Bramco Electronics Pty Ltd v ATF Mining Electrics Pty Ltd - [2013] NSWCA 392

Court of Appeal

Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: Bramco Electronics Pty Ltd v ATF Mining Electrics Pty Ltd [2013] NSWCA 392
Hearing dates: 20 August 2013
Decision date: 26 November 2013
Before: Meagher JA at [1]; Barrett JA at [8]; Ward JA at [55]
Decision:
1. Direct that the parties show cause why, in the interests of justice (as referred to in s 7(7) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth)), this Court should proceed to determine the summons seeking leave to appeal and, subject to the grant of leave, the appeal.
2. Direct that the parties do, within 21 days, file and serve such written submissions as they wish on that issue.
3. Direct that, unless a party notifies the Registrar in writing within 21 days that the party requires an opportunity to make oral submissions, that issue be determined on the papers.
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Catchwords:
PROCEDURE - courts - concurrent jurisdiction of different courts - transfer of proceedings under cross-vesting legislation
STATUTES - whether jurisdiction exercised by primary judge was with respect to a matter arising under the Patents Act in respect of which proceedings may under that Act be started in a prescribed court - whether Court of Appeal has jurisdiction to hear application for leave to appeal/appeal in present proceedings - operation of cross-vesting legislation
Legislation Cited: Copyright Act 1968 (Cth)
Judiciary Act 1903 (Cth)
Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth)
Patents Act 1990 (Cth)
Supreme Court Act 1970
Cases Cited: Abebe v Commonwealth [1999] HCA 14; (1999) 197 CLR 510
AFT Mining Electrics Pty Ltd v Bramco Electronics Pty Ltd [2012] NSWSC 1126
Australian Solar Mesh Sales Pty Ltd v Anderson [2000] FCA 864; (2000) 101 FCR 1; 175 ALR 566
Darling Downs Investment Pty Ltd v Ellwood (1988) 18 FCR 510
Felton v Mulligan [1971] HCA 39; (1971) 124 CLR 367
LNC Industries Ltd v BMW (Australia) Ltd [1983] HCA 31; (1983) 151 CLR 575
Macchia v The Public Trustee [2008] WASCA 241: (2008) 251 ALR 385
Macteldir Pty Ltd v Dimovski [2005] FCA 1528; (2005) 226 ALR 773
Masterwood Pty Ltd v Far North Queensland Electricity Board [1999] 1 Qd R 345
National Employers Mutual General Insurance Association Ltd v Manufacturers Mutual Insurance Ltd (1988) 17 NSWLR 223
NEC Information Systems Australia Pty Ltd v Lockhart (1991) 22 NSWLR 518
NEC Information Systems Australia Pty Ltd v Lockhart (1992) 36 FCR 258
Northern Territory v Collins [2008] HCA 49; (2008) 235 CLR 619
Pallas v Finlay (1985) 61 ALR 220
R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett [1945] HCA 50; (1945) 70 CLR 141
Roberts v Gippsland Agricultural and Earth Moving Contracting Co Pty Ltd [1956] VLR 555; [1957] ALR 71
Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46; [2013] 3 WLR 299
Webb v Repatriation Commission (2000) 105 FCR 415; 62 ALD 117; [2000] FCA 1635
Category: Principal judgment
Parties: Bramco Electronics Pty Ltd (Applicant)
ATF Mining Electrics Pty Ltd (Respondent)
Representation: Counsel:
Ms J Baird SC (Applicant)
C R C Newlinds SC with R D Glasson (Respondent)
Solicitors:
K&L Gates (Applicant)
Moray & Agnew Lawyers (Respondent)

File Number(s): CA 12/354542
Decision under appeal

Jurisdiction:

9111

Citation:

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

Date of Decision:

2012-10-19 00:00:00

Before:

Sackar J

File Number(s):

SC 12/059118

Judgment

MEAGHER JA: I agree with Barrett JA and add the following observations. The applicant's (Bramco's) action in this Court, although formulated as a claim for breach of contract, involved the exercise by this Court of federal jurisdiction. As the judgment of Barrett JA shows, that action concerned a matter arising under a law of the Commonwealth, the Patents Act 1990 (Cth). That matter is within the jurisdiction conferred on this Court by s 39(2) of the Judiciary Act 1903 (Cth), which is a law made in exercise of the power in s 77(iii) of the Constitution to invest State courts with federal jurisdiction in relation to matters within s 76(ii).

Section 155 of the Patents Act contains a more specific conferral of jurisdiction on courts which include this Court in respect of "matters arising under this Act in respect of which proceedings may, under this Act, be started in a prescribed Court". Section 158 provides, pursuant to s 77(ii), that appeals from a judgment or order in the exercise of that jurisdiction lie only to the Federal Court or, with special leave, to the High Court. That section is inconsistent with s 101(1) of the Supreme Court Act to the extent that the latter provides for appeals from a judgment or order of a Division of this Court exercising the jurisdiction conferred by s 155. By the operation of s 109 of the Constitution s 158 prevails to the extent of that inconsistency. The result is that this Court has no appellate jurisdiction in respect of judgments or orders made in the exercise of the jurisdiction conferred by s 155(1) of the Patents Act.

The proceedings before the primary judge were not, for the reasons explained by Barrett JA, with respect to a matter involving the exercise of that jurisdiction. Therefore, subject to the application of any other Commonwealth law there was a right of appeal to this Court from the decision of the primary judge.

That appeal would also involve the exercise of federal jurisdiction. Section 79 of the Judiciary Act provides that the laws of this State shall, except as otherwise provided by the laws of the Commonwealth, be binding on this Court exercising federal jurisdiction in cases to which they are applicable. One such applicable law is the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth).

Section 7(5) of that Act relevantly provides that a proceeding by way of appeal involving the determination of a matter "arising under" the Patents Act shall be instituted only in and determined only by the Full Court of the Federal Court. The expression "arising under" as used in that subsection is to be given the same meaning as it has in Chapter III of the Constitution. To read that expression more narrowly in this context, and as referring only to matters which have been the subject of an express conferral of federal jurisdiction by the legislation specified in the Schedule, would involve reading into the subsection words which are not there. It would also have the unlikely consequence, in relation to their application to the Patents Act, that the subject matter which would attract the operation of the subsection would be, by s 158(4), one in respect of which an appeal would not lie to this Court.

For the reasons given by Barrett JA the appeal proceedings require the determination of a matter "arising under" the Patents Act and accordingly this Court is required, by s 7(7) to transfer them to the Full Court of the Federal Court "unless the interests of justice require" that it proceed to determine the appeal. The parties have not had an opportunity to address that question.

The orders proposed by Barrett JA should be made.

BARRETT JA: In February 2012, ATF Mining Electrics Pty Ltd ("ATF") brought proceedings against Bramco Electronics Pty Ltd ("Bramco") in the Equity Division of the Supreme Court alleging breach by Bramco of two written contracts by which those parties had compromised patent infringement proceedings brought by ATF against Bramco in the Federal Court of Australia. The contracts, both dated 17 January 2008, were a deed of settlement and release ("deed") and a licence agreement ("licence") concerning ATF's Australian patent 704930 (referred to both in the contracts and in these reasons as "the Patent"). The monopoly conferred by the Patent relates to exploitation of technology for the manufacture of certain electrical sensors.

An order was made for the separate determination of certain questions in the Equity Division proceedings. For reasons published on 18 September 2012 (ATF Mining Electrics Pty Ltd v Bramco Electronics Pty Ltd [2012] NSWSC 1126), Sackar J answered those questions by holding that Bramco, by its conduct in relation to a particular electrical device, breached provisions of the deed and the licence, including provisions reserving exclusively to ATF (and expressly denying to Bramco) "all rights to use the Patent for purposes other than expressly permitted under" an earlier provision by which Bramco was licensed to "use and apply the Patent" to sell certain electrical items to certain persons and to repair certain such items.

His Honour made declarations that Bramco had breached the particular provisions of the deed and the licence and granted injunctions enjoining certain forms of conduct by Bramco in relation to electrical items of the relevant kind.

The proceedings in this Court

Bramco contends that the judge erred in finding that it had breached the contracts. It therefore filed in this Court a summons seeking leave to appeal (leave being necessary because of s 103 of the Supreme Court Act 1970) and a draft notice of appeal setting out several grounds of appeal.

Pursuant to directions made on 22 February 2013, Bramco's application for leave to appeal and the appeal itself were listed for hearing together.

At the start of the concurrent hearing on 20 August 2013, the Court raised with counsel on both sides the question whether the proceedings in this Court were caught by provisions of Commonwealth law under which certain classes of appeal from a single judge of a State Supreme Court properly lie to a Commonwealth appellate court. Counsel made general observations on that matter but were not in a position to offer considered submissions for the Court's assistance. Directions were made for the filing of such submissions in writing. Counsel then chose to present their respective cases on the substantive issues arising from the summons seeking leave to appeal and the draft notice of appeal. Written submissions on the jurisdiction question were forthcoming after the conclusion of the hearing.

Both counsel for Bramco and counsel for ATF submitted that the proceedings instituted in this Court are not affected by any provision of Commonwealth law of the kind to which I have referred. They say that this Court ought to proceed to determine the summons seeking leave to appeal and, if leave is granted, to deal with the grounds of appeal in the notice of appeal.

I find myself unable to accept those submissions. In my opinion, any appeal from the judgment and orders in the Equity Division properly lies to the Federal Court of Australia (or, with special leave, the High Court of Australia); and, subject to a possible qualification to be mentioned presently, this Court is constrained by Commonwealth law to transfer the undetermined proceedings of which it is now seised.

The view I have expressed is derived from provisions of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth). Before turning to those provisions, however, I should deal with the principal matter canvassed in submissions, namely, the operation and effect of s 155(1) and s 158 of the Patents Act 1990 (Cth).

Sections 155(1) and 158 of the Patents Act

Sections 155(1) provides as follows (it is not necessary to set out the other subsection):

"Each prescribed court (other than the Federal Court) has jurisdiction with respect to matters arising under this Act in respect of which proceedings may, under this Act, be started in a prescribed court."

The relevant parts of s 158 are subsections (1), (3) and (4):

"(1) An appeal lies to the Federal Court against a judgment or order of:

(a) another prescribed court exercising jurisdiction under this Act; or

(b) any other court in proceedings under subsection 120(1) or section 128.

. . .

(3) With the special leave of the High Court, an appeal lies to the High Court against a judgment or order referred to in subsection (1).

(4) Except as otherwise provided by this section, an appeal does not lie against a judgment or order referred to in subsection (1)."

By virtue of the relevant definition in the dictionary in schedule 1 to the Patents Act, the Supreme Court of New South Wales is a "prescribed court". Section 155(1) therefore vests in the Supreme Court "jurisdiction with respect to matters arising under this Act in respect of which proceedings may, under this Act, be started in a prescribed court".

Section 158(1) regulates an appeal against a judgment or order of the Supreme Court "exercising jurisdiction under this Act" (see s 158(1)(a)). It follows that, if the primary judge was exercising jurisdiction vested in the Supreme Court by s 155(1), the appeal now before the Court of Appeal of the Supreme Court is one that lies to the Federal Court under s 158(1) or (with special leave) to the High Court under s 158(3) and, by virtue of s 158(4), that appeal does not lie to the Court of Appeal.

The issue raised by these provisions of the Patents Act is whether, in terms of s 155(1), the jurisdiction exercised by the primary judge was jurisdiction "with respect to" a "matter" exhibiting two characteristics: first, it was a matter arising "under this Act"; and, second, it was a matter in respect of which "proceedings may, under this Act, be started in a prescribed court".

The Equity Division proceedings and their subject matter

In order to address the two questions posed by s 155(1), it is necessary to consider the effect and operation of the deed and the licence and the claims made by ATF in the Equity Division proceedings.

ATF's case below, as ultimately formulated, was pleaded in a further amended commercial list statement filed on 4 June 2012. ATF pleaded its proprietorship of the Patent, the institution and agreed resolution of the Federal Court proceedings, the making of the deed and the licence and specific provisions of both the deed and the licence (clause 4 of the deed and clauses 4.1 and 4.2 of the licence).

By clause 4 of the deed, Bramco agreed to enter into the licence and that it would not "sell, repair, maintain, improve or otherwise use or apply the Patent except as expressly permitted in accordance with the" licence, subject to geographic and time limitations defined by reference to "the Patent or a member of the same family of patents". By clause 4.1 of the licence, ATF granted to Bramco a non-exclusive right to use and apply the Patent in defined ways; and it was provided by clause 4.2 that all "rights to use the Patent" for purposes other than those expressly stated were excluded from the licence and belonged exclusively to ATF.

Having pleaded the contractual terms, ATF proceeded to plead breaches by Bramco of these provisions by specified acts of Bramco. ATF then said (in paragraph 14C):

"By reason of the matters in paragraphs 11A, 12, 13, 14, 14A and 14B above, the defendant breached the terms of the Deed and the Agreement pleaded in paragraphs 8 - 11 above."

The matters referred to in the enumerated paragraphs were acts of selling, manufacturing, repairing and maintaining certain electrical items. ATF also alleged (in paragraph 14B):

"Further, or in the alternative, the MRDs manufactured and/or sold by the defendant in the period from 31 December 2008 to date as pleaded in paragraphs 12, 13 and 14 above utilised the Patent or technology that was materially similar to the patent [sic]."

ATF next pleaded that, by reason of Bramco's breaches of the deed and the licence "pleaded in paragraph 14C above". ATF suffered loss and damage. This was followed by claims for declaratory and injunctive relief, a claim for delivery up of certain items and claims for damages, interest and costs.

The allegation in paragraph 14B arguably amounted to a direct allegation of infringement of the Patent. The allegations of sale and manufacture may have indirectly partaken of the character of allegations of infringement of the Patent. But particular acts were not said by ATF to entitle it to redress because they were acts within the monopoly conferred by the Patent. The complaint was that there had been an invasion of contractual rights - that Bramco had done things that it had promised to ATF that it would not do.

The first question posed by s 155(1)

The approach to be taken to the first question posed by s 155(1) - whether a matter is one "arising under" the Patents Act - is that indicated by the decision of the High Court in LNC Industries Ltd v BMW (Australia) Pty Ltd [1983] HCA 31; (1983) 151 CLR 575. The facts of that case appear sufficiently from the headnote:

"A company which held import licences to import a number of motor vehicles brought an action in the Supreme Court of New South Wales alleging that it was a term of a contract under which it agreed to transfer part of its quota to the defendant that the defendant would hold on trust for it any benefit accruing as a result of or related to the utilization of the transferred quota units. It claimed a declaration that the quota units were held on trust, an order that they be transferred and damages. The defendant successfully defended the action on the ground that the agreement was subject to an unfulfilled condition. The plaintiff applied for leave to appeal to the Privy Council."

The question before the High Court was whether the breach of contract claim arose under a law of the Commonwealth Parliament so that, by virtue of a provision of the Judiciary Act 1903 (Cth) as then in force, the decision of the Supreme Court was not subject to appeal to the Privy Council.

Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ noted (at 581) the observation of Latham CJ in R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett [1945] HCA 50; (1945) 70 CLR 141 at 154 that "a matter may properly be said to arise under a federal law if the right or duty in question in the matter owes its existence to federal law or depends upon federal law for its enforcement, whether or not the determination of the controversy involves the interpretation (or validity) of the law". The joint judgment continued (also at 581):

"When it is said that a matter will arise under a law of the Parliament only if the right or duty in question in the matter owes its existence to a law of the Parliament that does not mean that the question depends on the form of the relief sought and on whether that relief depends on federal law. A claim for damages for breach or for specific performance of a contract, or a claim for relief for breach of trust, is a claim for relief of a kind which is available under State law, but if the contract or trust is in respect of a right or property which is the creation of federal law, the claim arises under federal law. The subject matter of the contract or trust in such a case exists as a result of the federal law."

In Abebe v Commonwealth [1999] HCA 14; (1999) 197 CLR 510, it was said by Gummow and Hayne JJ (at [140]) that the particular justiciable controversy was a "matter arising under" a law made by the Commonwealth Parliament "because the determination of the controversy involves the interpretation of the [Commonwealth] Act and the rights or duties in question in the matter owe their existence to that statute".

In Macteldir Pty Ltd v Dimovski [2005] FCA 1528; (2005) 226 ALR 773, Allsop J (as he then was) applied the reasoning in LNC Industries Ltd v BMW (Australia) Pty Ltd in reaching a conclusion expressed as follows (at [95]):

"The enforcement of a contract to settle a case (at least between the parties to the suit) concerning rights owing their existence to Commonwealth law, and hitherto sought to be vindicated in the Federal Court under the FCA Act or the Judiciary Act or another Commonwealth Act will be a matter arising under a law of the parliament: LNC Industries, if it is not (as it may well be) part of the original matter."

Counsel for the respective parties submitted that the Equity Division proceedings were not of this kind. They emphasised that ATF's claim was not for infringement of the Patent and did not concern the validity of the Patent; also that the status and effect of the Patent were irrelevant to the matters in contest. The case was, it was said, one in which a question of federal law was merely "lurking in the background", in the words of Windeyer J in Felton v Mulligan [1971] HCA 39; (1971) 124 CLR 367 at 388.

It is clear that the scope of the monopoly created by the Patent was squarely in issue in the Equity Division proceedings. The contractual rights given by ATF to Bramco had content and meaning only when the nature and extent of the rights under the Patent were identified. The construction of the Patent was a central part of the case. Indeed, the primary judge expressly recognised (at [17]) that he was required to construe not only the parties' contracts but also the Patent; and, at [116] and following, his Honour dealt in considerable detail with the scope of the Patent and the question whether acts of Bramco were within that scope.

The parties' contract is in respect of a right or property which is the creation of federal law. The subject matter of the contract exists as a result of federal law. Those factors, according to the formulation in LNC Industries Ltd v BMW (Australia) Pty Ltd, caused the Equity Division proceedings - proceedings, it may be noted, of the very kind to which Allsop J referred in Macteldir Pty Ltd v Dimovski - to be a "matter arising under" the Patents Act as referred to in s 155(1) of that Act.

The second question posed by s 155(1)

That, however, is only part of the inquiry made necessary by s 155(1). Separate attention must be given to the question whether the matter is one "in respect of which proceedings may, under this Act, be started in a prescribed court".

Numerous provisions of the Patents Act specify things that a "prescribed court" may do. Reference may be made to s 42(1), s 97(3), s 101K, s 120, s 125, s 128, s 138, s 165, s 169, s 171 and s 192. Of these, the most relevant, for present purposes, is s 120 concerning "infringement proceedings", that is, in terms of the definition of that term in the dictionary in schedule 1 to the Act, "proceedings for infringement of a patent".

Each "matter" in respect of which a provision of the Patents Act allows adjudication by a "prescribed court" may be taken, for present purposes, to be, in terms of s 155(1), a matter "in respect of which proceedings may, under this Act, be started in a prescribed court".

As I have said, one particular matter that the Act puts within the power and disposition of a "prescribed court" is "infringement proceedings", or "proceedings for infringement of a patent". Proceedings are of that description if they are brought to enforce the exclusive right of exploitation that a patentee enjoys under s 13(1) of the Act as against the world by reason of the grant of the patent: Northern Territory v Collins [2008] HCA 49; (2008) 235 CLR 619 at [20]. Under s 121, a defendant in infringement proceedings may bring a counter-claim for revocation and thereby seek a determination that, "as against the world, the patentee had never had a valid patent": Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46; [2013] 3 WLR 299 at [51].

This emphasises that a patentee bringing infringement proceedings seeks to vindicate a right conferred by statute as against the world and runs the risk of a counter-claim that it has never enjoyed any right as against the world. The right in issue is therefore distinct from a right enjoyed by one person as against another because of bilateral circumstances affecting those immediate parties only.

In prosecuting the Equity Division proceedings, ATF did not seek to assert or enforce any statutory right secured to it as against the world by reason of its status as patentee. It sought to enforce contractual rights arising from contractual promises made to it by Bramco. The proceedings brought by ATF, although raising questions about the scope of the patentee's monopoly and whether acts of Bramco were within that scope, were not "infringement proceedings" as referred to in the Patents Act (nor, it may be noted, did ATF make any attempt to cast them as such in accordance with Part 48 of the Uniform Civil Procedure Rules 2005). The proceedings were accordingly not, by virtue of s 120 or otherwise, proceedings that, in terms of s 155(1) of the Patents Act, "may, under this Act, be started in a prescribed court".

Conclusion on s 155(1) and s 158

The conclusion therefore is that the Equity Division proceedings possessed the first of the characteristics referred to in s 155(1) (that is, they involved "matters arising under this Act"); but that they did not possess the second characteristic (that is, they were not proceedings which "may, under this Act, be started in a prescribed court"). That being so, the judgment and orders of the Supreme Court, while a judgment and orders of a "prescribed court", were not, in terms of s 158(1), a judgment and orders of such a court "exercising jurisdiction under this Act".

It follows that there is no basis for holding that s 158 of the Patents Act causes the appeal filed in this Court to be one that, in terms of s 158(1) and 158(3), lies to the Federal Court or the High Court and, in terms of s 158(4), may not be adjudicated by this Court.

Jurisdiction of Courts (Cross-Vesting) Act

That, however, is not the end of the matter. As I have said, I am of the opinion that provisions of the Jurisdiction of Courts (Cross-Vesting) Act of the Commonwealth operate in this instance.

The conclusion that a matter "arising under" a Commonwealth Act was in issue in the Equity Division proceedings means that the proceedings were of the description in s 76(ii) of the Constitution and were therefore within s 39(2) of the Judiciary Act 1903 (Cth). The jurisdiction that the Supreme Court exercised was accordingly federal jurisdiction conferred by s 39(2). That being so, it is the cross-vesting legislation of the Commonwealth, rather than its New South Wales counterpart, that applies to an appellate proceeding.

The section of the Jurisdiction of Courts (Cross-Vesting) Act of the Commonwealth of immediate relevance is s 7. It is sufficient, for present purposes, to set out subsections (5), (7) and (8):

"(5) Subject to subsections (7) and (8), where it appears that a matter for determination in a proceeding by way of an appeal from a decision of a single judge of the Supreme Court of a State or Territory (not being a proceeding to which subsection (6) applies) is a matter arising under an Act specified in the Schedule, that proceeding shall be instituted only in, and shall be determined only by:

(a) the Full Court of the Federal Court or of the Family Court, as the case requires; or

(b) with special leave of the High Court, the High Court.

. . ..

(7) Where:

(a) the Full Court of the Supreme Court of a State or Territory commences to hear a proceeding by way of an appeal; and

(b) before the Court determines the proceeding, it appears to the Court that the proceeding is a proceeding to which subsection (5) applies;

the Court shall, unless the interests of justice require that the Court proceed to determine the proceeding, transfer the proceeding to the Full Court of the Federal Court or of the Family Court, as the case requires.

(8) Where the Full Court of the Supreme Court of a State or Territory:

(a) determines a proceeding to which subsection (5) applies as mentioned in subsection (7); or

(b) through inadvertence, determines a proceeding to which subsection (5) applies;

nothing in this section invalidates the decision of that court."

The schedule to the Act lists thirteen statutes, one of which is the Patents Act. Section 3 defines "Full Court" in such a way that the Court of Appeal of the Supreme Court of New South Wales is, for the purposes of the Act, the "Full Court" of that Supreme Court.

Section 7(5) is concerned with "a proceeding by way of an appeal from" a decision of a single judge of the Supreme Court of a State. In the present case, Bramco filed a summons seeking leave to appeal supported by a draft notice of appeal setting out grounds of appeal. That such a proceeding is, for present purposes, "a proceeding by way of an appeal", even though leave to appeal has not been granted, is established by authority. It is sufficient to refer to the following passage in the judgment of Steytler P (with whom Le Miere AJA agreed) in Macchia v The Public Trustee [2008] WASCA 241: (2008) 251 ALR 385 (at [24]) approving both NEC Information Systems Australia Pty Ltd v Lockhart (1991) 22 NSWLR 518 and NEC Information Systems Australia Pty Ltd v Lockhart (1992) 36 FCR 258:

"The words 'proceedings by way of an appeal' have been given a wide meaning in NEC Information Systems Australia Pty Ltd v Lockhart (1991) 22 NSWLR 518 and in NEC Information Systems Australia Pty Ltd v Lockhart (1992) 108 ALR 561. In the former case Kirby P held that a summons for leave to appeal was 'a proceeding by way of an appeal' for the purposes of s 6(9) of the Cross-Vesting legislation. Meagher JA (with whom Samuels JA agreed) was of the view that the expression should be construed as covering all the steps in the appellate process, whatever they may happen to be in a given case (531). In the latter case, Black CJ, Lockhart & Gummow JJ held that the expression 'should be interpreted as including all steps in the appellate process including a summons, application or motion for leave to appeal".

The question posed by s 7(5) of the Jurisdiction of Courts (Cross-Vesting) Act is whether "a matter for determination in" the proceeding now before this Court is a "matter arising under" the Patents Act. It is therefore necessary to decide whether an issue raised by the summons seeking leave to appeal and the draft notice of appeal represents "a matter arising under" the Patents Act. The reference to "a matter" in the singular makes it clear that the provision applies even if one or more other "matters" also arise for determination in the proceeding.

The central issue in the proceeding that Bramco has brought in this Court is the same as that determined by the primary judge: in essence, did the conduct of Bramco breach provisions of the deed and the licence? That question, as it relates to the subject matter of the appellate proceeding, corresponds precisely with the question that the first aspect of the inquiry under s 155(1) of the Patents Act caused to be addressed in relation to the subject matter of the proceeding in the Equity Division. For the reasons already canvassed, the question must be answered in the affirmative.

Since the proceeding in this Court raises for determination "a matter arising under" the Patents Act, s 7(5) of the Jurisdiction of Courts (Cross-Vesting) Act dictates that, subject to s 7(7) and s 7(8), the proceeding "shall be instituted only in, and shall be determined only by" a Commonwealth court specified in s 7(5) itself.

In fact, of course, the present proceeding was "instituted in" this Court and this Court commenced to hear the proceeding but has not determined it. The institution of the proceeding in this Court by Bramco was inconsistent with s 7(5). It would likewise be inconsistent with s 7(5) for this Court to determine it, unless s 7(7) so allows. Because counsel for the parties chose to present their respective cases on the merits at the hearing on 20 August 2013, this Court has commenced to hear (but has not determined) a proceeding which, as it now appears, is one to which s 7(5) applies. Section 7(7) therefore has the effect that this Court must, "unless the interests of justice require that the Court proceed to determine the proceeding, transfer the proceeding to" the Full Court of the Federal Court of Australia. The qualification concerning the interests of justice is the qualification to which I referred at [15] above.

A direction to show cause should be made

The question whether the interests of justice "require" this Court to proceed to determine the proceeding now before it is one on which the parties have had no opportunity to be heard. In those circumstances and having regard to the conclusions reached about the compulsion otherwise exerted by the Jurisdiction of Courts (Cross-Vesting) Act, I am of the opinion that this Court should make directions as follows:

1. Direct that the parties show cause why, in the interests of justice (as referred to in s 7(7) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth)), this Court should proceed to determine the summons seeking leave to appeal and, subject to the grant of leave, the appeal.

2. Direct that the parties do, within 21 days, file and serve such written submissions as they wish on that issue.

3. Direct that, unless a party notifies the Registrar in writing within 21 days that the party requires an opportunity to make oral submissions, that issue be determined on the papers.

WARD JA: By Summons filed on 18 January 2013, Bramco Electronics Pty Ltd seeks leave to appeal from the judgment of Sackar J (AFT Mining Electrics Pty Ltd v Bramco Electronics Pty Ltd [2012] NSWSC 1126) in which his Honour found that Bramco had breached a Deed of Settlement and Release and a Patent Licence Agreement entered into with ATF Mining Electrics Pty Ltd. Those agreements (together, the Settlement Agreements) were entered into in January 2008 in settlement of patent infringement proceedings then on foot between Bramco and ATF in the Federal Court of Australia.

Pursuant to directions made on 22 February 2013, Bramco's application for leave to appeal was heard concurrently with the appeal.

Background

Both Bramco and ATF manufacture electrical equipment for use in the mining industry. ATF holds the patent for an invention called a "Load Control Module" (the Patent). In the Federal Court proceedings, ATF contended that Bramco had infringed the Patent, by inter alia, selling a machine recognition device referred to as the "Smarty" or Smart Pilot Node. The invention claimed in the Patent was a device or unit that, in lay terms, enabled the ordinary operating parameters associated with various machines to be set remotely through a control module. The invention was described in the Patent claims as comprising a "sensor unit". Bramco denied that it had infringed the Patent and cross-claimed for orders revoking the Patent on various grounds.

Settlement of the Federal Court proceedings was without admission by either party as to any or all of the facts, matters or contentions in those proceedings (Recital I to the Settlement Deed - WF Tab 2). ATF released Bramco from any claims in relation to the Patent and the sale of the Sensor. Bramco agreed, inter alia, not to challenge the validity of the Patent.

The terms of settlement included Bramco's agreement to enter into a licence agreement (which it did at the same time as entry into the Settlement Deed) and its agreement not to sell, repair, maintain, improve or otherwise use or apply the Patent "or the Sensor" except as expressly permitted in accordance with that licence agreement (clause 4.1 of the Settlement Deed with my emphasis). Under the Patent Licence Agreement (WF Tab 3), Bramco was given a limited licence in relation to the "Sensors" and it agreed (clause 1.2(b)), inter alia, that it must not sell "any Sensor" after 31 December 2008.

The genesis of the present dispute is that on 31 December 2008 (i.e., when the limited licence granted under the Patent Licence Agreement came to an end) Bramco began to manufacture and sell a device, referred to in these proceedings as the "MRD" (an acronym for "machine recognition device"), that his Honour accepted (at [93]) for all practical purposes did the same thing in the same way as the Smarty or Smart Pilot (SP) Node that had been the subject of the Federal Court patent infringement proceedings. Evidence to that effect was given by the respective experts called by the parties: ATF's expert, Mr Ellis (Blue 46/51); Bramco's expert, Mr Hollands (Blue 524/525). Mr Hollands, in cross-examination, conceded that there were no real differences between the SP Node and MRD and said that they did the same thing in the same way (Black 43.10-15).

In the proceedings before Sackar J, ATF claimed that Bramco was in breach both of the Settlement Deed (clauses 4.1 and 4.2) and the Patent Licence Agreement (clauses 4.1, 4.2 and 14.1) by selling and manufacturing the MRD after 31 December 2008. His Honour found that was the case. (In so doing there may have been a slip in his Honour's reasons, on which nothing turns for present purposes, as to the identification of the precise clauses of those agreements that his Honour accepted had been breached by Bramco's manufacture and sale of the MRD.) ATF claimed damages and other relief for the breaches in question.

There is no challenge to the findings by his Honour (at [115]) that the "Smarty" was a "Sensor" as defined in the respective Settlement Agreements and at [151] that any differences between the MRD and the Smarty devices were immaterial.

Present application

Bramco seeks leave to appeal from his Honour's decision on various grounds, including what it contends is the incorrect application by his Honour of the principles of construction applicable to patents (ground 3) as well as the contention that his Honour erred in finding that the MRD satisfied the requirements of the Patent (ground 8).

Leave is required pursuant to s 103 of the Supreme Court Act 1970 (NSW) since the judgment of Sackar J was in respect of questions the subject of an order for separate determination in advance of other issues in the proceedings (that order being made on 23 March 2012 by McDougall J) (National Employers Mutual General Insurance Association Ltd v Manufacturers Mutual Insurance Ltd (1988) 17 NSWLR 223). Questions of quantum of damages, equitable compensation or account of profits remained to be heard, if they arose, after the determination of liability. Nevertheless, it is clear that the orders made by Sackar J, though not finally determining the proceedings in the Equity Division, did finally determine the issue of Bramco's liability for breach of the Settlement Agreements and therefore his Honour's decision is one that clearly affects the substantive rights of Bramco. There was no demur from ATF to the proposition by Bramco that, on ATF's case, the damages claim will exceed $3.2 million.

ATF makes no submission against the grant of leave to appeal.

There is, however, a preliminary question as to this Court's jurisdiction to hear the appeal. The presiding judge drew the parties' attention to the potential application of s 158 of the Patents Act 1990 (Cth) at the outset of the hearing of the appeal. Leave was given for the parties to serve submissions going to the question of jurisdiction after the concurrent hearing of the leave application and appeal. The parties filed those submissions after judgment on the application was reserved.

I will return to the jurisdictional issue after setting out the proposed grounds of appeal, the relevant provisions of the Settlement Agreements and a brief description of the claims made in the Patent. In summary, however, leaving aside that question, I would have been satisfied that this was an appropriate case for leave to appeal to be granted. As it is, I agree with the conclusion reached by Barrett JA and with the orders proposed by his Honour.

Grounds of Appeal

The grounds of appeal articulated in the draft notice of appeal are as follows:

1. The primary judge erred in deciding at [156]-[157] that the appellant's device known as an MRD was a device which can be used in accordance with the invention described in Australian Patent no. 704930 (Patent) and is thereby a device within the definition of "Sensor" in the Deed of Settlement and Release dated 17 January between the respondent and the appellant (Deed) and Patent Licence Agreement dated 17 January 2008 between the respondent and the appellant (Agreement).

2. The primary judge erred at [138] and [139] in holding that the word "sensor" need not be construed as requiring the same meaning in each of claims 1, 2 and 3 of the Patent and that the term "sensor" does not include sensing functions when used in claims 1 and 2.

3. The primary judge ought to have held, applying the principles of construction applicable to patents (summarised inter alia in the authorities referred to at [22]-[29]), and accepting as he did the evidence of the expert witnesses that the term "sensor" in the Patent did not have any special technical meaning (at [68], [72] and [76]), that the term "sensor" as used in claim 1 of the Patent had its ordinary meaning of a device that detects a change in a physical stimulus and turns it into a signal which can be measured or recorded (as stated at [76]), namely, a sensing device, and that the meaning of the term did not change when used in claim 1, 2 or 3 of the Patent.

4. The primary judge, having properly accepted that the MRD was not a sensor within the ordinary meaning of the word (at [113]-[114]), ought to have held that the MRD was not a sensor or sensor unit within the meaning of the Patent, was not a device that can be used in accordance with the invention described in the Patent and was not a device within the definition of "Sensor" in the Deed and Agreement.

5. The primary judge erred in holding at [155] 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.

6. The primary judge failed to take into account a material consideration, namely the use of the phrase "said load protection data" in claim 1 of the Patent, at [155] when construing the meaning of "load protection data" in the claim.

7. The primary judge ought to have held that by the use of the phrase "said load protection data" claim 1 of the Patent requires that the load protection data transmitted by the sensor unit to the controller is the same load protection data that is then compared by the controller to the load operating data to determine whether to provide the second signal to isolate the load from the power source.

8. The primary judge erred in finding at [154] and [155] that the method of communication of data by the MRD satisfies the requirements of the Patent and the term "load protection data" and that the MRD clearly stores and transmits "load protection data" to the controller as described in claim 1 of the Patent, whereas he ought to have found, on the evidence, that the data transmitted by the MRD to the controller was not the same data that was compared to the load operating data by the controller to determine whether to provide the second signal to isolate the load from the power source and that therefore the MRD did not satisfy the requirements of the Patent and did not store and transmit load protection data as described in claim 1 of the Patent.

Pausing there, the grounds of appeal (as did Bramco's submissions on the present application) focus largely on how it is said that the Patent should be construed; Bramco contending that his Honour erred in finding that the MRD is a "Sensor" within the definition of that term in the Patent and in the respective Settlement Agreements.

Settlement Deed

Clause 2.1 of the Settlement Deed provided for payment of a Settlement Sum in full and final settlement of the Federal Court proceedings and of all claims which AFT had against Bramco in relation to "the Sensor".

"Sensor" was defined in clause 1 of the Settlement 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. (my emphasis)

It is the proper construction of this definition that is critical to the determination of whether Bramco breached its contractual obligations under the Settlement Agreements in selling and manufacturing the MRD. Significantly, the definition in its terms requires reference to the manner in which the invention described in the Patent is used.

"Controller" was defined in clause 1 of the Settlement Deed as meaning "equipment to control electrical switchgear". The definition of "controller" went on to provide that "module" and "relay" had the same meaning.

"Patent" was defined by reference to the Load Control Module patent that had been the subject of the patent infringement proceedings in the Federal Court.

Clause 4 of the Settlement Deed, headed "Bramco's rights and obligations", relevantly provided:

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) [it will] 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) [it will] 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) [it will] 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) [it will] 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.

Pursuant to clause 6 of the Settlement Deed, ATF provided a release in favour of Bramco from, inter alia, all liability or claims in relation to the Patent and the sale by Bramco of "the Smarty Sensor". The release in its terms was thus broader than one in respect only of patent infringement claims relating to the Smarty Sensor, though there might be an argument as to whether it should be construed as relating to future breaches of the Patent by the sale of some other machine recognition device (such as, as ATF contends has occurred, a device that in essence is simply a "re-branded" Smarty Sensor).

Neither the term "Smarty branded sensor", as used in the definition of "Sensor" in the Settlement Agreements, nor the term "Smarty Sensor" as used in clauses 4 and clause 6 of the Settlement Deed, was defined.

Patent Licence Agreement

The Patent Licence Agreement was expressed to be "interdependent, related to and conditional upon the parties entering into the Deed of Settlement" (clause 3.1). Clause 16.7 was a standard form "entire agreement" clause, providing that the Settlement Deed and Patent Licence Agreement recorded the entire agreement between the parties in relation to their subject matter and superseded all previous communication, understandings or agreements between them in respect to such subject matter.

Pursuant to clause 4.1 of the Patent Licence Agreement, Bramco was granted a non-transferable and non-exclusive right (subject to the provisos therein set out) "to use and apply the Patent" to do the following things:

(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 then set out, expressly for the avoidance of doubt, certain limitations on the licence there being granted to Bramco, namely that Bramco:

(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.

Accordingly, the claim before the primary judge of breach of clause 4.1 of the Patent Licence Agreement involved a claim of infringement of the limited licence to use and apply the Patent that was granted under that agreement. To the extent that the definition of "Sensor" in the Settlement Agreements is construed as having been objectively intended to include a device that would, but for the licence, infringe the Patent, the claims before his Honour alleged in essence an infringement of the Patent (though framed as a breach of contract claim).

Clause 14.1 imposed restraints on Bramco during the term of the licence granted under the Patent Licence Agreement, namely that it must not in any manner whatsoever without ATF's prior written consent:

(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 definition of "Sensor" in the Patent Licence Agreement was identical to that in the Settlement Deed and, again, there was no definition in this agreement of the term "Smarty branded sensor".

Load Control Module Patent

The invention described in the Patent (WF Tab 1) is for a load control module comprising a controller and a "sensor unit" with the attributes set out in the Patent claims, which are:

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; 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 accoding [sic] 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 leakage faults;

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

Patent claims introduced by the phrase "a load control module according to" are claims that are dependent on the previous claim or claims there identified. Hence, claim 3 is not independent of claim 1 but, rather, adds an additional feature to that encompassed in claim 1 (namely the periodic provision of a third signal by the "sensor unit").

Bramco maintains that the meaning to be attributed to features of the invention the subject of claim 3 (relevantly, the fact that it included a "sensor unit associated with the load") must, as a matter of construction, be the same as that in respect of the corresponding features in claim 1 (whether or not those features are required for use in accordance with claim 1).

Senior Counsel appearing for Bramco, Ms Baird SC, identified nine integers of claim 1 of the Patent:

1. A load control module for controlling switch gear

2. which, in use, connects a power source to a remotely located electrical load,

3. the module including:

4. a sensor unit associated with the load

5. for providing a first signal which transmits load protection data;

6. a controller

7. for receiving said first signal

8 and for selectively providing a second signal to the switch gear to isolate the load from the power source

9. when said load during operation does not comply with said load protection data. (my emphasis)

The gravamen of the dispute before the primary judge and in the present proceedings, was as to whether the MRD comprised a "sensor unit" (as required by integer 4) and whether the "load protection data" referred to in integer 9 (against which compliance of "said load during operation" is to be tested) must be the same data as that transmitted by the first signal referred to in integer 5. The latter issue arises because, again in lay terms, what is compared by use of the MRD is apparently not the actual signal transmitted to the controller but other information to which the transmission signal directs the controller to take into account.

Primary judgment

In reaching the conclusion (at [157]) that Bramco was in breach of both Settlement Agreements, his Honour considered it necessary (as Bramco had there contended and still contends) to construe not only the Settlement Agreements but also the Patent ([112]). His Honour considered this to be necessary since the patent infringement suit was the context in which the Settlement Agreements were entered. The terms of the definition of "Sensor" incorporate by reference provisions in relation to the Patent. ATF maintained that this was not necessary and that the relevant question was solely as to the construction of the Settlement Agreements themselves.

It was common ground in the proceedings below that neither the MRD nor the SP Node that had been the subject of the Federal Court proceedings was a "sensor" ([96]). His Honour noted in this regard the expert evidence to the effect that the device described in the Patent only required a sensing function if used in accordance with claim 3 (since it was only the periodic provision of the third signal in claim 3 that required the use of a sensor) (see judgment at [74], [78], [81]).

ATF's submission in the proceedings below was that the reference to "sensor" in the definition of "Sensor" was to be understood as a reference to the very "thing" or "device" which was the subject of the Federal Court proceedings (i.e., the SP Node) and that any device that could be used as part of the system described in the Patent was caught by the definition (by reason of the words "for use in accordance with the invention described in the Patent"), whether or not it was a sensor in the ordinary sense of the word (see [97]-[98]).

Bramco's position, to the contrary, was that while the inclusion of the words "Smarty branded sensor" brought the SP Node within the definition used the Settlement Agreements, those words did not otherwise expand the definition [101]. On Bramco's construction, to fall within the definition what was required was something that comprised a sensor unit and that as to be "for use in accordance with the invention described in the Patent", and that the inclusion of the reference to a Smarty branded Sensor simply meant that, for the purpose of the Settlement Agreements, reference to a "sensor unit" comprised something that the parties agreed was not a sensor per se, namely the Smarty or SP Node (but which the parties were content to treat as one for the purpose of their settlement).

In effect, Bramco's construction involves reading the words "including a Smarty branded sensor" as being a parenthetical aside and reading the words "for use in accordance with the invention described as the Patent" as qualifying the description of the sensor unit referred to in the opening words of the definition (rather than being words that only qualified "Smarty branded Sensor"). Hence, if the MRD was not a sensor unit (because it had no sensing functions) and did not, when used, involve the comparison of the same load operation data as that transmitted to the control module, it was not a "Sensor" for the purposes of the definition.

His Honour ultimately accepted ATF's arguments on the construction of the Settlement Agreements. At [112], his Honour said:

... However, apart from the particular device which triggered the litigation, the whole point of the settlement was not to concern any sensor that should or was capable of storing data, or that stored or was capable of storing and uploading or transmitting data to a controller or relay, [paras (a) and (b) of the definition of "Sensor"] but only a sensor which in effect infringed the Patent.

Thus his Honour seems to have accepted that what the parties objectively intended by their settlement was to bring within the definition of "Sensor" the particular device that ATF contended had infringed the Patent (doing so by the inclusion of the reference to the "Smarty branded sensor" in the definition) but that apart from that particular device all that was encompassed in the definition was something that would, in effect, infringe the Patent. At [115] his Honour thus concluded that the parties understood and should be taken objectively to have intended that the SP Node "come within the monopoly of the Patent when connected to the controller".

In other words, as I understand it, his Honour's construction of the definition of "Sensor" in the Settlement Agreements would encompass the particular Smarty branded sensor, the subject of the patent infringement proceedings (which Bramco did not concede had infringed the Patent but which, as part of the settlement, it was prepared to treat as if it did) and any other device which included a sensor unit (capable of storing and/or uploading or transmitting data) and which could be used in accordance with the Patent (i.e., that would infringe the Patent on its ordinary construction). That construction, as applied by his Honour, included within the definition something that, although not branded as a Smarty sensor, could be found to do the same thing in the same way. On that construction the definition would not extend to something that was not a "Smarty branded sensor" (other than, perhaps, a modification thereof that did the same thing in the same way) unless it would in fact infringe the Patent.

To illustrate, using the analogy of apples and oranges (where apples are devices with a true sensing function that can be used in accordance with the invention in the Patent and oranges are devices, such as the Smarty branded sensor, without a true sensing function, but which are capable of being used in accordance with the invention described in at least some claims in the Patent), the fact that the Smarty branded sensor was expressly to be treated as an apple would not bring all other oranges within the definition simply because they might do the same thing in the same way as the Smarty based sensor. However, if the orange in question was in substance a Smarty branded sensor, though not branded as such, it would fall within the definition on his Honour's reasoning.

His Honour considered (from [116]) whether the MRD in fact infringed the Patent even though it did not have a sensing function. His Honour concluded at [139] that it was not necessary to construe "sensor" in claims 1, 2 and 3 as having the same meaning as each (a conclusion challenged by Bramco having regard to the dependency, as a matter of patent construction, of claim 3 on claims 1 or 2). His Honour placed weight on the experts' evidence that the use of the word "sensor" was probably a misnomer in this regard.

As to the meaning of "said load protection data" in integer 9 of the Patent, at [155] his Honour construed the Patent as meaning that all that was to be transmitted by the device to the relay was a message that allowed load protection data to be communicated from one to the other (by whatever means might be devised) and that it was not necessary that the load protection data transmitted to the controller in claim 1 be the "full" or "whole" set of data (or be transmitted in the same format - be it analogue or digital for example).

His Honour in effect treated the inclusion of the reference to "a Smarty branded Sensor for use in accordance with the invention described in the Patent" as a reference to any machine recognition device that carried on the same function in the same way as the SP Node or Smarty Node that had been in issue in the patent infringement proceedings. (One difficulty with this construction may be the use of the word "branded"; which focuses on the branding of the device rather than its features as such. However, it is not necessary to consider this on the present application.)

His Honour's ultimate conclusion that the MRD infringed the Settlement Agreements was thus predicated on his finding at [170] that the MRD infringed the Patent itself.

His Honour made declarations as to breach of the Patent Licence Agreement and the Settlement Deed and made orders restraining Bramco until 23 August 2014 (the date on which both the Patent and the Settlement Agreements made with reference expires from engaging in specified conduct in relation to any Sensor or Controller (defining Sensor as meaning, inter alia, the Smart Pilot Node and the MRD exhibited in the proceedings and as defined in the Licence Agreement and Deed). Orders were also made for Bramco to deliver up, among other things, all Sensors and Controllers and all products that utilise the Patent or any technology materially similar to the Patent, in Bramco's control and to which it had title; as well as for the delivery up (in escrow until 23 August 2014) all drawings, designs, models and confidential information of ATF.

Jurisdiction

Section 155(1) and the relevant parts of s 158 of the Patents Act 1990 (Cth) have been set out in Barrett JA's reasons and I will not repeat them here.

The Supreme Court is a "prescribed court (other than the Federal Court)" within the meaning of s 155 of the Act and "another prescribed court" within the meaning of s 158(1)(a) of the Act. The relevant question is whether, in the proceedings in the Equity Division, Sackar J was exercising jurisdiction under the Patents Act, i.e., jurisdiction conferred by s 155 (namely, jurisdiction with respect to a matter arising under the Patents Act in respect of which proceedings may under the Act be started in a prescribed court).

There is no doubt that proceedings for patent infringement are proceedings that may be brought in a prescribed court other than the Federal Court (see s 120(1) of the Act). However, Ms Baird emphasises that the proceeding before Sackar J was not a proceeding for patent infringement and submits that as a consequence the relief granted was not made in the exercise of jurisdiction with respect to a matter arising "under" the Patents Act. Senior Counsel for ATF, Mr Newlinds SC, contends that the proceedings in question did not involve the exercise by primary judge of jurisdiction under the Patents Act on the basis that the claim was for breach of contractual obligations, not a claim or proceeding for infringement of a patent.

Certainly, the claims made by ATF in the proceedings concerned allegations of breach of express contractual restraints ([11A] and [12] - [14] of the Further Amended Commercial List Statement - WF Tab 5) but it is relevant to note that those contractual restraints related to the use of a device that, on at least part of the definition of "Sensor" required reference to a property right brought into existence under the Patents Act.

Ms Baird accepts that on Bramco's own case it was necessary for his Honour to construe the Patent claims but submits that this was because the Patent was incorporated by reference into the definition of the term "Sensor" in both the Settlement Agreements and that this does not mean that his Honour was concerned with hearing and determining proceedings for infringement of the Patent or any matter arising in respect of such a proceeding.

What his Honour was determining (at least in relation to the claim for breach of the Patent Licence Agreement) was whether there had been a breach of contractual covenants relating to a limited licence there granted for the application or use of the Patent itself. The impugned conduct after 31 December 2008 was conduct that on ATF's case amounted to an infringement of its Patent (because it was outside the limited licence that had been granted). The proceedings were for breach of a covenant not to do something that ATF had, in the earlier patent infringement proceedings, contended amounted to a breach of its Patent. Indeed, his Honour in determining the breach of contract claims made a clear finding of patent infringement (as set out earlier).

The distinction sought to be drawn by Counsel is between the question whether the primary judge was exercising jurisdiction under the Patents Act for the purposes of s 158(1)(a) when his Honour determined the allegation of breach of contract and the question whether the proceedings being heard constituted a matter arising under any laws made by the Commonwealth Parliament, such as would have been relevant to determine whether the Federal Court would have had jurisdiction to hear a purely contractual dispute arising out of the Settlement Agreements.

Mr Newlinds submits that the words "a court exercising jurisdiction under this Act" in s 158 mean that the jurisdiction being invoked by a party seeking relief in the relevant proceedings must be under that Act and the Court must be invited to exercise a power granted, or to vindicate a right created, by the Act (referring in this regard to Masterwood Pty Ltd v Far North Queensland Electricity Board [1999] 1 Qd R 345 at 352, where the words "under this Act" were understood to mean "by virtue of this Act").

In Felton v Mulligan [1971] HCA 39; (1971) 124 CLR 367, the High Court considered what was necessary for a matter to arise "under" a Federal law. At p 387, Windeyer J said:

... It is enough to say - and I quote Latham C.J. in R. v. Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett ((1945) 70 CLR 141 at p 154) - that:

" ... a matter may properly be said to arise under a federal law if the right or duty in question in the matter owes its existence to federal law or depends upon federal law for its enforcement, whether or not the determination of the controversy involves the interpretation (or validity) of the law."

contrasting the position where, "[t]he most one can say is that a question of federal law is lurking in the background". His Honour concluded at p 38 that:

In my view a matter does not arise for adjudication under a law made by the Commonwealth Parliament unless a statute is relied upon as giving a right claimed or as the direct source of a defence asserted. It is not easy to formulate with precision criteria which will suffice in every case.

Menzies J, at 382, said:

A matter arises under a law when it is necessary in litigation to determine whether that law confers a right or affords a defence which is an issue in the litigation. A matter arises under a law of the Parliament when in a proceeding it is necessary that there should be a decision upon a claim made by one of the parties to the litigation which is based upon that law.

In the present case, the argument put by the respective parties in essence is that the right claimed in the proceedings below is one that was created by contract not conferred by the operation of the Patents.

In LNC Industries Ltd v BMW (Australia) Ltd [1983] HCA 31; (1983) 151 CLR 575, the High Court considered the question whether a decision made at first instance in the Supreme Court of New South Wales was made in the exercise of federal jurisdiction. That question turned on whether the proceeding before the primary judge was a matter "arising under any laws made by the Parliament" within s 76(ii) of the Constitution. At p 581, the High Court said:

When it is said that a matter will arise under a law of the Parliament only if the right or duty in question in the matter owes its existence to a law of the Parliament that does not mean that the question depends on the form of the relief sought and on whether that relief depends on federal law. A claim for damages for breach or for specific performance of a contract, or a claim for relief for breach of trust, is a claim for relief of a kind which is available under State law, but if the contract or trust is in respect of a right or property which is the creation of federal law, the claim arises under federal law. The subject matter of the contract or trust in such a case exists as a result of the federal law. (my emphasis)

There, the relevant contracts were concerned with entitlements under federal import quota regulations. The High Court said:

The subject matter of the contracts and of the action arose under and existed only by reason of the provisions of the Regulations and the Act in pursuance of which the Regulations were made. The Act was of course a law of the Parliament and the Regulations were made under it.

The present case is not, to use the words of Windeyer J. in Felton v. Mulligan ((1971) 124 CLR at p 391), one in which the Regulations are merely "lurking in the background". The very subject of the issue between the parties is an entitlement under the Regulations. In substance the plaintiff's primary claim is to the benefit of rights and privileges under the Regulations. In these circumstances the matter involved in the action arose under laws made by the Parliament. The Supreme Court was therefore exercising federal jurisdiction in dealing with it and it follows that s. 39(2)(a) of the Judiciary Act precludes an appeal to Her Majesty in Council.

In the present case, it is said that where there was no allegation of infringement of the Patent (and it was not put directly in issue by a defence or cross claim of invalidity) the claim by ATF was not one that sought to enforce a property right created by federal law (cf the position in Australian Solar Mesh Sales Pty Ltd v Anderson [2000] FCA 864; (2000) 101 FCR 1; 175 ALR 566, where relief was sought to secure a right to a patent for an invention and a defence had been raised as to whether there was any entitlement under the patents legislation).

There is, in my opinion, force in the argument that if the only relevance of the Patent is that reference to it is necessary to determine the subject matter of the limited licence granted in and restraints imposed by the Settlement Agreements, then there is no matter arising "under" the Patents Act and this is merely a contractual dispute involving the construction of a clause that just happens to import a reference to the Patent (much as if the parties had chosen to define "Sensor" by reference to a description in a text book or other reference document).

However, such a conclusion would in my view be inconsistent with the reasoning (albeit in obiter dicta) of Allsop J, as his Honour then was, in Macteldir v Dimovski (2005) 226 ALR 773. There, the question whether an action for enforcement of a settlement (including the proffering of undertakings to the Court) was within the jurisdiction of the Federal Court was considered in the context of an application for personal costs orders against Counsel who had been involved in the conduct of proceedings in which that question of jurisdiction had arisen.

The parties had been embroiled in a copyright suit, which was settled by entry into Terms of Settlement and the giving of undertakings to the Court. In a not dissimilar fact situation to the present, there was then a claim that the terms of settlement had been breached and proceedings were brought to enforce the terms of settlement (and the Court undertakings). Allsop J held that the purported enforcement of the terms of settlement, including the undertakings to the Court, was not a separate and distinct controversy but was part of the original controversy, thereby remaining within federal jurisdiction (at [59]-[62]), applying Roberts v Gippsland Agricultural and Earth Moving Contracting Co Pty Ltd [1956] VLR 555; [1957] ALR 71; Darling Downs Investment Pty Ltd v Ellwood (1988) 18 FCR 510 and distinguishing Pallas v Finlay (1985) 61 ALR 220).

Mr Newlinds submits that the present case is distinguishable in that in Macteldir the question of jurisdiction turned on the conclusion that there the claim for breach of the settlement agreement (and of undertakings given to the Federal Court) was a continuation of the same "matter" as the case that had been settled. However, Allsop J in Macteldir, in obiter, went on to conclude that even if the purported enforcement was a separate and distinct controversy, it remained within federal jurisdiction because it involved, in part, the enforcement of rights which owed their existence to Commonwealth legislation, (namely the Copyright Act 1968 (Cth)), pursuant to s 39B(1A)(c) of the Judiciary Act 1903 (Cth) (at [63], [76]) applying LNC Industries and distinguishing Webb v Repatriation Commission (2000) 105 FCR 415; 62 ALD 117; [2000] FCA 1635). His Honour noted (at [36]) that the notice of motion seeking to enforce the settlement was not limited to a claim for breach of contract but that there was an unpleaded, but extant, claim for relief under the Copyright Act.

Allsop J dismissed as untenable, and a heresy, the broad proposition that the Federal Court did not have jurisdiction to entertain proceedings on a simple contract (for alleged breach of the terms of settlement). His Honour distinguished Pallas from Darling Downs (at [59]) on the basis that there the contract was between one of the persons to the controversy and strangers to the pleaded controversy and could be seen as extraneous and separate and distinct from the existing "matter" noting that in Darling Downs, the majority saw the enforcement of the settlement as part of the same matter. At [63] his Honour said:

Even if it be the case, contrary to my view, that the contractual enforcement was not part of, or an outgrowth or extension of, the original justiciable controversy, and was a new matter, the subject matter of the contract being enforced in this new matter was a bundle of rights which owed their existence, and the entitlement to enforce them in court, to Commonwealth legislation. So it was a matter arising under a law of the parliament: LNC Industries.

Relevantly, at [95], when summarising the position, his Honour said that:

The enforcement of a contract to settle a case (at least between the parties to the suit) concerning rights owing their existence to Commonwealth law, and hitherto sought to be vindicated in the Federal Court under the FCA Act or the Judiciary Act or another Commonwealth Act will be a matter arising under a law of the parliament: LNC Industries, if it is not (as it may well be) part of the original matter. (my emphasis)

In the present case, what was in issue before the primary judge was whether there had been a breach of contractual arrangements pursuant to which a licence had been granted to use the Patent. The Further Amended Commercial List Statement made it clear that the claim was for damages arising out of the Patent Licence Agreement and set out the contentions as to the Patent and the limited licence granted in relation thereto. By way of relief, one of the orders sought was to restrain Bramco from conduct in relation to the Patent (see [16(iii)(d) and (e)).

To use Allsop J's words, ATF was seeking to enforce a contract to settle the earlier Federal Court proceedings concerning rights owing their existence to a Commonwealth law and hitherto sought to be vindicated in the Federal Court. That raised questions not only as to whether there had been breach of a contractual obligation not to sell or manufacture a "sensor" as defined but also as whether there had been a breach of a licence agreement granted in respect of the use and application of the Patent. Bramco maintained (and his Honour accepted) that in order to determine whether there was a breach of the Settlement Agreements it was necessary to construe not simply those Agreements but also the Patent itself.

Looked at narrowly, I accept that what ATF sought to enforce in the Equity Division proceedings, by resort to the Settlement Agreements, was a contractual right not to sell or manufacture a particular item other than pursuant to a licence that had been granted in respect of the Patent (albeit an item defined in part by reference to the existing Patent). From that perspective, it might be said that the subject matter of the contract was not a right owing its existence to a federal law, but a contractual covenant the content of which was one that required reference to the Patent (at least insofar as it required assessment of whether the device in question was capable of or for use in accordance with the invention described by the Patent).

However, it is clear from the Settlement Agreements that the parties were agreeing (without admission as to the validity or otherwise of the Patent or as to whether it had been infringed by the SP Node or "Smarty" device), that Bramco would refrain from the sale or manufacture of particular products that could be used in accordance with the invention described in the Patent otherwise than in accordance with an express licence from ATF. Relief was expressly sought as to conduct in relation to the Patent.

Thus, while the contractual regime was, in one sense, one that did not turn on whether there was a valid patent or whether non-compliance would give rise to a remedy for patent infringement, the determination of whether there was a breach of the Deed required construction of the Patent itself. Moreover, the claim for damages for breach of the Patent Licence Agreement cannot easily be seen as otherwise than referable to the Patent: being the enforcement of a contractual obligation not to use or apply the Patent otherwise than as provided in accordance with the limited licence under the agreement.

It seems to me that enforcement of a settlement agreement which effects a compromise of earlier proceedings in which parties had sought to vindicate rights arising under federal law will not necessarily or in all cases have the consequence that the enforcement action is a matter arising under federal law (for example, where the settlement agreement dealt only with an obligation to pay a monetary amount it seems difficult to see why enforcement of that would necessarily involve exercise of federal jurisdiction). However, the present case involved a claim for damages for breach of a contract that gave limited rights to use and apply the Patent and a claim to restrain breaches that, on the arguments contended for in the previous Federal Court proceedings, would amount to an infringement of the Patent.

In Australian Solar Mesh Sales, the appellant had sought relief for allegedly defective and negligent performance of a contract of retainer directed towards the attainment of a right that was the creation of federal law, namely a right to patent an invention. The fact that the retainer concerned the patent in that case was sufficient for it to be held by the Full Court of the Federal Court to be a matter arising under federal law.

The centrality of the Patent to the determination of the issues in the appeal, at least on Bramco's case, is illustrated by the fact that in its submissions Bramco identifies two principal issues of construction on which its appeal rests: first, whether the term "sensor unit' has the same meaning when used in claim 1 of the Patent as when used in claims that are dependent on that principal claim (such as claim 3); and, second, whether the phrase "said load protection data" in claim 1 of the Patent requires that the "load protection data" transmitted by the "sensor unit" be the same as the "load protection data" compared by the controller in order to determine whether to provide a second signal. The position of ATF, while being that it is not necessary for the Patent to be construed at all; rather, that it is a simple question of construction of the Settlement Agreements, was that, if recourse to the Patent is required, his Honour was correct in his interpretation of the Patent.

Applying LNC and the obiter dicta in Macteldir, the claim made for damages in breach of the Patent Licence Agreement was in my opinion a claim in relation to a matter arising "under" a federal law. However, that does not necessarily mean that the matter determined by the primary judge was one in respect of which proceedings might under that Act be started in a prescribed court for the purposes of s 155(1) of the Patents Act. That requires consideration of the precise nature of the proceedings.

I have had the benefit of reading in draft the reasons of Barrett JA. I agree that, having regard to the relevant provisions of the cross-vesting legislation to which his Honour has referred, this Court must transfer the proceeding to the Full Court of the Federal Court of Australia unless the interests of justice require that this Court proceed to determine the matter. I agree that the parties should be directed to show cause why in the interests of justice this Court should proceed to determine the matter. I therefore agree with the orders proposed by his Honour.

**********

Amendments

10 December 2013 - [49] Third line - The word "ATF" has been replaced with the word "Bramco"[53] Third line - The word "ATF" has been replaced with the word "Bramco"

Amended paragraphs: [49], [53]

Decision last updated: 26 November 2013

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Citations

Bramco Electronics Pty Ltd v ATF Mining Electrics Pty Ltd [2013] NSWCA 392

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Cases Cited

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Statutory Material Cited

5

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

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Cited Sections

Medium Neutral Citation:	Bramco Electronics Pty Ltd v ATF Mining Electrics Pty Ltd [2013] NSWCA 392
Hearing dates:	20 August 2013
Decision date:	26 November 2013
Before:	Meagher JA at [1]; Barrett JA at [8]; Ward JA at [55]
Decision:	1. Direct that the parties show cause why, in the interests of justice (as referred to in s 7(7) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth)), this Court should proceed to determine the summons seeking leave to appeal and, subject to the grant of leave, the appeal. 2. Direct that the parties do, within 21 days, file and serve such written submissions as they wish on that issue. 3. Direct that, unless a party notifies the Registrar in writing within 21 days that the party requires an opportunity to make oral submissions, that issue be determined on the papers. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
Catchwords:	PROCEDURE - courts - concurrent jurisdiction of different courts - transfer of proceedings under cross-vesting legislation STATUTES - whether jurisdiction exercised by primary judge was with respect to a matter arising under the Patents Act in respect of which proceedings may under that Act be started in a prescribed court - whether Court of Appeal has jurisdiction to hear application for leave to appeal/appeal in present proceedings - operation of cross-vesting legislation
Legislation Cited:	Copyright Act 1968 (Cth) Judiciary Act 1903 (Cth) Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) Patents Act 1990 (Cth) Supreme Court Act 1970
Cases Cited:	Abebe v Commonwealth [1999] HCA 14; (1999) 197 CLR 510 AFT Mining Electrics Pty Ltd v Bramco Electronics Pty Ltd [2012] NSWSC 1126 Australian Solar Mesh Sales Pty Ltd v Anderson [2000] FCA 864; (2000) 101 FCR 1; 175 ALR 566 Darling Downs Investment Pty Ltd v Ellwood (1988) 18 FCR 510 Felton v Mulligan [1971] HCA 39; (1971) 124 CLR 367 LNC Industries Ltd v BMW (Australia) Ltd [1983] HCA 31; (1983) 151 CLR 575 Macchia v The Public Trustee [2008] WASCA 241: (2008) 251 ALR 385 Macteldir Pty Ltd v Dimovski [2005] FCA 1528; (2005) 226 ALR 773 Masterwood Pty Ltd v Far North Queensland Electricity Board [1999] 1 Qd R 345 National Employers Mutual General Insurance Association Ltd v Manufacturers Mutual Insurance Ltd (1988) 17 NSWLR 223 NEC Information Systems Australia Pty Ltd v Lockhart (1991) 22 NSWLR 518 NEC Information Systems Australia Pty Ltd v Lockhart (1992) 36 FCR 258 Northern Territory v Collins [2008] HCA 49; (2008) 235 CLR 619 Pallas v Finlay (1985) 61 ALR 220 R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett [1945] HCA 50; (1945) 70 CLR 141 Roberts v Gippsland Agricultural and Earth Moving Contracting Co Pty Ltd [1956] VLR 555; [1957] ALR 71 Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46; [2013] 3 WLR 299 Webb v Repatriation Commission (2000) 105 FCR 415; 62 ALD 117; [2000] FCA 1635
Category:	Principal judgment
Parties:	Bramco Electronics Pty Ltd (Applicant) ATF Mining Electrics Pty Ltd (Respondent)
Representation:	Counsel: Ms J Baird SC (Applicant) C R C Newlinds SC with R D Glasson (Respondent) Solicitors: K&L Gates (Applicant) Moray & Agnew Lawyers (Respondent)
File Number(s):	CA 12/354542
Decision under appeal	Jurisdiction: 9111 Citation: ATF Mining Electrics Pty Ltd v Bramco Electronics Pty Ltd [2012] NSWSC 1126 Date of Decision: 2012-10-19 00:00:00 Before: Sackar J File Number(s): SC 12/059118