Product Management Group Pty Ltd (PMG) v Blue Gentian LLC  FCAFC 179
This decision, by Kenny, Nicholas and Beach JJ was on an appeal by PMG from a decision by Middleton J  FCA 1331 in which he held that two innovation patents granted to Blue Gentian, relating to garden hoses, were valid and infringed by a hose imported and sold by PMG. The appeal decision upheld Middleton's decision on essentially all matters.
Both decisions are quite routine and fairly uneventful. The highlights are covered in the following. An application for leave to appeal to the High Court was filed by PMG, on grounds including that the Full Court misconstrued claims construction and applied an incorrect test for claim construction. The application has been refused as not raising a principle suitable for grant special leave and for having insufficient prospect of success.
The two patents are in respect of closely related innovations. They relate to a garden hose that, when pressurized, expands in diameter and length, but contracts when the water pressure is sufficiently reduced. The patentee's product is sold under the trade mark XHOSE, registered -in Australia by a purported exclusive licensee (Brand Developers Aust. Pty. Ltd.).
The hose as defined by the claims of each of the innovation patents includes:
(a) a flexible outer tube of a fabric material,
(b) a flexible inner tube of an elastic material,
(c) a first connector at one end of the hose for coupling each or the tubes to a tap,
(d) a second connector at the other end of the hose for discharging water, and
(e) a water flow restrictor that is coupled to, or included in, the second connector and that restricts the discharge of water so a pressure increase within the inner tube causes the inner tube to expand in both diameter and length to a maximum extent permitted by the outer tube, and so a decrease in pressure in the inner tube enables it to contract to its original dimensions."
The nature of the product can be understood sufficiently from the video accessible at www.Xhoseinventor.com
In July 2011, the inventor, one Michael Berardi, was exercising at his gym with an elastic resistance tube. The elastic tube was in a fabric webbing that limited the extent to which the tube could be extended. For some inexplicable reason Berardi, in what is described as his "Thomas Edison" moment, was caused to wonder what would happen if he ran water through the device.
True to his nationality to which I have already alluded, Berardi had exhibited, before that moment of inspired questioning, a level of product development and entrepreneurial skills. He followed his father's example and commenced his own paint and decorating business. Later Berardi was a successful songwriter, before starting his own record company. Then he founded a business making digital canvas prints from photographs and, after meeting some people in the Direct Response TV industry, he started Berardi Productions, ·producing TV commercials for that industry.
Following his brain flash at the gym, Berardi quickly tested his idea, and soon recognized the potential for its application to garden hoses and he foresaw a vast market for a lightweight hose that did not kink and was much more readily storable. So he soon was off on a short trip from Jupiter, FL, to visit his patent attorney in Palm Beach Gardens, FL, following which his first patent application was filed on 4 November 2011, with a request for expedited examination. The first two of four US patents were granted a little less than 12 months later, on 23 October 2012.
On 3 April 2012, Berardi lodged on behalf of Blue Gentian the first of two PCT applications, and the first of these has resulted in protection in Australia, Canada, China, Croatia, Eurasia, Europe, Germany, Japan, Korea, Mexico, New Zealand, Russia, Slovenia, Taiwan and United Arab Emirates. In Australia, there are the two innovation patents considered in the above decisions, as well as two further innovation patents, a granted standard patent and a recently accepted standard patent application, all resulting from the one application initiated by national phase entry from the earlier PCT application. Opposition by International Edge, lnc. a TV marketing company of New Jersey, substantially delayed grant of the standard patent. That company also opposed the recently accepted application. These matters of course do not relate to the litigation, although they do highlight some matters of importance that explain, at least in part, why litigation is based on innovation patents. Thus,
(i) there can be considerable delays in obtaining grant of a standard patent (so the first application for an innovation was filed as a divisional after PMG's product entered the market in Australia);
(ii) the delays that tend to be inherent in obtaining grant of a standard patent can be greatly exacerbated if opposition to the grant is initiated, as has occurred;
(iii) innovation patents are granted quickly, without examination or a possibility of opposition although examination must be requested and successfully concluded, to achieve the status of a certified innovation patent, before initiating action or warning in relation to an unauthorised product believed to be an infringement;
(iv) if, while there is a pending application for a standard patent, there is unauthorized use of its invention, it is possible to lodge an application for grant of an innovation patent with claims drafted, after careful consideration of the unauthorised product, so as to maximize the prospect for successful infringement proceedings, and
(v) while the claims of an innovation patent can have an inventive step, as required to sustain the claims of a standard patent, the claims need only meet the lower threshold of an innovative step and, despite the lower threshold, successfully establishing the lack of an innovative step can present considerable difficulty.
It is said by Berardi that his invention has become a worldwide phenomenon and one of the most successful products to be introduced in recent times. Sales in the last two years are indicated as about 50 million expandable hoses, with gross sales in the United States over $800 million, and worldwide about $1.2 billion. With this level of success, it is hardly surprising that, on the day Blue Gentian's first two US patents issued, the company found it necessary to initiate infringement proceedings. The initial proceedings were against Telebrands for their very successful "Pocket Hose" and against TriStar for their "Flex-Able Hose", although these actions evidently will not be heard until later in 2016.
Negating the idea of honour among thieves:
(i) Telebrands has had to seek a declaratory judgement that its Pocket Hose does not infringe US patents 7,549,448 and 9,022,076 granted to Ragner Technology and licensed to Tristar;
(ii) it has been intimated that US patent 9,022,076 has relevance only as a consequence of the addition of claims taken from one of the Blue Gentian patents (a matter that, if not disclosed to the US Patent Office, could potentially amount to fraud).
(iii) Tristar also sued distributors of Blue Gentian's Xhose;
(iv) somewhat quaintly, a US consumer alert website provides guidelines for distinguishing counterfeit Telebrands Pocket Hose Ultra from the genuine knock-off; and
(v) life has been complicated for both Telebrands and Blue Gentian by each of them having to cope with a respective class action relating to product failures.
As indicated among reviews recorded by Amazon, and arguably appropriate for much TV marketing, 1,258 of 1,313 people found the following review of an expandable hose to be helpful:
“0 out of 5 stars
By Jocegrace on April 6, 2013
“It’s garbage. Do not buy this if you have high blood pressure, a heart condition, or believe that cursing is a sin. I turned it on, and it came apart, sending water and profanity throughout the air. I repeat…GARBAGE!”
In contrast to the litigation lawyer's dream in the US, Blue Gentian and its licensee E Mishan & Sons (Emson) obtained a favourable UK decision against Tristar Products (UK) Ltd and Tristar Products Inc. - see  EWHC 4098 (Pat). In that case, the England and Wales High Court held that patent GB2 490 276 was valid over the principle prior art considered in the Australian cases plus a US application on which US patent 6,948,527 (an earlier version of US patent 9,022,076) was granted, and that GB2 490 276 was infringed by Tristar's Flex~Able Hose. These determinations were upheld in an appeal case  EWCA Civ 746. Despite this, it seems clear that infringing hoses continue to be available in the UK.
The success in the UK was not repeated in Canada, where Blue Gentian and Emson failed in infringement proceeding in the Canadian Federal Court [2014 FC 326 (CANLll)], against Supertek Canada, Inc., Telebrands and International Edge. The Blue Gentian patent was held to be invalid in view of a combination of prior art comprising:
(i) a Roll A Hose sold by Telebrands since 2002 that had a radially, but not axially, expanding inner tube within a fabric cover;
(ii) US patent 6,948,527 that disclosed an earlier version of the hose covered by Ragnar's US patent 9,022,076; and
(iii) the prior relied on without success in the Australian litigation.
There also is litigation underway in France.
But, back to the main game!
Blue Gentian, and its purported exclusive licensee, Brand Developers Ltd. (BDL), commenced the initial proceedings against PMG, with the involvement of BDL evidently to increasing the possible exposure of PMG to an award of damages. However, the standing of BDL was successfully challenged by PMG. It transpired that Blue Gentian had granted an exclusive licence to National Inc. (NEI), that NEI had granted a sub-licence to Emson, and that Emson licensed it within Australia and New Zealand to BDL. On the same day as the licence from Emson, Blue Gentian also granted a purported exclusive licence to BDL. Middleton J rejected the existence of an exclusive licence, and he was upheld on this in the appeal decision.
The Skilled Addressee
Blue Gentian relied on evidence by a Mr. William Hunter, a qualified mechanical engineer who had worked in product development and engineering design for about 30 years. PMG relied on evidence of Professor Steven Armfield, a Professor of Computational Fluid Dynamics and Head of Aerospace, Mechanical and Mechatronic Engineering at the University of Sydney: Of these persons it was said by the Appeal Court, no doubt following Middleton J, that:
(a) at ¶32: "The skilled addressee is a person with a working knowledge of the materials used for, and the design and manufacture of, hoses. He or she would also have an understanding of fluid mechanics. The general physical principles applying to garden hoses similarly apply to all hoses.", and
(b) at ¶33: "The primary judge regarded both Mr. Hunter and Professor Armfield as relevant skilled addressees, and that identification is not in dispute".
However, Mr. Hunter and Professor Armfield are quite disparate in their respective qualifications and professional experience, a case of a practical person and an academic. Mr. Hunter approximates reasonably well to the explanation 'of a skilled addressee, although Professor Armfield seems clearly to be completely overqualified, and possibly more appropriately a person qualified to guide the court on the reasoning a skilled addressee would adopt in fulfilling that role. Mr. Hunter's more practical views were favoured on most issues, in preference to the more extreme, strained constructions and reasoning provided by Professor Armfield, adding support for Professor Armfield not being recognised as a relevant skilled addressee. It is difficult to reconcile the two experts as both being an example of the same concept, namely that of a "relevant skilled addressee".
The Appeal Court traversed the well settled principles of claim construction. Thus, it was specified that:
(i) the claims are to be construed from the perspective of a person skilled in the relevant art, being neither particularly imaginative or inventive (innovative);
(ii) ordinary words are to be given their ordinary meaning, unless the skilled person would know to give them a technical meaning or the patent specification ascribes a special meaning;
(iv) construction is to be in the context of the specification as a whole, although the monopoly fixed by the words of the claims is not to be narrowed or expanded by glosses drawn from other parts of the specification;
(iv) if a claim is clear and unambiguous, it is not to be varied or made obscure by statements in other parts of the specification; and
(v) claims are to be given a "purposive" construction, neither too technical nor narrow, preferring a construction that will work in preference to one that may not; without extending the monopoly to ideas disclosed in the specification.
On this basis, all contentious terms of each of the two patents were considered in relation to the evidence from Mr. Hunter and Professor Armfield, and the decision of Middleton J on the basis of their evidence. In general, the claims were not overly difficult to construe, with the evidence of Mr. Hunter being preferred and in line with the opinion of Middleton J. However, without recourse to the totality of evidence provided by these skilled addressees, application of these principles seems to have been overly convoluted.
Claim 1 of patent 2012101797 reads:
1. A garden hose including:
a flexible elongated outer tube constructed from a fabric material having a first end and a second end, an interior of said outer tube being substantially hollow;
a flexible elongated inner tube having a first end and a second end, an interior of said inner tube being substantially hollow, said inner tube being formed of an elastic material;
a first coupler secured to said first end of said inner and said outer tubes for coupling to a pressurized water faucet;
a second coupler secured to said second end of said inner and said outer tubes for discharging water;
the inner and outer tubes being unsecured to each other between first and second ends thereof; and
said second coupler also coupling said hose to a fluid flow restrictor or including a fluid flow restrictor so that the fluid flow restrictor creates an increase in water pressure between said first coupler and said second coupler within said inner tube, said increase in water pressure expanding said elongated inner tube longitudinally along a length of said inner tube and laterally across a width of said inner tube thereby substantially increasing a length of said hose to an expanded condition and said hose contracting to a substantially decreased or relaxed length when there is .a decrease in water pressure between said first coupler and said second coupler.
The main passages of the claims considered included those underlined. The meaning of the preamble of "A garden hose"; of course, was not contentious in itself. It was taken by Middleton J to specify a hose capable of being used as a garden hose, thus able to be attached to a water source and being suitable for watering a garden. Not surprisingly the Appeal Court agreed with the circular reasoning. Its main relevance is that it confirms the title or preamble of a claim is itself a limitation under Australian law, whereas this is not necessarily the case with a US claim. More importantly, ¶229 of the appeal decision states that "It seems to us that the limitation of "garden Hose" in and of itself provides the innovative step" as a consequence of:
(i) it being a hose for a different purpose and function than the prior art hose;
(ii) other integers work together and in combination within the context of a garden hose; and
(iii) the combination of the prior art had a significantly different construction and properties to a hose suitable for use as a garden hose.
Thus, as explained at ¶184 of the appeal decision, "a relevant adaptation of the prior art to a different purpose can give rise to an innovative step, .and it was not to the point whether the claimed invention and the prior art otherwise "worked in substantially the same way" ”.
Much debate centered on the references to "an increase in water pressure" and "said increase in water pressure", as well as the meaning of "the fluid flow restrictor creates an increase in water pressure". The claim wording is less than optimal overall and particularly (i) in relation to the meaning of "creates", (ii) relative to what the water pressure is increased, and (iii) whether or not “said increase in water pressure" alone achieved the specified longitudinal and lateral expansion of the tube. Also, while it is unusual for a word to be regarded differentially in the one context, this seems clearly to have occurred with consideration of "said". In the case of each "said outer tube", "said inner tube", "said first end", "said second end" and "said hose", the use of "said" is taken to be a clear reference to the first mention of the respective integer: However, in the case of "said increase in water pressure" there were conflicting views on whether this was intended.
The debate on the relationship between “the fluid flow restrictor creates an increase in water pressure” and “”said increase in water pressure” is disappointing, at least from the perspective of one who fails to qualify as a skilled addressee. While possibly over simplistic, it would seem relevant to take into account the difference between the garden hose as defined and the hose with variation in the state of the restrictor in use, at least in the case of a nozzle able to be adjusted from opened and closed positions. There also would seem to be some relevance in comparing performance of the complete garden hose as defined with its performance after removal of the restrictor. There also would seem to have been a very obvious need for one ore other of the experts to have conducted quite simple, easily arranged trials to determine how a hose in accordance with claim 1, whether the patentee’s or the alleged infringer’s hose, performed in use as a garden hose. In each case it would have been pertinent to take into full account the everyday context of the simple product under consideration. The garden hose, to have its intended utility, is to be used with the first connector coupled to a pressurized water faucet which then is turned on (usually with its restrictor closed), as the second coupler is able to discharge water only if this is done and the restrictor is opened. If the faucet is opened, and the restrictor is not too opened, it seem likely to restrict the discharge of water completely or to a degree regulated by the extent to which it is opened, thereby building up back-pressure and generating an increase in water pressure between the couplers to an extent greater than if there was no restrictor. This presumably would cause resultant longitudinal and radial expansion of the inner tube due to an increase in volume of water building up in the inner tube until this expansion is resisted by the outer tube or, as seems to regularly occur, the hose fails. The expansion of the inner tube, until arrested by the outer tube, evidently would be similar to that of inflation of a sausage balloon with water, with the closed end remote from the inlet of the balloon acting as a non-openable restrictor.
Guided by the assertions of the skilled addressees, ¶71 of the appeal decision notes that Middleton J “said that the construction of “said increase in water pressure” turned on whether the word “said” was to be construed as referring to only the increase in water pressure between the first coupler and the second coupler within the inner tube created by the fluid flow restrictor alone (PMG’s construction) or whether it also included the increase in pressure created by the introduction of pressurized water from the faucet – that is, the increase in pressure was not limited to the increase caused by the fluid flow restrictor (Blue Gentian’s construction). As so expressed, the PMG construction appears to be preferable, indicating a reference back to the previous words “increase in water pressure” and so limited to that caused by the restrictor alone (but not implying whether or not another factor could increase that pressure). However the reasoning of Professor Armfield behind that construction, as noted at ¶74 of the appeal decision, “was that where water flows through the hose, the expansion of the hose is caused principally by frictional effects within the inner tube (that is, friction between the fluid and the wall of the hose) with the flow restrictor only making a minor contribution to the expansion of the hose”. While intended use of the hose results in a flow of water through the inner tube, it appears far from clear that friction will play a significant role in achieving expansion, both radial and longitudinal expansion, compared to the seemingly overwhelming influence of increasing water volume, particularly given the relative incompressibility of water. The factor enabling a flow of water is a pressurized water supply, resulting from connecting the hose to a faucet that then is turned on. If the restrictor initially is closed, there will be no flow from the hose but simply a flow of water into the inner tube that causes expansion of the hose. In the absence of flow through the hose, it would seem that frictional effects within the tube, at least those attributable to flow, will be small. Rather, the restrictor evidently will provide a reaction that is equal to the supplied pressure of water entering from the faucet and, as such, the restrictor can be regarded appropriately as creating an increase in water pressure between the couplers than the pressure that would prevail in the absence of the restrictor. Increasing flow through the inner tube will be enabled as the restrictor is progressively opened. While it would seem that friction between the water and the wall of the inner tube with water flow through the hose will increase in significance with increase in the rate of water flow, although the frictional effects would appear unlikely to increase such that a point will be reached at which the increase in pressure attributable to the restrictor becomes minor relative to the increase in pressure due to the frictional effects. However, apart from this, claim requires only that the restrictor creates an increase in water pressure between the couplers, not that it is the only cause on an increase in pressure or even that it is the major cause. It is considered on this basis that “said increase in pressure” is an appropriate reference back to the increase in pressure the restrictor is indicated as creating. Thus, in the context of action in a system under a supplied source of pressure, particularly a source that itself is able to vary over a range that impacts on pressure, as well as on the pressure influences able to be created by variation in the performance of the restrictor and also frictional effects, it is considered that the PMG construction is correct, but that this is contrary to the basis on which that construction is argued.
It does not seem to follow the Blue Gentian was wrong but for the right reasons. It was argued on the basis noted in ¶73 of the appeal decision, that “the word “said” referred back more generally to the words “increase in water pressure”, including pressure that resulted from the first coupler being connected to the “pressurized water faucet” which had been opened”. This seems potentially to risk the claim being held to be unclear, but to have been motivated by an attempt to indicate that “said” is a reference specifically to the previous mention of an increase in pressure, when that previous mention is considered in the relevant context.
Readily available information on hoses of the type covered by claim 1 indicates that, with the faucet open and the restrictor closed, the hose expands to a maximum set by the outer tube. When the restrictor is opened to enable watering of a garden, the hose remains expanded. When the restrictor is fully opened, the hose contracts to a degree that varies with the brand, with this attributed to a drop in water pressure. This is information from the marketing arms of manufacturers of the hoses and so either can be discounted as hyperbole or taken as a valid expression of the firsthand experience of persons skilled in the relevant art. However, it is convincing to the non-skilled person mentioned above, since the summarised verbiage is corroborated by a live demonstration.
Who knows what another court will make of this consideration of a word widely used for the very purpose of ensuring clarity in antecedence, and the general idea of consistency in word usage and meaning.