Gang-Nail Australia Ltd v Multinail Truss Systems P/L

[1993] FCA 808

JUDGMENT No. ........ ........ .. ...... ..... 80 8, '33

IN THE FEDERAL COURT OF AUSTRALIA )
VICTORIA DIVISION REGISTRY

GENERAL DIVISION

BETWEEN:

GANG-NAIL AUSTRALIA LTD

Applicant

- and -

MULTINAIL TRUSS SYSTEMS PTY LTD

- and -

HYDRO-AIR AUSTRALIA PTY LTD

Respondents

Coram:	Olney J
Place :	Melbourne
Date:	11 November 1993

MINUTE OF ORDER

THE COURT ORDERS THAT the costs of the respondents of and incidental to the proceedings since 5 February 1992 including all reserved costs and the costs in the cause ordered on 5 April 1993 be taxed and paid by the applicant.

-.	Settlement and entry of orders is dealt with in
Order 36 of the Federal Court Rules.
NOTE	'

IN THE FEDERAL COURT OF AUSTRALIA ) VICTORIA DIVISION REGISTRY )	GENERAL DIVISION	)
BETWEEN:

GANG-NAIL AUSTRALIA LTD

Applicant

- and -

MULTINAIL TRUSS SYSTEMS PTY LTD

- and -

HYDRO-AIR AUSTRALIA PTY LTD

Respondents

Coram:	Olney J
Place:	Melbourne
Date:	11 November 1993

REASONS FOR JUDGMENT

The applicant sought relief by way of injunction and damages arising out of the alleged infringement by the respondents of certain Australian Letters Patent. The respondents counterclaimed alleging invalidity but the counterclaim was discontinued during the course of the trial.

The application was originally filed on 5 October 1989. On

25 February 1991 Jenkinson J ordered that the question of liability be determined before and separately from any question of quantum of damages. The question of liability was tried before me on 9 to 11 September 1991 at which trial there were two issues for determination namely whether on the proper construction of a licence agreement between the second respondent and a predecessor in title of the applicant, the respondents infringed the patent by selling existing stocks of the patented product after the termination of the term of the licence, and whether the manufacture and sale by the respondents of another product infringed the patent.

The patent related to an invention described as a connector plate (referred to as the PT plate) whlch is used for joining pieces of timber. The respondents manufactured and sold the

PT plate under the llcence agreement. The term of the

licence expired on 30 April 1 9 8 9 and it was not renewed.
Prior to the expiration of the licence the respondents ceased
manufacturing the PT plate and manufactured another similar
product called the P plate. Later, a third product (the MN
plate) was manufactured and sold but for all practical
purposes it was treated as being the same as the P plate.

The applicants said first that the sale of the PT plate by the respondents after 30 Aprll 1 9 8 9 infringed the patent. The respondents said that on the proper construction of the

licence this was not so. In reasons given on 2 8 November	1 9 9 1 I held that the respondents' construction of the licence
was not sustainable and that the sale after 30 April 1 9 8 9 of any remaining stocks of the PT plate amounted to an infringement of the patent.
The second, and by far the most time consuming part of the applicant's case was that the manufacture and sale of the P and MN plates after 30 April 1 9 8 9 also constituted infringing

- 3 -

conduct. The applicant failed on this issue.

On 11 December 1991 the form of the orders was settled as follows:

1.    The respondents' cross-claim be dismissed with costs to be taxed.

2.   Declare that the respondents have infr~nged the applicant's patent by selling the PT plate after termination of the licence.

3.    Order an inquiry as to damages or an account, and for this purpose the proceeding be adjourned for directions to 3/2/92.

4.    The respondents be restrained during the term of the patent from promoting, offering for sale, supplying or selling the PT plate.

5.     The application be otherwise dismissed.

6.   The question of costs be adjourned to 3 February 1992.

7.   The proceeding be adjourned for further directions on 3 February 1992.

On 3 February 1992, after hearmg argument, I ordered that the applicant's costs excluding the costs of preparing the statement of evidence of the applicant's expert witness be taxed and a sum equal to 75% thereof be paid by the respondents. On the same day directions were given to facilitate an account of sales and profits belng made by the respondents in respect of the infringement of the patent.

The costs of the directlons hearlng on 3 February 1992 were reserved as have been the costs of further hearings on 24 April 1992, 14 August 1992, 28 August 1992 (consent order pursuant to 0.35 r. 10), 15 February 1992, 7 June 1993, 26 July 1993 and 9 September 1993. On 5 April 1993 the costs of an appearance were ordered to be in the cause. All of the foregoing appearances have been in relation to the applicant's pursult of its desire to have an inquiry as to the damages or an account arising out of the finding of infringement made on 28 November 1991.

The applicant has now decided not to pursue its claim any

further. According to counsel appearing before me on 5 November 1993, the amount of damages likely to be recovered would be small and the expense involved would not be warranted. However, the applicant has not discontinued its claim for damages nor sought leave to do so. In response to a direct questlon from the bench, counsel dld however agree that the decislon not to proceed is to be regarded as binding on the applicant so that apart from the matter presently under consideration, the proceedings can be regarded as being at an end.

Each party now seeks an order that the other party pay its costs incurred since 3 February 1992.

For the applicant it is argued that the decision made in respect of the infringement relating to the sale of PT plates after 30 April 1989 necessarily lmplied that the applicant would be entitled to some award of damages, however small, and that in those circumstances, if the matter were proceeded with, the ordinary consequences as to costs would be that the costs since 3 February 1992 would follow the event and be payable by the respondents. In support of this argument the applicant says further that it has only been possible to arrive at a proper assessment of the amount of costs likely to be recovered by pursuing the processes that have taken place since 3 February 1992, and that it is only reasonable that the respondents as the infringing parties should bear the burden

of those costs.

The respondents say however that the decision of the applicant not to proceed further has the same consequences as if the claim for damages had been discontinued and therefore, the costs since 3 February 1992 should be paid by the applicant.

Further, the respondents say that the material that has been provided to the applicant since 3 February 1992 indicates that there LS no evidence of any manufacture or sale of the PT

plate since 30 April 1989 and that therefore it is not correct for the applicant to say that it is ~nevitable that if the

matter proceeds there would be judgment in favour of the
applicant.

In opening the applicant's case on 9 September 1991, after referring to the order of Jenk~nson J relating to the trial of the questions of liability before and separately from questions of quantum, counsel said:

Thrs ha s enabled some of t h e ques t l ons between t h e p a r t r e s t o be

d e f e r r e d pendlng a r e s o l u t i o n of t h e c r l t l c a l r s s u e s of v a l i d l t y and

~ n f r ~ n g e m e n t . One of t h e o t h e r r s s u e s w h ~ c h does remarn

outstanding, however, 1s a ques t i on of t h e proper c o n s t r u c t i o n of t h e

l r c e n c e agreement t h a t I	have j u s t handed	t o your Honour.	One of
t h e I s s u e s t h a t w r l l r e q u i r e	t o be determrned	I n t h e quantum	hea r lng

1s whether s a l e s by Hydro A l r o r Mu l t rna r l , and it 1s no t c l e a r a t

t h e moment whrch of t h e p a r t i e s mlght have been undertaking t h e

s e l l l n g , b u t s a l e s by t h e respondents of a p l a t e which your Honour

w l l l l e a r n 1s known a s t h e PT - t h a t rs a c a p l t a l P and a c a p r t a l T -

p l a t e a f t e r 30 A p r l l 89 - I am s o r r y , t h e ques t l on is whether such

s a l e s a r e covered by an rmplred l i c e n c e flowlng from t h e terms of t h e

w r r t t e n l i c e n c e o r whether such s a l e s c o n s t r t u t e d a c t s o f

ln f r lngement .

The l l c e n c e , havrng fo rmal ly t e rmmated . lt appears t h a t t h e r e were

l n a l l p r o b a b l l l t y some s a l e s , b u t no t ve ry substantial s a l e s

p robab ly , of t h e PT p l a t e a f t e r t h e exp l ry of t h e l r c ence . Now, one

allegation I n subs tance 1s t h a t t h e r e was an rmplied t e r m r n t h e

l r c e n c e t h a t t h e y could se l l o f f e x r s t i n g s t ocks . The o t h e r

a l l e g a t i o n i s t h a t once t h e l i c e n c e had come t o an end - came t o an

end, t h e n t h e y cou ld no t sel l any more. That s h o r t r s s u e rs one of

t h e mlnor l s s u e s t h a t i s r a r s e d by t h e defence and lt w l l l be d e a l t

wr th more f u l l y by my lea rned f r l e n d , bu t ~.t is an l s s u e which

remalns ou t s t and ing .

Other t h a n t h a t , t h e on ly l s s u e s t h a t w l l l a r l s e f o r de te rmrna t ron by

your Honour a r e q u e s t l o n s of v a l r d l t y and lnfr lngement .

The same subject matter was referred to by counsel for the respondents at the end of a very brief opening address on 10 September 1991 when he said:

The on ly o t h e r r s s u e between t h e p a r t l e s , your Honour, i s r n r e l a t r o n

t o t h e PT p l a t e s and lt 1s s a i d , your Honour, t h a t s o f a r as t h e PT

plates are concerned, it rs conceded that they fall wrthin the scope
of the claims.

It will be said that they are different plates to the MN and P plates, but that rnsofar as any PT plates have entered or been placed on the market after the expiratron of the lrcence term, whrch ended on 30 Aprll 1989, that that conduct 1s excused. Conduct that would

otherwise be rnfringing conduct rs excused by reason of an rmplled

licence and that implied licence flows from circumstances and by
reference to the terms of the expressed llcence itself.

The respondents' counsel returned to the same subject in his final address on 10 September 1991 when he said:

Your Honour, there remains the rssue of the PT plates. For present purposes, your Honour, they are relevant only insofar as if any of those plates have travelled rnto the market place after the expiration of the licence term then my friend says that they are

rnfrrng~ng acts and they are not excused by reasonable llcence.

(T. p133)

Counsel for the applicant dealt with the question of the PT plate at the commencement of his final address on 11 September

1991.    At the outset he said:

Your Honour will recall that rt rs conceded that the PT plate, whrch rs exhibit 4, falls wlthrn the terms of claim 1 of the patent, but that it is sard that there is an rmplied term in the lrcence agreement, whrch rs, I thlnk, exhibit 2 - exhibit 3, I am sorry, your Honour - which, it rs sard, has the effect of permrtting the licensee to sell any remaming stocks.

(T. p138)

Counsel then proceeded to deal wlth the principles relevant to the implying of terms into a contract and later the following submissions and exchanges are recorded in the transcript:

MR SHAVIN: In the context of this document, rn the context of this product and ln the context of the evrdence whlch could, but which has not been, adduced before your Honour, in my respectful submrssion your Honour ought to re~ect the invrtatron of my learned friend to imply such a term Into this llcence.

If your Honour relects that invrtatron, then in my submrssron your Honour ought to frnd rnfringement by the respondents of the clarms of the patent by the production of the PT plate and order an inquiry as

t o damages o r account , depending upon t h e e l e c t l o n which t h e

a p p l i c a n t s may make a t an a p p r o p r l a t e t i m e .

HIS HONOUR:  I n s o f a r as t h e PT p l a t e 1s concerned, a s I unders tand it,

xs ~t on ly i n t h e s a l e o f t h e p l a t e a f t e r t h e e x p r r a t i o n of t h e

l i c e n c e , o r 1s ~t s a ~ d t h a t lt 1s - - -

MR SHAVIN: Y e s . There is no evldence a t t h i s s t a g e suggesting t h a t

t h e r e w a s any manufacture	a f t e r t h e 30th.
HIS HONOUR:	So t h e queStxOn i n i s s u e , l f I accepted your argument and

r e l e c t e d M r C a m e ' s as t o t h e construction of t h e c o n t r a c t , would be

a m a t t e r of ~ n q u r r i n g i n t o s a l e s of t h e PT p l a t e a f t e r - - -

MR SHAVIN:  Y e s , and e ~ t h e r l n q u l r l e s t o damages o r an account o f

p r o f i t s . . .

My l ea rned f r i e n d ha s suggested ~t would be a s imple inquxry a s t o

any manufacture o r s a l e a f t e r t h a t d a t e . There xs s imply no

ev idence b e f o r e your Honour a s t o manufacture and s a l e , and perhaps

~t would be a p p r o p r i a t e t o i nc lude t h e words "manufacture o r s a l e " ,

and w e would have an i n q u i r y as t o t h a t and then t h e r e would have t o

be an e l e c t i o n by t h e a p p l i c a n t s a s t o whether t h e y went f o r damages

o r an account . I n a l l p robabx l l t y , i n t h e con tex t of t h l s c a s e , it

i s more l l k e l y t h e r e would be an account t han an i nqu i ry , bu t I would

no t wlsh t o be bound by t h a t a t t h ~ s t age .

And presumably it w l l l be q u i t e easy because one w i l l s imply look a t s a l e s between 30 April 1989 and 16 December I t h l n k i s t h e d a t e ,

Lsn ' t it, t h l s yea r , s o it is a f i n l t e p e r ~ o d t o look a t s a l e .

HIS HONOUR: And ~f I accep ted M r C a m e ' s c o n s t r u c t i o n of t h e

c o n t r a c t , t h a t would slmply be t h e end of t h e mat te r .

MR SHAVIN: Y e s . For t h e PT p l a t e .

HIS HONOUR:  For t h e PT P l a t e .

MR SHAVIN: Y e s . Now, t h e counte r c l a m has been d i sposed o f .

The PT p l a t e ha s been d ~ s p o s e d o f .

At p 2 - 3 of my reasons publ ished on 28 November 1 9 9 1 I said:

The fo l l owing f a c t s a r e common cause. AuStral lan L e t t e r s P a t e n t No.

491,750 w e r e s e a l e d pursuan t t o t h e P a t e n t s A c t 1952 a s of 31

December 1975. The p r ~ o r ~ t y d a t e is 16 January 1975. The p a t e n t

was g r an t ed f o r a t e r m of 16 y e a r s commencing on 31 December 1975 and

relates t o an invention described a s a connector p l a t e ( r e f e r r e d t o

i n t h e p roceed ings and h e r e a f t e r i n t h e s e reasons a s t h e PT p l a t e ) .

The a p p l ~ c a n t became r e g ~ s t e r e d a s t h e proprietor of t h e p a t e n t on 19

June	1989.	By	agreement	da t ed	1 May	1984	( t h e l i c e n c e )	t h e t h e n
r e g i s t e r e d	p r o p r i e t o r	of	t h e p a t e n t	g ran ted	t h e	second	respondent	a
l l c e n c e	t o manufacture	and	sell	t h e	PT	p l a t e	i n A u s t r a l i a .	The

l ~ c e n c e t e rmina t ed on 30 A p r i l 1989. A t t h a t d a t e t h e second

respondent h e l d s t o c k s of t h e PT p l a t e which were manufactured by it

pursuan t t o t h e l i c e n c e and e i t h e r o r both of t h e respondents ha s o r

have s l n c e s o l d some o r a l l of t h o s e s t ocks . S m c e e a r l y i n 1989

t h e respondents have manufactured and s o l d i n Australia 2 t y p e s of

connec tor p l a t e s ( r e f e r r e d t o i n t h e proceedings and h e r e a f t e r xn

t h e s e r ea sons	a s t h e P	p l a t e	and	t h e MN	p l a t e ) which	a r e o f	sxmi l a r
( a l t hough	no t	~ d e n t l c a l ) des ign	t o t h e	PT	p l a t e .	For	practical

purposes t h e P p l a t e and t h e MN p l a t e a r e accepted a s no t be ing

s~gnrficantly different from one another.

The issues whlch requlre determination at thls stage of the proceed~ngs are whether the respondents have Infringed the patent by reason of flrst, the sale of the exrsting stocks of PT plates since

30 April 1989 and second, the manufacture and sale of P and MN

plates.

I then proceeded to deal first with the question of the

construction of the licence agreement and second with the
question of whether the P and MN plates infringed the patent.
The assertion that at the date of the termination of the
licence "the second respondent held stocks of the PT plate
which were manufactured by it pursuant to the licence and
either or both of the respondents has or have since sold some
or all of those stocks" was made on the basis of my
understanding of the submissions made by counsel in the course
of the trial. No finding of fact based on evidence was
involved. On a closer scrutiny of the transcript it seems
that neither counsel asserted positively that sales of the PT
plate were made after 30 April 1989. Rather, that assumption
was made for the purpose of the then limited questions which
were under consideration. If the applicant had made out both

that the P and MN plates infringed the patent (which it sought

to, but failed to do) and that there vras no implied term	authorising the sale of the patented product after 30 April
1989, it was a matter of no concern to it whether the post 30 April 1989 sales vrere of the PT or of the P and MN plates. Indeed in his opening all that counsel was prepared to say about the sale of PT plates after 30 April L989 was that "there were in all probability some sales, but not very substantial sales after the expiration of the licence". And in his closlng address he sald that there was no evidence as to manufacture and sale of the PT plate after 30 April 1989. Nothing in either opening or closlng addresses of the respondents' counsel could be construed as amounting to an admission that post 30 April 1989 sales were made of the PT plate.
The formal order made on 11 December 1991 was settled after the parties had had the opportunity to consider the reasons published on 28 November 1991. There was a consensus as to the terms of the order and in particular no exception was taken to either of orders 2 or 4 which assumed that sales of the PT plate had been made after the expiration of the licence.
The foregoing revlew of the proceedings provides the context In which the applicant proceeded with the interlocutory steps associated wlth its deslre to obtain an account of sales and profits by the respondents in respect of the infringement.
That the applicant has now concluded that it 1s not worth
proceeding further is not surprising. Indeed, on the flrst day of the trial the best lts counsel could say in relation to the matter was that there were in all probablllty infringing sales, which probably were not very substantial sales.
The real question now is whether the respondents should carry the burden of the costs associated wlth providing the necessary information which at best confirms the situation as outlined in counsel's opening, and at worst suggests that the implled concession that there had been some infringing sales was perhaps inappropriately made.
In my opinion the applicant having had limited the success on the question of liability, undertook the normal risks of litigation by pursuing the matter further. Having now decided to abandon that course it must accept the consequences that normally follow from the discontinuance of a claim or part of a claim. In the circumstances the applicant should pay the respondents costs of and incidental to the proceedings since 3 February 1992 including all reserved costs and the costs in the 'cause ordered on 5 April 1993.
So far as the costs of 3 February 1993 are concerned, it is clear that the order that "the costs of this day" to which reference is made in paragraph 8 refers to the costs of the directions rather than the costs of arguing the issue as to the costs order relating to the trial of the question of liability. Those costs were included in the applicant's bill
of costs which was later taxed in accordance with the order
made on 3 February, 1992.

I certify that this and the preceding 10 pages are a true copy of the Reasons for Judgment of the Honourable Mr Justice Olney

Associate: g 1! \

U

Dated: \ \ Q &h 1

Heard:	5 November 1993
Place:	Melbourne
Judgment :	11 November 1993

Mr B.J. Hess (instructed by Phillips Fox) appeared for the applicant.

Mr B.N. Caine (~nstructed by Minter Ellison Morris Fletcher)

appeared for the respondents.