Re Conoco Speciality Products Inc and Du Pont (Australia) Limited v Merpro Montassa Ltd and Merpro Montassa (Aust) Pty Ltd [1990] FCA 42 (23 February 1990)

FEDERAL COURT OF AUSTRALIA

Re: CONOCO SPECIALITY PRODUCTS INC. and DU PONT (AUSTRALIA) LIMITED
And: MERPRO MONTASSA LTD. and MERPRO MONTASSA (AUST.) PTY. LTD.
No. V G332 of 1989
FED No. 52
Intellectual Property

COURT

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Woodward J.(1)

CATCHWORDS

Intellectual Property - alleged patent infringement - second applicant a licensee but not an exclusive licensee - motion for summary judgment against second applicant - possibility of common law action succeeding - exercise of discretion.

Patents Act 1952 ss 6 and 114

PCUK v Diamond Shamrock Industrial Chemicals Ltd (1981) FSR 427 followed.

HEARING

MELBOURNE
23:2:1990

Counsel for the Applicants: Mr J E Middleton

Solicitors for the Applicants: Arthur Robinson &

Hedderwicks

Counsel for the Respondents: Dr J McL Emmerson QC
and Mr B N Caine

Solicitors for the Respondents: Dunhill Madden Butler

ORDER

(1) The respondents' notice of motion be
dismissed.
(2) Costs of the notice of motion be costs in the
cause.
(3) The applicants have leave to serve and file an
amended statement of claim by 9 March 1990.
(4) The respondents file and serve their defence
and any cross-claim by 23 March 1990.
(5) The applicants file and serve their reply and
defence to any cross-claim by 30 March 1990.
(6) The directions hearing fixed for 27 February
be adjourned to 3 April 1990 at 9.45 am.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

DECISION

This is a motion by the respondents to have the proceeding brought against them by the second applicant dismissed. The application is brought by the applicants to restrain the respondents from infringing certain Australian patents. Damages and other consequential orders are also sought. The statement of claim alleges, among other things, that "the first named applicant is and has at all times material...has been entitled by assignment to be registered as the proprietor of" the relevant patents. Paragraphs 9 and 10 of the statement of claim are then in the following terms:

"9....the secondnamed Applicant is and has at
all times material...been the firstnamed
Applicant's Australian licensee under the said
Patents.
10. The respondents have infringed and
threaten and intend to continue to infringe
the said Patents in the manner appearing in
the Particulars of Infringement served
herewith whereby the Applicants have suffered
and will suffer damage."

2. The short, but difficult, point raised by the respondents is whether the statement of claim discloses an arguable cause of action on the part of the second respondent, having regard to the terms of s 114 of the Patents Act 1952, which provides:

"(1) An exclusive licensee may bring an
action or proceeding for the infringement of a
patent.
(2) The patentee shall, unless he is joined
as a plaintiff in the action or proceeding, be
joined as a defendant.
(3) ..."

3. Counsel for the applicants conceded that he could not base a case for the second applicant on s 114. He submitted, however, that there were two other possible bases for the claim. The first was that s 114 is merely an enabling provision, which allows an exclusive licensee to bring an action in his own name where previously he could only do so in the name of the patentee. Counsel maintained that it was still possible for a licensee who was not an exclusive licensee to bring an action at common law for the infringement of the patent in question, provided that he sued jointly with the holder of the patent. The second point argued by counsel was that, even if the second applicant did not have standing to sue for infringement of the patent, it could still bring action at common law for interference with its contractual or economic relations with the first applicant. Counsel conceded that the statement of claim did not raise such a cause of action, but he said that an opportunity should be given to amend and the Court should not take the drastic step of dismissing the second applicant's action on a pleading summons.

4. Counsel for the respondents argued simply that the second applicant did not claim to be an exclusive licensee and that section 114 was clear in its terms and so the action should be dismissed as an abuse of the process of the Court.

5. A number of authorities were cited in argument, but the one which I have found to be most in point and most helpful is PCUK v Diamond Shamrock Industrial Chemicals Ltd (1981) FSR 427. The facts and the conclusions reached by Falconer J are conveniently set out in the headnote in the following terms;

"This was a motion by the defendants for
an order that the second plaintiffs be
excluded from further being party to this
action since the pleadings disclosed no
reasonable cause of action in respect of the
second plaintiffs. The second plaintiffs (who
were the first plaintiffs' subsidiary)
manufactured and sold in the United Kingdom
goods made in accordance with a patent owned
by the first plaintiffs under their informal
licence which was pleaded. The second
plaintiffs contended that they were de facto
exclusive licensees under the patent and
thereby entitled to bring an action against
the defendants for manufacturing and selling
products which infringed the patent; they
further alleged that the defendants' acts
constituted an unlawful interference with
their trade. The defendants submitted that
the second plaintiffs were not entitled to sue
since they were sole licencees rather than
exclusive licensees, their licence not
entitling them to work the patent to the
exclusion of the first plaintiffs. As regards
the allegation of unlawful interference with
trade, the defendants submitted that since the
unlawful acts alleged were the infringements
of the patent under which the second
plaintiffs had no right to sue, they were
claiming a right by virtue of the Act to which
they were not entitled.
Held, (1) That though the second plaintiffs
had not established that they had the right to
use the patent to exclusion of all others,
including its proprietor and were therefore
only sole licensees, the relevant part of the
pleadings would not be struck out, so as to
enable it to be amended if possible.
(2) It could not be said that the second
plaintiffs had failed to disclose a reasonable
cause of action on the question of unlawful
interference with trade."

6. In the course of his judgment Falconer J, having set out the relevant pleadings and legislation, continued,

"The Act, going to the infringement
sections, provides...that the persons who may
sue for infringements under the Act are the
proprietor...and an exclusive licensee, ...
and, as (counsel for the respondents) rightly
points out, no other person is provided for in
the Act as a possible plaintiff in an action
for infringement of a patent.
...In my judgment, in order to bring an action
for infringement as an exclusive licensee, the
pleading must in some way establish the
position that the licensee is an exclusive one
in the sense of the definition, that is to
say, that he has the right to the exclusion of
all others, including the proprietor.
This pleading does not establish that
position and, in my judgment, all it
establishes is the position of a sole
licensee. A sole licensee, as I understand
the Act, is not in a position to bring an
action for infringement of patent. However,
at this stage I would not be prepared to
strike out that pleading in case counsel for
the plaintiffs may feel that he can amend it
in some way which will make the cause of
action an acceptable one as being reasonable."

7. His Honour went on,

"So far as the second cause of action is
concerned, that is to say, unlawful
interference with the second plaintiff's
trade, the alleged unlawful acts being the
defendants' alleged infringement of the
patent, (counsel) for the defendants puts
forward the argument that, apart from the
classes of persons who are to be protected as
specifically provided in the Act by the right
to sue for infringement, that is to say the
patentees, in which I include.... exclusive
licensees, there is no provision for any right
of action by any other class of person such as
the second plaintiff in this action...."

8. His Honour went on to refer to the decision in J. Bollinger v Costa Brava Wine Company Ltd (1960) 1 Ch 262. He continued,

".....(counsel) for the plaintiffs relies
upon the case of Carlin Music Corporation and
Others v Collins and Another (1979) FSR 548,
and, in particular on the statement of
principle to be found in the judgment of Lord
Denning, M.R., at the top of 552. In that
particular case the plaintiffs were two
copyright owners and Mechanical Copyright
Protection Society Limited, who act as agents
for some 2,000 copyright owners, 90 per cent.
of the trade collecting on their behalf the
licence fees payable for mechanically
reproduced musical compositions for which the
Society receives a commission. The defendants
imported and sold on a large scale pirate and
bootleg records and did not pay any fees
either to M.C.P.S. or to the copyright owners.
The plaintiffs sought relief in the form of an
Anton Pillar Order and put forward as their
cause of action that the defendants had
interfered with their business by unlawful
means. At first instance, relief was refused
on the ground that there must be some
interference between the paintiffs and a third
party to establish the tort of interference
with business, and on the appeal, which was
allowed, the learned Master of the Rolls cited
from the case Acrow (Automation) Limited v Rex
Chainbelt Inc (1971) 1 WLR 1676 at 1682 the
following statement:
'I take the principle of law to be that
which I stated in Torquay Hotel Company
Limited v Cousins (1969) 2 Ch 106 at 139,
namely, that if one person, without just
cause or excuse, deliberately interferes
with the trade or business of another,
and does so by unlawful means, that is,
by an act which he is not at liberty to
commit, then he is acting unlawfully. He
is liable in damages: and, in a proper
case, an injunction can be granted
against him.'
Then the learned Master of the Rolls went on
to say:
'It seems to me that every one of those
words applies here, because here these
are the unlawful means employed by this
man. He had been importing these records
without the licence of the owner, knowing
that the owner has not consented to the
importation. It seems to me that the
unlawful means are there: and the
interference with the business is there:
because it is an interference with the
business of the agents. It interferes
with the agent's commission on the
stamps. So it seems to me prima facie
that this is a wrong which is being
done.'
I myself am unable to differentiate in
principle the position on the pleading now
before me from the position there set forth by
the learned Master of the Rolls and, while I
appreciate the point urged upon me by (counsel
for the defendants) to which I have referred,
I regard that authority, an authority of the
Court of Appeal, as sufficient authority to
support the second cause of action pleaded by
the second plaintiffs."

9. I note that there are differences between the relevant legislation in Australia and the United Kingdom. Section 130 of the Patents Act 1977 (UK) defines 'exclusive license' as meaning

"A license from the proprietor of or applicant
for a patent conferring on the licensee, or on
him and persons authorised by him, to the
exclusion of all other persons (including the
proprietor or applicant), any right in respect
of the invention to which the patent or
application relates..."

10. On the other hand the Patents Act 1952 (Commonwealth) provides in s 6 that,

"'exclusive licensee' means a licensee under a
licence granted by the patentee which confers
on the licensee, or on the licensee and
persons authorised by him, the right to make,
use, exercise and vend the patented invention,
throughout Australia, to the exclusion of all
other persons, including the patentee;"

11. The difference lies in the distinction between the words "any right in respect of the invention to which the patent or application relates" in the UK section, and "the right to make, use, exercise and vend the patented invention" in the Australian legislation. Thus in the UK it is possible to grant an exclusive licence to use an identifiable and severable right in respect of the invention, whereas in Australia an exclusive licence must relate to all uses of the invention.

12. However I do not see this distinction as being important for present purposes. The question still remains whether a person who is not an exclusive licensee under the terms of the respective definitions can nevertheless bring an action for infringement of the patent.

13. I have not found this an easy question to decide. On the one hand it seems that, as the authorities stand, the second applicant will have an uphill task in establishing that it has a cause of action against the respondents. On the other hand, it alleges wrongful acts on the part of the respondents which have caused it damage. And the common law is constantly being developed so as to provide remedies for wrong-doing in areas where it may have been thought that none existed.

14. A good example of this occurred in Beaudesert Shire Council v Smith [1966] HCA 49; 120 CLR 145, at 155-6, where the High Court said,

"There is, therefore, a solid body of
authority which protects one persons's lawful
activities from the deliberate, unlawful and
positive acts of another. It is not, however,
possible to adopt a principle wide enough to
afford protection in all circumstances of loss
to one person flowing from a breach of law by
another, for regard must be had to the
limitations which the law has placed upon the
right of a person injured by reason of
another's breach of statutory duty to recover
damages for his injury. Bearing this in mind,
it appears that the authorities cited do
justify a proposition that, independently of
trespass, negligence or nuisance but by an
action for damages upon the case, a person who
suffers harm or loss as the inevitable
consequence of the unlawful, intentional and
positive acts of another is entitled to
recover damages from that other. It may be
that a wider proposition could be justified,
but the proposition we have stated covers this
case..."

15. Against this background, I turn to consider the authorities which should guide me in determining this motion for summary judgment.

16. As Dixon J said in Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62, at 91,

"A case must be very clear indeed to
justify the summary intervention of the court
to prevent a plaintiff submitting his case for
determination in the appointed manner by the
court..."

This fundamental principle was echoed by Barwick C.J. in General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 130, where he said,

"...in my opinion great care must be
exercised to ensure that under the guise of
achieving expeditious finality a plaintiff is
not improperly deprived of his opportunity for
the trial of his case by the appointed tribunal".

17. I am influenced in the present case by the fact that the action is at a very early stage, and the agreement between the applicants, upon which the second applicant's case must be founded, is not before the Court. Counsel for the applicants has indicated a willingness, amounting perhaps to a desire, to amend his pleading so as to raise expressly a cause of action based upon unlawful interference with the applicants' economic or contractual relations with each other. And it is not as though there will be any great saving of the costs of the litigants or the time of the Court if I were to accede to the motion before the Court. The action is going to proceed in the name of the first applicant; and I have no reason to believe that there will be any great increase in costs or in time caused by the presence of the second applicant as a party to the action.

18. For all these reasons I think that the action should be allowed to proceed in the name of both applicants, but I shall give the applicants leave to amend their statement of claim and to file and serve it by 9 March 1990. I shall further order that the orders made on 28 November 1989 by Northrop J be varied to provide as follows:

(a) the respondents shall file and serve their

defence and any cross-claim by 23 March 1990,

(b) the applicants shall file and serve their

reply and defence to any cross-claim by 30 March 1990, and

(c) the directions hearing shall be adjourned to 3

April 1990 at 9.45 am.

19. Although the notice of motion is dismissed for the reasons which I have given, in my view the respondents were justified in attempting to have the action of the second applicant dismissed and I shall therefore order that the costs of all parties of the notice of motion be costs in the cause.