ATF Mining Electrics Pty Ltd v Bramco Electronics Pty Ltd - [2012] NSWSC 1126

Supreme Court

New South Wales

Medium Neutral Citation: ATF Mining Electrics Pty Ltd v Bramco Electronics Pty Ltd [2012] NSWSC 1126
Hearing dates: 27 June 2012, further written submissions from plaintiff on 2 August, 30 August and submissions from the defendant on 30 August 2012
Decision date: 18 September 2012
Jurisdiction: Equity Division
Before: Sackar J
Decision:
See paragraphs 169 to 173

Catchwords: Construction of contractual documents, principles, construction of patents, patent infringement, expert evidence
Legislation Cited: Patents Act 1990 (Cth)
Cases Cited: Australian Broadcasting Commission v
Australasian Performing Right Association Ltd (1973) 129 CLR 99
Australian Mud Co Pty Ltd v Coretell Pty Ltd (2011) 93 IPR 188
Catnic Components Ltd v Hill & Smith Ltd [1982] RPC 183
Decor Corp Pty Ltd v Dart Industries Inc (1988) 13 IPR 385
Firebelt Pty Ltd v Brambles Australia Ltd (2002) 76 ALJR 816
Firebelt Pty Ltd v Brambles Australia Ltd [2000] FCA 1689
Fuji Xerox Finance Ltd v CSG Ltd [2012] NSWSC 890
Improver Corp v Remington Consumer Products Ltd [1990] FSR 181
International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151
Kimberly-Clark Australia Pty Ltd v Multigate Medical Products Pty Ltd (2011) 92 IPR 21
Kinabalu Investments Pty Ltd v Barron & Rawson Pty Ltd [2008] FCAFC 178
Nesbit Evans Group Australia Pty Ltd v Impro Ltd (1997) 39 IPR 56
Nicaro Holdings Pty Ltd v Martin Engineering Co (1990) 16 IPR 545
Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451
Populin v HB Nominees Pty Ltd (1982) 59 FLR 37
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
VIP Plastic Packaging Pty Ltd v BMW Plastics Pty Ltd (2011) 92 1PR 130
Category: Principal judgment
Parties: ATF Mining Electrics Pty Ltd - plaintiff
Bramco Electronics Pty Limited - defendant
Representation: Counsel:
R Newlinds SC, R Glasson - plaintiff
Ms J Baird SC - defendant
Solicitors:
Moray & Agnew - plaintiff
Middletons - defendant

File Number(s): 2012/59118

Judgment

The plaintiff ATF Mining Electrics Pty Ltd (ATF) seeks declarations against the defendant (Bramco Electronics Pty Ltd), (Bramco) that the defendant is in breach of a Deed of Settlement and Release (Deed) dated 17 January 2008 and a Patent Licence Agreement (Agreement) entered into between them dated the same date.

The plaintiff seeks an order that the defendant by itself and its servants or agents or howsoever be permanently restrained from:

(a) selling any Sensor;

(b) manufacturing any Sensor; and

The plaintiff also requires delivery up by the defendant of all Sensors, and all things which constitute an improvement, enhancement, modification, adaptation or extension to any Sensor, or components of which are used to assemble or manufacture the Sensor and any relevant documentation concerning its design.

Bramco denies such relief should be available to the plaintiff.

Background Facts

The plaintiff (ATF) and the defendant (Bramco) both manufacture and sell devices for use in the mining industry.

In June 1999 ATF purchased the assets of Metal Manufacturing Limited Ltd which included Australian Patent No. 704930 for an invention entitled "Load Control Module" for a term of 20 years commencing on 23 August 1994 (the Patent). ATF also purchased and received an assignment of the equivalent Patent in South Africa.

From about 2006 ATF and Bramco were in dispute concerning sales by Bramco of a product called CPM1-Plus Smart Pilot Node (including with product numbers AOO254 and AOO255) and the validity of the Patent.

In December 2006 ATF commenced proceedings in the Federal Court of Australia alleging that Bramco had infringed the Patent by producing and selling a particular device which was known in the marketplace as the Smarty. In particulars supplied to the defendant in those proceedings the plaintiff alleged that in addition to the Smarty the defendant, had in doing so breached the Patent in manufacturing additional models identified as follows: CPM1mSP+ model, CPM, CPM1, CPM1m, Protection Smart Pilot "kit", Remote Identification Smart Pilot Node Earth Continuity Types - IC-1 and IC-2, Fan Control Module - Twister.

In addition to its defence in the Federal Court the defendant cross claimed seeking a declaration that the Patent was invalid and that it be thereby revoked.

On 17 January 2008 the Federal Court proceedings were resolved by the entry into a Deed and an Agreement.

In essence the Federal Court proceedings were settled on the basis that ATF retained the Patent, the defendant Bramco paid ATF $20,000. Bramco gave up the claim that the Patent was invalid and Bramco was given a limited licence to sell no more than "50 Sensors" to existing customers until 31 December 2008 and none thereafter. The Deed also provided that Bramco was prohibited from selling, after 31 June 2008 any controller or relay enabled to or intended to receive transmissions sent by a "Sensor" and developing, producing, marketing and selling any product that utilised the patent or technology that was materially similar to the Patent.

After 31 December 2008 Bramco manufactured and sold the product known as a "machine recognition device" (including with product numbers A01384, A01387, A01398, A01190 and A01190A) (the MRD).

It is not in dispute in this case that Bramco has sold MRD's in Australia and in South Africa after 31 December 2008.

The Contentions of the Parties

ATF alleges that the sale by Bramco of the MRDs is a breach of both the Deed and Agreement. That is because the MRD and the Smart Pilot Node (SP Node) perform the same functions in the same way.

Bramco however asserts that the MRD is not a "Sensor" as the term is defined and properly understood (and neither the MRD nor the Smarty is a Sensor). Further Bramco contends that the MRD is not used or capable of being used in accordance with the invention described in the Patent.

ATF asserts that as the MRD and SP Node perform the same function in the same way, breaches of occurred by Bramco's sales of the relevant devices. It contends the MRD in any event is capable of being used in accordance with the Patent.

Legal Principles

In this case it is necessary to construe a number of agreements and, as the defendant contends, the Patent as well.

Construction of Contracts

In relation to the agreements (that is the Deed and Agreement) the principles are not in dispute. In deciding whether a contract has been entered or what construction it bears the common intention that the court seeks to ascertain is what is sometimes called the "objective intention" of the parties. That is, the intention that a reasonable person with knowledge of the words and actions of the parties communicated to each other, and the knowledge that the parties had of the surrounding circumstances would conclude that the parties had, concerning the subject matter of the alleged contract: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179 [40]; International Air Transport Association v Ansett Australia Holdings Ltd (subject to deed of company arrangement) and Others (2008) 234 CLR 151 at [8]; Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109.

There is also no doubt that a factor to be taken into account in deciding whether a contract has been entered (and if so, what are its terms) is the "purpose and object of the transaction"; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 461 [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd at 179 [40]; in Pacific Carriers the joint judgment of Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ recognised the appropriateness of taking into account the purpose and object of the transaction and said:

[22]...In Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 350, Mason J set out with evident approval the statement by Lord Wilberforce in Reardon Smith Line Ltd v Hanson-Tangen [1976] 1 WLR 989 at 995 - 996;

in a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn pre supposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.

However the purpose and object of the transaction is itself ascertained objectively. It is to be ascertained by considering what a reasonable observer in the situation of the parties would conclude was the purpose and object of the transaction.

It is appropriate that I acknowledge that there has been recent debate as to when resort can be had to surrounding circumstances. I have recently expressed views about this matter in Fuji Xerox Finance Ltd v CSG Ltd [2012] NSWSC 890. In that judgment I expressed the view that until the High Court reconsiders its position as it were, a trial judge should proceed on the basis that, absent an ambiguity or where language is susceptible of more than one meaning, surrounding circumstances should not be resorted to. I propose to adhere to that approach here.

Construction of Patents

It is submitted that independently of the above principles, the relevant principles in relation to the construction of patent specifications are well established. Reliance is placed upon Kinabalu Investments Pty Ltd v Barron & Rawson Pty Ltd [2008] FCAFC 178 at [44] where the Full Court of the Federal Court summarising the principles stated:

[44] ...When determining the nature and extent of the monopoly claimed, the specification must be read as a whole. But as a whole it is made up of several parts which have different functions. The claims mark out the legal limits of the monopoly granted. The specification describes how to carry out the process claimed and the best method known to the patentee of doing that. Although the claims are construed in the context of the specification as a whole, it is not legitimate to narrow or expand the boundaries of monopoly as fixed by the words of a claim, by adding to those words glosses drawn from other parts of the specification. If a claim is clear and unambiguous, it is not to be varied, qualified or made obscure by statements found in other parts of the document. It is legitimate, however, to refer to the rest of the specification to explain the background of the claims, to ascertain the meaning of technical terms and to resolve ambiguities in the construction of the claims. See Flexible Steel Lacing Co v Beltreco Pty Ltd (2000) 49 IPR 331 at [73] - [75] Hely J.

Ordinary words should be given their ordinary meaning unless the person skilled in the relevant art would, in the context of the claims, give a special meaning or unless the specification ascribes a special meaning to them: Décor Corp Pty Ltd v Dart Industries Inc (1988) 13 IPR 385 at 391 per Lockhart J. Patent specifications are public documents which confer special rights and privileges. The primary rule is that patent specifications are to be construed by the person in the relevant art in light of the common general knowledge as at the priority date: Populin v HB Nominees Pty Ltd (1982) 59 FLR 37 at 42 - 43.

Expert evidence may be given in support of a claim that a word has a technical meaning in the particular field but in the absence of the special technical meaning expert evidence is not admissible to assist the court in construing the claims: Kimberly-Clark Australia Pty Ltd v Multigate Medical Products Pty Ltd (2011) 92 IPR 21 per Emmett J, at [12].

As the Full Court also observed in Kinabalu Investments at [45]:

...However, the construction of the specification is for the court, not for the expert. Insofar as a view expressed by an expert depends upon a reading of the patent, it cannot carry the day unless the court reads the patent in the same way.

Importantly it is the claims that are to be construed and while the context provided by the whole of the specification may assist, it cannot limit or qualify the clear meaning of the claims. Décor at 404 per Sheppard J.

Further His Honour in Décor set out the following ten principles with relation to relating to construction at 400 as follows:

(1) The claims define the invention which is the subject of the patent. These must be construed according to their terms upon ordinary principles. Any purely verbal or grammatical question that can be answered according to ordinary rules for the construction of written documents is to be resolved accordingly.

(2) It is not legitimate to confine the scope of the claims by reference to limitations which may be found in the body of the specification but are not expressly or by proper inference reproduced in the claims themselves. To put it another way, it is not legitimate to narrow or expand the boundaries of monopoly as fixed by the words of a claim by adding to those words glosses drawn from other parts of the specification.

(3) Nevertheless, in approaching the task of construction, one must read the specification as a whole.

(4) In some cases, the meaning of the words used in the claims may be qualified or defined by what is said in the body of the specification.

(5) If a claim be clear, it is not to be made obscure because obscurities can be found in particular sentences in other parts of the document. But if an expression is not clear or is ambiguous, it is permissible to resort to the body of the specification to define or clarify the meaning of words used in the claim.

(6) A patent specification should be given a purposive construction rather than a purely literal one.

(7) In construing the specification, the court is not construing a written instrument operating inter partes, but a public instrument which must define a monopoly in such a way that it is not reasonably capable of being misunderstood.

(8) The body, apart from the preamble, is there to instruct those skilled in the art concerned in the carrying out of the invention; provided it is comprehensible to, and does not mislead, a skilled reader, the language used is seldom of importance.

(9) Nevertheless, the claims, since they define the monopoly, will be scrutinised with as much care as is used in construing other documents defining a legal right.

(10) If it is impossible to ascertain what the invention is from a fair reading of the specification as a whole, it will be invalid. But the specification must be construed in the light of the common knowledge in the art before the priority date.

In summary whilst the patent needs to be read as a whole, the form and wording of the claims are all important. What is not claimed is disclaimed.

That said it is readily apparent that the principles of construction relating to contracts as opposed to patents are different for a number of obvious reasons. In the case of a contract, with or without reverting to surrounding circumstances, the exercise is to determine, objectively, the intention of the contracting parties. The construction of the patents (perhaps with the benefit of expert opinion) is to determine the nature of the invention for the benefit of the public. The patentee should have sufficiently described the invention with the requisite specificity so that all concerned not only understand clearly what the invention is, but in doing so clearly understand the limits of the statutory monopoly whilst the patent remains in force. As Lord Diplock said in Catnic Components Ltd v Hill & Smith Ltd [1982] RPC 183 (HL) the essential features of the invention, that is the "pith and marrow" is what is to be disclosed unilaterally by the patentee. A purposive rather than a literal construction is what is required. VIP Plastic Packaging Pty Ltd v BMW Plastics Pty Ltd (2011) 92 1PR 130 at 137, per Kenny J; Nicaro Holdings Pty Ltd v Martin Engineering Co (1990) 16 IPR 545, per Gummow J at [69] - [72]; Australian Mud Co Pty Ltd v Coretell Pty Ltd (2011) 93 IPR 188.

The Relevant Agreements

As a result of settling the Federal Court proceedings two agreements were entered into between the parties. First there was a Deed.

This document, leaving definitions aside just for one moment, provided that the defendant would pay the plaintiff the sum of $20,000 "in full and final settlement of the proceedings", (clause 2.1).

Clause 4.1 is in the following terms:

Bramco's rights and obligations

4.1 Bramco agrees:

(a) it will enter into the Licence Agreement on or about the same time as this Deed;

(b) it will not sell, repair, maintain, improve or otherwise use or apply the Patent or the Sensor except as expressly permitted in accordance with the Licence Agreement;

(c) not make any representation, allegation or assertion that ATF is not entitled as a matter of fact to the proprietary interest in the Patent;

(d) not to disparage or otherwise criticise ATF of an incidental to, or in relation to, the patent or the subject matter of the Proceedings;

(e) not assist or support any other person or entity in relation to its defence of any allegation of infringement by ATF or support any entity in attempts to have the Patent revoked unless compelled to by force of law on and from the date of entry into this Deed;

(f) not sell any controller, relay or module enabled to receive transmissions stored in a Sensor except as provided by clause 4.1(a) of the Licence Agreement;

(g) not make any reference to the Smarty Sensor in any promotional literature or marketing it undertakes and make no representation, orally or in writing, that it offers a Smarty Sensor for sale.

(h) that it will not enter into any agreement, understanding or arrangement with a third party to manufacture, distribute, use or otherwise exploit the Sensor or the technology in the Sensor.

Clause 4.2 is in the following terms:

4.2. Clause 4.1 of this Agreement only extends to any country in which ATF holds the Patent or a member of the same family of patents for the term of that or those patents.

The term "Sensor" is defined in clause 1 of the deed as follows:

Sensor means any sensor that:

(a) stores or is capable of storing data; or

(b) stores or is capable of storing data and uploading or transmitting the data to a controller or relay;

including a Smarty branded sensor for use in accordance with the invention described in the Patent.

The term "Smarty branded sensor" referred to in the definition and also referred to in clause 4.1(g) is not defined.

The term "Patent" is defined in clause 1 as follows:

...means the Australian patent No. 704930 titled "Load Control Module" in the name of ATF having priority date of 24 August 1993, any letters patent granted pursuant to such patent application and any patent application or letters patent taking priority from application PCT/AU 94/00492 in any country of the world including all renewals and extensions.

Controller is defined in clause 1 as follows:

...means equipment to control electrical switchgear. Module and relay have the same meaning.

The Agreement, which of course was entered into at the same time as the Deed has the same definition of "Patent and Sensor". The Agreement is said to be "interdependent, related to and conditional upon the parties entering into the Deed of Settlement". (clause 3.1)

The grant of the rights pursuant to the Agreement are found in clauses 4.1 and 4.2 of the Agreement. Clause 4.1 is in the following terms:

4.1 Grant

The Licensor grants to the Licensee and the Licensee takes from the Licensor a non-transferable and non-exclusive right to use and apply the Patent in any country in which the Licensor holds the Patent to:

(a) sell Sensors to the Licensee's Existing Customers, in the period from the Commencement Date until midnight on 31 December 2008, provided that:

(i) such sales do not during that period exceed a total of 50 Sensors; and

(ii) only Sensors sold prior to 30 June 2008 may be sold in conjunction with a Controller enabled to operate with that Sensor;

(b) repair or maintain any Sensors previously sold to Existing Customers, in the period from the Commencement Date until 31 December 2010;

(c) repair or maintain in the period after 31 December 2010 a maximum of two Sensors previously sold by Existing Customers per year; and

(d) repair or maintain in the period after 31 December 2010 more than two Sensors previously sold to Existing Customers per year, provided that the Licensor has been notified prior to the repairs being carried out by the Licensee.

Clause 4.2 is as follows:

Licence Limitations

All rights to use the Patent for purposes other than expressly permitted under clause 4.1 are excluded from this agreement and belong exclusively to the Licensor. For the avoidance of doubt, the Licensee:

(a) must not sell any Sensor to any New Customer after the Commencement Date;

(b) must not sell any Sensor after 31 December 2008;

(c) must not, after 30 June 2008, sell any enabled controllers, modules or relays intended to receive transmissions sent by a Sensor; and

(d) must not, after 31 December 2010, repair or maintain more than two Sensors previously sold to Existing Customers per year without notifying the Licensor prior to the repairs being carried out by the Licensee.

Clause 14.1 is in the following terms:

Restraint

Subject to the other provisions of this agreement, the Licensee must not, without the prior written consent of Licensor, at any time during the Term either individually or in partnership or jointly in conjunction with any person, persons, firm, association, syndicate, company, corporation or any other entity, as principal, agent, consultant or shareholder or in any other manner whatsoever:

(a) develop, produce, market or sell any product that utilises the Patent or technology that is materially similar to the Patent; or

(b) be interested in or advise or provide any consulting services regarding the Sensors, the Patent or technology that is materially equivalent to the Patent to any person or entity that develops, produces, markets, sells or otherwise deals in products or services similar to the Sensors or the Patent.

The Patent

The front page of the Patent has a diagram which, by a number and then by a description various components are depicted. The invention is described as relating to a load control module, in particular a load control module for controlling switch gear which when in use, connects a power source to a remotely located electrical load. It is said to be primarily for use in underground mining. It could also, of course, be used where load control is needed for electrically powered devices such as motors and transformers.

The Background to the Invention

The Patent states that high power electrical equipment such as motors and transformers may have been connected to a power source via switch gear. The switch gear would be in general set up for a particular piece of equipment, so that once predetermined load characteristics vary sufficiently, the power will be disconnected to prevent any potentially hazardous conditions which may result in the loss of equipment or life. Any set up or adjustment of the switch gear hitherto had to be manually performed, which could create dangers in the workplace. In underground mining applications, the switch gear is preferably located within a protective housing to ensure that any sparks generated during switching are not available to ignite flammable gases such as methane which may be present. Housing includes walls formed from thick steel plate. Again, hitherto, to set up or adjust the switch gear for a particular piece of equipment necessitated the opening of the steel housing by removing all bolts, the setting of the switch gear and the subsequent replacement of the door. Testing had to be undertaken to ensure that the process was safe, but if the switch gear had not been correctly set up, the process had to be repeated which was both time consuming and labour intensive. It could also lead to operator fatigue or misadventure. The invention (in its preferred embodiment) is to overcome or substantially ameliorate some of the deficiencies of the "prior art".

The purpose therefore of the invention is by the use of a load control module which can control the switch gear to convert a power source to a remotely located electrical load. The module is said to include a sensor unit associated with the load for providing a first signal which transmits load protection data and a controller for receiving the first signal, and for selectively providing a second signal to switch gear to isolate the load from the power source, when the load during operation does not comply with the load protection data. The sensor unit preferably periodically provides a third signal by which load operating data is transmitted when requested by the controller.

The "claims" describing the invention are as follows:

1. A load control module for controlling switch gear which, in use connects a power source to a remotely located electrical load, the module including:

a sensor unit associated with the load for providing a first signal which transmits load protection data; and a controller for receiving said first signal and for selectively providing a second signal to the switch gear to isolate the load from the power source when said load during operation does not comply with said load protection data;

2. A load control module according to claim 1 wherein the switch gear and the controller are located within a protective housing and the sensor unit and load are disposed outside the housing;

3. A load control module according to claim 1 or 2 wherein the sensor unit associated with the load periodically provides a third signal which transmits load operating data;

4. A load control module according to claim 3 wherein the sensor unit provides the third signal when requested by the controller;

5. A load control module according to any one of the preceding claims wherein the controller and sensor unit communicates through a single wire communication link which also supplies power to the sensor unit;

6. A load control module according to any one of the preceding claims wherein the switch gear selectively connects the power source to the load via a power cable, the cable including the communication link;

7. A load control module according to any one of the preceding claims wherein the controller includes means for detecting earth leaking faults;

8. A load control module substantially as herein described with reference to the accompanying drawing.

The first signal, according to the description in the Patent, transmits load protection data. The second signal then isolates if necessary the piece of equipment from the power source when the load does not comply with the load protection data.

The sensor unit (9 in the diagram) is said to "communicate" via cable with the controller (10 in the diagram). The controller is said to either "directly or indirectly" through sensor 9, obtain what is described as "sufficient information" about both the initial and normal operating parameters of the particular piece of equipment so as to enable the system to control the switch gear in response to conditions such as overload short circuit, single phasing, undercurrent earth leakage etc. (Patent p.7).

Once the system is powered up, the controller is able to carry out a self test procedure to ensure all of its components are in order.

There is little doubt that the Patent contemplates that messages or communications will pass between the "sensor" and the controller, which message may be coded with the information about the particular electrical load which is to be supplied via the switch gear. The message (in code) can convey the power requirements of the equipment as well as its stating characteristics. (Patent p.7)

Both the sensor unit and the controller are configured to receive analogue and digital signals which, in the case of analogue signals, need to be speedily converted to digital. (Patent p.7).

I should observe the drawing referred to in [42] above shows item 9 as described as a sensor unit.

I will return to the significance in my mind of some of these characteristics later in the judgment.

The Evidence

Before dealing with the construction issues it is important to have regard to what the various witnesses (lay and expert) understand the device does or does not do.

The plaintiff called one expert witness, Mr Scott Ellis. The defendant called a lay witness, Mr Leslie Hollands and an expert, Associate Professor Trevor Blackburn.

The Evidence of Mr Hollands

The only lay witness was called by the defendant. Mr Hollands is a qualified engineer who is the research and development manager for the defendant. He was involved in the development of the CPM1-Plus protection module. He has a detailed understanding of its design and operation. He confirmed that the defendant had manufactured and supplied the CPM1-Plus protection modules since about early 2008. Prior to that, and from about 1995 to early 2008, the defendant manufactured and supplied various protection modules including the CPM1 mSP. That module was sometimes referred to as the CPM1 Smart Pilot, or CPM1 Smarty. He said the CPM1-Plus however is and has always been supplied with computer software (version 6), which is known within the industry as firmware.

Mr Hollands indicated that, in conjunction with the sale and supply of the protection module, the defendant has offered for sale to supply a "node". The nodes have always been sold separately to the protection modules and as optional accessories. The node for operation with the CPM1 mSP was known as the "Smart Pilot" node or "Smarty Node". He agreed the node designed for operation with the CPM1-Plus is known as an "MRD".

Mr Hollands in his evidence in chief indicated that in his view there were two key differences between the SP Node and the MRD. He said that because they are designed to work with different firmware, the SP Node and the MRD interact with their respective protection modules in a different way. In addition the SP Node required and was supplied with an external diode in order to perform earth continuity tests. The MRD on the other hand has an inbuilt diode to perform that function. Mr Hollands said that it was possible to use the CMP1-Plus with an SP Node however some reprogramming of the Node was required to ensure compatibility. The programming however can be performed on the CPM1-Plus.

Mr Hollands however accepted in cross examination that neither SP Node nor the MRD are sensors. He also accepted that if a customer had purchased (from the defendant) the relay or controller prior to the proceedings in the Federal Court, the MRD is compatible with that system. In other words the MRD has "backward capability" as he agreed.

He was then taken to his evidence in which he purported to identify two "key" differences between the SP Node and the MRD. One of the differences he pointed out was the external diode as opposed to an inbuilt diode. However he accepted that both required the use of a diode. One was external, one was internal. Mr Hollands accepted in the end that that difference was of no moment. The customer could buy a diode at any electrical store for less than one dollar.

He also agreed that what happened between the time when the SP Node was being manufactured and sold, and the MRD was being manufactured and sold, is that the firmware within the CPM1-Plus or the controller part of the system has been updated.

He further accepted in cross examination that there is no difference in the internal working of the nodes, whether it be an SP Node or an MRD, but that the firmware in the controller has been updated and works in a significantly different way. He volunteered that it was "convenient" that both nodes worked with either version of the firmware in whichever controller was used. Mr Hollands accepted that the firmware within the nodes has not changed. Again Mr Hollands suggested that it was merely convenient that the original SP Node and the MRD are both able to operate under the same conditions with different data structures. It is just "fortuitous" he said. He agreed in effect that the SP Node and the MRD do not have any differences that mattered. He expressly agreed they "do the same thing in the same way".

He agreed that the software in the SP Node and the MRD is exactly the same. He also agreed that both the SP Node and the MRD were designed to work with either version of the firmware in the controllers.

The Expert Evidence of Mr Ellis

Mr Ellis, an engineer, was retained by the plaintiff to provide expert opinion. He provided three reports, one dated 29 February 2012, one dated 19 April 2012 and a confidential report dated 18 June 2012 after he had access to the source code for the firmware for the CPM1-Plus relay.

In his first report he performed only limited testing on the CPM1-Plus and the MRD. However he concluded that the CPM1-Plus (when in automatic mode) sends a "hello" byte out to any connected MRD device. If the MRD is present it responds with machine number and protection settings which are stored in the MRD, if the MRD has been previously configured. Mr Ellis expressed the view that it was apparent to him in his testing that there was additional data moving between the CPM1-Plus and MRD which was in his view likely to be "programming" of the MRD by the CPM1-Plus. However his testing at the point of his first report did not permit him to express any final view about the matter because he had not been able to fully investigate the issue in the time available.

In his report of 19 April 2012, he gave consideration to the Patent and he was asked to express a view about the kind of functions that the SP Node and MRD performed and to express some views about various diagrams in manuals he had been supplied with. He expressed the view that the key to the Patent involved transmission of load protection data (for a given load) by a sensor to the protection relay so that no manual configuration of the relay was required when loads were changed. The data transmitted by the "sensor" described in the Patent is not merely machine identification information (which identifies the type of load and machine number) it is the data which sets load protection values in the controller so as to protect the load according to the manufacturer's specification.

He expressed the view that where a load is unplugged from the relay and a different load is connected to the same relay, the "sensor" described in the Patent automatically configures the relay with the correct protection settings for the new load, even though that load may never had been connected to that relay previously and providing the sensor attached to the load has been configured to the load. This occurs because the device attached to the new load transmits via the pilot wire, the load protection data for the new load. Mr Ellis called this the first signal described in the Patent.

He said that while the key to the Patent is the sensor configuring the relay, another element of the Patent was a signal from the relay to the switch gear to disconnect the load if any of the load protection settings are exceeded. The signal to disconnect from the relay to the switch gear is the second signal described in the Patent.

He expressed the view that the word "sensor" as used in the Patent had, in his opinion, no particular technical meaning in electrical engineering terminology that is not consistent with the ordinary meaning. For the purposes of his second report he performed much more comprehensive testing and concluded, having tested the MRD and the SP Node, that each of the devices stored load protection data and transmitted that data to the relay when connected to the relay and power is applied. He therefore expressed the view that in his opinion the MRD and the SP Node stored data, transmitted the data to the relay and both of those functions were done consistently with the invention described in the Patent. He went on to express the view that the SP Node and the MRD "perform an identical function in the same manner, namely transmitting the load protection data to the relay in exactly the same format".

I should observe that Mr Ellis was jointly sworn with Associate Professor Blackburn. In his oral testimony Mr Ellis identified what he described as two key issues in respect of which there appeared to be disagreement between himself and Professor Blackburn. He stated that first, his view was that the MRD and the SP Node were essentially identical but he acknowledged that this was a matter of disagreement between himself and Professor Blackburn. So far as his testing was concerned, in an external sense, he looked at the signals that were generated and in respect of both devices he got similar responses. He reviewed various manuals and other materials which he was asked to consider. That did not affect his opinion.

The second issue which he identified as also resulting in disagreement between him and Professor Blackburn was whether the MRD was covered by the Patent or not. That in turn led to two further issues. He expressed the view that he believed that the MRD was a "sensor". Module 9 (relevantly the node) as identified in the diagram in the Patent was described as a sensor. He readily conceded however, that module 9 did not actually "sense" anything. He expressed the view that the device or node is only a "sensor" if it is used in accordance with claim 3. He said the third signal referred to in claim 3 required a "sensor". In particular he said:

I believe that the MRD does in fact match that device when connected with the CPM relay. And the reasons behind that really are about the best mode of invention that were given, presented earlier, in one mode of invention or one implementation of the invention. And so in that particular implementation module 9 is a sensor, in a plain English sense; but from my point of view, there is a reduced implementation of the invention where Module 9 doesn't generate a third signal but is still subject to claims 1 and 2 of the patent. So that's one part of it. (T46)

The next issue was whether the MRD does in fact store load protection data. Mr Ellis was of the view that, notwithstanding the fact that the load protection data was encoded by the defendant using its own special firmware, that did not mean that what was being communicated should not be regarded for relevant purposes as "load protection data".

In cross examination Mr Ellis conceded that, for the purposes of his first report, what he was only actually measuring was the electrical communications between devices, and that he was looking at the changes in the level of voltage, and that is indeed all he could measure at that point. Mr Ellis also conceded that he and Professor Blackburn both agreed that the word "sensor" had its ordinary meaning. He further agreed that the MRD was not a sensor within that meaning.

According to Mr Ellis only the "third signal" requires the device to be a "sensor". Mr Ellis said:

It is called the sensor because it does function as a sensor in the "best mode of invention" (which is claim 3).

On this topic I did not understand any difference of opinion between Mr Ellis and Professor Blackburn. Professor Blackburn also agreed in terms of the Patent the device described is only a "Sensor" if it is used in accordance with claim 3. (T76). His view was the third signal in claim 3 required a sensor (T51).

Associate Professor Blackburn

Professor Blackburn prepared two reports. One dated 8 May which was in response to Mr Ellis's report of 19 April. He prepared a further report of 26 June. He was involved in an expert conclave with Mr Ellis.

In his May report he agreed with Mr Ellis in terms of the definition of the word "sensor". He described it as a "device that detects a change in a physical stimulus and turns it into a signal which can be measured or recorded". His view was that that general statement was not inconsistent with the use of the term in general engineering parlance, and that that was the meaning that should be attributed to the term in the Patent.

Professor Blackburn considered that although Mr Ellis had by reason of his tests come to the view that the two devices he tested were identical in their operation and function, he thought there was significant differences with regard to their method of communication. Therefore, this did not make them totally compatible in their operation. Professor Blackburn was of the view that Mr Ellis did not appreciate the actual manner of the operation of the devices, and that they store and transmit codes that allow access to the data which is stored in the module, and the activation of a particular protection protocol for that module. In Professor Blackburn's views the "codes" transmitted cannot be regarded as load protection data. In his view the MRD has the capacity only to store and then transfer access code details when it is asked for them. It cannot store "load protection data" because the modules do not send the load protection data for storage in the MRD. Therefore in his view the MRD cannot store and cannot transmit "load protection data".

In discussing the status of the MRD, Professor Blackburn expressed the view that it is not a "sensor" or a "sensor unit" as understood in the Patent. Indeed as he pointed out it has no sensing capability whatever. He expressed the view that the importance of sensing as a function of a "sensor unit", as the term is used in the Patent, is exemplified by claim 3 which states that the sensor unit associated with the load periodically provides a third signal which transmits "load operating data". He said that in order to be able to transmit "load operating data" which may mean, for example operating current, voltage temperature, or similar parameters, the "sensor unit" must have the facility to measure these quantities and to convert them to an electrical signal that can be transmitted to the controller. The MRD does not, and cannot provide such a function, and thus is not a sensor. He was therefore of the view that the MRD did not function in the manner described in the Patent claims.

In further amplification he said that all that is stored in the MRD is an identifying code number used to select and activate the appropriate "load protection data" that is actually already stored in the protection module. He explained that what the MRD does is to provide an identifying number to the controller, and the controller or protection module responds by activating the appropriate protection data from its own storage, and then uses associated sensors such as current transformers (which are not part of the MRD) to perform the comparison and trip the circuit break if necessary.

In his report of 26 June, in commenting on some aspects of Mr Ellis' report of 8 May he again expressed the view that, used in conjunction with the CPM1-Plus relay, neither device transmits "load protection data" to the CPM1-Plus relay. Further, he reiterated that when either operates with the CPM1-Plus relay each can only perform the function of storing and sending pointers or codes which have been transmitted to them by the relay. To this extent the SP Node and the MRD are effectively slave devices for the CPM1-Plus relay and are unable to perform any protection function themselves. All they can do, once programmed by the relay, is to communicate data.

In relation to the sensor function, Professor Blackburn again expressed the view that despite what the claims say in the Patent, it is only claim 3 which makes a reference to the device performing a sensing function. It is only when the "sensor unit" is associated with the load, periodically providing a third signal which transmits load operating data, that it senses. This is a specific reference to the performance of a sensing function. In that respect neither the MRD nor the SP Node comply with the Patent claim in that regard in his opinion.

In cross examination when asked to comment further on Mr Ellis' evidence and reports Professor Blackburn said that he thought that what Mr Ellis was saying was that the load protection data were really "settings". However Professor Blackburn said it was his understanding, for example in relation to claim 1 of the Patent, that what was being described by the use of the term load protection data was not just a number of settings but the whole of the load protection data including, for example, all of the earth leakage characteristics, the overload characteristics, the short circuit characteristics and not just the settings that are used. He said the load protection data in his opinion involved the whole range of information that related to the protection of the system, not just single value settings as he put it.

Having given that further explanation, Professor Blackburn was asked about the conclave he had had with Mr Ellis on or about 23 May and in relation to certain draft reports that had circulated between the two of them. He was asked whether as recently as Friday (22 June) drafts were still being circulated. He was then asked as follows:

Newlinds: As recently as Friday. Do you recall one of the questions posed for that draft joint report was "What is the meaning of load protection data as that term is used in the patent", and do you remember in the first draft agreed report what was said was that you and Mr Ellis agreed that load protection data, is the set of values or single value which determine or determines the requirement for a module to operate?

Witness, Blackburn: Yes (T74.[30]-[35])

Professor Blackburn agreed that he had commented on the first draft and made some amendments, but he did not, at that stage, amend that answer. He was then asked to agree that throughout the next four drafts that particular answer again was not changed, notwithstanding he agreed he checked the drafts carefully. (T74.[40] - T75[40]).

The following exchange then occurred:

Newlinds: And so it does follow, doesn't it, for the best part of a month finishing about last Friday you agreed with the proposition that load protection data is the set of values or single value which determine..

Blackburn: Yes

Newlinds: What happened on Friday?

Blackburn: Nothing happened on Friday. Some protection data does have single values, as Mr Ellis was saying the earth leakage protection is one single value of earth pitch current and so in that case load protection data associated with that is a single value, load protection data associated with overload current has a very large number of different values.

Newlinds: What happened on Friday?

Blackburn: I just, I use load protection data to cover the whole range of the data including settings.

Newlinds: Someone spoke to you and suggested you change what it was that you had agreed with for the last month didn't they?

Blackburn: No.

Newlinds: Came up with it yourself?

Blackburn: I did.

Newlinds: What happened in your head to cause you to change your mind on Friday?

Blackburn: I didn't change my mind. I changed the way in which I described load protection data to incorporate settings. As I said before, load protection data includes all current protection, it includes the trip level setting and all of those characteristics which are used to determine the protection operation of equipment.

His Honour: Is that something you always knew?

Blackburn: That is something - yes.

Discussion

The following would appear at least not to be in issue between the parties.

(i) Bramco has sold MRDs in Australia and South Africa after 31 December 2008;

(ii) Bramco has sold a controller/relay, the CPM1-Plus after 30 June 2008;

(iii) Both the MRD and SP Node store or are capable of storing data and are capable of uploading or transmitting that data to a controller or relay; and

(iv) Both the MRD and SP Node are not "sensors" within the ordinary English meaning of that word.

(ATF's further submissions as to liability para 1 and Bramco's closing submissions para 1)

It is submitted however by the plaintiff that the MRD and SP Node do the same thing in the same way. This is in dispute.

In response to that, the defendant submits (which is clearly not in issue) that the MRD is not a sensor in the ordinary or technical meaning of the word and further that it is not the device that was the Smarty branded sensor or Smarty Node. In particular they say it is not a device "for use in accordance with the invention described in the patent" as the term "Sensor" is defined in the Deed, and as it is not a "sensor unit" either as that term is used in the Patent and it does not have the attributes of claim 1 or any other claim in the Patent.

It is pointed out however by the plaintiff that Mr Hollands, who has been the defendant's research and development manager for more than 17 years, gave evidence that, so far as the SP Node was concerned when compared with the MRD, it did not have any differences that really mattered. He said:

Q: Doesn't that really mean that the SP node and the MRD don't have any differences that matter?

A: That is true, yes

Q: They do the same thing in the same way?

A: We have said that before. Yes.

It is submitted on behalf of the plaintiff that the only actual difference that Mr Hollands identified concerned the firmware and that is the firmware in the controller/relay, not the nodes. The firmware in the SP Node and the MRD is exactly the same. It did not require any change. Mr Hollands did say however that the firmware that is in the controller has been updated and works in a significantly different way. In any event the MRD was designed to have, what Mr Hollands agreed, was "backward compatibility", so that it would work with the old controllers including those sold by the defendant prior to the Federal Court proceedings.

I accept these aspects of Mr Holland's evidence.

In Professor Blackburn's report of 8 May he does, as is submitted by the plaintiff, describe the MRD as a later version "of the SP Node". He also noted that the MRD differed "slightly" from the SP Node "in communications and programming the firmware as the SP Note contained "legacy" version firmware", He also agreed that the MRD is compatible with the "legacy firmware" in the older relay. Professor Blackburn did not disagree with what Mr Hollands said about the differences between the MRD and SP Node. It also seems to me that both Mr Hollands and Professor Blackburn ultimately agreed with Mr Ellis' opinion that the MRD and SP Node performed the same function in the same way. The plaintiff points out that it was not put to Mr Ellis in cross examination that this position was inaccurate. In particular Mr Ellis in his report of 19 April had said in terms as follows:

In my opinion the Smarty and MRD perform an identical function in the same manner namely transmitting the load protection data to the relay in exactly the same format.

It seems to me on the evidence, especially given the lack of challenge to Mr Ellis and his report of 18 June, [39], that the MRD and SP Node both interact with controllers/relays in exactly the same way. This enables me to find accordingly.

This is only, however, the prelude to much more significant questions which not only require further analysis of the expert and lay evidence but the terminology of the Deed, the Agreement and in my view the Patent. Ultimately it will be necessary to resolve the conflict, especially between the experts, as to whether what is communicated is load protection data.

The Construction Issue

The plaintiff submits that, properly construed, the word "sensor" in the definition of "Sensor" in both the Deed and the Agreement refers to, or would be understood by a reasonable person as referring to, the SP Node which was the subject of Federal Court proceedings.

It is common ground that neither the MRD nor the SP node are "sensors". The plaintiff submits that it is abundantly clear that the parties intended that the Deed and Agreement would prevent the defendant from selling the "thing" that was the subject of the Federal Court proceedings except in circumstances governed by the licence. It is further contended that even though the SP Node was never branded a "sensor" as such, all iterations of the Patent describe the Node as a "sensor" even though in claims 1 and 2 of the Patent it does not sense, and accordingly the term as used in the Patent is something of a misnomer. The plaintiff points to Professor Blackburn's evidence and to his agreement that the device described in claims 1 and 2 of the Patent, while called a "sensor", did not "sense" anything at all. In terms of the Patent his view was the device could only be described as a "sensor" if it is used in accordance with claim 3 where the third signal referred to in claim 3 requires the device to function in that way. He agreed the term "sensor" in clauses 1 and 2 was indeed a misnomer (TT51.[27]).

The plaintiff also submits that the inclusion of the words "Smarty branded sensor" in the definition of the word "Sensor" (in both the Deed and the Agreement) indicates that the parties intended to use that term to mean something different or wider than the ordinary meaning of "sensor" (accepting that the SP Node itself was not a "sensor"), within the ordinary meaning of that word. It is however submitted that it is consistent with the words "for use in accordance with the invention described in the Patent" (in that definition) when qualifying the words "Smarty branded sensor" and the words "sensor". While it is accepted the SP Node is not a "sensor" strictly speaking it performs the function described in claim 1 of the Patent by sending the signal to the controller. It is therefore submitted that the term "sensor" ought to be read so as to capture the "thing" or "device" that was the SP Node, the subject of the Federal Court proceedings.

The plaintiff further submits that the phrase "for use in accordance with the invention described in the patent" does qualify the definition of "sensor", but has nothing to do with infringement. It is submitted that it simply identifies that any device that can be used as part of the system described in the Patent is caught by the Deed and Agreement even though it is not a "'sensor" in the ordinary meaning of that word.

The defendant on the other hand submits that the proper construction of the term "sensor" as defined in the Deed and/or Agreement recognises that the definition has three limbs. First as a sensor that further performs either tasks in (a) or (b) of the first limb of the definition. Secondly as including a "Smarty branded sensor" and thirdly whichever of (a) and/or (b) of the definition is engaged. To come within the defined term, the device must be "for use in accordance with the invention described in the patent".

The defendant accepts that the use of the word "including" in the definition points to the parties having intended to expand the concept of a "sensor" in its defined meaning beyond the ordinary meaning of the term. But the expansion of the meaning to include the "Smarty branded sensor" the defendant submits, does not affect the first limb of the definition but simply adds to it.

One issue that arose on construction is the significance of the use of the term "Smarty Node". The plaintiff says this expands the definition. The defendant submits that the use of the term "Smarty branded sensor" when read with the third limb "for use in accordance with the invention described in the Patent" was to address the specific circumstances of the allegations in the Federal Court proceedings.

It is submitted by the plaintiff that the background circumstances to the Agreement and the Deed establish that by that phrase, the parties intended to identify the "SP Node" and that the parties proceeded on the basis that it came within the ambit of the monopoly of the Patent when connected to, and operating with, the CMP1-Plus controller. The plaintiff accepts that there was no such thing as a "Smarty branded sensor".

The defendant says that it is sufficient that there is a "node" which was called "Smarty" and the evidence is that the "node" was branded the "Smart pilot node" and that it was an optional accessory for the now obsolete CPM1-Plus controller. Therefore, whilst the SP Node was not branded "Smarty" it was branded "Smart" and was also called the "Smarty". The defendant further submits that the pilot node was not labelled "Smarty Node" and this does not expand the devices which might otherwise fall within the second limb of the definition. The defendant submits that it should be accepted that the second limb of the definition was adopted by the parties for more abundant caution to identify the particular named device that was a component of the apparatus alleged to have been infringed. Rather than it being an example of literalism, it simply makes commercial sense because it was the focal point factually of the litigation. The defendant therefore submits that by reason of the meaning of "sensor" as properly construed, the definition is limited both in terms of the named device and any other devices that satisfy the other limbs of the definition of sensor as used in the contractual documents.

The defendant also submits that the Deed and Agreement embody an acknowledgement that the defendant is entitled to make and sell sensors that are not components of a load control module with the attributes of the invention of the Patent but seek to restrain the defendant from trading on any reputation acquired in the name "Smarty". The defendant says that sensitivity in relation to the named device is underscored for example by clause 4.1(g) of the Deed and clause 6.1(e) of the Agreement, which are directed to highlight the plaintiff's concern about particular trading or market reputation.

The defendant also submits the Patent was central to the litigation and the settlement of it, and it must be construed accordingly. The plaintiff on the other hand submits the court need not resort to the Patent to resolve the respective grievances.

The defendant relies upon clauses 4.1 and 4.2 of the Deed. It is submitted that those clauses encompass but are not limited to the Smarty branded sensor, being the SP Node. It is submitted by the defendant that that those clauses allow for the runoff of the "Smarty branded sensor" and then prohibit, for the term of the Patent, the future sale of a broader category of sensors. Thus both named and unnamed devices are dealt with, and properly, only when they satisfy the limbs of the definition of "sensor" and so come within the monopoly of the Patent. It is obvious, as clauses 4.1 and 4.2 of the Agreement acknowledge, that the patentee could not grant greater rights than it held under the Patent. The defendant submits that the limited runoff period allowed the defendant to sell out of the product in the manufacturing pipeline and to meet existing orders for SP Nodes and CPM1-Plus Smarty modules. Thereafter the defendant was not able to supply devices that came within the definition of "sensor", or enabled controllers intended to receive transmission sent by a "sensor". If a device came within the first limb and the third limb of sensor, for example, it was caught.

It is further submitted by the defendant that the court could not conclude that "sensor" means any successor device to the SP Node, whatever called, not being a sensor and not for use in accordance with the Patent. Such a result, it is submitted, would rob the definition of "sensor" of any meaning.

The plaintiff on the other hand criticises what it says is the extreme literalism of the defendant's submissions as to the construction of express inclusion of a "Smarty branded sensor" in the definition of "sensor". The plaintiff contends that that approach is not warranted. First it completely ignores the obvious commercial purpose of the settlement in the Federal Court proceedings, and it subverts the clear commercial purpose and intent of both the Deed and Agreement by permitting the defendant to sell precisely the same product, provided only that the name or branding of the product has been changed. It is said that the defendant's position gives no real weight to the word "including" in the definition of "sensor". It is also said to be inconsistent with the use of the term "Smarty sensor" in clauses 4.1(g) and 6(b) of the Deed, and it is inconsistent, it is said, with the "runoff" period provided by clause 4.1(a) of the Agreement.

Both parties of course have to face the important words in the definition of "Sensor", namely, "for use in accordance with the invention described in the Patent". The plaintiff accepts that that phrase does qualify the definition of "Sensor" but has nothing to do with infringement. It is submitted that it simply identifies that any device that can be used as part of the system described in the Patent is caught by the Deed and the Agreement even if it is not a "sensor" in the ordinary meaning of the word. The plaintiff says as a matter of fact the MRD works perfectly well with the controller/relay described in the Patent. It is therefore submitted that the MRD must also utilise technology materially similar to the Patent and the technology in the sensor in breach of clauses 4.1 and 14.1 of the Agreement.

On balance I should say that I prefer the plaintiff's arguments on construction of the Deed and Agreement because they are more in tune objectively with what I consider the parties intended. This is subject to one qualification to which I will refer shortly.

The defendant submits that the phrase "for use in accordance with..." directs attention to the Patent and picks up the language of section 40 of the Patents Act 1990 (Cth). It imposes the limitation that it is only those devices which fall within the first or second limb of the definition that operate in accordance with the monopoly conferred by the grant of the Patent and that come within the term "Sensor". The defendant submits therefore it is necessary to construe the claims of the Patent to ascertain the nature of the invention, and infringement of the Patent is relevant in determining whether or not the Deed and/or Agreement have been breached.

Before I proceed to deal with the respective parties submissions on that issue I should indicate that I cannot accept the plaintiff's submission that the Patent is irrelevant and that the matter can be determined purely by construing the Deed and Agreement alone. Without being unduly repetitive, the Federal Court proceedings were about a patent infringement and a counter claim in which the validity of the patent was put into question. If the Patent was irrelevant, the suit would not have been couched as an infringement suit. There is no doubt that the focal point of the proceedings was the particular device which the parties chose to describe as the "Smarty branded sensor" in the contractual documentation. However, apart from the particular device which triggered the litigation, the whole point of the settlement was not to concern any sensor that stored or was capable of storing data, or that stored or was capable of storing and uploading or transmitting data to a controller or relay, but only a sensor which in effect infringed the Patent. I frankly cannot see any other sensible construction to place upon the contractual documents. Therefore in my mind this litigation cannot be determined without dealing with the construction of the Patent and whether it has been infringed.

I should say that although the term "sensor" in its ordinary meaning conveys something that "senses", that term itself must in my opinion be necessarily qualified by the use of the term in the Patent.

It must be accepted on the ordinary meaning of the word "sensor", that the MRD and the SP Node are not such devices. But I do consider that is somewhat beside the point. There is no doubt that the parties to the Deed and Agreement meant something different or wider than the ordinary meaning of that word, not the least because of the inclusion of the "Smarty branded sensor". I also consider that that construction is fortified by the use of the term "including" in the definition.

I am also of the view that the term "Sensor" as used in the Deed and Agreement would reasonably be understood as referring to the SP Node. Although the MRD and SP Node are not sensors, especially when one considers claims 1 and 2 of the Patent, it does clearly operate as a sensor in claim 3 as explained in the evidence. There is inclusion of the words "Smarty branded Sensor" which again clearly expands the ordinary meaning of the term "sensor". As I have observed it is in my view that term specifically was intended by the parties to capture the device which was at the centre of the Federal Court proceedings. There is also no doubt in my mind that the parties understood, and should be taken objectively to have intended the SP Node to come within the monopoly of the Patent when connected to the controller. That is, in my mind, the most reasonable explanation for the terminology used especially in the definition of "Sensor".

Has the Patent Been Infringed

The plaintiff submits in the alternative that the MRD does in fact infringe the Patent. The defendant says that the MRD does not use the technology or act in "accordance with" the invention described in the Patent because the MRD is not a sensor or a sensor unit, and it does not store or transmit load protection data to the relay.

It will be necessary to return to some of the evidence and resolve the conflicts I have earlier referred to.

There is no dispute on the expert evidence that it is only in sending, as it were, the third signal which requires the device to perform as a sensor. The plaintiff relies upon Mr Ellis, its expert, who said that it was called a "sensor" in the other claims in the Patent because it does function as a "sensor" in the best mode of invention.

Of course s 40(2)(a) of the Patents Act 1990 requires that the specification give full description of the invention including the best method known of performing the invention. This provision was considered by the High Court in Firebelt Pty Ltd v Brambles Australia Ltd (2002) 76 ALJR 816. At [57], the High Court in a joint judgment affirmed the correct approach of the Full Federal Court and the trial judge. As the Full Federal Court commented in Firebelt Pty Ltd v Brambles Australia Ltd [2000] FCA 1689 at [48]:

[48] This holding by the primary judge involves, in our respectful view, a misunderstanding of what is required by s 40(2)(a) of the Act concerning a description of the best method known to the applicant of performing the invention. In Vidal Dyes Syndicate Ld v Levenstein Ld (1912) 29 RPC 245 in the Court of Appeal, Fletcher Moulton LJ said at 269:

"It is settled law that a patentee must act towards the public uberrima fide, and must give the best information in his power as to how to carry out the invention. He is therefore bound to tell the public all the steps that can advantageously be taken in carrying out the invention. But he is not limited to claiming only the best way of carrying it out."

This requirement is to ensure good faith on the part of the patentee, and to protect the public against a patentee who deliberately keeps to himself something novel and not previously published which he knows of or has found out gives the best results, with a view to getting the benefit of monopoly without giving to the public the corresponding consideration of knowledge of the best method of performing the invention.

A patentee is not of course limited to making a claim as to the best method of performing the invention, but that at least needs to be done. The need to disclose is really an act of good faith on the part of the patentee to disclose the best method known to the patentee of performing the invention. The public is entitled to know all the patentee knows. But the best method is just that. It is the price of statutory monopoly, but it is not the only way a device, for example, can be used.

Whilst both parties accept that the construction of the Patent is ultimately a matter for the court I have been helpfully referred to the evidence of the respective witnesses on relevant aspects.

The plaintiff points to the evidence in chief of Professor Blackburn, when, on the one hand, he said load protection data meant "the full set of all of the protection characteristics setting and the current time characteristics for overload". It is just everything associated with the load protection requirements according to Professor Blackburn. In addition, the whole of the load protection data that is being referred to is not just a number of settings but the whole of the relevant data, including all of the earth leakage characteristics, the overload characteristics, short circuit characteristics and not just the settings that are used but the whole of the timing that is involved with many of the items of equipment. The plaintiff submits that he further expressed the view that the whole range of information that relates to the protection operation of the system should be regarded as load protection data, not just the single value settings. He otherwise described this as a "very large range of information" or "a large expanse of data". It was not just a single code sent by the MRD to the relay. The plaintiff submits that Professor Blackburn also asserted that neither the MRD nor SP Node transmit "load protection data" to the controller/relay but merely transmit a "code" or "pointer" which is not the full set or the whole of the protection data which is stored in the controller and not the Node. In other words, the MRD in essence stores and transmits "codes" which allow access to the data which is stored in the protection module and the activation of a particular protocol for the module.

Consistent with that view he disagreed that the devices described in claims 1 and 2 of the Patent were the MRD or SP Node, because "they don't store the load protection data" because it is "not a full load protection data". The plaintiff points out however, that Professor Blackburn nonetheless conceded that the data transmitted from the MRD/SP Node to the controller was all directly or indirectly associated with load protection. It is submitted that Professor Blackburn gave inconsistent evidence in chief and in cross examination, and accepted variously that load protection data could mean any information associated with load protection; equally it could mean the set of values or single value which determine or determines the requirement for a module to operate; and seemingly that some load protection data associated with that is a "single value". It is submitted by the plaintiff that for these reasons, but importantly because of his change of position, most relevantly on the eve of the trial, I should find that his explanation was not plausible and that it reflected poorly on him as an expert.

The plaintiff submits that the sum total of Professor Blackburn's evidence really involves an assumption that in order to infringe the Patent, the MRD must do all things that the Patent describes (that is infringe claims 1, 2 and 3) and that this is a fallacious proposition. It is submitted that fairly and or reasonably understood, Professor Blackburn's evidence would involve the transmission by the MRD to the controller of a single value as involving a transmission of "load protection data".

The plaintiff invited me to accept Mr Ellis' evidence on this point. He disagreed with Professor Blackburn and was emphatically of the view that the method of communication of data by the MRD, albeit by code, satisfied the requirements of the Patent and "load protection data". The plaintiff submitted that the Patent contained no clear definition of what is to be transmitted as "load protection data". Rather, all the Patent does is to give examples of the type of information that are "load protection data". Importantly the plaintiff submits the Patent does not rule out transmission of the first signal or "load protection data" by code.

The plaintiff submits that a sensible reading of the Patent leads to the inevitable conclusion that all that was to be transmitted by the device to the relay was a message that allows the load protection data to be communicated from one to the other. There is no reason why this transmission cannot occur in code. It is further submitted by the plaintiff that Mr Ellis and Professor Blackburn agreed that a code is really just another type of language.

On a proper construction of the Patent therefore it is submitted one should not, as Professor Blackburn did, use the second and/or third signals in order to read down the meaning of "load protection data" as it is first introduced into claim 1 of the Patent. The second signal, it is submitted, is sent by the controller to the switch gear to isolate the load from a power source and does not involve the MRD but rather the protection settings in the controller which were originally determined by the first signal sent by the MRD.

Again I am invited therefore to prefer Mr Ellis' view and hold that "load protection data" in the Patent, especially claim 1, means any information directly or indirectly associated with load protection including any single value which determines the requirement for a module to operate. It should not be construed so as to mean the "full" or "whole" set of data as asserted by Professor Blackburn.

It is submitted that the MRD and SP Node clearly store and transmit load protection data to the controller. It follows therefore that the MRD is a product that can be used "in accordance with the invention described in the Patent" within the definition of sensor in both the deed and licence agreement. The MRD therefore is also a product which is used or otherwise exploited in breach of clause 4.1(h) of the Deed and in breach of clause 14.1 of the Agreement. I think that argument has much force.

The defendant on the other hand submits that by reason of the third limb of the definition to be sensor a device must be:

a. a sensor unit within the meaning of the patent;

b. be used with the controller of the invention of the patent; and operating together with such a controller must have the attributes of the invention of the patent.

The defendant submits that the third limb, as it were, of the definition is self evidently concerned with Patent infringement. It is submitted that it is the components of the particular load control module invention of the Patent with which the definition of sensor is concerned. It is submitted that it is an irrelevant matter that the plaintiff in mid 2012 now accepts that the Smarty Node is not a "sensor" and since the term "sensor unit" (in the Patent) employs the same meaning of a sensor it follows that the Smarty Node cannot be used in accordance with the invention described in the Patent.

The defendant submits that although the MRD works with the CPM1-Plus module it means no more than that. The evidence, it is submitted, does not establish that the CPM1-Plus module has the attributes of the controller of the invention of the Patent, nor that together that module and the MRD are the load protection module of the invention.

It is also said that the Patent is in a standard form that is for one invention, a load control module fully described in the body of the specification. It is the same load control module in each claim. It is submitted therefore that the term "sensor unit" refers to the same unit forming part of the invention in each claim in which the term appears. The mere fact that in claim 1 there is no requirement to produce a third signal as is required in claim 3, it is submitted, does not change what is meant by the term or have the consequence that the sensor unit of claim 1 is a different device to the sensor unit of claim 3. It is submitted that the plaintiff's argument that the sensor unit of claim 1 is not a sensor, while accepting that the sensor unit of claim 3 (and that described in the description of the invention in the body of the specification) is a sensor unit in its ordinary technical meaning, cannot be accepted. The defendant submits that that is simply contrary to a proper construction of the Patent.

It is submitted on behalf of the defendant that, as required by paragraph 40(2)(a) of the Patents Act, the specification describes the invention fully. The sensor unit is diagrammatically depicted in item 9 in the drawing and is described including its operation as a component of the load control module. It is submitted that the specification requires that the "sensor unit" must be a sensing device. The Patent does not contain any dictionary to give to the term "sensor unit" any different meaning than its ordinary technical meaning.

It is submitted that the Patent should not be construed so as to encompass two sensor units, one that senses and one that does not. It is submitted for that to be so, clear language would have to be employed so as to distinguish two devices. It could also be confusing to say the least, the defendants submit, insofar as both were called sensor units. The defendant invites me to reject Mr Ellis' position, as he suggested in his evidence there was a "reduced implementation" of the invention where model 9 does not actually sense anything, it does not generate a third signal but is still subject to claims 1 and 2 of the Patent. The defendant submits that there cannot be a "reduced implementation of a invention", as the Patent claims must claim the invention of the Patent as required by section 40 of the Act, not some reduced implementation thereof.

It seems to me however the mere fact that claims 1 and 2 do not require the sensor unit to produce a third signal simply means that to come within claims 1 or 2 it is not necessary for there to be a periodic communication by the sensor unit of the third signal as required by claim 3. It does not follow that the sensor unit is other than a device within the invention described in the Patent.

However the defendant contends that the patentee would have used different wording in those claims (1 and 2) distinguishing the devices in the different claims by for example omitting the word sensor and merely using the word unit. The defendant also submits that the patentee did not take that course and it should be held that it deliberately chose (no doubt on advice) the particular description of the load controlled module (and its components). I think that is requiring too strict an approach to the words used.

In my view the evidence does support that the MRD was designed to work with the CPM1-Plus module and the particular firmware. The mere fact that the term "sensor" is used for example in claims 1, 2 and 3 does not, it seems to me, point to any inconsistency in usage. Whilst it has been agreed the term "sensor" is a misnomer in claims 1 and 2, no one skilled in the relevant art e.g. Professor Blackburn or Mr Ellis has been confused by that. The evidence is that, clearly and reasonably understood, the functions described in claims 1 and 2 do not involve sensing, whereas claim 3 does. In other words to apply the approach to construction suggested by the defendant is in my mind to approach the exercise in an excessively pedantic or literal manner.

It seems to me that it is not necessary that the word "sensor" be construed as requiring the same meaning in claims 1, 2 and 3, for example, when the context suggests otherwise to persons relevantly skilled. It does perform sensing functions in claim 3, the best mode of invention, and it is obvious to those with the requisite expertise that it does not include 1 and 2 for example. Meticulous verbal analysis is out of place in this context.

The defendant however in addition, and unsurprisingly, relies upon Professor Blackburn's evidence to the effect that the MRD does not transmit "load protection data" to the CPM1-Plus module, it merely transmits "a number, a pointer, an index" which will on receipt by the controller "bring up the load protection data that is stored in the controller". It is submitted, correctly in my view, by the defendant that Mr Ellis agreed that all the MRD transmits is a coded value although his evidence which I have dealt with earlier asserts that it is nonetheless properly characterised as load protection data.

The defendant points to concessions made by Mr Ellis in cross examination, namely that his testing in both his first and second reports (February and April) demonstrated nothing more than his external observations of a change in voltage. He did not see or read the content of any communication, merely the external fact of a communication occurring. He could conclude nothing more than that changes of voltage had occurred. The defendant submits, I think again correctly that the first and second reports of Mr Ellis are of limited utility. Mr Ellis' third report is confidential and was only concerned with input into the CPM1-Plus module.

But this is not a case about the validity of the Patent, nor is it a case about the novelty of the firmware. It is a case (in part) about what the Patent means.

The sending of the code (message) is a signal for the purposes of the Patent. Whether it is sent in one code as opposed to another, is, it seems to me, of no moment from the point of view of construing the Patent. It is also immaterial from the express words of the Patent whether the signal is digital or analogue.

The whole purpose of the communication via a signal (whatever is entailed in the signal) is to permit the invention to work prophylactically so no overload occurs which could otherwise create a safety issue. It only works if load protection data is communicated, hence if the message is received and understood, as such, that is what matters.

Professor Blackburn did say that load protection data could mean "any information associated with load protection": (T49). He did purport to however qualify that. Of much greater significance is that he had agreed at the expert's conclave with Mr Ellis that load protection data means "the set of values or a single value which determine or determines the requirement for a module to operate," (T74). He, it seems, held that view over four drafts which he accepted he had carefully reviewed, before making changes to his report on 22 June. He also gave evidence in cross examination that some load protection does have single values.

Professor Blackburn was, it seems, quite prepared to agree or acquiesce with Mr Ellis until it seems Friday 22 June (just before the start of the trial). But he then decided (as he put it) to change the way in which he described load protection data. That was something he always knew but nonetheless it was not, until the eve of trial, something he was provoked to disagree with Mr Ellis about. He did not for example suggest it was an oversight, which might have been difficult for him given his other evidence.

I do not accept Professor Blackburn as a reliable expert. My impression having observed him when he gave his evidence, and especially when he was asked to explain his change of stance, is that he was really unable to provide a plausible explanation for the change. I cannot accept that an expert with his qualifications and experience would, or more to the point, could sit by unprovoked by many drafts and not correct something as important as this matter until the very last minute as is the case. It does not reflect well upon him and his non-existent explanation for the late change causes me not to have confidence in his evidence on this issue.

I prefer Mr Ellis's explanation which I believe in any event best accords with the evidence as a whole. I should in passing on that point observe that Mr Hollands agreed in cross examination that the information given to the node by the controller and the material from the node to the controller was "load control data" or "load information" (TT37[25] and TT40[34]). At T37 he gave the following evidence:

Q: It is dumb in the sense that it can receive and store information, if that information is given to it by a controller?

A: Yes

Q: It can then, if plugged back into that controller, tell the controller that information?

A: Yes

Q: And that's the load control data?

A: That's the load control data

I regard it as significant that the Patent, whilst it speaks of signals and communication of messages, nowhere does it proscribe the manner in which the messages are communicated, whether analogue or digital. What is important is the communication of load protection data or what the controller interprets as such so the system can ensure there is no overload.

The precise type of the message or code is, it seems to me, irrelevant. I am satisfied that both devices participate in a similar fashion in communicating the message or code which conforms with the description of load protection data and (as I have said on that issue) I prefer the evidence and explanation of Mr Ellis.

As I have already said, I am also able comfortably to find the differences between the MRD and the SP Node are immaterial and that they do the same thing in the same way. Neither device "senses" in the ordinary usage of that term, and there is no doubt (and again I find) they were designed to work and do in fact work with either version of the firmware in the respective controllers. Even Professor Blackburn described the MRD as a "later version" of the SP Node (CB1/244).

Upon a proper construction of both the Deed and Agreement I consider the better view is that, by use of the term "Sensor" in the definition in each of those documents, the parties objectively intended to mean at least the SP Node the subject of the Federal Court proceedings. There is no doubt the Deed and/or Agreement was to prevent and/or restrict the defendant from selling that device.

It is also clear that although the SP Node was never branded as a "sensor", the Patent in claims 1 and 2 describes the node as a "Sensor", which is a misnomer. It is only when the device is used in accordance with claim 3 that it operates as a sensor. Mr Ellis, who I accept on this issue, said in his evidence that module 9 (the device) in the Patent is called a "Sensor" because in the best mode of invention, it is just that. This in my mind is clearly what the parties were at least adverting to by use of the phrase "in accordance with..."in the definition of "sensor" in the Deed and Agreement.

I am also satisfied on the basis of the evidence of Mr Ellis which I accept, that the method of communication of data by the MRD, albeit by code, satisfies the requirements of the Patent and the term "load protection data".

The Patent should be construed so that all that was to be transmitted by the device to the relay is a message that allows load protection data to be communicated from one to the other by whatever means may be devised. I consider the better view (and again I accept Mr Ellis) that "load protection data" in the Patent, in particular claim 1, means any information directly or indirectly associated with load protection, including any single value which determines the requirements for a module to operate including the initiation of the second signal. It is not necessary on my findings that it has to be the "full" or "whole" set of data. In my opinion the MRD and SP Node clearly store and transmit "load protection data" to the controller as described in claim 1 of the Patent.

It again follows that the MRD is a device which can be used "in accordance with the invention described in the Patent", and is thereby for the reasons I have otherwise explained, a device within the definition of the "Sensor" in the Deed and Agreement.

It follows in my opinion that the defendant is in breach of clause 4.1, 4.2 of the Deed and clause 14.1 of the Agreement. The MRD is a device therefore that can be used "in accordance with the invention described in the Patent" (within the definition of "Sensor" in the Deed and Agreement).

The South African Patent

The plaintiff asserted it had similar rights by reason of a South African Patent. The defendant contested the assertion by the plaintiff that it held the relevant letters patent in South Africa which take priority from a priority document of the Patent.

At the conclusion of the trial the plaintiff sought, and obtained over objection, to file further materials in this issue.

The defendant accepts that (in light of the further evidence adduced on re-opening) the plaintiff is the Patentee in South Africa of South Africa Patent No. 94/64-7 since June 2000.

The defendant also accepts that, insofar as the Agreement or Deed has any extension to conduct in South Africa, the South African Patent is the relevant Patent.

The defendant however submits that the parties did not consider the South African Patent or whether the MRD, was "for use in accordance with the invention described in the [South African patent]". The defendant submits that the plaintiff did not adduce any evidence (in particular expert evidence) directed to these matters. Nor did the defendant adduce evidence as to that matter.

The defendant also submits that it must follow from the plaintiff's failure to adduce evidence of the attributes of the MRD, and its workings referable to the South African Patent, that the plaintiff's case extending to sales of the MRD in South Africa must fail. As the court cannot conclude (it is submitted) that the defendant has breached the Agreement or Deed by any sales of the MRD in South Africa, the plaintiff is not entitled to any damages referable to any such sales.

It is to be noted of course that in the commercial list response the defendant admits sales in South Africa of the MRD. If it was sought to suggest the device was an entirely different one, the admission of sales would to some extent be irrelevant. The plaintiff of course asserted in paragraph 2 of the commercial list statement, that it was the holder of letters Patent in South Africa and other places. The defendant did not admit that allegation.

I observe also that the claims in the South African Patent are in substantially similar form to the claims in the Australian Patent. I am unaware of any argument that would relevantly distinguish the principles and propositions advanced both in respect of the construction of the Patent and with respect to the areas of expert evidence that I have heard in relation to the Australian Patent. The South African Patent was clearly before me as an issue.

The plaintiff submits that the fact the experts did not address the South African Patent is of no moment, as it is in substantially similar form, and if anything the words in claims 1 and 3 of the South African Patent, are the same as the Australian Patent or perhaps even wider.

In my view the evidence sufficiently discloses that ATF holds the Patent in South Africa which took priority from a priority document, and I so find.

I am also of the view that the wording of the South African Patent could lead to no different result than the one I have come to on the Australian Patent. That would lead to similar relief being granted to the plaintiff.

Relief

In the light of the above findings the plaintiff is therefore entitled to the relief sought and I propose to make declarations accordingly.

It follows that the defendants device infringes the Patent and hence the Deed and Agreement and the plaintiff is entitled to relief accordingly restraining relevant breaches (paragraphs 16 (iii) of the Further Amended Commercial List Response) and it would follow paragraph 16(iv) thereof.

Damages are also claimed by the plaintiff. On the current state of the evidence there is no basis upon which I could quantify the damages but it does seem to me that the plaintiff is entitled to have the matter determined in due course; proper opportunity having been given to the defendant to meet such evidence as the plaintiff may wish to call on the issue. This aspect of the case can be the subject of future directions.

I would request that the parties prepare short minutes to reflect my reasons.

I would reserve all questions of costs as they can be determined accordingly. I would invite the parties to have the mater relisted for this purpose at some convenient time.

**********

Decision last updated: 19 September 2012

Medium Neutral Citation:	ATF Mining Electrics Pty Ltd v Bramco Electronics Pty Ltd [2012] NSWSC 1126
Hearing dates:	27 June 2012, further written submissions from plaintiff on 2 August, 30 August and submissions from the defendant on 30 August 2012
Decision date:	18 September 2012
Jurisdiction:	Equity Division
Before:	Sackar J
Decision:	See paragraphs 169 to 173
Catchwords:	Construction of contractual documents, principles, construction of patents, patent infringement, expert evidence
Legislation Cited:	Patents Act 1990 (Cth)
Cases Cited:	Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 Australian Mud Co Pty Ltd v Coretell Pty Ltd (2011) 93 IPR 188 Catnic Components Ltd v Hill & Smith Ltd [1982] RPC 183 Decor Corp Pty Ltd v Dart Industries Inc (1988) 13 IPR 385 Firebelt Pty Ltd v Brambles Australia Ltd (2002) 76 ALJR 816 Firebelt Pty Ltd v Brambles Australia Ltd [2000] FCA 1689 Fuji Xerox Finance Ltd v CSG Ltd [2012] NSWSC 890 Improver Corp v Remington Consumer Products Ltd [1990] FSR 181 International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151 Kimberly-Clark Australia Pty Ltd v Multigate Medical Products Pty Ltd (2011) 92 IPR 21 Kinabalu Investments Pty Ltd v Barron & Rawson Pty Ltd [2008] FCAFC 178 Nesbit Evans Group Australia Pty Ltd v Impro Ltd (1997) 39 IPR 56 Nicaro Holdings Pty Ltd v Martin Engineering Co (1990) 16 IPR 545 Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 Populin v HB Nominees Pty Ltd (1982) 59 FLR 37 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 VIP Plastic Packaging Pty Ltd v BMW Plastics Pty Ltd (2011) 92 1PR 130
Category:	Principal judgment
Parties:	ATF Mining Electrics Pty Ltd - plaintiff Bramco Electronics Pty Limited - defendant
Representation:	Counsel: R Newlinds SC, R Glasson - plaintiff Ms J Baird SC - defendant Solicitors: Moray & Agnew - plaintiff Middletons - defendant
File Number(s):	2012/59118