The Commissioner is empowered under section 219 of the Patents Act 1990 to require security for costs in the case of a person who gives notice of opposition under the act, and who "neither resides nor carries on business in Australia" - in default of which the proceeding may be dismissed.

Section 219 has application only where a notice of opposition under the Act is filed. Proceedings which are not oppositions are not subject to a requirement for security for costs.

The sum requested as security is at the discretion of the Commissioner. The main consideration for an order for security being made is to provide for the plaintiff to have assets in Australia to which the defendant can have access if successful. Applications involving security for costs are relatively rare, and will only be taken at the request of one of the parties. If the parties cannot agree on the matter, the matter may be decided in a preliminary hearing.

The main consideration for an order for security being made is that the plaintiff has assets in the jurisdiction, to which the defendant can have access if successful.

See Farmitalia Carlo Erba Srl v Delta West Pty Ltd 28 IPR 336, (1994) AIPC 91-085; Kohn v. Rinson (1947) 2 All ER 840; C.A. Aeronave SPA v. Westland Charters Ltd. (1971) 3 All ER 532

In the latter case, Denning M.R. said "... if the defendant succeeds and gets an order for his costs, it is not right that he should have to go to a foreign country to enforce the order".

It is important to note that it is not appropriate to investigate the merits of the case on an application for security of costs unless it can be clearly demonstrated one way or the other that there is a high probability of success or failure.

See Porzelack KG v. Porzelack (U.K.) Ltd. (1987) FSR 353.

Quantum of Security

Generally, the amount of security can be reached by agreement or negotiation between the parties, having regard to the likely costs to be incurred by the applicant for the patent.

Security does not include Reasonable Expenses as the Commissioner has no power to award cost in regard to Reasonable Expenses.

The matter of security for costs in a patent matter were discussed in Farmitalia Carlo Erba SrL v Delta West Pty Ltd 28 IPR 336, (1994) AIPC 91-085. Where there is no agreement between the parties, the Commissioner will be required to assess the quantum of security on the basis of the information available. Conflicting evidence can be resolved in favour of the person seeking the security, if they can show that it is based on an examination of the actual files and discussions with that party’s legal advisers.

The quantum of security was also discussed in New York University v Nissin Molecular Biology Institute, Inc. (No 2) (1994) AIPC 91-090, in relation to a security for a breach of an undertaking made in respect of the release of a sample of a deposited microorganism.

Award of Costs when a Security has been Paid

Where an award of costs is made and the opponent has paid a security against costs, the decision awarding costs will need to deal with the security. Some issues that are likely to need consideration are:

if costs are awarded against the applicant should the security be released to the opponent or are there further matters in the proceedings against which the security must be retained?
if costs are awarded against the opponent, what is a reasonable time for the applicant to claim costs against the security? If those costs are not claimed by the applicant in that time, should that part of the security be available to the opponent?
if the award of costs against the opponent is less than the security, should the residuum be released to the opponent upon settlement of the applicant's claim, or are there further matters in the proceedings against which the security must be retained?

When the party who provided security before the Commissioner has no costs awarded against them, they are entitled to a return of their security. That situation is not altered in the event of an appeal against the Commissioner's decision. Any issues relating to security for costs (including the possibility that the court reverses the Commissioner's award of costs) is a matter to be dealt with entirely in the court proceedings.