FEDERAL COURT OF AUSTRALIA Mizzi Family Holdings Pty Ltd v Morellini (No 3) [2017] FCA 870 File number: QUD 112 of 2011 Judge: DOWSETT J Date of judgment: 1 August 2017 Catchwords: PATENTS – innovation patent – invention of device to plant billets of sugar cane – claim for damages for unjustifiable threats – no demonstrated adverse effect as a result of the threats Legislation: Australian Consumer Law s 236 Patents Act 1990 (Cth) s 128 Trade Practices Act 1974 (Cth) s 82 Cases cited: Australian Mud Company Pty Ltd v Coretell Pty Ltd [2017] FCAFC 44 Brabazon v Western Mail Ltd (1985) 8 FCR 122 Cryeng Pty Ltd v Loyola [2011] FCA 956 Flamingo Park Pty Ltd v Dolly Dolly Creation Pty Ltd (1986) 65 ALR 500 Horne v Johnston Brothers (1921) 38 RPC 366 Loyola v Cryeng Pty Ltd [2012] FCAFC 71 Solanite Signs Ltd v Wood (1933) 50 RPC 315 Ungar v Sugg (1892) 9 RPC 114 Date of hearing: 12 August 2016 Registry: Queensland Division: General Division National Practice Area: Intellectual Property Sub-area: Patents and associated Statutes Category: Catchwords Number of paragraphs: 22 Counsel for the Applicant/First and Second Cross–Respondent: Mr D Campbell QC Solicitor for the Applicant/First and Second Cross–Respondent: Boulton Cleary & Kern Counsel for the Respondent/Cross–Claimant: Mr A Ryan QC Solicitor for the Respondent/Cross–Claimant: Griffith Hack ORDERS QUD 112 of 2011 BETWEEN: MIZZI FAMILY HOLDINGS PTY LTD ACN 132 033 615 Applicant AND: DARYL MARK MORELLINI Respondent AND BETWEEN: DARYL MARK MORELLINI Cross-Claimant AND: MIZZI FAMILY HOLDINGS PTY LTD ACN 132 033 615 (and another named in the Schedule) First Cross-Respondent JUDGE: DOWSETT J DATE OF ORDER: 1 AUGUST 2017 THE COURT ORDERS THAT: 1. the cross-claim for damages be dismissed; and 2. on or before 4.00pm Tuesday 15 August 2017, the parties file and serve submissions as to costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT DOWSETT J: 1 These proceedings concern Innovation Patent 2010100955 (the "Patent"), previously held by Mizzi Family Holdings Pty Ltd ("Mizzi"). Mizzi alleged infringement of the Patent by Daryl Mark Morellini ("Mr Morellini"). Mr Morellini cross-claimed for revocation of the Patent and for relief pursuant to s 128 of the Patents Act 1990 (Cth) (the "Patents Act") against unjustified threats. At trial, infringement was not proven and the complaint concerning unjustified threats was upheld. However I did not award damages as I understood Mr Morellini to have abandoned his claim. The Full Court considered that he had not abandoned his claim. I should add that the Full Court also ordered that the Patent be revoked for false suggestion or representation. The only outstanding issue is the question of damages for unjustifiable threats. 2 The cases demonstrate two propositions which are relevant for present purposes. First, any award must be for damages resulting from the threats. See Ungar v Sugg (1892) 9 RPC 114 at 118 where Esher MR said: But then what is the liability? It must be for damage done by the threats – not damage done by anything else. They are not liable for the damage which is the result of any rumour getting about in the trade which is not their act. They are liable for the damages caused by their own act – the threats which they have made, and which they have caused to be made known to the people to whom their circulars were given. 3 See also Australian Mud Company Pty Ltd v Coretell Pty Ltd [2017] FCAFC 44 at [25]. 4 Secondly, the damage suffered may include loss resulting from the termination of negotiations as a result of the threats. See Solanite Signs Ltd v Wood (1933) 50 RPC 315 at 319 and Horne v Johnston Brothers (1921) 38 RPC 366 at 372. 5 The Patent was for a cane billet planter and a method for planting sugar cane. There is no doubt that the claimed invention met a need felt by cane farmers in North Queensland. It is not necessary that I say much more about the invention. Mr Morellini had also developed a cane billet planter which, Mizzi asserted, infringed the Patent. Mizzi obviously considered the Patent to be worth protecting and saw Mr Morellini's product as a challenge to its capacity to benefit from its exploitation. 6 From at the latest 2007, Mr Morellini had been actively engaged in the development of new mechanical planting methods. His interest was sparked by an accidental discovery that cane billets would grow effectively, even if planted under mounds of earth. This discovery occurred in 2006. It seems that in about 2007, or perhaps a little later, Mr Morellini received financial assistance from the government in connection with the design and construction of a planter which would leave the billets covered by such mounds. In June 2007 an article appeared in a local newspaper, reporting his successful application for funding. Since about 2005 Mr Paul Mizzi, the alleged inventor of the Mizzi invention, had been working in the same area. Mizzi is owned by his family. Mizzi's patent application was lodged on 25 June 2007. At that time Mr Morellini was also contemplating such an application. Mizzi and Mr Morellini were aware of each other's involvement in the area. In 2009, Mr Morellini displayed his planter at an open day in Ingham. 7 On 5 April 2010, at Mizzi's instigation, a notice appeared in the publication "Canegrowers". It identified Mizzi's patent application number and was headed, "Mizzi Mound Billet Planter" and "Manufactured by Carta & Co". The notice contained three photographs, contact information and a claim that Mr Mizzi was the inventor. Under the heading, "Plants in one pass leaving a packed uniform mound ready for harvest" the notice stated: This type of planting allows for conventional ground tillage or chemical spraying to control grass after planting. Plant into existing mounds. Requires minimal ground preparation prior to planting. Variable cane billet delivery rate and variable fertilizer delivery rate can be dialled in according to farmers requirements. Ground speed compensated. Pressure to the forming roller can be varied on the go allowing for different ground conditions and rates of moisture. Rain after planting is no longer a problem. Allows wide row planting for controlled trafficking. Can plant from 1.5m drill widths upwards. 8 Next to the notice was an article by Terry Hurlock of "Invention Pathways". Under the heading "Infringement danger" the article stated: North Queensland sugar farmers are quick to innovate. But with all that enthusiastic innovation comes a danger of copying patented inventions. A case in point is the new cane planting unit designed in Ingham NQ which has an application in for a patent with an established patent priority date. We know of farmers who are manufacturing their own version of the new invention whilst the patenting process is operating. If the patent owner decides to pursue his rights, he could make claims of infringement of patents when the patent is eventually granted. His rights extend back in time to the original application date. Infringement of patents can be a costly exercise where it can be shown that the patent holder has loss of income because of others who decide to make one of these units for there [sic] own use. "Own use" is still infringement. Some believe that by changing something by a small percentage infringement is avoided. Similarly, just a myth. You can still be in danger of infringement. Infringement penalties, if proven, can mean fines, or even loss of the infringing machine plus claims for loss of income. The safer arrangement that copying farmers seem reluctant to do, is to simply purchase a manufacturing right from the patent holder. 9 Mr Hurlock was associated with Mizzi's patent attorney. There is no doubt that Mizzi caused the publication of both the notice and the article. 10 There is little evidence concerning Mr Morellini's activities between 2009 and April 2010. However I infer that the existence of Mr Morellini's product was at least part of the motivation for the publication of the notice and the article. Mr Morellini does not recall any specific discussions with other people in the industry concerning the publication, but it seems to have been widely distributed throughout the Queensland cane growing areas. Mizzi did not really dispute any of these matters. 11 There is some quite specific evidence demonstrating industry interest in Mr Morellini's product. In March 2008, he had a discussion with an entity called Corradini and Co. It was interested in manufacturing the product. However, according to Mr Morellini, "they were a bit cautious because they were waiting for all this to be over", apparently a reference to the dispute between Mizzi and Mr Morellini, although infringement proceedings had not been commenced at that time. I accept Mr Morellini's evidence and infer that others saw commercial production and marketing of the product as a real possibility. However the fact that nothing came of it cannot be attributed to the pleaded threats which were made in 2010 and 2011. 12 There is also evidence from Mr Anderson concerning discussions with Robert Sorbello a local cane planting contractor in the Ingham area. Mr Sorbello asked Mr Anderson if he would consider building a planter for him, along the lines of that used by Mr Morellini. Mr Anderson said that he was not comfortable with the idea because he had heard about, "what was happening", presumably the dispute between Mr Morellini and Mizzi. Mr Sorbello suggested that he wanted to hold off for the same reason. Mr Anderson said that this conversation occurred in early 2010. As the first threat was published on 5 April 2010, I cannot infer that either Mr Sorbello's reluctance or that of Mr Anderson was the result of either threat. However, once again, I infer an interest in the product, which interest may have developed into a financially rewarding business for Mr Morellini. 13 The other evidence of interest in Mr Morellini's product emerges from the circumstances of the second threat. Mizzi admits that in May 2011, a Mr Charles Girgenti of Ingham, used Mr Morellini's planter, and that in June 2011, Mr Mizzi spoke to him in the terms which appear in para 11 of the amended statement of cross-claim. He made a clear allegation of infringement and demanded the payment of a royalty. 14 Mr Morellini designed and built a planter which was capable of meeting a need, just as the Mizzi product was able to do. No doubt Mr Morellini could have developed the product further. I infer that there was a possibility that it could have been successfully exploited commercially. However there is no detailed evidence as to how Mr Morellini would have gone about such exploitation. There is no suggestion that in the absence of the Patent he could have patented his product or method. Hence he probably would not have enjoyed a statutory monopoly. He may have been able to manufacture the product for sale, or for his own use. Perhaps he could have, in some way, charged a fee for making his plans available, or for providing consulting services to others who wished to produce a similar product. There is no evidence as to his capacity to manufacture the product for sale at a profit. However it seems that Mizzi was able to do so, or believed that it could. 15 As far as I can see, Mr Morellini can still seek to exploit his product but, as far as the evidence goes, he has not done so. Any damages will presumably reflect lost sales opportunities or delayed sales as a result of the threats. However Mr Morellini's failure to exploit the product in more recent times makes it difficult to draw inferences as to his conduct and its outcomes, had there been no threats. Assuming a largely unquantifiable chance that Mr Morellini could have successfully exploited the product, there remains a question as to whether any such loss resulted from the threats. 16 Mr Morellini also claims for loss of reputation, based upon the proposition that likely customers were wary about dealing with him, such wariness being the result of the dispute with Mizzi. I was taken to no authority for the proposition that damages for loss of reputation may be recovered pursuant to s 128 of the Patents Act. Mr Morellini relied upon decisions concerning claims for damages pursuant to s 82 of the Trade Practices Act 1974 (Cth) (the "Trade Practices Act"), now s 236 of the Australian Consumer Law. Pursuant to those provisions a person who suffered loss or damage because of the conduct of another, which conduct contravened the relevant Act, might recover the amount of the loss or damage. Section 128 of the Patents Act provides that a person aggrieved by threats may recover any damages sustained as a result of the threats. For present purposes, I accept that the link required between conduct and damage is the same in each case. 17 In at least three cases at first instance, Judges of this Court have held that pursuant to the above provisions, a person might recover damages for injury to commercial reputation. See Brabazon v Western Mail Ltd (1985) 8 FCR 122 (per Toohey J), Flamingo Park Pty Ltd v Dolly Dolly Creation Pty Ltd (1986) 65 ALR 500 (per Wilcox J) and Cryeng Pty Ltd v Loyola [2011] FCA 956 (per Stone J). The decision in Cryeng was upheld on appeal. See Loyola v Cryeng Pty Ltd [2012] FCAFC 71. 18 It is important to note that these cases concerned commercial, not personal reputations. A commercial reputation is necessarily built upon a trading history. Its existence cannot be assumed. In the present case, it is difficult to see how Mr Morellini could have developed a commercial reputation in connection with the supply of cane planting equipment, given his very limited history of dealing in such equipment. A further problem, which affects the whole of his damages claim, is the extent to which those in the relevant industry knew of the dispute with Mizzi before, and therefore irrespective of the threats. 19 Finally, there seems to have been no case involving threats in which damages have been awarded for reputational damage. The reason for this may be the difficulty in distinguishing between loss flowing from the threats and loss flowing from knowledge unconnected to the threats such as local knowledge, knowledge in the industry or knowledge of infringement proceedings. See Australian Mud Company (supra). 20 Finally, I turn to the necessary connection between the threats and any alleged damage. There is no direct evidence that anybody declined to deal with Mr Morellini as a result of the threats. It seems that even before the newspaper article on 5 April 2010, there was a degree of reluctance concerning any such dealings. That reluctance cannot have been attributable to the threats. Mr Morellini has not demonstrated that any adverse effect resulted from either of the threats. The newspaper article may well have been widely read within the sugar industry, but there is no reason to believe that the incident involving Mr Girgenti was a matter of common knowledge. Some people in the industry may have heard of it. In either case such knowledge may have re-inforced previous perceptions, but that is largely speculative. 21 I accept that, to some extent, the existence of the dispute with Mizzi reduced Mr Morellini's opportunity to market his product, at least for as long as the dispute remained unresolved. However he has given virtually no clear evidence as to how he would have proceeded, had the dispute not arisen. If he could show that, to some extent, his disadvantage was attributable to either or both of the threats, there would be a basis for allowing him some amount by way of damages. However, although one may speculate about the possible effects of the threats, I see no proper basis for attributing any part of the disadvantage to either or both of them. In those circumstances, I must reluctantly dismiss the cross-claim for damages. 22 If necessary, I shall hear submissions as to costs. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett. Associate: Dated: 1 August 2017 SCHEDULE OF PARTIES QUD 112 of 2011 Cross-Respondents Second Cross-Respondent PAUL LAURENCE MIZZI