Key takeaways

1. The Urrbrae decision confirms that the Federal Court has the power to order production of samples before substantive proceedings have been commenced, and that such an order can be made independently of an order for preliminary discovery of documents.  The Urrbrae decision is under appeal (VID385/2023).  Subject to any appeal to the contrary, this judgment is consistent with past decisions where production of samples has been ordered before substantive proceedings have been commenced alleging patent infringement or contraventions of the Australian Consumer Law.
2. Although preliminary discovery applications commonly seek the production of documents, the Urrbrae decision demonstrates use of this pre-action mechanism to obtain production of samples of a product or article that is not readily obtainable by public means.  To this end, Justice Moshinsky noted ([44]):

“In the context of potential patent proceedings, it may well be the case that the provision of documents under r 7.23 will not be sufficient to enable a prospective applicant to decide whether to commence a proceeding and that testing of samples may be required. This tends to support the view that it was intended that r 14.01 would cover the circumstances previously covered by O15A r 12.”

His Honour's comments are equally applicable to litigation involving other IP rights such as plant breeders' rights which are less commonly litigated in the Australian courts.

3. The Austin Engineering decision highlights the usefulness of Norwich Pharmacal style-orders to obtain information (in the form of a sworn affidavit), documents and objects required to prove infringement, including from non-parties to a dispute (in this case, from the former employee’s new employer).  Importantly, Norwich Pharmacal style-orders do not require the same (arguably more stringent) criteria necessary for an Anton Piller order; and the court will ask whether there is a serious question to be tried in circumstances where, at an early stage of the case, the evidence is often incomplete. 
4. Norwich Pharmacal orders can assist IP rights holders to obtain evidence of wrongdoing early in a proceeding’s lifecycle, particularly where there is reason to believe that a third party holds information concerning the alleged infringer’s identity or scope of alleged infringing conduct. Whilst these orders are apt for breach of confidence and copyright infringement scenarios (such as in Austin Engineering), they can and have been used to trace assets (relevant in damages claims), to obtain IP address information from online service providers, and to preserve evidence of infringing conduct, including where stored on physical devices or cloud-based systems.

The Urrbrae decision

(a) The facts

CSIRO is the registered co-owner of two patents (Australian Patent Nos. 2005321754 and 2004252186) which claim grain from a wheat plant with a reduced level of starch branching enzyme ("SBEIIa"), SBEIIa activity, or both.

In July 2022, CSIRO filed an application for preliminary discovery of documents and production of samples of wheat products for testing for the purpose of deciding whether to commence a proceeding for patent infringement against Urrbrae, the prospective respondent. Urrbrae agreed to produce the requested documents, but the balance of CSIRO's application (seeking production of samples) was adjourned. After CSIRO had reviewed the documents, it considered that it still lacked sufficient information to decide whether to sue for infringement, and pressed for production of a random, but representative, sample of 50 grams of seeds that Urrbrae intended to commercialise in Australia.

The key issue in the case was whether the Federal Court had the power to make a stand-alone order requiring production of samples in a preliminary discovery application, or whether such an order could only be made in aid of an order of preliminary discovery for "documents".

(b) The decision – Federal Court can order pre-action discovery of product samples

Justice Moshinsky accepted CSIRO’s submission that the Federal Court had the power to make an order for production of samples under rule 14.01 of the Federal Court Rules 2011 (Cth) ("2011 Rules").

Rule 14.01 enables a party to apply to the Court for certain orders concerning "property", including inspection, taking samples and trying an experiment on the samples. "Property" is defined to include "land, a document or any other thing, whether or not the land, document or other thing is in the possession, custody or power of a party to the proceeding."

While Urrbrae accepted that the Court had power to make orders under r 14.01 in a preliminary discovery proceeding, Urrbrae submitted that these powers "[could] only be exercised for the purpose of resolving the issues in the preliminary discovery proceeding" and not for preliminary discovery itself. Urrbrae submitted that "an order for production of samples would not contribute in any way to resolving the issues in the present matter, which are limited to whether the requirements of r 7.23(1) have been met", (that is, whether an order for preliminary discovery of documents ought to be made).

Urrbrae also submitted that the practical effect of the consent orders made on 9 December 2022 was that CSIRO's application for preliminary discovery was at an end, as CSIRO no longer sought relief in the nature of preliminary discovery, and the relief that was sought, was not in aid of resolving the issues arising in the preliminary discovery proceeding. In particular, Urrbrae emphasised the text of rule 7.23, which provides for preliminary discovery and is limited to the production of documents.

In advancing their respective arguments, the parties referred to the production regime under the Federal Court Rules 1979 ("1979 Rules") as compared to the regime under the 2011 Rules.

Order 15A, rule 12 of the 1979 Rules provided that the Court may make an order for the taking of samples which related to the subject matter of the proceedings or as to which any questions arise in the proceedings.  There is no equivalent provision in the corresponding preliminary discovery provisions in Division 7.3, Part 7 of the 2011 Rules.  The rule dealing with inspection of property under the 1979 Rules, Order 17, rule 1, also allowed orders for taking of samples of any property “for the purpose of enabling the proper determination of any matter in question in any proceeding” (wording omitted from rule 14.01 of the 2011 Rules). 

Justice Moshinsky considered that as the kind of order sought by CSIRO could have been made under O 15A r 12 of the 1979 Rules, it would be “surprising” if such an order could not be made under the 2011 Rules.  His Honour inferred that the reason that wording of O 15A r 12 was not precisely replicated was because rule 14.01 was sufficient.

The Austin Engineering decision

(a) The facts

Austin is an engineering company which designs and manufactures specialised truck parts and other products for the resources industry.  Podulova was employed by Austin until January 2023; during the COVID-19 pandemic, she had been provided with a company laptop to work remotely.  After leaving Austin, Podulova accepted a position with Schlam, one of Austin’s competitors.
Based on evidence from a forensic IT expert, Austin alleged that Podulova had: 

• Connected multiple external USB devices to the computer.
• Copied files containing information concerning Austin’s business onto the devices.
• Downloaded information from Austin’s server, onto the laptop, before she ceased her employment

Austin commenced proceedings against Podulova, alleging breach of obligations of confidence, and copyright infringement.  
Importantly, after commencing with Schlam, Podulova accessed Schlam’s server from the Austin laptop numerous times. Whilst there was no evidence that Schlam was knowingly involved in Podulova's conduct, the forensic expert concluded that there was a “reasonable probability” that Austin’s information was copied to the Schlam server, or used in documents accessible on the server.

(b) The decision – Norwich Pharmacal orders granted to bolster claim of copyright infringement and misuse of confidential information by former employee

Justice Jackson granted the Norwich Pharmacal orders sought by Austin, requiring affidavits from Schlam’s directors addressing the details of the relevant computer and storage devices, email accounts, networks and cloud storage that may have contained Austin’s information.

"Norwich Pharmacal” orders take their name from the English case establishing the availability of the equitable relief (Norwich Pharmacal Co v Commissioners of Customs & Excise [1974] AC 133).  These types of orders reflect the principle that if someone becomes involved in tortious wrongdoing, from no fault of their own, they come under a duty to assist the wronged person by providing full information.

In granting the orders, Justice Jackson held that the three conditions for a Norwich Pharmacal order were satisfied:

1. There was an arguable case that a wrong had been carried out by an ultimate wrongdoer: it was not in dispute that Austin had established an arguable case that wrongs had been carried out by Podulova.
2. The order must be necessary to enable the applicant to bring legal proceedings or seek other legitimate redress for the wrongdoing: Austin had a legitimate interest in protecting misuse of its confidential information and copyright materials.  Austin had provided confidential examples of material copied by Podulova, including technical drawings of parts and products which it designs and manufactures, sales and pricing information, client tender information and other customer communications.  Justice Jackson accepted that Austin rightly had “grave concerns” if competitors or customers accessed such information, but equally, Austin could not establish its claim unless it knew what had been done with the information.
3. The persons against whom the order is sought must be involved in the wrongdoing in a way which distinguishes them from being a mere witness: Schalm employed “the ultimate wrongdoer” (Podulova), the alleged wrongs took place during her employment with Schlam, and there was reason to believe that Austin’s information may have been transferred to, or used in files on, Schalm’s servers.  

Justice Jackson also considered that, as a matter of discretion, the discovery orders should be made.  If the orders were not obtained early in the proceeding, critical information might be lost, or further disseminated, causing further harm to Austin.  Further, Podulova had admitted that the main USB device used in the allegedly unauthorised copying of Austin’s information had been destroyed.  This meant that accessing information about Schalm’s network and devices was critical to Austin’s case.