Re Martin Engineering Company and ESS Engineering Services and Supplies Pty Limited v Nicaro Holdings Pty Limited; Matflo Engineering Pty Limited and Richard Couper [1991] FCA 24 (12 February 1991)

FEDERAL COURT OF AUSTRALIA

Re: MARTIN ENGINEERING COMPANY and E.S.S. ENGINEERING SERVICES AND SUPPLIES
PTY LIMITED
And: NICARO HOLDINGS PTY LIMITED; MATFLO ENGINEERING PTY LIMITED and RICHARD
COUPER
No. G427 of 1987
FED No. 25
Patents
(1991) AIPC para 90-799

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Burchett J.(1)

CATCHWORDS

Patents - infringement - proof - whether device complying with an integer of the Claim could escape infringement if not used in the manner contemplated by the patent, though capable of such use - measure of damages in claims by (a) patentee, (b) exclusive licensee.

Patents Act 1952, ss. 114, 118

HEARING

SYDNEY
12:2:1991

Counsel for the Applicant: Mr D.K. Catterns

Solicitors for the Applicant: Messrs Williams Niblett

Counsel for the Respondent: Mr P.W. Gray

Solicitors for the Respondent: Messrs Clapin, Robinson and Carbone

ORDER

The applicants bring in, on a date to be fixed, short minutes of orders to reflect the reasons of the Court.

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

DECISION

The applicants, who are respectively the registered proprietor and the exclusive licensee of a patent number 512902, instituted proceedings against the respondents seeking injunctive relief and damages for alleged infringement of the patent. The case has already produced several reported decisions - Martin Engineering Co v. Matflo Engineering Pty Ltd (1987) 17 FCR 132, in which I granted an interlocutory injunction pending this hearing; Martin Engineering Co. v. Trison Holdings Pty Ltd (1989) 14 IPR 330, in which I dismissed a cross-claim for revocation of the patent brought by the respondents in this proceeding and heard together with a similar cross-claim raised in other proceedings; and Nicaro Holdings Pty Ltd v. Martin Engineering Co. (1990) 91 ALR 513, in which a Full Court dismissed an appeal from the decision in respect of the cross-claim. The issues that must now be dealt with are the issues of infringement and damages.

2. I have already set out, in the second of the abovementioned decisions, the salient provisions of the patent and the nature of the apparatus to which it relates. There is no need to repeat the details in these reasons. However, some brief explanation may be convenient. The patent is concerned with the cleaning of conveyor belts used in mines and in industry generally. It is common for such belts to be cleaned by some form of scraping at a point at or near the commencement of the return run of the belt after the discharge of its load. In practice, the space in this area may be confined and cluttered, so as to produce problems of access when work upon maintenance of the scraping equipment is required to be performed. Scrapers, which may have to be urged against the surface of the belt with some force, from time to time become worn or broken and must be replaced. It was an object of the patented invention to overcome these problems by the devising of a system under which individual scrapers could be held firmly in position during use, but yet be able to be slid off a support with a minimum of delay or difficulty, even under conditions of constricted working space. Delay, of course, is costly, particularly if it is necessary to stop the operation of the conveyor belt during maintenance of the belt cleaner. Accordingly, the invention provided for the individual scrapers to be mounted on sleeves which were able to slide upon a support member, but not to rotate about it (that would negate ability to scrape), the support member having a means of adjustment so that the scrapers could be brought into or out of engagement with the conveyor belt. While disengaged, they would be free to slide. Claim one of the patent, upon which the applicants rely, reads as follows:
"Apparatus for cleaning a conveyor belt comprising a

linearly extended support member adapted to be positioned
beneath the conveyor belt in use and generally transverse to
the direction of the conveyor belt travel; at least one
sleeve member mounted on the support member for sliding
movement therealong, the sleeve member being arranged to
cooperate with the support member to prevent rotation of the
sleeve about the support member when mounted thereon,
mounting means on the sleeve members, one or more belt
cleaning elements mounted on the mounting means, and an
adjusting element operable on the support member for
bringing the belt cleaning elements into engagement or out
of engagement with the conveyor belt."

3. The respondent companies, of which the third respondent, Mr Couper, is a director and the moving spirit, have manufactured scraping equipment ("the respondents' apparatus") which undoubtedly reflects all of the integers of claim one other than the last, "an adjusting element operable on the support member for bringing the belt cleaning elements into engagement or out of engagement with the conveyor belt". The dispute in the case centres upon that integer. The applicants claim, and the respondents deny, that it also is to be found in the respondents' apparatus. No question is now raised in respect of the earlier portions of claim one - in particular the requirement of prevention of rotation of the sleeve about the support member, and the requirement of mounting means on the sleeve members - which grounded the arguments upon the issue of infringement raised on behalf of the respondents at the interlocutory hearing.

4. One of the ways in which the patentee has realized the last integer, in belt cleaning equipment marketed by it, has been by the provision of a means of rotating the support member, which is positioned beneath the belt at right angles to its direction of travel. By this method, cleaning elements fixed in position at right angles to the support member can be rotated into or out of engagement with the conveyor belt. When out of engagement, they can easily be slid off and replaced during maintenance of the equipment, and that, in some cases, without stopping the running of the conveyor belt. In the respondent's apparatus also, the support member rotates, but its rotation is limited to an arc of about 15 degrees by the interposition of an airbag connected to a lever, and the addition of a stopping device which prevents expansion of the airbag forcing the lever beyond a certain point. The airbag itself restricts the travel of the lever in the opposite direction, unless it should be collapsed, and even in that case, will stop it at some point.

5. The belt cleaning elements utilised by the respondents (which are similar to those produced by the applicants pursuant to the patent) are of two sorts - pre-cleaners, and secondary cleaners. Typically, a belt is intended to be cleaned by cleaners of both types, the pre-cleaners being mounted on one piece of equipment and the secondary cleaners on a second piece of equipment. The pre-cleaners consist of thick slabs of synthetic rubber ("rubber") mounted on sleeve members able to slide on their support conformably with claim one. The rubber, although thick and quite stiff, has some degree of elasticity, enabling it to be forced away from the conveyor belt by bending. The secondary cleaners, on the other hand, involve metal scraper blades on metal torsion arms, attached to their mounts on sleeve members (which again are able to slide on their support) through a flexible block of rubber or similar material which permits them also to be forced in a direction away from the conveyor belt, but only until the limit of the flexibility of the flexible block is reached. At that point the cleaner becomes rigid.

6. It is the presence of a degree of flexibility in each type of cleaning element, together with the operation of the airbag, limited in the way I have already described, upon which the respondents rely. They contend that the airbag, and the lever attached to it, do not constitute "an adjusting element operable on the support member for bringing the belt cleaning elements into engagement or out of engagement with the conveyor belt". They are certainly operable on the support member, but they are said to have a function quite distinct from that stated in the integer of the patent I have quoted. Their function is claimed to be simply to enable a measured force to be applied to hold the cleaning elements against the surface of the conveyor belt, by inflation of the airbag, while enabling the system, through the cushioning effect of the airbag, to ride over any inequalities in the surface of the belt. The applicants, on the other hand, confess and avoid; they say the respondents' apparatus may indeed operate in the way the respondents assert, but this does not prevent it from also fulfilling precisely the last integer of the patent. The airbag and lever constitute an adjusting element, admittedly operable on the support member, which enables the purpose to be achieved of bringing the belt cleaning elements into or out of engagement with the conveyor belt, something essential for the regular maintenance of the equipment.

7. A remarkable feature of this conflict is the difference in approach to proof shown by the two sides. The applicants called direct evidence of the manner in which, according to their case, the cleaning elements of the respondents' apparatus were in practice installed, and removed for maintenance and reinstalled, during the period from about July 1986 to about late October 1986. That evidence was provided by a Mr Ross Savage who was, during the period mentioned, a director and shareholder of the respondent Matflo Engineering Pty Limited. It is not in dispute that all examples of the respondents' apparatus which have been sold were sold by that company, and not by Nicaro Holdings Pty Limited nor by Mr Couper personally. (Nicaro Holdings Pty Limited is a respondent because it has threatened to take over the marketing of the respondents' apparatus, but it has not done so as yet. Of course, all the respondents have been restrained by the interlocutory orders since those orders were made in 1987.) There is no suggestion that the method of installation of the respondents' equipment changed between October 1986 and the grant of the interlocutory injunction, although it is said that an improvement of the system has been devised by Mr Couper since the interlocutory proceeding. The person who was in charge of installation and maintenance of the respondents' apparatus was a Mr Rolf Driene, a director of the respondent Matflo Engineering Pty Limited. It is admitted that Mr Savage assisted Mr Driene in this work. Mr Savage gave evidence, which I accept, that he himself also carried out installation or maintenance alone.

8. Although it was proved that Mr Driene, who had been overseas in Germany, was available, and that Mr Couper had spoken to him immediately before the hearing, he was not called. Mr Couper himself claimed to have had nothing to do with installation or maintenance. The process of reasoning to which the High Court gave its approval in Jones v. Dunkel [1959] HCA 8; (1959) 101 CLR 298 is applicable to this situation. An interesting example of its application to the proof of an infringement of patent rights is to be found in the Israeli case, Wellcome Foundation Limited v. Plantex Limited (1972) RPC 136 at 139-140, where the Israeli Judge determined the matter in accordance with English authorities. Quite apart from the effect of Jones v. Dunkel, I would, in this case, accept the evidence of Mr Savage as to the method of installation of cleaning elements in the carrying out of which he was involved. The reasoning in Jones v. Dunkel, as applied to the absence of Mr Driene from the witness box, confirms me in doing so. Mr Savage described the method he and Mr Driene used in the following language:

"The support member is rotated so as to bring the Scraper
Blades into and out (of) engagement with the conveyor belt
by means of an adjustable air bag operating on that support
member. When the Scraper Blades are out of engagement with
the conveyor belt, they are normally positioned roughly
horizontal to the support member (ie. the blades themselves;
the torsion arms carrying them project from the support at
right angles) and their blades are about half an inch to one
inch from the surface of the belt. When air is pumped under
pressure into that air bag, the support member is rotated
and the Scraper Blades are brought into engagement with the
conveyor belt and the force of such engagement is maintained
'automatically' with uniformity even though the Scraper
Blades wear down as a result of friction with the belt.
When the pressurised air within in the adjustable air bag is
released, that bag collapses enough to counter-rotate the
support member and so bring the worn Scraper Blades out of
engagement with the conveyor belt by a minimum practical
distance to enable the blades to be slid sideways free of
the belt. This distance would normally be about half an
inch to one inch. By this means such worn Scraper Blades
are easily able to be removed by being slid off one end of
the angle iron track attached to the support member and
replaced by new blades. Once this replacement is completed
and the new Scraper Blades are moved into their desired
position beneath the conveyor belt, compressed air is pumped
into the adjustable air bag which rotates the support member
so as to bring the new Scraper Blades back into engagement
with the conveyor belt."

Mr Savage specifically denied that the method for which the respondents contended at the hearing, which I shall explain shortly, was ever recommended to him by Mr Couper or by Mr Driene; he said, and I accept, that he never observed this method in operation, and that he was not aware of it ever being implemented.

9. The method for which Mr Couper contended, supported by the evidence of Dr Penman (a well qualified engineering expert called for the respondents), by which it was alleged cleaning elements were to be installed and removed from the respondents' apparatus, depends on the utilisation of the flexibility inherent in each of the types of pre-cleaner and secondary cleaner which have already been described. It is alleged that the resilience of the rubber blocks in the secondary cleaners is capable of absorbing a pressure equal to 14 pounds weight before the torsion arm of the cleaning element becomes rigid. The respondents claimed that, in many applications, the correct working pressure would be less than that (10 pounds on each cleaning element was suggested), so that the torsion arm of the cleaning element would not be fully flexed as it pressed against the conveyor belt. For this reason, it would be possible, it was asserted, to pull the scraper blade away from the surface of the conveyor belt, and then to slide the cleaning element along the support without rotating the support. If the equipment were installed and maintained by this method, there would be no need to touch the airbag, and there would be no rotation of the support member or other adjustment of it "for bringing the belt cleaning elements into engagement or out of engagement with the conveyor belt".

10. The first answer made to the respondents' argument was that, in fact, the equipment was not installed or maintained in the manner contemplated by that argument. I have already indicated my acceptance of Mr Savage's evidence on this point. But a number of other answers were also made. There was evidence that the respondents' apparatus was not always used with flexibly mounted cleaning elements. If the cleaning element was rigid, it is plain that the method described by Mr Savage, and not that suggested on behalf of the respondents, must have been employed. Next, it was pointed out that the pre-cleaners operated differently from the secondary cleaners, although they also were flexible to some extent; to what precise extent was not made clear. Not only were some secondary cleaners rigid in construction; there was evidence, which the respondents' expert Dr Penman did not dispute, suggesting that in many cases efficient cleaning would require the application of a force equal to from 18 pounds to 25 pounds. Indeed, Dr Penman said: "It can be higher in certain circumstances." As the secondary cleaners become rigid upon an application of 14 pounds pressure, it is plain that in all these cases the method advocated by the respondents could not be used. Even within the ranges of force preserving sufficient flexibility in the torsion arms to enable the respondents' method to be adopted, there would be further difficulties. As the cleaning unit is mounted upon something in the nature of a sleeve designed to slide upon the support, any pulling of the blade away from the conveyor belt, which would necessarily increase the frictional force obstructing sliding, must conflict with the principle upon which the equipment is constructed. In practice, the obstruction would be likely to be quite considerable, since the surfaces to slide upon each other would often be encrusted with dirt and grit falling from the conveyor belt.

11. Mr Couper suggested an ingenious solution to the problem of increased friction by the use of a clip, to be attached to the cleaning unit in order to hold it rigidly in a fully flexed position (exhibiting a sort of self-contained system of a triangle of forces) without any force being transferred to the sliding junction with the support. However, it was admitted that this device had never been used in practice, being something Mr Couper thought of after the interlocutory proceeding. That being so, this evidence rather supports the applicants. For it demonstrates an acknowledgment of a real difficulty with any procedure other than that alleged by them, and it would plainly not overcome the difficulty in all cases. Even if the clip had been available, it would have been impossible to use where the pressure on the cleaning element exceeded 14 pounds, and difficult to use in confined spaces. Certainly, the suggested method could not have been used, with any semblance of safety, without stopping the operation of the belt. The evidence suggests that, in many situations, an ability to adjust the support so as to bring the cleaning elements out of engagement with the conveyor belt, in order to slide them off the support, without stopping the conveyor is regarded as important.

12. I have concluded that not only was the respondents' apparatus not installed or maintained in any manner other than that described by Mr Savage, but it is most unlikely that it would, over a large range of applications, be maintained in any other manner, in practice, even if Mr Couper's latest device were available. That is not to deny that there might be some applications where the device would be most useful.

13. On the view I take of the facts, I do not think there is any doubt about infringement. The evidence of its installation and maintenance in the manner described by Mr Savage clearly demonstrates that the respondents' apparatus has been constructed and used in such a way as to take the last integer of claim one quite precisely.

14. Even had I taken a different view, it would not have followed that the respondents should succeed. There is no doubt the respondents' apparatus, as constructed, is capable of being used in the way described by Mr Savage. If it is said the respondents do not desire it to be used in that particular way, the question remains whether this is a sufficient answer. In Terrell On the Law of Patents 13th ed. (1982) s.6.23, it is stated:

"Further, where the claim was 'a machine claim and not a
method claim,' the manufacture or sale of a machine which
contained an infringing device would have been an
infringement if such device was capable of being brought
into use; and the fact that the machine could be, or was
normally, used without bringing the device into operation
was not material."

For this proposition, the learned author cites British United Shoe Machinery Co Ld v. Gimson Shoe Machinery Co Ld (1928) 45 RPC 85 at 104 where Tomlin J., in the context of an allegation of infringement by the use of an automatic device, said:

"If the machine in fact contains mechanism capable of
operating automatically it will not, I think, escape being
an infringement because it can be used in some way which
does not bring the automatic mechanism into operation."

Terrell also cites the same case on appeal (45 RPC 290), when this view of the law was accepted by Lord Hanworth MR at 301, and similar views were stated by Lawrence L.J. at 304 and Russell L.J. at 308. Russell L.J. said:

"It seems to me of little importance to consider the actual
user of a machine if in fact the machine contains an
infringing device which is capable of user."

Terrell's proposition is also accepted in the Canadian work Fox on The Canadian Law and Practice relating to Letters Patent for Inventions 4th ed. (1969) at 390, which states:

"Where a machine contains infringing mechanism a charge of
infringement cannot be escaped because the machine can, or
could, be used in some way that does not bring that
mechanism into operation, even though that mechanism is, in
fact, not used. It is of little importance to consider the
actual use of a machine if in fact the machine contains an
infringing device that is capable of use."

15. The applicants, having established infringement a continuance of which is admittedly threatened, are entitled to injunctive relief. They are also each entitled to damages. (As to the right of an exclusive licensee, see ss.114 and 118 of the Patents Act 1952.) The measure of damages applicable to the patentee is the royalties lost by the infringement. In this case, I think it is probable that all of the sales effected by the respondent Matflo Engineering Pty Limited would, but for its conduct, have been effected by the applicant E.S.S. Engineering Services and Supplies Pty Limited (the exclusive licensee), whereby the applicant Martin Engineering Company would have become entitled to royalties. The exclusive licensee would have been the natural vendor to purchasers whose choice of equipment of the kind the subject of the patent suggests they would have been unlikely to have gone to other suppliers whose products worked upon quite different principles. In General Tire and Rubber Company v. Firestone Tyre and Rubber Company Limited (1976) RPC 197 at 220 Lord Wilberforce (with whom Viscount Dilhorne, Lord Diplock and Lord Kilbrandon agreed) took as "a satisfactory and real measure of the respondents' loss", they being the patentees, the rate at which they would have been willing to license use of the invention. Lord Salmon at 225 said:

"A patentee whose invention is used without a licence, has,
amongst other things, the right to be paid damages for the
loss he suffers as a result of the infringement. When, as
in the present case, the patentee exploits his invention in
the United Kingdom by licensing others to use it there, his
loss is the capitalised value of the royalties which the
infringer should have paid him in the United Kingdom."

On this basis, the damages to be awarded to Martin Engineering Company, and there is no dispute about the calculation, come to the amount of $9,750.60.

16. The exclusive licensee is also entitled, as damages, to the loss suffered by it as a result of the infringement. In Watson, Laidlaw and Co. Ld. v. Pott, Cassels, and Williamson (1913) 30 RPC 285 at 290, Lord Dundas said: "(T)he measure of damage is prima facie the amount of profit which the Pursuers could have made if they had effected these sales themselves." He pointed out that, in some cases, the nature of a particular trade, or of competition in it, might weaken the presumption. I have already held that, in the present case, it is probable the exclusive licensee would have effected the sales. Both the applicants and the respondents have placed before me calculations, which differ by a relatively small amount, of the damages of the applicant exclusive licensee upon this basis. The difference relates to whether or not royalties paid to the other applicant are deductible in the calculation of net profit. I think they are deductible in principle, at least where damages by reference to royalties which should have been received are also awarded to the patentee. If there is any ambiguity in the evidence as to whether they were deducted in the calculations provided by the applicants, any such ambiguity must be resolved against them, since they bear the onus of proof. Accordingly, I assess the damages payable to the applicant exclusive licensee upon the basis of the respondents' calculation, that is, at $40,367.48.

17. I direct the applicants to bring in short minutes, on a date to be fixed, of orders in conformity with these reasons.