# AUBTRALIA Attention: Judgments Clerk Weth the Conploments off My Sustice R oC Cooper Please find herewith copy judgment in the matter of Allgas Energy Ltd. v. East West Int. Gas Equipment P/L and Tubby G47 of 1994 handed down by Cooper J. today 30.9.94 together with a disk containing a copy of same. ith Hawdeds, Austr kyr JUDGES' CHAMBERS FEDERAL COURT OF AUSTRALIA 119 NORTH QUAY BRISBANE 4000 AUSTRALIA JUDGMENT No. 010c2OQ.. 2, CATCHWORDS Interlocutory injunction - alleged joint infringers of patent no serious question to be tried - balance of convenience does not arse - alleged infringement of copynght - no threat of further infringement. Magna Alloys & Research Pty, Lid, v. Coffey [1981] VR 23 No. G47 of 1994 Cooper J., Brisbane, 30 September, 1994 QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION 47 of 1994 BETWEEN: ALLGAS ENERGY LTD. Applicant AND EAST WEST INTERNATIONAL GAS EQUIPMENT PTY. LIMITED First Respondent AND JEFFREY ALLEN TUBBY Second Respondent IUDGE MAKING ORDER: Cooper J. WHERE MADE: Brisbane DATE OF ORDER: 30 September, 1994 MINUTES OF ORDER THE COURT ORDERS THAT: 1. The application for interlocutory injunctive relief 1s dismissed. 2. The costs of the application are reserved to the trial judge. ah, Ya Cad: Toy ge AK ANID 3° Note: Settlement and entry of orders are dealt with in Order 36 of the Federal Court Rules QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION No, G47 of 1994 BETWEEN: ALLGAS ENERGY LTD. Applicant AND EAST WEST INTERNATIONAL GAS EQUIPMENT PTY, LIMITED Exrst Respondent AND: TEFFREY ALLEN TUBBY Second Respondent CORAM: Cooper J. PLACE: Brisbane DATE: 30 September, 1994 REASONS FOR JUDGMENT The applicant is the holder of Australian Standard Patent No. 644255 in respect of a control system for diesel engines running on a mixture of natural gas and diesel fuel. The applicant also claims copynght :n certain schematic diagrams, drawings and graphs. The first respondent 1s a company incorporated in New South Wales and whose registered office is at 96 Percival Road, Stanmore, New South Wales. The second respondent was previously an employee of the applicant for the period 3 January, 1989 to 2 July, 1993. The second respondent deposed that he commenced employment with the first respondent on 26 July, 1993. However, in matters which are the subject of these proceedings he held himself out as the project manager of East West International Gas Equipment Pte. Ltd. 2. Mr, Alwin Fisher, the Manager of NGV and Central Workshops of the South Australian Gas Company Limted ("SAGASCO"), deposed that the second respondent had visited the premises of SAGASCO on 2 February, 1994 and had spoken to Mr, Fisher and Mr. Cook of the development group of SAGASCO. He left his business card on that occasion. The business card describes the second respondent as the project manager of East West International Gas Equipment Pte. Ltd. and gives an address of 96 Percival Road, Stanmore, New South Wales, 2048, together with telephone and fax numbers. At the conclusion of the meeting, Fisher asked the second respondent to forward to SAGASCO wnitten information and pricing for the products the second respondent was marketing and wished to sell. Under cover of a letter dated 10 March, 1994 signed by the second respondent as project manager, the second respondent sent to SAGASCO pnices for diesel/CNG systems together with two documents; one described as "Diesel/CNG Systems", and the other described as "Kit Specifications Mixed Fuel Engines Diesel/Gas". The covering letter and both documents were on the letterhead of East West International Gas Equipment Pte. Ltd. The letter states, and the second respondent deposed, that the documents were prepared to obtain system approval for the diesel/CNG systems offshore, specifically in Indonesia. Included in the documents are schematic diagrams, graphs and component drawings in which the applicant claims copyright. A copy of the documentation prepared for the Indonesian authonties was also sent to the Gas and Fuel Corporation of Victoria. 3. On 26 April, 1994 the applicant, by its solicitors, served notice of demand on the first and second respondents. I set out in full the letter to the second respondent as it records the matters of which the applicant complains and the rehef sought. An almost identical letter was sent to the first respondent. "We act for Aligas Energy Ltd. Our chent is the holder of letters patent (Patent No. 644255) in respect of a control system for diesel engines running on a muxture of natural gas and diesel fuel which controls the rate of supply of natural gas to the diesel engine. That control system includes : (a) a switch means for switching on the supply of natural gas to the engine when the engine exceeds a_ predetermined minimum speed, or revolutions per minute; and (b) a control means for controlling the amount of natural gas fed to the engine wherein that control means is operatively connected to a throttle valve and operable when a pressure differential is present between the throttle valve and that control means. We enclose a copy of the Specification of our client's patent, as granted. We are instructed that you are now employed by East West International Gas Equipment Pty Limited as a Project Manager, and have been seeking expressions of interest in a diesel/natural gas vehicle ('NGV') conversion system for diesel engines to be supplied by East West International Gas Equipment Pty Lid ('East West'). We are further instructed that the system promoted by you, and sought to be provided by East West, 1s a system which includes: I. @ switch means for switching on the supply of natural gas to the engine when the engine exceeds a_ predetermined minimum speed, or revolutions per minute; 2. @ control means for controlling the amount of natural gas fed to the engine wherein that control means 1s operatively connected to a throttle valve (or butterfly valve) and operable when a pressure differential is present between the throttle valve and that control means; 3. an engine speed sensor which is operatively associated with the switch means so as to close the switch means when the engine minimum speed is reached or exceeded; 4, 4. a speed sensor which is fitted to a rotating part of the engine; 5. a solenoid valve which 1s operatively connected to the switch means and which opens in response to the closing of the switch means to permit natural gas to flow to the engine; 6. an electrical connection between the switch means and the ignition switch; 7. a speed sensor which is a magnetic pickup; 8. a diesel limit means associated with a diesel fuel pump which limits the amount of diesel fuel supplied to the diesel engine; and 9. a damping means for damping the rate at which diesel fuel is withdrawn from the diesel engine when the switch means is closed and natural gas 1s initially supplied to the diesel engine. We are also instructed that the material being used by you to market the East West conversion system, when read as a whole, describes a system that is substantially in accordance with Figure 1 of the Specification. You will note that Claim 19 of the patent as granted claims a control system for diesel engines substantially as descnbed in the patent specification with reference to the accompanying drawings. Figure 1 of the Specification is one of those accompanying drawings. By incorporating each of these features in the diesel/NGV conversion system being marketed by you, on behalf of East West, you infringe or threaten to infringe our client's patent. Those features clearly fall within the scope of Claims I, 2, 3, 4, 6, 7, 14, 18 and 19 of the patent as granted. The East West diesel/NGV conversion system may also fall within the other claims of our client's patent as granted. However, we are instructed that our client presently has insufficient information to reach any conclusions in respect of the remaining claims. We are instructed that, according to the material being circulated by you, the East West diesel/NGV conversion system makes use of two control means, being a gas governor unit (which incorporates a power valve) and a bobbin type valve, or metering valve. We note that you and East West have made an application for provisional patent in respect of improvements to a control system for diesel engines. We assume that the improvement which is the subject of that application is the inclusion of a second control means, being the bobbin type valve, or metering vale. 5. However, the inclusion of that second control means does not remove the East West system, as described in the matenal being circulated by you, from the scope of the claims of our client's patent. Further, on our instructions, the inclusion of a second control means is not an improvement to the system and does not add anything to the level of performance of the system or its efficiency. Both control means are operatively connected to the butterfly valve, which is the air throttle of the system, and operate when a pressure differential is between the gas governor or metering valve and the butterfly valve. Both control means clearly fall within the scope of Claim I of our client's patent. A diesel/NGV conversion system constructed in accordance with the descriptions contained in the material relied upon by you to market and promote the East West conversion system clearly infringes our client's patent. The marketing of such a device also infringes our client's rights under that patent. Further, we are instructed that a number of the schematic diagrams, drawings and graphs contained in the material relied upon by you are identical reproductions of a number of our client's schematic diagrams, drawings and graphs. Those schematic diagrams, drawings and graphs are onginal artistic works that have been prepared by employees of our client in the course of their duties as employees. Accordingly, copyright subsists in each of those schematic diagrams, drawings and graphs and that copyright is owned by our client. Our client has the exclusive nght to reproduce, or substantially reproduce, each of those artistic works. To reproduce, or substantially reproduce, any of those artistic works without our client's permission is an infringement of our client's copyright. We are also instructed that the material used by you in marketing the East West conversion system represents that: 1. the mixed fuel/diesel gas systems in current use by East West have been developed, thoroughly tested and field evaluated over the last S years by East West; 2. East West has fitted dual fuel systems, as described in that material, to the following engines: (a) Isuzu 6BDI; (b) Isuzu 6BG1; (c) Mitsubishi 557J; (a) Mitsubishi 437K; (e) Cummins 240; (ta) Mazda 0409; (g) Nissan C60; (h) Caterpillar 3208T; (i) Ford 360; () Cummins VT195; (k) Caterpillar 33 Series; and () Hino FC; 3. You have, whilst employed by East West, been responsible for the successful development of mechanical mixed fuel systems for diesel engines; 4, East West has conducted tests on an Isuzu test engine from which East West and/or you has obtained vanous results Showing the fuel efficiency of the East West conversion system; and 5. East West has been responsible for bringing into existence the various Schematic diagrams, drawings and graphs contained in that material. The diesel/NGV conversion system that is described in the material being circulated by you has been developed over a 5 year period and has been thoroughly tested and field evaluated during that time. However, none of that work has been performed by or on behalf of East West. All of that developmental work, field testing and evaluation has been performed by our client. Further, whilst each of the engines referred to in the material has been Jitted with the diesel/NGV conversion system as described in that material those systems have not been fitted to those engines by East West. Those systems have been fitted to those engines by our client. It is literally correct to say that you have, since migrating to Australia 5 years ago, been involved in the successful development of mechanical mixed fuel systems for diesel engines. However, all of your work, pnor to 2 July, 1993, in respect of the development of mechanical mixed fuel systems for diesel engines was with our client. None of the drawings, schematic diagrams and graphs contained in the material has been prepared by or on behalf of East West. They have been prepared by and on behalf of our client. Further, those schematic diagrams, drawings and graphs contain information obtained as a result of the field tests and evaluation work carried out by our client. In these circumstances, each of those representations, as contained in the material being circulated by you, is clearly misleading or deceptive, or likely to mislead or deceive. You may be aware that, under Section 52 of the Commonwealth Trade Practices Act 1974 a corporation, such as East West, cannot, in trade or 7. commerce, engage in conduct that is misleading or deceptive or likely to mislead or deceive. The representations referred to in the matertal being circulated by you, on behalf of East West, are clearly being made in trade or commerce and clearly contravene Section 52 of the Trade Practices Act 1974. Because you are knowingly concerned in, or party to, these contraventions, Section 82 of the Trade Practices Act 1974 makes you personally liable for them. Our client is most concerned by all of this conduct. Our client will be denied the opportunity to exploit its monopoly nights, as granted by the patent. Further, the marketplace may easily be led into believing that the diesel/NGV conversion system is the property of East West. We are instructed that at least 2 of our client's customers have already indicated to our client that any decision to proceed with additional converston systems has been postponed. The circumstances of each decision to postpone has led our client to believe that the decisions were taken as a result of approaches being made to them by you, on behalf of East West. Our client is also concerned that its reputation and the reputation of its system, in which it has invested a very significant level of research and development resources and time over the last 5 years, will be significantly damaged by your continued conduct. Your conduct, and the conduct of East West, entitles our client to: 1. injuncnve relief, restraining East West and you from: (a) __ infringing our client's patent; (b) infringing the copynght in our client's original artistic works; and (c) engaging in misleading or deceptive conduct or conduct that is likely to mislead or deceive; 2. damages, or at our client's election, an account of profits, in respect of the infringement of the patent and the infringement of copyright; 3. damages for the contraventions of Section 52 of the Trade Practices Act; 4. orders that East West and you deliver up all systems, or components of those systems, which infringe the patent and all works which infringe our client's copyright or contain misleading or deceptive representations or representations that are likely to mislead or decetve; 8. interest on any amounts awarded by way of damages; and payment of our client's legal costs should it have to institute any action to protect us rights. We are instructed to give you the opportunity of providing undertakings that are satisfactory to our client before instituting proceedings against you and East West. Accordingly, we are instructed to demand that you immediately Provide an undertaking in writing that you will not, whether by yourself, your servants or agents or otherwise howsoever: I, directly or indirectly, during the term of the Australian Standard Patent No. 644255 (the 'Patent') infringe the Patent, and in particular, will not use, manufacture, sell or otherwise exploit a system for the operation of diesel engines using natural gas, as described in the document of East West International Gas Equipment Pty Ltd ('East West') entitled 'Diesel/CNG Systems'; infringe the copyright subsisting in the onginal artistic works of Allgas Energy Ltd ('Allgas') comprised in drawings or Schematic diagrams of the dual fuel system the subject of the Patent (the 'dual fuel system'), or any part of it, graphs depicting the performance of the dual fuel system or any other drawing the copyright of which is owned by Alligas (the 'Works') by: (a) substantially reproducing any of the Works in a material form; (b) authorising the substantial reproduction in a material form of any of the Works; or (c) constructing or authorising the construction of a dual fuel system or any component thereof which would, if constructed, constitute a three dimensional reproduction, or a substantial reproduction, of any of the Works; and engage in misleading or deceptive conduct or conduct that is likely to mislead and deceive, in particular by representing, in trade or commerce, that: (a) the mixed fuel diesel/gas systems in current use by East West have been developed, thoroughly field tested and field evaluated over the preceding 5 years by East West; (b) (c) (d) (e) 9. East West has fitted dual fuel systems to the following engines: Isuzu 6BDI; fsuzu 6BG1; Mitsubishi 557J; Mitsubishi 457K; Cummins 240; Mazda 0409; Nissan C60; Caterpillar 3208T; Ford 360; Cummins VT195; Caterpillar 33 series; and Hino FC; Jeffrey Allen Tubby ('Tubby') has, whilst in. the employ of East West, been responsible for the successful development of mechanical mixed fuel systems for diesel engines; East West has conducted tests on an Isuzu test engine from which East West and/or Tubby obtained the results indicated in Figure 3 of the East West document entitled 'Diesel/CNG Systems'; and East West has been responsible for bringing into existence the schematic diagrams, drawings and graphs, contained in the East West document entitled 'Diesel/CNG Systems'. We are also instructed to demand that you deliver up to the offices of Messrs Minter Ellison Morris Fletcher, Level 27, Riverside Centre, 123 Eagle Street, Brisbane: 1. all dual fuel systems (or parts or componentry thereof) in your possession, custody, power or control' 2. all copies of the drawings in your possession, power or control which are coptes or substantial reproductions of any of the Works; and 3. copies of all of the East West documents entitled 'Diesel/CNG Systems' in your possession, power and control. Should we not receive the requested written undertakings, and the material required to be delivered up, by 12 noon, Thursday, 28 April 1994 we are instructed to institute proceedings against East West and you personally for 10. appropriate relief in respect of the infringement of our client's patent, the infringement of our client's copyright in the Works and contraventions of Section 52 of the Trade Practices Act 1974. If it is necessary to institute those proceedings our client will also be seeking the costs of those proceedings from East West and you. Those proceedings will be issued without further notice to you". Evidence was given by the second respondent. He stated that the documents were prepared by him and the schematic drawings, diagrams and graphs were taken from techmical reports given to him as his own property whilst an employee of the applicant, the second respondent having been involved in the research and development work, the subject of the reports. He also gave evidence, as appears to be the fact, that the materials used to produce the documents supplied to SAGASCO and the Gas and Fuel Corporation of Victoria, including the technical reports which he claims were given to him, have been delivered up to the applicant's solicitors. The letter of demand and the material filed by the applicant contends that the conduct complained of was engaged in by the first respondent. However, I am not persuaded that such is necessarily so. All of the correspondence and the documentation 1s in the name of East West International Gas Equipment Pte. Ltd. and not in the name of the first respondent, and the anagram "EWIGE" used on the letterhead and in the text of the documents and the offers to supply relate to that company. Although there is clearly gome association with the address at 96 Percival Road, Stanmore, New South Wales, there is no evidence that the second respondent did anything for and on behalf of the first respondent. at il. In a letter of introduction to Carpentana Transport dated 18 January, 1994 on the letterhead of East West International Pte. Ltd., the second respondent is described as the project manager and a Mr. S.B. Graham of PO Box 3034 Southport 1s described as the managing director of that company. The second respondent and Mr. Graham are similarly described in the letter of offer to SAGASCO. Mr. Graham is not shown as a director of the Australian company in the Australian Securities Commission records. On the second respondent's evidence, Mr. Graham is married to Ms. Evangeline Chin Eng Lim who 1s shown as a director of the Australian company, but whose address 1s shown as 44 Jalan Keli, Singapore, Singapore. Mr. Graham is the person to whom the second respondent sworn he was responsible to as his employer. Mr. Graham and Ms. Lim apparently reside at Southport. What continuing ties, 1f any, exist between Singapore and Ms. Lim were not explored. Counsel for the applicant was cntical of the records of the first respondent, 1n particular the failure to disclose Mr. Graham as the managing director of the first respondent. However, there is no evidence that Mr. Graham is in fact the Managing director of the first respondent or has held himself out as such. The material shows that East West International Gas Equipment Pte. Ltd. 1s not incorporated in Australia nor registered in Australia as a foreign company. However, that does not necessarily mean that the company does not exist, or that the Australian company of a similar name is to be substituted for it or to be responsible for its conduct in Australia. The conscious use of "Pte" instead of "Pty" on various items of stationery, and the fact that the two technical documents were onginally prepared for submission to the authorities in Indonesia would suggest that the company East West International Gas Pte. Ltd. was incorporated outside Australia. This is particularly so where, on the 12. evidence, the company had been engaged in installation work for or in conjunction with the applicant and on its own behalf in Indonesia and the document prepared for the Indonesian authorities claims that a Mr. Bob Newcombe, an automotive engineer and licensed gas installer, "was responsible for development work and installation with EWIGE principally in Malaysia and Indonesia" and "was also responsible for training personnel in Malaysia'. The applicant did not seek to establish the relationship, if any, between East West International Gas Equipment Pty. Ltd. and East West International Gas Equipment Pte. Ltd. Rather, the applicant sought to equate the two entities or simply assumed that the two names related to one and the same company. The applicant's material, particularly the affidavits of Dr. C. Anderson in paragraphs 85 and 113 and Mr. Fisher in paragraph 6, wrongly assert that correspondence or documentation was on the letterhead of the first respondent when an inspection of the documents shows this is not so. Mr. Fisher's affidavit, where it onginally correctly recorded what was on the letterhead, was altered to purport to make it a document of the first respondent. In consequence, I have no confidence in Dr. Anderson's statements in paragraphs 74 to 77 of his affidavit that the dealings he deposes to were with the first respondent as opposed to East West International Gas Equipment Pte. Ltd., or in Mr. Fisher's assertion in paragraph 4 of his affidavit that the second respondent discussed the diesel/natural gas vehicle conversion system on behalf of the first respondent. The evidence goes no further than showing they both use the address of Mr. Stephenson, an accountant of 96 Percival Road, Stanmore, New South Wales, and 13. that the reputed managing director of one company is marned to a director of the Australian company. The applicant by its notice of motion seeks to :- 1, Restrain both respondents from infringing Australian Standard Patent No. 644255. 2. Restrain both respondents from infringing copyright claimed by the applicant in drawings, schematic diagrams and graphs included in the documents forwarded to SAGASCO. 3. Restrain the first respondent from making representations that the first respondent had developed and tested the dual fuel systems described in the documents forwarded to SAGASCO or that the second respondent, as an employee of the first respondent, had done so, or, that certain of the gtaphs, schematic diagrams and drawings were the work of the first respondent. In correspondence with the applicant's solicitors and in the affidavit of Mr. Young filed in these proceedings on behalf of the respondents, the respondents have produced prior art, publications and expert opinion which would challenge the validity of the applicant's patent. The material establishes that there is a serious question to be tried as to whether the applicant's patent is liable to be revoked on the grounds that the invention claimed was obvious and invoived no inventive step, or was not novel, having regard to 14, what was known and published by the applicant and others prior to the priority date. The matenal establishes that there may be a serous question to be tned as to whether the systems described in the documents forwarded to SAGASCO and the Gas and Fuel Corporation of Victoria infringe the applicant's patent. The material establishes that there 1s a serious question to be tried as to whether the second respondent has infringed the copynght claimed in the schematic drawings, diagrams and graphs taken from the technical reports of the applicant which were in the possession of the second respondent. However, the maternal does not show that there 1s a serious question to be tried that the first respondent has infringed or 1s threatening to infringe the applicant's patent, or that the first respondent has infringed or threatens to infringe the copyright that the applicant claims in the material reproduced in the documents forwarded to SAGASCO and the Gas and Fuel Corporation of Victoria. Likewise, there is no material which would persuade me that in producing the documentation for the Indonesian authorities, copies of which were made available to SAGASCO and the Gas and Fuel Corporation of Victoria, the second respondent was acting other than for East West International Gas Equipment Pte. Ltd. There is nothing in the contemporary material which named the Australian company and it only intrudes into the matter because its existence was revealed in a search of the Australian Securttes Commission records. On the evidence, the other company was doing business in Indonesia and Malaysia and seeking to procure business in Australia. There is no evidence that the second respondent did, or purported to do, any act in Australia on behalf of the first respondent. Therefore there is no serious 1S. question to be tried that the first respondent by the second respondent engaged in conduct in contravention of section 52 of the Trade Practices Act as alleged by the applicant or at all. The applicant does not make out as against the first respondent any serious question to be tned to support the interlocutory injunctions claimed against the first respondent in paragraphs 1, 2 and 3 of the notice of motion. No question of balance of convenience arises until there is made out a serious question to be tned (Magna Alloys & Research Pty. Ltd. v. Coffey [1981] VR 23 FC at 29). The case alleged against the second respondent is that he is, or threatens to be, a joint infringer with the first respondent of the applicant's patent. As I have said, the material does not demonstrate such a case. Rather, all the documentation shows that he was acting for and on behalf of East West International Gas Equipment Pte. Ltd., and that if there 1s a serious question to be tried, then it is whether or not he is liable as a joint infringer with that company of the applicant's patent. That, however, 1s not the case brought against him. As against the second respondent, the serious question to be tried on the case as alleged against him is limited to infringement of copynght. Having regard to the circumstances in which the technical documents came into existence and their distribution in Australia, together with their return to the applicant, I am satisfied there 1s no real 16. likelihood of the documents in which copyright 1s clamed being reproduced by the second tespondent pending tnal. There is nothing to suggest that the applicant has suffered any damage by the documents being reproduced and forwarded to SAGASCO and the Gas and Fuel Corporation of Victoria. Those two organisations appear to have known the true facts and the applicant's interest in the matter. Indeed they seem to have acted throughout in the applicant's interest. Nor 1s it demonstrated that 1f the second respondent was in any way involved with the manufacture of components which constituted three-dimensional copies of the drawings in which the applicant claims copynght, that damages would be an inadequate remedy for breach of the copynght. I am satisfied that an injunction pending trial against the second respondent to restrain any breach of copyright is unnecessary and the balance of convenience ts against the granting of it. No interlocutory relief is sought against the second respondent to restrain the making of representations of the type complained of against the first respondent. For the above reasons the application for mterlocutory injunctive relief 1s dismissed. The costs of the application are reserved to the tnal judge. It may be relevant to the question of costs to identify the party with which the applicant was doing business in Indonesia and whether there was any basis to sue the first respondent, other than that the search of the Australian Securities Commission index identified an 17. Australian company of substantially the same name and address and failed to identify a foreign company carrying on, or seeking to carry on, business in Australia. 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 Cooper. Date: 30 September, 1994 rev wa K. Alana Associate Counsel for the Applicant: P.D. McMurdo QC Solicitors for the Applicant: Minter Ellison Morris Fletcher Solicitor for the Respondent: Mr. M. Foley of Foleys Solicitors Date of Hearing: 25 May, 1994 Place of Hearing: Brisbane Date of Judgment: 30 September, 1994