No Anshun Estoppel in Fourth VMS Validity Challenge

Orikan Group Pty Ltd v Vehicle Monitoring Systems Pty Limited [2023] FCA 1031

29 August 2023

Federal Court of Australia

O’Bryan J

Highlight

The Federal Court considered for the first time post-RTB, whether Anshun estoppel operates to prevent a cross-claimant for patent revocation raising arguments it did not raise in a previous opposition to grant of the same patent, or in subsequent Federal Court appeals.  In finding that no Anshun estoppel exists, the Court placed significance on the fact that that the revocation challenge was in defence to infringement proceedings, but it left open whether the answer would be different if the revocation suit was not by cross-claim.

Background

Orikan Group Pty Ltd (Orikan), is the registered owner of the patent in suit AU2013213708 titled “Vehicle Detection” (Patent), assigned to it from SARB (a related entity) in 2022.

Orikan alleged infringement by Vehicle Monitoring Systems Pty Ltd (VMS) in connection with the manufacture, sale and use of in ground vehicle detection sensor units dating back to 2013.  VMS denied infringement and filed a cross-claim for revocation of the patent.  This decision concerns an interlocutory application by Orikan for a stay of the cross-claim on the basis of Anshun estoppel or strikeout as an abuse of process in light of the fact that VMS did not (but could have) raised the same invalidity grounds in earlier opposition proceedings or subsequent Federal Court appeals.

The dispute is part of a longstanding and multipronged commercial dispute between the parties relating to several patents to vehicle monitoring devices, including:

1. 2011 VMS Infringement Proceedings: The first spat between the parties occurred in 2011, when VMS sued SARB for infringement of a VMS patent titled “Method, apparatus and system for parking overstay detection”, and SARB cross-claimed for revocation. Judgment was delivered in May 2013 in favour of VMS.
    
2. 2012 SARB Innovation Patent Proceedings: Infringement proceedings commenced by SARB against VMS for infringement of an innovation patent titled “Vehicle detection”. Both that innovation patent and the Patent claim priority to the same 2008 parent application, and the claims overlap considerably.  VMS cross-claimed for revocation.  The dispute settled in 2014.
    
3. 2016 VMS Opposition Proceedings: Unsuccessful VMS pre-grant opposition filed in 2016 against the Patent. VMS’s 2018 appeal to the Federal Court was decided in March 2020 to the same effect.  VMS appealed again to the Full Federal Court and its decision delivered in December 2021 again rejected the opposition. We reported on that decision in our 2021 Patent Case Summary.  The patent granted in January 2022 and was assigned to Orikan in May that year.
    
4. 2022 Orikan Infringement Proceedings: The same year the Patent was granted and then assigned to Orikan by SARB, Orikan brought proceedings against VMS for infringement of the Patent, and VMS cross- claimed for revocation.

Orikan’s interlocutory application for stay (based on Anshun estoppel) or strike (based on abuse of process) which we report on here was based on VMS’s cross-claim for revocation raising invalidity grounds in the 2022 Orikan Infringement Proceedings (these proceedings) which it had not previously raised in the 2016 opposition proceedings or the two subsequent appeals, in which it challenged the same Patent.  Importantly, there was substantial overlap between the invalidity grounds raised in this revocation cross-claim and that in the 2012 innovation patent proceedings.

Orikan’s application was unsuccessful and it did not appeal the decision.

Key Issues

Anshun estoppel is a common law principle that precludes a party from raising an issue of fact or law in a subsequent proceeding, if the later proceeding was “so connected with the earlier proceeding that it would have been unreasonable” not to raise the issue in that earlier proceeding.  Anshun estoppel will only apply if the issue could have and should have been raised in the earlier proceeding.  The question for the Court is whether it was “unreasonable to defer” the challenge, which depends “not so much on legalities, but on practicalities” (paragraph 27).

VMS accepted that it could have raised the current particulars of invalidity in the 2016 opposition proceedings, but not that it should have.  VMS submitted that employing the various avenues to challenge validity made available under the Patents Act 1990 (Cth) should not count against it.  VMS argued that it was not unreasonable to have relied on more limited grounds in the initial opposition before the Patent Office, as compared to the more ‘expansive approach’ taken in the cross-claim in both these proceedings and the 2012 innovation patent proceedings, submitting this was in fact an efficient use of judicial resources.

The Court has power under r16.21(1)(f) of the Federal Court Rules 2011 (Cth) to strike out proceedings for an abuse of process.  The Court made clear that there is no hard and fast rule; rather a broad, merits-based judgment is required, taking into account public and private interests and all the facts of the case and facilitating efficient resolution of disputes.

Orikan’s application for the strikeout was based on the time, cost and inefficiencies arising from the invalidity cross-claim in these proceedings being the fourth challenge to the validity of the Patent, and having already challenged the validity of the same subject matter in the 2012 innovation patent proceedings.  VMS submitted that the Patent assignment from SARB to Orikan occurring between the Federal Court decision in the 2016 opposition proceedings and these proceedings meant that neither had suffered harassment or unjustifiable oppression.  It again made the argument that it was not unreasonable to rely on different statutory routes to challenge the validity of a patent.

Outcome

The Court held that no Anshun estoppel operated to prevent VMS running its invalidity cross-claim.  First, there was no risk of inconsistent judgments, since if VMS were to succeed in the cross-claim, it would be on a different basis to any decision in the 2016 opposition proceedings.  Further, any cost relating to the additional particulars was not in fact additional, since Orikan’s position was essentially that they should have been raised anyway, only earlier.

The Court held there was no abuse of process for the same reasons.

Implications

The question of whether Anshun estoppel operates to prevent a subsequent validity challenge following a failed opposition under the pre-RTB Act was answered in the negative by the Full Court in Genetics Institute Inc v Kirin-Amgen Inc [1999] FCA 742.

The pre-RTB standard of proof required for oppositions and appeals to the Federal Court (‘practically certain’) then differed from that required in revocation cases (‘balance of probabilities’).  But the standard of proof required in oppositions and appeals post-RTB (‘balance of probabilities’) is now aligned with that required in a revocation suit.  Therefore, notwithstanding Genetics Institute, the question of whether Anshun estoppel would operate post- RTB has been one for Australian patent lawyers to debate since the RTB reforms came into effect.

In this case, a single judge of the Federal Court considered – for the first time post-RTB – whether Anshun estoppel operates to prevent a party raising in a revocation cross-claim arguments not raised in a previous opposition or Federal Court appeal from the opposition decision.  In finding that no Anshun estoppel exists, and despite the same standard of proof applying, it was significant that the revocation challenge was in defence to an infringement allegation.  Anshun estoppel did not prevent a revoker holding back arguments from an opposition and any subsequent appeals, keeping them “up its sleeve” for a subsequent revocation challenge as a “shield” to an infringement suit.

The Court left open whether the answer would be different for a revocation suit other than by cross-claim.  Because VMS had not previously raised these substantive arguments, legal questions relating to the applicability of issue estoppel and res judicata (in short, “asked and answered”) were saved for another day.

The distinction the Court drew between a revocation challenge initiated by the revoker (which remains an open question) and a revocation case as a “shield” to an infringement suit (which the Court addressed here) seems, with respect, to be splitting hairs.

About Pearce IP

Pearce IP is a boutique firm offering intellectual property specialist lawyers, patent attorneys and trade mark attorneys to the life sciences industries (in particular, pharmaceutical, biopharmaceutical, biotech, ag-tech and food tech).  Pearce IP is the 2021 ‘Intellectual Property Team of the Year’ (Lawyers Weekly Australian Law Awards) and was shortlisted for the same award in 2022.  Pearce IP is ranked in IAM Patent 1000 and Managing IP (MIP) IP Stars, in Australasian Lawyer 5 Star Awards as a ‘5 Star’ firm, and the Legal 500 APAC Guide for Intellectual Property.

Our leaders have been recognised in virtually every notable IP listing for their legal, patent and trade mark excellence including: IAM Patent 1000, IAM Strategy 300, MIP IP Stars, Doyles Guide, WIPR Leaders, 5 Star IP Lawyers, Best Lawyers, and Australasian Lawyer 5 Star Awards, and have been honoured with many awards including Australian Law Awards – IP Partner of the Year, Women in Law Awards – Partner of the Year, Women in Business Law Awards – Patent Lawyer of the Year (Asia Pacific), Most Influential Lawyers (Changemaker), among other awards.