Re Beelab Semiconductor Ltd

HCAL 151/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTITUTIONAL AND ADMINISTRATIVE LAW LIST

NO. 151 OF 2008

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Before: Hon Reyes J in Court

Dates of Hearing: 12 January & 13 February 2009

Date of Decision: 13 February 2009

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D E C I S I O N

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I.  INTRODUCTION

1.BeeLab seeks judicial review against:-

(1)  the Ombudsman’s alleged refusal to investigate the appointment of Hong Kong Productivity Council (HKPC) as agent of the Innovation and Technology Commission (ITC);

(2)  the Ombudsman’s refusal to provide more detailed reasons for her refusal to investigate certain of BeeLab’s complaints made by letter dated 18 September 2007; and,

(3)  the Ombudsman’s decision dated 16 September 2008 in relation to the engagement of solicitors (Boase Cohen & Collins (BCC)) by BeeLab in connection with BeeLab’s complaints to the Ombudsman.

2.I have to decide whether to grant leave to apply for judicial review.

II.  BACKGROUND

3.In July 2005 BeeLab applied to ITC for a Patent Application Grant (PAG). This was for a “multiple mode charge pump based power supply apparatus” (the invention) developed by BeeLab.  HKPC processed the application on behalf of ITC.

4.In processing BeeLab’s application, HKPC requested the Australian Patent Office (APO) to prepare a search report on the invention.  The APO’s Report dated 18 August 2005 highlighted 7 prior art documents (that is, similar material to the invention available to the public before the date of patent application).

5.BeeLab was unhappy with the Report.  It entered into a long correspondence with the APO criticising the Report.

6.HKPC proposed that, in light of the Report, advice be sought from a registered attorney on the patentability of the invention.  Such advice (HKPC said) would have to be funded by BeeLab.  BeeLab rejected the proposal.

7.On 6 January 2006 BeeLab complained to ITC about the Report and about “HKPC’s ignorance of [BeeLab’s] questions and failure to ensure the quality of the Report”.

8.On 7 April 2006 ITC refused BeeLab’s application for a PAG.  This was because, in the absence of a favourable professional opinion on the patentability of the invention, HKPC could not recommend it.  HKPC then refunded BeeLab’s assessment fee.

9.On 28 August 2006 BeeLab complained to the Ombudsman about maladministration by HKPC and ITC.  BeeLab alleged that HKPC lacked the necessary professional knowledge to assess the patentability of the invention and that ITC had failed to monitor HKPC adequately in relation to the processing of BeeLab’s application and the running of the PAG scheme.  BeeLab also queried the level of HKPC’s administration charge which (BeeLab suggested) could amount to 20% of a grant.

10.On 14 September 2006 the Ombudsman replied that she had no jurisdiction over HKPC.  The Ombudsman further stated that there was no evidence that ITC had failed to monitor HKPC or had processed BeeLab’s application in an unfair manner.

11.On 4 October 2006 BeeLab replied that, HKPC being ITC’s agent, ITC had to assume responsibility for any deficiencies in HKPC’s conduct.  BeeLab also demanded that the Ombudsman provide detailed reasons for refusing to take up the case.

12.On 27 October 2006 the Ombudsman signalled a change of mind, responding that there was enough evidence to substantiate further enquiries.

13.Lengthy correspondence ensued between BeeLab and the Ombudsman.

14.On 3 May 2007 the Ombudsman replied substantively to BeeLab’s complaints as follows:-

“Operation and Monitoring of the [PAG] Scheme

5.  Under ITC, the Scheme serves to provide financial assistance to first-time applicants to make their first application for patent registration.  ITC has appointed HKPC, a neutral and non-profit making organization, as its agent for implementing the Scheme.

6.  Upon receiving an application, HKPC will conduct a patent search-cum-technical assessment by, inter alia, obtaining a patent search report from a patent office, usually APO, to assess whether the invention has a reasonable chance of obtaining a patent.  If the search report is unfavourable, i.e. if it finds some relevant, partly relevant or similar prior art documents identified and the distinctions proved, HKPC will then recommend to ITC on whether the application should be approved or not.

7.  HKPC’s operation of the Scheme is under ITC’s monitoring and supervision.  At the outset, HKPC was issued a set of operation guidelines, which covers, inter alia, the above procedures.  HKPC is also required to submit monthly and half-yearly reports on applications received, cases approved and the operation, progress and implementation problems of the Scheme.  ITC and HKPC regularly hold monitoring meetings and review the procedures and criteria of the Scheme. Furthermore, ITC audits select applications.

ITC’s Handling of Your Complaints

8.  The events relevant to your case are summarized at the Annex.

9.  On 27 July 2005, ITC received your written enquiry about the deposit of $3,000 requested by HKPC.  ITC replied to you on 4 August 2005 and clarifies the purpose of the deposit.

10.  Dissatisfied with the patent search report, you wrote to ITC on 6 January 2006, disputing the way HKPC handled your application, querying the quality of the report and requesting approval of your application.  In response, ITC made inquiries and replied to you substantively on 7 April 2006, disapproving your application on the grounds that the patentability of the invention could not be ascertained.

11.  After examining the explanation and information given by HKPC, ITC is satisfied that HKPC had followed the established procedures and guidelines in processing your application.  ITC holds that it was usual practice to advise you to seek third-party professional advice from a patent attorney.  ITC also considers HKPC to have properly addressed your concern over the quality of the search report.

12.  As you did not agree to seek professional advice based on the search report, HKPC was unable to further assess the patentability of your invention and make a recommendation to ITC.  This resulted in your application being rejected by ITC.

ITC Comments

13.  Having reviewed the case, ITC agrees that there is room for improvement regarding the communication between HKPC and applicants.  To avoid misunderstanding, ITC has requested HKPC to explain to applicants the reasons for obtaining a patent search report from a particular patent office, its purpose and nature as well as the need for patentability advice.

Our Comments

14.  Paragraph 7 above shows that HKPC’s operation of the Scheme is closely supervised by ITC through the issuance of guidelines, periodical reporting, regular meetings and review.  From paragraphs 9-13, it can also be seen that ITC had taken due action in response to your complaints and carefully scrutinized HKPC’s processing of your application.  Moreover, it had clearly explained to you its rationale for rejecting your application.  We, therefore, see no maladministration in this case.

15.  While we can appreciate your disappointment at the outcome of your application, we deem it a reasonable and fair arrangement for ITC and HKPC to give applicants an opportunity to seek third-party professional advice on the patentability of an invention based on both the prior art documents identified and the distinctions provided by the applicants.

16.  In any event, we are glad to learn that ITC has requested HKPC to improve its communication with applicants (paragraph 13).

Concluding Remarks

17.  As the issues have been clarified, The Ombudsman hereby concludes this case.”

15.On 18 September 2007 BeeLab wrote to the Ombudsman accusing her of “sidestepping” BeeLab’s complaints and “ignoring the evidence”.  In particular, BeeLab remained critical of the selection process by which HKPC was appointed as ITC’s agent.  Further, BeeLab took the view that HKPC’s charges lacked transparency.  It believed that the choice of APO to report on the patentability of the invention had been inappropriate and unduly expensive, given BeeLab’s interest in patenting the invention in China.

16.On 25 March 2008 the Ombudsman replied as follows:-

(1)  It suggested that BeeLab’s complaints were “driven by [its] views on the patentability of the invention”.  That was a “complex issue” which was not a matter of maladministration but instead involved “a highly specialised discipline of international treaties as well as domestic laws”.

(2)  HKPC (as opposed to ITC) was not one of the bodies which the Ombudsman was empowered by statute to investigate.

(3)  BeeLab’s complaints essentially had 2 aspects:-

“9.  ... The first relates to HKPC’s processing of your application under the [PAG] Scheme and the outcome largely depends on the patentability of your invention.  This is clearly not an administrative issue envisaged by The Ombudsman Ordinance.  Essentially, this is a professional matter within the realm of patent laws and the patent protection system.  This has nothing to do with The Ombudsman and we are not prepared to be involved or be drawn into a debate about matters outside our purview.

10.  The second issue, which we accepted as an administrative matter within The Ombudsman’s jurisdiction, is whether ITC had supervised HKPC’s administration of the Scheme through issuing guidelines, vetting reports, monitoring and whether ITC had duly responded to your complaints.  We had looked into this issue and gave you a substantive reply on 3 May 2007.”

17.BeeLab then engaged BCC which wrote more letters to the Ombudsman. 

18.The outcome was that by letter dated 13 August 2008 the Ombudsman agreed further to review BeeLab’s case.

19.On 9 September 2008 BCC wrote to the Ombudsman demanding that her office pay BeeLab’s costs (about $160,000) for engaging BCC to correspond with the Ombudsman.

20.On 16 September 2008 the Ombudsman denied that it had retracted anything.  On the contrary, she stood by her original findings and conclusions, but her office had simply agreed to review the case “focusing on any fresh evidence or new angles”.

21.In respect of BeeLab’s request for reimbursement of BCC’s fees, the letter continued:-

“7.  On (b), Section 18A of The Ombudsman Ordinance stipulates that no person acting in good faith shall be personally liable for any civil liability or claim whatever in respect of any act done or omitted to be done in the performance of any function under the Ordinance.  Accordingly, we do not accede to your demand for compensation.

8.  The Ombudsman Ordinance stipulates that avenues of complaints under that Ordinance are free to any aggrieved person seeking to invoke them.  The Ombudsman’s investigations are not intended to be quasi-judicial proceedings, and The Ombudsman does not normally accept request by complainants to be legally represented. Nevertheless, we accepted BeeLab’s request in the belief that this would be a helpful gesture.  If a complainant chooses to seek professional advice in an attempt to strengthen the case, he/she is at liberty to do so.  However, there is no justification for such costs to be allowed to pass onto taxpayers by seeking The Ombudsman to bear those costs.

9.  Given that our proceedings are free, we see no need for BeeLab to incur hefty legal costs in pursuing its complaint through this Office.  While we respect BeeLab’s free choice in this matter, The Ombudsman does not consider it in the public interest to accept BeeLab’s wish or attempt to pass its costs via this Office onto taxpayers. In this context, The Ombudsman has decided under section 12(4) of The Ombudsman Ordinance that she is not prepared to accept continued representation of BeeLab by your firm.

10.  We shall communicate directly with BeeLab from now on as regards our review of its complaint.”

22.On 20 October 2008 the Ombudsman wrote to BeeLab as follows:-

“2.  We are reviewing your case according to our established procedures and based on the arguments and additional information provided by [BCC] on your behalf.  For avoidance of doubt, our review will focus on whether maladministration was involved in the [ITC’s] processing of your application for [PAG], including any administrative action taken by [HKPC] on its behalf in such processing.

3.  We will not examine the merits of ITC’s appointment of HKPC as its implementation agent, since it would be too far-fetched to relate that issue to the particular case of alleged improper handling of your application by HKPC.”

23.On 9 January 2009, however, the Ombudsman wrote to Beelab as follows:-

“2.  As a result of [preliminary inquiries under s.11A of The Ombudsman Ordinance], we have found information which warrants a full investigation.  Accordingly, we have informed the Commerce and Economic Development Bureau of The Ombudsman’s decision to conduct a full investigation into the case under s.12(1) of the Ordinance.

3.  Having considered legal advice, we will, inter alia, examine the Innovation and Technology Commission (‘ITC’)’s monitoring of the Hong Kong Productivity Council (‘HKPC’)’s operation, including ITC’s mechanism, if any, for reviewing its engagement of HKPC.”

24.I initially heard oral submissions on this matter on 12 January 2009.  At that time, for whatever reason, the letter of 9 January 2009 (which was not mentioned in Beelab’s application for judicial review) was not drawn to my attention.  It was not until late on 15 January 2009, the day before (as the parties had been notified) I proposed to make a ruling on leave, that I was told of the 9 January 2009 letter.

25.BeeLab has now applied to amend its application for judicial review in minor ways to take account of the 9 January 2009 letter.  It maintains that the letter does not go far enough.  It says that the letter is unclear on whether the Ombudsman will or will not examine the qualification and appointment of HKPC  as ITC’s agent in the first instance.

III.  DISCUSSION

A.  Ground 1: Ombudsman’s alleged refusal to investigate appointment of HKPC as ITC’s agent

26.The complaint here is in relation to §3 of the Ombudsman’s letter of 20 October 2008.  There the Ombudsman stated that “it would be too far-fetched to relate [HKPC’s appointment as agent] to the ... alleged improper handling of your application by HKPC”.

27.Ms. Jessica Chan (appearing for BeeLab) submits that the stated reason is unintelligible.

28.First, she observes that the appointment by a principal of an agent is an administrative act and thus capable of being done improperly.  If improper, an appointment could be an act of maladministration within the Ombudsman’s purview.  Thus, ITC’s appointing HKPC (if improper) would be within the Ombudsman’s jurisdiction.

29.Second, she argues that it may or may not be the case that BeeLab’s complaint is the only one relating to HKPC’s appointment.  But that would not render the complaint any more or less valid.  It would still have to be investigated.

30.Third, it is unclear (Ms. Chan contends) why the appointment is unrelated to any improper handling of BeeLab’s application.

31.Finally, Ms. Chan says that the Ombudsman has failed to explain why BeeLab’s complaint is “far-fetched”.

32.In my view, Ms. Chan’s submissions are untenable as a basis for judicial review on the present facts. 

33.Either HKPC processed BeeLab’s application properly or it did not.  The Ombudsman agreed in August 2008 to look further into that question.  If HKPC acted incompetently in relation to BeeLab’s application (whether due to a lack of knowledge or for whatever reason), the Ombudsman’s further investigation will presumably ferret that out.

34.More importantly, by her letter of 9 January 2009, the Ombudsman has now agreed to conduct a “full investigation”, including “reviewing [ITC’s] engagement of HKPC”.  By any yardstick, that means that the Ombudsman will be looking into the appointment of HKPC and whether the same was appropriate whether now or at any time.  There is no ambiguity or lack of clarity.  To the contrary, the Ombudsman could not be clearer: a “full” investigation means a “full” investigation. 

B.  Ground 2: Failure to provide detailed reasons for refusal to investigate

35.This ground falls away (it seems to me) in light of the 9 January 2009 letter.  There was an initial refusal by the Ombudsman to conduct a full investigation.  But that has now changed.

36.Any judicial review now in advance of a final report by the Ombudsman, stating her considered findings and reasoned conclusions, would be premature.  It is not the function of the Court in a judicial review to tell the Ombudsman what precisely to investigate or how to investigate the same.  At the very least, one should await the Ombudsman’s final report.  At that stage, there may or may not be a basis for a judicial review of the way that she has carried out her statutory duties.

C.   Ground 3: Refusal to reimburse BCC’s fees

37.The Ombudsman Ordinance (Cap.397) (TOO) s.12 (entitled “Proceedings of Ombudsman”) provides as follows:-

“(1)  Before investigating any action, the Ombudsman shall inform the head of the organization affected of his intention to conduct an investigation and may seek his comments.

(2)  Subsection (1) shall not apply where the Ombudsman thinks compliance is inappropriate in the particular circumstances of the case and, instead of complying with that subsection, informs the Chief Secretary for Administration of his intention to conduct an investigation.

(3)  Subject to the provisions of this Ordinance, the Ombudsman:-

(a)  may obtain any information, document or thing from such persons, and makes such inquiries, he thinks fit; and,

(b)  may regulate his procedure in such manner as he thinks fit.

(4)  Every investigation shall be conducted in private and counsel and solicitors shall not have any right of audience before the Ombudsman, but may appear before him if he thinks fit.

(5) It shall not be necessary for the Ombudsman to hold any hearing and, subject to subsection (6), no person shall be entitled to be heard by the Ombudsman.

(6)  If at any time during the course of an investigation it appears to the Ombudsman that there may be sufficient grounds for him to make any report or recommendation that may criticize or adversely affect any officer, organization or person he shall give to the officer, head of the organization affected or person an opportunity to be heard.”

38.Ms. Chan construes the reference to TOO s.12(4) in the Ombudsman’s letter of 16 September 2008 as a ban against BCC representing BeeLab.  She submits that s.12(4) only applies to the subject of an investigation, not to a complainant.

39.I am unable to construe the 16 September 2008 letter in the manner suggested.  Nor do I see anything in the TOO that justifies the restricted reading given to s.12(4) by Ms. Chan.

40.The Ombudsman, in my view correctly, rejected BeeLab’s application to pass on its legal costs to the taxpayer through the Ombudsman’s office.  The reasons given by the Ombudsman for this stance were unimpeachable.

41.First, TOO s.18A gives the Ombudsman acting in good faith immunity from any civil claim (including reimbursement of legal fees) in respect of any act done or omitted to be done.  There is no suggestion here of bad faith on the Ombudsman’s part.

42.Second, it is up to a complainant to decide whether to engage solicitors (or anyone else) when dealing with the Ombudsman.  But the complainant cannot expect the Ombudsman to foot the bill for legal costs incurred as a result of any such engagement.

43.Read in context, by referring to TOO s.12(4) in her letter of 16 September 2008, the Ombudsman was merely stating that in the future she would correspond with BeeLab directly and not through BeeLab’s solicitors.  This was clear from §10 of the Ombudsman’s letter.  The Ombudsman was entitled so to decide as a matter of discretion by reason of TOO s.12(4).

44.All the Ombudsman has determined is “to communicate directly with Beelab from now on as regards [her] review of its complaint”.  Nothing is said about how BeeLab is to communicate with the Ombudsman.  As far as I can see, nothing prevents BeeLab (which as a company can only act through agents) from writing to the Ombudsman through BCC or any other agent.  Contrary to Ms. Chan’s submission, there is no interference with Beelab’s right to consult whatever legal advisor of its choice.  Obviously, BeeLab may continue to employ BCC for private advice if BeeLab so wishes, but that must be at BeeLab’s own expense.

IV.  CONCLUSION

45.In my judgment, none of the 3 proposed amended grounds of review are arguable with any reasonable prospect of success.  Leave to apply for judicial review is accordingly refused.

Ms Jessica Chan, instructed by Messrs Boase, Cohen & Collins, for the Applicant