Interlocutory injunction Granted to Restrain Alleged Patent Infringement in New Zealand

Inguran, LLC & Ors v CRV ltd & Ors [2023] NZHC 3692 (14 December 2023, reissued 22 December 2023)

Introduction

The High Court of New Zealand is only rarely called on to determine applications for interlocutory injunctions in proceedings alleging patent infringement.  The decision in this case was that, despite taking more than a year to commence proceedings, the applicants were entitled to an injunction, albeit one that would expire in less than four months’ time.  Some of the specific findings suggest that New Zealand law may be inconsistent with that in comparable common law jurisdictions such as Australia.

Background

The parties are each interested in technology relating to sex-sorting of bull semen.

The allegedly infringing conduct appears to have been made public from at least February 2022.  Proceedings were not commenced until May 2023, being served in June 2023 along with cease-and-desist demands expiring on 30 June 2023.  The interlocutory injunction application was not made until 21 July 2023.  The matter was heard in November and December 2023.  Judgment was issued on 14 December 2023, and then re-issued following further submissions on 22 December 2023.

The plaintiffs’ injunction application related to alleged infringement of three New Zealand patents, two owned by Inguran, LLC expiring in March 2024 and one by Cytonome/ST, LLC not expiring until 2034.  The application was initially described in the decision as being for an injunction “pending trial” but also said to be for an injunction running until “16 months after the earlier patents’ expiry”.

A third plaintiff, STGenetics New Zealand Ltd (STgenetics) was also named.  It was neither the owner nor exclusive licensee of any relevant patent.  It claimed standing on the basis that it was suffering loss in New Zealand due to the allegedly infringing conduct of the defendants.

The defendants comprised two groups; Genus ABS (NZ) Ltd, ABS Global, Inc, and Genus PLC (together, the ABS defendants) which provide semen sorting technology in competition with the plaintiffs; CRV Limited and CRV International BV (together, the CRV defendants) which were users in New Zealand of the ABS technology.

The ABS defendants cross-applied to the Court to partially dismiss and otherwise stay the proceedings including on the basis that a December 2022 settlement agreement barred the infringement claims.  That agreement was subject to the law and exclusive jurisdiction of Wisconsin, USA.  Proceedings relating to that agreement were pending in Wisconsin, including to determine if the agreement barred this New Zealand proceeding.  Related litigation has occurred in other jurisdictions since 2014.

Injunction application – Key issues and findings

The Court sought to apply established law to the question of whether to grant an interlocutory injunction:

• The Court granted an injunction but only until the March 2024 expiry of the two earlier patents, on the basis that any springboard losses after that time could be compensated for by damages (should the interlocutory injunction be found to have been wrongly granted at the final hearing).  It does not appear to have been argued by the parties or considered by the Court whether the later patent could support an injunction running beyond the expiry of the earlier patents.  Nor was there any discussion of the likely timing of a substantive trial.
• There seems to have been extensive and contested expert evidence concerning the lengthy patent specifications and the alleged infringing activity. The Court, perhaps unsurprisingly, found that it could not easily determine the issues of infringement, so there was at least a serious question to be tried on those points.  Although each patent was considered in this analysis, the Court did not separately identify what serious question the third plaintiff had to be tried.
• Determining whether the infringement claim was barred by the Wisconsin agreement was a matter of interpreting whether the allegedly infringing activities fell within descriptions used in the agreement.  Again, the Court was unable to determine this issue, leaving it as a serious question to be tried.
• It appears that at least some of the defendants had not pleaded any defence based on invalidity of the asserted patents.  In any event, validity was not expressly dealt with in the consideration of whether there was a serious question to be tried.
• In considering the balance of convenience, the Court said that “patent cases carry a particular weight in favour of grant [of an interlocutory injunction].  That is because the usual disqualifying aspect of adequate damages has less materiality by reason of patents’ conferral of a statutory monopoly” the advantage of which may be “lost to infringing competition and such lost opportunity may not be adequately compensated for in damages”.  The case cited in support of that proposition, Congoleum Corporation Ltd v Poly-Flor Products (NZ) Ltd [1979] 2 NZLR 560, is one in which all three judges of the Court of Appeal each found a “strong, prima-facie case” for both infringement and validity of the patent in question.  Future cases may need to explore the weight carried by this proposition in differing circumstances.
• Balance of convenience issues appear to have been addressed only in the context of the proposed injunction expiring in March 2024, despite the application seeking a significantly longer period.
• The Court held that 16 months’ delay in seeking an injunction was acceptable in circumstances where the defendants had commenced business with knowledge of the relevant patents and the consequent risk, and there had been ongoing negotiations.  The judge also thought it relevant that two of the patents had only a few months remaining before expiry (the judge did not separately consider the position in respect of the later patent which had over a decade to run before final expiry).
• The Court considered that the long-running overseas litigation meant that the status quo should be taken as being the position before the defendants began business in New Zealand.
• Somewhat unusually, the terms of the injunction were not determined in the judgment as first issued but were included as a schedule to a re-issued judgment following further memoranda from the parties and a judicial conference.

The grant of the injunction is said to be “on condition of each plaintiff’s signed undertaking otherwise in terms of r 7.54(1) of the High Court Rules 2016 to be filed”.  It is not clear whether any plaintiff had not already filed this undertaking as to damages, which under the Rules ought to be filed with any injunction application, or if the word “otherwise” means there was some modification needed to undertakings already filed.

Defendants’ application to stay proceedings – Key issues and findings

The Court also considered the ABS defendants’ application to stay the proceedings based on the 2002 Wisconsin agreement.  That agreement is subject to Wisconsin state law and confers exclusive jurisdiction on that state’s courts to deal with any dispute arising out of or in connection with the agreement.  ABS appears to have argued that:

(a) The Wisconsin agreement meant that the New Zealand courts did not have jurisdiction.  It is not clear whether this position was based simply on the agreement barring the proceedings, or whether it was argued that the New Zealand infringement claims were a dispute “arising out of or in connection with” the agreement and subject to the exclusive jurisdiction clause;

(b) Particular parties lacked sufficient connection to New Zealand for its courts to have jurisdiction;

(c) STgenetics New Zealand Ltd lacked standing to sue for infringement as it was neither the owner nor exclusive licensee of any pleaded patent; and

(d) If the New Zealand courts did have jurisdiction, the proceedings should be stayed pending determination by Wisconsin courts whether the 2002 agreement prohibited the issue of the New Zealand proceeding.

The key findings of the Court were as follows:

• The ABS defendants’ stay application failed.
• The Wisconsin agreement did not prevent the New Zealand courts determining either the substantive infringement claims or the interlocutory applications.  The Court said the Wisconsin court had no jurisdiction to enforce New Zealand patents or to provide interim relief.
• A Wisconsin court ruling that the plaintiffs had breached the Wisconsin agreement by issuing the New Zealand infringement claims would not necessarily be accepted by the New Zealand court as a defence to those infringement claims.
• The Court appears to have said, although it is not clearly expressed, that although there was a risk that any eventual Wisconsin ruling could be relevant to the substantive determination of at least part of the New Zealand proceeding, that did not require an immediate stay of the entire New Zealand proceeding.  The Court appears to have invited a more limited application at a later date for a more limited stay, presumably when any risk becomes more apparent.
• New Zealand jurisdiction over the foreign defendants was relatively easily established under the relevant High Court Rules.

The judge said he did “not understand” the defendants’ claim that STgenetics was “lacking ‘standing’, as being neither the patentee nor exclusive licensee of any of the NZ patents”.  His Honour held that standing arose under High Court Rule 4.2(1) based on the allegation that this plaintiff had a right to relief.  The judge appears to be of the view that this rule applied notwithstanding section 148(1) of the Patents Act 2013 (NZ) which expressly reserves the right to bring patent infringement proceedings to the owners and exclusive licensees of patents only.  It is respectfully suggested that this view negates the effect of section 148(1) and it should not be the preferred interpretation.  It may well be that a proper claim could have been formulated by this plaintiff that avoided the standing issue and related to the same damage.  For example, the economic tort of causing loss by unlawful means.  In any event, there could also have been benefit to the defendants in having a New Zealand domiciled plaintiff that will be liable under its undertaking as to damages should the injunction prove to have been wrongly granted.

Takeaways

One must be cautious not to put too much weight on interlocutory decisions which, by their nature, are argued and decided on relatively tight timeframes and without the benefit of full evidence.  However, points of interest to those likely to be involved in New Zealand patent litigation include the following:

• The suggestion that the existence of a granted patent in itself strongly favours the grant of a preliminary injunction.  This is not the case in comparable common law jurisdictions such as Australia;
• The finding that quite significant delay in seeking a preliminary injunction is not fatal where the alleged infringer was proceeding in business with its eyes open to the risk of infringement proceedings (even if the injunction is to have a very short lifespan).  Again, in comparable common law jurisdictions such as Australia it is likely that the significant delay here without any apparent cogent explanation for the delay would have weighed heavily against the grant of an injunction; and
• The finding that a party other than a patent owner or exclusive licensee can be at least a joint plaintiff in infringement proceedings.

This proceeding has been discontinued, so unfortunately none of the specific findings above will be revisited either on appeal or as part of a substantive trial.  Given the relative rarity of decisions of this type in New Zealand, there is a real possibility that these issues will not receive further judicial attention for some time.  Any disparity between this decision and comparable foreign law, or previous understandings of New Zealand law, may not be soon resolved.

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