arbitration - contract made in U.S.A. containing arbitration clause - proceeaingas for breach of contract and breach of Fart CATCHWORDS Trade Practices Act. 1974 and patent infringement - stay application by respondent in sespect cr whole proceedings - stay o£ proceedings mandatory unaer Srbitration \Foreiaqn Awards and Agreements) Acc, 1374 - stay reru s claims ain contract. Flakt Australia Ltd. ua Part Vo and patent infringement - stay granted in respect of Williams & Davies Construction vo. ed for matters relating to Lta, i Cyt a Sopot ere C1379] 2 H.S.NW.L.8. 243 - con. Blders CED Ltd. v. Drave Corporation 11984) 53 ALR 206 Roussel-Uciar v. ¢.0. Searle & Co. Limited (13 ALLERGAN PHARMACEUTICALS INC. LIMITED v. LIMITED No. NSW G250 of Beaumont. J. and ALLERGAN PHARMACEUTICALS PIY. BAUSCH & LOMB INC. ana BAUSCH & LOMB (AUSTRALIA) Pry. IN THE FEDERAL COURT OF AUSTRALIA ) } Vr a eee ere eee NEW SOUTH WALES DISTRICT REGISTRY ») No. G250 of 1985 ) GENERAL DIVISION ) BETWEEN : ALLERGAN FHARMACEUTICALS INC. and ALLERGAN PHARMACEUTICALS PTY. LIMITED Applicants AND: BAUSCH S§ LOMB INC. and BAUSCH & LOMB (AUSTRALIA! PLY. SIMITED MINUTES OF ORDER JUDGE MAKING ORDER: BEAUMONT J. . DATE OF ORDER: _ * OCTOBER, 1585 WHERE MADE: 2 LDNEY THE COURT ORDERS THAT: L. Order pursuant to 3.7 of the Arbitration (Foreian Awards and Agreements; Act, 1974 (a) That these procesdings be stayea sc far as they involve claims for breach or contract upon the condition that such stay may be terminated upon application bv the applicants in the event that the respondents dao not do all things mecessary to be done on their part to have the matters referred to hereunder determined in acztordance with the arbitration agreement between the parties with yeasonable expedition. soy oie > oy 5 - 7 areceri nts * = A - _4 ae \b) That the parties be referred to arbitration in respect of the matters the subject of hese proceedings so far as they involve claims for breach of contract. a. Reserve costs. 3. Reserve liberty to apply cn 3 days notice. with Rules. NOTE: Settlement and entry of orders 12 de in Order 36 of the Federal Co rome i Of cr ad eet Mw spr 2 Leon IN THE PEDERAL COURT OF AUSTRALIA ) ) NEW S9UTH WALES DISTRICT PEGISTRY ) No. GZz50 of 1985 } GENERAL DIVISTON } BETWEEN : ALLERGAN PHARMACEUTICALS INC. and ALLERGAN PHARMACEULPTCALS PTY. LIMITED Applicants AND: BAUSCH & LOMB INc. and BAUSCH & LUMB (AUSTRALIA) PTY, LIMITED Respondents CORAM: Beaumont, d. DATED: 4 October 1985 REASONS FOR JUDGMENT (ON RESPONDENTS' APPLICATION FOR STAY GR SUMMARY DISMESSAL UF PROCEEDINGS ) These proceedings were commenced by application filed on 30 August 19385 by the first applicant. Allérgan Pharmaceuticals Inc... a Delaware corporation, and by its subsidiary company, Allergan Pharmaceuticals Pty. Limited, a company incorporated in New South Wales, the second applicant. The applicants riled at the same time a statement of claim which has since been amended twice without objection. In their pleadings. the applicants seek various forms of relief against the first respondent. Bausch & Lomb Inc.. a New York corporation, and its subsidiary, FITZ Bausch & Lomb (Australia) Pty. Limited, a company incorporated in New South Wales, the second respondent, under several provisions of Part V of the Trade Practices Act, 1974. They also seek to invoke the Court's associated and accrued jurisdictions in respect of certain other claims being allegations of infringements of certain Australian letters patent including a claim that the respondents have aided and abetted others in infringements of the letters patent. A claim i3 also made for damages for alleged breach or contract. The present application is made by the respondents a= pursuant to an amended notice of motion filed on 27 September 1985 for orders that the vroceadings be stayed pursuant to 3.7 of the Arbitration \Foreiqn Awards « Aqreements) Act, 1374 ("the Arbitration AcE"); alternatively. a stay 15 sought undec the arbitration Act of 50 much of the proceedings as involves claims of contraventicns of the provisions of Part V of the Trade Practices Act and consecmuential relief. A fucther application is made by the respondents pursuant to 0.20 r.2 for dismissal of the proceedings ganerally; alternatively. the respondents seek, pursuant to 0.20 r.2. the dismissal of the claims made by the applicants so far as they charge contraventions of certain of the provisions of Part V of the Trade Fractices Act. Finalliv, assuming that the claims lastly mentioned have been dismissed as asked. the or a dee respondents seek an order dismissing the claims alleging patent infringements on the ground that the Court then lacked accrued or assoctated jurisdiction to entertain such I shall deal first with the stay application. Ey 5.4 of the Arbitration Act. approval is given to accession by Australia to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted in 1958 by the United Nations Conference cn International Commercial Arbitration ("the Convention"). section 7 lz as rolliow uw "7.¢1) Where - .a) the procedure in relation to arbitration under an arbitration agreement 1s governed. whether by virtue of the express terms of the aqreement or otherwise, by the law of 2 convention country; this section applies to the agreement. 12) Subject to this Act, where - (a) proceedings instituted by a party to an arbitcation agreement to which this section applies aqainst another party to the agreement are pending in a court; and (b) the proceedings involve the determination of a matter that. in pursuance of th aqcreement. 15 capable of settiement by arbitration, on the application of a party to the agreement. the court shall. bv order. upon such conditions (1f any) as it thinks rit. stay the proceecings or so much of the proceedings as involves the determination of that matter. as the case may be, and refter the parties to arbitration in respect oft that matter. (emphasis added) is {3) Where a court makes an order under sub-section (2), it may, for the purpose of preserving the rights of the parties, make such interim or supplementary orders as 1% thinks f1t in relation to any property that 1s the subject of the matter to which the first-mentioned order relates. (4) For the purposes of sub-sections 12) and (3), a reference to a party includes a reference to a person claiming throuch or under a party. a eree An "arbitration agreement" 1s defined in 5.311} to mean an agreement in writing of the kind referred to in sub-article 2 of Article II of the Convention. That sub-article is in these terms:- "1. Fach Contracting State shall recognize an agreement in weiting under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. concerning a subject matter capable or settlement by arbitration." The arbitration agreement now relied upon bv the respondent is an agreement made as of 1 July 1379 between the first applicant and the first raspondent dealing with the sale or resale of the products of the first applicant, in particular an enzyme contact lens cleaner. outside of the United States, including in Australia ("the Aqreement"). It will be necessary to refer later to the detail of the Agreement and its surrounding circumstances. It will gurfice, for present purposes, to note that in 1ts "application to the enzyme cleaner. the Agreement is to terminate on 31 December 1991. and to refer to sections X1Xx and ZX of the Agreement. which are as follows: - "KIX. Arbitration Any controversy or claims arising out of or relating to this Agreement shall be settled by aroitration in the City of New York, State of New York, in accordance with the Rules of the American Arbitration Asseciation, and judgment upon the award cendered ty the Arbitrator(s) may be entered in any Court having jurisdicticn thereof. ZX. New York Law This Adqreement shall accordance with the prov lawas if made and to be York." be construed in isions cf New York erformed in New WO There is documentary evidence, tendered pursuant to s.10(1) of the Arbitration Act. that on 30 September 1970 the United States of America acceded to the Convention ana has continued to be a Convention country for the purposes of the Act. In order to understand the several questions which arise on the respondents' application, it is necessary toa explain in some detail the allegations made by the applicants in their amended statement of claim. The first respondent carries on the business of manufacturing and selling optical products. including contact lenses which are marketed in Australia by the second respondent (paras. 3 ana 4). The first applicant carries on the business of s we rte eee eee gov en ge ee - om - a * . . 6. developing, manufacturing and marketing contact lens care products including a product for the removal of proteinaceous deposits from contact lenses ("the Hydrocare product") sold under the trade mark and name "Hydrocare". The rirst applicant supplies these products. including the Hydrocare products, to the second applicant which carries on the business of selling them in Austral1la (para.5). The first applicant is the registered proprietor of Australian letters patent No. 483265 for an invention entitled "Method and Composition of Removing Proteinaceous Deposits from Contact Lenses" ("the Hydrocare Patent"). It will surfrice for present purposes to note that the primary ciaim defining the invention the subject of these letters patent 15 "(a method for removing proteinaceous deposits from contact lenses comprising contacting the lens for a period of time surficirent to clean the lens, with &4n aquecus solution containing an erfective amount of a protease". The Hydrocare Patent was granted pursuant to a patent application lodged on 16 April 1974, the completed specification of Which was published on 13 November 1375 ana accepted on 11 May 1977 (para.6). The Hydrocare product is manufactured in accordance with the Hydrocare Patent and is sold as tablets '""Hydrocare .tablets") which contain a measured amount of protease enzyme which is non-toxic to eyes and contact lenses, together with instructions for use (para.7). since 1976, the second er i tH' \ t ' mica tere 7. applicant has s30ld Hydrocare tablets under the trade mark and name "Hvdrocare" (para.d). Since 1971, pursuant to agreements made on 17 September 1971, 11 May 1973, 1 November 1974, 24 January 1977 and 1 July 1979 between the First applicant and the first respondent ("the agreements"), the first applicant has agreed to supply tc the first respondent certain soft contact lens cleaning products including Hydrocare tablets (para.9). The amended statement of claim then pleads, in terms. sections IV, V. VI. VII, VIII and Is of the agreement. Section IV deals with the supply. forérasting and crdering of products. Packagin dealt with in Q iv wu section V as follows - "V, Packaging A. ALLERGAN shall supoly to BéL the Products, Combination Packages, Samples and Sample Packages in the same size packages as the Comparable ALLERGAN Products are sold in a country. The package design and art work shail be determined by B&L. ALLERGAN shall. at B&L's request and providing such requests are reasonable. provide Samples and Sample Package sizes different from that used for the Comparable ALLERGAN Products. If the direct manufacturing costs of B&L's selected packaqding exceeds that of the Comparable ALLERGAN Product, H&L shall pay the difference. B. The words "Manufactured by Allergan Pharmaceuticals" shail appear on each Product package 1n one place. to he determined by B&L, in no larqder than 10 point type." Viewer oe nee ee en ee eee ee te ae eee — se - - - sane te ae oer Ps 7 % San Samples are dealt with by section VI. Para.C 1s in these terms - "C. Samples and Sample Packages shall be used by B&L for the purpose of creating new customers for the Products and shall not be sold except as part of a B&L starter kit." Section VII deals with the first respondent's ""Soflens" brand as follows:- "JII. SOFLENS Brand A. The Enzyme Cleaner shall be the only proteolytic enzyme contarning product for cleaning soft contact lenses so0id by B&L under the SOFLENS brand name. B. The SOFLENS brand of enzyme cleaner shall be sold by ALLERGAN only to B&L. Cc. The Soaking Solution shall be the only disinfecting soaking solution for sort contact lenses sold by B&L under the SOPLENS brand name. DB. The SOFLENS brand of disinfecting soaking solution shall be sold bv ALLERGAN only to B&L. Promotion is dealt with by section VIII:- "VIII. Promotion A. xcept as authorized by Section VIII.B., B&L shall recommend and promote the sale of the Enzyme Cleaner ana manner not inconsistent with its labelling as one of its cleaning regimens for use with the SCFLENS (polymacon) Contact Lens in ail countries in which it may legally be sold and in which B&L has a Subsidiary or Branch which sells the lenses. wyr oc cl yee Wop rr es ery ii. If. ina countrv where BSL has a Subsidiary or Branch. B&L should discontinue the sale of the Enzvme Cleaner or cease promoting the Enzyme Cleaner or sell a different enzyme preparation for the cleaning of SOFLENS (polvmacon, Contact Lenses then ALLERGAN may sell the SOFLENS brand of enzyme cleaners in that country to persons other than B&L. With cespect to any such sales ALLERGAN shall ray, within thirtv davs artter the ciose of each quarter to 5&L. at Rochester. New Yorn, a rovalty equal to 7. 1/2% of its Net Sales accompaniec bv a report showing the pasis ucon which en the payment to BaL has been computed. (empnasis added) os Notwithstanding the license grantea in Paragraph 5.1., B&h shail retaczr full ownership of the tra aamark SOFLENS and all such trademarks andor logos ainciuding the name "Bausch & Lomb" as well as "B&i" which may be used in connection with the Marketiang of the S5ab hydrophilic plastic contact lenses. ALLERGAN agrees to maintain the quality of the Enzyme Cleaner so.id under the trademarks at a high level commensurate with the reputation of B&L. ALLERGAN shall supply B&L with samples of the Enzyme Cleaner from time to time and B&L shall have the continuous right to inspect the Enzyme Cleaner in order to ascertain that ALLERGAN is* meeting the high quality standards of B&L. ALLERGAN will submit in advance to B&L samples or all labelling and promotional material to be used in connection with the marketing of the Enzyme Cleaner and, before using any such labelling or promotional material in connection with the marketaina of the Enzyme cleaner. ALLERKGAN shall first have obtained weitten approval for such use from B&L. If B&L shall. in its sole opinion, disapprove of the labelling or promotional material or determine ro \ t \ L> t 10, that the quality of any of "the Enzyme Cleaner does not meet B&b quality standards. it shall so notify ALLERGAN and ALLERGAN shail not use the disapproved labelling or promotion material nor sell such Enzyme Cleaner until the labelling or promotion material 1s approved, or the quality is improved to meet B&L's standards. as the case may be. Further ALLERGAN agrees to do nothing chat would in any way depreciate the value or RB&L's trademark. iii. In the event of termination of this Agreement for any ceason whatsoever ALLERGAN shall simmeaiately cease all further use outside of United States of any of the rademarks licensed hereundes. a) Except as provided in Faragraph VIII.5B.. BEL does not grant and ALLERCAN does not acquire any rights in or to the SOFLENS or Bausch & Lomb trademark or trade name. D. ALLERGAN may not feature the SOFPLENS Contact Lens name in its labéiling and advertising ror cComparabie aLLERGAN Products. The listing of the SOFLENS Contact Lens brand ina ist cf lens brands of equal prominence is not deemed to be "reatured."" L i By section 1X provision is made for the payment royalties as follows - "IX Royalties ALLERGAN shall pay, within thirty (30) days after the close of each quarter to E&L at Rochester. New York, a royalty equal to 5% of ALLERGAN'S Net Sales of enzymatic contact isns cleaning tablets and 2 1/2% or ALLERGAN'S net sales of Combination Packages or Comparable ALLERGAN Products sold under any brand name other than the SOFLENS brand name accompanisd by a report showing the basis on which the pavment to B&L has been computed." Hy ll. -- The amended statement of claim further aileges that pursuant to (a) (b) (c) (da) It foreqoing, elsewere opthalmologists of soft contact the agreements - the first applicant supplied to the first respondent throughout the world and the second applicant has supplied to tne second respondent in Australia. inter aiia. Hydrocare tablets in the same size packages as comparacle Allergan products are sold in the countries or supply, including Australia. bearing words such as "manufactured by Allergan" and bearing the name "Bausch & Lomb" and/or the trade mark and name "Soflens"; in Australia, the respondents have not sold any proteolytic enzyme product for cleaning soft contact lenses under or vy reference to the name "Bausch & Lomb" or under or by reference to the trada mark and name "Soflens" except Hvdrocare tablets: in Australia. the respondents have not sold any disinfectant soaking solution under or by reference to the name "Bausch & Lomb" and/or the trade mark and name soflens except Allergan U.S. disinfectant soaking solution. the cessondents have widely advertised and 30ld throughout the world and in Australia the Hydrocare tablets under and bv reference to the name "Bausch & Lomb" and the trade mark and name "Soflens", bearing words such as "manufactured by Allecgan" as aforesaid. (para.1l>. is then alleged that, by reason of a it has been represented in Australia and the to medical practitzroners. opticians, and members of the public, including wea lenses. and it 1s the fact that. and it rers is the belief of medical practitioners, opticians. opthalmologists and members of the public. including wearers anne ee nln ' no pose a AO, ahr en oe 12. of go0ft contact lenses to whom such representations were made, that - (a) the Hvydrocare tablets sold by the respondents under the trade marks and names "Bausch & Lomb" or "Soflens" are manufactured by the first applicant: (b) the Hydrocare tablets sold by the respondents under the trade marks and names 'Bausch & Lomb" or "Soflens" are or the same standard, quality. grace and composition as the Hydrocare tablets manufactured and sold by the applicants. (c) the Hydrocare tablets solid by the respondents under the trade marks and names "Bausch G& Lomb" oc "Soflens" have tne sponsorship or approval of the applicants or have the performance charactecistics. uses and benefits of the Hydrocare tablets manufactured and so0ld by the applicants (para.12), It ig then said that bv reason of the foregoing, the applicants have valuable goodwill and reputation in and in relation to he Hydrocare tablets manufactured by the first applicant tpara.13). It is furtner alleged that the Hvydrocare tablets sold by the applicants to the respondents and resold by the respondents to purchasers and users under the names and marks "Bausch & Lomb" or "Soflens" were sola without restriction as to use and it was an implied condition of their sale that the respondents had the right to sell them and that the purchasers thereort and the users thereof would enjoy quiet possession of the Hydrocare tablets (cf. Trade Practices Act. 5.59). (para.idi. ' ! > t | ' 13. It is further alleged that the Hydrocare tablets sold by the applicants to the respondents have been sold by the respondents to purchasers and users in a distinctive get-up which is the same or a similar get-up to that adopted by the cespondents for other products used in contact lens care. (para.14A). It is further alleged that the first respondent has developed an enzymatic cleaner for use in removing proteinaceous deposits from soft contact lenses and that the respondents intend to sell tablets containing protease for the purpose of cleaning soft contact lense te - together with instructions for thelr use. keference 1s made to the filing by the first respondent of European Patent Application No.84307265.3 entitled "Microbial Enzymatic Contact Lens Cleanser and Methods for Use" {(para.15). An intringement of the Hydrocare patent by the respondents is then charged by reason of their manufacture and sale of the tablets (para.16). It 15 further alleged that the respondents intend to anfringe the Hydrocare Patent and to aid and abet others to do so (para.1i7). Then it is said that the respondents threaten to Kepresent to consumers - (a) that consumers are entitled to use a product containing protease, other than the Hydrocace Product manufactured by the first applicant as an enavmatic cleaner for contact lenses: rc a yT ener (Bb) (c) (d} 4e) threaten to represent to medical 14. that consumers will enjoy quiet possession of any such product for such use; that such product is manufactured by the first applicant: that such product is of the same standard quality grade or composition as the Hydrocare tablets sold by the applicants; that such product has the performance characteristics, uses and benefits of the Hydrocare tablets manufactured and sold bv the applicants; that such product is the same as the product previously marketed by the respondents. which had been manufactured by the fir3t applicant (para.17A). and ophthalmologists - (a) (b) (c) (d) (@) that medical practitioners. opticians and cphthalmologists have the cight to prescribe or sell ai product containing protease, other than the Hydrocare Product manutactured by the rirst applicant for use as an enzymatic cleaner for contact lenses; that medical practitioners, opticians and ophthalmologists will enjoy quiet possession of any such product for such use; that the respondents have the right to sell such a product, other than the Hydrocare Product manufactured by the first applicant for such use or for resuppiy for such use; that such product is manufactured by the first applicant; that such product is of the same standard quality grade or composition as the Hydrocare tablets manufactured and sold by the applicants; The arplicants further charge that the veéspondents practitioners, opticians aprow won cE . tas ae ee se 15. (f) that such product has the performance characteristics. uses and benefits of the Hydrocare tablets manufactured and sold by the applicants; (g) that such product is the same as the product previously marketed by the respondents, which had been manufactured by the first applicant tpara.17B). The applicants further charge that the respondents threaten to mislead and deceive medical practitioners, opticians. ophthalmologists and members of the public py substituting for the Hydrocare product soid under the names "Bausch & Lomb" or "Soflens" ai product other than che Hydrocare product manufactured by the first applicant: and that the cespondents intend to use in relation to the said substituted product a get-up the same or closelv similar to that used by the respondents for their other products referred to in para.14A (para.17C). In the premises. the respondents are charged with conduct or threatened conduct - (a) which 15 misleading and deceptive or likely to mislead or deceive within s.52Z of the Trade Practices Act; (b) whereby they falsely represent that goods are of a particular standard quality grade or composition within 3.53(a) of the Trade Practices Act; \c) whereby they represent that goods have sponsorship approval or performance characteristics which they do not have within s.53(d) of the Trade Practices Act: and id) whereby they make a false or misleading statement concerning the existence of a right. within $.53(q) of the Trad Practices Act (para.18). . 16. ! | The applicants then seek the relief claimed in the application filed with their statement of claim. In their application the applicants seek injunctions restraining the respondents from - (a) selling any substance containing protease or any compound within the invention claimed in the first respondent's European Patent Application for use as an enzymatic i cleaner for contact lenses other than the ' genuine product of the applicants sold - under or by rerercence to the names ' "Allergan", "Hydrocare", "Soflens" or "Bausch & Lomb"; be (b) vepresenting to consumers that they are entitled to use any such substances or Ve compound as an enzymatic cleaner for Ly contact lenses other than the said product . of the applicants; (c) representing tc consumers that thev will - enjoy quiet possession of any such 2 substance or compound for use as an re enzymatic cleaner for contact lenses other Chan the said vroduct of the avplicants: (d) representing to consumers and to medical a practitioners, optometrists and * ophthalmologists that the respondents or , medical practitioners. optometrists or ophthalmologists have the right to sell anv such substance or compounc for such use; (a) selling such substance or compound todether with instructions for use in infringement I of the letters patent; (f) aiding or abetting or being a party to ths | conduct of others the subject of orders ta). (¢b). (cc) and (d) above and from counselling or procuring the infecingement of the letters patent by others. 17. The applicants further claim damages pursuant to 8.82 of the Trade Practices Act; an order for delivery up by the respondents of all products, packaging, plates, promotional matter. marketing material or printed matter of any kind bearing instructions for use of the product in y anfringement of the letters patent; an inquiry as to damages, or, in the alternative. an account of profits in respect of the infringement by the respondents of the letters patent; damages for breach of contract; such for correctivy wa furtner or other order, including order oy 2)rs fat) fan [ey ie) my fn io cr a) a fay ue advertising and otherwise under 3.387 of t act as to the Court may seem fit. m Reference should next be made to the respondents' defence filed on 23 September 1985. Formal matters apart. it will suffice for present purposes to note that the respondents put in issue any contravention ofr the Trade Practices Act, any infringement of the letters patent and any breach of the Agreement. In addition to the claim for stay now sought, a number of special defences are raised. The respondents sav that the claims of the letters patent are invalid on the grounds of objection they then particularise. They further sav that the effect of the Agreement is to confer upon the respondents a icence in respect of the patent upon a condition that prohibits or restricts the respondents from using for the term of the Agreement that 1s to say until 31 December 1991. any product were er eotytc teem oy 18. for cleaning soft contact lenses sold by the respondents under the Soflens brand name which contains any proteolytic enzyme and which is supplied by a person other than the applicants, but they say that the said condition is void and it is not an infringement of the patent for the respondents to do what it is alleqed that they have done or are threatening to do :see Patents Act 1952, s.112). Then the vespondents refer to section VIII of the t u c b Agreement and say that 1t contains covenants by the f applicant that the applicants will not do anything that or tw would in any way depreciate the value of tne trade mark the respondents or acquire any rights in or to the Soflens trade mark or trade name or the Bausch & Lomb traae mark or trade name; and that the first respondent will retain full ownership of the trade mark Sofiens and all such trade marks or logos including the name "Bausch & Lomb" as well as "B. & L." which may be used in connection with the marketing by the respondents of hydrophilic plastic contact lenses. The respondents say that by the institution of these proceedings and by allegations made in paras. 12. 13, 17A, 17B, 17C, 18 and 19 of the amended statement of claim and by the relief sought in these proceedinds, the applicants have broken and propose furtner to breach the said covenants in the Agreement. sweq ie 19. x In support of their present application. the respondents tendered a body of documentary evidence, including cértain paragraphs of the arfidavit of the Managing Director of the second applicant, Mr. Christopher D.B. Greenhill, sworn on 3 September 1985 and filed on behalf of the applicants. For their part, the applicants read the balance of Hr. Greenhill's affidavit. The affidavit 15 lenathy. I am satisfied that the case sought to be made by the applicants in the evidence of Hr. 1v in rc) Greenhill, including his oral evidence .Q cross-Svamination on his affidavit. not only dces not qo beyond the case sought to be made by the applicants in their amended statement of claim but, substantially at least. seeks to make that case. In the circumstances. it 15 unnecessary to refer to that evidence or. indeed, any of the other evidence tenderea by anv party, with the exception of certain correspondence now to be mentionec. By letter dated 21 June 1985, Mr. James C. Bullis. Director, Materials Management of the first applicant. wrote te Mr. John BE. Housden, Vice-President, International Marketing, of the first respondent saying - "As you may be aware, certain subsidiaries and branches or Bausch & Lomb have, over the last several months, begun submitting to Allergan purchase crder forecasts showing no demand ror enzyme cleaning product. The Agreement dated July 1, 1979, between Allergan and Bausch & Lomb. which covers the sale or enzyme tablets internationally, authorizes Bausch & Lomb to discontinue the sale of Allergan products on a Ree ogee a 2 ? va a 20. country-by-country basis and commence the sale of its own product. This letter is to confirm that, within approximately 30 days, Bausch & Lomb will begin the introduction of its own enzyme product in the countries on the attached list. Accordingly, no further purchases of Allergan product will be required for those countries..." On the same date, Mr. Daniel E. Gill, Chairman of the Board and President of the first respondent, wrote to Mr. Gavin S. Herbert. Chairman of the SBoaré and Chiert Executive Officer of the first ap @e toa 's licant in respon ta letter written ov Mr. Herbert on 10 June 1385. Mr. Gill. ct iy 'ty us) fo ia a fo ej cT uw GB ct a fon fan a w cr a uw after claiming that the firs patent was unenforceable against the first respondent. salid:- ".,.,contractual issues which concern you arise out of two separate and distinct agreements: 1) the domestic agreement Tor the sale of enzyme tablets in the United States, fe) 2 international agreement for the sal tablets internationally. Your tatement. therefore, that Bausch & Lomb's marketing of the new enzymatic product "will inevitabiy result in a breach of the agreeement between our companies" needs to be examined in the light of the provisions of the two agreements. Your conclusion is not correct under either agreement..." w drs oO cer w [- a ow The first question which arises . for determination is the meaning of the phrase "matter that is capaole of settlement by arbitration" where used in s.7(2)(b) of the arbitration Act. In Flakt (Australia) Ltd. v. Wilkins & Bavies Construction Co. Ltd. (1979) 2 N.S.W.L.R. 243, McLelland, J. said vat p.250) - ~ wee res wae - some mas tr y TV nie CED Lt 21. "The plaintiff contends that the word "matter" in $.7(2)(b) denotes the ultimate subject matter at issue between the parties, which 15 said to be how much is the defendant entitled to ne paid for the work it has done. and further contends that there could be no "settlement" within the meaning of the section without a complete resolution of that issue, which, it is said, is not possible under the arbitration agreement, because of the claims foreshadowed by the defendant as alternatives to its primary contentions, for rectification of the accepted purchase order and for breach of an alleged duty by the plaintiff to draw attention to material changes in the scope of the work that would arise out of the purchase order. Such claims for cectification or for breach of duty, it 1 said, are not capable of being determined 5; arbitration under the arbitration aqreement. It is further contended for the plainciff tnaac. an 50 far as the present application is founced upon s.7 of the 1974 Act, it 1s premature. [It is argued that it is not until aftsr the pleadings have closed that one can ovsropecly determine whether the proceedings fall within 3.7(2)(b). In my opinion, the word "matter" in 5.7(2)(b) denctes any claim for relief of a kand proper Tor determination ina couct. It does not include every issue which would. or might, arise for decision in the course of the deterinaticon or such a claim. The use of the word "settlement" provides support for the view. "Settlement" is an apt term to be used in relation to a claim for relief - it is less apt in relation to a mere issue." This reasoning was rollowed by Foster, J. in Elders dad. v. Dravo Corporation (1984) 59 A.L.R. 206 at 9.210 and, theref claims In par claim with respect, I aqree with it. It 15 nec rv) $s ore, to analyse with some precision the nature of the Sacy, for relief made 1n the amended statement of claim. ticular. ait will be necessary to inquire whether any 1s made for breach of the Agreement. fa eee en eee Stan pa ee - or 22. ~ In this respect. the pleading is somewhat equivocal. Certain sections of the Agreement are pleaded in terms. However, on the face of 1t, these allegations appear to do no more than provide part of the substratum of facts in which, as a matter of background only, the apprehended contraventions of the Trade Practices Act will occur. There 1s not. in terms at least, any specific alleqation that a breach nas occurred of any of the provisions of the Aqreement. notwithstanding the foreshadowing of such a clain in the dune 13985 correspondence. On the cther hand, the application does claim damages for breach of contract. In the circumstances, it must be accepted that part of the applicants' claim, as presently framed, is based on an alleged breach or breaches of the Agreement. although the pleading hardly defines such a cause of action with any particularity. But, once such an allegation is pleaded. the provisions of section XIX of the Agreement must apply - a Claim for damages for breach of contract is clearly a "controversy or claim arising out of or relating to (the) Agreement" at least so far as concerns the tirst applicant. (The position of the second applicant may he different because it was not a party to the Agreement). It follows that, since the rovisions of s.7(2)(b) are mandatory, a stay or proceedings so far as concerns the first applicant should be granted so far as a claim for tA nnn ng ene oe eee yoru ct erence wre ry 23. breach of contract is involved. I shail return later to the conditions to be imposed on the grant of the stay. The position of the second applicant in this regard is not so obvious, although the definition of "B&L" in section 1A of the Agreement extends to subsidiaries of the first applicant and the provisions of s.7(4) of the Arbitration Act may apply so as to pick up the second a] applicant in any event (see Roussel-Uclaf v. G.D. Searle co, Limited (1378) R.P.C. 747 at pp.754-5). Because of the ebscurity of the pleading, 1t must pe assumed, at this stage at least. that the second applicant is also seeking relief for breach of contract. It follotws that a stay of proceedings should now bé oranted against the second applicant so faras a claim for breach of contract 1s involved. For those reasons, in my opinion. a stay of proceedings should be granted so far as they involve claims ror rel1ref for breach of contract. The respondents further seek a general stay. Such a stay can, in my view, onliv be granted if the remaining claims for relief fall within the provisions of section KIX of the Agreement. The phrase in that reference "arising out of or relating to (the) Agreement" is. ait is true. capable of the widest construction (see Heyman v. Darwins. Limited £1942] A.C. 356 at p.366 and Fountain v. Alexander 150 C.L.R. 615 at ».629). orm a ne pepe ep Fern eet oo ser ong eay MEM ypsween cose mau ba was whe in De aot ot. But can it be said that the applicants' claims that the several provisions of the Trade Practices sct have besn contravened are referable to arbitration under this clause? In my opinion, those claims fall outside the purview of that clause. In my view, causes of actzon in the form cr 163) 2, 5 {d) or S3lq) arise tu (a), 5 Gs contraventions of 35. exclusively from the statutory provisions themselves. ft 12 trite to sav that causes of action uncer the general law, whether ain contract or otherwise, arise independently of a these pravizions. In the absence of anv substantive nexus aE connection between the conteactc sued upon and tne contraventions sr the ssveral provisions of Fract VV of the Trace Fractices Act alleged, and. ain my Vicw. none exists here. the latter causes of action cannot be referable to arbitraticn pursuant to section <I. In my opinion, it 1s not enough for this pussosée to point to tha contract as part of the Sackqround to these a alleged contraventions. As has kEsen said. the svatutor7 causes of action now suea upon exist aindependentiy cf contract. They are consumer protection provisions which ir no way depend upon any private agreement for their scurce. a onduct of the kind proscribed bv Part V of the Trade Eractices Act will be established. if at all, ilrresvective of the contractual relations of the immediate parties. Nor could any contract inter partes constitute a defencs to anv alleged conteavention of suck Ilsegislation In snhert., an 29. alleged contravention of Fart V of the Trade Practices Act ig not. as a matter of characterisation, a "controversy or claim arising out of or relating to (the? Agreement" for the apres - purposes of section XIX ot that contract. «cr. Wvatt Earp Enterprises Inc. v- Sackman Inc. 157 F Supp 621 (1958)>. [o} The same observations can be made oF the clazwed infringement of tie letters patent. Again. the cause of o Ns ¥ sniv (see N.V. Maatschapsi2 Voor cr tu iy action 15 35t Industereie Waarden v. A.v- Smith Corsoration $23 F. ca &7¢ In the vesult. I refuse to extend the star beyond the claims fcr breach of contract. As to conditions. I propese So asopt the approach taken bv McLelland dg. in Flakt. noting that Lockhart. d. took a similar course in White Industries [td. v. Trammeil (1983) 52 A.L.R. 779 at 6.786. It must follow from tne stay to pe granted that the applicants will need to further amend their statement of claim s0 as to excluace their claims in contract. In the timetable mentionea in the reasons given on the applicants' application for interlocutory relief. prevision should oe athin 7 days vmade for a direction that the applicants £11 a an amendea statement of claim cmittind any claim tor breach toe 7 ' ae wre eye some 26... of contract. Provision should also be made in that timetable for the respondents to file an amended defence within a further 14 days. If any dispute arises on the Tresh pleadings, including the amended defence. as to the scope or operation of the limited stay now to be granted. 1b ean be dealt with pursuant to the liberty to apply to he reserved, It 15 hardly necessary to say that the amended pleading should clearly exclude any suggestion that the applicants seek to agitate in this Court any substantive Cause of action in contract. This i853 not to sav that the apglisants may not properly cefer to the aqresments by vay of background to there claimed contraventicns or the Trade Evactices Act. . I make the following orders - l. Graér eursuant to 3.7 of the Arbitcation (Foreign Awards and Agreements; Act. 1974 (a} That these proceedings be stay sO far as they involve claims fa breach of contract upon c condition that such st 3 terminated upon applicaticn by the applicants in the evant respondents do not do all things necessary to be done on their part to haves the matters rererred fe) hereunder determined in accordance with the arbitration acreement between the IALTLS with reasonable ex spedition. \b) nat the parties be referrea te acbitration in spect of the matters the or these nvolve Saree) woop merce TT es eee ete 3 Ll ma a "A 2. Reserve costs. 27. 3. Reserve liberty to apply on 3 days' notice. Counsel and Solicitors Tor Applicant: Counsel and Solicitors for Respondent: Dates of hearina: Date Judament Delivered: | Certify that this and the 26 Jages are a true copy of udgment herein of The He: Ar Justice Beaumont. Jated 4 Cctolog, BS Mr. J.C. Campbell and Mr. Cc. Cc. Hodgekiss were instructed by Minter Simpson. Mr. W.M. Gummow was instructed by Allen Allen & Hemslev 27. 30 September 1985 1 October 1985 4 Uctober 1585 Preceuing, the reasons for nourable Associate IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY } No. G250 of 1985 , GENERAL DIVISION ) BETHMEEN : ALLERGAN PHARMACEUTICALS INC. and ALLERGAN PHARMACEUTICALS PTY. LIMITED Applicants AND: BAUSCH & LOMB INC. and BAUSCH & LOMB (AUSTRALIA) PPY. LIMITED Respondents Beaumont, J. ie5 = 4 October 1985 oO Z eg REASONS FOR JUDGMENT (ON APPLICANTS APPLICATION FOR INTERLOCUTORY RELIEF) In this application the respondents have proffered undertakings to the Court in the terms or the document annexed to these Reasons. Although the application was arqued at some length. ait ultimately emerged that, subject to a satisfactory final hearing date being avaliable. the applicants accepted that the undertakings proffered by the respondents would preserve the status quo, After some discussion, the parties agreed upon a tinetable which meant that the matter could proceea to a final hearing on 21 April 1986. I propose to fix the hearing date to commence on that date. I nete that it 1s estimated that the hearing time required will be ain the order of four weeks. I arena soe mora pow ge Ten a ge ig» eye ere ey propose to give directions in accordance with the timetable agreed upon by the parties. The formal orders I now make are as follows - 1. IT note the undertakings to the Court given on behalf of the respondents. 2. Reserve costs. Ww Reserve liberty to any party to apply on such notice as a Judge shall allow. | certify that this and the 4A preceding Pages are a true copy of the reasons for judgment herein of The Honourable Mr Justice Beaumont Associate Dated + 0 \des~ proposed oe wee eee eee ee we . - ae 2 eee renpe is i i ! ' | a ' ' it ia vj xu 7 Lv wl ©" IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES REGISTRY GENERAL DIVISION Ro. G250 of 1985 "IN THE MATTER OF THE TRADE PRACTICES ACT, 1974 (AS AMENDED ) BETWEEN: ALLERGAN PHARMACEUTICALS INC. and ALLERGAN PHARMACEUTICALS PTY. LIMITED Applicants AND: BAUSCH & LOMB INC. and BAUSCH & LOMB (AUSTRALIA) PTY. LIMITED Respondents UNDERTAKING $ The Court notes the undertaking of the Respondents by their Counsel, without admissions, not to:- (a). (b). For a period of three months from September 27, 1985 import, market, offer for sale, promote, advertise, sell and/or supply in the Commonwealth of Australia: (4) any substance containing a protease and/or (ii) any compound within the invention claimed in the First Respondent's European Application No. 843072653 for use as an enzymatic cleaner for contact lenses other than the product manufactured by the Applicants. At any time after the expiration of the three months period referred to in (a) above, import, market, offer for sale, promote, advertise, sell and/or supply: (i) any substance containing a protease and/or (44) any compound within the invention claimed in the First Respondent's European Patent Application No. 843072663 ety tegen I 3cer for use as an enzymatic cleaning for contact lenses other than the product many) by the Applicants without first giving the Applicants sé&xey "days prior written notice.61v Em re TcR 2% O&@amllZA 46. Represent that any enzymatic cleaner advertised, sold or supplied by the Respondents for contact lenses, not being one manufactured by the first named Applicant: (41) ids manufactured by the first named Applicant or (ii) is the enzymatic cleaner for contact lenses previously advertised, sold and supplied by the Respondents. Counsel for the Respondents 27 September, 1985 er ary eres