Clemco International Sales Company v Bolrette Pty Ltd

Re: CLEMCO INTERNATIONAL SALES COMPANY
And: BOLRETTE PTY. LIMITED trading as AUTOBLAST; LESLIE ROY MOSS and KELVIN E.
LORD
No. G 457 of 1984
Injunctions
(1985) ATPR para 40 - 585
(1985) AIPC para 90 - 230

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Neaves J.

CATCHWORDS

Injunctions - interlocutory - Proceedings pending in Federal Court of Australia for injunctive relief and damages for alleged misleading and deceptive conduct in breach of s.52 of Trade Practices Act 1974 (Cth) and under s.121 of Patents Act 1952 (Cth) - Undertakings by respondent not to make representations or threats - Petty patent subsequently granted to respondent - Applicant adds claim for revocation - Proceedings for infringement of petty patent pending in Supreme Court of Western Australia at suit of respondent - Claim for interlocutory relief therein - Whether Federal Court should restrain respondent from proceeding with claim for interlocutory relief in State Court.

HEARING

CANBERRA
#DATE 3:7:1985

ORDER

1. The injunction granted on 27 June 1985 restraining the first respondent from proceeding further (otherwise than by way of an application for an adjournment) upon the chamber summons filed on its behalf in the proceedings No.1680 of 1985 pending in the Supreme Court of Western Australia in which the first respondent is plaintiff and Godfrey Howden Pty. Limited and Horrocks Nominees Pty. Limited are defendants be dissolved.

2. The applicant's motion notice of which was filed on 27 June 1985 be dismissed.

3. The applicant pay the first respondent's costs of the motion.

Note: Settlement and entry of orders is dealt with in

Order 36 of the Federal Court Rules.

JUDGE1

This is a motion on behalf of Clemco International Sales Company ("the applicant") for an order restraining Bolrette Pty. Limited ("the first respondent") until the hearing and determination by this Court of certain interlocutory proceedings to which it will be necessary to refer from further proceeding upon a chamber summons for interlocutory relief filed in the Supreme Court of Western Australia on 19 June 1985. The notice of motion as filed claimed wider relief in terms both of subject matter and duration but the applicant did not persist in that claim.

The chamber summons was filed in proceedings commenced on 18 June 1985 in the Supreme Court of Western Australia between the first respondent as plaintiff and Godfrey Howden Pty. Limited and Horrocks Nominees Pty. Limited as defendants. In those proceedings the first respondent, which carries on business as a sandblasting and heavy haulage contractor, seeks injunctive relief and damages for the alleged infringement by the two companies named as defendants of a petty patent, being Letters Patent No.540591, for an invention entitled "Abrasive Blasting Nozzle". Godfrey Howden Pty. Limited is alleged to carry on business as a supplier of industrial sandblasting equipment. Horrocks Nominees Pty. Limited is said to be the proprietor of Temco Distributors which carries on business as a distributor of industrial sandblasting equipment. It may be accepted for the purposes of the present proceedings that both companies are sales agents of the applicant and that the infringements alleged consist in the sale on 24 May 1985 and 14 June 1985 respectively of abrasive blasting nozzles manufactured and supplied to those companies by the applicant. The Letters Patent alleged to have been infringed were sealed on 24 January 1985 for a term of twelve months commencing on that date and are the same Letters Patent as are the subject of a claim for revocation pending in this Court.
The chamber summons seeking interlocutory injunctive relief in the proceedings in the Supreme Court of Western Australia was returnable on 21 June 1985. When the present motion came before me on 27 June 1985 I was informed that the hearing of the chamber summons had been adjourned until 28 June 1985.
At the conclusion of the hearing of the motion I reserved judgment in order that I might give further consideration to the arguments presented on behalf of the parties. In the absence of an undertaking by the first respondent that it would not seek to proceed with the claim for interlocutory relief in the Supreme Court of Western Australia pending the delivery of judgment on the applicant's motion, I granted an injunction restraining the first respondent until further order (in effect, until judgment was delivered) from further proceeding (otherwise than by way of an application for an adjournment) upon the chamber summons. I also directed that notice of the injunction be given by the Registrar by telephone to the solicitor in Western Australia for the first respondent.
The proceedings in this Court were commenced on 21 December 1984. By the application filed on that day the applicant claims, in respect of conduct alleged to be misleading or deceptive and therefore in breach of s.52 of the Trade Practices Act 1974, injunctive relief and damages against the first respondent and two individuals, Leslie Roy Moss (the second respondent), a director of the first respondent, and Kelvin E. Lord (the third respondent), a patent attorney acting on the first respondent's behalf. Relief is also sought against the first respondent based on s.121 of the Patents Act 1952.
The statement of claim filed on behalf of the applicant alleges that the applicant's business includes the manufacture and sale in Australia of high pressure water abrasive blast equipment for the construction and building industry and, in particular, air compressors, abrasive and water containers, hosing and a high pressure water/abrasive mixer and delivery nozzle. Paragraph 8, relating to the claim under the Trade Practices Act 1974, is in the following terms -

"8. Since about August 1984 the First Respondent has represented to customers and sales agents of the Applicant that:

(a) the First Respondent is entitled to protection under the Patents Act 1952 ("the Act") in respect of a mixing unit;

(b) the sale by the Applicant and by its sales agents of the Applicant's Mixing Unit constitutes an infringement of the First Respondent's rights under the Act;

(c) the First Respondent is the proprietor of a valid patent application numbered 25107/84 in respect of a mixer unit;

(d) the sale of the Applicant's Mixer Unit constitutes a contravention of the First Respondent's rights under such patent application;

(e) the First Respondent is entitled to a written undertaking;

(f) the First Respondent is entitled to a written undertaking from the Applicant's sales agents that they would not sell the Applicant's Mixing Unit;

(g) the First Respondent is entitled to a written undertaking from the Applicant's customers that they would not use the Applicant's Mixing Units."

It would appear that sub-para. (e) was included in error or is incomplete. Each of the representations is alleged to have been false when made.

Paragraph 22 of the statement of claim, relating to the claim under s.121 of the Patents Act 1952, reads -

"22. Further, and in the alternative, the First Respondent has by letters sent on its behalf by the Third Respondent to customers and sales agents of the Applicant threatened such customers and sales agents with an action or proceedings for infringement of a patent or some other like proceeding."

It is alleged that such threats were unjustifiable and caused the applicant loss and damage.

On 3 January 1985, on the hearing of an application by the applicant for interlocutory relief, the first respondent gave certain undertakings to the Court. Those undertakings included undertakings that, until further order, the first respondent, its servants and agents

"will not represent in trade or commerce that:

(a) it is entitled to protection under the Patents Act 1952 in respect of a mixing unit;

(b) the sale by the Applicant or by its sales agents of the Applicant's Mixing Unit constitutes an infringement of the First Respondent's rights under such Act;

(c) the First Respondent is the proprietor of a valid patent application numbered 25107/84 in respect of a mixing unit;

(d) the sale of the Applicant's Mixing Unit constitutes a contravention of the First Respondent's rights under such patent application;

(e) the First Respondent is entitled to a written undertaking from the Applicant's sales agents that they would not sell the Applicant's Mixing Unit;

(f) the First Respondent is entitled to a written undertaking from the Applicant's customers that they would not use the Applicant's Mixing Unit."

The first respondent also undertook that, until further order, it, its servants and agents

"will not threaten any sales agent or customer of the Applicant whether by means of circular, advertisement or otherwise with an action or proceeding for infringement of a patent claimed to be held by the First Respondent in respect of mixing units or with any other like proceeding."

At the time the undertakings were given the first respondent had pending in the Patent Office application No.25107/84 for a standard patent in respect of an invention entitled "Abrasive Blasting Apparatus" and the application for the petty patent to which reference has already been made. The application for a standard patent is still pending. The petty patent (Letters Patent No.540591) was, as I have said, sealed on 24 January 1985.
On that day, 24 January 1985, the applicant filed in this Court an amended application and an amended statement of claim. The effect of those documents was to add to the relief previously sought a claim that Letters Patent No.540591 be revoked on a number of grounds, including want of subject matter, lack of novelty and obviousness.
The respondents have filed a defence to the amended statement of claim. The defence either denies or does not admit virtually all the allegations contained in the amended statement of claim. Each of the respondents also disputes the jurisdiction of this Court to entertain any part of the applicant's claim as amended and, by notice of motion dated 17 April 1985, seeks orders striking out the amended application or, alternatively, staying that application permanently. By the same notice of motion the first respondent seeks to be released wholly or in part from the undertakings given to the Court on 3 January 1985. That application and the application to strike out the amended application have been adjourned for hearing on 8 and 9 August 1985.
There is also pending before this Court a motion by the applicant that the first respondent be punished for contempt in committing breaches of the undertakings given to the Court on 3 January 1985. The alleged breaches consist in the commencement of the proceedings in the Supreme Court of Western Australia to which reference has already been made and the pursuit therein of the claim for interlocutory relief. The contempt proceedings have not yet been called on for hearing and, in any event, may be adjourned until the hearing of the substantive application: see Australian Consolidated Press Limited v. Morgan (1965) 112 CLR 483 at pp 489-490.
The applicant seeks to support the present motion on two bases. First, it submits that, when issues are properly raised in proceedings in this Court, the Court should take the necessary steps to ensure that, pending its determination of those issues, a party to the proceedings is restrained from continuing proceedings in another court in which the same issues will arise. Secondly, the applicant submits that the first respondent's conduct amounts, prima facie, to a failure to comply with certain of the undertakings given to this Court on 3 January 1985 and hence a contempt and the Court should intervene to restrain a continuation of that conduct.
The first of these bases requires a consideration of the issues arising on the pleadings in the application pending in this Court and those likely to arise in the proceedings pending in the Supreme Court of Western Australia. I say likely to arise because defences have not yet been filed in those proceedings. It may, however, confidently be assumed that in those proceedings the validity of Letters Patent No.540591 will be challenged on similar grounds to those taken in the amended statement of claim filed in this Court. The result is that, although the issues in the two sets of proceedings will be quite different, both proceedings will, subject to the question which is raised as to the jurisdiction of this Court to entertain the claim, involve the validity of those Letters Patent.
In relation to the claim under the Trade Practices Act 1974 pending in this Court, it will be for the applicant to establish that the representations alleged were made and that they were false. It is, I think, common ground that the representations relied upon by the applicant were made by reference to the first respondent's application No.25107/84 for a standard patent. No doubt one of the questions which will be raised is whether that application could give rise to a valid patent. Under this part of the applicant's claim, however, no issue directly arises in relation to the petty patent No.540591 or the application for it. Whether it will do so indirectly I am unable to say. The specification lodged in support of the application for the standard patent and that upon which the petty patent was granted are not before me and no argument was presented on the question whether a decision as to the validity of the standard patent applied for would be decisive of, or relevant to, the question whether the petty patent is valid.
The claim under s.121 of the Patents Act 1952 pending in this Court is a claim which would not, if the subject of independent proceedings, be within the Court's jurisdiction. If it is within the Court's jurisdiction it is because of the operation of s.32 of the Federal Court of Australia Act 1976 as a matter associated with the matter arising under the Trade Practices Act 1974. If the claim is within the Court's jurisdiction it will also raise the issue whether the application No.25107/84 for a standard patent could give rise to a valid patent.
The jurisdiction of the Court to entertain the claim that petty patent No.540591 is invalid and should be revoked must arise, if it arises at all, under s.32 of the Federal Court of Australia Act 1976. A number of grounds has been foreshadowed by the first respondent in support of the proposition that this Court lacks jurisdiction to entertain that claim. Suffice it to say for present purposes that there are very serious questions to be tried on the jurisdictional issue. It is by no means clear that that issue will be resolved in favour of jurisdiction. It is also likely that one or other of the parties will not be content with a decision thereon by a single judge of the Court. Substantial delay may, therefore, occur before the question is resolved finally.
The infringement action pending in the Supreme Court of Western Australia is a proceeding which this Court would have no jurisdiction to try, it not being a "prescribed court" as defined in s.6 of the Patents Act 1952 and there being no proceeding pending in this Court with which the claim could properly be said to be associated so as to bring it within s.32 of the Federal Court of Australia Act 1976. The questions which arise, or are likely to arise, in those proceedings are whether petty patent No.540591 is valid and, if so, whether the abrasive blasting nozzles manufactured by the applicant and supplied to the defendant companies for sale and sold by them constitute an infringement.
Apart from directing the Court's attention to the different issues that arise, the first respondent correctly points to the fact that there is no identity of parties in the two sets of proceedings. I do not, however, regard that as of any real significance in considering the issue that now falls for decision.
It is apparent from the examination of the proceedings which I have made that, if all the claims are to be pursued, there is no single court that can determine all of them. This Court cannot determine the infringement proceedings and the Supreme Court of Western Australia has no jurisdiction to entertain the applicant's claim under the Trade Practices Act 1974.
The first respondent, being the registered proprietor of petty patent No.540591, is entitled, subject to the patent being valid, to enforce the rights to which it is thereby entitled and, as part of the process of enforcement, to seek interlocutory relief in a court of competent jurisdiction. The applicant submits that the first respondent should be restrained from seeking such relief until this Court has determined whether it has jurisdiction to entertain the applicant's claim that the petty patent is invalid and should be revoked. It may seem somewhat paradoxical that the applicant should, while recognising that there is a substantial issue to be tried as to this Court's jurisdiction to determine the validity of the patent, seek at the same time to restrain the first respondent from proceeding further in a court which has undoubted jurisdiction to decide that question. It is even more surprising when one appreciates that the validity of the patent is at the core of the dispute between the parties and the desirability of disposing of that issue promptly is manifest. It is said that this Court, if it has jurisdiction, may be in a position to determine that issue more expeditiously than the Supreme Court of Western Australia. That is a matter upon which I am not in a position to form any opinion but, if it be correct even allowing for any delay in resolving finally the jurisdictional issue, that circumstance is not of itself sufficient to warrant this Court granting the relief which the applicant seeks particularly as there are no circumstances in which this Court, having decided in favour of jurisdiction and validity, could proceed to resolve what would then remain as an issue whether the abrasive blasting nozzles of the applicant's manufacture constitute an infringement.
It is to be noted that in the present application the applicant does not go so far as to seek to restrain the first respondent from proceeding with its substantive action in the Supreme Court of Western Australia. In the event that this Court determines that it has jurisdiction to entertain the issue of validity of the petty patent, the question may then arise whether that issue should be tried in this Court or in the Supreme Court of Western Australia. But, even if the view were taken that in such circumstances the issue should be tried in this Court (a matter upon which I express no opinion), it does not follow, so it seems to me, that the first respondent should, by reason of that very circumstance, be restrained from seeking to have the applicant's sales agents enjoined pending the determination of the substantive question from selling what the first respondent alleges are infringing articles. Whether it is entitled to such interlocutory relief is, of course, quite another matter. The challenge to the validity of the petty patent will itself be a relevant, though perhaps not a decisive, factor to be taken into account on the hearing of any application for such relief: see Appleton Papers Inc. v. Tomasetti Paper Pty. Ltd. (1983) 50 ALR 428 noting, however, that that decision was concerned with a standard patent, not a petty patent, and that the procedures for the grant of the latter are considerably different from those relating to the grant of a standard patent.

The applicant adverted to a number of considerations in support of the relief sought. They may be summarised as follows -

(a) The parties have been litigating in this Court since 24 January 1985 on the basis that the question of the validity of the petty patent was to be determined in this Court if it had jurisdiction to do so;

(b) An application made by the respondents on 5 February 1985 to change the venue of the proceedings to Western Australia has not been pursued;

(c) There is certainty about the litigation in this Court in the sense that the pleadings are closed and dates have been assigned for the hearing of certain interlocutory proceedings therein whereas the course of the proceedings in the Supreme Court of Western Australia is at this stage uncertain;

(d) The issue of validity of the petty patent was first raised in this Court and it should be dealt with here even though the question of jurisdiction must be resolved as a preliminary matter;

(e) The Court should not give weight to the circumstance that the Supreme Court of Western Australia has undoubted jurisdiction to entertain the infringement proceedings;

(f) To allow the matter to proceed in the Supreme Court of Western Australia could not be seen as avoiding a multiplicity of proceedings and could result in inconsistent judgments.

The first respondent disputed much of what was put to the Court by the applicant in relation to the above matters and I find myself in substantial agreement with much of what was said on its behalf. In particular, I accept the first respondent's assertion that it has at no stage accepted that the question of the validity of the petty patent should be determined in this Court. I also accept that the application for a change of venue has been adjourned and not abandoned though I must say that I am unable to see how its abandonment would advance the applicant's case. I have difficulty in accepting that there is any greater certainty, in the sense in which that expression was used, about the litigation in this Court having regard to the matters to which I have referred earlier in this judgment. Again, the circumstance that the Supreme Court of Western Australia has undoubted jurisdiction to entertain the infringement proceedings cannot, I think, be disregarded.
Bearing in mind that it is only the interlocutory proceedings that are sought to be restrained, one may ask what right of the applicant will be irreparably harmed if the first respondent is permitted to proceed further with those proceedings. The crux of the matter is whether the issue of the validity of the petty patent is to be decided in a situation in which the applicant's sales agents are free to continue to market the applicant's product or in a situation where they are restrained from doing so. The resolution of that question does not depend in any sense on the identity of the court which may ultimately try the substantive issue of validity. Further, the question whether the applicant's sales agents should be so enjoined cannot be determined by this Court but only by the Supreme Court of Western Australia.
Having given careful consideration to all of the matters put to me on behalf of the applicant, I am not satisfied that the first of the two bases upon which the applicant relies provides, in the circumstances of this case, any sound foundation for the granting of the injunction sought.
I turn then to the second basis upon which the applicant relies.
I was, at first, attracted by the argument that there was a prima facie case that the first respondent, by instituting the infringement proceedings in the Supreme Court of Western Australia, had breached the undertaking that it would not threaten any sales agent of the applicant with an action for infringement of a patent claimed to be held by the first respondent in respect of mixing units. However, upon further consideration of that undertaking read as it must be against the background of s.121 of the Patents Act 1952 upon which it was obviously based, and of judicial pronouncements upon that section and the corresponding provision in the United Kingdom legislation, I am far from satisfied that the applicant has established a prima facie case of breach of that undertaking.
The applicant also submitted that there was a prima facie case that the respondent had breached the undertakings that it would not represent in trade or commerce that (a) it was entitled to protection under the Patents Act 1952 in respect of a mixing unit and (b) the sale by the applicant's sales agents of the applicant's mixing unit constitutes an infringement of the first respondent's rights under that Act. Those undertakings were given in the context of the assertions that had been made by the first respondent in reliance upon its application No.25107/84 for a standard patent. It is not clear on the material before me whether, at the time the representations relied upon by the applicant were made by the first respondent, application for the petty patent had been made. However, it seems to be common ground that that application, if it was then pending, was not specifically referred to in any of the representations relied upon. In any event, the sealing of the petty patent on 24 January 1985 was a new factor and, although the language in which the undertakings are expressed may be said to be wide enough to encompass an assertion based on the application for that patent or on that patent itself, it will be a question for consideration in the contempt proceedings, should they be pursued, whether the undertakings should have been so understood.
Whether, in the light of these considerations, it would be prudent for the first respondent, before proceeding further with the infringement proceedings, to seek a release from the undertakings it gave on 3 January 1985 in so far as they may be thought to limit its freedom of action in pursuing that claim is a matter for the first respondent and its legal advisers. But the circumstances are not such as, in my view, to justify the conclusion that the applicant has established a sufficiently clear or strong case to warrant the granting of the injunction sought. In any event, unless a very clear case of breach of the undertakings were shown, the balance of convenience, in my view, militates against the granting of the injunction sought.
For the reasons given above, the injunction granted on 27 June 1985 as an interim measure pending judgment being given on the applicant's motion should be dissolved. That motion should be dismissed. The applicant should pay the first respondent's costs of the motion.

[1985] FCA 286

03 JULY 1985