Durack, Michael James v Associated Pool Builders Pty Ltd

[1983] FCA 384

Re: MICHAEL JAMES DURACK
And: POOL FABRICATIONS PTY. LIMITED
And: RODNEY WEBB
And: POOL FAB (SOUTHSIDE) PTY. LIMITED
And: ASSOCIATED POOL BUILDERS PTY. LIMITED
No. QLD G120 of 1983
Patents - Practice

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Bowen C.J.
Fox J.
Fitzgerald J.

CATCHWORDS

Patents - Petty Patent - Threat of legal proceedings by patentee - Infringement alleged - Validity of petty patent challenged - Combination petty patent - Alleged want of novelty and obviousness.

Practice - Interlocutory injunctions - Balance of convenience - Undertakings not to make threats previously given in relation to an application for a standard patent covering the same invention - Difficulty for respondent to establish damage suffered if injunction not granted - Appellants' freedom to notify existence of petty patent.

Patents Act 1952 - ss.45A(2), 49A, 68A, 68B, 121, 122.

HEARING

BRISBANE

#DATE 21:12:1983

ORDER

1. The appeal be dismissed.

2. Michael James Durack. Pool Fabrications Pty. Limited. Rodney Webb and Pool Fab (Southside) Pty. Limited. pay to Associated Pool Builders Pty. Limited its costs of the appeal.

JUDGE1

An interlocutory injunction was granted in the Supreme Court of Queensland on 6 December 1983 in action No. 3155 of 1983. Upon the respondent's undertaking as to damages and that it will not "represent by letters, circulars, advertisements or otherwise (except legal proceedings) that Petty Patent No. 533818 is invalid", Matthews J. ordered that each of the appellants be restrained until the trial or further order from threatening the respondent or any other person or persons with any legal proceedings in respect of any alleged infringement of, inter alia, that petty patent. The appellants appealed to this Court and the appeal was expedited. At the conclusion of the hearing on 13 December 1983, the appeal was dismissed with costs. No separate point was made on the appeal concerning the form of the order, the inclusion in it of reference to other patents which may hereafter be granted, or the making of the order against some of the appellants. The Court stated when it dismissed the appeal that its reasons for judgment would be published in due course.

The second appellant and the respondent are rival manufacturers of swimming pools which are sold in kit form to distributors. The second appellant's product is known as a "Pool Fab" pool and the respondent's product is known as a "Tracey Wickham" pool. The respective pools are not materially dissimilar. A pool constructed by use of either kit consists of prefabricated wall sections held in place by prefabricated coping sections and a steel cable. The pool is usually set into a cavity in the ground on a concrete base. The inside of the pool comprises a removable vinyl liner which covers the base of the pool and the internal walls of the pool to the coping.

The first appellant is a director of the second and fourth appellants. The fourth appellant is a distributor of the second appellant's product. The third appellant is an employee of the fourth appellant. No point concerning parties was made before us; all the appellants were represented before us by the same counsel, and they were all represented by the same counsel before Matthews J.

Action No. 3155 of 1983, relates to threats allegedly made in reliance upon Patent Application No. 64857/80 and was commenced by the respondent on 23 June 1983. The pending application was for a standard patent and was made by the second appellant on 3 December 1980. It was accepted by the Patents Office on 24 June 1983, but the acceptance was not advertised until 18 August 1983. In response to written requests made on behalf of the respondent, the appellants, by letter from their solicitors dated 7 July 1983, gave the following undertakings until the hearing of action No. 3155:

"1. That the First and Second Defendants either personally or by their servants or agents and each of them will not threaten persons who act as agents or distributors of the Plaintiff's swimming pool kits with an action or proceedings in respect of any alleged infringement of the alleged patent rights of the Defendants or any of them.

2. That the Defendants and each of them either personally or by their servants or agents will not threaten purchasers or potential purchasers of swimming pool kits manufactured by the Plaintiff with an action or proceedings in respect of any alleged infringement of the alleged patent rights by the Defendants or any of them.

3. That the Defendants will not represent to any other person that the Plaintiff or its distributors or customers are or will be in breach of any alleged patent rights held or to be held by the Defendants or any of them."

The undertakings were not marked as being "without prejudice", and were referred to openly in these proceedings.

Notice of opposition to the grant of a patent on application No. 64857/80 (serial No. 531391) was given on 16 November 1983 by Mr. Geoffrey James Ramsey, a director of the respondent, on the following grounds: "(e) that the invention so far as claimed in any claim, was published in Australia before the priority date of that claim;

(g) that the invention so far as claimed in any claim, was obvious and did not involve an inventive step, having regard to what was known or used in Australia on or before the priority date of that claim;

(h) that the invention so far as claimed in any claim was, before the priority date of that claim, otherwise not novel in Australia; and

(i) that the complete specification does not comply with requirements of Section 40 of the Act."

The priority date attaching to the application for this patent is 3 December 1979.

On 24 August 1983, the second appellant made an application for a petty patent (No. 18351/83). There is evidence that the claim of the petty patent is "substantially identical" or "virtually identical" with claim 8 of the specification for the standard patent (No. 64857/80). The claim is for a combination patent. The application was accepted on 22 November 1983. It was notified on 28 November 1983 and (as No. 533818) was granted, sealed and advertised on 1 December 1983. The claim defining the invention is as follows:

"(57) Claim 1. A liquid retaining structure comprising: a plurality of preformed wall panels arranged in edge to edge relationship to form on a base a wall member of predetermined shape with at least one concave curve in an outer perimeter; said wall panels being maintained in a desired abutting edge to edge relationship at their respective lower edges by lower retaining means and at their respective upper edges by a plurality of cast concrete coping members; a tensile member associated with said coping members adjacent the upper edge of said wall member such that in use said tensile member undergoes tension as a result of inwardly or outwardly directed forces on said wall member, said coping members act in compression as a substantially continuous beam to withstand flexure from said inwardly and outwardly directed forces on said wall member, said coping members act in compression as a substantially continuous beam to withstand flexure from said inwardly and outwardly directed forces on said wall member; and, a membrane liner releasably secured within said structure by liner retention means attached to an inner face of said wall member adjacent an upper edge thereof, said membrane liner being constructed from flexible polyvinyl chloride sheet plastics material."

For present purposes it is accepted that the priority date of the petty patent is the same as that for the the standard patent application (see s.45A(2) of the Patents Act 1952 ("the Act")).

A defence was filed in action No. 3155 of 1983 but, so far as appears, no further steps were taken in that action until 2 December 1983. On that date the second appellant had caused an advertisement to appear in the "Courier Mail" newspaper, a morning newspaper circulating daily in Brisbane and elsewhere in Queensland. Relevant parts of the advertisement are as follows:

"1.POOL FABRICATIONS PTY. LTD has had granted to its Letters Patent No. 533818 on its prefabricated concrete vinyl lined modular pool concept. Letters Patent No. 533818 is dated 1/12/83. 2.POOL FABRICATIONS PTY LTD. wishes to protect its $800,000.00 investment and the seven (7) years to research in the development of its product. Pool Fabrications Pty. Ltd. also wish to protect the investments of its fifty (50) franchise dealers and licensees both in Australia and overseas. The granting of Letters Patent No. 533818 gives Pool Fabrications Pty. Ltd. and its franchisees and licensees the exclusive right to construct swimming pools in accordance with its patented system. 3.POOL FABRICATIONS PTY. LTD. are aware of two swimming pool manufacturers which make and sell and/or supply componentary for the construction of prefabricated concrete vinyl lined modular swimming pools on the same concept as set out in Letters Patent No. 533818. Those manufacturers are:-

(a) ASSOCIATED POOL BUILDERS PTY. LTD. TRADING AS TRACEY WICKHAM POOLS;

(b) PIONEER POOLS PTY. LTD. Pool Fabrications Pty. Ltd. also believe that Geoffrey James Ramsay (sic.), and a firm calling itself Pool Filtration and Equipment have been conspiring with Associated Pool Builders Pty. Ltd. (TRACEY WICKHAM POOLS) to mislead pool dealers into believing that Pool Fabrications Pty. Ltd. would never obtain a Patent on these pools. If you believe that you have been innocently duped into paying for a dealership which now must cease, please let us know in writing at our head office. See the list of authorised Pool Fabrication Pty. Ltd. dealers, anyone not on this list purporting to sell the same product is infringing our patent. Legal proceedings have been commenced against Associated Pool Builders Pty. Ltd. for breach of confidential information necessary to construct a swimming pool in accordance with the now patented system of Pool Fabrications Pty. Ltd."

It is not disputed for present purposes that the document constituted a threat of legal proceedings within the meaning of s.121.

On the same day the respondent obtained ex parte an interim injunction in the Supreme Court of Queensland. This injunction in form related specifically to the standard patent application, and to "any other patent application to which the defendants or any of them claim to be interested".

The present notice of motion was filed on 5 December 1983. It does not refer to the petty patent. The injunction under appeal was granted on 6 December last, and does refer to the petty patent.

The statement of claim has not been amended to refer to the petty patent, or the threats giving rise to the present application for an interlocutory injunction. Something will have to be done to put the proceedings in order. In the meantime we have considered the matter on the basis on which it was argued. as if the current proceedings came within action No. 3155 of 1983.

We have referred to the content of the injunction granted. It should be explained that the undertaking set out has reference to evidence from which it is proper to infer that in November 1983, the respondent publicly asserted that the second appellant did not hold and would not obtain a valid patent which would comprehend the respondent's pool. There was also uncontroverted evidence that the respondent's product and advertising is copied from that of the second appellant.

We understand the debate before the learned Judge revolved around the petty patent and so it has been before us. The relief at present sought is set in the context of s.121 of the Act, sub-sections (1) and (2) of which read:

"121. (1) Where a person, by means of circulars, advertisements or otherwise, threatens a person with an action or proceeding for infringement of a patent, or some other like proceeding, then, whether the person making the threats is or is not entitled to or interested in a patent, or is or is not interested in an application for a patent, a person aggrieved may bring an action against the first-mentioned person and may obtain a declaration to the effect that the threats are unjustifiable, and an injunction against the continuance of the threats, and may recover such damages (if any) as he has sustained, unless the first-mentioned person satisfies the court that the acts in respect of which the proceedings were threatened constitute, or, if done, would constitute -

(a) an infringement of a patent in respect of a claim in the specification which is not shown by the plaintiff to be invalid;

(b) an infringement of rights arising under section 54C in respect of a claim in a complete specification that is not shown to be a claim that would be invalid if a standard patent had been granted in respect of the complete specification; or

(c) an infringement of rights arising under section 54D in respect of the claim of a petty patent specification that is not shown to be a claim that would be invalid if a petty patent had been granted in respect of the petty patent specification.

(2) The mere notification of the existence of a patent, or of an application for a patent, does not constitute a threat of proceedings within the meaning of this section."

This is not a section which grants a right, or provides an invitation, to make threats, even to the proprietor of a standard patent. It is concerned with relief by a person aggrieved when groundless threats of legal proceedings are made.

Some of the appellants' argument seemed to place excessive reliance upon the fact that a petty patent had been granted. One should, however, understand some of the special features of such a patent. The term of the patent, unless extended, is twelve months only (s.68A). There is no scope for opposition to the grant. If the application and specification comply with the requirements of the Act, non-acceptance is to be based upon the positive satisfaction of the Commissioner that there is lawful ground of objection to the grant (sub-sections (2) and (11) of s.49A).

Section 122(1) of the Act gives a defendant to an action under s.121 a right to counter-claim for infringement in that action and s.122(2) gives the plaintiff a right in the action to seek revocation of the patent.

The procedure thus provided for correlates with the language of s.121(1), which negatives action under that sub-section where infringement is proved (by the defendant), unless the plaintiff establishes invalidity. It has been accepted that success of the present motion is conditioned by these considerations of infringement and invalidity.

As we have said, there has been no dispute that there was a threat. There has also been no dispute that there has been an infringement if the petty patent is valid, and not revocable. Two matters of substance have been debated. One is the validity of the petty patent, and the other is where the balance of convenience lies in deciding whether an injunction should go. The decision appealed from is of course a discretionary one, and we have to bear in mind the rules governing appeals in such cases.

The submission in support of invalidity was based on want of novelty and obviousness. Essentially, this came to reliance on anticipation by prior publication and prior user and, to a degree, on common general knowledge. If the priority date of the petty patent could not, in reliance on s.45A(2), be determined as being the priority date of the application for the standard patent (3 December 1979), the evidence would, to say the least, very strongly support the submission. However, we have not been invited to explore the application of s.45A(2) and do not do so. We will accept for present purposes that the priority date for the petty patent is 3 December 1979.

When invalidity is in question, the complexity of the matters raised or to be raised, will often tell against the grant of an interlocutory injunction, and this is of course not the less so when infringement (assuming validity) is admitted, but the course of the present proceedings leaves it more open for a court to come to an interim conclusion on the validity question.

The submission depends upon an understanding of the petty patent. It is, as we have said, a combination patent. On both sides, the matter was argued on broad considerations, and in reliance on very generalised evidence, and the precise way in which the various integers came to constitute an invention was not discussed. The proper construction of the claim was not debated. The patent was treated by counsel for the appellants as having three integers of major significance:

(a) the concave curve provided for in the framework of the pool;

(b) the liner for the pool being removable, and the method of affixing it;

(c) the nature of the liner for the pool (polyvinyl chloride plastic).

At times, the argument seemed to place complete reliance upon the novelty of (b), so far as concerned use in the liquid retaining structure. There is oral and documentary evidence, not always of a very precise or detailed nature, which tends to show that there was anticipation. There is evidence of plans prepared and pools constructed before the priority date embracing, in the one combination, nearly all the integers specified in the claim. There is oral evidence that in at least one case all the ingredients of the claim were used. In so far as there was, in a particular case, an absence of some integer, its use was said to be an obvious addition or variant. It is of course necessary to guard against putting together as a "mosaic", particular aspects of the invention which have been anticipated, in order to defeat a combination patent, but, as we see it, the evidence so far produced goes beyond that situation. One document is a newspaper article, attributed to a "Brisbane architect", which was published on 11 November 1979 (i.e. before the priority date), and which deals specifically with the second appellant's pool.

As the action remains to be heard, it is not desirable that we express views in any detail upon the evidence so far produced. We are, however, satisfied that, going as it does to the question of validity, it is sufficient to support the grant of an interlocutory injunction (see Beecham Group Limited v. British Laboratories Pty. Limited (1968) 118 C.L.R. 618; American Cvanamide v. Ethicon Limited (1975) A.C. 396 and the recent decision of Gibbs C.J. in The Australian Coarse Grain Pool Pty. Limited v. The Barley Marketing Board of Queensland (1983) 57 A.L.J.R. 425). It is unnecessary for us to consider further the question of obviousness.

Some matters of criticism by counsel for the appellants of his Honour's reasons may be noticed. His Honour commented adversely on the fact that the first and second appellants, in face of the opposition to the grant of the standard patent, sought a petty patent to circumvent the opposition. We think the Act contemplates an application for a petty patent whether or not there has been opposition to an application for a standard patent to which the petty patent application relates. In this case the application for the petty patent preceded by some months the notice of opposition. His Honour made a comment, as going to the balance of convenience, that the second appellant would have a very strong case for an extension of the petty patent if the respondent failed at the hearing to prove its invalidity and it transpired that the second appellant had therefore unjustifiably been prevented by the interlocutory injunction from protecting its rights under a valid petty patent. Such a consideration would possibly have relevance to the extension of the term of a standard patent, but the six-year extension provided for in s.68A of the Act is governed by different considerations (see s.68B).

We are of the view that the balance of convenience favours the respondent's case. The principal parties are producing pools in competition. If there is an infringement by the respondent, the appellants, so far as appears, are protected by the undertaking as to damages. If there is any question as to the likely efficacy of the undertaking, that matter can be raised separately. No argument in relation to it has been addressed to us. The appellants are also protected by the further undertaking by the respondent to the effect that the validity of the petty patent will not be publicly challenged pending the trial.

The undertakings given earlier in the year in relation to what was in the statement of claim in action No. 3155 of 1983, are seemingly, within their scope, still on foot. It is not submitted that they govern what might be threatened because of the petty patent. Nevertheless, they are interesting, if not somewhat puzzling, in relation to what is now submitted on behalf of the appellants. It is said, in effect, that they should be free to make threats related to an important part of the claims in respect of which they have given undertakings not to make threats. This stance carries a suggestion that temporary deprivation of a freedom to make threats in relation to the claim which now finds expression in the petty patent is not, or at least was not, a matter of great concern to them. For the appellants to be free to offer threats based on the petty patent would be to put aside the challenge to its validity, and to give an opportunity to do damage to the respondent's business.

It is submitted that the appellants need to be able to make threats in order to ensure that persons infringing the patent cannot claim protection under s.124 of the Act as innocent infringers. While "potential infringers" are referred to in the evidence, no indication is given of their nature or extent. In any event the injunction leaves the appellants free to act under s.121(2).

On the other hand, if the respondent was adversely affected in its business by threats, and it was established at the hearing that the patent should be revoked, it could have difficulty in establishing the damage suffered. While this is a factor to be taken into account, it must be assessed with recognition of the fact that threats are permissible in some circumstances, and are not automatically to be arrested by interlocutory process.

For these reasons we are of the opinion that the appeal should be dismissed with costs.