~ my OB gat td Zo IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION CORR ) ) } No. QLD G120 of 1983 ) ) ON APPEAL FROM THE SUPREME COURT OF QUEENSLAND BETWEEN : MICHAEL JAMES DURACK First Appellant AND: POOL FABRICATIONS PTY. LIMITED Second Appellant AND: RODNEY WEBB Third Appellant AND: POOL FAB (SOUTHSIDE) PTY. LIMITED Fourth Appellant AND: ASSOCIATED POOL BUILDERS PTY. Respondent IGENODA Amendment to the Reasons for December 1983. Judgment of the Court of 21 Page 3 Line 16: Insert a full stop after "appellant" and delete "on 3 December 1980,". B. RAMSAY ASSOCIATE TO THE CHinr JUDGE 18 January 1984 CATCHWORDS Patents - Petty Patent - Threat of legal proceedings by patentee - Infringement alleged - Validity of petty patent challenged - Combination petty patent - Alleged want of novelty and obviousness. Practice - Interlocutory injunctions - Balance of convenience - Undertakings not to make threats previously given in relation to an application for a standard patent covering the same invention - Difficulty for respondent to establish damace suffered 1f injunction not aranted - Appellants' freedom to notify existence of petty patent. Patents Act 1952 - ss.45A(2), 49A, 658A, 68B, 121, 122. MICHAEL JAMES DURACK AND OTHERS v. ASSOCIATED POOL BUTLDERS Pry. LIMITED No. Qld. G120 of 1983 Bowen C.d., Fox and Fitzaerald JJ. 21 December 1983 Brisbane IN THE FEDERAL COURT OF AUSTRALTA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION JUDGES: WHERE MADE: DATE: No. QLD G120 of 1983 we ~ ew ON APPEAL FROM THE SUPREME COURT OF _ QUEENSLAND BETWEEN : MICHAEL JAMES DURACK bad First Appellant AND: BQOL FABRICATIONS PTY. LIMITED Second Appellant AND: RODNEY WEBB Third Appellant AND: POOL FAB (SOUTHSIDE) PTY. LIMITED Fourth Appellant AND: ASSOCIATED FOOL BUILDERS PTY. LIMITED Respondent ORDER Bowen C.d.. Fox and Fitraeralid JJ. ty vaney 13 December 1995 THE COURT ORDERS THAT: 1. The appeal be dismissed. Ze Michael James Durack. Pool Fabrications Ftv. Limited, Rodney Webb and Pool Fab {(Southside)Pty. Limited. pay to Associated Pool Buzlders Ptv. Limited 1ts costs of the appeal. IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION CORAM: DATE: ww No. OLD G120 of 1983 ON APPEAL FROM THE SUPREME COURT OF QUEENSLAND BETWEEN : MICHAEL JAMES DURACK First Appellant AND: POOL FABRICATIONS PTY. LIMITED Second Appellant AND: RODNEY WEBB Third Appellant AND: POOL FAB (SOUTHSIDE) PTY. LIMITED Fourth Appellant AND: ASSOCTATED POOL BUILDERS PTY. LIMITED Respondent Bowen C.d., Fox and Fitzgeraid JJ. 21 December 1983 REASONS FOR JUDGMENT THE COURT: An interlocutory iniunction was granted in the Supreme Court of Queensland on 6 December 1983 in action No. 3155 of 1983. Upon the respondent's undertaking as to damages and that it will not "represent by letters, circulars, advertisements or otherwise (except legal proceedings) that Pettv Patent No. 533818 is invalid", Matthews J. ordered that each of the appellants be restrained until the trial or further order from threatening the respondent or anv other person or persons with anv leaal proceedings in respect of any alleged infringement of, inter alia, that petty patent. The appellants appealed to this Court and the appeal was expedited. At the conclusion of the hearing on 13 December 1983, the appeal was dismissed with costs. No separate point was made on the appeal concernina the form of the order, the inclusion in 1t of reference to other patents which mav hereafter be granted, or the making of the order against some of the appellants. The Court stated when it dismissed the appeal that its reasons for iudgment would be published in due course. The second appellant and the respondent are rival manufacturers of swimming pools which are sold in kit form to distributors. The second appellant's product is known as a "Pool Fab" pool and the respondent's product 1s known as a "Tracey Wickham" pool. The respective pools are not materially dissimilar. A pool constructed bv use of either kit consists of prefabricated wall sections held in place bv prefabricated coping sections anda steel cable. The pool is usually set intoa cavity in the ground on a concrete base. The inside of the pool comprises a removable vinyl liner which covers the base of the pool and the internal walls of the pool to the coping. The first appellant is a director of the second and fourth appellants. The fourth appellant is a distributor of the second appellant's product. The third appellant is an employee of the fourth appellant. No point concerninga parties was made before us; all the appellants were represented before us by the same counsel, and they were all represented by the same counsel before Matthews J. Action No. 3155 of 1983, relates to threats alleaedlv made in reliance upon Patent Application No. 64857/80 and was commenced by the respondent on 23 June 1983. The pending application was for a standard patent and was made by the second appellant on 3 December 1980. It was accepted by the Patents Office on 24 June 1983, but the acceptance was not advertised until 18 Aucqust 1983. In response to written requests made on behalf of the respondent, the appellants, by letter from their solicitors dated 7 July 1983, gave the following undertakinas until the hearing of action No. 3155: "lL. That the First and Second Defendants either personally or by their servants or agents and each of them will not threaten persons who act a5 agents or distributors of the Plaintiff's swimming pool kits with an action or proceedings in respect of anv alleged infringement of the alleged patent rights of the Defendants or any of them. That the Defendants and each of them either personally or by their servants or agents will not threaten purchasers or potential purchasers of swimming pool kits manufactured by the Plaintiff with an action or proceedings in respect of anv alleged infringement of the alleged patent rights by the Defendants or any of them. That the Defendants will not represent to anv other person that the Plaintiff or its distributors or customers are or will be in breach of any alleged patent rights held or to be held bv the Defendants or anv of them." The undertakings were not marked as being "without prejudice", and were referred to openly in these proceedings. application Wo. 64857/80 (serial No. 531391) was given on 16 Notice of opposition to the arant of a patent November 1983 by Mr. Geoffrey James Ramsev, a director of respondent, on the following grounds: "(e) that the invention 50 far as claimed in any claim, was published in Australia before the priority date of that claim; (aq) that the invention so far as claimed in any claim, was obvious and did not involve an inventive step, having reqard to what was known or used in Australia on or before the priority date of that claim: (h) that the invention so far as claimed in any claim was, before the priority date of that claim, otherwise not novel in Australia; and (i) that the complete specification does not comply with requirements of Section 40 of the Act." The priority date attaching to the application for this patent 1s 3 December 1979. On 24 Auaust 1983, the second appellant made an application for a petty patent (No. 18351/83). There is evidence that the claim of the pettv patent is "substantially identical" or "virtually identical" with claim 3 of the specification for the standard patent (No. 64857/80). The claim is for a combination patent. The application was accepted on 22 November 1983. It was notified on 28 November 1983 and (as No. 533818) was granted, sealed and advertised on 1 December 1983. The claim defining the invention is as follows: "(57) Claim 1 . A liquid retaining structure comprising: a pluralitv of screformed wall panels arranged in edaqe to edge relationship to form on a base a wail member of predetermined shape with at least one concave curve in an outer perimeter; said wall panels being maintained in a desired abutting edge to edge relationship at their respective lower edges by lower retaining means and at their respective upper edges by a plurality of cast concrete coping members; a tensile member associated with said coping members adjacent the upper edge of said wall member such that in use said tensile member underacoes tension as a result of inwardly or outwardiv directed forces on said wall member, said coping members act in compression as a substantially continuous beam to withstand flexure from said inwardly and outwardly directed forces on said wall member. said copind members act in compression as oa substantiailv continucus beam to withstand flexure from said iunwardlv and outwardlv directed forces on said wall member; and, a membrane liner releasably secured within said structure bv liner retention means attached to an inner face of said wall member adjacent an upper edae thereof, said membrane liner heing constructed from flexible polyvinvl chloride sheet plastics material." For present purposes it 1s accepted that the prioritv date of the petty patent is the same as that for the the standard patent application (see s.45A(2) of the Patents Act 1952 ("the Act")). A defence was filed in action No. 3155 of 1983 but, so far as appears, no further steps were taken in that action until 2 December 1983. On that date the second appellant had caused an advertisement to appear in the "Courier Mail" newspaper, a morning newspaper circulating dailv in Brisbane and elsewhere in Queensland. Relevant parts of the advertisement are as follows: "1,.PO0OL FABRICATIONS PTY. LTD has had cranted to it Letters Patent No. 533818 oan its prefabricated concrete vinvl lined modular pool concept. Letters Patent No. 533818 is dated 1/12/83. 2.POO0L FABRICATIONS PTY LTD. wishes to protect its $800,000.00 investment and the seven (7) vears to research in the development of its product. Pool Fabrications Pty. Ltd. also wish to protect the investments of its fifty (50) franchise dealers and licensees both in Australia and overseas. The arantinag of Letters Patent No. 533818 aives Fool Fabrications Pty. Ltd. and its franchisees and licensees the exclusive ridht to construct swimminad pools in accordance with its patented system. 3.POO0L FABRICATIONS PTY. LTD. are aware of two swimming pool manufacturers which make and sell and/or supply componentary for the construction of prefabricated concrete vinvl lined modular swimming pools on the same concept as set out in Letters Patent No. 533818. Those manufacturers are:- (a) ASSOCIATED POOL BUILDERS PTY. LTD. TRADING AS TRACEY WICKHAM POOLS; (b) PIONEER POOLS PIY. LID. Pool Fabrications Pty. Ltd. also believe that Geoffrey James Ramsay (Csic.4J, and a firm calling itself Pool Filtration and Equipment have been conspiring with Associated Fool Builders Pty. Ltd. (TRACEY WICKHAM POOLS) to mislead pool dealers into believing that Fool Fabrications Pty. Ltd. would never obtaina Patent on these pools. Tf you helieve that vou have been innocently duped into paving for a dealership which now must cease, please let us know in writing at our head office. See the list of authorised Pool Fabrication Pty. Ltd. dealers, anyone not on this list purporting to sell the same product is infringing our patent. Leqal proceedings have been commenced against Associated Pool Builders Pty. Ltd. for breach of confidential information necessary to construct a swimming pool in accordance with the now patented system of Pool Fabrications Ptv. Ltd." Ib is not disputed for present purposes that the document constituted a threat of leqal proceedings within the meaning of s.121. On the same day the respondent obtained ex parte an interim iniunction in the Supreme Court of Oueensland. This iniunction in form related specifically to the standard patent application, and to "any other patent application to which the defendants or anv of them claim to be interested". The present notice of motion was filed on 5 December 1983. It does not refer to the petty patentc. The injunction under appeal was aqranted on 6 December last, and does refer to the petty patent. The statement of claim has not been amended to refer to the pettv patent, or the threats giving rise to the present application for an interlocutory injunction. Something will have to be done to put the proceedings in order. In the meantime we have considered the matter on the basis on which it was arqued, as if the current proceedings came within action No. 3155 of 1983. We have referred to the content of the iniunction granted. It should be explained that the undertaking set out has reference to evidence from which it 1s proper to infer that in November 1983, the respondent publicly asserted that the second appellant did not hold and would nat obtain a valid patent which would comprehend the respondent's pool. There was also uncontroverted evidence that the respondent's product and advertising 15 copied from that of the second appellant. We understand the debate hefore the learned Judae revolved around the petty patent and so it has been before us. The relief at present sought is set in the context of 5.121 of the Act. sub-sections (1) and (2) of which read: Thi i} "121. (1) Where a person, by means of circulars, advertisements or otherewise, threatens a person with an action or proceeding for infringement of a patent, or some other like proceeding, then, whether the person making the threats is or is not entitled to or interested in a patent, or 1s or is not interested in an application for a patent, a person adqarieved may bring an action acainst the first-mentioned person and may obtain a declaration to the effect that the threats are unjustifiable, and an iuntunction aaqainst the continuance of the threats, and may recover such damages (if any) as he has sustained, unless the first-mentioned person satisfies the court that the acts in respect of which the proceedings were threatened constitute. or, 1f done, would constitute - (a) an infringement of a patent in respect of a claim in the specification which is not shown by the plaintiff to be invalid: (b) an unfringement of rights arising under section 54C in respect of a claim in a complete specification that is not shown to he a claim that would be invalid if a standard patent had been aqrantead in respect of the complete specification: or (c) an infringement of richts arising under section 54D in respect of the claim of a petty patent specification that is not shown to be a claim that would be invalid if a petty patent had been aranted in respect of the petty patent specification. (2) The mere notification of the existence of a patent, or of an application for a patent, does not constitute a threat of proceedings within the meaning of this section." is not a section which arants a ricght. or provides an invitation, to make threats, even to the proprietor of a standard patent. Tt 1s concerned with relief by a person aggrieved when aroundless threats of leqal proceedings are made. 10. Some of the appellants' argument seemed to place excessive reliance upon the fact that a pettv patent had been granted. One should, however, understand some of the special features of such a patent. The term of the patent, unless extended, is twelve months only (s.68A). There is no scope for opposition to the grant. Tf the application and specification comply with the requirements of the Act, non-acceptance is to be based upon the positive satisfaction of the Commissioner that there is lawful ground of obiection ta the arant (sub-sections (2) and (11) of 5.49A). Section 122(1) of the Act gives a defendant to an action under s.121l a right to counter-claim for infringement in that action and s.122(2) gives the plaintiff a right in the action to seek revocation of the patent. The procedure thus provided for correlates with the lanquage of s.121(1), which negatives action under that sub-section where infringement is proved (bv the defendant), unless the plaintiff establishes invalidity. Tt has been accepted that success of the present motion 1s conditioned bv these considerations of infringement and invaliditv. As we have said, there has been no dispute that there was a threat. There has also been no dispute that there has been an infringement if the pettv patent is valid, and not revocable. Two matters of substance have been debated. One is the validity 1l. of the petty patent, and the other is where the balance of convenience lies in deciding whether an injunction should ao. The decision appealed from is of course a discretionary one, and we have to bear in mind the rules oqoverning appeals in such cases. The submission in support of invalidity was based on want of novelty and obviousness. Essentially, this came to reliance on anticipation by prior publication and prior user and, to a dearee, on common general knowledge. If the priority date of the pettv patent could not, in reliance on s.45A(2), be determined as being the priority date of the application for the standard patent (3 December 1979), the evidence would, to sav the least, very strongly support the submission. However. we have not been invited to explore the application of 5.45A(2) and do not do so. We will accept for present purposes that the priority date for the petty patent is 3 December 1979. When invaliditv is in question, the complexitv of the Matters raised or to be raised, will often tell aqaiunst the grant of an interlocutory injunction, and this is of course not the less so when infringement (assuming validity) 1s admitted, but the course of the present proceedings leaves 1t more open for a court to come to an interim conclusion on the validity question. The submission depends upon an understanding of the petty patent. It 1s. as we have said, a combination patent. On 12. both sides, the matter was arqued on broad considerations, and in reliance on very generalised evidence, and the precise way in which the various integers came to constitute an invention was not discussed. The proper construction of the claim was not debated. The patent was treated by counsel for the appellants as havina three integers of maior significance: (a) the concave curve provided for in the framework of a the pool; (b) the liner for the pool being removable, and the method of affixing it; (c) the nature of the liner for the pool {(polvvinvl chloride plastic). At times, the argument seemed to place complete reliance upon the noveltv of (b), so far as concerned use in the liquid retaininad structure. There is oral and documentary evidence, not alwavs of a very precise or detailed nature, which tends to show that there was anticipation. There 15 evidence of plans prepared and pools constructed before the prioritv date embracing, 1n the one combination, nearly all the intecers specified in the claim. There is oral evidence that in at least one case all the ingredients of the claim were used. In so far as there was. ina particular case, an absence of some inteqer, 1ts use was said to be an obvious addition or variant. Tk is of course necessary to 13. quard against putting together as a "mosaic", particular aspects of the invention which have been anticipated, in order to defeat a combination patent, but, as we see it, the evidence so far produced goes beyond that situation. One document is a newspaper article, attributed to a "Brisbane architect". which was published on 11 November 1979 (1.e. before the priority date), and which deals specifically with the second appellant's pool. As the action remains to be heard, it is not desirable that we express views in any detail upon the evidence so far produced. We are, however, satisfied that, qoinaq as it does to the question of validitv, it is sufficient to support the grant of an interlocutory injunction (see Beecham Group Limited v. British Laboratories Ptv. Limited (1968) 118 C.L.R. 618; American Cvanamide v. Ethicon Limited £19753 A.C. 396 and the recent decision of Gibbs C.J. in The Australian Coarse Grain Pool Pty. Limited v. The Barlev Marketing Board of Oueensland (1983) 57 A.L.d.R. 425). It 15 wumnecessarv for us to consider further the question of obviousness. Some matters of criticism bv counsel for the appellants of his Honour's reasons mav be noticed. His Honour commented adverselv on the fact that the first and second appellants, in face of the opposition to the arant of the standard patent, sought a petty patent to circumvent the opposition. We think the Act contemplates an application for a pettv patent whether or not there has been opposition to an application for a standard patent to which the petty patent application relates. In this case the application for the petty patent preceded by some months the notice of opposition. His Honour made a comment, as going to the balance of convenience, that the second appellant would have avery strong case for an axtension of the petty patent if the respondent failed at the hearing to prove its invalidity and 1t transpired that the second appellant had therefore unjustifiablv been prevented by the interlocutory injunction from protecting 1ts vricghts under a valid petty patent. Such a consideration would possibly have relevance to the extension of the term of a standard patent, but the six-vear extension provided for in s5.68A of the Act is governed by different considerations (see s.68B). We are of the view that the balance of convenience favours the respondent's case. The principal parties are producing pools in competition. If there is an infringement bv the respondent, the appellants, so far aS appears, are protected by the undertaking as to damages. If there is any question as to the likely efficacy of the undertaking, that matter can be raised separately. No argument in relation to it has been addressed to us. The appellants are also protected bv the further undertaking by the respondent to the effect that the validitv of the pettv patent will not be publicly challenged pending the trial. The undertakings given earlier in the vear in relation to what was in the statement of claim in action No. 3155 of 1983, are seemingly, within their scope, still on foot. It us not a 15. submitted that they govern what might be threatened because of the petty patent. Nevertheless, they are interesting, if not somewhat puczling, in relation to what is now submitted on behalf of the appellants. It 1s said, in effect, that they should be free to make threats related to an important part of the claims in respect of which they have given undertakings not to make threats. This stance carries a suaqgestion that temporarv deprivation of a freedom to make threats in relation to the claim which now finds expression in the petty patent is not, or at least was not, a matter of oareat concern to them. For the appellants to be free to offer threats based on the petty patent would be to put aside the challenge to its validity, and to give an opportunity to do damage to the respondent's business. Tt is submitted that the appellants need to be able to make threats in order to ensure that persons infringing the patent cannot claim protection under s.124 of the Act as innocent infringers. While "potential infringers" are referred ta in the evidence, no indication 15 qiven of their nature or extent. In anv event the injunction leaves the appellants free to act under s.121(2). On the other hand, if the respondent was adverselv affected in its business by threats, and it was established at the hearing that the patent should be revoked, it could have difficulty in establishing the damage suffered. While this is a factor to be taken into account, it must be assessed with 16. recognition of the fact that threats are permissible in some circumstances, and are not automatically to be arrested bv unterlocutory process. For these reasons we are of the opinion that the appeal should be dismissed with costs. | certify that this and the |S preceding Pages are a true copy of the reasons for judgment herein of the Coure — ? LL flea] ZO Associate