Law v Razer Industries Pty Limited
[2010] FCA 1058
FEDERAL COURT OF AUSTRALIA
Law v Razer Industries Pty Limited [2010] FCA 1058
Citation: Law v Razer Industries Pty Limited [2010] FCA 1058 Parties: ROBERT ROY LAW v RAZER INDUSTRIES PTY LIMITED (ACN 010 582 313) File number: NSD 221 of 2010 Judge: BENNETT J Date of judgment: 29 September 2010 Catchwords: PATENTS – practice and procedure – patent ceased for fixed period – infringement commenced during ceased period – respondent unaware of failure by patentee resulting in ceased period – whether respondent can obtain a licence from Commissioner of Patents pursuant to s 223 Patents Act 1990 (Cth) and reg 22.21 Patents Regulations 1991 (Cth) – whether respondent entitled to a stay of orders for infringement pending determination of licence application – whether applicant entitled to restraining order preventing respondent from infringement pending determination of licence application Legislation: Patents Act 1990 (Cth) ss 13, 223
Patents Regulations 1991 (Cth) reg 22.21
Federal Court Rules O 35 r 1Cases cited: Berlei (UK) Ltd v Bali Brassiere Company Inc (1972) RPC 568 cited Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 34 Counsel for the Applicant: Mr J M Ireland QC with Mr J Cooke Solicitor for the Applicant: Spruson & Ferguson Lawyers Counsel for the Respondent: Mr N R Murray Solicitor for the Respondent: Clayton Utz
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 221 of 2010
BETWEEN: ROBERT ROY LAW
ApplicantAND: RAZER INDUSTRIES PTY LIMITED (ACN 010 582 313)
Respondent
JUDGE:
BENNETT J
DATE OF ORDER:
29 SEPTEMBER 2010
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.Pursuant to O 35 r 1, the respondent, whether by itself, its directors, officers, servants or agents or otherwise, is restrained from engaging in the following acts within the patent area (as that term is defined in the Patents Act 1990 (Cth)) within the term of Australian Patent No. 784051 (the Patent), without the licence or authority of the Applicant:
(a)making, selling or otherwise disposing of any products claimed in any of the claims of the Patent (collectively, the Infringing Products);
(b) offering to make, sell or otherwise dispose of the Infringing Products;
(c) using or importing the Infringing Products;
(d)keeping the Infringing Products for the purpose of doing any of the acts described in sub-paragraphs (a) to (c) above;
(e)authorising others to engage in any of the acts described in sub-paragraphs (a) to (d) above;
(f)otherwise infringing the patent.
2.Liberty is reserved for the parties to apply to the Court on three days’ notice to dissolve, in whole or in part, the injunction the subject of order 1 above upon showing proper cause.
3.Pursuant to O 29 r 2, the applicant’s claims for pecuniary relief in the proceeding be determined separately.
4.The respondent’s notice of motion dated 21 May 2010 be dismissed.
5.The respondent pay the applicant’s costs of the notices of motion.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 221 of 2010
BETWEEN: ROBERT ROY LAW
ApplicantAND: RAZER INDUSTRIES PTY LIMITED (ACN 010 582 313)
Respondent
JUDGE:
BENNETT J
DATE:
30 SEPTEMBER 2010
PLACE:
SYDNEY
REASONS FOR JUDGMENT
The applicant (Mr Law) is the owner and inventor of Australian Patent No. 784051 titled “Conveyor Belt Cleaner” which was granted on 4 May 2006 (the Patent). By notice of motion dated 25 June 2010 Mr Law seeks a restraining order preventing the respondent (Razer) from engaging in certain acts that would infringe the Patent.
By notice of motion dated 21 May 2010 Razer seeks a stay of proceedings until after a licence application that it has filed with the Commissioner of Patents (the Commissioner) under s 223 of the Patents Act 1990 (Cth) (the Act) and Reg 22.21 of the Patents Regulations 1991 (Cth) (the Regulations) has been heard (the licence application).
BACKGROUND FACTS
The facts that give rise to the present dispute are not in issue. Mr Law has at all material times been registered as the owner and inventor of the Patent. For reasons which were not intentional and are presently not relevant, Mr Law did not pay the renewal fees for the Patent for the years 2007 and 2008. For that reason the Patent ceased during the period from 27 September 2007 to 26 October 2009 (ceased period). During the ceased period the particulars of the Patent remained on the Register of Patents (the Register). During the ceased period the Register also recorded the ceased status of the Patent.
On 17 August 2009 Mr Law applied for an extension of time in which to pay the 2007 and 2008 renewal fees for the Patent for the period from 27 September 2007 to 27 August 2009 (the extension application). The extension application was advertised in the Australian Official Journal of Patents (the Official Journal) on 17 September 2009. The extension application was accepted without opposition and the Patent was restored on 27 October 2009. The acceptance of the extension application was advertised in the Official Journal on 12 November 2009.
It follows that, with the exception of the ceased period, the Patent has been subsisting at all times since 27 September 2001.
During the ceased period, Razer entered into an agreement with TuffStuff (Qld) Pty Ltd (TuffStuff) which required it to manufacture and sell products within the scope of the claims of the Patent, such as replacement belt cleaning systems (the agreement). Razer says that at the time of entering into the agreement, it relied on:
·statements by TuffStuff as to whether the products infringed any third party intellectual property rights;
·warranties given by TuffStuff in the agreement in relation to intellectual property rights; and
·Razer’s own patent searches, carried out by its patent attorneys.
Razer commenced selling its products on or around 1 September 2008, which was during the ceased period. It is not in dispute that since the end of the ceased period on 27 October 2009 Razer has continued to manufacture and sell products within the scope of the claims without the licence or authority of Mr Law.
On 18 February 2010 Razer filed the licence application. Under the licence application Razer seeks protection for acts done during the ceased period and for continuing and future acts that would otherwise constitute infringement of the Patent.
On 5 March 2010 Mr Law commenced proceedings in this Court against Razer for infringement of the Patent. Mr Law is not bringing infringement proceedings in respect of infringements committed during the ceased period.
THE NOTICES OF MOTION
On 25 June 2010 Mr Law filed a notice of motion seeking orders restraining Razer, in effect, from making, selling or using products within the scope of the claims. On 21 May 2010 Razer filed a notice of motion seeking a stay of these proceedings until after the final determination by the Commissioner of the licence application. Razer’s defence to Mr Law’s claims for infringement is the licence application. If a licence is granted, and granted retrospectively, Razer will not infringe and will not have infringed the Patent.
The discretionary factors relevant to the consideration of a stay of proceedings for infringement of the Patent include:
·Mr Law’s rights under the Patent, which is valid and existing;
·the licence application, which is yet to be heard and determined by the Commissioner;
·the effect of a stay on each party;
·the fact that the parties are competitors in the marketplace; and
·the fact that a hearing before the Commissioner may not occur for over two years.
However, Mr Law submits as a threshold issue that Razer has no statutory right in the circumstances of this case to bring the licence application. For that reason, Mr Law says, there should be no stay of proceedings and the orders sought in Mr Law’s notice of motion should be made.
THE STATUTORY PROVISIONS
Section 223 of the Act provides for extensions of time because of, inter alia, an error or omission by the person concerned, or by his or her agent or attorney, in carrying out a “relevant act”. It was under that provision that Mr Law obtained acceptance of the extension application. Section 223 also deals with the consequences of such a grant being made. Relevantly, s 223(9) provides:
Where the Commissioner grants:
(a)an extension of more than 3 months for doing a relevant act; or
(b)an extension of time for doing a prescribed relevant act in prescribed circumstances;
the prescribed provisions have effect for the protection or compensation of persons who, before the day on which the application for extension of time is advertised under subsection (4), exploited (or took definite steps by way of contract or otherwise to exploit) the invention concerned because of the failure to do the relevant act within the time allowed, the lapsing of the patent application or the ceasing of the patent, as the case may be.
[emphasis added]
The term “relevant act” is defined in s 223(11) of the Act as ‘an action (other than a prescribed action) in relation to a patent, a patent application, or any proceedings under this Act (other than court proceedings)’. The relevant act in this case was Mr Law’s failure or omission to pay the renewal fees.
Regulation 22.21 of the Regulations provides relevantly:
Protection or compensation of certain persons
(1)The following provisions of this regulation are prescribed for subsections 41(4), 150(4) and 223(9) of the Act.
(2)Persons who availed themselves of or exploited, or took definite steps by contrast or otherwise to avail themselves of or exploit, inventions:
…
(c)in the case of inventions to which subsection 223(9) of the Act applies — within the period of time extended under that subsection;
may apply, in the approved form, to the Commissioner for the grant of licences to exploit the inventions.
…
(4)A person on whom a copy of an application has been served may oppose the grant of the licence.
(5)The Commissioner, if reasonably satisfied that the application should be granted, must grant a licence to the applicant on such terms as the Commissioner thinks reasonable.
THE LICENCE APPLICATION
It is not in dispute that it is for the Commissioner rather than the Court to decide whether or not to grant a licence under s 223(9) of the Act and Reg 22.21 of the Regulations and to determine the terms of such licence as she thinks reasonable. The parties both submit that the Court does not have original jurisdiction to entertain the application for a licence. That is, until the licence application has been determined by the Commissioner, the Court does not have jurisdiction to determine the licence application. Razer submits that Mr Law’s rights as patentee to exploit the Patent, as provided for in s 13 of the Act, are ‘subject to’ the Act such that if Razer has a right to a licence under s 223 of the Act or the Regulations, Mr Law’s rights are subject to Razer’s rights.
Mr Law raises a number of matters concerning the effect of any licence that may be granted by the Commissioner, including any retrospective effects on the payment of royalties. However, Mr Law’s primary submission is that the licence application upon which Razer depends to avoid infringement cannot succeed because s 223(9) of the Act does not apply. Mr Law submits that this is because Razer did not exploit the invention during the ceased period ‘because of’ Mr Law’s failure to pay the renewal fees or ‘because of’ the ceased period that resulted.
The threshold question for the purposes of both notices of motion is whether Razer is a person to whom s 223(9) of the Act applies.
DOES S 223(9) OF THE ACT APPLY TO RAZER?
Background Facts
It is necessary to understand some preliminary matters. ESS Engineering Services and Supplies Pty Ltd (ESS) was incorporated on 20 June 1980. The only directors of ESS are Mr Law and his wife, Mrs Law. They are also the beneficial shareholders of ESS. It is ESS that at all material times has manufactured, sold, installed and serviced conveyor sealing and cleaning equipment. At all material times, Mr Law has licensed ESS to exploit the Patent in Australia without the payment of royalties. ESS has been manufacturing and selling scraper blades and conveyor belt cleaners as claimed in the Patent since the 2001/2002 financial year. Generally speaking, ESS manufactures, offers and exhibits for sale, sells and exports various products within the scope of the claims. Those products are largely sold in Australia in the mining industry.
Did Razer have knowledge of the existence of the patent when it entered the agreement?
A search of the Register using the publicly available search engine provided by IP Australia (the search engine) as at 17 August 2009 and using the correct search criteria, such as the Patent number, the title of the invention or the patentee’s or inventor’s name, would have revealed to the searcher that the Patent existed and had ceased, that the renewal fees had only been paid until 27 September 2007 and that neither an application for an extension of time nor an application for restoration had been filed. A search would also have revealed the usual particulars of the Patent including the title “Conveyor Belt Cleaner” and the name of the owner and the inventor, Mr Law. Such a search would not have disclosed the name of ESS, which was not recorded on the Register as a licensee of the Patent.
On 11 September 2008 on instructions from Razer, Razer’s patent attorneys conducted searches of the Register. The patent attorneys used the search engine and employed the following search parameters:
(a) “Martin Engineering”;
(b) “ESS”;
(c) “Martin Engineering” + application status = active; and
(d) “ESS” + application status = active.
None of the searches revealed the Patent.
A search using the appropriate parameters would have revealed both active and ceased patents. It is apparent that, because the search terms did not include “Law” or the title of the Patent and ESS was not a registered licensee, the search failed to reveal the Patent.
It is not in dispute that Razer was unaware of the existence of the Patent or its ceased status when it entered into the agreement and subsequently took the steps to manufacture and sell the infringing products. Razer relied on the result of the searches of the Register, the statements made by officers of TuffStuff to the effect that ‘there are no patent issues associated with the product’ and warranties in the agreement. It is also not in dispute that TuffStuff was not aware of the existence of the Patent at the time of entering into the agreement.
It would seem that Razer did not monitor the Official Journal and did not see Mr Law’s advertisement for an extension application. Had it done so, Razer could have opposed the grant of extension of time as provided for in the Act.
What is the consequence of Razer not having knowledge of the Patent?
Section 223(9) of the Act provides for the protection or compensation of persons who exploited or took definite steps by way of contract or otherwise to exploit the invention because of, in this case:
·Mr Law’s failure to pay the renewal fees; and
·the ceasing of the Patent.
Regulation 22.21 of the Regulations, which is prescribed for, inter alia, s 223(9) of the Act, also applies to persons who availed themselves of, or exploited, or took definite steps by contract or otherwise to avail themselves of or exploit, inventions because of the relevant failure. In this case, it was because of Mr Law’s failure to pay the renewal fees and the ceasing of the Patent. That is, the persons who may apply for a licence are not any persons who took steps to exploit the invention but only those persons encompassed within s 223(9) of the Act.
Relevantly, under that section the protection would only be afforded to a person who becomes aware that the Patent had ceased and takes actions based upon that status of the Patent. As the search terms used by Razer’s patent attorneys did not include any reference to Mr Law, its searches of the Register would not have revealed the Patent even if it were active. Just as a failure to appreciate the Patent’s existence would not have protected Razer from infringing the Patent if it were active, Razer is not protected from infringement by being unaware that the Patent had ceased.
Section 223(9) of the Act is not designed to protect a person who by happenstance takes steps to exploit a patent during a period in which it is ceased. It cannot be that a person who manufactures and sells products within the scope of the claims of a patent can be protected simply because that person is lucky enough to have commenced those steps while that patent was not in force through an error or omission of the patentee. There must be a link between the fact that the particular patent has ceased and reliance upon that fact by the person seeking to obtain the protection. Regulation 22.21 of the Regulations does not specifically refer to that necessary link but the regulation can rise no higher than the subsection to which it refers and for which it is prescribed.
SHOULD THE ORDERS IN THE NOTICES OF MOTION BE MADE?
Mr Law’s request for restraining orders
Mr Law moves under O 35 r 1 of the Federal Court Rules, which provides that the Court may, at any stage of the proceeding on the application of a party, pronounce such judgment or make such order as the nature of the case requires. It is not in dispute that the orders sought in Mr Law’s notice of motion are orders to which a patentee would be entitled against an infringer. In my view it is appropriate to make the orders sought.
Razer’s request for a stay
The basis for the stay of proceedings sought by Razer is to permit the licence application to be heard by the Commissioner.
Razer’s case is that Mr Law’s rights to exploit the Patent as granted in s 13 of the Act would be subject to a licence granted by the Commissioner. Razer does not presently have such a licence. It has lodged the licence application but wishes to continue to sell infringing products.
Mr Law has a presently enforceable right by reason of the valid and existing Patent to exploit the invention and to prevent others from doing so without a licence. A stay until the licence application is determined necessarily interferes with Mr Law’s rights under the Patent. On the facts as agreed between the parties and as led in respect of the two notices of motion, Razer is not a person to whom s 223(9) of the Act and reg 22.21 of the Regulations applies. That being the case, Razer’s likelihood of success in obtaining a licence from the Commissioner is such that it is not appropriate, in my view, to stay the proceedings, let alone for the substantial length of time that would be necessary for the Commissioner to determine the licence application under the Act.
There are competing discretionary factors to consider including:
·adequacy of compensation;
·Razer’s assertion that it is entitled to a licence without the payment of any royalties to Mr Law;
·the rights of third parties; and
·the effect on each company’s profits and employees.
Assertions as to whether or not Razer would have continued with its course of conduct if it had known of the Patent are not presently relevant. Ultimately, the discretionary factors relied on by Razer do not outweigh the fact that Razer has not established that it is a person entitled to a licence granted by the Commissioner. It follows that the stay of proceedings should be refused.
Mr Law has suggested, and Razer does not oppose the suggestion, that it should be made clear (as it was in Berlei (UK) Ltd v Bali Brassiere Company Inc (1972) RPC 568 at 571) that nothing in these orders shall preclude Razer from prosecuting the licence application before the Commissioner so that, if the licence application is successful, exercise of the rights given under such a licence shall not be deemed to constitute an infringement of the Patent.
I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bennett. Associate:
Dated: 29 September 2010
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