Spencer Industries Pty Limited v Anthony Collins and B & J Manufacturing Company

[2002] APO 4

OFFICIAL NOTICE

DECISION OF A DELEGATE OF THE COMMISSIONER OF PATENTS

Petty Patent  :          No. 719185 in the name of SPENCER INDUSTRIES PTY  LIMITED

Title:          Tyre Rasp Blade and Assembly

Action:          Application under section 69 for an extension of term of the petty patent, and notice under section 28 by ANTHONY COLLINS and B & J MANUFACTURING COMPANY

Decision:          Issued            .

Abstract

The only ground of invalidity asserted by the section 28 informants is that the patentee was not entitled to be granted the petty patent.

According to the notice of entitlement filed in relation to the petty patent, the patentee derived title to the invention through an assignment to them from the inventor, Mr Collins.  However, the evidence revealed that Mr Collins had never executed an assignment and, furthermore, that the patentee now claimed proprietorship by virtue of their employment of Mr Collins.

The informants submitted that the petty patent had as a consequence been granted to the patentee "on a false statement to the Commissioner" made in the notice of entitlement which was incapable of remedy by amendment.  They argued the Commissioner should for this reason alone decline to extend the term of the petty patent.

This preliminary submission was rejected on the basis that:

• The only question for determination in the present proceedings is whether the patentee was entitled to the grant of the petty patent by virtue of being an eligible person under section 15, not whether the basis of that entitlement has been misstated by the notice filed pursuant to regulation 3.1(2) (Stack v Brisbane City Council [1999] FCA 1279). Indeed, there is no provision in the Patents Act 1990 which makes the truth of this statement a condition of validity (Stack v DaviesShephard Pty Ltd and Another 34 IPR 117).

• Even if it constituted an available ground of invalidity, there was nothing in evidence to suggest that the misstatement of fact by the notice of entitlement arose from an intention on the part of the patentee to deceive or mislead.

• In the event that the patentee made a request for leave to amend the notice of entitlement the Commissioner would have no discretion to ascertain whether their conduct prior to making the request should in some way disentitle the patentee to leave (New England Biolabs Inc v Commissioner of Patents [2001] FCA 787).

• The non-exhaustive provisions of section 104 allow any filed document to be amended for any purpose, and an amendment to the notice of entitlement so that the patentee was no longer categorised as the assignee of Mr Collins would not have the effect of falsifying the Register of Patents (cf. R v The Commissioner of Patents; Ex Parte Martin (1953) 89 CLR 381).

• In any case such an amendment would not be necessary if the informants failed to make their case (Austgen Biojet Holdings Pty Ltd v Goronszy [1997] APO 49).

Employers' rights in the inventions of employees are not governed by statute but by common law and equitable principles which clearly show that in the absence of any express contractual obligation, as was the case here, there is no rule that an invention made by an employee is inevitably the property of the employer.  It is instead necessary to determine whether the employment relationship suggests that the invention concerned was made in the ordinary course of employment or, in other words, whether it is something it was the employee's job to invent.

Mr Collins was engaged as a sales manager and in promoting the sale of products manufactured by the patentee he provided an after-sales service to their customers and distributors.  Mr Collins consequently became aware of problems experienced in the field which he referred for solution to the patentee, albeit with possible suggestions.  However, these suggestions were on the evidence prompted by the commercial desirably of expanding the patentee's range of products so as to match those of other competitors, not by an obligation to undertake any creative design activity on behalf of the patentee.  The evidence provided little insight as to the circumstances in which the invention arose but did indicate that in all likelihood it was not developed by Mr Collins as a result of instructions received from the patentee to devise a new or improved product.

In this light it was found that the invention was not made in the ordinary course of Mr Collins' duties and that ownership consequently vested in him alone.  In the alternative, the evidence did not establish that Mr Collins owed a fiduciary duty to the patentee.

The extension of term was as a consequence not granted, thereby opening the way for Mr Collins to invoke the provisions of section 33(2).

PATENTS ACT 1990

DECISION OF A DELEGATE OF THE COMMISSIONER OF PATENTS

Re:Petty Patent No. 719185 in the name of  SPENCER INDUSTRIES PTY LIMITED, application under section 69 for an extension of term of the petty patent, and notice under section 28 by ANTHONY COLLINS and B & J MANUFACTURING COMPANY

BACKGROUND

Petty patent 719185 (the petty patent) was filed on 4 November 1999 in the name of Spencer Industries Pty Limited (the patentee) as petty patent application 58291/99 with no claim to earlier priority.  The petty patent was sealed on 4 May 2000.  On 15 August 2000 Anthony Collins and
B & J Manufacturing Co (collectively, the informants) filed a notice under section 28.  The patentee applied for an extension of the term of the petty patent on 30 March 2001.

Standard patent application 736898 was filed on 3 August 2000 as a further application of the petty patent and is currently the subject of a request made under section 32 by the informants in these proceedings.

After an exchange of evidence the matter of the section 28 notice came to hearing in Canberra on 2 August 2001.  Mr Anthony Franklin of Counsel, instructed by Mr George Griziotis of Peter Maxwell and Associates, appeared for the patentee.  Also present as observers were Mr Jim Pincott and Mr Sidney Smith.  On 27 July 2001 Mr Bernard M Holt of Halford & Co advised that the informants did not intend to appear at the hearing and would instead rely on written submissions which were subsequently filed on 30 and 31 July 2001.

The petty patent system was abolished from 24 May 2001 when the Patents Amendment (InnovationPatents) Act 2000 came into operation. However, it is clear from the saving provisions of the amended Act that the "old law" continues to apply to petty patents. The "old law" means the Patents Act 1990, and the regulations made under it, in force immediately before the commencement of the amended Act, and any reference in this decision to the legislation should be read in that context.

THE SPECIFICATION

The specification is directed to an assembly for removing the tread from worn tyres.

The specification explains that worn tyres (or casings) are conventionally retreaded by mounting them in an inflated condition on what is known as a buffing machine.  A tyre buffing rasp hub having a number of toothed rasp blades mounted on a hub core is contacted upon rotation with the casing so as to grind and roughen its peripheral surface sufficiently to enable a new rubber tread to be bonded to the casing.

The tyre buffing rasp hub typically includes a pair of interconnected cylindrical end plates between which the rasp blades are mounted as "stacks" formed of a number of separate parallel arrays.  The teeth on each blade are symmetrically disposed across its working edge and configured such that any one tooth of a blade is aligned substantially horizontally (or vertically depending on the set up of the buffing machine) with the corresponding tooth of an adjacent blade.

According to the specification, the invention lies in the realisation that by staggering the teeth across each stack of the rasp hub the worn tyre tread can be rapidly removed while minimising the heat generated that might otherwise adversely affect the texture of the buffed surface of the casing needed for suitable retreading.  This staggered array is preferably produced by indexing the teeth of each blade by a quarter of the pitch by which each tooth is repeated.  The blades are then arranged in a stack such that the teeth of one blade are offset by a half of the pitch from the teeth of the blades on either side thereof.  Alternatively, the blades may have symmetrically disposed (non-indexed) teeth but are arranged in unaligned stacks to again create a staggered array whereby the teeth of each blade are offset by half the pitch from those of their neighbouring blades.

Claim 1 of the petty patent is in the following terms:

"An arrangement of rasp blades on a tyre rasp hub, wherein at least one stack of spaced apart rasp blades is fitted to the rasp hub as a parallel array extending circumferentially around the tyre rasp hub, said arrangement comprising, in any two adjacent rasp blades in the or each stack of spaced apart rasp blades:

a first blade including a first set of teeth uniformly distributed along a working edge of the first blade, said first set of teeth having a predetermined pitch, and

a second blade including a second set of teeth uniformly distributed along a working edge of the second blade, said second set of teeth having the same pitch as the first set of teeth but located in a staggered relationship to the first set of teeth."

GROUNDS OF INVALIDITY

The grounds specified in section 28(1) on which a person (the informant) can assert by notice that a petty patent is invalid are:

(a)    that the patentee was not entitled to be granted the petty patent;

(b)   that the invention is not a patentable invention because it does not comply with paragraph 18(1)(a) or (b); and

(c)    that the specification does not comply with subsection 40(2) or (3).

If the Commissioner is satisfied that any of these grounds is made out, the Commissioner may refuse to grant an extension of the term of the petty patent.  If not so satisfied, the Commissioner must extend the term (see section 69 and regulation 6.6).

In the present case the informants deny the entitlement of the patentee and assert that ownership of the invention originally vested in Mr Collins alone as inventor who has agreed to assign his interest to B & J Manufacturing Company.

THE EVIDENCE

The evidence filed in support of the section 28 notice consists of a statutory declaration executed on 15 August 2000 by Anthony Collins, who is one of the informants as well as the inventor of record, accompanied by a number of exhibits.

In response to this evidence the patentee filed:

• a statutory declaration dated 2 May 2001 by James Spencer Pincott, the patentee's Managing Director;

• a statutory declaration dated 2 May 2001 by George Griziotis, the attorney for the patentee;

• a second statutory declaration dated 21 May 2001 by Mr Griziotis; and

• a statutory declaration dated 2 May by Robynne Lyndsay Sanders, a Solicitor of the Supreme Court of New South Wales who is employed by the attorney firm acting for the patentee

together with accompanying exhibits. 

Further Evidence

On 27 July 2001 the informants sought to have a second declaration executed by Mr Collins admitted as further evidence.  As stated in G S Technology Pty Ltd v Davies Shephard Pty Ltd andGSA Industries (Aust) Pty Ltd [2000] APO 38, such a request is a matter to be determined by the Commissioner pursuant to regulation 22.24. At the commencement of the hearing Mr Franklin objected to the admissibility of this evidence for a number of reasons which I will return to shortly.

The present proceedings are not governed by Chapter 5 of the Patents Regulations 1991 but the considerations that apply to regulations 5.10(4) and (5) are also relevant here (per Impact PostAnchors Pty Ltd v Carsburg 45 IPR 300). In this regard I am obliged to follow the now well known principles set out in A Goninan & Co Ltd v Commissioner of Patents 38 IPR and Ferocem Pty Ltd vCommissioner of Patents 28 IPR 243 before exercising the broad discretion conferred by regulation 22.24.

These principles were said by Burchett J in Ferocom to involve:

"a balancing exercise, in which competing considerations must be taken into account.  There are the interests of the persons directly concerned in the application and opposition in question.  There are also public interests, which are not necessarily all ranged on the same side.  They include the expeditious disposal of matters in the Patents Office, and questions of costs, of efficiency, and of insistence upon the professional standards being maintained by those who deal with the office.  But they also include, as Kitto J pointed out in Kaiser Aluminium & Chemical Company v Reynolds Metal Co (1969) 120 CLR 136 at 143, 'the public interest that a serious opposition by a person entitled in fact to oppose the grant of a patent should be dealt with on the merits, rather than that it should be shut out in consequence of a failure in procedure, lamentable though the failure may be.'"

Mr Franklin argued that the patentee would be disadvantaged by a protraction of proceedings if the informants' request to admit further evidence was allowed.  However, the further evidence is already to hand thus minimising any potential delays which in any event would not unduly effect the patentee to the same extent as the informants if the latter parties were denied the opportunity to fully state their case.  The absence of undue prejudice to the patentee is in my view also demonstrated by the fact that Mr Franklin was able to address the further evidence at least in a preliminary sense even though the patentee was not made aware of the informants' intention to rely on that evidence until just prior to the hearing.

Moreover, and while not overlooking the need for matters before the Commissioner to be pursued diligently, there remains a public interest in ensuring that patents are only granted to those with whom entitlement lawfully resides.  Thus where the question of ownership arises for determination the public interest weighs heavily against compromising any legitimate claim to the invention through a failure to determine the matter on its merits.  The applicable principles were analysed by Sackville J in Goninan as follows:

"In order for the Commissioner or his delegate to give proper, genuine and realistic consideration to the aspect of public interest I have identified, it is necessary to consider the nature of the evidence the opponent seeks to adduce and the significance of that evidence for the opposition proceedings.  I do not mean to suggest that the evidence has to be scrutinised in the same way as would occur at a hearing on the merits.  But unless the delegate forms a view as to the issues addressed by the proposed evidence, and whether that evidence is likely to be important in the opposition proceedings, it is difficult to see how proper consideration can be given to the public interest in having such proceedings being determined on its merits."

These principles were recently affirmed in National Starch & Chemical Company vCommissioner of Patents [2001] FCA 33. As will become apparent, the central question in the present case is whether the invention was made by Mr Collins in the course of his normal duties whilst employed by the patentee. Having reviewed the nature of the further evidence sought to be adduced by the informants there can be no doubt that it is "on reasonable grounds, arguably relevant" to this question (per G S Technology v The Commissioner of Patents (1998) AIPC
91-387).

Taking all circumstances into consideration I believe it is appropriate to permit the informants' further evidence into these proceedings.  The parties were notified accordingly and on 2 October 2001 Mr Griziotis advised that "the patentee does not wish to respond to the second Collins declaration by filing evidence and/or written submissions of its own, or request to be heard on the matter."

DECISION

Preliminary Issues

The entitlement of a person to the grant of a patent is provided for in section 15, which states:

"15 Who may be granted a patent?

(1) Subject to this Act, a patent for an invention may only be granted to a person who:

(a)   is the inventor; or

(b)   would, on the grant of a patent for the invention, be entitled to have the patent assigned to the person; or

(c)    derives title to the invention from the inventor or a person mentioned in paragraph (b); or

(d)   is the legal representative of a deceased person mentioned in paragraph (a), (b) or (c).

(2) A patent may be granted to a person whether or not he or she is an Australian
     citizen".

Mr Collins clearly falls within paragraph 15(1)(a) and both the patentee and B & J Manufacturing Company, who Mr Griziotis has described as the patentee's major US competitor, rely on the original entitlement of Mr Collins as the source of their alleged title to the petty patent.

So far as the entitlement of B & J Manufacturing Company is concerned, Mr Collins has stated that while on a sales trip to the United States in May 2000 he met with their Chief Executive Officer and agreed to assign his rights in the invention to them.  Aside from the fact that the capacity of Mr Collins to validly assign any rights in the invention remains for me to determine, there is no evidence of an actual transfer of title so as to create a relationship by which B & J Manufacturing Company satisfy either paragraph 15(1)(b) or (c).  It follows that they cannot on any view be regarded at this point as the beneficial owner of the petty patent.

Another difficulty presented at the outset concerns the notice of entitlement filed in relation to the petty patent which recites that the patentee derives title from Mr Collins "on the basis of Assignment".  However, the evidence is fully consistent with a refusal on the part of Mr Collins to execute an assignment of the petty patent from him to the patentee.  Rather, what emerges from the evidence is that the patentee now claims ownership of the petty patent under paragraph 15(1)(b) by virtue of their employment of Mr Collins. 

Mr Holt submitted that the petty patent had as a consequence been granted to the patentee "on a false statement to the Commissioner" made in the notice of entitlement which was incapable of remedy by amendment.  He argued the Commissioner should for this reason alone decline to extend the term of the petty patent.

The principal vice with this submission is that Mr Holt has incorrectly assumed that, in the event the patentee made a request for leave to amend the notice of entitlement, the Commissioner would be empowered to ascertain whether their conduct prior to making the request should in some way disentitle them to leave.  In New EnglandBiolabs Inc v Commissioner of Patents [2001] FCA 787 the patent applicant during the course of an appeal from opposition proceedings sought leave to amend the complete specification in order to address the points of invalidity found by the delegate of the Commissioner. The opponent alleged that the applicant had made a number of false and misleading representations in order to advance the patentability of the invention, and argued that the applicant was disentitled, by way of such "inequitable conduct", to the favourable exercise of the Commissioner's discretion to grant leave to amend. However, Emmett J found that there was no discretion to refuse to grant leave to amend on the basis of the applicant's prior conduct nor was there any discretion to refuse to allow the amendments requested on the basis of that conduct. He further observed:
"If the Regulations contemplated that the Commissioner had a discretion not to allow an amendment by reason of the prior conduct of the applicant, one would expect that the Commissioner would be required to report on that conduct so that the applicant for leave could contest the report pursuant to r 10.2(3).  However, there is no requirement for any report on any matter except a matter that would have the effect that the proposed amendments are not allowable under the Act or the Regulations".

Mr Holt's submission also relies for justification upon the assertion that grounds of invalidity based on false suggestion or misrepresentation are open to an informant under section 28, but as stated in Stack v Brisbane City Council [1999] FCA 1279 at page 15:

"Section 28 is concerned with the grant of the petty patent.  In the context of s 28(1), the patentee is the original grantee and the provision is concerned with the eligibility of the original grantee to become the owner of the petty patent".

and later at page 17:

"… it follows that the question of entitlement for the purposes of the notice under s 28 of the Act … ultimately involves the question of the eligibility of [the original grantee] under s 15 to the grant of the petty patent".

Thus the only question for determination in these proceedings is whether the patentee was entitled to the grant of the petty patent by virtue of being an eligible person under section 15, not whether the basis of that entitlement has been misstated, intentionally or otherwise, by the notice filed pursuant to regulation 3.1(2) (cf. sections 138(3)(d) or (e)).  Indeed, there is no provision in the Act which makes the truth of this statement a condition of validity.  As confirmed by a Deputy Commissioner in Stack v Davies Shephard Pty Ltd and Another 34 IPR 117:

"When granting a patent, the commissioner normally does not require proof of entitlement; rather the patent is granted on the basis of the prima facie claim to entitlement that the applicant provides in the "notice of entitlement" required by reg 3.1(2)."

and I additionally note here the provisions of section 195(1) which have been maintained by the courts in accepting an entry on the Register of Patents as prima facie evidence of entitlement of the original grantee (see eg. George Stack & Anor v The State of Queensland & Anor [1996] FCA 1 and Stack v Brisbane City Council, supra).  Even if Mr Holt's argument were valid, there is nothing before me to suggest that the misstatement of fact by the notice of entitlement arose from an intention on the part of the patentee to deceive or mislead.  In his first declaration Mr Griziotis explains that

"… it was common practice … for an employee who conceives or creates an invention in the course of his or her employment, to execute a Deed of Assignment overtly evidencing the transfer of intellectual property rights in the invention to the employer …"

Mr Franklin submitted that as the invention was made in the ordinary course of Mr Collins' duties as an employee of the patentee, no assignment of the invention from him to the patentee was necessary.  Any assignment would, so the argument runs, have been ex abundante cautela.  The circumstances under which the invention was developed are of course presently in dispute.  Importantly, though, Mr Collins by his own admission first objected to executing an assignment in favour of the patentee only after the notice of entitlement had been filed, and apparently resisted all further attempts by the patentee to secure execution which ultimately led to his resignation in the month following the grant of the petty patent.  It is therefore not altogether surprising that at the time of grant the notice of entitlement continued to claim proprietorship of the patentee as the assignee of Mr Collins.

Mr Holt's submission that the notice of entitlement is not capable of rectification by amendment is also misconceived.  In taking this line of attack further he firstly drew attention to section 69(4) which enables a patentee to amend the patent request or complete specification for the purpose of removing a ground of invalidity under section 28.  According to Mr Holt, there is as a result no authority to amend the notice of entitlement for this purpose.  The closest relevant precedent that I am aware of is G S Technology Pty Ltd v Davies Shephard Pty Ltd and GSA Industries (Aust)PtyLtd [2000] APO 38 which would seem to support this proposition. However, Mr Holt has again presupposed that the misstatement of fact by the notice constitutes an available ground of invalidity. As indicated earlier, such an assertion is unfounded in law.

Mr Holt next argued that section 104(1) similarly does not provide the patentee with an opportunity to amend in the present situation.  To understand this argument it is necessary to refer to the written submissions filed by Mr Holt on 30 July 2001 where he states:

"A voluntary amendment under Sec 104 may be possible if made by the patentee but it must be for correcting a clerical error or an obvious mistake and the evidence is silent in support of such clerical error or obvious mistake.  We submit that Sec 104(1)(a) does not apply.  It allows leave to amend to remove a lawful ground of objection to a patent request or specification only.  We submit that The Queen v The Commissioner of Patents; Ex Parte Martin (1953) 89 CLR 381 applies."

However, on any interpretation, Mr Holt's argument is plainly incorrect since it ignores the non-exhaustive provisions of section 104(1) which allow any filed document such as a notice of entitlement to be amended for any purpose (see also New England Biolabs v Commissioner of Patents, supra).  Moreover, regulation 19.1(1) specifies what particulars of a patent are to be registered from which it is evident that the statement of entitlement appearing in the notice filed pursuant to regulation 3.1(2) is not reproduced in the record of the grant of a patent.  Thus a request by the present patentee to amend the statement of entitlement under section 104 so that they were no longer described as the assignee of Mr Collins would not have the effect of falsifying the Register of Patents (cf. R v Commissioner of Patents, supra ).

Mr Franklin advised that the patentee indeed intended to request leave to amend with this aim in mind, but in my opinion such an amendment would be unnecessary if the informants fail to make their case.  As stated by a Deputy Commissioner in Austgen Biojet Holdings Pty Ltd v Goronszy [1997] APO 49, where entitlement was again in issue:

"A patent application includes a patent request, and a notice of entitlement.  In the present case, both of these documents as originally filed do not make reference to Mr Goronszy.  The question arises of whether those documents require amendment before the application can proceed to grant.  I consider they do not.  The issue of inventorship and entitlement was fully explored in the Commissioner's 1995 decision [where entitlement was found to jointly reside with Mr Goronszy].  Consequently by following that decision the Commissioner must be satisfied that the patent has been granted to an entitled person falling within the class of person listed in s. 15.  It follows that no useful purpose is served by requiring the patent request and notice of entitlement be amended to be consistent with that decision, and I can find nothing in the Act or Regulations which mandates amendment of these documents before a patent can be granted."

By the same reasoning I do not consider that any useful purpose would be served by amending the notice of entitlement if the patentee is able to substantiate their eligibility to the grant of the petty patent.

In view of the foregoing considerations, I reject Mr Holt's submission that the effect of the misstatement of fact by the notice of entitlement is to invalidate the petty patent ab initio.

Entitlement

In deciding a matter such as this the Commissioner is entitled to act on any material which is "logically probative" of the issues under consideration.  In reaching a conclusion on any issue, the standard of proof required is the civil standard of proof on the balance of probabilities (Dunlop Holding Ltd's Application (1979) RPC 523). However, while the onus normally lies with an informant to prove their case, the following warning from Stack v Davies Shephard, supra is potentially relevant in the present circumstances:

"    where there is proper cause to query the entitlement of the patentee it is incumbent upon them to provide substantiation of their asserted entitlement to the grant of a patent.  Inability to substantiate entitlement must prima facie leave it open to find that the patentee was not entitled to be granted the patent."

The basic facts of the matter appear from the evidence to be as follows:

• Mr Collins is a qualified first class machinist who was employed by the patentee on 2 April 1990 as a Sales Manager and held that position until 9 June 2000.

• Prior to his employment by the patentee Mr Collins served as a sales representative with PBR Industrial Pty Ltd who were a supplier of hydraulic and pneumatic equipment

• The idea of offsetting the teeth in a rasp blade hub assembly first occurred to Mr Collins in late May 1996 but for commercial reasons was not pursued by the patentee at the time.  Mr Collins nevertheless continued to work on the idea and again approached the patentee in early 1998.  Following their renewed interest, Mr Collins prepared "a full blue print for the general lay-out of the offset rasp blade" which was based on a drawing (exhibit AC5) made by him on 2 December 1998.

• In early 1999 the patentee manufactured a small number of rasp blades having offset teeth as shown in Mr Collins' drawing which were subsequently confirmed to improve the performance of conventional rasp blade hub assemblies.

• The patentee consequently decided to meet with their patent attorney, Mr Griziotis, to discuss "the structure, function and patentability of the new rasp blade hub assembly."  At a meeting on 30 September 1999, also attended by Mr Collins, Mr Pincott instructed Mr Griziotis to draft a petty patent application directed to the offset teeth arrangement which was to be filed in the name of the patentee.  While Mr Collins was acknowledged as the inventor, he evidently did not contest the suggestion that his rights be assigned to the patentee for a nominal amount in the expectation that he would be duly compensated by Mr Pincott.

• In a letter dated 15 November 1999 Mr Griziotis advised the patentee of the filing particulars of the petty patent application.  A deed of assignment (exhibit GG1) for execution by Mr Collins was attached to the letter.

• During March 2000 Mr Collins spoke with Mr Griziotis about the possibility of altering the terms of the assignment so as to refer to royalty payments or a commission.  Mr Griziotis advised that although these added conditions could be made the subject of a new assignment this was a matter for discussion between Mr Collins and the patentee.

• Mr Collins was asked on at least one occasion (in early April 2000) to execute the deed of assignment.  He sought to include an addendum to the assignment imposing further conditions in his favour, but this proposal was rejected by Mr Pincott.

• On 29 April 2000 Mr Collins departed for a sales trip to the United States.  He tendered his written resignation upon returning to Australia without having ever signed the deed of assignment.

As previously mentioned, the central question in these proceedings is whether Mr Collins made the invention when performing his normal duties as an employee of the patentee.

Employers' rights in the inventions of employees are not governed by statute but by common law and equitable principles which clearly show that in the absence of any express contractual obligation there is no rule that an invention made by an employee is inevitably the property of the employer.  It is instead necessary to determine whether the employment relationship suggests that the invention concerned was made in the course of employment or, in other words, whether it is something it was the employee's job to invent.  The law applying in these situations has been summarised in Fine Industrial Commodities Ltd v Powling 71 RPC 253 as follows:

"The law relating to the position of officers or employees who make an invention affecting the business of the company which they serve is well settled.  The principles applicable are stated in Worthington Pumping Engine Co v Moore (1902) 20 RPC 41; British Reinforced Concrete Co v Lind (1917) 34 RPC 101; and Triplex Safety Glass Co v Scorah [1938] Ch 211; 55 RPC 21. The mere existence of a contract of service does not in itself disqualify the officer or employee from taking out a patent for an invention made by him during his term of service, even though the invention may relate to subject matter germane to, and useful for, his employers in their business, and even though the employee may have made use of his employer's time and servants and materials in bringing his invention to completion, and may have allowed his employers to use the invention while he was in their employment. But all of the circumstances must be considered in each case. It is very material to see what is the nature of the inventor's position in regard to the business, and it may be a term of his employment, apart altogether from any express covenant, that any invention or discovery made in the course of the employment of the employee in doing that which he was engaged and instructed to do during the time of his employment, and during working hours, and using the materials of his employers, should be the property of the employers and not of the employee, and that, having made a discovery or invention in the course of such work, the employee becomes a trustee for the employer of that invention or discovery, so that as a trustee he is bound to give the benefit of any such discovery or invention to his employer."

In the present case no contract between the parties has been brought to my attention which regulates the ownership of any invention made during the ordinary course of Mr Collins' employment and, consequently, I need to examine the nature of the duties he was engaged by the patentee to perform.

Mr Pincott states that Mr Collins' claimed training as a qualified first class machinist and experience in the engineering field was deliberately put to use by the patentee to the extent that his role was more as a technical adviser, rather than as a salesman, to customers and distributors both in Australia and overseas.  According to Mr Pincott, this role encompassed the resolution of any technical problems customers or distributors may have experienced with the range of products manufactured by the patentee.  He further states that Mr Collins often discussed problems with him and a Mr Sidney Smith, an engineer with the patentee, and frequently suggested a modification to or redesign of existing blade and hub assemblies.

This evidence is reinforced to a certain extent by Mr Griziotis who states that he was left with the understanding after the meeting on 30 September 1999 that Mr Collins "was routinely involved in conceiving and suggesting to the Patentee Corporation technical improvements to existing products and new products to improve performance".  Exhibits GG2-GG13 to his first declaration are claimed to be illustrative of suggestions for product redesign or modification originating from Mr Collins.  Importantly, Mr Collins does not dispute his technical input into product change and in fact has acknowledged his contribution, either solely or jointly with Mr Smith, to "several matters which had given rise to patent or design applications being filed" during the course of his employment.  Examples given are the application for the petty patent, design registration 119499, and standard patent application 85936/91 which has since lapsed.

Mr Franklin contended that Mr Collins had by his innovative activities assumed a role beyond that of a salesman.  However, before considering this contention further, it is convenient at this point to deal with a submission repeated by Mr Collins that he

"at no time understood nor do I recall it being explained to me by Mr Pincott that any inventions or intellectual property that I created during the course of my employment by Spencer Industries Pty Limited were owned and were assignable to my employer Spencer Industries Pty Limited merely by reason of my employment."

As submitted by Mr Franklin, any lack of awareness on the part of Mr Collins does not displace the patentee's prima facie right to claim the benefit of the invention if it was made by Mr Collins in his capacity as their employee.  Nevertheless, the fact that intellectual property authored by Mr Collins was applied for by the patentee alone without protest from him does not necessarily imply that designing or inventing were part of his normal duties as alleged, but is equally consistent with an ignorance of patent law, particularly as it relates to issues of ownership.  There is some disagreement as to whether Mr Collins was actually consulted by the patentee before filing patent application 85936/91 and the application for design registration 119499 in their name.  However, what does stand unchallenged on the evidence is the uneducated belief held by Mr Collins that his interests could be best served by some remuneration or consideration for the suggestions he had made which ultimately formed the basis of those and the subsequently filed application for the petty patent.  In this light I also accept as plausible Mr Collins' explanation that the subject matter covered by the earlier applications did not constitute "high volume sales items and I therefore did not pursue this issue expecting little return."

So far as the petty patent is concerned, Mr Griziotis has stated that Mr Collins did not "express to me any desire on his part to interfere with the automatic assignment of his intellectual property rights in the invention to his employer" which again seems hardly surprising given the position maintained by Mr Collins that he is unable to recall being alerted to the duty allegedly owed by him as an employee to forego any claim to the benefit of the present invention, or that "the signing of an assignment to that effect was a mere formality."  This version of events receives coincidental support from Mr Pincott.  Although Pincott has provided an outline of his understanding of the respective rights of employer and employee, at no stage does he (or for that matter Mr Griziotis) indicate that knowledge was communicated to Mr Collins and indeed his evidence that Mr Collins "understood or should have understood his obligation … to his employer" (my emphasis) suggests the contrary.

For the reasons discussed above I consider there is insufficient evidence to confirm Mr Franklin's assertion of a "silent acquiescence" by Mr Collins to the patentee's claim to the petty patent or, more relevantly, that his inaction in opposing attempts by the patentee to secure intellectual property protection to his exclusion was a tacit acknowledgement of their rights as beneficial owner of any innovative product improvement conceived by him. 

Returning now to the central issue in the matter, Mr Collins' appointment as a Sales Manager by the patentee resulted from an advertisement in the Sydney Morning Herald on 9 December 1989 (exhibit AC7).  The advertisement reads in part:

"You are a professional but practically minded and resourceful individual, probably with previous sales experience, possibly in an industrial environment.

This small but expanding local manufacturer enjoys a well earned reputation for its range of specialist products that it markets via a world-wide network of distributors.

You will enjoy total responsibility for sales and contracts and the authority to negotiate new agencies both in Australia and overseas.

Ideally, you will have qualifications in a mechanical, engineering or related discipline, but more important will be your industry experience and motivation to succeed in a demanding "hands-on" industrial environment."

Mr Collins is not qualified as an engineer but was as explained by Mr Pincott employed as a direct result of his industrial experience.  However, Mr Pincott has further stated that Mr Collins' experience in pneumatic and hydraulic engineering was of particular interest which I think is curious given the lack of an obvious connection between that field of engineering and the class of products manufactured by the patentee.  More importantly, the newspaper advertisement which provided the vehicle for Mr Collins' engagement by the patentee does not carry with it any implication with regard to invention, and nor does Mr Pincott indicate that Mr Collins was obligated to undertake any creative design activity on their behalf (cf. Charles Selz Ltd's Application (1954) 71 RPC 158 and Adamson v Kenworthy (1932) 49 RPC 57). Mr Collins has stated in this regard that

"I did not understand that my technical background was sought by Spencer Industries so that I could provide improvements in existing products or to create new ones.  While reporting defects in existing products was in the interests of the company and of improving customer relations, these comments were passed to Sid Smith in Engineering to provide solutions.  While I suggested an expansion of the product range I saw the solution of this to reside with Mr Pincott and the Engineer Sid Smith."

thereby suggesting an employment relationship in which Mr Collins' role was restricted to reporting any problems with products manufactured by the patentee for them to consider and solve.  Mr Pincott agrees that Mr Collins often alerted him to problems of a technical nature, but asserts that "once Mr Collins had raised the problem, he would often suggest a modification or redesign of the blade or hub assembly to overcome the problem."  This does not, however, satisfactorily answer Mr Collins' claim that "[i]f I did suggest possible solutions to these problems it was made clear to me that this was not my function as a sales manager", and is uncorroborated in its implication that any "modification or redesign" proposed by Mr Collins had arisen from the exercise of his ingenuity.

It is clear from the evidence that in promoting the sale of products manufactured by the patentee Mr Collins provided an after-sales service directly to customers and through the patentee's distributors.  However, it seems to me that any imperative on the part of Mr Collins to suggest product change was in response to competition from other manufacturers rather than an obligation to apply his mind for the purpose of devising an invention or anything in the nature of an invention.  On this Mr Collins says

"… I suggested to Mr Pincott on a number of occasions to add to the product range sold in order to provide a more competitive position.  Other manufacturers provided a broader range of products than I had available to sell.  A hub assembly included pins, spacers, end plates as well as the rasp blades that were the principle product made and sold by [the patentee].  I suggested, for example, the need to supply a hub, spacers, and a sharpening machine for sharpening rasp blades.  This was to have been done by "copying" products already on the market and which products had been on the market for some time.  I thought that this would provide a more competitive position … The addition of hubs spacers and pins to the product range meant that we didn't have to supply these from other manufacturers, often with that manufacturers' identification on the product. 

… The so called "modification or redesign of blades" referred to in paragraph 14 of Pincott refers to introducing such new products to match those that were already in the field from other suppliers and that were copied as stated above … A sharpening machine was added to the product range designed by an outside contractor as were air cooled spacers that were designed by Mr Pincott and Engineering."

Exhibits GG2-13 referred to previously throw some light on the extent of Mr Collins' involvement in product change.  The first of these is a copy of a letter dated 17 April 2001 to Mr Griziotis from a Mr Chuck McGee, President of Pincott Sales Company, the US distributor for products made by the patentee, who says Mr Collins

"provided us excellent technical engineering support.  He visited many of our distributors and end users annually giving them instructions on how to use the Pincott rasp blades, spacers, and hubs.  He provided Pincott Sales diagrams of how to modify customers rasp blade products to improve performance.

Anthony [viz. Mr Collins] always had an interest on how to design Spencer Industries rasp blades, hubs, and spacers.  Anthony mentioned on numerous occasions different product changes he was involved in developing.  His technical knowledge and training skills were valuable to Pincott Sales."

According to Mr Griziotis, this letter attests to the role played by Mr Collins in the provision of technical support and training but I can only agree with Mr Collins that the dissemination of product knowledge and sales skills is precisely what would be expected of a sales manger.  The letter is also said to confirm the responsibilities of Mr Collins in respect of product modification or redesign.   However, Mr McGee does not state that Mr Collins' contribution to product change arose from his normal duties, nor is there an indication that the changes he suggested involved anything more than the application of basic technical skills.  The direct evidence of Mr Griziotis is similarly of concern since he has also failed to demonstrate a pattern of innovative activity on the part of Mr Collins and in common with Mr Pincott simply relies instead on an implied link between the words "modification" or "redesign" and "invention".  Clearly these words are by no means necessarily synonymous.  Moreover, I am quite surprised by the lack of any hard evidence to corroborate the duty alleged owed by Mr Collins to the patentee given his length of service with them and their global distribution of sales.

On the other hand, Mr Collins has again maintained that his association with Mr McGee and other clients must be viewed in the context of his attempts to advance the patentee's business opportunities.  He points out that

"It was overlooked that Mr McGee also sold the products of competitors because the supply of pins, spacers or hubs was often dependent on supplying these products from a competitor.  Hence my repeated suggestion for [the patentee] to produce these products."

and claims that exhibit GG5, for example, stems from his suggestion that the patentee expand their product range to include blade sharpening machines already on offer from other suppliers so as to enhance their competitiveness.  This is not contested by the patentee.  Exhibit GG5 comprises a copy of a letter from Mr Collins to Mr McGee and it is perhaps telling that the information it contains relating to performance improvement is merely in the nature of suggestions for the use of different but apparently standard option products depending on the particular application.  There is certainly no hint of any fundamental change in design to existing blade sharpening machines, and indeed I am left with the sense that much of what Mr Collins says in the letter is in the nature of "sales talk".  I additionally accept in the absence of counter argument that exhibits GG6 and GG7 among others also concern "obvious applications or adaptations of the existing products", requiring no inventive ingenuity.  In contrast, exhibit GG4 refers to an entirely new product used to replace hub assembly pins made by the patentee which had proved unsatisfactory in the field.  Although Mr Collins states that "[a]s I had done a good job of organising the replacement pin I was asked to keep it in my control'", it is significant to my mind that any creative input into this new product seems to have come from a qualified engineer, not Mr Collins himself.

Having given the matter careful consideration I am satisfied on balance that the present invention was not made by Mr Collins in carrying out his normal duties.  It is true that the patentee's business was at the time of his employment concerned with the manufacture of the same class of products to which the present invention is directed (cf. Harris' Patent [1985] RPC 19). However, as I see it Mr Collins had only an obligation to effect sales of those products and to ensure after-sales service. Although in fulfilling his primary duty Mr Collins may have alerted the patentee to problems experienced by their customers, there is no satisfactory evidence to support the contention that it was incumbent upon him to provide solutions to such problems. I note with interest here that nowhere does Mr Pincott directly state that Mr Collins was ever instructed to devise new or improved products, despite having had ample opportunity to do so. Moreover, the material relied upon by the patentee relating to instances in which Mr Collins had been involved in dealing with customers' difficulties goes no further than establishing that beyond comparatively minor engineering suggestions he did not routinely take it upon himself to solve design problems encountered in practice. As already discussed, Mr Collins advocated an expansion of the range of products made available by the patentee as a marketing strategy and, as this was to have been done by "copying" products already on the market, clearly had nothing to do with invention.

The evidence regarding the background to the present invention is also of no assistance to the patentee.  Mr Collins says he first thought of the idea of offsetting the teeth in a rasp blade hub assembly in late May 1996, but does not disclose the circumstances in which he identified the need for a "new type of rasp blade".  However, it is clear from the evidence that the idea was conceived by Mr Collins while on holidays and refined by him over a period of some two years following the patentee's initial lack of interest in manufacturing a new blade.  No suggestion is made that Mr Collins was directed by the patentee to initiate or continue this work.  It therefore seems to me that Mr Collins evolved the present invention in his own time and of his own volition which further points to the fact that it was not made in the normal course of his employment (per Triplex Safety Glass v Scorah, supra).

In support of an apparent alternative case, Mr Pincott states that Mr Collins was third in the patentee's hierarchical order and received a salary commensurate with his position.  The fact that an employee occupies a management position is a factor to be taken into account when considering the issue of entitlement, but is far from determinative (see eg. Charles Setz Ltd's Application, supra).  However, and as I have already concluded, Mr Collins' duties were confined to sales and there is no evidence to show that he had any authority to exercise managerial functions.  For example his visits to overseas customers and distributors were subject to approval by Mr Pincott, and the impression created by the evidence overall is that any decision to further the business interests of the patentee, notably the introduction of new products, was made to the exclusion of Mr Collins.  The following passage from Harris' Patent, supra seems apposite here:

"… plainly the position in this regard of a managing director whose obligation to further the interests of his employer's undertaking of which he is the managing director will, no doubt, extend across the whole spectrum of the activities of the undertaking, will differ from that of, say, a sales manager."

Moreover, while Mr Collins may have received a salary in keeping with his senior status, he has claimed that his performance was judged by sales results alone.  Mr Collins further contends, again unchallenged, that any salary rises were as understood by him "due to the increase in sales from my efforts".  This is in my view consistent with an obligation on the part of Mr Collins to do no more than limit his endeavours to the sale of products manufactured by the patentee.  I therefore find that the evidence does not justify Mr Pincott's inferred assertion of a fiduciary duty.

CONCLUSION

I have found that the present invention was made by Mr Collins outside the course of his normal duties as an employee of the patentee and, as it is clearly abundant from the evidence that Mr Collins has not assigned his rights in the invention to the patentee, I find that ownership of the invention vests in him alone.  The informants have as a result successfully made their case under section 28(1)(a) and, accordingly, I refuse to grant an extension of the term of the petty patent.

It is now open to Mr Collins to invoke the provisions of section 33(2) and make a complete application under section 29 within three months of this decision (regulation 3.8) upon which a petty patent may be granted.  The term of the petty patent, if granted, will run from the date on which the application is made (Massey v Noack 11 IPR 632).

COSTS

Having considered all the circumstances in this case I see no reason to depart from the normal practice that costs follow the event.  I therefore award costs against the patentee, Spencer Industries Pty Ltd.

O L Haggar
Delegate of the Commissioner of Patents

Patent attorneys for the patentee:     Peter Maxwell & Associates, Sydney

Patent attorneys for the informants:  Halford & Co, Sydney