted by the appellant‟s previous solicitors. But there can be no doubt that these witnesses would have been available if the appellant had chosen to instruct them. It may be that the appellant‟s previous lawyers were aware of these witnesses but chose not to call them, it is impossible to know. However, the fundamental point remains these witnesses were available and could have been called by the appellant at the original hearing.[29] The only witness who claims he has what could be considered "new"evidence in the sense that it was not known about at the time of the hearing before the Commissioner is Mr Maynard. Mr Maynard‟s three declarations were filed in May 2009 and February 2010 (prior to the hearing by the Commissioner) in support of the appellant‟s opposition.[30] Mr Maynard‟s "new" evidence relates to claims of both prior use and prior publication of what is claimed to be the subject matter of this patent application.Several of the "new" witnesses give evidence of the discovery of prior publications which arise from Mr Maynard‟s evidence (e.g. Mr Denny, Mr Boyd). The new evidence relating to prior use primarily arises from trials of what is said to be the subject matter of the patent and the consequential publications.[31] Mr Maynard‟s evidence relates to trials Carter Holt Harvey are said to haveundertaken at the respondent‟s request using the patent methodology. This is said to be evidence of prior use of the patent.[32] Mr Maynard said further, however, that amendments made by the respondent to its claim in the opposed patent application before the Assistant Commissioner got him thinking about the patent. He therefore undertook further enquiries. Finally, he said it was only sometime after the opposition hearing that he thought about further matters covered by his recent evidence. He said those trials occurred around twenty years or more ago and so it was understandable he had forgotten them.[33] There was some conflict in Mr Maynard‟s affirmation filed in this Court as to the circumstances and timing of when he came to recall the Carter Holt Harvey trials and its relevance to the patent process and prior use. Part of the patent process involves introducing preservative into the wood under pressure. To impregnate the wood with the preservative requires some form of pressure differential.[34] As to this Mr Maynard in his affirmation said:24. Amendments made by Osmose to the claims in the Opposed Patent Application got me thinking further about this matter. I looked and thought again about the use of a pressure differential to impregnate lumber with predominantly aqueous compositions containing borate and glycols. Prior to that, I had been considering a modern pressure treatment plant which uses a more complex assemblage of pressure chamber, pipework, vacuum pumps and pressure pumps. This aligns with the chart included in the Opposed Patent Application, but clearly dipping is also a pressure treatment process where the pressure differential is created by the hydrostatic head. By hydrostatic head I mean the weight of the treatment flue creating pressure during dipping.25. What at least in part prompted my recall was the combination ofwords „pressure differential‟. This in its own right is not the entirepicture.26. As noted, I am aware of the presentations made by Osmose in its promotional material regarding TimberSaver and spraying but did not recall at that time anything to do with Pinepac; I recalled that later.27. These days I think about other methods (notably Rueping, Lowry, Vac/Vac and even our own method protected by NZ Patent 523249)when I turn my mind to "pressure differentials" because these createlarge variations in pressure, however a dip tank also involves a pressure differential. By immersing the timber to be treated in the liquid in the manner of a dip tank, preservative is "driven" into that timber by the pressure of the liquid on the timber as it is "dipped".28. It was only some time after the opposition hearing before IPONZ (and the resultant decision on this matter) that I thought about dipping as a pressure differential method in the context of this Opposed Patent Application.[35] There is on the face of it a conflict between what Mr Maynard says in para 24 and in para 28 as to when he thought about pressure differentials in a way which gave rise to the enquiries about the Carter Holt Harvey trials. In [24] Mr Maynardsays that after the response by the respondent to the appellant‟s opposition (wellbefore the evidence was filed and the opposition hearing held) he began thinking about pressure differentials to impregnate timber. Mr Maynard says prior to therespondent‟s reply response he had focussed on modern pressure treatment plants. But he says he realised that dipping timber in water also created a pressure treatment process by creating a pressure differential.[36] Thus, in [24] he appears to say that he became aware that dipping timber was a pressure treatment process well before the hearing of the opposition and, therefore,well in time to present the "new" evidence, the subject of this application. However, in [28] he says it was only after the opposition hearing he thought about dipping as a pressure differential method.[37] Perhaps the use of the word "but" in [24] is intended to illustrate that it was only later that Mr Maynard thought about the two processes in the similar way, as the appellant argued. However, on the face of these two paragraphs there appears to be a conflict as to when Mr Maynard first thought of the issue which led him to the Carter Holt Harvey trials and the new evidence. At best Mr Maynard‟s evidence isequivocal as to exactly when he thought about the pressure differential point and, therefore, it remains unclear exactly when he thought of the similarity.[38] The importance of timing can be expressed in this way. If Mr Maynard recognised that the immersion in water was itself a form of pressure treatment of timber before the opposition hearing then his evidence about the Carter Holt Harvey trial and the consequential publications could all have been discovered with diligence before the opposition hearing. Thus, this evidence now presented by theappellant as "new" would not be "new" at all.[39] Given how important to the appellant‟s case this evidence is, it is difficult tounderstand how this uncertainty arose. After all, Mr Maynard‟s evidence is at thecore of the new evidence relating to existing use. At best, therefore, this aspect of his evidence is equivocal and it remains unclear exactly when he thought of that similarity and, therefore, uncertain whether the evidence is "new" or not.[40] The respondent makes, in my view, several telling points with regard to Mr Maynard‟s evidence. Firstly, Mr Maynard said that part of the reason he made these further enquiries was some information in the respondent‟s promotional material for a particular product. However, the particular promotional material dates from May 2005 well before the patent opposition hearing. This evidence, therefore, seems to support the proposition that he knew about or could have discovered the new evidence before the opposition hearing.[41] Further, even assuming Mr Maynard did not recall the Carter Holt trial until after the hearing that does not, in my view, make the evidence "new". All of the material that Mr Maynard has now recollected is and was available at the time of the last hearing. The fact that Mr Maynard did not think of this material or did not seethe issues in a particular way does not make the evidence "new".[42] Essentially it involves an expert witness looking back over his evidence perhaps assessing why it has failed and now, at an appeal, wishing to put forward further evidence which he says supports his conclusion. It is an attempt by Mr Maynard to improve on the evidence he gave before the Assistant Commissioner.[43] Further, two of the documents sought to be admitted as "new" evidence (not related to Mr Maynard‟s Carter Holt Harvey evidence) were rejected by the Assistant Commissioner on the basis that the date of publication of the documents had not been established by the appellant before him. Experienced counsel and parties in patent litigation are well aware of the need to prove the publication date of a document relied upon to establish previous publication. In this case the respondent in its counterstatement made it clear it denied publication of the two documents. The appellant was then put on notice of the need to prove publication.[44] When the appellant at the hearing failed to prove publication the Assistant Commissioner unsurprisingly rejected the documents. Part of the proposed new evidence is the publication details of these two articles. I am not prepared to admit this evidence as new evidence. There is no question that with diligence the publication details of these two documents could have been obtained before the last hearing. The appellant could have been in no doubt it had to prove publicationbefore the Assistant Commissioner. It cannot now "fix up" an error or mistake madeat the time of the Assistant Commissioner hearing which it had clear notice of.14[45] My conclusion is, therefore, that none of the evidence proposed is new in the sense intended by such an application. All of the evidence could with reasonable diligence have been found and presented before the opposition hearing.Is the evidence relevant?[46] The second question, therefore, is whether or not the proposed new evidence is relevant in the sense that it relates to the grounds of opposition and appeal.[47] A significant portion of the proposed "new" evidence relates to the prior use claim. As I have previously noted ([16]) prior use was not a ground of opposition before the Assistant Commissioner. In the original grounds of opposition "existing use" was pleaded in opposition. However, in the amended grounds it was abandoned. Presumably there were tactical or other reasons for that abandonment.14 Mediline AGs Patent [1973] RPC 91 at 93.[48] Thus, there is no decision of the Assistant Commissioner relating to prior use. As a result the notice of appeal identifies the four grounds of original opposition ([9]), the Assistant Commissioner‟s rejection of these grounds of opposition and that the appellant wishes to appeal each rejected ground. The alleged errors of law and fact in the notice of appeal relate solely to these grounds. The only mention of prior use comes at the end of the notice of appeal when the appellant notes:[17] Additional evidence, in particular relating to prior use, is only nowcoming to counsel‟s attention. The Appellant is currently pursuingthat evidence and will make an application for leave to file further evidence in support of this appeal as soon as practicable.[49] There are good reasons not to allow any extension of the appellant‟s grounds of opposition at this appeal. As I have noted ([6]–[8]) the Patents Act and Regulations carefully identify pre-hearing obligations and require full identification of grounds of opposition. To allow an additional ground of opposition at an appeal stage is to undermine the statutory regime. Further, it reduces the opposition hearing to a dummy run allowing new grounds of opposition when those nominated do not work. This was not a case of a lay litigant failing to understand a statutory obligation. The appellant was represented by experienced counsel. It made its election as to the grounds of opposition.[50] The vast bulk of the "new" evidence is designed to show prior use. This evidence, therefore, is not relevant given my conclusion that it does not relate to any available appeal ground.Overall justice[51] The appellant submits that given the "new" evidence will be of importance to a decision maker in reaching a decision as to the patent opposition it is in the interests of the appellant and indeed in the wider community and, therefore, in the interests of justice to admit this evidence.[52] I consider the interests of justice strongly favour the respondent‟s position.[53] The respondent says the appellant‟s new evidence identifies seven prior usesand thirteen new documents. The appellant responds that essentially there are only two existing uses and substantially fewer than thirteen new documents.[54] Without deciding whether the proposed new evidence does identify seven existing uses and thirteen new documents, it is clear the proposed new evidence will add substantially to the material that was before the Assistant Commissioner. My impression is that it would at least double by way of volume and importance the evidence before the Assistant Commissioner.[55] If I allow the evidence there can be no question that this will be substantially a new case. It would have to be treated as such. If the new evidence is allowed then this Court would not have the benefit of a first instance decision by a specialist tribunal. The statutory appellate process would also be compromised. The respondent would not have a merit based right of appeal if such evidence was permitted. The appellant, however, irrespective of the outcome has a merit based challenge through revocation proceedings.[56] Further, the appeal without the new evidence would be likely to occupy one to one and a half days and could be heard in this Court speedily. If the new evidence is allowed then there will inevitably be months of delay. The respondent would have to be allowed several months to gather any further response evidence. And there would be an appellant reply right. Given the volume of new evidence already filed it is clear that the patent opposition will turn into a substantive hearing on the merits of the patent. Four days hearing or more are likely to be required.[57] All of the new evidence the appellant has obtained can be used in revocation proceedings. That is the process designed to deal with the substantive merits of a patent application.15 High Court Rule 22.17 provides that revocation proceedings are to be by originating application with evidence by affidavit and cross-examination is permitted. I note High Court Rule 22.19 which, in revocation proceedings, also requires particulars of the objection to the patent to be identified in the pleadings.15 Patents Act, s 41.[58] As the respondent pointed out if the new evidence was allowed the appellant would end up with three de novo challenges to the patent. The first as a "dry run"before the Commissioner, the second on appeal before the High Court (beingallowed to "fix" any inadequacies in its opposition before the Commissioner) and the third revocation proceedings.[59] As I have noted (para [5] to [8]) the process in the Patent Act and Regulations requires the parties, especially the opposer, to closely identify, before hearing, its grounds of opposition, its evidence and the documentary material it relies upon to support its opposition. The opposer, therefore, is on notice that particular care is required in the preparation of this material before hearing.[60] In this case there were two years between the filing of a notice of opposition and the hearing. There was, therefore, ample time for the appellant to give the closest consideration to its case. To allow this evidence now to be read would, therefore, have the effect of undermining the statutory regime for the hearing of patent opposition. If the hearing before the Assistant Commissioner is reduced to a dry run to see how the evidence in opposition holds up before the real battle in the High Court, then the first instance specialist tribunal will be undermined.[61] A further difficulty arises in this case. There is no pleading required at the appellate stage which would mirror the obligations in s 21 and the regulations relating to the identification of the grounds of opposition, the evidence and any relevant documentary material. Thus, without that pleading the respondent issignificantly handicapped in understanding exactly what the appellant‟s case is.[62] I am satisfied, therefore, that the interests of justice also point to refusing the application.[63] In summary, therefore:(a) much if not all of the evidence proposed could, with reasonable diligence, have been discovered before the opposition hearing and is, therefore, not new;(b) most of the proposed evidence is not relevant as it does not relate to an available ground of appeal;(c) it is in the interests of justice that the proposed evidence not be read.[64] The application to have this further evidence read at the appeal is, therefore, refused.Costs[65] Although an interlocutory hearing costs should not await the final appeal hearing. The respondent should file a costs memorandum within ten days and the appellant in reply within a further seven days._________________________Ronald Young JSolicitors:J A Hazel, Baldwins Law Limited, PO Box 5999, Wellesley Street, Auckland,email: aucklandlit@baldwins.comG F Arthur, A J Park, PO Box 949, Wellington, email: greg.arthur@ajpark.com