Re General Tire and Rubber Company's Patent Application

[1968] HCA 26

HIGH COURT OF AUSTRALIA

Menzies J.

RE GENERAL TIRE AND RUBBER COMPANY'S PATENT APPLICATION

(1968) 117 CLR 613

14 May 1968

Patents

Patents—Extension of term—Patentee inadequately remunerated—Refusal of extension—Matters taken into consideration—Patents Act 1952-1962 (Cth), ss. 90, 93.

Decision

May 14.
MENZIES J. delivered the following written judgment:-
The petitioner, The General Tire and Rubber Co., is incorporated in the United States of America. It was the holder of Australian letters patent 152,872, which expired on 20th November 1966. Considering that it had been inadequately remunerated by its Australian patent, it is seeking extension of that patent for a further term. Its petition is opposed by The Olympic Tyre and Rubber Co. Pty. Ltd., Polymer Corporation Ltd. and The Firestone Tyre and Rubber Co.. The Commissioner of Patents has been represented at the hearing and the submissions of his counsel have been of assistance to the Court. (at p614)

2. The patent in question relates to oil-extended synthetic rubber for the making of rubber tyres produced by mixing in the latex stage at least thirty parts by weight of oil with a polymerizing product having a "computed Mooney plasticity of at least ninety", i.e., "tough" synthetic rubber. It is stated in the specification: "We have found in accordance with the present invention that the tough rubbers which were considered unprocessable and not suitable for making extruded tire treads in production may be mixed with relatively large amounts of one or more compatible oils or plasticizers to provide compounds of exceptional quality. Such compounds containing large amounts of softener have produced tire treads superior to those produced with the general purpose synthetic rubbers heretofore available and at very much reduced cost. The softener is incorporated, in accordance with the present invention, in the rubber before the rubber is deteriorated by mastication and preferably while the rubber is in a finely divided state such as is present in aqueous dispersions or in a crumblike state with small particles which may be separated by a pigment such as carbon black." (at p615)

3. All the evidence is documentary but, although there are 302 documents before the Court, the material facts fall within a comparatively small compass. (at p615)

4. The patent is a convention patent based upon an application for a patent made by the petitioner in the United States of America on 20th November 1950 which eventually resulted in U.S. patent 2,964,083 on 13th December 1960. The most significant difference between the Australian patent and the U.S. patent is that, in the former, the invention covers the employment of twenty parts or more by weight of oil whereas the latter is confined to the use of thirty parts or more by weight of oil. The petitioner applied for its Australian patent on 23rd October 1951, a complete specification was published on 10th January 1952, and this was accepted on 18th August 1953. There was no opposition. (at p615)

5. The petitioner's course in the United States of America was not as easy as it was in Australia, and it was not until ten years after its application, and, after a good deal of litigation, that a patent was finally granted. Its U.S. patent runs from 13th December 1960 and until that date the use of its invention in the U.S.A. was not an infringement of its rights. In many other countries throughout the world - and patents had been granted in about twenty-five other countries to the petitioner, or its subsidiary, Gentiruco A.G. - the petitioner also met considerable opposition in its attempt to secure patent protection for its invention. It happened, therefore, that Australia was one of the few countries in which the petitioner obtained patent rights without loss of time. Accordingly, it occupied a more favourable position in Australia than it did in the U.S.A. during the decade 1950-1960, but now its Australian patent has expired, whereas its United States patent has years to run. (at p615)

6. The story of what the petitioner has done in Australia since obtaining patent rights can be told very shortly. Before 1961 it did nothing. In October 1961, as a result of moves made as early as 1958, the manufacture of oil-extended synthetic rubber was begun in Australia by a company called Australian Synthetic Rubber Co. Ltd. at Altona, Victoria. In this company the petitioner had no part, although one of its world-wide competitors had and has. The petitioner, no doubt suspecting that the company's production was an infringement of its patent, conducted certain tests in 1962 which, it is said, showed a strong probability that at least three Australian tyres manufactured were infringing Australian patent 152,872. The petitioner, disregarding Australian Synthetic Rubber Co. Ltd. altogether, caused its patent attorneys to write letters to the Hardie Rubber Co. Pty. Ltd., Goodyear Tyre &Rubber Co. (Aust.) Ltd. and The Olympic Tyre &Rubber Co. Pty. Ltd. which stated that, in the opinion of the patent attorneys, tyres manufactured by those companies would constitute an infringement of the patent. Each letter contained this paragraph: "We have been requested to communicate with you, draw your attention to the patent No. 152,872 and inquire as to whether you wish to take a licence under the patent. The obvious alternative is immediate cessation of user of the patent and an undertaking to not infringe the patent at any time during its currency." These letters brought no response and the petitioner did nothing more. Two other letters were written, one to Dunlop Rubber Australia Ltd. on 23rd September 1963 drawing attention to Australian patent specification no. 152,872, quoting claims 1 and 2 and concluding : "This is not to be construed as an allegation of infringement." Finally, on 15th February 1966 the petitioner's patent attorneys wrote to the patent attorneys for S.A. Rubber Mills Pty. Ltd. of South Australia - a general manufacturer of rubber goods which in 1963 started manufacturing tyres in association with a large U.S. associate, Uniroyal - inquiring whether that company wished to accept a licence under patent 152,872 and stating : "If your client company is desirous of considering the question of taking licence please let us know." Nothing eventuated. The petitioner had clearly enough decided not to assert its Australian rights for the time being. (at p616)

7. In 1961 the petitioner entered into an arrangement with the Hardie Rubber Co. Pty. Ltd. for that company to market certain of its tyres - not being tyres covered by the patent - and in 1966 when The Firestone Tyre and Rubber Co. by the purchase of shares became the owner of a controlling interest in the Hardie Rubber Co. Pty. Ltd., a like arrangement was made by the petitioner with The Olympic Tyre and Rubber Co. Pty. Ltd. (at p616)

8. Infringement proceedings were commenced in Australia against the Hardie Rubber Co. Pty. Ltd. and Dunlop Rubber Australia Ltd. in May 1967. The action against the Hardie Rubber Co. Pty. Ltd. is still pending. The action against Dunlop Rubber Australia Ltd. has, pursuant to the settlement with Dunlop, hereafter to be mentioned, been discontinued. (at p616)

9. The petitioner's only other activity in Australia has been to apply for the extension of the term of its patent under ss. 90 and 95 of the Patents Act 1952-1962 (Cth). The s. 95 application has been refused by the Commissioner. (at p616)

10. So far as appears, the petitioner took no real interest in the Australian market until proceedings for the extension of its patent were instituted. It seems that it conducted no market surveys ; it appointed no agents for the sale of products covered by the patent ; it brought to Australia nothing covered by the patent ; it did not investigate the position in Australia about imports or currency restrictions ; it did nothing, either by itself or with others, to embark upon the manufacture of synthetic rubber or tyres in Australia. In one affidavit in support of its petition, the following paragraph appears : "General has for many years been aware of the rapid growth of the Australian economy and for a number of years has given consideration to entering Australia on a large scale. General has entertained hopes of entering Australia by acquisition of an interest in an existing tyre-manufacturing company. When the Hardie affiliation was established in 1961, General Tire first commenced to export tyres to Australia. General Tire was led to believe that Hardie was not interested in any closer tie for the time, but General hoped that through continued profitable efforts, a common ground for a more substantial affiliation might develop. It was very much to General's surprise and disappointment when, in the latter part of 1966, it was announced that Firestone had acquired a majority shareholding in Hardie." This I am not prepared to accept at its face value, principally because the petitioner's whole case has been that as a matter of deliberate policy it has always looked to licensing agreements as its chosen means of exploiting its Australian patent. The statement that The General Tire and Rubber Co. was led to believe that "Hardie was not interested in any closer tie for the time" is, of course, so vague and general that I cannot attach importance to it. Presumably it refers to 1961 but, as is apparent, it was not until the latter part of 1966 that The Firestone Tyre and Rubber Co. acquired a majority holding in the Hardie Rubber Co. Pty. Ltd. by the purchase of shares. Whether the petitioner made any advances in the intervening five or six years is left to speculation. Furthermore, it does not appear whether whatever it was which led the petitioner to believe that the Hardie Rubber Co. Pty. Ltd. was not interested in any closer tie in 1961, had anything to do with the shareholders from whom The Firestone Tyre and Rubber Co. acquired a majority holding in 1966. Whatever the position may have been, there is no evidence that the petitioner's ephemeral interest survived 1961, notwithstanding its "surprise and disappointment" in 1966. (at p617)

11. Finally, the petition states : "If this Honourable Court should extend the term of the said letters patent as sought by this petition your petitioner is ready and willing to exploit the said letters patent in Australia and to expend money on a large scale in Australia for that purpose." This was disavowed and, like the paragraph in the affidavit to which I have just referred, is entirely inconsistent with the petitioner's case that it has deliberately, and for good reason, adopted the policy of confining its exploitation of the patent in Australia to the granting of licences to tyre manufacturers, and, that this would be done, primarily, by means of agreements made with its American competitors with world-wide interests. This policy, and the causes for it, are of course matters of great importance to which I must return. (at p618)

12. Before doing so and in order to appreciate what benefits the petitioner has received that can properly be attributed to its Australian patent, it is necessary to refer to the organization of the tyre-making industries in the United States of America and in Australia during the relevant time. (at p618)

13. The petitioner was, and is, a corporation with very extensive business interests and great assets in many countries. Thus, in 1950 its assets were worth $US75,027,859, its sales were $US125,375,837, and its profits $US8,557,616 ; while in 1966 its assets were worth $US683,635,779, its sales were $US1,001,507,987, and its profits were $US50,245,300. In 1964 it had twenty-three plants in the United States of America, twenty subsidiary or affiliated plants in fifteen other countries, and technical service affiliations in five other countries. In that year, capital expenditure exceeded $US53,000,000. In 1961, to take a year of some importance in this case, the petitioner invested $US27,000,000 in capital improvements, raising the total of such expenditure between 1950 and 1961 to $US150,000,000. (at p618)

14. Large as the petitioner is, it has, at all times, had even larger competitors which also carry on business on a world-wide scale. Among these are Goodyear Tyre &Rubber Co. (which I shall call "Goodyear"), The Firestone Tyre and Rubber Co. (which I shall call "Firestone") and B. F. Goodrich Co. (which I shall call "Goodrich"). Another competitor with a world-wide business is The Dunlop Co. Ltd. of England and its United States associate, Dunlop Tire and Rubber Corporation (which I shall call "Dunlop"). (at p618)

15. In Australia, the tyre producers are the Goodyear Tyre &Rubber Co. (Aust.) Ltd., linked with Goodyear ; Dunlop Rubber Australia Ltd., linked with Dunlop ; Hardie Rubber Co. Pty. Ltd., linked with Firestone ; B. F. Goodrich Aust. Pty. Ltd., linked with Goodrich ; and The Olympic Tyre &Rubber Co. Pty. Ltd. Of these companies, all but B. F. Goodrich Aust. Pty. Ltd. were in business in Australia in 1950. This last-mentioned company commenced business in Australia in 1960. The Hardie Rubber Co. Pty. Ltd. became linked with Firestone in 1966 and has extended its tyre manufacture in Australia since 1950. In 1963, as previously mentioned, Uniroyal - another great United States corporation - took an interest in S.A. Rubber Mills Pty. Ltd. and the manufacture of tyres was then undertaken. (at p619)

16. In the United States of America the petitioner, as I have said, encountered opposition, including opposition from the United States government, in obtaining a patent for its invention and an original grant was withdrawn. The ultimate grant of a patent in 1960 was, however, not the end of its difficulties. Its competitors refused to recognize the patent and to make licensing agreements with it. A number of proceedings for infringement of U.S. patent 2,964,083 were taken from 1960 to 1967. Six are still being pursued. Throughout the world, the petitioner is now maintaining twenty-seven infringement actions of which one, namely that against the Hardie Rubber Co. Pty. Ltd. is pending in Australia. In these infringement actions, the defendants have raised the question of the validity of the various patents. None of the infringement actions has been heard and determined in court but some have been settled. The most important settlements for present purposes are the world-wide settlements made with Goodyear in February 1966, with Goodrich in April 1967 and with Dunlop in September 1967. Each of these settlements covers the Australian company with which the principal is linked. It is important to observe that litigation between the plaintiff and Firestone is still continuing and, in this litigation, the validity of the United States patent is in question. (at p619)

17. What I propose to do now is to examine the settlement with Goodyear and then state shortly the effect of the other settlement agreements with Goodrich and Dunlop. (at p619)

18. The agreement between the petitioner and Goodyear provides for the termination of all suits throughout the world between the petitioner or its subsidiary, Gentiruco A.G., with Goodyear, its subsidiaries and affiliates, including opposition to applications for extension. The petitioner has agreed not to assert any claim under its patent rights, including the Australian patent, against Goodyear, its suppliers, customers or users, with certain exceptions. Goodyear has engaged that its agreement with the petitioner debars it from contesting the petitioner's patent rights anywhere. The petitioner has warranted that no third party other than certain named persons - all irrelevant to these proceedings - has been granted immunity from suit by the petitioner. Goodyear has undertaken to pay the petitioner $US2,000,000 plus $US1,000,000 if the petitioner should succeed in its suit with Firestone in the United States of America, and minus $US1,000,000 in the event of Firestone's succeeding in that suit. It is to be observed that neither validity nor the extension of the Australian patent has any significance in the settlement that has been made and that, so far as Goodyear is concerned, the settlement provides the petitioner with a return for any use by Goodyear or the Goodyear Tyre &Rubber Co. (Aust.) Ltd. of the petitioner's Australian patent. (at p620)

19. As I have said, similar agreements have been made with Goodrich and with Dunlop. Under the Goodrich settlement, the petitioner receives $US710,000, plus $US290,000 if the petitioner succeeds in its proceedings against Firestone relating to its United States patent, but minus $US320,000 if Firestone succeeds in that litigation. Under the Dunlop agreement, the petitioner receives $US900,000. (at p620)

20. The petitioner has also made settlement agreements with other United States companies, viz. (1) Uniroyal, (2) Cooper, (3) Carlisle, (4) McCreary, and (5) Schenuit, and is awaiting approval of agreements made with Japanese manufacturers. (at p620)

21. The petitioner has calculated that as a result of the settlement agreements already made, it will receive $US6,505,157 in the event of its succeeding in this litigation in the United States of America with Firestone, and $US2,820,157 in the event of Firestone's succeeding in that litigation. The petitioner has estimated its costs to 30th June 1967 for research and development, and patent proceedings, together with internal expenses attributable thereto, at $US5,041,986, including $US4,541,986 for patent proceedings. On these figures, if the petitioner should succeed against Firestone, its profits from the invention will be $US1,463,171 plus any amount in diminution of its expenditure for costs and, if Firestone succeeds, the petitioner's loss will be at least $US2,221,829. Of these amounts, the petitioner attributes 4.5 per cent to Australia - that being the Australian percentage of the world tyre market - so that in the event of its success against Firestone it will, under the agreements which it has made, receive in respect of its Australian patent $US65,843 - i.e. $A59,000. It appears, therefore, that the petitioner has in effect agreed upon the remuneration for the use of its Australian patent by the Goodyear, the Goodrich, Dunlop and Uniroyal companies, and the Australian companies linked with them, at something less than $A59,000 - if it succeeds against Firestone - without regard to whether the term of the Australian patent is, or is not, extended. This sum is in respect of a large part of the Australian usage of synthetic rubber for tyre making, there being outside the scope of the agreements only Hardie and Olympic, as tyre manufacturers; importers of infringing synthetic rubber or synthetic-rubber tyres, about which I have no information; and the Australian Synthetic Rubber Co. Ltd. (at p621)

22. At this point it is convenient to consider the place of the Australian Synthetic Rubber Co. Ltd. in the Australian industry. This company was formed as part of a petro-chemical complex at Altona, Victoria. It was planned in 1958 and incorporated in 1959 by Mobil Petroleum Co. Inc., Esso-Standard Oil (Aust.) Ltd. and Goodyear Tyre &Rubber Co. (Aust.) Ltd. - each holding approximately one-third of the shares. Its associates were Altona Petrochemical Co. Pty. Ltd. and C.S.R.C.-Dow Pty. Ltd. In 1961 it began the production of synthetic rubber - including, it seems, oil-extended rubber containing 37.5 parts of oil to 100 parts of rubber. By 1964, oil-extended rubber accounted for more than two-thirds of the company's production. Its plant is capable of producing 30,000 tons of S.B.R. (polybutadiene styrene synthetic rubber) annually - a quantity substantially in excess of the Australian usage. The company has had the advantage of a substantial tariff rising to sixpence per lb. in 1964. It supplies all Australian rubber-tyre manufacturers. It seems that the petitioner has never concerned itself with the activities of the Australian Synthetic Rubber Co. Ltd. and, in particular, has disregarded any infringement by this company of its Australian patent. The explanation put forward for this disregard of Australian Synthetic Rubber Co. Ltd. is that the petitioner has at all times been concerned exclusively with the licensing of tyre manufacturers to use its patent. It appreciated, so it is said, that it could not get a double royalty and chose to obtain royalties from users rather than the manufacturers of oil-extended synthetic rubber. This policy I regard as a very important consideration in this case. An industry has been established in Australia which by December 1963 was using funds of about 5,000,000 pounds making synthetic rubber and employing about 150 men. Its accumulated loss on the production of S.B.R. to 1963 was 778,000 pounds. The company's principal line is Austrapol 1712, an oil-extended S.B.R. used mainly in vehicle tyres. Notwithstanding manufacture by the Australian Synthetic Rubber Co. Ltd., there have been imports of synthetic rubber into Australia. In 1963-1964 these amounted to about 11,000 tons as compared with 26,917 tons in 1961. (at p622)

23. The petitioner's policy outlined in the previous paragraph is, in my opinion, a very important consideration to be taken into account. A substantial industry has been established in Australia and has operated for seven years against substantial imports. If the petitioner's patent were now to be extended prospectively, that industry would now be at some risk. The petitioner could at any time, and particularly after it has come to a settlement with the tyre manufacturers, turn its attention to the Australian Synthetic Rubber Co. Ltd. It may be that, in view of the petitioner's seeming acquiescence in the infringement of its patent by the Australian Synthetic Rubber Co. Ltd. - if that has occurred - an injunction against manufacture in infringement of the patent could not now be obtained, but it seems that the petitioner has in no way debarred itself from taking proceedings for infringement and could, at will, do so. This is a matter to which I will have to return. (at p622)

24. In the course of his final address, Mr. Aickin intimated that the petitioner's case rested upon what happened before 1960 or, at the earliest, 1958. It was said " We say what happens after 1960 is not material to the question of whether there is any lack of remuneration" and " What we rely upon is the first period of time up to, we would say, 1960 or, at the earliest, 1958, as being the period when no amount of effort by General could have produced any remuneration in Australia". Although this stand does not render what happened thereafter unimportant, in my consideration, of " all the circumstances of the case" (s. 93 (c) of the Patents Act), it does, in confining the period up to 1960 as that upon which the petitioner relies to establish that it has been inadequately remunerated, require that I should give close attention to that early period. (at p622)

25. In 1950, as an aftermath of the war, synthetic rubber production in the United States of America was still under the control of a government agency known as the Rubber Reserve which owned the producing plants established during the war years. It had arrangements with private enterprise, including the petitioner, to run those plants, on a fee basis, in accordance with the policy of the Rubber Reserve and as an integrated system. The synthetic rubber so produced belonged to the Rubber Reserve, and consumers, including the petitioner, obtained their requirements of synthetic rubber directly from the Rubber Reserve. Sales to foreign customers were usually made through agents. This system, by virtue of a congressional decision, remained until 1955 when the plants were sold to private enterprise by tender. Shortly after 1950 the petitioner attempted to make an arrangement with the Rubber Reserve for remuneration for the use of its invention of oil-extended rubber but its advance was rejected, seemingly because the Rubber Reserve considered that the petitioner was not prepared to make adequate disclosure before fixing its remuneration, and because the Rubber Reserve claimed, in effect, that the invention belonged to it. The opposition of the United States government to the granting of the U.S. patent to the petitioner was based upon this latter contention, which failed when the patent was finally granted in 1960. During the period 1950-1955 the GR-S market abroad " while substantial was not actively exploited" and " highlevel domestic demand for GR-S . . . limited the volume of rubber available for the exploitation of markets abroad". These quotations are made from the first report of the Attorney-General on competition in the synthetic-rubber industry, dated 1st May 1956. The national policy so indicated of looking after the home market first was the general policy of the industry, to which the petitioner conformed. During part of the time there was some rationing of consumers by producers. In 1955, when the synthetic-rubber plants were sold to private industry, the petitioner did bid for the plant which it had operated for the Rubber Reserve, viz. Baytown, Texas, but it was not an enthusiastic bidder and its eyes were already elsewhere. The Baytown plant was sold to a competitor, and the petitioner established a new plant of its own at Odessa, Texas, which came into operation in 1957. It seems that up to 1960, at any rate, the petitioner itself absorbed the major portion of the oil-extended rubber which it produced both at Baytown and at Odessa. From 1951 the petitioner used oil-extended rubber in the tread of tyres manufactured by it, and from 1953, certain technical difficulties having been overcome, the bulk of its tyres have been so produced. Indeed the petitioner has adopted the policy that it should never be a synthetic-rubber producer, except where it could utilize a large percentage of its own production in the manufacture of tyres. From 1955 the production of synthetic rubber in the United States of America increased by leaps and bounds, as did exports. The actual figures are of no importance. By 1957 the petitioner was exporting some oil-extended rubber tyres to other countries, including South Africa, but, not including Australia. (at p623)

26. As obstacles in the way of exports to Australia, counsel for the petitioner pointed to import controls and the dollar shortage operative during the decade 1950-1960 and something must be said about these, although there is no evidence that they actually deterred the petitioner from exporting to Australia during that time. Paragraph 15 of the affidavit of F. W. Knowlton (Ex. 112) is argumentative rather than factual and, as I read it, the references to manufacturing difficulties and control of imports are not to information which the petitioner had between 1950 and 1960. (at p624)

27. The fact is, however, that there was, in Australia, import control through licensing from December 1939 until February 1960, but I am concerned only with its operation from 1955 because I am satisfied that up till then there was in the circumstances that existed little, if any, synthetic rubber and few, if any, tyres made from synthetic rubber available for importation into Australia. In 1954-1955 imports of all motor-car and motor-cycle tyres - mainly from the United Kingdom - amounted only to 144,000 approximately, as against local production of 2,830,000 approximately. None of those imports were tyres made from oil-extended rubber. From 1955 until 1957 dollar imports - and any possible importation of goods covered by the patent must have been from dollar countries - were confined to essential goods not available elsewhere. After 1957 when dollar availability improved, there was a progressive relaxation of its control and some provision was made for importation by those who had no previous quota. By 1959, ninety-five per cent of imports - the remaining five per cent including motor cars - were free from discrimination based upon origin in dollar countries. The importation of tyres was therefore on a world basis by 1959, although licences to import remained necessary until 1960. In addition to the foregoing control of imports, Australian tyre manufacturers had protection against imports of tyres from abroad by way of a customs tariff, rising apparently, to about two shillings a tyre, as appears from the Tarriff Board's report on rubber tyres and tubes dated 7th December 1955. There was also duty on rubber, including latex, natural and synthetic, as appears from the Tariff Board's report on synthetic rubber dated 10th December 1962. The details are not, I think, important. (at p624)

28. Before leaving the matter of importing synthetic rubber into Australia during the period between 1955 and 1960, it is necessary to refer to the evidence of J. A. Smithson who, in 1955, was technical manager of The Olympic Tyre &Rubber Co. Pty. Ltd. His evidence shows that by 1955, this Australian company had become aware of the possibility of using synthetic rubber effectively and profitably for tyre treads, and thereupon obtained a variation of its import licence to permit the greater part of its exchange quota to be in dollars so that it could import synthetic rubber rather than natural rubber. In the second half of 1955 orders given by the company in Canada and the United States of America were fulfilled, and thereafter the company had no difficulty in obtaining sufficient synthetic rubber to meet all its requirements. As to this, F. W. Knowlton, a member of the board of directors of the petitioner, has observed: " I suggest that the only reason Olympic became interested in synthetic rubber in 1955 was because of the entry of its competitors into use of synthetic rubber and the actions of its competitors related directly in part at least to the attitudes of their parent companies." From this it would seem that the petitioner was, at least, aware of the use of synthetic rubber in Australia as early as 1955. By this time it was probable that at least some of the synthetic rubber so used would be oil-extended synthetic rubber. (at p625)

29. The experience of The Olympic Tyre &Rubber Co. Pty. Ltd. was, of course, that of a company with an existing quota, but it is significant that it was not until 1962 that there was any approach by the petitioner to The Olympic Tyre &Rubber Co. Pty. Ltd. to take a licence to use the patent that it had obtained ten years earlier. It is also significant that by 1959 imports of synthetic rubber into Australia had risen to between 16,000 and 17,000 tons annually. In 1960 they excceeded 22,000 tons. (at p625)

30. I turn now to a different aspect, namely, the nature and merit of the invention in relation to the public. About this I have no doubt, notwithstanding the attractive argument of Mr. Shaw to cast doubt upon its inventive ingenuity. I can therefore deal with this matter shortly. Merit in this context has two aspects, the first the quality of the inventive step taken in the invention and, secondly and more importantly, the value of the invention to the public. In both aspects, I consider the petitioner's invention to have considerable merit, particularly in the latter. (at p625)

31. As to the quality of the inventive step, I rely principally upon the two affidavits of Dr. W. J. S. Naunton although I should say that after hearing Mr. Shaw and reading Exs. 187-193 and 254 relating to the use of Shell Dutrex; Ex. 289, the Wilmington patent; and Exs. 294-295, I would have been more assisted if Dr. Naunton had discussed the material appearing in these exhibits - which had been relied upon by the opponents of the application before Dr. Naunton came to swear his second affidavit - rather than confining himself, as he did, to an emphatic reiteration of his astonishment that - as the invention disclosed - over twenty parts by weight of oil could be used in making synthetic rubber and the quality could nevertheless be maintained. Nevertheless I accept Dr. Naunton's statement that: "in 1951 I first heard of the invention by The General Tire &Rubber Co. which is disclosed by the said letters patent and I was greatly interested in and impressed by the revelation that The General Tire &Rubber Co. in the United States of America were actually proposing and indeed proceeding to process a raw rubber of higher viscosity than could, in the light of the information then available anywhere in the world be processed, and to extend this by the addition of large quantities of oil and normal quantities of black or other filler to a level where it could be extruded without difficulty". I also accept the opinion expressed by Dr. Naunton that " the said invention was one of outstanding importance in the rubber industry. It overcame a long-standing problem and produced a solution which has revolutionized the manufacture of car tyres and the treads therefor". In so doing I am fortified by the report of the Subcommittee on Patents, Trademarks, and Copyrights of the Committee on the Judiciary, United States Senate, in 1959 (Ex. 117), which treats the manufacture of cold rubber and oil-extended GR-S as the two major developments in the rubber industry in the ten preceding years. Indeed, of the utility of the invention there is really no question. It has been generally adopted and it makes possible the production of high-quality tyre treads at a very substantial saving in cost. (at p626)

32. One other matter remains to be dealt with before I come to the application of s. 93 of the Patents Act to the facts as I have found them. It concerns claims 18 and 19. Counsel for the Commissioner has drawn my attention to these claims and submitted that they are plainly invalid. Claim 18, apart from an obvious error, has two faults; it contains no limitation to a conjugated diolefinic compound having not more than eight carbon atoms, whereas it is apparent that the invention is so limited, and there is no requirement that the plasticizer should be at least thirty per cent by weight. Claim 19 shares the first fault with claim 18. The petitioner did not defend these claims but, for it, it was argued that any extension of the patent should be upon terms that the petitioner should apply to the Commissioner to delete or re-form these claims. Having regard to s. 85 of the Patents Act and the existence of infringement proceedings, I am satisfied that the course suggested would not be the right one for me to take, and, that any order, which might be made for extension, should exclude these claims. (at p626)

33. In considering my decision upon the petitioner's application, I am directed by s. 93 of the Patents Act to have regard to (a) the nature and merits of the invention in relation to the public; (b) the profits made by the patentee as such; and (c) all the circumstances of the case. (at p627)

34. As to (a), I am satisfied, for the reasons already stated, that there is a strong prima facie case that the invention did constitute an important step forward in the process of making tyres which had great merit both by reason of its simple ingenuity and its utility. The public - i.e., the Australian public, including tyre manufacturers and tyre users - has benefited substantially from the invention. Upon the evidence before me I have reached the same conclusion as that expressed by Lloyd-Jacob J. in determining an application in the United Kingdom for the extension of the petitioner's United Kingdom patent on the ground of war loss. His Lordship said: "The material manufactured in accordance with the letters patent had two particular advantages. One was that because of the incorporation of oil in the polymer, the oil being a cheaper product than the SB-R to which it was added, it resulted in a reduction of the cost per pound of the patented product. Secondly, it was found to have considerably improved performance when utilized in association with motor-car tyres to form tread portions. Its oil resistance was substantially better than that of natural rubber." (at p627)

35. As to (b), although my principal concern is of course with the Australian profits of the invention, the profits of the patentee derived from corresponding patents have to be taken into account. This is so in this case, particularly, because the patentee has chosen, in effect, to make what no doubt will be the most substantial part of the profits it might expect from the Australian patent, depend entirely upon its United States patent and the results of litigation in the United States of America concerning its validity. Nevertheless, I would regard $A59,000 as a small profit from the Australian patent and, even if this amount were to be increased by reason of success in its proceedings against Firestone in the United States of America - which no doubt would affect the Hardie Rubber Co. Pty. Ltd. and the action against it in Australia - I consider that the petitioner could reasonably have expected to make considerably more out of its Australian patent. The remuneration which it has received must be disappointing to it. (at p627)

36. It is in giving appropriate weight to many factors which make up "all the circumstances of the case" that I find the real difficulty in determining what I should do upon this application. (at p627)

37. Had the petitioner been anxious to exploit its Australian patent, and had it been diligent in doing so, it would have found it no easy matter up to the year 1960. Indeed, when it obtained its Australian patent, it must have been obvious that the possibility of exploiting it for some years was very remote. In the U.S.A. the invention still needed some practical development, e.g., to overcome the splicing problem, and United States production was committed to United States demands. Upon investigation of the position in Australia, the petitioner would have found that established tyre manufacturers had capacity to meet the expected increase in the Australian requirements of tyres. Had it decided to manufacture tyres in Australia, it would, therefore, have had either to add a new plant to an already competitive industry, or to have made an arrangement with one or other of the two independent Australian companies. Had it decided in 1955, or thereabouts, to do what Goodrich did three or four years later, and establish its own factory, it would have had to obtain a licence to import synthetic rubber and this, up to 1957 at least, would have been a discouraging difficulty. Had the petitioner decided to attempt to establish, in conjunction with others, a plant to manufacture synthetic rubber, it would no doubt have faced problems of great difficulty. It would, as the founders of Australian Synthetic Rubber Co. Ltd. did in 1958, have had to take the initiative in establishing a petro-chemical complex with which to co-operate. This would not have been a simple task, but I am not satisfied that it would have been an impossible task after 1955. A few years later it was found practicable. The practicability of exports must also be considered. Had the petitioner, after consideration, put aside any thought of embarking upon manufacture in Australia, it would, in accordance with its established policy, have had little inducement to export synthetic rubber to Australia. That policy, it will be recalled, was to provide synthetic rubber for the purpose of its own manufacture. In accordance with that policy, the import of synthetic oil-extended rubber would have had to be preceded by the petitioner embarking upon, or participating in, tyre manufacture in Australia. Another course which might have been considered was the establishment of an export market for tyres within Australia. Again there would have been difficulties, but I am satisfied that the difficulties which would have been experienced would not have been insurmountable. Curiously enough it seems that the petitioner has come to the conclusion that the Australian market - unlike other markets - is not willing to pay for high quality goods. (at p628)

38. It is easy enough now, to assemble a collection of obstacles to justify the petitioner's inaction; but it must be remembered that, notwithstanding difficulties, the enterprise of others did, by 1961, establish a synthetic-rubber plant in Australia, establish a tyre manufacturing business in Australia, and arrange for the importation of synthetic rubber and tyres into Australia. The truth is, I think, that the petitioner was not interested in any undertaking of the kind just discussed. As a matter of settled policy, it had come to the conclusion that the only way in which it would exploit its patent in Australia was by granting licences to tyre manufacturers in return for royalties. This conclusion lay like a dead hand upon the petitioner's initiative with respect to Australia. Its inaction in Australia is in marked contrast with its enterprise elsewhere, and with the enterprise of others in Australia. (at p629)

39. The policy which was adopted has not been altogether a failure, as the agreements with Goodyear, Goodrich and Dunlop demonstrate. The policy has not, however, been an unqualified success. I am not very concerned with Firestone and the Hardie Rubber Co. Pty. Ltd. because the petitioner is pursuing in the United States of America its settled policy and, if it succeeds, it will no doubt obtain some recompense for the use by the Hardie Rubber Co. Pty. Ltd. of its Australian patent, if such use should be established. However, while the petitioner has been following its settled policy in the United States of America, where its patent had many years to run, in Australia time has been running out and its patent has expired before the petitioner has made any profits from the use (if any) of its patent by The Olympic Tyre &Rubber Co. Pty. Ltd., by the Australian Synthetic Rubber Co. Ltd., and by those who have sold imported tyres which infringe the patent. So far as The Olympic Tyre &Rubber Co. Pty. Ltd. is concerned, the matter is fairly straightforward. This company does not currently infringe the patent and it will not do so if the patent is extended, although it would like to be free from the limitations which the patent imposes upon its manufacture. Furthermore, the petitioner has, since 1966, had its own commercial arrangements with The Olympic Tyre &Rubber Co. Pty. Ltd., and it has been in a position to protect its patent rights in the event of their being infringed. Turning to imports, I have no information about current importation of tyres, and whether or not tyres imported do infringe the patent, nor do I know whether the manufacturers of imported tyres which do infringe the patent are being pursued by the petitioner in foreign proceedings or have reached settlements with the petitioner. If so the petitioner will, no doubt, continue with its actions, and, it can still sue for any infringements by importers into Australia, except to the extent that it has incapacitated itself by agreement or delay. The possibility of the petitioner obtaining some profit from future imports is not, I think, a consideration of much weight in favour of granting an extension of the term of the patent. (at p630)

40. This leaves the manufacture of synthetic rubber by the Australian Synthetic Rubber Co. Ltd. as a matter for consideration. Having regard to the petitioner's professed policy of collecting royalties from tyre manufacturers rather than from the manufacturers of synthetic rubber, I do not think that there should be any extension of the Australian patent, to give the petitioner the opportunity to depart from its deliberate policy, and to force the Australian Synthetic Rubber Co. Ltd. to make a contribution towards its profits, beyond anything which may be recovered for any infringement during the statutory term of the patent. (at p630)

41. Bearing the foregoing matters in mind, it seems to me that the proper course to follow here, is to leave the petitioner to pursue the policy which it has deliberately adopted for many years, which, in effect, overlooks infringements in Australia except as part of infringements throughout the world by its great competitors. In substance, the petitioner has disregarded its rights under its Australian letters patent and has concentrated upon obtaining and exploiting its United States patent. This policy it can still follow, so far as Firestone is concerned, without any extension of the terms of the Australian patent. It can also sue for past infringements in Australia, except to the extent to which it has incapacitated itself. (at p630)

42. In all these circumstances, I consider that the application to extend the term of the patent should be refused. (at p630)

43. The order of the Court is application dismissed with costs including the costs of the Commissioner. (at p630)

Orders

Application dismissed with costs including the costs of the Commissioner of Patents.