George Stack & Anor v Brisbane City Council

[1996] FCA 579

CATCHWORDS

PATENTS - infringement proceedings - whether the unregistered equitable owner of a patent has standing to sue for infringement in his own name - registered proprietor of patent and assignee of patent where assignment is registered during course of proceedings both proper parties in infringement action.

Patents Act 1952 (Cth) - s 113
Patents Act 1990 (Cth) - ss 13(2), 15(1)(b) and (c), 34, 120, 188, 189(3), 196(b)(ii)

Federal Court Rules - O 6 r 10(2), O 6 r 11(3), O 62 r 17

Cases Considered

Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25
Imray v Griffin (1888) 10 NSWLR 114
Martin and the Miles Martin Pen Co Ltd v Scrib Ltd (1950) 67 RPC 127
Norman v Federal Commissioner of Taxation (1963) 109 CLR 9
Performing Right Society Ltd v London Theatre of Varieties Ltd [1924] AC 1
Townsend Controls Pty Ltd v Gilead (1989) 16 IPR 469

GEORGE STACK & ANOR v BRISBANE CITY COUNCIL & ORS
QG 28 OF 1994

DRUMMOND J
BRISBANE
2 JULY 1996

FEDERAL COURT OF AUSTRALIA       )  No. QG 28 of 1994
QUEENSLAND DISTRICT REGISTRY   )
GENERAL DIVISION  )

BETWEEN:              GEORGE STACK

First Applicant

AND:  G S TECHNOLOGY PTY LTD

Second Applicant

AND:  BRISBANE CITY COUNCIL

First Respondent

AND:  DAVIES SHEPHARD PTY LTD

Second Respondent

AND:  DAVIES SHEPHARD (QUEENSLAND) PTY LTD

Third Respondent

MINUTES OF ORDERS

JUDGE MAKING ORDER:  Drummond J
DATE OF ORDER:  2 July 1996
WHERE MADE:  Brisbane

THE COURT DIRECTS THAT:

1.  The second applicant file and serve proof of its having become registered as patentee of petty patent No. 645740 by 31 July 1996.

2.  The applicants file and serve a further amended statement of claim, identifying with precision their respective legal titles to the patent and the relief each claims, by 31 July 1996.

THE COURT ORDERS THAT:

3.  The second and third respondents’ notice of motion be adjourned sine die.

4.  If either of Directions 1 or 2 is not complied with, the second applicant shall be dismissed as a party as from 1 August 1996.

5.  The notice of motion, in so far as it seeks relief by paragraph 3, be dismissed save that the applicants pay to the respondents their costs of and incidental to the applicants’ now-abandoned claim for interlocutory relief.

6.  The costs of and incidental to the notice of motion, up to and including the hearing on 14 December 1995, be reserved.

7.  The parties have liberty to apply with respect to those costs.

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

FEDERAL COURT OF AUSTRALIA       )  No. QG 28 of 1994

QUEENSLAND DISTRICT REGISTRY   )
GENERAL DIVISION  )

BETWEEN:              GEORGE STACK

First Applicant

AND:  G S TECHNOLOGY PTY LTD

Second Applicant

AND:  BRISBANE CITY COUNCIL

First Respondent

AND:  DAVIES SHEPHARD PTY LTD

Second Respondent

AND:  DAVIES SHEPHARD (QUEENSLAND) PTY LTD

Third Respondent

REASONS FOR JUDGMENT

The second and third respondents apply by motion on notice to strike out the amended application and statement of claim in a patent infringement action and for other orders.  At the hearing, however, senior counsel for the second and third respondents stated that he sought only an order dismissing the proceedings brought by the second applicant and an order dismissing with costs the application
by both applicants for interlocutory relief.  The first respondent supported these claims.

At the hearing, the respondents referred to the fact that a Deputy Commissioner of Patents had heard and reserved his decision on an application by the first applicant for an extension of the term of the petty patent allegedly infringed, an application opposed by the present respondents.  The parties have now advised that the Deputy Commissioner has refused to extend the term of the petty patent.  The Deputy Commissioner’s reasons show he made this decision on the ground that the first applicant was not the sole inventor and so was not entitled to the grant of the petty patent.  This decision is the subject of review proceedings which are pending in this Court.  If the review fails, that will be the end of the action by both applicants in which the respondents have brought the dismissal application now before me.  If the review proceedings are, however, successful, the action will continue, hence the continued relevance of the respondents’ motion.

The point of the application for dismissal of the proceedings brought by the second applicant is that, while it is pleaded that the first applicant is the patentee of the petty patent allegedly infringed, the amended statement of claim alleges that the second applicant is the beneficial owner of the invention the subject of that patent. The first applicant assigned his interest in the patent to the second applicant before the action was commenced and this assignment was, at least for a time, not registered. It is said that only the registered patentee or an exclusive licensee has standing to sue for infringement, having regard to s 120 the Patents Act 1990 (Cth).

Townsend Controls Pty Ltd v Gilead (1989) 16 IPR 469 involved infringement proceedings under the Patents Act 1952 (Cth).  Section 113 of that Act provided:

“An action or proceeding for infringement of a patent may be instituted in a prescribed court, but nothing in this section prevents such an action or proceeding being instituted in a court that is not a prescribed court.”

Von Doussa J dismissed a cross-claimant as a party to a cross-claim for infringement on the ground that he was not a proper party.  He had joined with the registered patentee in cross-claiming to answer an action brought against the two of them for making groundless threats that the plaintiff was infringing their patent.  This dismissal thus served a purpose in the action.  His Honour said, at 471-472:

“He was not a registered patentee.  He claimed an equitable interest as assignee of a share in the patent under an unregistered instrument.  I briefly record my reason for making the dismissal order.  The registered patentee pursuant to s 26 of the Patents Act [1952] has power to deal with the patent as if he were the absolute owner:  see also ss 25 and 31.  Mr Gilead was suing on, and defending, the monopoly granted by the patent.  In these circumstances I considered that a party asserting only an equitable interest should not be a party to the proceedings.  An equitable assignee of a patent does not have the standing to exercise the rights of the patentee:  Performing Right Society Ltd v London Theatre of Varieties Ltd [1924] AC 1 at 28-29. The position would be otherwise if the registered patentee refused to take action to protect the monopoly; in such a case the holder of an equitable interest could sue or defend so long as the registered patentee was joined as a party. However, this right of the holder of an equitable interest is, in my opinion, an exception to the general rule that the proper party to proceedings is the registered patentee.”

Martin and the Miles Martin Pen Co Ltd v Scrib Ltd (1950) 67 RPC 127 concerned an infringement action brought by the registered proprietor of a patent in which the defendant denied the plaintiffs’ title to sue, alleging that there was an equitable assignment of the patent by the registered proprietor before the action was brought. The Court of Appeal held that it was irrelevant, in an infringement action brought by the registered owner of a patent, that another, not on the register, might be the beneficial owner of the patent and that the plaintiffs were therefore not obliged to give discovery of any documents relating to the assignment. Jenkins LJ referred to the provisions of the Patents Act 1949 (UK) dealing with the Register and the rights given by registration, provisions that do not differ materially from those of Part III of the Patents Act 1952 (Cth) and Chapter 19 of the Patents Act 1990 (Cth), and said, at 133:

“These provisions, in my judgment, really make it plain beyond argument that the policy of the Act is that, in order to ensure some certainty and finality as regards title to patents, a Register is to be kept, and vis-a-vis the outside world the registered proprietor is to be regarded as the owner of the patent, subject to any interest which may have been carved out of his interest and duly noted on the Register.  The registered proprietor, in my judgment, therefore, has, by virtue of registration and so long as the registration stands, the requisite interest to start an action for infringement; and indeed he or somebody else with an adequate registered entry are the only persons who can maintain such an action.”

It is unnecessary to decide whether the prohibition in the 1952 Act on a non-registered owner of a patent suing in his own name for infringement of the patent is qualified, as indicated in Townsend Controls Pty Ltd v Gilead, supra, or
absolute, as suggested by Martin and the Miles Martin Pen Co Ltd v Scrib Ltd, supra.

Section 120 the Patents Act 1990 (Cth) is more explicit than s 113 of the 1952 Act.  It provides:

“(1)Infringement proceedings may be started in a prescribed court, or in another court having jurisdiction to hear and determine the matter, by the patentee or an exclusive licensee.

(2)If an exclusive licensee starts infringement proceedings, the patentee must be joined as a defendant unless joined as a plaintiff.

(3)A patentee joined as a defendant is not liable for costs unless the patentee enters an appearance and takes part in the proceedings.

(4)Infringement proceedings must be started within:

(a)3 years from the day on which the relevant patent is granted; or

(b)6 years from the day on which the infringing act was done;

whichever period ends later.”

The equitable owner of a proprietary right can, in general, commence proceedings in his own name with respect to the right in question, although, before he can obtain final relief, he must join the legal owner in the action, either as a plaintiff or defendant:  Performing Right Society Ltd v London Theatre of Varieties Ltd [1924] AC 1 at 14 and 18-19. But, even if the authorities on the significance of registration under earlier patent statutes to which I have referred are put to one side, the wording of s 120 is of itself sufficient to show that the equitable owner of a patent cannot even commence infringement proceedings in his own name. No one other than the patentee or an exclusive licensee can bring proceedings for infringement under the 1990 Act (and a person who sues as exclusive licensee must still join the patentee before judgment). Section 34 of the 1990 Act does not assist the second applicant: it only authorises the Court in certain circumstances to declare that a person with a good equitable claim is entitled to the grant of a patent for the invention in question and so entitled to be registered as the patentee; such a person will only be able to commence proceedings for infringement when the Registrar has given effect to the declaration.

However, the 1990 Act does not prohibit the creation of equitable interests in registered patents.  Section 188 goes no further than prohibiting the inclusion in the Register of notice of any kind of trust relating to a patent.  The Act recognises that the rights comprising a patent are personal property and can be dealt with as such:  see s 13(2).  Equitable interests can therefore be created in patents.  Section 15(1)(b) and (c) provide for the grant of a patent to, inter alia, equitable owners.  The enforceability of unregistered equities in relation to patents is acknowledged by the Act:  see, eg, s 189(3) and s 196(b)(ii).

It follows from the fact that only the registered proprietor, ie, the patentee, (and an exclusive licensee) has standing to sue for infringement of a patent and from the fact that the patents legislation recognises that unregistered equitable interests in patents can exist, that if a registered proprietor has the bare legal title to a patent, beneficially owned by another who is not on the Register, any
infringement action that the registered proprietor may bring will be brought for the benefit of the equitable owner and the registered proprietor will hold any damages or any moneys recovered under an account of profits on trust for the equitable owner.  But the equitable owner of a patent registered in the name of another will often be the only person with any interest in challenging infringements of the patent; the patentee, as the bare legal owner, may not be prepared to bring an action for infringement of the patent when that will, if successful, be a burden to him and advantage only the beneficial owner.  There may not be time for the beneficial owner to obtain an order compelling the registered legal owner to allow the beneficial owner to use his name in an infringement action for the latter’s benefit before the limitation period expires.

Although the unregistered beneficial owner of a patent is barred from bringing proceedings in his own name, the Act does not, in my opinion, prevent him suing, in an appropriate form of procedure, to vindicate his equitable proprietary rights in a patent registered in the name of another.  Where, as is alleged here, a person is the equitable assignee from the registered patentee of the bundle of legal rights comprising the patent, he can, before obtaining registration as patentee, procure the patentee to bring infringement proceedings in the patentee’s name for the equitable owner’s benefit, or he can himself bring infringement proceedings for his own benefit, but in the name of the registered patentee.

The reason why the latter form of procedure is open to the equitable owner of a registered patent appears from the judgment of Windeyer J in Norman v
Federal Commissioner of Taxation (1963) 109 CLR 9 where, in dealing with procedures long available at law under which equitable assignees of choses in action could bring proceedings at law in respect of their proprietary rights, his Honour said, at 27:

“And courts of equity would come to the assistance of the assignee if the assignor refused to do whatever was necessary to enable the assignee to get the benefit of the assignment.  Thus a recalcitrant assignor would be required, on having an indemnity for his costs, to permit his name to be used in an action to recover the debt; or an assignor would be restrained from receiving the debt for himself ¼  Because the assistance of equity was available, it was generally not needed.  The common law courts recognised that an assignee might sue in the assignor’s name.  So that in 1849 it could be said that ‘the courts of law have adopted the doctrines of the court of chancery in regard to assignments of choses in action’; so much so that ‘In ordinary cases, where the plaintiff has an easy remedy by suing in the name of the assignor, the court (scil. the Court of Chancery) will not entertain jurisdiction, but leave the party to his remedy at law’.  ¼  Therefore, as the Chief Justice observed during the hearing of this case, it is somewhat misleading to say, as is often said, that before the Judicature Act the common law would not allow assignments of legal choses in action ¼”

That the common law will allow an equitable owner to sue for his sole benefit in the name of the legal owner can have unsatisfactory consequences:  see Imray v Griffin (1888) 10 NSWLR 114 at 130-131. But there is, in my opinion, no barrier to the unregistered equitable owner of a registered patent bringing proceedings for infringement of the patent, provided he does so in the patentee’s name. The equitable owner will be required to give the patentee, whose name he uses, an indemnity for the patentee’s costs, if that is demanded: Norman v Federal Commissioner of Taxation, supra, and Imray v Griffin, supra, at 129. This
requirement flows from the fact that the beneficial owner can obtain a decree in equity compelling the legal owner to permit the use of his name for this purpose; but he will get that equitable relief only upon equitable terms requiring him to protect the legal owner in respect of costs.  The equitable owner suing in the patentee’s name may be required, in an appropriate case, to provide security, eg, in the form of a personal undertaking, for the alleged infringer’s costs of the proceedings.  It may also be necessary, if the patentee refuses to acknowledge the equitable assignee’s ownership of the patent, for the equitable owner to bring proceedings against the patentee separate from the infringement proceedings brought in the patentee’s name for a declaration, as against the patentee, of the equitable owner’s interest in the patent.  But these are, I think, matters of detail that can be dealt with as the circumstances of the particular case require.

By both their original and their amended applications, the applicants seek an injunction to restrain the second and third respondents from infringing the petty patent during its term or any extension of the term and an enquiry as to damages or, at the applicants’ option, an account of profits made by the respondents’ infringement of the petty patent.  For the reasons given, the action was, at its inception on 17 March 1994, improperly constituted by reason of the second applicant, who was then only beneficial owner of the patent under a deed of assignment executed on 16 March 1994, being on the record as an applicant for relief in respect of infringement of the patent.

If the second applicant is not now on the Register as the new proprietor of the patent initially granted to the first applicant, ie, if it is still only the unregistered beneficial owner of the patent, it is the first applicant alone who has standing to maintain this infringement action.  He will be entitled to all the relief, including an injunction and damages, that would be appropriate, if he were the beneficial as well as the legal owner of the patent.  But he will hold all such relief for the benefit of the second applicant.  The respondents acknowledged that, if the assignment has not been registered, the first applicant would be entitled to recover full damages for any infringement, notwithstanding the assignment.  However, they submitted that the first applicant would, in that event, not be entitled to any injunctive relief.  This latter submission, I think, fails to distinguish between the different impacts on a patentee’s claim to injunctive relief of an assignment of the patent that is not registered and an assignment that is registered.

It appears that, subsequent to commencement of the proceedings, the second respondent may have become registered as the owner of the patent.  The reasons of the Deputy Commissioner for his refusal to extend the term of the petty patent recently provided to me refer to this assignment having been registered on an unidentified date.  In Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25, the registered proprietor of a trade mark sued for relief similar to that sought by the applicants here, but, during the course of the action, assigned the mark to another, who had not been joined as a party in the proceedings; this assignment was registered in the course of the litigation. Windeyer J expressed great doubt, at
31, whether, even by consent, an injunction could be granted to restrain the use of a registered trade mark at the suit of a party who, before judgment, has assigned the mark.  His Honour said:  “The plaintiff seems to me to be not now a person having a sufficient interest to obtain an injunction.”  His Honour was, I think, speaking only of a case in which the plaintiff was registered proprietor of the mark when it commenced its infringement action, but another had become registered proprietor of the mark during the pendency of the suit.  After making certain orders, his Honour adjourned the hearing; when the matter came back before him, the assignee applied and was granted leave to be joined as co-plaintiff in the action.  His Honour thereupon observed (p 41) that:  “The case being thus newly constituted, I am now able to make, and I do make, an order for an injunction in favour of (the assignee).”

In the earlier phase of the hearing, Windeyer J also said (p 31) that:  “¼ the assignment of the mark limits the period in relation to which either damages or an account of profits may be had.”  His Honour indicated that the account of profits should be taken in favour of the then sole plaintiff as from 30 August 1965 (when the defendant became aware that he was transgressing the plaintiff’s rights in its registered mark) to 18 October 1966, when the assignee from that plaintiff of the mark, under the assignment of January 1966, converted its equitable interest in the mark to legal ownership by registration of the assignment.  His Honour said that the original registered proprietor of the mark, although only bare legal owner during the latter part of this period, held the property at law in the mark until registration of the assignment “whatever were the rights in equity of the assignee for some months
before then”.  At the resumed hearing, after the assignee had been joined as a party, Windeyer J made an order that the defendant also account to the assignee for profits made from its use of the mark after 18 October 1966, when the assignee became legal owner of the mark (p 41).

On the assumption that during the course of the proceedings the second applicant has, by registration of the assignment, converted its equitable title to the patent into a legal title, it is entitled to be joined as a party, as from that date:  see O 6, rr 10(2) and 11(3) the Federal Court Rules and cf Colbeam Palmer Ltd v Stock Affiliates Pty Ltd, supra, at 41. This authority suggests that only the second applicant would, in that event, have any right to the injunctive relief claimed, if the complaints of infringement can be made out at trial. While the first applicant alone would be entitled to the profits made by the respondents from any infringement of the patent in the period up to when the second applicant became registered patentee, it is the second applicant alone who would have the right to any profits so made by the respondents after that date. Similarly, if an election is made in favour of damages rather than of an account of profits, the second applicant is the proper claimant for that relief, but only as from the date its equitable ownership became converted by registration into full legal and beneficial ownership of the patent. Since the first applicant, although the bare legal owner of the patent, was entitled to maintain it, albeit for the benefit of the second applicant up to the date of registration of the second applicant as patentee, and since it is open to him to claim damages or an account of profits up to that time, even though he will hold the fruits of such relief
for the benefit of the second applicant, the first applicant would remain a proper party.

If, as appears likely, the second applicant has now converted its equitable title to the patent under the deed of assignment of 16 March 1994 into a registered legal title, it would, if it were not already on the record, have been entitled to be joined as an applicant, as from the date of registration of the transfer of the patent to it.  There is no suggestion that any of the respondents have suffered any prejudice as a result of the incorrect constitution of the action that could be remedied by dismissing the second applicant now.  There is, in fact, no suggestion that they have suffered any prejudice at all by reason of the initial mis-joinder of the second applicant.  Moreover, they only brought this dismissal application 18 months or so after the action was commenced.  It would be a pointless exercise, productive only of unnecessary expense, to dismiss the second applicant as a party from the action as originally instituted, but to immediately give it the leave to which it is entitled, to be joined as a party as from the date of its registration as patentee.

It seems to me the matter can be best dealt with by adjourning the second and third respondents’ motion sine die, by directing the second applicant to file and serve proof of its having become registered patentee and, conditionally upon that being done, by giving the applicants leave to file and serve a further amended statement of claim which identifies with precision their respective legal titles to the patent and the relief each claims.  If, however, the second applicant is not now on
the Register, but remains equitable owner only of the patent, it should be dismissed as a party, although it is unlikely that that will have any practical effect on the future conduct or the outcome of the litigation.  I will reserve the costs of the motion up to and including the hearing before me:  the appropriate order will, I think, depend, in part at least, on whether the applicants make good their claims that the second applicant has become registered as the patentee and on whether this occurred and was made known to the respondents before their notice of motion now before me was filed.

As to that part of the motion that seeks the dismissal of the applicants’ original application for interlocutory relief, that latter application came before the Court on 14 April 1994 when each of the respondents gave undertakings and it was thereupon adjourned; at that same time the Court made orders for the determination of certain questions separately from the other issues in the action and directed that the applicants deliver and file an amended application and statement of claim within seven days of the answers to these questions being given.  The judgment of 4 August 1995 answered the separate questions adversely to the applicants.  In compliance with the direction of 14 April 1994, the applicants filed an amended application on 14 August 1995, together with an amended statement of claim.  No claim for interlocutory relief was made in either process.  It follows that, by filing and serving the amended process, the applicants abandoned any claim for interlocutory relief.  At no time after August 1995, and in particular when the respondents’ notice
of motion that is before me was filed, was there in existence any application for interlocutory relief which the Court could order to be dismissed.

However, it ultimately emerged in argument that what was really sought was an order that the applicants pay the costs of the hearing of 14 April 1994, in so far as that hearing involved the applicants’ claim for interlocutory relief that they have now abandoned.  It appears that the applicants may not have pressed their claim for interlocutory relief on that day and that argument concentrated on whether an order should be made for the early determination of separate questions, as occurred.  The order of 14 April 1994 in respect of costs was that all the costs of and incidental to that day’s application be reserved to the trial judge.  Some of these reserved costs were dealt with on 4 August 1995, when the Court answered the separate questions and ordered that the applicants pay the respondents’ costs of and incidental to those questions.  The residue of the costs reserved on 14 April 1994, that is all that is now in question, will therefore follow the event, unless the trial judge otherwise orders:  O 62, r 17 the Federal Court Rules. I consider I have power under this rule to award these reserved costs to the respondents now.  It seems clear that all three respondents are entitled to their costs of the hearing of 14 April 1994, in so far as that hearing related to the claim for interlocutory relief which the applicants then had on foot, but which they have now abandoned, and to the costs the respondents incurred incidental to that claim for interlocutory relief.

The notice of motion, in so far as it seeks relief by paragraph 3, will be dismissed, save that I will order that the applicants pay to the respondents their costs of and incidental to the applicants’ now-abandoned claim for interlocutory relief.

I certify that this and the preceding 15
pages are a true copy of the reasons
for judgment of the Honourable
Justice Drummond.

Associate:

Date:  2 July 1996

Solicitor for the applicants:  Andrew P Abaza

Counsel for the first respondent:             Mr G C Martin

Solicitors for the first respondent:            Brisbane City Council

Counsel for the second and third

respondents:  Mr P D McMurdo Q C

Solicitors for the second and

third respondents:  Minter Ellison

Date of Hearing:  14 December 1995