CPC Patent Technologies Pty Ltd v Apple Pty Limited (No 2)

CPC sued Apple over alleged infringement of asserted claims in two patents by a broad range of Apple products containing biometric security systems. Apple denied infringement and also brought a cross-claim alleging that the asserted claims were invalid. In the earlier substantive judgment referred to throughout this decision, the Court rejected CPC's infringement case and largely dismissed Apple's invalidity challenge.

This later judgment was about the commercial clean-up after that mixed result. Burley J had to decide how costs should be allocated, whether Apple's offer of compromise changed the position, whether four third parties connected with CPC should also be liable for costs, and whether confidential information about Apple products should remain protected by suppression orders. The stakes were high. The Court recorded evidence that each side's costs exceeded $8.5 million.

The first major issue was whether the Court should deal with costs globally across the whole proceeding, or separately for the infringement claim and the invalidity cross-claim. That mattered because CPC lost on infringement, but Apple was only partly successful on validity. If the whole case were treated as one event, Apple had a stronger argument for a broad costs order in its favour. If the claim and cross-claim were treated separately, the result could be split.

The second issue was whether Apple's October 2023 offer of compromise justified a more favourable costs order, including indemnity costs after the offer was not accepted. The third issue was whether four third parties connected with CPC should be jointly and severally liable for any adverse costs order. The fourth issue was whether final suppression orders should be made to prevent disclosure of confidential information.

CPC argued that the ordinary patent approach should apply, meaning the infringement claim and the invalidity cross-claim should be treated as separate events for costs. It accepted that it should pay Apple's costs of the failed infringement claim, including pre-trial case management hearings and claim construction issues. But CPC said Apple's cross-claim had raised separate and substantial validity issues, much of that case failed, and Apple should therefore pay CPC's costs of defending the cross-claim, subject to a 15% reduction to reflect Apple's limited success in invalidating three claims.

CPC also argued that any amount it had to pay Apple on the infringement side should be reduced by 35% because of what it described as significant additional costs caused by Apple's conduct concerning evidence about the operation of Apple devices.

Apple took a different approach. It argued that the proceeding should be viewed globally, with the cross-claim treated mainly as defensive. Apple said much of its invalidity case was premised on CPC's own construction arguments and that it would have been risky not to maintain that cross-claim given what Apple described as CPC's ambulatory and unclear approach to construction issues. Apple also sought indemnity costs after its offer of compromise was not accepted, and if separate costs orders were made, Apple preferred taxation rather than lump-sum assessment.

Burley J held that costs should be ordered separately for the infringement claim and the invalidity cross-claim. The reasons explain that patent infringement claims and invalidity cross-claims are typically treated as separate events unless the issues are so closely connected that they share a common factual substratum, are wrapped up together, or cannot readily be disentangled.

The Court examined how Apple had actually pleaded and run its invalidity case. Burley J accepted that by closing submissions Apple had narrowed parts of its position and framed much of the case in a more defensive way. But that was not how the invalidity case had originally been pleaded or how CPC had been required to meet it for most of the proceeding. The pleaded cross-claim had raised a wide range of novelty, inventive step, manner of manufacture, priority date and section 40 issues across both patents. In that overall context, the Court held it was not correct to characterise the cross-claim as merely defensive.

The result was that CPC had to pay all of Apple's costs of the infringement claim, including pre-trial case management hearings and construction issues. Apple had to pay 85% of CPC's costs of the invalidity cross-claim, reflecting CPC's substantial success in resisting most of the validity attack while allowing for Apple's success in invalidating three asserted claims. The Court also rejected Apple's attempt to improve its position through the offer of compromise and held that costs should be assessed on a lump-sum basis in accordance with the Federal Court's Costs Practice Note.

A practical part of the judgment concerns CPC's complaint that Apple had caused significant extra cost through the way it disclosed information about the operation of Apple devices. Burley J rejected CPC's characterisation of Apple's conduct as extraordinary and unsatisfactory.

The Court noted that the Apple devices were complicated and used sophisticated software to perform complex operations. Apple had not been ordered to provide a comprehensive description of all device operations, and general discovery had not been sought. Instead, CPC proposed and Apple agreed to provide a product or process description of relevant features in response to CPC's infringement position statement under the Federal Court's intellectual property practice note.

The reasons show a recurring problem in technical patent cases. Apple said it needed greater specificity from CPC about the construction of contested claim features before it could provide a targeted response. In particular, Apple said it struggled to understand what CPC alleged to be the relevant transmitter sub-system and receiver sub-system. Apple invited CPC to clarify its position. The Court recorded evidence that Apple sent a detailed response letter and that CPC did not respond to that invitation.

The judgment also refers to source code inspection in Washington, later evidence from Apple engineers, and CPC's complaint that additional components and functionalities were identified later than expected. Burley J accepted that some later Apple evidence expanded upon or qualified aspects of the earlier product or process description. But on the material before the Court, that did not justify reducing Apple's entitlement to costs on the infringement claim.

The judgment is especially important for businesses using litigation funding or support from related entities. Apple sought orders that four third parties be jointly and severally liable for any costs order made against CPC: Charter Pacific Corporation Ltd, International Litigation Partners No. 10 Pte Ltd, International Litigation Partners No. 12 Pte Ltd and Lyndcote Holdings Pty Ltd.

The reasons record that Charter Pacific accepted that a third party costs order was appropriate. ILP-10 and ILP-12 accepted that a third party costs order should apply to ILP-12, but disputed liability for ILP-10. Lyndcote disputed liability altogether. Burley J ultimately found that each of the four third parties was jointly and severally liable to pay the costs orders against CPC.

The catchwords show some of the factors the Court considered. These included whether one litigation funder had been replaced by another under a new agreement, whether there was enough evidence to infer that the original entity no longer had the ability to recoup, and whether a funder that became involved only after judgment had been reserved still had a sufficient connection because it stood to gain a commercial benefit. Even without reproducing every step of the reasoning here, the message is clear: a non-party does not need to be the named litigant to face costs exposure.

For businesses, this matters in two directions. If you are bringing a claim with external funding, your funder and related entities may need to model adverse costs risk from the start. If you are defending a funded claim, a third party costs application may be a meaningful recovery tool where the claimant itself has limited assets.

Apple also sought final suppression orders over information it said was confidential. CPC questioned whether enough evidence had been provided to show the orders were necessary and whether some material had already been publicly disclosed or was not truly confidential to Apple. Burley J held that suppression orders should be made in the form sought by Apple.

The orders included interim restrictions on disclosure or publication of the reasons except to specified solicitors and persons who had executed suitable confidentiality agreements, pending the parties conferring and providing highlighted reasons and draft short minutes. The judgment refers to section 37AG of the Federal Court of Australia Act 1976 (Cth) as the statutory basis for the suppression application.

For technology businesses, the practical point is that confidentiality in litigation is not automatic. If source code, engineering documents, product architecture or internal technical descriptions are likely to be used, confidentiality needs to be managed actively through evidence, protocols and carefully drafted orders. Waiting until the end of the case can create unnecessary risk.

This is a procedural and costs judgment, not a general patent law primer. But it carries several practical lessons for businesses of all sizes. First, patent litigation should be budgeted as a series of possible cost events, not as a single all-or-nothing contest. Infringement, invalidity, interlocutory disputes, confidentiality applications and post-judgment costs fights can each have their own commercial consequences.

Second, if you are defending a patent claim, think carefully about the breadth of any invalidity cross-claim. A broad challenge may be strategically justified, but if it goes well beyond what is needed to defend infringement and largely fails, it may generate a separate adverse costs exposure.

Third, if you are bringing a patent claim, do not assume that losing on infringement means every costs issue is lost. Where the other side runs a substantial and mostly unsuccessful invalidity case, there may still be room for a separate costs order in your favour.

Fourth, funding structures matter. If a funder or related entity stands to benefit commercially, the Court may look beyond the named party when making costs orders. Fifth, technical evidence management matters. Product descriptions, source code access, expert evidence and claim construction positions should be coordinated early and revisited as the case develops. Finally, settlement offers should be assessed seriously, but businesses should not assume that an offer of compromise will automatically transform the costs result.