Martin Engineering Company v Trison Holdings Pty Ltd

[1991] FCA 248

245, 4/

JUDGMENT No. .. .. ........ ..., A

NOT SUITABLE FOR DISTRIBUTION

JN THE FEDERAL COURT OF AUSTRALIA )

)

NEW SOUTH WALES DISTRICT REGISTRY ) NG 212 of 1988

)

GENERAL DIVISION )

BETWEEN :  MARTIN ENGINEERING COMPANY

First Applicant

E.S.S. ENGINEERING SERVICES &

SUPPLIES PTY LIMITED

Second Applicant

RECEIVED	AND:	TRISON HOLDINGS PTY LIMITED tradinq
FEDERAL COURT OF	as DYNA ENGINEERING IWAL

AUSTRALIA PRINCIPAL First Respondent

GIANGREGORIO MASSAROTTO

Second Respondent

JUDGE MAKING ORDERS: Burchett J.

WHERE ORDERS MADE: Sydney

DATE OF ORDERS:  22 March 1991

SHORT MINUTE OF ORDERS OF THE COURT

THE COURT ORDERS THAT:

this order.

1.   The respondents Trison Holdinas Ptv Limited and Gianareaorio Massarotto pay to the first applicant damages in the sum of $10,407 within fourteen days of the date of this order.

2.    The said respondents pay to the second applicant damages in the sum of $21,262 wlthin fourteen days of the date of

3.   The respondents pay the applicants' costs of these

proceedings.

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

POT SUITABLE FOR DISTRIBUTION

JN THE FEDERAL COURT OF AUSTRALIA	)
1

NEW SOU TH WALES DISTRICT REGISTRY ) NG 212 of 1988

)

GENERAL DIVISION 1

BETWEEN:  MARTIN ENGINEERING COMPANY

First Applicant

E.S.S. ENGINEERING SERVICES &

SUPPLIES PTY LIMITED

Second Applicant

AND:  TRISON HOLDINGS PTY LIMITED tradinq
as DYNA ENGINEERING (WA)

First Respondent

GIANGREGORIO MASSAROTTO

Second Respondent

CORAM: Burchett J.
PLACE: Sydney

DATE : 22 March 1991

REASONS FOR JUDGMENT

BURCHETT J.:

O\'

By their amended statement of claim, the applicants alleged infringement of patents numbers 512902 and 488722, of each of which the first applicant is the registered proprietor and the second applicant the exclusive licensee. Relief including injunctions and damages was sought. Particulars of the infringements alleged included both the manufacture and sale of the very apparatus the applicants produced and sold in pursuance of the firstmentioned patent and also manufacture and sale of articles which, though somewhat different, were

alleged nevertheless to infringe. The respondents challenged the validity of the first patent by cross claim for its

revocation. That cross claim was disposed of, in advance of

the hearing of the allegations of infringement, in conjunction with a similar cross claim raised in other proceedings. The cross claim was dismissed, and an appeal from the decision by which it was dismissed was also dismissed: Martin Enaineerinq Go v. Trison Holdinas Ptv Ltd (1989) 14 IPR 330; Nicaro

Holdinas Ptv Ltd v. Martin Engineering CO (1990) 91 ALR 513.

When the claim for infringement then came on for hearing, it	(
was not defended by the respondents, and relief was granted ex parte, including an order for the assessment of damages.
In due course, the assessment of the damages came on for hearing, and Mr Massarotto appeared in person. The corporate respondent did not appear. These reasons are concerned with the assessment, and with the question whether Mr Massarotto should be ordered to pay the damages personally, or whether an award should be made only as against the first respondent.

Evidence has been given proving sales by the first

respondent of various items of infringing equipment, most of which related to the scraping of conveyer belts, the subject of the first patent, though a few sales were of items by the sale of which the first respondent infringed the second patent, items known as the Martin Big Blaster. Because of the destruction of records of the respondents, there was difficulty in provlng the precise value of the items sold, but evidence was put before me from which approximate figures

could be derived. Although Mr Massarotto disputed some of the
details, he did not dispute the substance of this evidence.

On this basis, counsel for the applicants put before me calculations with a view to showing that the total value of sales of items infringing the first patent amounted to $96,195, and of items infringing the second patent $9,825 (there was a minor arithmetical error in this latter figure, which should be $9,875). Counsel then submitted that the

first applicant should be awarded damages in the sum of ten

per centum of each of these figures on the footing that, as patentee, it would have received royalties upon these sales if they had been made by its exclusive licensee, and not by the infringing company. There was evidence, which I accept, that had the infringements not occurred the sales would probably have been made by the second applicant. Counsel then submitted that the second applicant's damages were represented by two sums, one being 4 6 % of the selling price of the

articles to which the first patent related, and the other	being 40% of the items to which the second patent related.
These percentages were based on evidence of the profit percentage involved in sales of the respective items. I should note that this case is different from the matter of Martin Enaineerinu Company v. Nicaro Holdinos Ptv Limited, in which my unreported judgment was delivered on 12 February 1991. In that case, the evidence did not establish that the
46% profit margin obtained by E.S.S. Engineering Services and
Supplies Pty Limited was calculated after deduction, as an expense, of the 10% royalty paid to Martin Engineering Company; in the present case, the evidence did establish that fact.
~r Massarotto advanced two criticisms in respect of counsel's calculations. In the first place, he pointed out
that the sales figures in relation to the items which infringe
the first patent were calculated upon the basis of list prices
which did not apply to the whole of the period during which '(
sales took place. The difference would be quite small - sales
making up about two thirds of the amount were calculated at
$1,371.60 per item, whereas some of the items may have been
correctly priced at $1,270 per item. On the evidence, it is
clear that the majority of the items were correctly priced at
the higher figure. It is not possible on the material to make
a precise calculation, but I am quite satisfied that a
deduction of $2,000 from the sum of $96,195 calculated by the
counsel for the applicants would make full allowance for those (
items in respect of which it is necessary to take the price
change into account.
The more significant matter raised by Mr Massarotto relates to the profit percentages of 46% and 40%. He polnts out that, although the second applicant now sells directly in most of the areas in which it operates, it was at the time when and in the area where this dispute erupted, and still is in some areas, selling through a distributor. The
distributor's margin was 25%. If there had been no infringement, and the sales in question had been effected by a distributor at that percentage, the profit of the second applicant would have been reduced accordingly. Furthermore, the sales in question were at a distance, in Western Australia. Even if the second applicant had sold there directly, and not through a distributor, it is likely there would have been costs, additional to those upon which its general percentage of profit has been calculated, of sending

c	salesmen to a distant part of Australia. The applicants' evidence provided no basis for accurate assessment of those costs, and, as a result, it was submitted the court would be compelled to take the 25% paid to a distributor as an appropriate yardstick, there being no other.
There is substance in the contentions put forward by Mr Massarotto. Bearing in mind that it is for the applicants to prove their case; that there is simply no evidence upon which I could find precisely what additional costs the second
Australia; and that it was not dlsputed a distributor's applicant would have incurred in effecting sales in Western
discount of 25% had been allowed by the second applicant for distribution in Western Australia at about, or only shortly before, the relevant period, I think I should apply such a discount in assessing damages in this case.
Accordingly, I have recalculated the 10% royalty figure, after allowing a deduction of $2,000 from the gross receipts,
at a total for the claims in respect of the two patents of $10,407 (being $9,419.50 in respect of the first patent and $987.50 in respect of the second). I have also recalculated the profit figures at respectively 21% of $94,195 and 15% of $9,875. Those calculations come to $19,781 and $1,481 respectively. I think the sum of those amounts, i.e. $21,262, represents a reasonable assessment, on the evidence, of the damages sustained by the second applicant.

In my reasons for judgment, to which I have earlier (

referred, in Martin Enaineerina Com~anv v. Nicaro Holdinas Pty

Limited, I referred to authority to justify the assessment of

damages payable to a patentee by reference to the royalty

which would have been received, and to justify the assessment

of damages payable to an exclusive licensee at the amount of

profit which could have been earned by the effecting of the

sales in fact made by the infringer, at least where it was

probable the exclusive licensee would have effected the sales

but for the infringing sales. It is unnecessary to repeat the	t
discussion set out in those reasons.

In further reasons which I delivered on 6 March 1991 in the same matter I cited authority for the proposition that a director may be liable for the tortious acts of his company which he has ordered or procured to be done. I will not repeat that discussion either in these reasons, but will content myself with referring to the decision of Thomas J. in Kalamazoo (Austl Ptv Ltd v. Com~act Business Systems Pty Ltd (1985) 84 FLR 101 at 127, where he said:

"(1)n the usual course a director who procures or directs his company to perform a tortious act will be liable along with the company."

In the present case, Mr Massarotto is the managing director of the other respondent, and it is clear on the evidence that he was personally responsible for the actions it took which constituted infringements of the applicants' patent rights. He directed the company to do the tortious acts. In those circumstances, I think the orders to be made by the court awarding damages to the applicants should be made against both respondents. Orders will be made accordingly.

I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment herein of his Honour Mr Justice Burchett

Associate

Dated: 22 March 1991

Counsel for the Applicants:	Mr D.K. Catterns
Solicitors for the Applicants:	Messrs Williams Niblett

No appearance on behalf of First Respondent.

Second Respondent:	Mr G. Massarotto appeared
in person.
Date of hearing:	8 March 1991