The Ohio Art Co v Hunter Leisure Pty Ltd [1998] FCA 982

FEDERAL COURT OF AUSTRALIA Interpretation of instruments – sub-licence agreement – whether agreement void for uncertainty – whether restrictions on use and transfer of technology and tooling were operative after expiration of agreement. Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 – appl.

THE OHIO ART COMPANY v HUNTER LEISURE PTY LIMITED

NG 463 of 1998

JUDGE: BEAUMONT J.

PLACE: SYDNEY

DATE: 12 JUNE 1998

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 463 of 1998

BETWEEN: THE OHIO ART COMPANY

Applicant

AND: HUNTER LEISURE PTY LIMITED

Respondent

JUDGE: BEAUMONT J.

DATE: 12 JUNE 1998

PLACE: SYDNEY

REASONS FOR RULING Before the Court is an application for final injunctive relief sought by The Ohio Art Company ("Ohio"), as applicant, against Hunter Leisure Pty Limited ("Hunter"), as respondent. Relief is sought under the general law, and under s 52 and 53 of the Trade Practices Act 1974 ("the Act"). In the course of final submissions by counsel, it emerged that one of the principal claims of Ohio depended upon a particular construction of the terms of a sub-licence agreement made between Ohio and Hunter in 1993. In this connection, Ohio seeks a permanent injunction restraining Hunter from using or transferring, except with Ohio's consent, technology or tooling or improvements thereto, developed and used by Hunter in the manufacture and distribution of Ohio's product "Pro Basketball" in Australia and New Zealand. Pursuant to the agreement, Ohio also seeks a final mandatory injunction for the delivery up of technical drawings provided by Ohio to Hunter in that context. The sub-licence agreement, which is expressed to be effective on 1 January 1993, was for an initial term of two years commencing on 1 January 1993 and ending on 31 December 1994. It was renewable for successive additional terms of one year each. In fact, the agreement was renewed from time to time but it is now common ground that it finally expired on 31 December 1997. The agreement recited that Ohio, as licensor, was the holder of a licence to manufacture, distribute, market and sell the products registered and marketed under the registered trademarks as defined in the addendum attached to the agreement and had the right to grant the sub-licence (recital (1)). The addendum to the agreement referred, in this connection, to the following: "No. Description Royalty Rate Royalty Advance 692 Michael Jordan Pro Basketball 4% Michael Jordan $10,000.00 5% Ohio Art TOTAL ADVANCE $10,000.00 All advances and royalties are payable in U.S. FUNDS." The recitals went on to state that Hunter desired to obtain an exclusive non-transferable sub-licence to manufacture, distribute, market and sell in the Territory (defined in the agreement as Australia and New Zealand) and that Ohio was willing to grant such a sub-licence in accordance with, and subject to, the terms and conditions of the agreement. For immediate purposes, the relevant provisions of the agreement are as follows: Article 2 dealt with the grant of the sub-licence; Clause 2.01 was in these terms: "GRANT – The Licensor hereby grants to the Sub-Licensee an exclusive nontransferable sub-license to manufacture, distribute, market and sell the Product(s) only." Clause 2.03 was as follows: "Improvements – Each of the Licensor and the Sub-Licensee shall keep the other party continuously informed as to any improvements in the product or the Technology made by it, subject to any rights of the Licensor therein. Licensor shall keep the Sub-Licensee continuously informed as to any improvements in the Product or the Technology which the Licensor has obtained from others and is free to disclose to the Sub-Licensee. All such improvements in the Product and the Technology shall fall within the scope of this Agreement. In the event of termination of the Sub-License, all improvements in Product made by Licensee, including any patents, will be transferred to Licensor at no charge to the Licensor."