IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-006076 [2013] NZHC 2418

BETWEEN	MERIAL LIMITED
First Plaintiff

MERIAL NEW ZEALAND LIMITED
Second Plaintiff	
AND	BAYER NEW ZEALAND LIMITED
First Defendant

THE UNIVERSITY OF OTAGO
Second Defendant	

Hearing:	16 September 2013 (by telephone)	
Appearances:	C Elliot QC and K T Glover for Plaintiffs
J Miles QC, J Baigent and J C Dickson for First Defendant C T Walker and B Tompkins for Second Defendant	
Judgment:	16 September 2013	
Reasons:	16 September 2013	

REASONS FOR JUDGMENT OF VENNING J
On application to stay

This judgment was delivered by me on 16 September 2013 at 5.00 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date……………

Solicitors:	Ellis Terry (Terry IP), Wellington
Simpson Grierson, Auckland Gilbert Walker, Auckland
Copy to:	C Elliott QC, Auckland J Miles QC, Auckland

MERIAL LIMITED v BAYER NEW ZEALAND LIMITED [2013] NZHC 2418 [16 September 2013]

Introduction

[1] The plaintiffs apply to stay these proceedings until further order of the Court pending the determination of the opposition proceedings before the Intellectual Property Office of New Zealand (IPONZ).

[2] The application is opposed by the first defendant. The second defendant abides the decision of the Court.

[3]  The application was conducted at a teleconference.  Written submissions were exchanged in advance. At the conclusion of the hearing I declined the stay with reasons to follow. These are the reasons.

Background

[4] The background to the proceedings is set out in the judgment of this Court delivered on 28 August 2013 on the defendant’s application to strike out the plaintiff’s fourth cause of action. I take the background from that judgment. It is unnecessary to repeat it in this judgment.

[5] Following the delivery of that decision the plaintiffs made the current application.

Plaintiffs’ submissions

[6] The plaintiffs submit that, following the Court’s ruling on the strike-out application, the issue of entitlement will be determined in the IPONZ opposition proceedings which were commenced on 30 August 2010 but are currently stayed. The plaintiffs submit that the determination on the question of entitlement will be a fundamental issue in the High Court proceedings. Mr Elliott QC referred to the correspondence between the patent attorneys referring to that issue. The plaintiffs argue that at the least the IPONZ proceedings will at least clarify the parties’ positions in terms of liability and quantum. In particular the outcome of the IPONZ proceedings will determine whether the plaintiffs have suffered any damage as a result of the misuse of the alleged  confidential information.   They submit that

determination of the IPONZ proceedings may even resolve issues  between  the parties to these proceedings and obviate the need for a fixture in these proceedings.

[7] The plaintiffs submit that if the High Court proceedings are tried prior to determination of the entitlement and validity issues at IPONZ, this would be costly and an inefficient and unnecessary use of resources of the parties and/or the Court.

[8] The plaintiffs submit that it is in the interests of justice a stay be granted because it is the most direct and efficient means of determining the real controversy between the parties, which is the question of entitlement.

[9] The plaintiffs also make the submission that a stay will eliminate or significantly reduce the risk of inconsistent findings of fact and/or law.

Defendants’ submissions

[10] The first defendant opposes the application on the grounds that it will not be efficient to stay these proceedings and the plaintiffs should be held to its election to pursue them. It makes the point the notice of opposition at IPONZ was lodged by Merial Limited (US) (not the first plaintiff) and Merial then sought and obtained a stay of the IPONZ proceedings. These proceedings were not issued until approximately a year later.

[11] When initially issued the proceedings only contained the three causes of action which are now before the Court:

breach of contract;

breach of duty of confidence; and

proprietary constructive trust.

[12] The first defendant submits (and the plaintiffs now accept) the proceedings in IPONZ were not stayed by consent but rather were stayed by the IPONZ at the request of Merial Ltd (US).

[13] The first defendant makes  the  point it has directed significant resources towards defending the High Court proceedings and preparing for the three week trial scheduled to commence 11 November 2013. A stay of the High Court proceedings would leave serious allegations against the first and second defendants unresolved for an indefinite period of time. It also submits it would be unreasonable for the plaintiffs, having effectively requested the stay of the opposition proceedings in order to achieve a final decision in the High Court, to reverse that election a week prior to their evidence being due.

[14] It makes the point that the High Court proceedings and the opposition proceeding are separate and distinct proceedings and there are no causes of action in common, therefore a stay of the High Court proceedings would perform no beneficial function.

Decision

[15] In support of the application the plaintiff refers to rr 10.12, 10.13, and 15.1. With respect the reliance on those Rules is misconceived. Rule 10.12 provides that where there are two or more proceedings the Court may order any one of them be stayed until determination of any other of them.   The proceedings referred to in r 10.12 are however proceedings before the Court.1 The Court is the High Court, not IPONZ.

[16] Further, r 15.1, which also provides for a stay (as an alternative to strike-out) applies where there is no reasonably arguable cause of action; or the proceedings are likely to cause prejudice or delay; or they are frivolous or vexatious; or otherwise an abuse of the process of the Court. I doubt the plaintiffs would categorise their proceedings in those ways.

[17] However, I note r 15.1 does not affect the Court’s inherent jurisdiction. The Court clearly has inherent jurisdiction to stay the proceedings if to do so is in the interests of justice. I approach determination of the application on that basis.

1	High Court Rules, r 1.3 Interpretation.

[18] The determinative issue on this application is whether,  as  the  plaintiffs submit, the ruling on the IPONZ opposition proceedings on the issue of entitlement will have a fundamentally important effect on the proceedings before this Court.

[19]   The IPONZ proceedings will resolve the issue of whether the first defendant is entitled to a patent in the teat seal process described in its application.

[20]   The first defendant’s opposition to the grant of such patent is on the grounds of obtaining, prior publication, prior claiming, prior use, obviousness by publication, obviousness by use, not an invention and insufficiency. The very reason those matters are before the IPONZ is the specialist nature of that Tribunal and its ability to determine those issues. It is not necessary for those proceedings to be determined before the issues before this Court can be resolved.

[21] A review of the opposition proceedings confirms that it is only on the issue of obtaining that there is any potential overlap at all. However the objections on the basis of prior publication, prior claiming, prior use, obviousness by publication, obviousness by use, not an invention, and insufficiency, are matters outside the issue of obtaining or entitlement.

[22] Whether the information from the 2000 research project is sufficiently confidential to support the causes of action in these proceedings is a different issue to whether the first defendant is entitled to the grant of patent or whether the grounds of opposition can be made out.

[23] Further, it appears from counsels’ submissions and the discussion about evidence that the plaintiffs’ relief, if successful in these proceedings, is likely to be limited to declaratory relief, or an inquiry into damages.

[24] While there is the limited degree of overlap to that extent, the Court could, in these proceedings, determine the issues raised by the pleadings without infringing on the jurisdiction of the IPONZ in dealing with the issue of entitlement. Merial’s pleading is sufficiently broad that the allegedly misappropriated information is not necessarily limited to the information in the patent application itself.

[25] Put another way, the determination by IPONZ of the opposition proceedings and the grant of the patent to the first defendant would not necessarily lead to a finding of or affect this Court’s determination on whether there was a misuse of confidential information.

[26] In summary, there are sufficient differences between the issues raised in these proceedings and the IPONZ proceedings that the outcome of the IPONZ proceedings will not necessarily lead to a resolution of these proceedings. In those circumstances, the history of the progress and conduct of these proceedings becomes particularly relevant.

[27] On 30 August 2010 Merial Ltd (US) gave notice of opposition to the MRC application for patent. Over a year later, on 29 September 2011, the plaintiffs issued these proceedings, limited to the causes of action now before the Court. At Merial Ltd (US)’s request, (against the first defendant’s opposition) the IPONZ proceedings were stayed on 22 December 2011. From that time, the parties have focused on these proceedings. They are to be heard on 11 November 2013.

[28] Significantly, although Merial Ltd (US) obtained a stay of the IPONZ proceedings it did so on the basis of the existing claim before this Court. The amended claim raising entitlement was not pleaded by the plaintiffs until March 2013, some 15 months after the stay was obtained. That has now been struck out.

[29] The short point is that the plaintiff was apparently prepared, when it issued these proceedings, to go to trial on the first three causes of action. That remained the position until this year when it filed the amended pleading incorporating the fourth cause of action which has subsequently been struck out.

[30] If the plaintiffs, for their own reasons, do not now wish to pursue these proceedings to a hearing until the IPONZ matter is resolved then that is a matter that they should have addressed by either not issuing these proceedings or, if these proceedings were issued to avoid limitation defence, by seeking a stay shortly after issue, and before the defendants had actively engaged in the proceedings.  Certainly

they should have applied for a stay well before the proceedings were allocated a trial and with directions for trial running and the attendant cost.

[31] The defendants  are  entitled  to  have  proceedings  determined.  As  Mr Miles QC noted, the fact the proceedings are before the Court has practical implications for the first defendant.

[32] While abiding the decision of the Court, Mr Walker also submitted the second defendant and the academic staff referred to in the pleadings were affected by any delay and were entitled to have them resolved.

[33] The first defendant also submitted the proceedings were issued for a collateral purpose as evidenced by the application for orders entitling them to use the documents discovered in these proceedings in the IPONZ proceedings. Mr Elliott denies that. As there is a separate application before the Court to deal with that issue I do not propose to make any finding on that issue. It is unnecessary to do so to determine this application.

Summary

[34]    Ultimately the issue is whether the interests of justice support the stay or not. I am not satisfied the interests of justice support the stay sought by the plaintiffs in this particular case. The issues in these proceedings can be determined without the outcome of the IPONZ hearing. The IPONZ proceedings will not necessarily be determinative. Also, given the change in approach by the plaintiffs, and the stage these particular proceedings are at, a stay is not warranted.

Result

[35]    For those reasons the application to stay these proceedings was dismissed.

Costs

[36]    Costs to the first defendant on a 3B basis (for one counsel) on its application.

Timetable issues

[37] The plaintiffs are in default of the directions regarding the exchange of briefs. The time for the plaintiffs to exchange briefs is extended, once again, to 20 September 2013. If the briefs are not exchanged by that date, I reserve leave for the defendants to apply for appropriate relief which may include strike out.

Application for access/use

[38] The plaintiffs’ application for access to documents is adjourned for a half day fixture to be allocated by the Registrar on a date to follow the substantive determination of these proceedings.

Venning J