Dart Industries Inc v The Decor Corporation Pty Ltd

[1992] HCATrans 350

..

• "I

• ~

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne No Ml5 of 1992

B e t w e e n -

DART INDUSTRIES INC

Appellant

and

THE DECOR CORPORATION PTY LTD

and RIAN TOOLING INDUSTRIES PTY

LTD

Respondents

MASON CJ
DEANE J

DAWSON J

TOOHEY J

McHUGH J

Dart(2) 79 4/12/92

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 4 DECEMBER 1992, AT 10.17 AM

(Continued from 3/12/92)

Copyright in the High Court of Australia

MASON CJ: Yes, Mr Ellicott.

MR ELLICOTT:  Your Honours, yesterday I gave Your Honours a

reference to schedule 1 at page 44 of volume 1 and

Your Honours will remember that is a schedule that

sets out the overheads and a list of them. It has

got some figures on it that might lead Your Honours

to think those are the exact figures. Just to

disabuse Your Honours of those, the figures that
give a better appreciation of the effect of

allowing or disallowing these overheads are found

in the second volume at page 266. These were

figures that were put before the Full Fe~eral Court

when we sought leave to appeal as we had to,

because it was an interlocutory matter. And,

Your Honours will see that it is the difference

between 0.35 and 1.42, which are the figures I
broadly gave to Your Honours yesterday. Then there

is added some interest and it is the difference

between 0.80 and 3.32, but the interest, of course,

is a separate factor.

On page 267 there are figures for retailers,

for whom I do not act at the moment, and at

page 268 are figures for the manufacturers for whom

we do act. And on page 269 there is an overview of

the effect; it is a difference, if you take it

right across the board, and Your Honours will

appreciate these are broad figures and they are

based on calculations that have not been agreed by

the appellants, but based on our assessments of

allowing or not allowing the overheads, that makes

a difference right through of a figure of 1.44 and

7.85.

DEANE J: Mr Ellicott, I do not follow the figures at 266, I

am sorry.

MR ELLICOTT: Well, Your Honour will see that if the

overheads are included, the costs would be 2.97 on

the left-hand column; if they are excluded, except those that are directly attributable, it is 1.9.

DEANE J: But what is the 3.32 in the total?

MR ELLICOTT: Down the bottom? That total is - - -

DEANE J: It is either a mistake or it is incomprehensible.

McHUGH J: It is a mistake. It should be 2.51, should it

not?

MR ELLICOTT:  I think it should be, yes. And that will make

that figure 7.00 on 269. You are quite right,

Your Honour, I am sorry about that. But the line of figures that are significant are the second line,

Dart(2) 80 4/12/92

the differences between the costs, included or not

included, there is $1 million included and the

purpose of my referring to this, of course, is only

to give Your Honours the idea of the magnitude of
the amounts that are involved in this.

Your Honours, we did hand up, at the end of the Court sitting yesterday, a document that set out accountancy terms. I just wanted quickly to

refer Your Honours to two of the definitions. One

is 2(d) in the document, Respondents' Accountancy

Terms, at the foot of the first page:

"General Overheads": "those general charges

or expenses, collectively, in any business

which cannot be charged up as belonging

exclusively to any particular part of the work
or product, such as rent, taxes, insurance,

lighting, heating, accounting, and other

office expenses."

Your Honours will find that there is some support for that definition in those American cases.

The other definition that I wanted to refer to

is, Opportunity cost, at the foot of page 2. This

is according to Horngren:

"the maximum available contribution to profit

that is foregone (rejected) by using limited

resources for a particular purpose."

or:

It is the "value of the alternatives foregone

by adopting a particular strategy or employing

resources in a specific manner ... As used in

economics, the opportunity cost of any

designated alternative is the greatest net

benefit lost by taking an alternative."

Your Honours will recall that in Hungerfords v

Walker, 173 CLR, Your Honour the Chief Justice and

Mr Justice Wilson, in dealing with the question of

interest, at the foot of page 143, used the notion

of opportunity cost in order to support the view

that - I think it was compound interest.

Your Honours said:

The requirement of foreseeability is no

obstacle to the award of damages, calculated
by reference to the appropriate interest

rates, for loss of the use of money.

Opportunity cost, more so than incurred

expense, is a plainly foreseeable loss

because, according to common understanding, it

represents the market price of obtaining

Dart(2) 81 4/12/92

money. But, even in the case of incurred

expense, it is at least strongly arguable that

a plaintiff's loss or damage represented by

this expense is not too remote on the score of

foreseeability. In truth, it is an expense

which represents loss or damage flowing

naturally and directly from the defendant's

wrongful act or omission, particularly when

that act or omission results in the

withholding of money from a plaintiff or

causes the plaintiff to pay away money.

They are used in a different context but it is

the same notion, in our submission, of opportunity

costs. That is to say, an opportunity foregone, an

opportunity rejected, or an opportunity not had, in

the case of interest, because the money is not

there to take a step in relation to the use of the

money that they should otherwise have had,

according to simple interest rates.

Another definition that I wanted to refer

Your Honours to in that document was full costing.

Helmkamp says:

" ... we discussed special order pricing in

which the selling price may be lower than

normal. We justified such a policy for short- term decisions only because of the incremental profits that may be involved. In the long

run, however, total cost provides the floor

below which prices cannot fall for a firm to

be profitable.	As such all costs are relevant
for long-term pricing decisions.	A total-cost

pricing approach includes both product and
period costs. This means that all

manufacturing, selling and administrative

costs must be considered (or whatever

functional costs are incurred by a particular

business). It also means that both variable

and fixed costs must be covered by selling

prices. "Full costing is often the basis for

product pricing. While contribution margin

(and variable cost) is useful for one-time

tactical decisions and for setting short-term

prices, a normal, long-term price must be high

enough to cover fixed costs as well as provide

a profit margin."

They are not legal principles and they are not

trying to use them that way, but they are

accountancy terms and they would accord, just as

Your Honours said in Hungerfords v Walker, they

would accord, we would submit, with ordinary

understanding of costing of products. And if full

Dart(2) 82 4/12/92

costing is the basis, as we would ask the Court to

assume in relation to products in a business, then

one can assume that the infringer, if using the

full costing method as it would prudently do, is

going to set a price which will include a return of

those particular costs and it will include a share

of overhead. So that the price, or the returns

that are the gross returns, are set on the basis of

recovering such costs.

In fairness, the net profit should be worked

out after taking into account such costs. And if

that is the normal way of doing business, then

items such as overheads, which are attributable to

the product, should be deductable in relation to an

account of profits.

In this particular case there is evidence that

our client, Decor, does undertake an assessment of

profitability, that is product group profitability,

and I will not take Your Honours to the evidence

but Your Honours will find it in the appeal book at

pages 12 to 13, but that indicates that they do it

on a full costing basis and that these press button

canisters have to line up with the others and take

their share of all the costs across the board.

I am not suggesting that that is binding in an

account of profits; what I am saying is that if

that is how people do business, and it is common

sense that they would do it, then it is proper that

if full costing is used then those costs which can

be, by accountancy methods, attributed to the
particular product, then those costs should be

allowed in an account of profits.

If in the costs there is, to take Your Honour

Justice Deane's example, an item which represents

past losses for instance to recoup them and the

company is setting a margin so as to recoup them,

obviously if they are not attributable to the

product then in an account of profits they would

not be deductible. So I am not trying to force it

into a proposition that the court or the master or

the registrar has to take into account all the
costs, but because business is done this way, on
the basis of full costing, that is the appropriate
way in which an account should be taken so as to

include referable overheads.

Your Honours, just some quick references - and

again, I do not think Your Honours will need me to

take Your Honours to them. First of all, I have

said several times that the courts have used

accountancy principles to determine profits.

Your Honours will find a decision in Odeon, it is

in the Court of Appeal, and there is some healthy

Dart(2) 83 4/12/92

dicta there from Lord Justice Buckley as he then

was, it is No 11 in volume 2, I do not propose to

take Your Honours to it. It is (1973) 1 Ch 288 at

293 and 294 and 299. That is Lord Justice Salmon

and Lord Justice Buckley.

And there is a decision of

Mr Justice Lockhart, QBE Insurance Group, which is

No 17 in volume 1 under Australian authorities, but

its reference is (1992) 10 ACLC 1490 and the page

is 1506. What Mr Justice Lockhart does there is

cite a number of authorities for the proposition

that the courts always look to accountants and

accountancy for the purposes of defining the

profits of an organization.

In Sheldon there is a discussion in the United

States Supreme Court of the purpose of an account

and may I quickly take Your Honours to that. It is

in volume 1 and it is Bl2, at pages 399 and 400.

MASON CJ: Is that the right page reference?

TOOHEY J:  I think it is that problem we had yesterday of 11

and 12.

MASON CJ: It is No 11.

MR ELLICOTT:  Yes, it is the Supreme Court decision, and it

is at page 399, the right-hand column:

Petitioners stress the provision for recovery

of "all" the profits, but this is plainly

qualified by the words "which the infringer

shall have made from such infringement". This

provision in purpose is cognate to that for

the recovery of "such damages as the copyright

proprietor may have suffered due to the

infringement". The purpose is thus to provide

just compensation - - -

MASON CJ:  Mr Ellicott, I am still having difficulty in

finding 399. Under tab 11 we have Sheldon but

Circuit Court, it starts at page 45. Under tab 12

we have Sheldon again, it seems to be Supreme Court

but the page is 681, 309 us.

McHUGH J: That is the Supreme Court.

MR ELLICOTT:  I have been working on an old copy,

Your Honour. At 684, if Your Honours will see

those figures through the columns, 399 and 400,

they are the United States Reports numbers.	I am
reading at the top of the first column at 684:

Petitioners stress the provision for recovery

of "all" the profits, but this is plainly

Dart(2) 84 4/12/92

qualified by the words "which the infringer

shall have made from such infringement". This

provision in purpose is cognate to that for

the recovery of "such damages as the copyright

proprietor may have suffered due to the

infringement". The purpose is thus to provide

just compensation for the wrong, not to impose

a penalty by giving to the copyright

proprietor profits which are not attributable

to the infringement.

Prior to the Copyright Act of 1909, there

had been no statutory provision for the

recovery of profits, but that recovery had

been allowed in equity both in copyright and

patent cases as appropriate equitable relief

incident to a decree for an injunction. That

relief had been given in accordance with the

principles governing equity jurisdiction, not

to inflict punishment but to prevent an unjust

enrichment by allowing injured complainants to claim "that which, ex aquo et bono, is theirs,

and nothing beyond this". Statutory provision

for the recovery of profits in patent cases

was enacted in 1870. The principle which was

applied both prior to this statute and later

was thus stated in the leading case of

Tilghman v Proctor:	"The infringer is liable
for actual, not for possible, gains.	The

profits, therefore, which he must account for,

are not those which he might reasonably have

made, but those which he did make, by the use

of the plaintiff's invention; or, in other

words, the fruits of the advantage which he

derived from the use of that invention over

what he would have had in using other means

then open to the public and adequate to enable

him to obtain an equally beneficial result.

If there was no such advantage in his use of

the plaintiff's invention, there can be no

decree for profits, and the plaintiff's only

remedy is by an action at law for damages". In passing the Copyright Act, the

apparent intention of Congress was to

assimilate the remedy with respect to the

recovery of profits to that already recognized

in patent cases.

That, we would submit, is an appropriate and

salutary principle. It is based in equity. It is

not based in statute. It comes out of the

equitable consideration by the courts in the United

States and it emphasizes that this is not a

one-sided matter and it is on the basis of this

that apart from those cases like Carter to which I

referred yesterday the courts in the United States,

Dart(2) 85 4/12/92

as the main thrust of those authorities is to tend

in favour strongly of the view that punishment is

not a relevant circumstance to bring to account,

except in very severe cases, and certainly not a

case where, as here, although you do not have an

innocent infringer, you do not have a deliberate

infringer.

We would submit that for the purposes of Australian law, that distinction in the United

States law should not be adopted. It is not an

aberration but, with all these circuit courts,

obviously some of them have gone off on a different

tack.

Your Honours, could I just summarize, but in

the course of it refer to some further cases, why we attack the incremental approach. First of all,
we say it is a short-term costing tool used to see
whether, if a business introduces a new product,

the overall result will be an increase in profits.

It is a short-term tool, not a long-term tool.

Again, it offends the general accounting

principle that all products of a business must bear

their share of overheads and other costs. As

pointed out in Tremaine v Hitchcock a hundred years

ago, it generates the problem of undistributed

overheads, because if you do not do it with one

product, you do not do it with others if you are

talking about the cost of producing a product.

This notion of incremental cost has been

rejected in patent extension cases. May I again

quickly take Your Honours to some short passages in

the cases in New South Wales; first of all, to a

High Court decision which is in volume 1, No 2, re

Robinson's Patent, 25 CLR 133. This was the first

time the High Court had to consider in depth patent

extensions. At the foot of page 132, dealing with

accounts, Mr Justice Isaacs, as he then was, says

in the last few lines: 

It was elicited in cross-examination of the

petitioner by the caveator's counsel that he

has embarked about 15,000 pounds capital in

his business.

Then His Honour says this:

The forms and precedents to which I have

referred show that rent paid, interest on

capital and taxes are - in accordance with

common sense - recognized allowances for

expenditure.

Dart(2) 86 4/12/92

In a case of Du Pont, that is not developed to any significant degree, I can tell Your Honours. In Du

Pont, which is No 16, at page 307 - this was a

patent extension case - Mr Justice Hodgson rejected incremental. At line 29 he says:

The third general class of costs as to

which there was some contest concerned general

overheads of the plaintiff. Mr Banks gave

evidence to the effect that there should be

charged against the income from this patent

only amounts by which it could be shown that

the PET project increased the general

overheads of the plaintiff's business.

So it is an incremental approach.

I reject that view. If the same view was

applied to every project undertaken by the

plaintiff, it may be that none of the general

overheads of the business could be charged

against any project at all.

That is Tremaine v Hitchcock.

It seems to me appropriate that this project

should carry an appropriate proportion of the

general overheads of the business; and as I

understand it, once this general approach is

accepted, no attack is made on the actual

apportionment adopted in this case.

In another patent case, an extension case, of

Re Pfizer Inc, which is in volume 1 at No 13 in

that volume, at pages 570 and 571 - right at the

bottom of page 570:

Next, I do accept that the expenditure

which has been attributed and deducted from

the gross receipts in Australia to arrive at a net figure has been calculated on a reasonable

basis. In particular, I accept that it is

appropriate to attribute as part of such

expenditure a proportion of the plaintiff's expenditure on non-productive research. In

that regard again I respectfully adopt what

Justice Kearney said in Ciba-Geigy. I accept

also that it is appropriate to attribute to

and deduct from the remuneration in Australia

a proportion of the overall expenditure on the

product and of the appropriate amount of

non-productive research, on the basis of

Australia's approximate share -

et cetera. So, there again we have an item which

one might think is remote from the actual

production of the product, but the practice in

Dart(2) 87 4/12/92

these cases is to reject the incremental approach,

allow overheads and allow such items as

non-productive research.

Your Honours, the incremental costing approach

has been rejected in relation to - in determining the cost of trading stock, and there is a case of

Philip Morris v Federal Commissioner of Taxation.

It is No 12 in volume 1, I have not proposed to

take Your Honours to it, but the headnote would say

just that. There is quite a discussion on the

subject of absorption costs and direct cost, in

other words, incremental costs as it is dealt with

there, but it is No 12, 79 ATC 4,352.

The other thing that we have said about this,

and as I indicate, I am summarizing our attack on

the incremental approach. It unjustly enriches the

patentee at the expense of the infringer. In

effect it gives it profits made on other products,

we would say in effect, because those other

products did not bear the overheads to that degree.

This product did. Again, the incremental approach

would not allow for any overheads, even if

referable to the production of the product unless
there was an increase demonstrated. That seems to

be embodied in my friend's submission, so if the

catalogue cost the same, it does not matter that it

has got the press button product in it, inserted in

the first year, you cannot take a proportion of
that unless you can show an increase in the cost of
the catalogue, or an increase in the cost of the

electricity, or an increase in the cost of the -

and then if you do, you have got to show that it is

attributable to these products. If it is

electricity, it is easier to do with a catalogue,

but that is an unjust notion, we would submit, it

does not square with common sense.

Again the concept is impossible to apply in an

ongoing business over a period, as here, of eight

years. How does one measure it in later years for

instance? In year 1 overheads have to increase for

product A which is the infringing product. Changes

are made in years 2 and 3, new products coming in, old products going out but product A continues on.

How do you calculate the incremental cost of

product A in year 4 and 5. Your Honours, an

analysis of that shows the difficulty of applying it sensibly in relation to an account of profits.

Again, it offends the notion of overheads which, by definition, are not directly attributable

to a product. How do you show it, if you cannot

prove, for instance, that the electricity is - although you know that it was used in order to

assist the warehousing of the particular product,

Dart(2) 88 4/12/92

you cannot prove that so many watts of electricity

have been used for that particular product, but yet

the notion of direct attribution which is the

opposite to overhead, because overhead is not

directly attributable, even though you can

demonstrate that it was used for that purpose.

Incremental costing is offensive to the very notion

of overheads, and you would never get any overheads

on that view.

We say, Your Honours, that it is only appropriate for short term side line activities.

Your Honours, can we hand Your Honours three examples which Your Honours might like to consider.

We say they demonstrate these propositions, and if

I hand those up.

The first example is an extreme one, it really

asks the question, "What happens if you have a

number of products in a firm" - it assumes there

are 50 - "and you take the incremental approach and

you do not allow overheads?" The result is, on

that view, the profit from the product is per
product, 3 million, instead of 1 million, which is

the actual profit of the firm after taking into

account overheads. But yet, each o.f them is an

infringing profit. The result would be ridiculous,

because instead of having to disgorge with 50

products, the 50 million, the result is you have to
disgorge 150 million. That just cannot be right.

That is an extreme example, and I am not suggesting that it is in accord with reality in

this case. But one only has to ask the question,

"If you had a number of infringing products in a

firm and you applied this concept it could lead to

that ridiculous result?"

The second example is actually designed to

show that it would work against a patentee if you

actually applied incremental costing, because if

the first product that was manufactured was the

offending product and then other products were

manufactured, then the result would be that

particularly those later products on the theory

would not bear the overheads. It would all be

borne by the first product and the net result would
be, if Your Honours follow through that example,

that the patentee would not get anything. We say

that that is clearly not right either. That is to

the advantage of the patentee to say that. But it
would lead to injustice to a patentee.

And the third example is a case again where,

because Your Honours will appreciate that if we had
set up a warehouse just to warehouse these

particular products, we could have claimed all the

Dart(2) 89 4/12/92

expenses of that warehouse. This assumes that

there is a new warehouse for the new but infringing

product and it asks a series of questions based on
various possibilities and, in our submission, we

end up by saying it makes no more sense to

attribute the whole of the increase in rent - that

was from the taking on a new factory - to product

101, that is the offending product, than it does to

refuse to allocate a proportion of overheads to a

product when those costs contributed to the

obtaining of the profit on that product. The only

rational basis is to allocate it appropriately

between all the products in the range.

Now, Your Honour Justice Deane gave an example

yesterday of the loss. We say, just to draw the

distinction, and it is the distinction which

Mr Justice Harvey drew in Leplastrier, is that we

are concerned with the profits from a product, not

the profits of a business, and if you have got

those accumulated losses, et cetera, well, that is

an aspect of the business as distinct from the

product. It is something perhaps I did not bring

out yesterday sufficiently.

Can I take Your Honours to Leplastrier, and

that is No 3 in volume 1. What happened here was

that the defendant was told to bring in this

account and he brought in an account for the whole

business and he tried to apply average costing

right across the business. Now, in some

circumstances that might be appropriate but

Mr Justice Harvey did not think it was appropriate

in this case. That appears from page 588, as to

how he brought in the account and, needless to say,

Mr Justice Harvey made his comments in that

context. So, at 591, he says:

On the whole, however, I do not see why a

Court of Equity should give the plaintiff more

than it has always given, leaving him to get

what further damages he can at law ..... So

that, in that case, apparently the
Vice-Chancellor held that the old practice was

still to be followed, and that all the

plaintiff could get was the profits which the

infringing person had made.

That does not throw any light upon the

question of how these profits are to be
ascertained, but I think the fundamental

fallacy of the account which has been filed by
the defendant is this, that he assumes that

what he has got to show are the profits of a

business. His account is drawn up on the

lines that he has to give the profits which he

has made in his business in connection with

Dart(2) 90 4/12/92

making these particular machines ..... Every

sale of a machine gives the plaintiff a

separate right to recover profits made on the

sale of that machine, and the plaintiff has a

right to require that he shall have details of

the sale and the cost of every individual

machine. That is the inquiry that is

directed.

That is not in contest. What he has to account for

is the profits on any machines on which he happens

to have made a profit. At the foot of page 592:

In my opinion the Master's directions are

perfectly correct in this case, that the

proper inquiry -

again, it is the manufacture of each machine.	Then
over the page, we get to the passage, but it is
against that background. So Sir John Harvey is
considering an account which is for a whole

business, and he is left speculating really as to

what should be allowed and he is trying to be

helpful to the master - that is what one suspects

is happening - and not in a greatly informed way,

with respect. He cannot find any United Kingdom

authority, he has not looked at Crosley apparently,

and he treats with disdain - something that this

Court does not do - the United States authorities.

So he has left himself unaided by, for instance,

Tremaine v Hitchcock which had been there for

50 years. He goes on and says:

Under no circumstances can he, in my

opinion, deduct interest on his capital

employed in the business.

As a broad proposition, that might be correct, but

he qualifies that later on:

Under no circumstances can he claim any

remuneration to himself, nor under any

circumstances can he claim in my opinion any

director's fees -

Again, Your Honours, that may not necessarily be so

in a case if those director's fees relate to the

product.

I have no desire at the present stage to say

exactly what can be taken into account -

so he is not being definitive.

It is clear that costs of material can be

taken ..... It is possible that other costs may

be taken, but I think the test which is to be

Dart(2) 91 4/12/92

applied is that the only expenses which can be

deducted are those which were solely

referable -

It really does depend what that means.

Sir John Harvey, as I understand it - I did not

have the privilege of meeting him, but when one was

introduced to him at the law school, he was seen as

a fairly practical sort of person who was a good

equity - - -

MASON CJ: What is the implication; not a good lawyer?

MR ELLICOTT:  No, Your Honour. One has to put a meaning to

what he is saying. He was a good lawyer, but he is

doing this not on the run, but it is not a studied

judgment. Although he is to be -

MASON CJ:	He did not reserve very often, did he?
MR ELLICOTT:	He did not reserve and he did in this case, but only for seven days; he did not look at the
American authorities. But all I am saying, Your Honours, is that the words "solely referable"
are capable of two meanings: a very narrow meaning
or wide meaning. And we say that His Honour
obviously meant the wide meaning and he
demonstrates it.  He goes to the machinery and then
he says in the relevant passage:

if his machinery is used partly for the
purpose of making these machines and partly
for the purpose of other machines it may be

proper to allow him such depreciation for wear

and tear on the value of his machinery as may
be properly allocated to the work which has

been done on the infringing machines -

et cetera. Now one can distinguish between

obsolescence and wear and tear, but the truth is

that obsolescence - if one has a machine that has

the benefit of that machine for the following few	two or three years to run, the product is getting
years and a depreciation is properly attributable,
we would say, to that machine; not on the basis of
just wear and tear, but on the basis of obsolescence.

DAWSON J:  Mr Ellicott, is it possible to have a situation

where a business is making a loss and then it

manufactures an infringing product, which would

have the effect of reducing the loss and which

would show again, by the incremental method, but

would still show a loss by your method? So that,

although it has the effect of reducing the overall

loss of the business, in fact you have nothing

according to your method.

Dart(2) 92 4/12/92

MR ELLICOTT:	No, Your Honour.
DAWSON J:	Why not?

MR ELLICOTT: It may, for the purposes of an account of

profits, yield a profit, because it is the profit

of the product, not the business.

DAWSON J: Yes, I know that, but with large overheads, a

business running to loss, if you apply those to the

product it may show a loss, too.

MR ELLICOTT: If it is an inefficient business, the

principle seems to be that the patentee must take

the business as he finds it. He cannot talk about,

we would say, better business methods or greater

efficiency; he has to take it as he finds it. And if there is a loss when you take into account what

is received from the product and what it cost, and

those overheads are properly attributable to it,

then so be it.

DAWSON J:	And yet it may have the effect, theoretically, of reducing the amount of the loss.
MR ELLICOTT:	It may have the effect of reducing the amount

of the loss of the business, but the costs -

DAWSON J: Yes, well that is a gain to the infringer, is it

not?

MR ELLICOTT: Well, Your Honour, if it has that effect, may

I submit, it is going to be because the difference

between the amount received in respect of the

product and the appropriate expenditure attributed

to it is a plus, otherwise there is not going to be a plus to the business, and in that case there will

be a plus to the patentee. But if there is

inefficiency in the business, if the overheads are

there because they have got five secretaries when
they only need one, then the patentee has to accept

that, provided those secretaries' salaries are

shown to be in part attributable to these
particular products.	So there is no premium for
inefficiency that goes to the patentee.	The

patentee can say, I will take profits or take

damages, and I remind Your Honours that in a patent

suit, as Your Honours will know, discovery is often

not complete up until judgment and after judgment,

because if you started off with full discovery you

would discover all the books and records of the

business, so you would be able to see whether they

have made a profit or not and the patentee could

decide whether to elect for damages or for profits.

DAWSON J: But, Mr Ellicott, the way in which you put it the

emphasis on your case is entirely on cost. You

Dart(2) 93 4/12/92

would say, and probably rightly, that in so far as

the incremental method is concerned, the emphasis

is entirely on gain.

MR ELLICOTT:  No, with respect, not, Your Honour. We are

simply trying to balance against the gross profit

or the gross return the appropriate costs, that is,

the cost of making or distributing, et cetera, that

particular product and it will give you a net gain

or it might give you a net loss. That is what the patentee is entitled to or not entitled to, as the case may be.

DEANE J:  But may not the answer be contrary to what you are

submitting and what Dr Emmerson is submitting, and

that is that there is no rule of law saying which

of these two approaches you take; all that is

involved is ascertaining what is the appropriate

method of determining the profit in the

circumstances of this case and that in a loss

situation where economies of scale do lead to a

benefit you may have one approach, in the ordinary

case you may have another prima facie approach.

That certainly seems to be what underlies the

American - - -

MR ELLICOTT:  To some degree, Your Honour, but at least the

American courts have given some assistance and they have rejected - - -

DEANE J:	I was not suggesting that - - -
MR ELLICOTT:	I do not resist this proposition, Your Honour,

because it is not part of our submission, that each

case must be taken on its own facts and that,

broadly speaking, what is the profit will be

dependent on the facts of each case. What we say

is that you do not come to that task with a
predetermined notion that you are only entitled to

something if you can show that you have spent more in relation to overheads, or with some narrow view

of the phrase "solely referable to" if that is to

be picked up and enshrined as a principle of law.

That is what we are resisting. We simply say the

question in each case is: are these costs which you

claim, defendant, attributable to the production,

manufacture, et cetera, of this particular product,

and that that has to be determined according to

ordinary accountancy principles. That is our case,

and that is a question of fact in every case, and

if the Court said that it would be sufficient for

our purposes. That is not asking the Court to lay

down anything but what we say is a broad

common-sense proposition, but somewhere there has

to be a proposition of law but - - -

Dart(2) 94 4/12/92

DEANE J:  Why has there got to be any proposition of law

beyond that the method of ascertaining profits is

the method which is equitable in the circumstances

of a particular case?

MR ELLICOTT:	If Your Honours say that and the Full Court of the Federal Court has done its best to indicate
what they are in this case then Your Honours will
refuse the appeal because that is what they have
done.

DEANE J: Except within the context of that being the

appropriate question, the submissions put against you do not simply disappear, they remain but in a

different environment.

MR ELLICOTT:  I suppose what I am submitting, Your Honours,

is that you cannot - I do not mean this fancifully,

of the Court - the Court cannot escape saying

something in principle about this.

DEANE J:	I was not suggesting that.
MR ELLICOTT:	But within that principle there has to be,

first of all, a rejection of incremental costing as the basis and, also, the rejection of a proposition

that overheads cannot be claimed unless there is an

increase, which is another facet of incremental

and, again, a rejection of the notion that words

such as ttsolely referable tott mean that you have to

produce, to use the American cases, the secretary,

the treasurer, the president, et cetera, in order

to prove those facts before you can get those

costs.

So that there is involved a notion of the

usage of ordinary commercial principles. Within

that there has to be, we would submit, the

expression of a principle of law but not intending

to confine masters or registrars or courts in their

endeavour to do this. Otherwise, if it is left at

large, the cases will become legion to the Full

Your Honours to look at them again, but inquiries	Federal Court and, who knows, they might prompt
on an account of profits will become a very lengthy
and very expensive - - -

DAWSON J:  But then you do have to choose if you are going

to choose methods and ignore the facts. For

example, what if it could be shown that there were

no opportunity costs, there were no alternatives,

it was either the infringing product and no other,

so that -

MR ELLICOTT: That might be all right and this is Crosley's

case, probably. If one knew more about the facts,

that is all right.

Dart(2) 95 4/12/92

DAWSON J:  Would you accept that then you cannot apportion the overheads?

MR ELLICOTT: In such a case?

DAWSON J: In such a case.

MR ELLICOTT:  That may be such a case not because just about

some notion of opportunity costs because you cannot

say that the overheads are attributable to this

product. But if you can say it in the sense that I

have been addressing Your Honours - and I do not

want to repeat it - that you can attribute part of

the overheads, then it is allowable. On the notion

of discovery in the patent suit, if I may just

finish that, Your Honour, what I wanted to say was

that it is not uncommon after the judge finds

infringement for further discovery to take place so

that then the patentee can decide whether or not to

go for damages or to go for an account of profits

because they can look at the books, et cetera, on a

particular basis of the defendant.

It is not that the patentee has to make its

election in the dark. It can make it informed by

its own view of what has happened in the business of the defendant. But it must take that business as it finds it and if there is a loss on the

product because of inefficiency, that is just

unfortunate, and if it looks at the books it ought

to see that and go for damages.	It is in its own
hands.

So, Your Honours, in relation to Leplastrier,

we would submit that Sir John Harvey in that

passage that my friend relies on, is actually

saying that overheads can be deducted because

depreciation and wear and tear is an overhead. You cannot measure it in any way, there is no meter you

can put on the machine, it has to be done by some

allocation method. It is overhead. We would

submit, quite appropriately, he did not consider

it. Also, the other aspect of depreciation would

be allowable because you are using up, with this

machine, the life that is left: the remaining

three years. He goes on to say that, I will not

read the passage again, but he also says it in

relation to capital. He says:

but if, as a matter of fact, he has had to

borrow capital and the company, or he himself,

has had to pay interest and he can show that

that has been incurred to some extent solely

by reason of this manufacture, he might be

entitled to deduct such interest.

Dart(2) 96 4/12/92

So Leplastrier, Your Honours, we would say is a

case where His Honour should not be interpreted as

being against us, but if he is then we ask

Your Honours not to follow him.

There is, in volume 2 - I will just give

Your Honours the reference to this but it is an old

work - under the United Kingdom authorities, there

is a reference to Perkins' Patent in 2 Webs. It is

No 3 under D3, in volume 2. That actually shows an

account and it includes an amount:

Interest at 5 pounds per cent on the average

amount of capital for twelve years at 225

pounds a year -

So way back in the last century they were thinking of these things. That is at pages 207 and 208 of

that work.

Amount of yearly sales of patent apparatus

Materials, labour, tools and expenses

belonging to the sales

Bad debts -

then, over the page:

labour in experiments .... .

Interest at 5 per cent .... .

Personal attendance of patentee for thirteen

and a half years at 400 pounds a year

This is the profits of the patentee. All those

went in.

Your Honours, in relation to Colbeam Palmer,

we say quite simply that that is a side line case.

It is a case where, apparently, it was thought the incremental method was appropriate. It is a sort of Crosley-type case. His Honour,

Mr Justice Windeyer was not purporting at pages 38

and 39 of the authority to say otherwise. You

cannot read into him a rejection of our submissions

in this case.

My friend sought to make use of Peter Pan,

that is in volume 2, United Kingdom, it will be D9.

The relevant passage is at the foot of page 59 and

60, and Your Honours can read that from the bottom

of page 59 over on to the top of page 60, but it

says nothing, in our submission, about incremental

cost or approving Crosley's case, or adopting

anything that was illuminative in Lever v Goodwin.

It just says:

is entitled to, is simply an account of

profits in the sense which I have indicated,

Dart(2) 97 4/12/92

that is, what has the plaintiff expended upon

manufacturing these goods? What is the price

which he has received on their sale and the

difference is profit.

Well, that is all right. It depends what you mean.

What has the plaintiff expended? What is the

expense? The expense of a business is what it has

cost. Part of that cost is obviously, we would

submit, the overhead. I mean after all, with the

amount of overhead that is in this company is it to

be said that none of those secretaries, none of

those salesmen, none of the catalogues, none of

that - that is the effect of this argument - is to

be allowed in our client's account of profits, and

that all that is to go to the benefit of the

patentee. We would submit that would be an

outrageous result.

Your Honours, we have said what we want to say

in relation to the Canadian cases. I had not

proposed to take Your Honours to them, as obviously

we would submit that Your Honours should not follow

them, that they are misguided because they put too

much stress on Carter v Colgate Palmolive in the

United States, and they certainly do not embrace a

notion such as Your Honour Mr Justice Deane is

expressing at the moment. I am not suggesting

embracing. We do, in the course of our outline,

refer to forms of allocation, and there are many

cases that go to the question of allocation in

relation to overheads. To a large degree, and we

are not seeking a ruling from this Court, but just

as a matter of practice, it is illuminating to see

how the United States cases have picked up, because
they say you cannot get involved in the minutiae,

they picked up allocations of accountancy in order

to resolve the problem and there is nothing new

about that, we do it here, they do it there, but it

is common sense. The Court is not going to allow

the master, we would submit, to have to descend

therefore forms of allocation, and a very	into minutiae in relation to these matters, and
significant one is sales, that seems to be the most
popular one in the United States and the one we are seeking to adopt here, sales is one form of
allocation.

Now, Your Honours, that is what I wanted to

say in relation to the appeal. There is, of course

a cross appeal. I would just ask, may I,

Your Honours, do Your Honours want to hear from my

friend on the appeal first, and then deal with the

cross appeal, or will I open the cross appeal.

MASON CJ: Straight on, Mr Ellicott.

Dart(2) 98 4/:2/92

MR ELLICOTT: If Your Honour pleases. Your Honours, we have

an embarrassment of riches for Your Honours, but

only if Your Honours wish them. I have what is

called an outline of argument and I have an

extended outline. If I put the extended outline in

front of Your Honours, although this sounds a bit

strange, it will probably take less time because I

can refer Your Honours - there are quotations.

MASON CJ: Yes, I think it would be better if you place the

extended argument before the Court.

MR ELLICOTT:  If Your Honours please. And could I hand up

in relation to the previous argument, Your Honours,

what is really a summary of our argument but it is

a broader summary and if Your Honours would like to

use it it is there; if not, Your Honours will

obviously do something else.

MASON CJ:  It is consistent with what you put to us orally,

is it?

MR ELLICOTT: Yes.

MASON CJ: It does not contain additional material?

MR ELLICOTT:  It will save Your Honours picking your way

through the transcript, if I may put it

respectfully that way, Your Honour.

MASON CJ: Are you going to hand up your outline of argument

on the cross-appeal as well?

MR ELLICOTT: Yes, it is being handed up as well,

Your Honour. Could I hand up the outline as well.

DAWSON J: This is the non-extended?

MR ELLICOTT: Yes, this is the non-extended. I hope I do

not confuse Your Honours; it is not intended to do

that; simply, as always, to assist the Court.

DEANE J: This is they say, "being snowed".
MR ELLICOTT: It is, Your Honour.	I see I am a bit behind

time and I will need to hurry a bit.

Your Honours, we first have to seek leave to

appeal and Your Honours might like to read it but

if I can take Your Honours through it?

MASON CJ: 

Mr Ellicott, we think you should proceed to the

substance of the argument you want to present on
the cross appeal. That is not to say I am

indicating to you we will grant special leave

because, obviously, I have got to hear what

Dr Emmerson says about that.

Dart(2) 99 4/12/92

MR ELLICOTT:  Yes. I will do that, Your Honours. In

paragraph 2, because this is not really in dispute,

we say the overriding principle governing

apportionment is that a patentee should recover
only those profits which accrue to an infringer

from the use and exercise of the patentee's

patented invention. Now, that is not in dispute

and before Mr Justice King, he does not dispute it,

not does the Full Court dispute that as a basic

proposition, nor do we.	We have given those
authorities.	But in one case, Westinghouse v

Wagner, United States Supreme Court, it helpfully

says:

if plaintiff's patent only created a part of

the profits, he is only entitled to recover

that part of the net gains -

which means only. As the patented invention here

is the lid alone, what we are saying, Your Honours,

is that Dart is entitled to only those profits,
that is the profits from the lid as distinct from

the canister, and not to the profits which, as they have held, flow from the sales of the containers to

which the lids were fitted.

Now, Your Honours, I will have to take you to

the relevant parts of the judgment, both of

Mr Justice King in the Full Court and the passage

is at 252, at the top of the page, having set out

Colbeam Palmer, and I will have to take Your Honour

to that passage later, but:

Having ascertained the principle of law

which is applicable its application in a
particular case becomes a matter of fact.

Normally this would fall to be decided when

the account of profits hearing takes place.

Just stopping there, can I just say this:

His Honour said because, in effect, it is what

attracted the consumer, that seemed to be behind

it, the press button lid, that that was the end of

the matter and that although one had the lid and
the base, the fact is that the two went together.

Now, obviously, looking at them as two separate

items, the lid was the infringing part, the base

was not an infringing part at all.

The fact is, and we give reference to it, that

in the patent proceeding itself the claim was made

that we had breached claims of the patent which

included the base and they abandoned the claims in

relation to the lid and the base and they only

proceeded in relation to the lid. Now, it would be

strange, having abandoned that, they are now

Dart(2) 100 4/12/92

claiming profits from the whole of it and I just

want Your Honours to understand that.

In Colbeam Palmer and other cases there is

developed the notion of the difference between the

product as it was sold, that is with the infringing
part, and a product which would not have the

infringing part. Now, Your Honours only have to go

through the catalogue to see that the base is like

other bases that this company uses.

It would have been open to it to put another type of lid on it and to sell it; for instance,

what is called a press seal lid could have been put
on it or one with clips. Whatever it was,
Your Honours will be familiar with them from the

kitchen, but those products are varied. The base is basically the same, or the bases might be sold

separately.

There may be evidence of sales of those products separately. We say that because in a case

like this where the press button lid is so

identifiably separate, that you cannot just put

them together and simply say, "Oh well, the result

is that you treat it as one product and it's the

profits from the whole product." When I say "put
them together", I simply mean the court considering
the matter cannot, where they are so clearly
severable, just go on and say, "It's the whole

product that we consider."

There are cases - and we refer to these - of

commingling or intermingling, where the patented

part of the particular machine or device is so much

part of it, or where the confidential information

that is used is so much part of - and this happened

in Peter Pan - that it is proper to take the whole

product. But if you can see, if it is clear that

there are two parts to a particular object, one has

to go into the inquiry, which His Honour rejected

and the Full Court rejected, of asking the question
either in the terms:	"What would be the

alternative? That is to say, could these have been

sold with other lids and what profit would have

been made if a non-infringing use of the base was

made", as against what was done with this, and then

to allow the difference as a - in our example, to

take account of that difference in the account of

profits.

That is what did not happen, and the reasons

why it did not happen emerge first of all from this

passage at page 252. He said:

Evidence on the point was given by

Raymond David Gordon, a director of the first

Dart(2) 101 4/12/92

defendant, who deposed that when the first

defendant's range of press button canisters

was introduced in November 1980 it joined

three competitors in the sale of such goods.

He says that the press button range was

introduced in response to requests from

retailers. The catalogues of the first

defendant put in evidence show that the only

feature of the press button range

distinguishing it from some other containers

in the first defendant's range of products is
the press button lid which is the subject of
the plaintiff's patent. Over at least part of

the relevant period each press button canister

marketed by the first defendant has carried a

label featuring the words "Press Button" much

more prominently than any other word in the

label. Mr Gordon has expressed the view that

the press button has been only one of seven

selling features of this particular product,
and that it is plain from sales comparisons

that the lid is not a key factor in the sales

of the product.	I think that this argument is
beside the point.	The defendants must have

adopted the patented invention with the

intention of increasing their sales, and I

think that it must be assumed -

there is no evidence of this -

that trade customers purchased press button

canisters rather than canisters incorporating

only the other six selling features because
they wanted the patented feature. That being
so, sales of press button canisters are for

present purposes attributable to use of the

patented invention. I think that the pressure

from retailers on the first defendant to

market such a container and the prominence

that the first defendant has given in

marketing to the press button feature show

that it has been more important than Mr Gordon

makes out. My finding is therefore that the

profits for which the defendants must account
are the profits from the containers -

Your Honours, we submit that much of that - and I

will have to come back to it - much of His Honour's

finding is not based on the evidence.	The Full
Federal Court dealt with this.

DEANE J: Mr Ellicott, can I interrupt you and ask you do

you see this case as one involving concurrent

findings of fact by the courts below? Prima facie

it does.

MR ELLICOTT:  You mean?

Dart(2) 102 4/12/92

DEANE J:  Your cross appeal.

MR ELLICOTT:  Yes, Your Honour. I am not following the

consequence of that, Your Honour.

DEANE J: Well, normally we will not interfere with

concurrent findings of fact.

MR ELLICOTT:  Your Honour, what we see it as, is although

there is a finding of fact, and although you might

describe it as concurrent, the fact is - - -

DEANE J:  I mean, by the two courts.

MR ELLICOTT:  Yes. The fact is in this case both the

Full Court and the court below have misdirected

themselves by not applying the proper principle.

Having cited the case like Colbeam Palmer and

Mr Justice Windeyer, they then proceed not to apply

it.

DEANE J: Well, do you see it as a matter of a mistake of

principle?

MR ELLICOTT:  Yes. I am not trying to do other than to

point to a principle, because otherwise I realize I

would not have any chance in front of this Court.

But the principle I am trying to draw attention to

is this principle that is embedded in some cases I

will take Your Honours to, that you do take a

comparison between the product with the patented

part and the product without the patented part;

either selling it alone as a base or alternatively

with an alternative lid. They are the facts of

this case, but that approach would be in accordance

with the principles that have been laid down.

So we say - we set out the errors on page 2,

that His Honour made. We say, misdirected himself

as to the proper test to apply to identify what

proportion of profits flow from the lid and that he

made without the infringing feature. That is, he	consider objectively whether it could have been failed to examine the product as a whole so as to	failed to consider hypothetically what the
defendants would probably have used as a lid
instead of the invention and what profits would
have been made had they done so. He misdirected
himself in that he based his conclusion principally upon speculation about the motives of real or hypothetical purchasers or the relative attraction
to such purchasers of different aspects of the work
when such motivation is inherently variable. He
failed to base his assessment of consumer
preference upon any or any proper evidence. Well,
that may not be a matter that Your Honours would be
concerned about, but it only demonstrates how he

Dart(2) 103 4/12/92

misdirected himself in principle. He failed to

consider that it is only when an infringing feature
of a product is commingled or inextricably
intertwined with a non-infringing feature or where

a product could not have been manufactured or sold

at all without the patented feature that it is

proper to refuse an apportionment. And those, (i)

(ii)   and (iv), they are matters of principle.

Now, the Full Court we say also fell into

error, first of all, in misconstruing
Mr Justice King as having found that the canister

would never have been produced at all without the

lid, they so found. And in concluding that the

lids alone created the market for the canisters

without there being any or sufficient evidence upon
which to make such a finding.

Now at pages 293 to 297 of the appeal book, volume 2, Their Honours deal with that matter.

They place a considerable amount of weight on a

case of Duplate, an American case, and that was a
case where a windscreen glass was used, and it

could not be used for other purposes, and

Mr Justice Cardozo was quoted, but a particular

passage which highlights the difference between

Mr Justice Cardozo's case and this case is quoted

at the top of page 296 and Their Honours rely on

it.

DEANE J:  Does the evidence disclose that the bases used for

this product are the same as bases used for other

products or whether they are?

MR ELLICOTT:  I think from the catalogue one can deduce

that, Your Honour, but I do not know of any precise

evidence.

DEANE J: Because if you be wrong on this argument, it is

very hard to see how the argument put against you

on the appeal applies to the bases if the bases are

made for all sorts of products.

MR ELLICOTT:  Yes, they are made for all sorts of products but not to those precise measurements. One can

look through the catalogue, there is nothing

special about the base except its size is different

to other sizes. I think it is 140 millimetres or

something but no matter; others are 150.

DEANE J:  In one sense, your argument on the main appeal is

a bit stronger if your argument on this aspect of

the case is rejected in that there is an added

difficulty in refusing to apportion costs among

bases if there is nothing special about them and

they are manufactured for all the products.

Dart(2) 104 4/12/92

MR ELLICOTT:  Yes, Your Honour, I follow that and if that is

the result, accept the result, Your Honour, but at

the moment I do submit that there is a difference

and it is a difference that the courts below have

ignored.

DEANE J:  I follow that.

MR ELLICOTT: That passage:

"The acceptance of such a measure would enable

the infringers to profit by their wrong.

There was no use in the automobile industry

for glass so thin as this except in connection

with the process described in the

complainant's patent .... If there had been

no infringing business, the large amount of

glass that went into the infringing product

would never have been sold at all."

That is the difference between that case and this

case and that was not a finding that His Honour

made. It was a very significant finding that

Mr Justice Cardozo made in that case and the

approach taken by Mr Justice Cardozo was grounded

in the principle upon which the account is taken.

Then there is a reference to what

Mr Justice Windeyer said in Colbeam Palmer.

Before that, if I may just go backwards to

295, they say, at the top of the page:

The other argument is more formidable.

The respondent cannot gainsay that it is only

entitled to the profits obtained by the

infringement. If, for example, a patented

brake is wrongfully used in the construction

of a motor car, the patentee is not entitled

to the entire profits earned by sales of the

motor car. He must accept an appropriate

apportionment. But the question is how that

principle shall be applied to a situation

where the patent relates to the essential	feature of a single item. Take, for instance,
a patent for a soft drink. The drink cannot
be sold without a container. Would it be
right to attempt to apportion the profits from sales of bottles of infringing soft drink? The entire reason for the sale of the bottle
was as a container for the drink. Similarly,
it seems to us that it was open to the judge
to find, and he correctly found, that what
characterized the infringing product was the press button lid, without which this
particular container would never have been
produced at all.

Dart(2) 105 4/12/92

There was no evidence of that, and Their Honours

fell into error in fact, but we extract out of that

a failure to observe the principle and - - -

DAWSON J:	But what he is really saying is that a press button lid is of no use without a canister.	A
press button lid by itself is - - -

MR ELLICOTT:	He is saying that the base is no use without the press button - - -
DAWSON J:	No, the other way around.
MR ELLICOTT:	I would submit, Your Honour, that is how they are interpreting it.
DAWSON J:	The base is of use, you can put another lid on

it. But you cannot do anything with a press button

lid by itself.

MR ELLICOTT:  No, that is the very point, Your Honour, that

we are seeking to drive home, that His Honour and

the Full Court paid no attention to the base

because they said you cannot sell the lid without

the base. Of course you needed a base, but the

base was not patented. It was a device, useful in

itself, vendable in itself and usable in another

way, with other lids, to provide a saleable

product, had the alternative been gone into. But His Honour rejected that notion and went off on a

basis that, although they say carburettor and motor

car, brake and motor car - you cannot have a car

without a brake, you cannot have a car without a

carburettor. Not yet, as I understand it. You can

say you cannot have a lid without a base.

But the fact is the courts, in looking at it

as a matter of principle, have not allowed the

commingling idea that one is tied up with the other

to be driven mad to the extent that it should apply

in any case where you can say, oh well, you cannot

The test is, look at the article, what part is have one without the other. That is not the test.	infringing, what part is not, what is the profit
from the use of the infringing part and only if you
cannot sever them are they entitled to any profit
that might come from the base.
In this case, in effect, we get the cost of the base, but what is involved is actually any
profit on the base. That is what is involved in this argument, in effect, because we get the cost
as a deduction in making the product if it is
looked at as a whole. What we are not given in
that equation is the profit that we could make out of it and that is what we are arguing about.

Dart(2) 106 4/12/92

So it is in that way that we say that both the

on to develop it. First:

Full Court and Mr Justice King erred in principle.

product is and how it is composed;

to determine whether any part of the product

does not represent the invention and whether

the product as a whole could therefore be made

without the infringing item;

to consider what profits would have been made

by a defendant had he employed some

alternative component in the product other

than the invention. That this is the test is

clear from the authorities.

Your Honours, Siddell v Vickers, in a line

which says no more than this, per curiam, at

page 162, paragraph 11:

"The true test of comparison was with

what the defendants would probably have used

instead of the invention, looking at all the

circumstances of the case." There the

defendants forged iron using a steam-powered

appliance which infringed the plaintiff's

patent, having previously relied on manual

labour. The account of profits awarded was

the difference not between the profit made

when using the appliance and that made from

using manual labour alone, but between the

profits actually made and that which would

have been made using some other steam-powered

appliance.

Now, Your Honours, in My Kinda Town the court actually ordered an account of the profits actually

made, the account is one between the profits

actually made and the profits which would have been
made.	So that, of course, is in a trade mark case.
Siddell v Vickers is a patent case.	The one up the

top, Cartier v Carlisle, is explained - that quote

in 10 is actually taken from My Kinda Town at

page 155. In other words, you will not find

Sir John Romilly saying that, as we have quoted it

there, but you will find that as being the analysis

of Cartier v Carlisle in My Kinda Town at page 155.

In Colbeam Palmer, Mr Justice Windeyer applied

this principle. May I take Your Honours to

His Honour's judgment, which is in volume 1, No 7.

It is in 122 CLR. At page 42 to page 46 there is

a - and I do not propose to read all this,

Your Honours, but it is very important because it

Dart(2) 107 4/12/92

does endorse the principle that we are seeking to

have applied in this case, that is, it is the

difference between the two. There is reference to

the United States cases as well and, at page 46, in

the middle:

However that be, if the profit which would

have been made if this course had been taken

be compared with the profit actually made by

selling the goods with the mark Craftmaster on

them, the difference may perhaps be regarded

as, in part and in some sense, reflecting the

profit made by the use of the mark.

Now that is, admittedly, in a trade mark case, but

His Honour does, in those passages, explain the

principle and why he comes to that view.

The same notion will be found in Goodlet v

Fowler, and we deal with that in paragraph 14, and

then we indicate, in paragraphs 15 and 16, what I

have already said, and that is that His Honour

Justice King failed to apply that principle and, if additional costs would have been incurred in

modifying the container, or manufacturing a new

lid, then these would form part of the calculation

as to the proportion of profits which would

ultimately be paid over. At worst, the containers

arguably could have been sold without lids at all.

That is an objective test and it is

susceptible to expert testimony and there are

numerous authorities in the United States which

deal with the question of apportionment, and may we

hand up a summary of those.	They go back to
Tilghman v Proctor and Westinghouse.	I will not

take Your Honours individually to those cases but
they are the American authorities which deal,
again, with this question of apportionment and they

are very informative and they assist greatly our

argument because they do emphasize that it is an

considerations, for instance, consumer preferences determined by reference to subjective objective matter and not something that is to be and the like.

McHUGH J: Before you do, Mr Ellicott, supposing there was

evidence in the case which established that the
trade customers purchased the press button

canisters rather than canisters incorporating the

other features of the product only because they

wanted the patented feature. On that hypothesis,

would Mr Justice King's finding be challengeable?

MR ELLICOTT:  We would say yes, Your Honour, because those

authorities that I have referred to, the United

States authorities and the English authorities, and

Dart(2) 108 4/12/92

indeed what Mr Justice Windeyer is saying in those

passages, are saying that fundamentally the test is

an objective test and it is best decided by

ordinary accounting principles, that is objective

principles, rather than by subjective attitude to

purchasers.

I will take Your Honours to Potton's case,

which is a very recent case, which says just that.

It is partly because you can get a - these are

hypotheticals, but you can get a problem if you
have got - in such a case as Your Honour is putting

to me, you might get a problem if you have got a

patented base and a patented top, but the patented

base is an infringement of one patent and the other

is the other. Is one to give double the profits?

Of course not. Why not? Because they need to be

looked at objectively and separately. That may be

a far-fetched case, but it is - - -

McHUGH J: Yes, but you need not necessarily give double the

profits, because the finding might be that one

patent played no part at all in the sales.

MR ELLICOTT: That is going to subjective intention if one

says that, if it played no part in the sale. What

is important is not the sale; it is the use of the

invention, because the patentee is only entitled to

the profits from the use of the invention, and no

more.

McHUGH J: Yes, but on the learned judge's finding of fact

in this particular case, the whole of the profit

was attributable to the press button top.

MR ELLICOTT: That is what he says, but there is no evidence

to support that.

McHUGH J: That is another factor.

MR ELLICOTT: In doing that, he falls into error in law, not

just because there is no evidence - we do not have

that point here; we do if we are in front of the

Court on an appeal - but the explanation of it is

that His Honour failed to take into account the

appropriate principle, that is that this is an

objective matter.

McHUGH J: Having regard to this particular trial judge's

experience in these matters, it is impossible to

think that he was not fully aware of - but he

regarded it as a special case.

MR ELLICOTT:  If Your Honour will find - if Your Honour went

into the facts of the case - this was towards the

end - that at the hearing before, he said, "I'd

better stand this over, because I don't have enough

Dart(2) 109 4/12/92

facts", and then on this particular day he decides

to go ahead and decide it.	So it is not as easy as
that, if I may say so.	I appreciate he is a judge

with a lot of experience and he has been around for

a long time in this patent law, but so far as this

matter was concerned, we say he misdirected

himself.

He misdirected himself because he was too

quick to adopt a notion that, "This is why they're

buying it", and looked at the lid and saw "press

button", perhaps applying some subjective notions

to it, and not looking at it objectively and asking
the question, "Where was the patent used; where

was the invention used?" "It was only used in the

lid." "All right, they're only entitled to profits

from the lid." "What about the base? Could that

be used separately; could it be used with another

product, et cetera? Should I take into account the
notions of purchasers?"

The affidavit of Raymond Gordon is in the cross-appeal book at 187. At page 189, Mr Gordon

sets out in paragraph 5 that:

The Decor range ..... was introduced in November

1980 -

and there were others on the market. He goes on,

over the page, at paragraph 7, of page 190 -

Consequently, when the Press Button airtight

canister range was introduced in 1980, an

essential selling feature was the clear base.

He goes on to explain that.

following selling features were emphasised -

and he names some seven:

clear bases .... .

dishwasher safe .... .

multiplicity of uses .....

airtight seal .... .

ease of use .... .

range of six sizes .....

colour range .....

Dart(2) 110 4/12/92

Thus, the press button lid was one feature of

seven that was considered to be a selling

feature of the product.

While the press button nature of the lid

is a feature of the canister, and for this

reason is used descriptively to distinguish

the canister ..... it is plain from comparisons

of sales of the different types of canister

that the press button lid is not a key factor

in the sales of the containers/canisters.

Thus, sales of the Clearseal range of

containers/canisters, which possess an

airtight lid, were unaffected by the

introduction of the press button canister -

so he gives a reason which ought to have cautioned

His Honour to go the other way.

McHUGH J: With great respect, it is not a very persuasive

reason.

MR ELLICOTT:  At least it is the evidence and judges should

decide things on the evidence.

McHUGH J: Well, the judge rejected his evidence, he did not

accept his evidence, that is what he said.

MR ELLICOTT:  But, Your Honour, there was no other evidence

but he made it up.

McHUGH J: But it was common sense.

MR ELLICOTT:  He made it up, Your Honour, and again he says,

at page 192:

Accordingly, I conclude that the following are

the most important selling features of the

Press Button canister range:

- the clear base;

the choice of six sizes .....

- the significant price advantage over similar

canisters in the Decor range.

One would have thought that that was a significant

matter and that that ought to have been taken into

account but it was not. That was the evidence and

I would refer to that just to show that His Honour

went off, we would submit, with great respect, as

did the Full Court in relation to this on their own
conception of what the evidence was as distinct

from what it really was. In paragraphs 19 and

20 - - -

Dart(2) 111 4/12/92

DEANE J:  Mr Ellicott, can I ask you a question about

page 191, paragraph 8? The second half, "Thus,

sales of the Clearseal range", what does that mean?

Is it saying that the total sales of canisters was

not affected by the introduction of this product?

MR ELLICOTT:	Yes.
DEANE J:	Or that the sales of other canisters were not

affected by the introduction of this product?

MR ELLICOTT:  It is saying that the product, the Clearseal

range of containers, manufactured by Decor, which

possess an airtight lid and not a press button lid,

they were unaffected by the introduction and that,

therefore, it was not a threat to them and people

still went on buying the others. You cannot

conclude, therefore, that they were attracted

necessarily to the press button lid; they still

bought them in the numbers.

DEANE J:  Does that mean that he is saying that the press

button lid generated additional sales because of

the press button?

MR ELLICOTT: Well, not necessarily because of the press

button lid. He is saying it generated different -

additional sales, but I, Robert Gordon, refer to

the following matters and he sets them out as

reasons -

DEANE J:  I follow that, but if you read that - I read it

differently - but if you read that the way you read

it, it supports the trial judge's findings surely?

MR ELLICOTT: Well, I would submit not, Your Honour

DEANE J: What, you have got a range of products and you add

one item to it with a particular feature, and the

sales of the item with the particular feature do

not affect the sale of the existing range of

products.

MR ELLICOTT: 

The question to ask is why, and this expert

witness, Raymond David Gordon, he gives the
reasons. He is the one who knows, not the judge,

he gives the evidence and he says the things that

will attract people to this, and not just the press
button lid -

DEANE J: But is that not the only difference?

MR ELLICOTT:  No, Your Honour, the

McHUGH J: Well at paragraph 8 it is, that is why I said to

you it is not a very persuasive reason. He says:

Dart(2) 112 4/12/92

the press button lid is not a key factor -

and then he gives an illustration, what I would

have thought, proved the contrary.

MR ELLICOTT: Well, with respect, Your Honour, what he ends

up in saying in 10 is:

I conclude that the following are the most important selling features ..... the clear base

which is very important, people like to see their

lettuce or whatever they put in it:

the choice of six sizes -

because they are sold in a group, and:

the significant price advantage over similar

canisters -

That is over the Clearseal.

McHUGH J: But he does not say that the Clearseal do not

have those features. One would presume, for

example, that from the name of the Clearseal, you

can see the clear base.	He does not say it does
not have an airtight seal.

MR ELLICOTT:  Once Your Honour, with respect, does that,

Your Honour is starting to be a witness and this is

the only evidence and you have got to decide cases

on the evidence that we know. There is no -

DEANE J: But you seem to me, with respect, not to be

acknowledging the significance of the last sentence

in paragraph 8 if one reads it as you read it.

That is, you have a statement that we have a

Clearseal range of products, we introduce a product

with this pop up feature, we sell those without

affecting the sales in the rest of the range. Now

it does not seem to me that you need to be a genius

to draw a conclusion from that.

MR ELLICOTT: Well, I will not talk about genius,

Your Honour - - -

McHUGH J:  The conclusion the learned trial judge drew.

MR ELLICOTT: - - - but I would submit that what you draw

from that is that the use of the seal has not, in

effect, taken sales from the other product. It was

not the attractive force that the judge is finding

it to be. What may have made the difference was

not the press button but the features that are

referred to at 10 and the fact that the others are

not affected is a reason why the press seal was not

Dart(2) 113 4/12/92

the significant feature. The inference is the

other way and, with respect, I think, I would

submit Your Honour is taking too much from that

sentence. It is intended to point in quite the
opposite direction.

But be that as it may, the true test is not to get involved in notions of why purchasers buy, the

true test is to look at the matter objectively, and

that is what I would like to quickly refer

Your Honours to.

McHUGH J: Well, you would at least have to concede this,

would you not, as a matter of logic, that the

second sentence in paragraph 8 does not prove the

proposition in the first sentence? In the first

sentence the witness asserts that the press button

lid is not a key factor and then he gives us an

illustration something which does not prove that

proposition at all; indeed it seems to me it tends

to prove the contrary.

MR ELLICOTT:	It depends on how you read it, Your Honour, and this gentleman, who is the expert, is the
expert; it is not His Honour or for that matter, with respect, Your Honour.
McHUGH J:	You may be right about the matters referred to in

paragraph 10, but I am just referring to

paragraph 8.

MR ELLICOTT:  Yes. Well, Your Honour remains unconvinced

but, on reflection, Your Honour may not. But,

nevertheless, even if in the quietness of

Your Honour's chamber, Your Honour does remain

unconvinced, nevertheless, we say His Honour fell

into error, because that was not the way to

approach it.

Now, we set out in paragraph 20 a quotation

from the case of Potton Limited v Yorkclose

Limited, which is a recent case:	reference to evidence of or speculation about	the motives of real or hypothetical purchases
or the relative attractions to such purchases of different aspects of the work.

A better guide is not to be apportioned by

reference to evidence of that nature.

A better guide is likely to be provided by

ordinary accounting principles whereby, in the

absence of some special reason to the

contrary, the profits of a single project are

attributed to different parts or aspects of

the project in the same proportions as the

Dart(2) 114 4/12 92

costs and expenses are attributed to them
(for) what is required is not mathematical

exactness but a reasonable approximation.

McHUGH J: Are the emphasized words in the judgment or are

they in the submission?

MASON CJ: Emphasis added, is it not?

MR ELLICOTT:  Yes, they are in the judgment, yes. Oh, we

added the emphasis, yes, just to - I am sorry,

Your Honour, I am a little bit slow today.

McHUGH J: It is the length of your submissions wearying

you, Mr Ellicott.

MR ELLICOTT:  In Stearns-Roger Mfg Co v Ruth - well I am

trying to read it, Your Honour, instead of

expounding it, to save time - the United States

Court said:

that the evidence given by two mining

engineers is to the features which dominated

in their recommendations to clients to

purchase floatation machines was "without

value. The engineers recommended the entire

machine, and the appellant sold an entire

machine. Resort cannot be had to an analysis

of the mental processes of the engineers in

recommending the purchase of infringing

machines in order to compute profits. If so,

the profits would vary with the state of mind

of different purchasers."

And that is quite right. Your Honour, we then

deal with the proposition I have already dealt with, that there is no direct evidence, and we

refer to the affidavit of Mr Gordon in paragraph 24

and we refer to the fact that it was significantly

cheaper, and I need not read those passages. In paragraph 26 we deal with what we call the
commingling doctrine.	Where a product is made up

of component parts, some of which are infringing

and some of which are not, an apportionment should

only be refused where it is not merely difficult

but impossible to carry the burden of apportionment

- the defendant had inextricably commingled and

confused the parts comprising it. Now, that is

what is said in Westinghouse and that is the result

of that - that is an objective test in obviously, and it requires the court or the master

to look at the object and ask the question,
objectively, and not to get, as we would submit,

involved in these subjective considerations.

Dart(2) 115 4/12/92

We give, in 27, examples of commingling. We

say that the product here consisting as it does of

a base and a lid can fairly be treated as two

separate items; there is no inextricable

commingling between the two. And here is another

problem: the lid and bases were made separately by

Rian Tooling. Some orders from Decor - this is

paragraph 29 - required the manufacture of both the

infringing lid and non-infringing base while others

involved the manufacture of the infringing lid only

and yet others involved the manufacture of the

non-infringing base only. In the latter two

instances the base and lid were manufactured by

other subcontractors for Decor.

Now, this obviously posits a problem because Rian Tooling had been required to account on the basis that even though they manufactured only the bases in relation to some orders they have got to

account on the basis that they have hypothetical

lids on them, and that is the result of the

absurdity of not drawing distinctions between the

base and the lid. And we draw that out in

paragraph 31.

At first instance, Mr Justice King answered

closures only and answered "Yes" to the question whether the profits for which Decor and Rian must account are the profits for the closures and the

"No" to the question whether the profits for which

canisters to which they are fitted. The separate

manufacture of the lid and the base raises squarely the problem of whether the order of Mr Justice King requires Rian to account for the legitimate profits

which some other manufacturer had made on the

container for those orders where it made the lid

alone. If not, then it should not be required to

account for the profits which it itself

legitimately made on the container, and the same

can be said for Decor.	The absurdity of the
the manufacturers of the base alone are supposed to	refusal to apportion can be shown by asking whether
deliver up profits on notional lids.

And that is embodied in the judge's finding

and that is, again, because he has got this

overbearing conception that this is why these purchasers do it - not based on the evidence,

His Honour's view - and therefore you cannot distinguish between the base and the lid and they

go together.

We point out in paragraphs 32 and 33 and

following paragraphs what I have already said in

relation to the Full Court. If Your Honours look

at the case of Duplate, that was a windscreen which

Dart(2) 116 4/12/92

could not be sold elsewhere. This is a case where

the base is obviously a severable item and it can

be used and sold elsewhere. It is not like the

windshield glass. So with very great respect, the

Full Court fell into error in drawing a comparison

between those two cases.

Their Honours also said that without the lids,

there would not have been any production. That is

wrong, too; there is no evidence of that.

Their Honours concluded that at that page. At

page 12 of our extended outline, we deal with the

price differential. They rejected that.

Their Honours said that the reasoning in Duplate

was said to be:

entirely applicable to the present appellants'
attempt to press into the service of their
case the alleged benefits of their pricing

policy.

To treat the pricing policy as irrelevant on this

basis is misconceived. In Duplate the request was

for the court to allow for a reasonable royalty to

be made to the manufacturer of the glass to

compensate it for the economies achieved during the

course of the manufacturing process through the 26

patents of its own it had used. Duplate was

seeking to reduce the quantum of profits it had to
disgorge.

But we are not appealing to it to request that there be a deduction from the profits; we are

simply appealing to the difference in price as a

reason why Their Honours were wrong and why

Mr Justice King was wrong and that it was not right to conclude as they did, that it was the price

differential.

On page 14 in paragraphs 41 to 44, we develop

the argument that the patentee had elected. Can I

hand up the patent specification to Your Honours.

Claims 1 and 2 of the patent relate to the lid, 3	and 4 are the combination. When the matter went to
court, the claim of infringement related to
claims 1 to 6. As pointed out, the only ones that
were persisted in were 1, 2 and 5, and all of those
relate to the closure member, that is the lid. So
they elected not to proceed to claim infringement
in relation to the whole object.

Having done that, we say it is odd that they

can come here, or to any court, and say, "We claim profits in relation to the whole of it", when they have abandoned a claim that the whole of the

container and closure were an infringement. It is

clear that they are not saying it was an

Dart(2) 117 4/12/92

infringement, and that should be something that

bears on a judicial consideration of whether they
are entitled to profits on the whole of the

product.

Then in paragraph 45, we point to Dubiner, a

Canadian case:

There the plaintiff argued that the defendant

who had infringed its trademark was liable to

disgorge all of its profits made during the
accounting period because it was the goodwill

of the mark that the defendant had traded

upon. The defendant insisted upon giving up

only those profits directly attributable to

the use of the mark.

Justice Noel said:

"(Consider] a case where use is made of

several trade marks belonging to different

owners. Indeed, one might ask whether, if the

trade marks used together belonged to

different people, the defendant should be

compelled to pay an amount equal to all of his

profits to each of the individual owners. To

reach such a result would indeed be most

unreasonable and would lead to unjustifiable

abuses."

And then we go on to point out that:

If the container had been the subject of a

separate patent owned by a different person,

and if it was found that Decor had also

infringed that patent in separate proceedings,

King J.'s finding would lead to the absurd and

unconscionable result that Decor would be

compelled to pay amounts equal to all of their

profits to Dart and, in addition, amounts

equal to the profits on the container -

If the view about why people buy these things

is to be taken then one could come to different

results, but if you do treat them together then

obviously if you have got that strange situation of
the base and lid being patentable to others, you

could get the strange result of the court coming to

the view in each case that, in effect, as a result

of both, double the profits have to be disgorged.

We would submit that that is just not intended.

Could I take Your Honours to page 201 of the cross appeal book. At page 201 there is a table

setting out the press button price comparison and,

Your Honours, against item 580 which is the press

button 1 litre there is an item "Decor sell" under

Dart(2) 118 4/12/92

July 87 "$1. 66". And under "Press seal" which is a

different product - this is just to show the price
differentiation - is $2.19. That indicates the
evidence that there was to show the difference in

price, which was quite significant, indeed,

53 cents. Many a purchaser might well be attracted

by that, even in the 1980's, Your Honour.

MASON CJ: Is there any explanation for the difference in

price? It just seems strange, on the face of it.

MR ELLICOTT: It was just in the market, Your Honour, price

competition. But there was a significant
difference in price and, again, it only shows how

perhaps unwise it is to speculate about why.

DEANE J: What is the figure above, Mr Ellicott? The

97 cents? Is that the cost to your client?

MR ELLICOTT: Yes, that is the cost.

DEANE J:  As the Chief Justice says, that is strange,

because if you go along to July 1988 the press seal

costing $1.01, the press button $1.02, but you are

selling the press seal for $2.43 as against $1.80.

MR ELLICOTT: Yes, well, that is competition; that is the

market.

DEANE J:  But you would think they were competing with one

another.

MR ELLICOTT: Well, even if they were, it does not matter.

Even if there was an element in the market that

they wanted to attract people to this new range but they thought that they could still continue a level of sales for the others, well, they have done it,

and that is good business and that is why this is,

no doubt, an effective company which exports its

products overseas and all the rest of it and it is

a widely known product range.

McHUGH J:	You started off with fairness and justice and now we are in -
MR ELLICOTT:	I know we are, Your Honour, but that is what happens when judges speculate about facts and, with
the very greatest of respect, what we have here, we say - and I am sorry for being lighthearted about
that, Your Honours, but on this particular issue,
just to take the point, we are simply saying, be objective about it; the Court has to be objective in the sense of looking at the article, seeing that
there are clear differences, and asking the
question, which is a very simple question, "That is
where the patent is used, that is where it is not,
what could we have done with this?" They are not

Dart(2) 119 4/12/92

intermingled or commingled in any sense whatever.

In some of the American cases they even go into the

interstate transport question of intermingling and

commingling as an example of the type of problem

that one gets in this type of case.

In paragraph 28 there is a statement which is

not quite accurate and that is, although they were

not sold separately, Your Honours. That is not

accurate in fact. So, Your Honours, we would ask

that Your Honours give special leave in relation to

the cross-appeal and that Your Honours will allow

the cross-appeal, and those are our submissions.

MASON CJ: Yes, Dr Emmerson.

MR EMMERSON:  If the Court pleases, I will first deal with

some matters in reply on the principal appeal. For

the most part we join issue with the submissions

that have been made by my learned friend. We

would, however, add the following observations: so

far as incremental costing is concerned, we dispute

the proposition that incremental costing gives rise
to difficulties. It is our submission that the

difficulties to which my learned friend alludes are

difficulties which arise only if you seek to charge

overheads which are not increased by the infringing

activities with a proportion of the infringing

activities.

That is where the difficulty arises. In other

respects, in our submission, incremental costing is

a simple and straight forward exercise. You ask

the cost of manufacture or purchase of the goods

and you ask what is received by way of sale. That

is the principal exercise that you do. So, in our

submission, it is just simply wrong to say that

incremental costing, somehow, makes an analysis

more difficult.

Secondly, on that point, we would say that, in

one which is used to deny my clients the account to	any event, if that is a difficulty it should not be
which they are entitled. As my learned friend has
pointed out, the difference between the case in
which his clients would be allowed to use
absorption costing and, therefore, use revenue from
infringing activities to defray general overheads
leads to a result which very greatly reduces the
amount which would be available to my clients as a
result of the accounting.
Secondly, on incremental costing, my learned friend tended to suggest that incremental cost
accounting is not an ordinary procedure. I had
already submitted that it is a procedure which is
well known where one is concerned with determining

Dart(2) 120 4/12/92

what is gained by a particular product line. I

would refer the Court to two brief passages in the

evidence on this, in each case it is evidence of

Mr Whitear who was an expert called on behalf of my

client and at page 220 Mr Whitear is being asked

about management accounting in cross-examination by

Dr Jessup and he is asked, at the top of the page:

Q. Is it not a matter for the company itself,

to decide what product groups it will have

and how it will allocate them?

A. Yes.

Mr Whitear adds:

But there again, it is what comes back to

our point, isn't it. That the company is

free, for its management accounting

purposes to allocate its costs in

whichever way it sees fit, but that

doesn't - won't result in producing a

profitability statement which will show

the profits earned on selling these

infringing products.

So, Mr Whitear's evidence was that management cost

accounting was simply not of assistance in the

present case. At pages 230 to 231, Mr Whitear was

asked in re-examination, about certain warehousing

costs and his attention was drawn to question:

Q. And it was put to you that under those

circumstances it would be appropriate to

allocate the wages of that employee across

each of those products, and you referred

your answer to the true incremental profit
issue - I am not sure that I have put the

context exactly correctly, but what did

you mean when you referred to the true

incremental profit?

A.	What I was intending to mean was that if
you want to know the additional profit 1e

company has made as a result of selling a

new product, you should not allocate

warehouseman's costs, which would have

been incurred in any event even if the product had not been sold. You should only look at the gross revenue from the

sale of any product, and any additional

expenses that have been incurred which

would not have been incurred, but for

selling this new product.

Q. Is this the concept of marginal cost relevant in this context?

Dart(2) 121 4/12/92

A. This is the concept of marginal cost.

Third, as to my learned friend's submissions

on opportunity costs, it is our submission that

opportunity costs are clearly not outgoings at all.

This is merely another way in which my learned

friend seeks to raise the issue of overheads which

would have incurred in any event.	Mr learned
friend referred to Hungerford v Walker.	I will not
take the Court again to that passage, but

Your Honour the Chief Justice drew a distinction there between what one was doing when one was

looking at opportunity costs and what one was doing

when one was looking at actual profits.

The reference then to opportunity costs, in

our submission, fails to maintain the distinction

which the cases make clear between an account of

profits and damages. Further, on the issue of

opportunity costs, the issue in an account is for
the infringer to account for its gain from its
infringing activities, not merely for the
difference in gain when compared with other

possible activities and, in our submission, the

authorities are clear that fixed costs, or costs

which are not increased, are not here deductible.

The reference then to opportunity costs is,

accordingly, in our submission, quite inconsistent

with what the learned judge in Leplastrier says at
page 593 and with the tenor of the other cases to

which we have referred.

As to the United States authorities, I do not

propose to deal with these point by point. We would say that my learned friend's citation of

those authorities simply shows that they

demonstrate no single approach. There is an

approach which varies from circuit to circuit and

there is nothing that emerges which, in our

submission, would be appropriate for lifting

wholesale and incorporating into Australian law.

Further than that, my learned friend's summary

of the cases chooses cases on some circuits in

which absorption cost accounting has been supported

but ignores ones in other circuits which have

rather supported incremental cost accounting and it

may perhaps be convenient, if it would suit the

Court, if I could just put a list of relevant cases

in written form on that point.

MASON CJ: Certainly.

MR EMMERSON:  If the Court pleases, those are the matters

which we would put to this Court by way of reply.

Dart(2) 122 4/12/92

MASON CJ:  On the appeal?

MR EMMERSON:  On the appeal. So far as the cross appeal is

concerned, we hand up an outline of argument. I

hand up copies for the Court, and copies for our

learned friends, and perhaps if I give the Court a

moment to read through that outline.

MASON CJ: Yes.

MR EMMERSON:  As to the question as to whether this is an

appropriate case for grant of special leave, it is

our submission that it is an inappropriate case for

a grant of special leave. The issues which my

learned friend seeks to agitate are issues which

depend on findings of fact made by the learned

trial judge and not disturbed on appeal to the

Full Court, and it would be our submission that

there is no point of general application which is
raised by my learned friend's argument.

The true view, we say, is that one starts with the legal principle correctly stated by the learned

trial judge that the:

relevant profits are those accruing to the

defendants from their use and exercise of the

plaintiff's patented invention.

The exercise then that has to be carried out is to

determine as a matter of fact what are those

profits.

The approach which, in our submission, has

been maintained by the courts is to first identify

what is the wrongful use of the invention and then

inquire what profit has been made by this use. My

learned friend in his argument referred, for

example, to some trade mark and passing off cases.

The slight difference in the way that the approach

is expressed in the courts between trade mark and

passing off cases on the one hand, and patent cases

on the other, arises from the difference in the

nature of the tort of trade mark infringement or

passing off as distinct from patent infringement.

It is for that reason that certain emphases

appear differently in trade mark and passing off

cases. But the underlying thread is the same in

all cases. It is what profit has been made by the

wrongful use of the industrial property concerned.

In a case such as the present of a patent for an article, the wrongful use of the invention is the

sale of that article and so every sale prima facie

must be accounted for.

Dart(2) 123 4/12/92

The only qualification to that that appears in

the cases is that in some cases there are special reasons to dissect the sale of a patented article

into bits. Again, this is treated as a question of
fact, and we submit that it is correctly so

treated, whether it is proper to dissect the sale

of a single article into the sale of various

components.

Now, that question of fact, whether it was

appropriate to dissect in this case, was considered

both by the trial judge and by the Full Court.	In
each case it was held that there should be no
dissection.

DEANE J:  Dr Emmerson, are there any clear statements in the

cases which support your proposition 6, that is,

that the prima facie position as in 5 and you need

special reasons for 6?

MR EMMERSON:  Yes, Your Honour. We would say that the

reasoning in Colbeam Palmer would support that, and

I was going to take the Court in just a moment to

Colbeam Palmer.

DEANE J: Well, you deal with it in your own way.

MR EMMERSON: Perhaps, though, before going to that, I

should say a little bit about the factual basis in

the present case. The learned trial judge held

that the first cross-appellant had never sold or

made profit from closures independently of

canisters. I would also add, apropos of my learned

friend's observation that the base was somehow a
separate item of commerce, that there was no

finding, and we would say no evidence, that these

bases were ever sold separately.

Further, there was no finding, and we would

say no evidence, that they were somehow

interchangeable with other closures in the

defendant's range. as the findings of the courts below assume, They were, in our submission,	intended to be sold and were sold just with these
closures.

The second point is this, that on the reasons

for the sales the learned trial judge found that
the only feature in the goods sold distinguishing

them from other containers in the first

cross-appellant's range was the press button lid.

That was prominent in the labelling. It was this

distinguishing feature which was added at the

request of retailers and the trial judge inferred

that trade customers purchased press button

canisters rather than canisters incorporating the

other six selling features because they wanted the

Dart(2) 124 4/12/92

patented closure. The Full Court held that it was

open to him to reach the views he did and, in our

submission, that is clearly so and should not be

disturbed on this appeal.

Now, if that is right and the question is

ultimately to be determined as a matter of fact in

each case whether it is appropriate to perform the

dissection, then we have a decision of both the

trial judge and the Full Court that dissection is

inappropriate in this case.

Now, in our submission, the approach which we

say is the correct one was the approach which was

adopted by the court in Leplastrier. There again,

the question was whether one was to characterize

individual sales as being patented machine plus
extras or as being a composite and the court
considered that as a matter of fact, that one had

to see on the facts whether you characterized the

sale as the sale of a single unit or a unit plus

extras. There was a basis on which the trial judge

and the Full Court could find that there was no

dissection in this case and that is consistent with

Leplastrier.

Could I now go to Colbeam Palmer. Colbeam

Palmer is a case which involves one complication: namely that it was a trademark case. But it will

sufficiently illustrate what, in our submission, is

the general approach that one makes in trademark

cases. At page 36 in the second full paragraph on

that page, the trial judge said:

The proper order in this case is, I

consider, that an account be taken of the

profits the defendant ..... by its use as a

trade mark of the word "Craftmaster" -

And in considering what that expression meant, the court at page 44 - just in the long paragraph,

about half way down the page and about ten lines

from the top of that paragraph: 

If that mark was for him an inducement, not

necessarily the sole inducing cause, of his

buying the goods, the infringing seller is

accountable to the owner of the mark for the

profit he made by the sale.

The reason why His Honour adopted this

approach was that in contrast with the patent case

where the selling of the object is an infringement,

in a trade mark case it would have been open to the

defendants to sell the painting sets but without

the trade mark on it. So the question is: how do

you deal with the addition of the trade mark?

Dart(2) 125 4/12/92

The approach taken by the learned judge was

not, as my learned friend would tend to suggest, to simply ask whether the trade mark contributed extra value to the sale, but whether it could properly be

said that there was a sale because the trade mark

was an inducing cause, even if not the sole

inducing cause.

In Colbeam Palmer the Court also referred to

other types of intellectual property. At page 37, it referred to patent case. If one takes the long paragraph at the bottom of the page and the fourth sentence in that paragraph:

If the infringer of a patent sells an article

made wholly in accordance with the invention
and thereby obtains more than it cost him to

make or acquire it, he is accountable for the

difference as profit. That is because he has

infringed the patentee's monopoly right to

make, use, exercise and vend the invention.

His Honour then goes on to deal with a special

difficulty which can occur in patents for

improvements and he mentions Goodlet v Fowler down

at the bottom of the page. A little further on at

page 42, in a paragraph beginning half-way down the

page, His Honour says this:

What the defendant must account for is

what it made by its wrongful use of the

plaintiffs' property. The plaintiffs'

property is in the mark, not in the painting

sets. The true rule, I consider, is that a

person who wrongly uses another man's

industrial property - patent, copyright, trade

mark - is accountable for any profits which he

makes which are attributable to his use of the

property which was not his.

Now, in our submission, that is a useful statement

and the approach taken by His Honour is to look at

are special reasons for dissecting. the infringing act and not to dissect unless there

MASON CJ:	Is that entirely consistent with what appears in the next paragraph, going over to the top of
page 43?

MR EMMERSON:  Yes, Your Honour. Then United Horseshoe case

is a case in which what was sold was not, in fact,

the patented object. It is one of a line of

process patent cases, as is Siddell v Vickers.

There, what one has is methods of manufacture. In

the case of a patented object, the approach we

would say that one takes is prima facie the sale is

Dart(2) 126 4/12/92

an infringement and it is for that that an account

must be taken.

If you conclude that, really, there is a

reason either because there is an improvement

patent or a part of the machine which is to be

regarded in a proper sense as being separate then

one may perform some apportionment. That is why we

say that this is a question of fact and we do not

seek to propound a rule which will encapsulate all

the varieties of circumstances which can occur in

patent cases.

It is sufficient for our purposes simply to

say that prima facie the approach taken by the

courts is to look at the infringing act, to ask

what are the profits made by that infringing act
and if there is some reason which we would say

would be of a special sort then one can make some

apportionment.

DAWSON J: Then, the beginning of the third paragraph on

page 43 is more useful to you, is it not?

MR EMMERSON:  We would say that is of great assistance to

us, yes, Your Honour.

If one man makes profits by the sale of

some thing, and the whole thing comes into existence by reason of his wrongful use of another man's property in a patent, design or

copyright, the difficultys disappears and the

case is then, generally speaking, simple.

And we would say that, on the facts as found by the

trial judge and the Full Court, is this case.

So, what one looks to see is how the thing, as

an article of commerce, comes into existence and if

it comes into existence as a result of

infringement, then the whole profits are to be

accounted for.

Now, in the present case, the thing which

distinguishes the infringing containers from the
other containers in the range, is simply the use of
the press button closure which is, in our
submission, the critical feature.

The approach that we have sought to put here of first identifying the wrongful act and then

compelling the defendant to account for the whole

is supported, in our submission, by Lever v Goodwin

which I have already cited at page 7, by Peter Pan

which I have already cited at page 58 and by the

Teledyne case which I have already cited at page

204.

Dart(2) 127 4/12/92

If the Court pleases, I am conscious of the

time and I think that it is possible for me to

complete what I have to say, at least in summary

form, in just a very few minutes, if that would be

a convenient course for me to adopt with the Court.

MASON CJ: Yes, but do not feel, Dr Emmerson, that the Court

is constraining you to do that. But we would be

happy to sit on for a few minutes if you could

conclude but do not, as I say, feel that you are

under any constraint.

MR EMMERSON:  I am indebted to Your Honour for that. On my

learned friend's oral submissions, in support of

the cross appeal, one of the matters that he raised

was a suggestion that my clients had claims in

their patent which would cover the whole container

but had elected not to pursue those claims in this

case.

MASON CJ:  Dr Emmerson, it is almost certain that

Mr Ellicott will want to reply. That being so, it

might be better if we did adjourn now.

MR EMMERSON: If the Court pleases.

MASON CJ: You do want to reply, do you not, Mr Ellicott?

MR ELLICOTT: Yes, but it would not take me more than two

minutes, Your Honour, if it is of any interest to

Your Honours.

MASON CJ:	I do not know whether it will be of interest until I hear it, Mr Ellicott.
MR ELLICOTT:	No, if it is of any interest to know that I

will only take two minutes. Your Honours may not

believe it but that is another matter.

MASON CJ:  I must say I am a little sceptical. Dr Emmerson,

do you think it is worth persevering with.

MR EMMERSON: It is probably not, Your Honour. It is

probably more satisfactory for me to rearrange some

of the things that I was going to say and put them

succinctly over an adjournment.

MASON CJ: Yes, I would think so. We will adjourn until a

quarter past two.

MR EMMERSON: If the Court pleases.

AT 12.51 PM LUNCHEON ADJOURNMENT

Dart(2) 128 4/12/92

UPON RESUMING AT 2.16 PM:

MASON CJ: Yes, Dr Emmerson?

MR EMMERSON:  If the Court pleases, I wanted in resuming to

try to state succinctly a major difference between

the position that we adopt in the matters raised by

the application for cross appeal and the position

adopted by my learned friend. The first of the

grounds my learned friend seeks to put in his

notice of appeal is that:

The Full Court erred in principle in holding

that the canisters ..... of the press-button

seal products ..... did not contribute to the

value of the products in the calculation of

profits payable by the Respondents to the

Appellant.

So the test which is sought to be brought forward

here is a test as to whether the canisters

contributed to the value of the products. The

question is whether that is the correct test that

should be applied in the taking of .an account or

whether the approach adopted by the learned trial

judge and the Full Court on this aspect of the case

is to be regarded as correct.

In our submission, the question is not whether

some parts of the article that is sold contribute

to that article, but rather that one approaches the

matter by looking at what is sold as an article of

commerce. You first ask whether that is in truth

to be regarded as being made up of separate

articles of commerce.

That was the sort of question which was

considered in Leplastrier. If it is not, then you

ask broadly whether what is being sold is the

result of the use and exercise of the plaintiff's

patented invention.

Now, this approach, in our submission, has been adopted by the various cases. Depending on

the facts of the cases, different results get

reached but the approach, in our submission, is
never to ask whether something contributes in the

sense in which my learned friend seeks to put it,

but rather to look at the matter more broadly.

Now if I could illustrate that, first by

reminding the Court, but without detailed citation,

that in Leplastrier the question was whether what

was sold was to be properly characterized as sale

Dart(2) 129 4/12/92

of a unit or as sale of a unit plus extras so that
you dissected out the unit from the extras.

It is clear, in our submission, that the reasoning of the court in that case was looking at

the question as a matter of commerce. It was not

simply asking the mechanical question, could the

various bits which are mentioned by the court there

be physically removed, but it was looking at the

way one characterized the thing.

Similarly, in our submission, in Colbeam

Palmer, there the case was concerned with a trade

mark and the article itself was a painting set, and

the test that was applied by the learned judge at

page 44 is one which I have already read, but I

would read the sentence again:

If that mark was for him -

that is to say the purchaser -

an inducement, not necessarily the sole

inducing cause, of his buying the goods, the

infringing seller is accountable to the owner

of the mark for the profit he made by the

sale.

It is important to note the question that was not being asked by the Court there. The Court was not

asking: by how much can it be said the commercial

value of the painting set is improved by the use of

the trade mark? Rather, what is being asked is

whether the article of commerce, namely the

painting set with its trade mark, was to be

regarded as sold because of the presence of the

trade mark in the sense that the trade mark was an

inducement, not necessarily the sole inducing cause

of the sale.

Applying that approach to the findings of fact

in the present case, the learned trial judge held

at page 253 of the appeal book, it could be

inferred:

that trade customers purchased press button

canisters rather than canisters incorporating

only the other six selling features because

they wanted the patented feature.

So this is a passage which makes it clear that

commercially the articles were sold because of the
patented closure; that was, to paraphrase

Sir Victor Windeyer, an inducement or possibly the

sole inducing cause for the sale.

Dart(2) 130 4/12/92

Now, that approach of asking as the threshold question whether you include the article of

commerce in your account is, in our submission, the

threshold question which the cases show, and it is

distinct from asking the question that my learned

friend would invite the Court to ask of whether, by reason of the particular patented feature, a higher

price is or is not obtained.

Now, this approach permeates the whole of

Colbeam Palmer. If I could just return briefly to

a passage about which Your Honour Mr Justice Dawson

asked me a question at page 43. It is the first

two sentences in the paragraph beginning a little

over half-way down the page:

If one man makes profits by the use or

sale of some thing, and that whole thing came
into existence by reason of his wrongful use
of another man's property in a patent, design
or copyright, the difficulty disappears and
the case is then, generally speaking, simple.

In such a case the infringer must account for

all the profits which he thus made.

Now, it is clear, in our submission, that the

learned judge in that context is meaning that the thing owes its existence as a separate article of

commerce to the infringement of the patent, the

design or the copyright. And that, in our

submission, is the true approach.

Similarly, in the Peter Pan case - this was a

case, the Court will recall, of confidential
information, and in that case confidential

information was used in the manufacture of

brassieres and the court said, at page 58, line 44:

As regards the second point, the effect

of my judgment is that the manufacture and

sale of brassieres of styles U.15 and U.25

involves confidential information, and

therefore the defendants are not entitled to
manufacture those styles.	From that it

follows as a matter of right that the
defendants are entitled at their option to

claim damages in respect of such invasion of

their rights as has already taken place, or
alternatively, an account of the profits made

by manufacture and sale of brassieres in

invasion of their rights.

So the threshold question is: is this manufacture

and sale an infringing act? When that is answered

in the affirmative, what is to be accounted for is

the profits made by that manufacture and sale? The

court does not inquire were these garments made

Dart(2) 131 4/12/92

more valuable by reason of the confidential

information. That sort of apportionment is simply

not present there.

Similarly, in the various examples that

His Lordship gives in the passage running from
page 59 to 60, the question again is: what is the

infringing act and then an account is ordered of

the profits realized by reason of the infringing

act. And so the short form of question put at the

top of page 60:

what has the plaintiff expended upon

manufacturing these goods?

I think His Lordship there means defendant.

What is the price which he has received on

their sale?

And, again, the question is not put in the form:

by how much does the commercial value of the

article concerned increase by reason of the

wrongful use of confidential information?

If I might take the Court to some of the

submissions put by my learned friend in the course

of his address this morning, it is perhaps
convenient to go to the cross appellant's outline

of argument beginning at page 2, dealing with first

what is described as the proper test. My learned

friend says that one assesses what profits flow

from the use and exercise of a patented invention

by:

(i) to examine objectively what the nature of

the product is and how it is composed -

We would not criticize the requirement that you

start by determining the facts. Then he says:

(ii) to determine whether any part of the

product does not represent the invention and

whether the product as a whole could therefore

be made without the infringing item -

In our submission, confusion enters at that point

because it all depends on what you mean by the
product. If the product is such that, as in the

present case, it is a product for which the

characterizing feature is the infringing closure,

then that product could not be made without the

infringing item. We say that properly so looked

at, that would be right. But if my learned friend

is seeking to say, "Could you remove the lid and

perhaps sell the underneath part without it, or

could you put on a different lid", that, in our

Dart(2) 132 4/12/92

submission, is not the question asked in the cases

at all.

The third limb of the test that my learned friend puts is to consider whether profits would

have been made by the defendant had he employed

some alternative component in the product other

than the invention. Now, in our submission, the

notion of an alternative method is not one which is

generally found in the taking of accounts. It is

found in a limited class of cases by reason of the

special character of the industrial property
concerned in those cases, and that class of cases

consists of cases in which the actual article

itself is not an article the sale of which

constitutes a violation of someone's industrial

property.

It is a case, then, in which the problem goes

back earlier and Siddell v Vickers is a very good

example of that class of case. That was a case in which the patent was not a patent for the articles

that were eventually sold, but rather for an

improved method of manufacture of those articles.

Now, the question then was, what profit has the

defendant made by his infringing activities, namely

the use of the infringing method of manufacture.

And it is in that context that the dispute arose

and the dispute between the parties was that the

plaintiff said that what you did was compare costs

of current manufacture with costs of manufacture

under the old procedure. And what the defendant

said was what you compared was costs of current

manufacture with the best modern practice.

Those are questions we would accept which can

arise where the violation of industrial property is

in the use of a particular method which has as its

benefit a cost saving, although the end product is

the same as it would have been if you had not used

that method. But that is way apart on its facts

from the present case where the article itself, its

manufacture and sale, involve an infringement of

patent.

We would, therefore, take issue with my

learned friend's submission in paragraph 10 of his

outline, that the learned trial judge should have

considered what the product might have been like if
a non-infringing substitute had been used instead
of the press button lid. Now, in our submission,

that is not what the cases tell you you do where

you have a patent for a particular patented article

as distinct from something which is used on the way

to that patented article.

Dart(2) 133 4/12/92

Next we would take issue with my learned

friend's submission that one does not take into

account what he calls "consumer preferences." The

truth of the matter is, in our submission, that one

does look at the infringing article where one is

concerned with the sale of infringing article, and

ask about its status as an article of commerce and

it does make a difference to ask "Well, what is it

that makes this distinctive as an article of

commerce?"

Now, that is the answer to my learned friend's

question as to what happens if you have something

sold which has two parts, each of them subject to a

patent. Again one looks at the article sold and

one asks, as a matter of fact, how you characterize

that article. But that is simply not this case,

because the facts which have then found by the

learned trial judge and upheld on appeal make it

clear that the characterizing feature of the

article in the present case was the infringing lid.

Similarly, in our submission, the use of

United States authorities on commingling doctrine

is of no help. My learned friend says, in

paragraph 16 of his summary:

The product can fairly be treated as two

separate items. The base and lid can readily

be physically separated and the base has a use

and a commercial value independently of the

lid.

That is, as to the first part that they can be

physically separated, irrelevant; as to the second

part, we would say that that is simply not

supported by the findings of the learned trial

judge or the approach taken in the Full Court. The

trial judge and the Full Court both accepted that

what characterized the infringing products was the

lid and we say that is a finding of fact which

should not be disturbed.

Similarly, in paragraph 18, my learned friend

criticizes the Full Court for saying that

Mr Justice King did not make a:

finding that the press-button feature was

something "without which this particular

container would never have been produced at

all, II

In our submission, that, in substance, is what he

did find, that the lids were never sold other than

in conjunction with the canisters, that this was

the distinguishing feature, that this was why the

trade customers purchased the goods. So this

Dart(2) 134 4/12/92

particular container, as an article of commerce,

would not have been produced at all without the

lid.

Similarly, on the price differential, in our

submission, that amounts to an attempt to reopen a

matter of fact which was debated before the court

at first instance and before the Full Court and it

is simply a question of fact and there is no reason

to disturb the finding that was made.

Next, as to the alleged choice made by the patentee, something must be said about that because

it is asserted in essence that my clients could

have sued for infringements of a combination of a

lid plus container but chose to sue in respect of
the lid only and therefore it would be unfair or

inequitable if they were entitled to recover

profits on the claims that were infringed.

The truth of the matter is that if one looks

at the claims in the specification which my learned friend has handed up, claims 3 and 5 are subsidiary

claims to, in each case, putting special limiting

features on the container. They are not just

simply: we claim a lid as defined together with a

canister but, in the case of claim 3, which my

learned friend relies on, it is referring to a jug.

You have got to include in the container a pouring

spout and venting slot, which are not present in

the infringing articles; and similarly, in claim S,

there is a requirement about:

opposed locking means interconnectably
overlapping to secure said top and main walls

together.

So that is a limitation on a closure member.

Now, in our submission, it is quite wrong to

say that we could have but elected not to proceed to claim as an infringement of claims 3 and 4 the

particular canisters with which they are concerned.

They had a special feature which is not present

here. But none of that touches the equity of our
recovery for the infringement that in fact did

occur.

As to the alleged absurdity proceeding from

apportionment, if there had been a separate

contained owned by a different person again, in our

submission, on the approach that we would take

where you look at this as a matter of fact and ask

whether, in truth, where the object infringing the

two patents is sold, whether the relevant profits

are those accruing from the use and exercise of the

plaintiff's patented invention. Now, in those

Dart(2) 135 4/12/92

circumstances, the answer may very well be that one

of the patented features is not what makes a
product a useful article of commerce and if that be
the fact, then the owner of the other patent is

entitled to recover an account of the whole of the

profit. But all of this, as I stressed in opening,

is a matter of fact.

Another matter of fact which should be

stressed is this:  my learned friend in some of his

submissions seemed to suggest that the bases of
these canisters were sold on their own or were sold

with other tops. In our submission, there is no

evidence to support any of that and, indeed, when
one looks at the two one finds that the shape of
the canister is adapted for use with the particular

closures that we have here. So, that basis for

saying that the court was wrong in concluding that

these were not separate items of commerce must, in

our submission, fail on the facts.

So on the subject of facts, there is one

further matter to which my learned friend alluded

several times: the alleged innocence of his

client's infringing activities. His client is not

an innocent infringer, as that matter is understood

under Australian law. Manufacture and sales of the

infringing canisters began in late 1980. This

present action was commenced in 1981, and by far

the bulk of infringing sales has taken place during

the pendency of the present action.

So it simply cannot be said that my learned

friend's clients did other than go ahead and

manufacture and sell these canisters in full

knowledge not only of the existence of the patent,

but of the claims that were being made against

them. This, in our submission, is very far from
the standard notion of an innocent infringer; it

is more the action of a party that chooses to take

its chance. In this case, having taken its chance,

it has been held and upheld on appeal that its
sales were infringing sales.	So there is no basis

there either on which it would be proper for my

learned friend to invite the Court to apply any

special rules developed under United States law in

respect of innocent infringements.

If the Court pleases, I would just give one

evidentiary reference to something which is not in

the appeal books but was raised by my learned

friend. In the patent infringement action, there

was expert evidence from an independent expert,

Mr Bayly, who deposed at page 1128 of the

transcript that closures were designed either for

specific containers or designed together with

containers so that they match. So that the

Dart(2) 136 4/12/92

evidence was against my learned friend's suggestion

of interchangeability in the present case.

If the Court pleases, I have assumed, without reading, some parts of our outline. We would be

content to rely on the principles as stated in that

outline and in the absence of any matter which the

Bench is of the view I should enlarge, then I do

not wish to add anything more by way of response to

my learned friend's application for leave to appeal

and his substantive argument.

MASON CJ: Thank you, Mr Emmerson. Mr Ellicott?

MR ELLICOTT:  Your Honours, on that last matter, my friend

referred to some evidence. His Honour, of course,

in no way relied on that evidence as part of the

proceeding below and therefore I submit that does

not assist my friend.

On the question of innocence, I was not saying, of course, that my clients were innocent in

the sense of our own Patents Act, I was drawing a

distinction between the deliberate infringer and

our own case which would not be deliberate

infringement - - -

DAWSON J:	You said they were not guilty of villainy.
MR ELLICOTT:	That is right. We are in the situation where

we believed that we were not infringing, or

alternatively, strongly believed that their patent

was invalid, but we need not go into that. But

that is the category that we fall in - - -

MASON CJ: A vigorous but not deliberate infringement.

MR ELLICOTT:  Infringement, Your Honour, as it turned out,

but	not action that was done that was	mala fide in
the	sense that we wilfully infringed.	It was quite
the	opposite. In other words, we had	advice.

Your Honours, my friend relied on

Colbea.m Palmer. There are some passages on

pages 43 and 44. I am sure, Your Honours, my

client was not amused when the verdict went the

other way. However, that is another matter. At

page 43 and 44 in Colbeam Palmer, a passage in

which Peter Pan is referred to - - -

MASON CJ: Yes, the second half of 43.

MR ELLICOTT:  Yes, and my friend did not read that, but I

ask the Court to read it, but I particularly wanted

to refer to Peter Pan because it does highlight the

difference and it is the last page of Peter Pan and

it is in volume 2 and it is case D9.

Dart(2) 137 4/12/92

It rather points out the difference between

this case and our contentions and what my friend

says this case is, and his contentions. In the

very last paragraph His Lordship said:

I should, I think, mention that one of the cases cited to me by Mr Tockey was Siddell

v Vickers 9 RPC 152. In that case on the

particular facts of the case the Court of

Appeal laid down that "The true test of

comparison was with what the defendants would probably have used instead of the invention -

page 60, Your Honour.

MASON CJ: Yes.

MR ELLICOTT:  Now that is the part, the passage that I

referred Your Honours to this morning in

Siddell v Vickers, and counsel in that case was

trying to make use of it. Now, His Lordship said:

"That means only this, that the defendants

could have manufactured the product in

question by other means, but were able to

manufacture more economically by making use of

a particular appliance which they were not

entitled to use. The position there seems to

be wholly different from that in the present

case where the manufacture of the article in
question of itself involved the use of the
confidential information and the defendants
could not have manufactured that article at

all without the use of the confidential

information. So again it seems to me that the

proper order for an account is in the terms

which the plaintiffs have put forward, which

is the time honoured form, and I do not see

myself any reason why that form should not be

adopted.

That is not a rejection of the test, the test still

stands and it is one that is applicable to this

case. It was on that basis that His Honour

Mr Justice Windeyer distinguished for the matter in

Colbeam Palmer at pages 43 and 44.

My friend tried to use his statement in the

middle of 44, that is Mr Justice Windeyer's

statement, to this effect:

If that mark was for him an inducement, not

necessarily the sole inducing cause, of his

buying the goods, the infringing seller is

accountable to the owner of the mark for the

profit he made by the sale.

Dart(2) 138 4/12/92

Your Honours, trade mark, of course, has to do with

attracting purchase. That is different to the use

of an invention. It may be an attractive feature

but trade mark is in the area of inducement of

purchasers whereas the patent is quite distinct in

intellectual property. It is an invention, it may

be said that it will attract a purchaser but it is

the invention which is used and then vended which

is the offence to the intellectual property. That
is why one cannot readily take that passage and

apply it to a patent case.

This is not, we would submit, a matter of

characterization. You do not take a broad

characterization of the product and say, "This is a

press button seal container". That is not only an

over simplification, it is just plainly wrong in

terms of asking the question which has to be asked,

namely: to what extent has the invention been used

in the production, et cetera, and sale of this

product? That, we submit, is the true question and

I cannot add anything to what I have already said

in relation to it. If the Court pleases.

MASON CJ: Thank you, Mr Ellicott. The Court will consider

its decision in this matter and we will adjourn

until 10.15 am on Tuesday next.

AT 2.58 PM THE MATTER WAS ADJOURNED SINE DIE

Dart(2) 139 4/12/92