Minnesota Mining & Manufacturing Co. v C Jeffries P/L

[1992] FCA 589

Re: MINNESOTA MINING AND MANUFACTURING CO.
And: C. JEFFRIES PTY. LIMITED trading as SEIBULITE OF AUSTRALIA; SEIBULITE
INTERNATIONAL INC. and SEIBU POLYMER CHEMICAL INDUSTRY CO. LIMITED
No. G638 of 1989
FED No. 589
Patents
(1992) 24 IPR 413
(1992) 37 FCR 294

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Sheppard J.(1)

CATCHWORDS

Patents - infringement established and injunctions granted - claim for damages or an account of profits - applicant uncertain for which to elect - whether applicant entitled to limited discovery prior to making election.

HEARING

SYDNEY

#DATE 18:8:1992

Counsel for the Applicant: Mr D.M. Yates

Solicitors for the Applicant: Freehill, Hollingdale and Page

Solicitor for the Second: Mr P.J. Kerr of Allen Allen and Hemsley
and Third Respondents

ORDER

THE COURT ORDERS THAT:-

1. On or before 9 September 1992 the second and third

respondents provide discovery of all documents relating to supply and sale in Australia by the second and third respondents, or either of them, of Seibulite Ultralite grade retroreflective sheeting.

2. The second and third respondents pay to the applicant its

costs of this application.

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

JUDGE1

In this matter the applicant has sought an order against the second and third respondents in the following terms:-

"The second and third respondents provide discovery by 21 August 1992 of all documents relating to supply and sale in Australia by the second and third respondents, or either of them, of Seibulite Ultralite grade retroreflective sheeting."

1. The action is one for infringement of a patent. The second and third respondents are outside the jurisdiction of the Court but have appeared in the proceedings. The matter was fixed for hearing earlier this year but, prior to the commencement of the hearing, the second and third respondents indicated that they did not propose to contest the proceedings. I directed that a motion for judgment taken out by the applicant against all the respondents be placed in the list in advance of the date fixed for hearing. When the matter was called on, the solicitor for the second and third respondents said that he proposed to offer no evidence in opposition to the claim but would make submissions about the orders which were to be made. After some short argument, I decided that I should accede to the application of counsel for the applicant that orders be made restraining the second and third respondents from engaging in conduct which would involve them in infringing the patent. The first respondent was separately represented and the matter is proceeding against that respondent.

2. The present problem arises as a result of the applicant's decision to pursue the second and third respondents either for damages or for an account of profits. The making of the order above set out is opposed on the grounds that the applicant has not yet elected whether it will seek damages or an account of profits. The solicitor for the second and third respondents has submitted that I should not require them to give discovery until the election has been made. Counsel for the applicant, on the other hand, says that his client is not in a position to make an election until it has access to the relevant documents in the possession or power of the second and third respondents.

3. A successful applicant for relief in patent infringement proceedings (and indeed in other cases where there has been an infringement of intellectual or industrial property rights) must elect whether it will seek an account of profits or damages; see Colbeam Palmer Limited v. Stock Affiliates Pty. Limited (1968) 122 CLR 25 per Windeyer J. at p 32, Terrell On the Law of Patents, 13th ed., (1982) para. 14.158, p 426 and Ricketson, The Law of Intellectual Property (1984), para. (2.15), p 22. Some account of the history of the matter is to be found in the judgments of the House of Lords in Neilson v. Betts (1871) LR 5 HL 1 and De Vitre v. Betts (1873) LR 6 HL 319. In the latter case it was said that the rule that, upon a decree against a party for the infringement of a patent, the patentee is not entitled to have both an account of profits and an inquiry into damages, was established and applied to every case of infringement. The patentee was required to elect which of the two forms of relief he would adopt. The House of Lords varied the decree by altering that part of it which gave an account of profits and confining it to an inquiry as to damages (p 324). This would suggest at first sight that the decree against the infringer for the infringement must order either an account of profits or an inquiry as to damages with the consequence that the applicant's election needs to be made at or immediately after the decree or order in relation to infringement is made. As counsel for the applicant in the present case points out, such a rule would have about it an undesirable degree of inflexibility particularly in cases where the applicant was unaware of sales of the infringing product made by the respondent and whether any such sales had been profitable.

4. More recently the matter was considered by Henry J. in the High Court of New Zealand in Thornton Hall Manufacturing Limited v. Shanton Apparel Limited (1988) 12 IPR 48. The case was one involving the infringement of copyright but the principles are as applicable to cases involving the infringement of patents. I do not need to refer at length to what Henry J. said in the course of his judgment but he emphasised that, the question being one of election, the party having the right to elect must act fairly towards the other party. In the course of his judgment he referred to Spencer Bower and Turner, The Law Relating to Estoppel by Representation, 3rd ed., (1977), para. 309 and following.

5. The question at issue in the Thornton Hall case was whether the plaintiff should be entitled to amend its claim prior to the hearing of the infringement action to add as an alternative claim to its existing claim for an account of profits, a further and alternative claim for conversion damages. Henry J. decided that he should permit the plaintiff to amend its claim accordingly. He said (p 52):-
   

"The doctrine relied upon as a bar is based upon fairness, which is why it is a necessary element that there be detriment to the other party: Spencer Bower and Turner, para. 334. No detriment is suggested as having occurred to the defendant in the present case as a result of the original pleading not having included a prayer for conversion damages. There is and can be no injustice resulting to the defendant from the plaintiff now 'resiling' from its original position of not seeking conversion damages. It can be noted that where a party has proceeded to judgment, the doctrinal requirements of communication and detriment appear to have no relevance because the judgment dissolves the alternative liability: Spencer Bower and Turner, para. 337.

I can see nothing unfair or unjust in allowing a plaintiff to defer his election of alternative remedies down until the time of judgment, and as I understood Mr Casey accepted that in general such a course is open. In the present case there is nothing unfair or unjust in allowing this plaintiff now to pursue its claim in the alternative. It has not in my view made an unequivocal and irrevocable choice to discard the remedy of conversion damages, and the requirements of the common law doctrine of election in the circumstances are not made out."

1. Thornton Hall differs from the present case because the amendment was sought before the hearing of the infringement claim. Here the applicant seeks to keep its options open notwithstanding that there has been the grant of injunctive relief. But it only wishes to defer making an election until it has had access to the respondents' documents. Once it has inspected them, it will make its election with the consequence that the election will be made prior to the hearing of the claim for damages or an account of profits and, importantly, before any other step is taken towards the preparation of that case for hearing by both the applicant and the respondents.

2. The order which the applicant seeks is not a general order for discovery in relation to an account of profits or a claim for damages. It is limited to certain documents which relate to the supply and sale in Australia by the respondents of the infringing product. It seems likely, as counsel for the applicant submitted, that such documents would need to be discovered whether the claim is for damages or a claim for an account of profits so that there is no question of costs being thrown away as a result of the exercise. The documents and the information which they contain are in the possession and within the knowledge of the respondents. The applicant has no means of knowing what sales or what supplies of the infringing product have been made. There was an undertaking to keep a proper account as from a particular date. But the obligation to keep that account arose only after these proceedings were instituted. The account will by no means cover the entirety of the period during which the infringing conduct continued.

3. In all the circumstances I have reached the conclusion that this is an appropriate case to make the order which the applicant seeks. In the course of the argument there was discussion about the making of a more limited form of order. Having reflected on the matter, I do not think that that is warranted. I think it reasonable in all the circumstances to make the order which was originally sought. The second and third respondents are to pay the applicant's costs of the application.