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Fonterra contract at heart of dairy monitoring patent dispute

Wednesday 18th April 2012

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The cash flow associated with servicing New Zealand’s biggest company, Fonterra Cooperative Group, is at the heart of a patent dispute worming its way through the courts.

Christchurch-based BayCity Technologies is seeking to revoke DairySense’s patent on a remote data acquisition system, and faces a counterclaim from the Wisconsin-based company alleging BayCity’s UAD4 data logger infringes its own patents.

Judge Helen Winkelmann knocked back a bid by DairySense for more and better discovery orders in a March 21 judgment. The decision in the High Court in Auckland was published on the Justice Ministry’s website this week.

At the heart of the dispute is BayCity’s deal with Fonterra, which buys its UAD4 milk monitoring system – a contract DairySense says infringes its intellectual property.  DairySense isn’t pursuing the dairy exporter direct because it wants to take over the contract.

“DairySense wishes to be able to supply the patented system to Fonterra for use, and it believes its prospects for sales would be detrimentally effected were it to make an allegation that Fonterra is in breach of its patent, Judge Winkelmann said in her decision.

The conflict dates back more than seven years when BayCity was tackling the previous owner of the disputed IP, Michael Uttinger with whom it reached an out of court settlement in 2005. BayCity paid Uttinger $55,000.

BayCity resumed its action in 2010 claiming Uttinger had breached the terms of the deal when the patent was transferred to DairySense, a company he is a director of.

In a 2010 judgment by Judge Christopher Allan, BayCity sought to revoke the patent on the grounds it wasn’t new and lacked novelty and didn’t involve an inventive step from work done in the mid-1990s.

DairySense New Zealand was struck off the Companies Office register in 2005, and was affiliated with Wisconsin dairy business management firm Dairy Strategies.

In its counterclaim, DairySense is pleading its ownership of the patent is being breached by BayCity’s UAD4 devices. Uttinger filed an affidavit saying he saw two Fonterra supplier farms using milk vats with those monitoring systems installed.

“BayCity is implicated because it sells its product as being capable of being used to transmit such information to a milk processing company, and it installs its products on Fonterra farms knowing that Fonterra intends to use the data logger as part of an infringing system,” the judgment said.

Judge Winkelmann took a dim view of DairySense’s request for a wider discovery order, saying “it is so broadly expressed as to capture material not even related to the dairy industry. This is a fishing exercise, not tied in any way to a pleading.”

She ultimately rejected making an order for further and better discovery in that the applications were too broad and its pleading obscure.

“It may have valid commercial reasons for being obscure in its pleading, but those reasons cannot relieve it of the obligation to properly plead its claim,” the judgment said. “It cannot seek discovery or issue interrogatories, or indeed seek rights of inspection in reliance upon unmade or unparticularised allegations.”

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