JUDGMENT No. 511/61. CATCHWORDS PATENTS - Discretion to admit evidence under s.3l - Principles applicable to the exercise of the discretion - Novelty - Obviousness - Infringement - Principles governing the grant of interlocutary relief in respect of infringement of a patent - Modification of apparatus held insufficient to avoid infringement. Patents Act 1952, s.31l MARTIN ENGINEERING COMPANY & ANOR. -V- MATFLO ENGINEERING PTY LIMITED & ORS. NSW G.427 of 1987 Burchett J. Sydney 29 October 1987 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION BURCHETT J. This to restrain alleged hearing of proceedings brought by the applicants, No. G.427 of 1987 BETWEEN: » z is) | [2iw] 2 i] lziw] REASONS FOR JUDGMENT MARTIN ENGINEERING COMPANY First Applicant ENGINEERING SERVICES AND SUPPLIES PTY LIMITED Second Applicant MATFLO ENGINEERING PTY LIMITED First Respondent NICARO HOLDINGS PTY LIMITED Second Respondent RICHARD COUPER Third Respondent is an application for an interlocutory injunction infringements of patent pending the final an United 2. States corporation and the Australian exclusive licencee of its patent rights, against the respondents. The application was filed on 1 September 1987 under the jurisdiction conferred on this Court by the Jurisdiction of Courts (Miscellaneous Amendments) Act 1987. I have not been asked to grant interlocutory relief against the third respondent, who has not personally made or sold the allegedly infringing items, while the respondent Matflo Engineering Pty Limited has, on the evidence, for some time ceased to engage in any such manufacture or sale. Mr. Couper, as a director, gave evidence that he was prepared to undertake to the Court that the items known as the Matflo components would not be sold until the determination of the proceedings. In these circumstances, the applicants sought interlocutory relief only against the respondent Nicaro Holdings Pty Limited, which, it was admitted, intended to manufacture and market an altered version of the Matflo components, asserted by the applicants, and denied by the respondents, to infringe the applicants' patent rights. The applicant Martin Engineering Company 1s an United States patentee, to which a convention patent has been granted in Australia with priority date 15 October 1980 by Australian Letters Patent No. 512902, in respect of an invention referred to as a "belt cleaner mounting arrangement". The invention concerns apparatus for the cleaning of conveyor belts, which are used extensively in industry for the conveyance of coal, ores, etc, the apparatus being designed to scrape the conveyor belt clean of dirt and fragments of material adhering to it after it has 3. delivered its load. The scraping 1s done while the belt 1s travelling upside down on its return to the point of pick-up. In the patent, the invention is described as follows: "A track mounted conveyor belt cleaner wherein individual belt scraper blades are affixed to sleeve members which slide linearly along a support member positioned generally transverse to the direction of travel of the belt to be cleaned. The sleeves are slidably mounted on the support member such that they may freely slide from one end to the other but are fixed against either rotational or vertical movement and provide for repair or replacement of wiper blades without requiring conveyor belt shutdown." Claim one reads as follows: "(1) Apparatus for cleaning a conveyor belt comprising a linearly extending support member adapted to be positioned beneath the conveyor belt in use and generally transverse to the direction of the conveyor belt travel; at least one sleeve member mounted on the support member for sliding movement therealong, the sleeve member being arranged to cooperate with the support member to prevent rotation of the sleeve about the support member when mounted thereon, mounting means on the sleeve members, one or more belt cleaning elements mounted on the mounting means, and an adjusting element operable on the support member for bringing the belt cleaning elements into engagement or out of engagement with the conveyor belt." The first problem raised by the application 1s the proof of the second applicant's standing to make it. On behalf of the second applicant, a licence agreement was tendered to establish that it was the exclusive licencee of the first applicant in Australia. However, no entry has been made in the Register of Patents in respect of the licence. Section 31 of the Patents Act 1952 provides: "A document or instrument in respect of which no entry has been made in the Register in accordance with the provisions of this Act 1s not, unless the court otherwise directs, admissible in evidence in a court in proof of the title to a patent or to an interest ina patent, except - (a) in proceedings to enforce equities in relation to a patent or licence; or (b) in an application made under section 32." (Section 32 relates to rectification of the Register.) Counsel were unable to refer me to any authority which offers guidance concerning the exercise of the discretion conferred on the Court by s.31. In principle, such a discretion is reserved to enable the policy of a statutory provision to be pursued with sufficient flexibility to allow for the exigencies of particular cases, avoiding the infliction of unnecessary hardship. So far as the pursuit of the policy 1s concerned, it is not here suggested that any interest, public or private, has in fact suffered by the failure to register, or (excepting the interest of the respondents to defeat this application) will suffer by an exercise of my discretion to give a direction. The failure to register has not left the respondents, as parties interested, in ignorance of the existence or identity of the licencee of the patent, so as to prejudice them in taking any steps which could have avoided their incurring liability. Application has now been lodged to have the appropriate entry made in the Register. In all the circumstances, I direct that the licence be admissible in evidence in proof of the title of the second applicant to an interest in the patent as licencee. 5. Findings to be made and views to be expressed in this judgment in relation to the strength of the applicants' case are of course provisional only, in accordance with the usual position in respect of the hearing of claims for interlocutory relief. The second applicant became exclusive licencee of the first applicant in about 1979, and the evidence is that the marketing of the invention has proved successful, with sales doubling annually. In about August 1986 Mr. Law, the Managing Director of the second applicant, became aware that Matflo Engineering Pty Limited was offering the Matflo components for sale. However, he did not until February 1987 actually obtain the cleaning components of that system. He telephoned Matflo Engineering Pty Limited and spoke to Mr. Couper. Before Mr. Law had identified himself, he had obtained from Mr. Couper a description of the cleaning system which included the statement that it was "mounted ... on a stainless steel track with stainless steel slide." This aspect of Mr. Couper's description of the product may be significant, having regard to a matter to be mentioned later in these reasons. After identifying himself, Mr. Law stated: "I believe that they may infringe the Martin patent." In June 1987 Mr. Law was told by another director of Matflo Engineering Pty Limited, a Mr. Rolf Driene, that he understood Matflo Engineering Pty Limited might not be selling the cleaners "at present". Shortly afterwards, Mr. Couper told Mr. Law that Matflo Engineering Pty Limited was "virtually finished". But at the end of August 1987 Mr. Couper told Mr. Law that he had started another company, Nicaro Holdings Pty Limited, which would sell a modified belt cleaner claimed by Mr. Couper to avoid infringement of the patent. Mr. Couper asserted that the modified cleaner "can be vertically fitted without having to slide on the angle." This conversation was on 28 August 1987, but even at that date Nicaro Holdings Pty Limited remained a shelf company, the shareholding in which had not yet been transferred to reflect Mr. Couper's intention to carry on business through it. At the hearing, the evidence indicated that orders worth about seven and a half thousand dollars were held by Mr. Couper, that no order had been met by Matflo Engineering Pty Limited since 15 May, that Nicaro Holdings Pty Limited had not yet commenced to sell, and that it was Mr. Couper's intention that the outstanding orders, some of which had been outstanding for about three months, would be met by Nicaro Holdings Pty Limited. The evidence makes it plain that at all times Mr. Couper was aware of the patent claimed by the applicants, and that the modified version of the cleaner intended to be sold by Nicaro Holdings Pty Limited was modified in an attempt to avoid infringement of the patent. As the evidence presently stands, I consider that Nicaro Holdings Pty Limited threatens to compete directly with the second applicant, selling at significantly lower prices. Two former employees have left the second applicant, one of whom, Mr. Driene, was its sales manager, in order to join Mr. Couper, and I accept the applicants' contention 7. that 1t should be concluded the prices charged for the Matflo Engineering Pty Limited components were fixed having regard to information they supplied. In this regard, I think the following question and answer in the cross-examination of Mr. Couper are significant: "Question: Did you have any regard to the prices being charged by ESS (the second applicant) or Martin (the first applicant)? Answer: Rolf (Mr. Driene) could not remember the exact prices of the Martin equipment he had been selling. He did not have any records of those prices." In the last few months before the hearing, Mr. Couper has been approached by a United Kingdom based multinational company which is a major manufacturer of conveyor belts. There have been some discussions with 1ts representative in Australia concerning the possibility of an arrangement being made for the marketing of the Matflo cleaning system in Australia and other countries of the world. However these discussions are very preliminary and the proposal is not only jeopardized by the present application, so far as Australia 1s concerned, but would also encounter overseas the problem of the first applicant's United States patent and, presumably, convention patents in other countries. In argument, counsel for the respondents said he did not wish to address me on whether there is a serious question to be tried, although no formal concession was made in that regard. But he raised a number of matters which would have a bearing on the strength of the applicants' case, contending that the 8. respondents will be able to show at a final hearing that the invention 1s not novel, that it is obvious, and that the modified cleaning system does not infringe the patent. The primary argument put for the respondents was that this is not a case where the Court should be guided by a finding that there is a serious question to be tried and an assessment of the balance of convenience. It was said that patent cases demand a different approach, and that the Court should be reluctant to grant interlocutory relief. Reliance was placed on Beecham Group Limited v. Bristol Laboratories Pty Limited (1968) 118 C.L.R. 618 (though there it may be noted some emphasis was placed on the importance of preserving the status quo, and the keeping of an account of profits - as is also offered in the present case - was considered insufficient). Reliance was also placed on Polaroid Corporation v._ Eastman Kodak Company [1977] R.P.C. 379, where the plaintiffs were held not to require an interlocutory injunction (though that was a case where the defendant was beyond argument well capable of meeting any award of damages). I think 1t is plain from the judgment of Buckley L.J. at 395, and the judgment of Goff L.J. at 397, that the Polaroid Corporation case presented some very special features. Buckley L.J. said: "It is, I think, important that every case should be considered on its own facts, and in this respect reference to other decided cases is unlikely to be of very great assistance. There seems (sic) to me to be considerable differences between the facts of the present case and those in the Cyanamid case, the most outstanding of which is that, whereas in that case the plaintiffs were struggling for a 9. foothold by means of their patented product in a highly competitive United Kingdom market, in the present case the plaintiffs enjoy, by means of their patented products, a monopoly of the market in the United Kingdom in instant photographic products." This statement emphasises the special nature of the case at bar, and at the same time distinguishes it from the case before me no less than from the decision of the House of Lords in American Cyanamid Co. v. Ethicon Ltd. [1975] A.C. 396. Although counsel for the respondents urged me not to follow the decision of McLelland J. in Appleton Papers Inc. v. Tomasetti Paper Pty Ltd (1983) 50 A.L.R. 428, I am in respectful agreement with that decision, which was accepted as correct in Telmak Teleproducts Australia Pty Ltd v. Bond International Pty Ltd (1985) 66 A.L.R. 118 at 122, and was cited with apparent approval by Dawson J. in A v. Hayden (No. 1) (1984) 56 A.L.R. 73 at 79. Accordingly, though this is a patent case, and the considerations mentioned in the Beecham Group case must be borne in mind, those considerations "should not be treated as displacing or qualifying the fundamental principles which govern applications for interlocutory injunctions generally, and ... they should be given weight proportionate only to the extent to which they bear upon the question as to what justice as between the parties requires in the circumstances of the particular case" (Appleton v. Tomasetti at 439). In any case, it may be noted that even under the principles which have now been declared obsolete, which issued in a reluctance on the part of the courts to grant interlocutory injunctions in patent cases, as those principles were stated in Marshall and The Lace Web Spring Co. 10. Ld. v. The Crown Bedding Co. Ld. [1929] 46 R.P.C. 267, an exception was made in favour of a patentee whose patent was more than six years of age on the basis that "in such a case there is a prima facie presumption in favour of the validity of the patent" (per Romer J. at 269). Cf. the Beecham Group Ltd. case, Supra, at 624. The nature of the general test to be applied to determine whether there is a serious question to be tried ina particular case has recently been discussed by the Full Court of this Court in Aboriginal Development Commission _v. Ralkon Agricultural Company Pty. Ltd. (Forster, Woodward and Wilcox JJ., unreported, 12 June 1987). Reference was there made to a passage in the judgment of Woodward J. 1n Bullock v. The Federated Furnishing Trades Society of Australasia (No. 1) (1985) 5 F.C.R. 464 at 472 which has also been applied in Spotless Catering Services Ltd. v. Western Mining Corporation Limited (1987) A.T.P.R. 40-806. In these cases, 1t was pointed out that whether a sufficiently serious question to be tried has been shown, and whether the balance of convenience favours an order, are not questions to be determined in strict isolation from each other. As was stated by Mason A.C.J. in Castlemaine Tooheys Ltd. v. State of South Australia (1986) 67 A.L.R. 553 at 557: "The degree of likelihood of success in the action 1s a factor that is related to the balance of convenience ... ." He made it clear at 559 that the relationship might involve "the court's perception or evaluation of the strength of the plaintiff's case". ll. So far as the strength of the applicants' case 15 concerned, the respondents place reliance on the availability on public record at the Patents Office of two prior United States patents. I do not think these are capable of sustaining an argument that the invention claimed was obvious, since there 1s no evidence that they were part of common general knowledge at the relevant time: see Minnesota Mining and Manufacturing Company v. Beiersdorf (Australia) Limited (1980) 144 C.L.R. 253 at 295 per Aickin J. However, 1t was submitted that the respondents would have a cross-claim for revocation on the ground that the patent was not novel, having been anticipated by the United States patents in question. The test for anticipation by a prior patent is whether it discloses all of the integers of the applicants' patent: Minnesota Mining and Manufacturing Company case at 298; and see Dennison Manufacturing Co. v. Monarch Marking Systems Inc. (1983) 66 A.L.R. 265 at 274, 284-5; Windsurfing International Inc. v. Petit [1984] 2 N.S.W.L.R. 196 at 223, 225. In the present case, the respondents rely on the United States patent number 3,342,312, a patent which 1s referred to as part of the prior art in the applicants' patent. It was not shown that this earlier patent discloses all the integers of the combination involved in the applicants' patent, though it does disclose some of them. Repair or replacement of scrapers forming part of an apparatus constructed in accordance with the earlier patent would appear to involve a relatively major operation, in contradistinction to the requirements in relation to_ the 12. apparatus in question in the present application, a principal advantage of which is claimed to be the ease with which such repairs and replacements can be effected, and that without interruption to the running of the conveyor belt being cleaned. The other United States patent relied upon is number 3,674,131, but this patent appears to relate only to one integer of the conveyor cleaning combination, the mounting means employed in respect of the torsion arms which bear one of the two kinds of scrapers employed. The respondents also argued that the applicants' case was flawed in respect of the issue of infringement. Reference was made to the statement of Gibbs J. in Olin Corporation v. Super Cartridge Co. Pty. Ltd. (1977) 51 A.L.J.R. 525 at 530: "There can be no doubt that the appellant cannot succeed in establishing infringement unless it 1s proved that the respondents' process takes 'each and every one of the essential integers' of the appellant's claim." See also Rhone-Poulenc Agrochimie SA v. UIM Chemical Services Pty Ltd (1986) 12 F.C.R. 477 at 496-7. The words in claim one which I have quoted above, "to prevent rotation of the sleeve about the support member", and the reference to "mounting means on the sleeve members", were each seized upon by counsel for the respondents. So far as the first of these points is concerned, this was the matter the subject of the modification made by Mr. Couper. The applicants' apparatus involves the sleeve member 13. sliding upon the support member so that it can be slid into position or slid off again, but it cannot rotate upon the support member, and indeed rotation would render the apparatus useless, because it would result in the scraper blade rotating away from the surface 1t 1S required to scrape, thus exerting no scraping force whatever. Since an inability to rotate is essential to the operation of the equipment, it is not surprising to discover that this feature is as present in the respondents' modified components as it is in those of the applicants. What Mr. Couper has done, which the respondents' argument inaccurately regards as giving rise to an ability to rotate, is to introduce a hinge into the rigid side of the sleeve member, enabling it to be removed vertically from its support, while at the same time retaining its ability to slide upon its support. Vertical removal 1s really quite unnecessary, since it can be slid off, except that, in a further attempt to differentiate his apparatus from that of the applicants, Mr. Couper has introduced a block at the end of the support member which prevents complete removal by sliding, while preserving the major advantage of the patented apparatus that sliding away from under the conveyor belt enables repair or replacement to be undertaken without stopping the belt. But this unnecessary complication of the act of removal, which appears to add nothing very useful to the apparatus, in no way alters the fact that whilst it 1s in operation the sleeve member 1s prevented from rotating about the support member, as 1t must be if it is to function effectively. It seems to me that the - respondents' apparatus introduces a block to the sliding ability, which 1s an important 14. feature of the invention, only at a point where that ability has already been exerted, and has achieved all of its purpose except the ultimate removal of the sleeve member. The block should be considered a deliberate defect superimposed upon the equipment, that has then been corrected by the vertical removal capacity of the hinge mechanism, which would otherwise serve little or no purpose. Cf. the comments of Aickin J. in the Minnesota Mining and Manufacturing Company case at 286, and see also the Windsurfing case, supra, at 224, and the Rhone-Poulenc case, supra, at 485, 493, 497-8. I think the words of Menzies J. in Commonwealth Industrial Gases Limited v. M.W.A. Holdings Pty. Limited (1970) 44 A.L.J.R. 385 at 388 are in substance applicable: "Patent rights are not to be set at nought by such a subterfuge which I am satisfied added nothing to the equipment and was made merely in an attempt to take full advantage of the invention while avoiding infringement of the plaintiff's letters patent by a modification so small as to be insignificant." As to the question of mounting means, the equipment involves two types of scraper. No question 1s raised concerning the mounting means involved with one of these types of scraper, in relation to the use of which, even if the point were good in respect of the other, there would still be infringement. The second type of scraper is made of a substance with the appearance of a heavy plastic which fits tightly over the sleeve member. It 1s said to be capable of being prised off, so as to be removed vertically, in a manner comparable to that by which the other scraper may be removed through the use of the hinge already discussed - and the argument I have already rejected is 15. Maintained in respect of 1t also on that account. The argument with which I must now deal is that there is no mounting means in the case of this type of scraper, and therefore one of the essential integers of the applicants' claim has not been taken by the respondents. In my opinion there are two reasons why this argument should be rejected. The short answer to it 1s that, on the evidence before me, a bonding agent (Chemlock) 1s employed as a mounting means. However, although the respondents adduced no evidence on the point, I was told from the bar table that the respondents asserted no bonding agent was in fact employed. I am unable to see that this provides an answer. For it seems to me the second reason for rejecting the respondents' argument is that a mere tightness of fit, between the sleeve member and the belt cleaning element, may quite appropriately be described as a mounting means. To my mind, there 1s an air of extraordinary unreality about the respondents' proposition. The cleaning element is in fact mounted on the sleeve member, and the means by which it 18 so mounted is the fit of the one upon the other. It is said that the cavalry with which Hannibal won the battle of Cannae were not mounted in the manner much later familiar to military history; but 1f they rode virtually bareback and without stirrups, they were none the less mounted, and in my view could properly be described as possessed of mounting means, though those means were their own skilled grip and balance. Even if to describe the fit of the cleaner on the sleeve member as a mounting means, and the cleaner as "mounted on the mounting means", be thought less than felicitously idiomatic in point of 16. English expression, there is authority that "on a question of infringement, the issue 1s not whether the words of a claim can be applied with verbal accuracy or felicity to the article or device alleged to infringe. It is whether the substantial idea disclosed by the specification and made the subject of a definite claim has been taken and embodied in the infringing thing" (per Dixon J. 1n Radiation Limited v. Galliers & Klaerr Proprietary Limited (1938) 60 C.L.R. 36 at 51, quoted by Gibbs J. in the Olin Corporation case supra at 530). What Dixon J. went on to describe at 52 as "a good verbal point" 1s not enough. In the Olin Corporation case at 531 Gibbs J. said: "No doubt the words of claim 1 would not naturally be used by a person endeavouring to describe the respondents' process. Nevertheless I have concluded for the reasons I have given that all the elements of that claim are found in the respondents' process." It seems to me that the element here in question 1s not lacking from the modified apparatus of the respondents in the present case. Next, it was said that relief should be refused because of the applicants' delay. Reference was made to Pacific Hotels Pty. Ltd. v. Asian Pacific International Ltd. (1986) 7 I.P.R. 239 at 251. The effect of delay is, of course, very much a matter of the particular facts, and the surrounding circumstances in the setting of which they occur in each case. [In my opinion, it 1s legitimate to take into account, in the present case, that the respondent Matflo Engineering Pty. Limited appears to have ceased its activities some time before proceedings were commenced, and 17. that the proceedings may fairly be regarded as a prompt response to the threatened replacement of that ailing infringer by Nicaro Holdings Pty. Limited, with modified components which it claimed would not infringe the patent. Another matter raised was the possible impact of an interlocutory injunction upon the respondents' position in respect of the negotiations with the United Kingdom based company previously mentioned. This is an aspect of the effects of the grant or withholding of relief which must be weighed in order to ascertain the balance of convenience. The uncontradicted evidence concerning the financial difficulties of Matflo Engineering Pty. Limited suggests that another aspect is the question whether the applicants will be able, as a practical matter, to enforce an award of damages, quite apart from the adequacy of damages as a remedy. For their part, the applicants offer the usual undertaking as to damages, and there is no suggestion that that undertaking is illusory. In all the circumstances, I have come to the conclusion that it is appropriate in this case to grant an interlocutory injunction restraining Nicaro Holdings Pty. Limited from manufacturing or selling the modified equipment referred to in the evidence. I shall make an order upon short minutes being brought in on behalf of the applicants, and at that time I shall also hear the parties as to the appropriate order in respect of costs. I certify that this and the preceding sixteen (16) pages are a true copy of the Reasons for Judgment herein of his Honour Mr. Justice Burchett. WZ Lhe Associate Dated: 29 OctoBer, 1987. Counsel for the Applicants: Solicitors for the Applicants: Counsel for the Respondents: Solicitors for the Respondents: Dates of hearing: 18. Mr. D. Catterns Williams Niblett Mr. P. Gray Mr. R.T. Gregory 25/9/87; 28/9/87.