12 C.L.R.] OF AUSTRALIA. [PRIVY COUNCIL.] NATIONAL PHONOGRAPH COMPANY OF AUSTRALIA LIMITED } SE RELUENTS 5 MENCK . # 3 = ' 3 3 . RESPONDENT. ON APPEAL FROM THE HIGH COURT OF AUSTRALIA. Patent—Infringement—Use and vending of patented invention—Conditions attached to patented article on sale—Whether conditions binding apart from contract— Breach of contract—Patents Act 1903 (No. 21 of 1903), secs. 4, 62, 65, First Schedule. A patentee may, by virtue of his patent, sell his patented article accom- panied by restrictive conditions which would not apply in the case of ordinary chattels. The imposition of such conditions in the event of a sale is not presumed, but, asale having oceurred, the presumption is that the full right of ownership was meant to be vested in the purchaser. 'The rights of the purchaser of a patented article will be limited if there is brought home to him knowledge at the time of the purchase of conditions imposed upon his vendor by the patentee. The plaintiffs, who were the manufacturers of three patented articles, sold them wholesale to "jobbers" upon the terms of an agreement which provided that jobbers should only sell the articles to ''dealers" who had signed a "retail dealers' agreement" in a form provided by the plaintiffs. Both the jobbers' agreement and the retail dealers' agreement provided that the articles should not be sold on better terms than those authorized by the plaintiffs. The jobbers' agreement provided that all dealers must sign the retail dealers' agreement, which was to be forwarded immediately to the plaintiffs. By the dealers' agreement the dealer covenanted and agreed that, in consideration of *Present—Lord Macnaghten, Lord Atkinson, Lord Shaw, Lord Mersey, and Lord Robson. Privy Counci. 1911. NationaL PHoNo- GRaPH Co. or Aus- TRaLIa Lrp. w MEnck. HIGH COURT sale of the plaintiffs' patented articles, was bound by them. Decision of the High Court: National Phonograph Co. of Australia Ltd. Menck, 7 O.L.R., 481, reversed. AprEAL to His Majesty in Council from the decision of the Hig! Court: National Phonograph Co. of Australia Ltd. v. Menck (1). The judgment of the Court was read by Lorp Suaw. This is an appeal brought in an action torestrain _ the respondent, Mr. Menck, from (1) acting in breach of a certain contract between the parties, and (2) from infringing the patent. i rights of the appellants, the National Phonograph Company of Australia. The facts were investigated by Mr. Justice Isaacs, and reported by him to the High Court of Australia, whicl delivered a judgment dismissing the action, and finding the appellant company liable in costs. The appellants own three patents for "Improvements in Phonographs," "Improvements in the production of Sound Records or Blanks," and "Improvements in Sound Records or Blanks." All of these patents were granted pursuant to the provisions of the Patents Act 1903 of the Commonwealth of Australia. z Sec. 62 of the Statute is to the following effect :—" The effect _ of a patent shall be to grant to the patentee full power, sole privilege and authority, by himself, his agents, and licensees during the term of the patent to make, use, exercise, and vend _ the invention within the Commonwealth in such manner as to () 7 C.L.R., 481, 12 CL.R.] OF AUSTRALIA. him seems meet, so that he shall have and enjoy the whole profit and advantage accruing by reason of the invention during the term of the patent." Privy Councrn. 1911. I Substantially, nothing depends upon the particular wording of Namronan PxoNo- this section, or of the language of the First Schedule, which cnars Co. contains the form of a grant of patent, it being admitted by the » parties that their rights are not varied by the differences, if any, between the language of the Australian and the British Patent Acts. The application for an injunction has been accompanied on the part of the appellants by a series of charges and allegations against Mr. Menck of contravention of their rights, which have been rightly found to have no foundation. One of these charges, in fact, alone remains to be dealt with, and this will be subsequently referred to. It has also been accompanied by propositions in law and arguments and pleas of a highly contro- yersial and delicate character, produciny marked differences of opinion among the learned Judges in Australia. Notwith- standing the insubstantial extent of the questions as matters of business which have been raised by the appellants, and the difficulty of seeing that they have, at least as yet, suffered the slightest patrimonial loss by the actions of Mr. Menck, it appears to their Lordships that, in view of the judgments of the Court below, in which the decisions of distinguished Judges of the English Courts have been examined in much detail, it is expedient that the questions, more especially those dealing with the nature and effect of a patent grant, should be scrutinized and dealt with. In the course of their business the appellants sold Edison phonographs, records, and blanks, made in accordance with, and under the protection of, the letters patent. Their mode of pro- ceeding was to sell to jobbers under jobbers' contracts. Jobbers had power to sell to dealers, but the dealers' contracts were made direct with the appellants. Mr. Menck, the respondent, was a dealer and had various dealers' agreements dated April and May 1906, and the appellants entered him in their dealers' list. The position of being upon this list appears to have been one of com- mercial importance. By the ninth head of the dealers' agree- Vou, xu. 2 or Aus- RALIA Lrp, v MeEnck. 18 HIGH COURT Privy ment it was provided that "dealers violating any of the forego ade conditions of sale, or any other reasonable conditions that —— — from time to time be imposed" by the appellants". . . n Raper be at once withdrawn from the dcalers' list." On the deal crarx Co. part, he undertook that "in the event of my name being remo nee A'sp, from the dealers' list, I will in no way handle, sell, or deal in, ae use, either directly or indirectly, Edison phonographs and thereof, Edison records and Edison blanks, unless authorized do so in writing " by the appellants. There are, as stated, two questions which arise in the The first has reference to the allegation by the appellants tl the respondent has acted in breach of this contract. The second —much more important in principle—is that he has acted in breach of their rights as patentees. Be A considerable portion of the judgments and opinions of 'the learned Judges of the High Court is occupied with the investi gation of the transactions upon which the charges of br of contract made by the appellants depended. Much weig must necessarily attach to the judgment of Mr. Justice Isaacs, which these transactions were most carefully resumed. Th Lordships do not think it necessary to enter upon these det further than to state that they concur in the statement of t general result of his investigation made by that learned Judg when he declares (1) :—" With regard to the breach of contract, whatever else may prove to be the legal relations of the parties, no special damage was proved, and indeed none of the alleged breaches were substantiated as laid." But Mr. Justice Tsaacs, while holding this general opinion, is constrained, manifestly _ with reluctance, to hold that one breach of the agreement was "technically justified." He thus describes his position (1) :—"A more difficult consideration is whether the Beckett transactic was a violation of clause 4 or clause 6 of the agreement. On th facts found, no other alleged violation occurred, and the Becket dealing was in any aspect a trivial matter upon which to hi such momentous consequences, But if it constitutes a violation, the removal of the defendant's name from the plaintiffs' list o dealers was technically justified by the contract." It may (1) 7C.L.R., 481, at p. 532. 12 C.L.R.] OF AUSTRALIA. said that upon the contract question, by three to two, the J udges of the High Court held that no violation of the appellants' rights had occurred. 'The appellants might well, in their Lordships' opinion, have been content with this part of the judgment. They, however, challenged it, and it is accordingly necessary to deal with it. One cannot peruse either the dealers' or jobbers' agreement without perceiving that the main object of those documents, so far as the appellants were concerned, was to secure that there should be no selling of their productions at less than their standard prices to the public. Commissions were fixed to jobbers and to dealers respectively, but, so far as the ordinary purchasers were concerned, no undercutting of prices was permitted. The appellants started their case with various allegations of under- cutting, all of which have proved to be unfounded.. As Mr. Justice Iswacs has found, Menck never even contemplated such a thing, nor did he ever engage in that method of business, and whether the transactions were before or after his name being deleted from the dealers' list, that is the case. But a second object of the agreement was to secure by the prevention of exchange that the articles of rival manufacturers should not, by the assistance of jobbers or dealers, be, so to speak, put into circulation, The fourth condition accordingly is in these terms: " Exchanging or tendering Edison phonographs or parts, records or blanks, in whole or part payment for privileges of any character, or for advertising, or for goods of some other make or nature, or the exchange or acceptance of merchandise of other make or nature, in whole or part payment for Edison phono- graphs or parts, records or blanks is not permitted. This does not prohibit the acceptance of a talking machine at full list price, if good as new, or less cost of repairs to make good as new, in exchange for an Edison phonograph sold at full retail list price; but does prohibit the acceptance of records or blanks of any kind, at any price, in exchange for Edison phonographs or parts, Edison records, or Edison blanks," The appellants strenuously argued that the last portion of this clause pro- hibiting the acceptance of records or blanks of any kind at any price was absolute and universal. It is plain, however, that the Privy CounciL. 1911. NatIonaL PxHono- GRAPH Co. or Aus- mRatiA Lrp. v MENckK, Privy Councin. 1911. —— Nationat Pxono- o@RraPH Co. or Avs- Travia Lrp. v MENCK. HIGH COURT clause deals with the introduction of rival goods into the market goods spoken of thus: " Exchanging or tendering" Edison in whole or part payment for privileges or for advertisin; for goods of some other make or nature, or the exchan, acceptance of merchandise of other make or nature." Havi made that general point clear, it is however added that "# does not prohibit the acceptance of a talking machine at u list price," and so on, "but does prohibit the acceptance of records or blanks of any kind at any price in exchange Edison goods. In the opinion of their Lordships, the majori the learned Judges of the Court below are right in holding this is not a prohibition against one dealer in Edison goods, wh on the trade prices so as to ees first, any undercutting, ai secondly, the introduction of rival goods. It is found as a in this case that Mr. Menck, in one solitary and small transaction, exchanged a Gem phonograph of the appellants' make (worth few guineas) for another of the appellants' phonographs and records, these also being of the appellants' make. The exchan, was arranged on the basis of the dealers' price list. It certainly not a wilful breach, and Mr. Menck made no pro from it. It is the view of their Lordships that such a transact apparently perfectly reasonable from the point of view business, did not constitute a contravention of the agreement parties. When, therefore, the 9th condition of the contract sets o that dealers violating any of the foregoing conditions may be once withdrawn from the dealers' list, and when Mr. Mene covenanted that, in the event of his name being removed from that list, he would in no way handle, sell or deal in, or use # Edison goods, it appears clear that, if the appellants are to foun as matter of contract upon this comprehensive restraint on that he has violated the contract. As it is not established thal he has done so, and all the allegations to that effect have failed, it 12 OLR.) OF AUSFRALIA. follows that the respondent stands free of obligations to the appellants in so far as these are contractual obligations. It was in these circumstances not unnatural that the respondent should consider himself as free as any ordinary member of the public with regard to the dealing in and sale of the appellants' goods. 'The second point of the case is thus reached. Large portions of the contentions of the appellants, both in their written pleadings in the Court below, and as these may be supposed to be reflected in their stated case to this Board, con- sisted of propositions and views in law which are unsound, and their Lordships are not surprised that the learned Judges of the High Court were put to great difficulty in endeavouring to dis- entangle such pleadings. On the other hand, the respondent, believing, and being possibly advised, that his position, there being no agreement which bound him, was that of an ordinary member of the public buying goods in the ordinary market, also put forward a view of the case which was lacking in soundness. On the one hand, the appellants not only maintained that they, as owners of the letters patent, could sell their goods upon terms and conditions importing only a limited right to deal with the goods, but they went the length of maintaining that such a limited licence "1runs with such goods in the hands of all persons into whose possession they may come, and whether such persons acquired such goods with or without notice of the terms of such limited licence." On the other hand, the respondent maintained that a patentee imposing conditions upon the use or sale of his patented articles is not entitled "to enforce such conditions upon a subsequent purchaser of those articles apart from any contract with such subsequent purchaser." Two of the learned Judges supported the former proposition, and three (the majority) of the learned Judges supported the latter proposition. In their Lord- ships' opinion, both propositions are unsound. An examination is made by Griffith C.J. of the appellants' pro- position, both from the point of view of principle, and from an examination of the authorities. These authorities are examined in detail; certain observations are made upon the judgments therein, and the learned Judge comes to the conclusion that he is not bound by the various dicta to which he refers. Privy CounciL. 1911. "S NavionaL Pxono- crapn Co, oF Aus- TRALIA Lip. v MENcK. Privy Councir. 1911. NatIonaL PHoNO- GRAPH Co. or Aus- Rata Lrp. v. MENCK. HIGH COURT It would rather appear accordingly that, standing the pres judgment on the one hand and those English judgments or di referred to on the other, a different conception might prevail witl regard to the rights of a vendee of patented articles in Austr: from that which prevails in England ; and this would, of cor result pro tanto in a different administration of the law on same subject. It may accordingly be as well, from that isolat point of view, that an appeal was taken to this Board. To begin with, the general principle, that is to say, the ciple applicable to ordinary goods bought and sold, is not hen question. The owner may use and dispose of these as he thi fit. He may have made a certain contract with the person fr whom he bought, and to such a contract he must ans' Simply, however, in his capacity as owner, he is not bound any restrictions in regard to the use or sale of the goods, ant is out of the question to suggest that restrictive conditions 1 with the goods. The judgment of Mr. Justice Swinfen Eady, Taddy & Oo. v. Sterious & Co. (1), is plainly sound. It would be contrary to the public interest and to the security of trade, well as to the familiar rights attaching to ordinary ownership, any other principle applied. The real point of difficulty is the enforcement of that princi without impinging upon something else, namely, the right o property granted by the State and by way of monopoly to patentee, and his agents and licensees, "to make, use, exerci and vend the invention . . . in such manner as to him seems meet." This is, of course, with reference to the grant of th right as a sole right, that is to say, put negatively, with a pow to exclude all others from the right of production, &e., of th patented article, and also with reference to the imposition of conditions in the transactions of making, using and vendi which are necessarily an exception by Statute to the rule ordinarily prevailing. In the opinion of their Lordships it is perfectly possible t adjust the incidence of ownership of ordinary goods with th incidence of ownership of patented goods in such a manner to avoid any collision of principle. In their Lordships' view (1) (1904) 1 Ch., 354, t 12 CLR.) OF AUSTRALIA. this has been done for a long period of years in England by decisions which are consistent and sound. The learned Chief Justice, after dealing with the case of patent rights confined geographically to England, deals with the general subject of the sale of a patented article thus: He remarks (1) that it has "come into lawful existence and circu- lation as a chattel, the owner of which is entitled to make such use or disposition of it as he pleases, unless forbidden by Statute. Such an article may be regarded, to use the American phrase, as having ' passed out of the limit of the monopoly.'" It is accord- ingly plain that, if this doctrine be correct, the owner of ' patented goods which he has purchased could, notwithstanding his full knowledge at' the time when he made the transaction of purchase as to conditions and restrictions having been attached by the patentee to the rights in the articles sold, maintain that the ordinary incidents of sale of a chattel should apply, and that these wiped such conditions and restrictions out, and that the purchaser, notwithstanding his knowledge thereof, stood free therefrom. The learned Judge arrives at the same conclusion under his view of the word "vend," which he properly does not . limit to the idea itself, but extends to the product of the invention. Commenting upon the argument that after "vending" the patentee may still have rights of restriction, &., which bind the owner of the goods, he observes (2): "It would follow that by the introduction of that word (vend) into the English Patents Act of 1883 a radical change was effected in the law of personal property, and that there came into existence a new class of chattels to which is attached the quality or character of being inalienable without the consent of some person other than the owner, although that other has no right of property in them." There is no doubt that, if the doctrine contended for by the appellants and affirmed by the dissentient Judges in the Court below were to be given effect to, namely, that the conditions imposed by the patentee run with the goods, a radical change in the law of per- sonal property would have been made. But if that latter view be an extreme view, and if the restriction upon alienation, use, or otherwise of the chattel purchased, be a restriction arising from (1) 7¢.L.R., 481, at p. 511. (2) 7C.L.R., 481, at p. 512. Privy Counc. 1911. = NarronaL PxHono- GRaPH Co. or Aus- Travia Lop. v MENCE. Privy CounciL. 1911. i NaTIONAL PHono- GRapH Co. or Aus- TRALIA LED. v MENCK. HIGH COURT {191 the fact that the person who has become owner has done so with the knowledge brought home to him of the limitation of rights of alienation or otherwise, then there seems to be no radical : change whatever. All that is affirmed is that the general doctrine of absolute freedom of disposal of chattels of an ordinary kind is, in the case of patented chattels, subject to the restriction that thi person purchasing them, and in the knowledge of the conditions — attached by the patentee, which knowledge is clearly brought home to himself at the time of sale, shall be bound by that know- ledge and accept the situation of ownership subject to the limita. : tions. These limitations are merely the respect paid and th effect given to those conditions of transfer of the patented article _ which the law, laid down by Statute, gave the original patentee a power to impose. Whether the law on this head should be — changed and the power of sale swb modo should be withdrawn or limited is not a question for a Court. It may be added that where a patented article has been acquired by sale, much, if not all, may be implied as to the consent of the licensee to an un- disturbed and unrestricted use thereof. In short, such a sal negatives in the ordinary case the imposition of conditions ani the bringing home to the knowledge of the owner of the patented goods that restrictions are laid upon him. These principles harmonize the rights of the patentee with the rights of the owner. They are not, in their Lordships' opinioi novel, nor did they start, as might appear to be the view of the case law adopted by some of the Judges inthe Court below, with the judgment of Mr. Justice Wills in the case of Incandescent Gas Light Co. Ltd. v. Cantelo (1). : Betts v. Willmott (2) was decided in the year 1871. In that — case "the owner of an English patent manufactured the patented article in France as well as in England. In a suit to restrain the sale of the article in England, the plaintiff proved that it was not made at his manufactory in England, but could not prove that it was not made at his manufactory in France." It being incumbent accordingly on the plaintiff to prove, not only the sale but that the article was not made by himself or his agents, and he having | failed in this proof, he failed in his suit. In that case Lord (1) 12 R.P.C., 262, (2) L.R. 6 Ch., 239, 12 C.L.R.] OF AUSTRALIA. Hatherley LC. deals with the general point both as to what arises from the ordinary case of purchase of an article and also as to the case where a patented article is sold with notice of restrictions. "When a man" says his Lordship (1), "has pur- chased an article he expects to have the control of it, and there must be some clear and explicit agreement to the contrary to justify the vendor in saying that he has not given the purchaser his licence to sell the article, or to use it wherever he pleases as against himself." As to an ordinary vendee as distinguished from the mere agents of the patentee, what is required of the patentee is not only to show (1)" that there is some clear injunction to his agents, but that there is some clear communication to the party to whom the article is sold" of any restrictions in the rights. Accordingly these two points, first, as to the ordinary effect of a sale, with the presumption of the sale carrying everything, unless in the case of licensed goods there be clear agreement to the contrary; and secondly, that that agreement must be, not a communication to agents merely, but to the party to whom the article is sold, are made clear by that decision. In 1883 the same two points appeared in the judgment of Lord Justice Cotton in Société Anonyme des Manufactures de Glaces vy. Tilghman's Patent Sand Blast Co. (2). Again, in 1888, in Heap v. Hurtley (8), Bristowe Vice- Chancellor of the Palatine Court, followed up the two cases of Betts v. Willmott (4) and Société Anonyme des Manufactures de Glaces v. Tilghman's Patent Sand Blust- Co. (2) on exactly the same lines. Then in 1895 there occurred the case of Incandescent Gas Light Co. Ltd. v. Cantelo (5). As the judgment has been much canvassed, and as, in their Lordships' opinion, it forms undoubtedly a leading authority in the law of England, these passages from the opinion of Wills J. may be cited (6):—*< The sale of a patented article carries with it the right to use it in any way that the purchaser chooses to use it, unless he knows of restrictions. Of course, if he knows of restrictions, and they are (1) L.R. 6 Ch., 239, at p. 245. (4) L.R. 6 Ch, 239, (2) 2 Ch. D., 1. (6) 12 R.P.C., 262. (3) 5 R.P.C., 603. (6) 12 B.P.C., 262, at p. 264. Privy Councit. 1911. a National PxHono- crapH Co, or Avs- vrata Lrp. v MeEncK. Privy Councit. 1911. NationaL PxHono- GRraPH Co. or Aus- rratra Lp, all, he has the right to do the lesser thing, that is to say, to im- v. MENCK. HIGH COURT brought to his mind at the time of the sale, he is bound by them. He is bound by them on this principle: the patentee has the sole' right of using and selling the articles, and he may prevent any- body from dealing with them at all, inasmuch as he has # right to prevent people from using them, or dealing-in them at pose his own conditions. It does not matter how unreasonable or how absurd the conditions are. It does not matter what they are if he says at the time when the purchaser proposes to buy, or the person to take a licence, 'Mind, I only give you this licen on this condition, and the purchaser is free to take itor leave i as he likes. If he takes it, he must be bound by the conditic It seems to be common sense, and not to depend. upon any paten law, or any other particular law." As to the attempt, however, to bind a purchaser to a condition not brought to his notice at the time of the sale such an attempt cannot succeed. The pur- chaser (1) "had bought it subject to no condition ; and the brin, ing of a condition to his mind after the sale was) completed will not do, and it ought not to do. It would be a most oppress thing that any person who bought a box of this: kind, and who — happened to find out before he used the thing that it was covered with a label of this kind—it would be a most oppressive thing if he were bound to observe the conditions which are upon it." So far as this judgment is concerned, it will be seen that it only put with force and clearness what had been the result of authority a England for about at least a quarter of a century on the two main points, namely, first, the effect of sale without conditions, and secondly, the limitation of the rights of an owner who buys patented article with knowledge of the conditions. It may said to have introduced a third element which was really a clear- ing up of the other two, namely, that the imposition or knowledge of restrictive conditions must occur at the time of sale, and that a purchaser who has made his bargain is not bound to confo to conditions which are attempted to be subsequently impose upon him. In 1901 occurred the case of the British Mutoscope and Biograph Co. Ltd. v. Homer (2). The ease had reference to the seizure of a (1) 12 R.P.C., 262, at p. 264. (2) (1901) 1 Ch., 671. : 12 OLR.) OF AUSTRALIA. patented chattel on the premises of a licensee under the operation of a distress for rent issued by the landlord. he distinction taken between a chose in action, which has no locality and is ineapable of manual seizure, and a chose in possession found upon the demised premises, need not be entered upon; but upon the rights of a patentee Farwell J. made these observations, entirely in accord with, by that time, the long line of authority (1): "A patentee is entitled to restrain any person in whose hands he finds an article which infringes his patent from infringing such patent unless the defendant can show a title direct or derivative from the patentee to use the patent ; and it has recently been held in Incandescent Gas Light Co. Ltd. v. Brogden (2) that a purchaser who buys with knowledge of the conditions under which his vendor is authorized to use the patented invention is bound by such conditions, and that such conditions are not contractual, but are incident to and a limitation of the grant of the licence to use, so that if the conditions are broken there is no grant at all." There was then in 1904 the case of McGruther v. Pitcher (8). This had reference to the case of ordinary, that is, unpatented, goods, which were held free, on a transaction of sale, from con- ditions restrictive of the power and price of resale. The judgment of the present Master of the Rolls (then Lord Justice Cozens- Hardy) is, in the opinion of their Lordships, of value, in this especial respect, that it clearly and expressly pointed the distinc- tion between the sale of unpatented and of patented goods. His Lordship said (4): "I cannot help thinking that in the argument in the Court below some confusion was introduced by reference to patent rights. Now this action is neither in form nor in fact an action by a patentee claiming an injunction to restrain an infringement of his patent. In such an action it is open to the defendant to plead a licence by the plaintiff. That licence may be express, or it may be implied from the sale by the patentee of the patented article, but, if the defendant pleads a licence, then it is competent for the plaintiff to reply, 'The licence which I granted is a limited licence, and you, the person who has now got the patented article, were aware it was only a limited licence, (1) (1901) 1 Ch., 671, at p. 673. (3) (1904) 2 Ch., 306. (2) 16 R.P.C., 179. (4) (1904) 2 Ch., 306, at p. 312. Privy * Counert. 1911. NationaL Puono- GRAPH Co. or Aus- TRALIA Lrp. v MENcK. Privy Councrn. 1911. — NatIonaL PxoNo- GRaPH Co. or Aus- pRALIA Lop. v MeENcK. HIGH COURT (1911. and you cannot therefore defend yourself against my claim fo an infringement of my patent, because you are going outside the licence which to your knowledge I gave with reference to this" article. Such a case would not depend upon any condition run- ning with or attaching to thearticle. It would depend only upon the limits of the licence which the patentee had granted when he _ first parted with the goods." Es In their Lordships' opinion, it is thus demonstrated by a clear course of authority, first, that it is open to the licensee, by virtue of his statutory monopoly, to make a sale sub modo, or accompanied by restrictive conditions which would not apply in the case of ordinary chattels ; secondly, that the imposition of these conditions in the case of a sale is not presumed, but, on the contrary, a sale : having occurred, the presumption is that the full right of owner- ship was meant to be vested in the purchaser ; while thirdly, the owner's rights in a patented chattel will be limited if there is brought home to him the knowledge of conditions imposed, by the patentee or those representing the patentee, upon him at the time of sale. It will be observed that these propositions do not support the principles relied upon in their absolute sense by any of the Judges of the Court below. On the one hand, the patented _ goods are not, simply because of their nature as chattels, sold free from restriction. Whether that restriction affects the purchaser is in most cases assumed in the negative from the fact of sale, but depends upon whether it entered the conditions upon which the owner acquired the goods. On the other hand, restrictive condi- tions do not, in the extreme sense put, run with the good: because the goods are patented. Applying these principles to the present case, the result is this: the respondent, Mr. Menck, has been acquitted of every charge of violation of contract which was laid against him by the appellants. He has also succeeded in showing that the claim made by the appellants as patentees was in its nature extreme and unsound in law. But he made this mistake: he assumed that, being guiltless of violation of contract, he was as free as an ordinary member of the public who had acquired possession of articles embodying the appellants' patent. His misfortune, however, consists in this, that by the very fact that he entered 12 C.L.R.] OF AUSTRALIA. into contractual relations with the appellants, he has become seized with the knowledge of the conditions on which they dis- pose of their goods, and he is not free to propone the plea that such conditions have not been brought home to him. When he therefore announced his intention to deal in these articles as ordinary articles of commerce, he must be held to have pursued a mistaken course, the course of treating himself as an unre- stricted instead of a restricted trader. In this particular case the result may involve some hardship to him, but their Lordships cannot see their way to a departure from the principle that a restriction rests upon a purchaser of goods which are covered by a grant of patent, and which have come into the possession of a purchaser in the full knowledge of the restrictions imposed by the patentee upon their disposal. Notwithstanding the most able presentment of his case by his counsel, Mr. Levinson, their Lordships are of opinion that in the one particular referred to it cannot be given effect to. Their Lordships do not further examine the attitude and action of the appellants, but they are of opinion that the award of costs in favour of the respondent in the Court below should stand, and that having regard to the condition upon which special leave to appeal was granted, the repondent is entitled to his costs as between solicitor and client in this appeal. Their Lordships will humbly advise His Majesty that the judgment of the High Court of Australia be reversed, and that in lieu thereof an injunction in the limited sense before men- tioned do issue against the respondent, namely, to restrain him, his servants or agents, from infringing the letters patent, and that quoad ultra the appellants' claims in the action be dismissed, with an order as above indicated as to costs. Appeal allowed. Privy Councin. 1911. NationaL PxHono- GrapH Co. or Aus- TRatia Lrp. v Mgncx.