National Phonograph Co of Australia Ltd v Menck

The High Court of Australia heard an action brought by the National Phonograph Company of Australia Limited against Walter T. Menck. The company, as the owner of patents relating to phonographs and sound records, alleged that Menck had infringed these patents and had also breached several written contracts. These contracts stipulated that Menck would not sell the company's patented articles below certain prices and, in the event his name was removed from the company's dealers' list, would cease to handle or sell such articles.

The central legal questions before the Court were whether a patentee could, by virtue of the patent itself and independently of contract, impose conditions on the use or sale of patented articles, and whether the specific conditions imposed by the National Phonograph Company were legally binding on the defendant, Menck. The Court was also required to determine if Menck had breached these conditions and if his removal from the dealers' list was lawful.

The majority of the Court, comprising Griffith CJ, Barton, and O'Connor JJ, held that a patentee cannot impose conditions on the use or sale of patented articles apart from a contractual agreement. They dissented from prior decisions in English cases that suggested otherwise. The Court found that the "retail dealers' agreement" constituted a contract between the plaintiffs and the defendant. However, on the facts, the majority concluded that Menck had not breached the conditions of this agreement and that his removal from the dealers' list was improper. Isaacs J, in dissent, took a different view on the enforceability of patent conditions and the interpretation of the agreements.

Consequently, the Court ordered that the defendant was not liable for a subsequent breach of the agreement not to deal in the plaintiffs' goods, as his name had been wrongfully removed from the dealers' list. The claim for patent infringement was also dismissed on the basis that the defendant had not committed a breach of the conditions, and therefore, his dealings were not unlawful.