Patent preliminary discovery in Australia

Quick summary of preliminary discovery in patent cases

Yes. Under rule 7.23 of the Federal Court Rules 2011 (Cth), a patentee or exclusive licensee can obtain documents from a suspected infringer before suing. It must reasonably believe it may have a right to relief, have made reasonable inquiries without getting enough information to decide, and show the documents would help it decide.

Key insights

Preliminary discovery lets a prospective applicant obtain documents from a prospective respondent before starting a proceeding.
The applicant’s belief must be reasonable, and it is about what may be the case, not what is the case.
An application is not a mini-trial, and the applicant does not have to prove infringement.
It is most useful where a method or composition is secret, so public information cannot show whether the patent is infringed.
The Court can narrow the orders, require security for the costs of compliance and protect the respondent’s confidential information.

In Sovereign Hydroseal Pty Ltd v Steynberg [2020] FCA 1084 (Sovereign), the exclusive licensee of a patented method for sealing cracks in concrete suspected that a former employee was using the method in his own waterproofing business. Public information showed the two processes looked very similar, but not what was in his sealing compound. The Federal Court held that Sovereign was entitled to preliminary discovery to find out, subject to narrowing the orders or giving security for the costs of compliance.^[1] This article explains how preliminary discovery works under the Federal Court Rules 2011 (Cth) (Rules) and what Sovereign shows for patent owners. For an overview of how we help, see our patent infringement lawyers page.

——— The rule

What is preliminary discovery?

Preliminary discovery is a court order that requires a person to hand over documents before any proceeding has started, so a prospective applicant can decide whether to sue. In the Rules, a prospective applicant is a person who reasonably believes there may be a right to obtain relief against someone who is not yet a party to a proceeding.^[2]

The Rules provide two kinds of order. Rule 7.22 is used when the applicant does not know who the wrongdoer is, and requires another person to help identify them.^[3] Rule 7.23 is used when the wrongdoer is known, and requires that person to give discovery of documents relevant to whether the applicant has a claim.^[4]

	Rule 7.22 – identity	Rule 7.23 – prospective respondent
Purpose	Find out who the prospective respondent is	Decide whether to sue a known prospective respondent
Who gives discovery	Another person who knows, or holds documents about, the respondent’s identity	The prospective respondent
What can be ordered	Oral examination about the description, production and discovery of documents about it	Discovery of documents directly relevant to whether there is a right to relief
Typical use	An internet service provider identifying account holders	A suspected infringer’s technical documents, formulations or sales records

In Pfizer Ireland Pharmaceuticals v Samsung Bioepis AU Pty Ltd (Pfizer), the leading Full Federal Court decision on the rule, Allsop CJ described rule 7.23 as a beneficial provision, the purpose of which is to let a person obtain information to make a responsible decision about whether to start proceedings.^[5]

In short, preliminary discovery lets a patent owner look before it leaps, by obtaining documents before committing to infringement proceedings.

——— The test

What must a patentee show to get preliminary discovery?

A patentee must show a reasonable belief that it may have a right to relief, that it has made reasonable inquiries without getting enough information to decide whether to sue, and a reasonable belief that the respondent holds documents that would help it decide.^[6]

Rule 7.23(1) requires the prospective applicant to:

reasonably believe that it may have the right to obtain relief in the Court from a prospective respondent whose description has been ascertained;
after making reasonable inquiries, not have sufficient information to decide whether to start a proceeding to obtain that relief; and
reasonably believe that the prospective respondent has, or is likely to have, or had, documents directly relevant to whether it has a right to relief, and that inspecting them would assist in making the decision.

The belief must be reasonable, and it is about something that may be the case, not something that is the case. In Pfizer, Allsop CJ warned against re-expressing the test with words such as “suspicion” or “speculation”.^[7] A belief is reasonable if it is founded on considerations or views that are reasonably open, even if others contest them, but not if it rests on considerations that are unreasonable, untenable, irrational or baseless.^[8]

An application is not a mini-trial. To a certain extent, the rule authorises a “fishing expedition” so the applicant can find out whether it has a case.^[9] To defeat an application, the respondent generally has to show that the applicant does not actually hold the belief, or that there is no reasonable basis for thinking there may be a case.^[10]

The application is made by originating application, supported by an affidavit stating the facts relied on and identifying, as precisely as possible, the documents or categories of documents sought.^[11]

In short, the patentee does not have to prove infringement, but it does need evidence that makes its belief a reasonable one.

——— The case

Why did the Court grant preliminary discovery in Sovereign?

Because what was in the respondent’s sealing compound was not public, the patentee had no other way to find out whether it fell within the patent, and the evidence it did have made its belief reasonable.

Sovereign was the exclusive licensee of a patent for a method and composition for sealing passages such as cracks, joints and voids in concrete structures and geological formations; the two patentees joined the application. Mr Steynberg had worked for Sovereign in 2008 and 2009, and Sovereign’s evidence was that he had been trained in its sealing method and had access to its confidential information.^[12] Sovereign had pursued him before: a preliminary discovery application in 2011 was resolved when his then company consented to provide documents, and proceedings in 2013 over an earlier, now expired patent settled with consent orders restraining infringement.^[13]

In late 2019, Sovereign learned that Mr Steynberg was running a business called H2O Seal. The Court weighed the evidence as follows:

Information from an unnamed potential customer was hearsay and given no weight, except to explain why Sovereign made further inquiries.^[14]
Photographs in an H2O Seal flyer did not reveal Sovereign’s confidential information; it was the words used in the flyer that could support Sovereign’s belief.^[15]
A private investigator obtained an email in which Mr Steynberg described “a natural nanotechnology rubber grout” injected under pressure, which matched his earlier website’s description of a “blend of rubber emulsions”. He had also written that he was carrying on the same business as before the consent orders.^[16]

It was not disputed that Sovereign had made reasonable inquiries, including internet searches and the investigation.^[17] Mr Steynberg had refused Sovereign’s request for documents, although the Court agreed that the deadline in the demand letter had been unreasonably short.^[18]

The Court found that, while none of the evidence proved Mr Steynberg was using the same method and composition, the two processes appeared on their face to be very similar, and there was no other way to find out what was in his sealing composition. Sovereign was entitled to test it.^[19] Mr Steynberg’s evidence that he did not know about the patent was no answer to an application aimed at helping Sovereign decide whether to sue.^[20] The Court decided the application on the possible patent infringement claim alone, without relying on the breach of confidence and contract claims.^[21]

In short, words in marketing material and correspondence, combined with the respondent’s history and the lack of any public information about the composition, were enough for a reasonable belief.

——— Safeguards

How does the Court protect the respondent?

The Court balances the applicant’s need for information against the cost and intrusion for the respondent, and it has several tools to do so.

Security

Security for the costs of compliance

A respondent can ask for security for the costs of giving discovery and complying with the orders. In Sovereign, the orders sought were “quite expansive”, and the Court’s tentative view was that security should be given if Sovereign pressed for orders of that width.^[22]

Scope

Narrower orders

The Court held that Sovereign was entitled to the orders it sought only subject to security or a sufficient reduction in their scope, and gave the parties time to agree the terms.^[23]

Confidentiality

Protecting the respondent’s secrets

The Court accepted that the respondent’s own intellectual property had to be weighed, and noted that Sovereign had proposed a conventional confidentiality regime to deal with it.^[24]

Costs

Who pays for the application

A respondent can also ask that the applicant pay its costs and expenses. The Court raised the option of the applicant paying the respondent’s costs unless it started proceedings within a set period.^[25]

Privilege is also preserved: a respondent does not have to produce a document it could withhold on the ground of privilege in an ordinary proceeding.^[26]

In short, preliminary discovery is not free or unlimited, and an applicant who asks for too much should expect to pay for it.

——— Next steps

What happens after preliminary discovery?

The respondent files a list of documents, the applicant inspects them, and the applicant then decides whether to start infringement proceedings.

A person ordered to give preliminary discovery must file a list of documents. The applicant can then apply to have the documents produced for inspection and can copy them at its own expense.^[27]

If the documents support a claim, infringement proceedings may be started by the patentee or an exclusive licensee. If an exclusive licensee sues, the patentee must be joined as a party.^[28] Proceedings must be started within three years from the grant of the patent or six years from the infringing act, whichever ends later.^[29]

The court can grant an injunction and, at the patentee’s option, damages or an account of profits, with additional damages in serious cases.^[30] A court may refuse damages or an account of profits if the defendant proves it was not aware, and had no reason to believe, that the patent existed, but that does not prevent an injunction.^[31]

In short, preliminary discovery is a step towards a decision, and the usual time limits for infringement proceedings keep running while it happens.

Suspect a competitor is using your patented method? Dundas Lawyers advises patent owners on preliminary discovery and infringement proceedings. Call 07 3221 0013 or submit an enquiry online.

——— Practical tips

Practical tips for patent owners seeking preliminary discovery

Do your own inquiries first

Search websites, brochures and public records, and consider an investigator, so you can show the Court what you could and could not find.

Ask before you apply

Write to the suspected infringer asking for the information, and give a realistic time to respond.

Be precise about documents

Identify the documents or categories you need, such as data sheets, formulations and sales records, as precisely as you can.

Keep the request proportionate

Broad orders invite a request for security for the costs of compliance, so ask only for what you need to decide.

See also our article on preliminary discovery procedures in the Federal Court.

Frequently asked questions about preliminary discovery in patent cases

What is the difference between preliminary discovery and ordinary discovery?

Preliminary discovery happens before a proceeding starts, to help a prospective applicant decide whether to sue or identify who to sue. Ordinary discovery happens within a proceeding that has already started, between the parties to it.

Do I have to prove infringement to get preliminary discovery?

No. You need a reasonable belief that you may have a right to relief. The application is not a mini-trial, but the belief must rest on evidence that makes it reasonable, not on considerations that are baseless.

Can I get preliminary discovery if I do not know who the infringer is?

Yes. A separate rule lets the Court order another person, such as an internet service provider, to help identify a prospective respondent whose identity you cannot find out yourself.

Who pays for preliminary discovery?

The respondent can ask the Court to order the applicant to give security for, or pay, its costs of compliance. In Sovereign, the Court’s tentative view was that security should be given if the patentee pressed for the broad orders it had sought.

Will the other side’s confidential information be protected?

Usually, yes. The Court weighs the respondent’s own confidential information and intellectual property, and orders are commonly made with a confidentiality regime. Privileged documents do not have to be produced.

How long do I have to sue for patent infringement?

Under the Patents Act, infringement proceedings must be started within three years from the grant of the patent or six years from the infringing act, whichever ends later.

Key takeaways about preliminary discovery in patent cases

Preliminary discovery lets a patent owner obtain documents before deciding whether to start infringement proceedings.
The test is a reasonable belief that the owner may have a right to relief, after reasonable inquiries, and that the documents would help it decide.
In Sovereign, similar public descriptions, the respondent’s history and a composition that was not public were enough for a reasonable belief.
The Court can narrow the orders, require security for costs and protect the respondent’s confidential information.
After discovery, the owner must still decide whether to sue within the Patents Act time limits.

Need advice about a suspected patent infringement? Call Dundas Lawyers on 07 3221 0013 or submit an enquiry online.

Our approach to preliminary discovery

Dundas Lawyers acts for patent owners and for businesses facing preliminary discovery applications. We gather the public evidence first, frame the documents sought tightly so the application is proportionate, and plan the next step before the documents arrive, so the client can decide quickly whether to sue.

Links and further references

Legislation

Federal Court Rules 2011 (Cth) rr 7.21–7.29
Patents Act 1990 (Cth) ss 120, 122, 123

Cases

Pfizer Ireland Pharmaceuticals v Samsung Bioepis AU Pty Ltd [2017] FCAFC 193; (2017) 257 FCR 62
Sovereign Hydroseal Pty Ltd v Steynberg [2020] FCA 1084

Further information

If you need advice on your rights as a patent owner or on a preliminary discovery application, contact us for a confidential and obligation‑free discussion.

Malcolm Burrows B.Bus.,MBA.,LL.B.,LL.M.,MQLS.
Legal Practice Director
T: +61 7 3221 0013 (preferred)
M: +61 419 726 535
E: mburrows@dundaslawyers.com.au

Disclaimer

This article contains general commentary only. You should not rely on the commentary as legal advice. Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

[1] Sovereign Hydroseal Pty Ltd v Steynberg [2020] FCA 1084, [67]–[68], [72] (‘Sovereign’).

[2] Federal Court Rules 2011 (Cth) r 7.21.

[3] Ibid r 7.22.

[4] Ibid r 7.23.

[5] Pfizer Ireland Pharmaceuticals v Samsung Bioepis AU Pty Ltd (2017) 257 FCR 62, [4] (Allsop CJ), quoted in Sovereign (n 1) [11] (‘Pfizer’).

[6] Federal Court Rules 2011 (Cth) r 7.23(1).

[7] Pfizer (n 5) [8], quoted in Sovereign (n 1) [11].

[8] Sovereign (n 1) [13], citing Pfizer (n 5) [69].

[9] Sovereign (n 1) [12], citing Pfizer (n 5) [2], [108]–[109], [119].

[10] Sovereign (n 1) [14], citing Pfizer (n 5) [121].

[11] Federal Court Rules 2011 (Cth) r 7.24.

[12] Sovereign (n 1) [3], [17]–[19].

[13] Ibid [22]–[23].

[14] Ibid [27], [41].

[15] Ibid [45].

[16] Ibid [29], [55]–[56], [60]–[62].

[17] Ibid [33].

[18] Ibid [30], [34].

[19] Ibid [67]–[68].

[20] Ibid [69].

[21] Ibid [15], [26].

[22] Ibid [70]–[72]; Federal Court Rules 2011 (Cth) r 7.29(a).

[23] Sovereign (n 1) [72], order 1(a).

[24] Ibid [66].

[25] Ibid [73]; Federal Court Rules 2011 (Cth) r 7.29(b).

[26] Federal Court Rules 2011 (Cth) r 7.26.

[27] Ibid rr 7.25, 7.27–7.28.

[28] Patents Act 1990 (Cth) s 120(1)–(2).

[29] Ibid s 120(4).

[30] Ibid s 122(1)–(1A).

[31] Ibid s 123(1).

Can a patent owner get preliminary discovery before suing?