High Court of Australia Taylor J. Courtaulds Ltd's Patent, Re [1952] HCA 53 ORDER Orders accordingly. Cur. adv. vult. The following written judgment was delivered:— Oct. 21 Taylor J. This is an application made by originating summons pursuant to s. 84 (6) of the Patents Act 1903-1950 for an extension of the term of letters patent granted with respect to an invention in relation to a continuous spinning process for rayon thread or yarn. The term of the letters patent will, unless extended, expire on 17th November, 1952, and this application seeks an extension for a period of ten years from that date or such other term as the Court may see fit to order. The applicant, Courtaulds Ltd., which is an English company, acquired its interest in the letters patent by an assignment from the Industrial Rayon Corporation in May 1947. The latter company is a company incorporated in the United States of America, and the evidence shows that in or about 1938 or 1939 it had introduced the subject invention into its continuous spinning plants at Painsville and Cleveland in the United States. During 1938 and 1939 the applicant commenced negotiations with the Industrial Rayon Corporation with a view to the acquisition by the former, or by the American Viscose Corporation, a United States company in which the controlling interest was, until 1941, held by the applicant, of various patent rights with respect to the invention, including the Australian letters patent, which were then the property of the Industrial Rayon Corporation. The outbreak of war brought an end to these negotiations for the time being and by 1940 it was quite certain that negotiations could not be resumed until at least after the cessation of hostilities. In May 1945, after the cessation of hostilities in Europe, negotiations were recommenced and by October 1945, it is said, arrangements had been completed for the purchase by the applicant from the Industrial Rayon Corporation of the whole of the latter's patent rights with respect to the subject invention in European countries and in the countries of the British Commonwealth of Nations. Upon the evidence before me, it is, I think, extremely probable that, but for the intervention of the war, the applicant or the American Viscose Corporation would have acquired the interest in the letters patent, the subject of this application, at a much earlier stage than 1945 or 1947, when a formal transfer was executed and duly registered. No doubt arrangements for the acquisition of this interest would have been completed some four or five years before 1945, and, probably, steps would then have been taken to carry out the preliminary work necessary for the establishment of a factory in Australia. The whole history of the matter seems to me to support this view. But, as I have already said, there was no agreement between the applicant and the International Rayon Corporation until 1945 and no formal assignment until 1947. Nevertheless, the applicant began even as early as 1940 to consider the possibility of undertaking the establishment in Australia of a factory for the purpose of manufacturing rayon and rayon products. Beyond an interchange of views, however, nothing of a positive nature took place until 1944, when a representative of the applicant visited Australia for the purpose of making a preliminary investigation of the prospects of establishing such a factory. Further investigations were undertaken in 1946 by a technical mission on behalf of the applicant and this was succeeded in 1947 and in 1948 by further investigations of the many matters which arose for consideration in commencing an undertaking of this magnitude. From the evidence it appears that as a result of the reports following upon the investigations in 1948, the board of the applicant company decided that, provided satisfactory arrangements could be made for establishing an Australian company a substantial part of the capital of which would be furnished from Australian sources, a rayon industry would be set up in Australia by the applicant and that its factories would be located at Tomago, near Newcastle, in the State of New South Wales. This decision was reached in 1949 and later in that year a company called Courtaulds (Australia) Ltd. was formed. This company was formed to enter into and carry into effect agreements embodying the provisions contained in an agreement entitled "Heads of Agreement between Courtaulds and the Australian Company". This document provided, among other things, that the applicant should sell to the Australian company such technical data and information as it would be necessary or desirable for the Australian company to have in order that it might be able to manufacture tyre yarn, tyre fabric and acetate yarn in the best manner known to the applicant and it also provided that the applicant should grant to the Australian company royalty free licences or sub-licences for the use in Australia of all processes covered by all Australian letters patent in so far as they might relate to the manufacture of tyre yarn, tyre fabric or acetate yarn. As consideration for the above, it was stipulated that the Australian company should pay to the applicant the sum of £75,000 in cash and issue and allot to the applicant 675,000 fully paid deferred shares in its capital. In the circumstances which I have briefly set out the applicant put its case on a number of grounds—(1) that the suspension of the negotiations with the International Rayon Corporation in 1939 and 1940 and the delay which thereafter occurred until the resumption of negotiations in 1945 occasioned loss or damage to the applicant as patentee; (2) alternatively, that there is evidence upon which a finding should be made that International Rayon Corporation, the predecessor in title of the applicant, suffered loss and damage during this period as patentee; and (3) that after 1945, when, it was conceded, the applicant became beneficially entitled to the Australian letters patent, the work of investigating the possibility of establishing an Australian factory and proceeding with its establishment was unduly delayed and hindered. The applicant claims that the delays referred to in (1) and (3) above resulted in loss and damage and that such loss and damage, and also that referred to in (2) above, were the direct result of hostilities of the nature referred to in s. 84 (6). The first ground raises for consideration the question whether a patentee, who has secured his letters patent by assignment, can in an application under s. 84 (6), rely upon a business loss suffered by him before he became the patentee, and, indeed, at a time when he had no beneficial interest in the patent. The ground upon which this sub-section permits an application by originating summons is that the patentee, as such, has suffered loss or damage by reason of hostilities between His Majesty and any foreign State. The expression "loss or damage" includes loss of opportunity on the part of the patentee of dealing in or developing his invention owing to his having been engaged in work of national importance connected with such hostilities. But, of course, the loss or damage to which the sub-section is directed is loss or damage suffered by the patentee as such. In my view, inability to earn profits by the exploitation of a patent constitutes loss or damage within the ambit of the sub-section only where the person who is claimed to have suffered such loss or damage was, or should be deemed to have been, the patentee during the period of such inability. The section has no application to a business loss occasioned primarily by delay in negotiations for the acquisition of the patent in question, even though it may appear that if the negotiations had been completed without delay and a formal transfer executed, the transferee would have been prevented or impeded by circumstances directly attributable to the war from dealing in or developing the subject invention or otherwise exploiting his patent. In support of his argument to the contrary, counsel for the applicant referred me to In re Brearley's Patent [1] , in which the Supreme Court of Victoria followed the decision in In re Western Electric Co. Ltd.'s Patent [2] . I think it is clear, however, that Brearley's Case [1] does not cover the position of the applicant in the present case. Neither of the two cases to which I have referred goes further than to establish, in the words of Luxmoore J. in the latter case, "that the phrase "patentee as such" covers not only all those persons who were the owners of letters patent granted before or during the War but also all those persons who were entitled to apply for the grant of letters patent which when granted would be as of a date antecedent to the date of the actual application, this date itself being either before or during the War period" [3] . The critical period to which the applicant has directed its evidence on this aspect of the matter is the period between 1939 and 1945, and it is clear to me that any business loss or damage which it may have sustained during this period by reason of the intervention of the war and the consequent suspension of negotiations, was not loss or damage to which the sub-section refers. 1. (1933) V.L.R. 5. 2. (1931) 1 Ch. 68. 3. (1933) V.L.R. 5. 4. (1931) 1 Ch., at pp. 75, 76. On this view of the matter it is unnecessary to consider whether the applicant, in fact, suffered loss or damage by reason of the delay in, or the suspension of, the negotiations for the purchase of the letters patent under consideration. I should mention, however, that on the evidence it is a matter for speculation whether, if the negotiations in 1939 had then been carried to completion, the letters patent in question would have passed to the applicant or to the American Viscose Corporation. Indeed, upon the evidence, it seems likely that they would have passed to the latter and in these circumstances and notwithstanding the fact that at that time the applicant held a majority of the shares in that company, I should find it impossible to hold that the applicant as distinct from the American Viscose Corporation suffered the loss complained of. The second ground upon which the application is based requires some consideration of the position of the International Rayon Corporation between 1939 and 1945 when negotiations were resumed and then completed. Counsel for the applicant has pressed upon me that during this period this corporation was prevented by hostilities of the nature specified in s. 84 (6) from exploiting its Australian patent and that this circumstance resulted in loss or damage appropriate to found this application. Whilst it is clear that the outbreak of war in 1939 resulted in the suspension of negotiations between the applicant, the American Viscose Co. and the International Rayon Corporation, it seems equally clear that the International Rayon Corporation never at any time contemplated undertaking manufacturing processes in Australia pursuant to its Australian letters patent. On the contrary, the evidence establishes that its intention was to dispose, by sale, of its patent rights in the invention in this and other countries. This it did in 1945 when it sold to the applicant the whole of its patent rights to this and other inventions in European countries and in the countries of the British Commonwealth of Nations. The consideration for the sale was the sum of 5,000,000 dollars. The International Rayon Corporation did not join in making and was not otherwise a party to these proceedings, but it was conceded that the applicant had used its best endeavours to place before the Court the evidence relevant to a consideration of the activities of that corporation during the war years and there was a considerable body of such evidence. From this it is quite apparent that as early as 1941 the invention was a proved success and that its employment, at that time, in the production of rayon yarn by continuous process was not only useful but constituted an extremely substantial contribution to that industry. Reviewing the facts as best I can, I find that no other conclusion is open than that there was a delay of at least four years during which the International Rayon Corporation was prevented by hostilities of the nature specified in s. 84 (6) from selling or otherwise exploiting its Australian patent. I should add that it was not suggested that this period of delay or frustration was caused by hostilities other than hostilities between His Majesty and other foreign States. The original negotiations were suspended before the entry of the United States of America into the war, and even if other factors began to contribute to the delay after that event, the period of suspension was materially determined by circumstances as they existed in the United Kingdom and in Australia and which resulted directly from hostilities of the nature specified in s. 84 (6). From the evidence to which I have made a brief reference, I think I am bound to conclude that the right to the Australian letters patent were no less valuable in 1940 than they were in 1945. In the former year the invention was already a proved success on a commercial scale, and, since the letters patent then had a longer residual term, it may be proper to say that a sale at that time, quite apart from its earlier completion, would have been more beneficial to the International Rayon Corporation than the result of the sale which took place in 1945. There are, however, a number of circumstances which make it difficult to conclude that this would probably have been so. But the circumstance that the International Rayon Corporation was for at least four years virtually prevented from selling its Australian letters patent and thereby suffered a corresponding delay in the receipt of such of the purchase money as was attributable to the Australian letters patent is, I think, sufficient to require an extension to the letters patent for that period. I should add that in the course of their addresses counsel reviewed the annual financial statements of the International Rayon Corporation published during the war years, and it was contended on behalf of the commissioner that any loss to the International Rayon Corporation under the heading to which I have referred was more than offset by profits attributable to the invention made by the corporation in the United States out of war activities. It is, I think, sufficient to say that there is nothing in the evidence which leads me to this conclusion. On the contrary, I am disposed to think, upon the evidence, that if war had not intervened, the employment by the International Rayon Corporation of the invention in the course of its manufacturing processes would have resulted in greater profits than those which it, in fact, achieved. At one stage of the case it was suggested that the loss and damage which was sustained by the International Rayon Corporation was not appropriate to found an application by the applicant as the assignee of the International Rayon Corporation for an extension of the term of the letters patent. This contention is, of course, in conflict with the authorities on the earlier part of s. 84 and, in my view, is disposed of by the observations of Sargant J. in In re Summers Brown's Patent [1] . 1. (1922) 2 Ch. 759. Nor do I think that the absence of representation on behalf of the International Rayon Corporation in this application in any way affects the matter, although it has been the practice in applications of this kind to join the original patentee. I see no reason why an application made by an assignee should not be allowed to proceed whereas in the present case notice of the application has been expressly given to the original patentee and for some not readily apparent reason the original patentee has refused to join in the application. Perhaps I should add that no submission contrary to this view was advanced on behalf of the commissioner. An additional period of one year should also be allowed upon the third ground upon which an extension is sought. It was not suggested that the applicant's evidence to the effect that circumstances arising directly out of the war operated to delay the establishment of its undertaking in Australia should not be accepted, though it was contended that the applicant's own estimate of the period of delay was based, in part, upon circumstances which should be regarded as too remote from hostilities "between His Majesty and any foreign State". I think that this may be so, but nevertheless, I am satisfied that the applicant was occasioned some delay, amounting at least to a period of one year, by circumstances arising directly out of hostilities. In the circumstances I am of opinion that the term of the letters patent should be extended for a period of five years from 17th November 1952 and I so order. I further order that the applicant pay to the commissioner his costs of and incidental to the application, including costs of the summons for directions, and I direct that the exhibits in the case, including that attached to Mr. Sheldon's affidavit of 30th July 1952 may be taken out of Court.