CATCHWORDS

PRACTICE AND PROCEDURE  - Appeal - Stay of orders below revoking patent - Principles on which granted - Possible difficulty of rectifying register if appeal allowed - Appropriate undertakings and conditions - Federal Court of Australia Act 1976 (Cth) s 29

Federal Court of Australia Act 1976 (Cth) ss 29

Amalgamated Carburetters Ltd  v Bowden Wire Ltd [1931] 48 RPC 105

Cincinnati Grinders Incorporated v B S A Tools Limited [1931] 48 RPC 33

The Ritz Hotel Ltd v Parfums Yves Saint Laurent Ltd (1989) 15 IPR 328

Westaflex (Aust) Pty Ltd v Wood (1990) 18 IPR 168

ATLANTIS CORPORATION PTY LIMITED ACN 003 233 681 & ANOR  v. PETER SCHINDLER & ORS

No. NG 284 OF 1997

EMMETT J

SYDNEY

27 MAY 1997

MINUTE OF ORDERS

THE COURT ORDERS THAT:

1.           The operation of Order 1 made by the Chief Judge in Equity in the Supreme Court of    New South Wales on 27 March 1997 be suspended pending determination of the       Appeal or until earlier further order.

2.           The costs of the application for a stay be costs in the Appeal.

3.           Liberty is granted to apply including in relation to any variation of or release from an       undertaking.

THE COURT NOTES THAT:

4.           The Appellants undertake to pay to the Respondents such damages or loss whether       legally claimable or not as a Judge may think just and fair as compensation to the             Respondents for any disadvantage they may sustain by reason of these orders.

5.           The Appellants undertake to the Court that during the period of the stay in Order 1:

(a) they will not threaten or commence proceedings for infringement of Australian Patent No. 593085;

(b) they will obtain the earliest possible date for the hearing of the Appeal; and

(c) they will not seek to amend the patent otherwise than in the course of these proceedings.

Note:               Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

EX TEMPORE REASONS FOR JUDGMENT

There is before me an application brought pursuant to section 29 of the Federal Court of Australia Act 1976 (Cth) for a stay of the orders made by Justice McClelland, Chief Judge in Equity of the Supreme Court of New South Wales.  The orders made by his Honour were that Australian Patent number 593085 be revoked so far as it relates to claims 1, 3, 4, 5, 6, 7, 9 and 11.  His Honour had ordered that the operation of that order be suspended for 28 days and by consent, the suspension in effect has been extended up to today.

The appellant has submitted short minutes of the orders which they seek.  The short minutes include an undertaking by the appellants to pay to the respondents such damages or loss whether legally claimable or not as a judge may think just and fair as compensation for any disadvantage they may sustain by reason of the stay.  The short minutes also include undertakings by the appellants that, during the period of the stay, they will not threaten or commence proceedings for infringement of the patent, that they will obtain the earliest possible date for the hearing of the appeal and that they will not seek to amend the patent otherwise than in the course of the proceedings.

Those terms are consistent with authority in the United Kingdom. Senior Counsel for the appellants referred me to the decision of Farwell J in Amalgamated Carburetters Ltd v Bowden Wire Ltd [1931] 48 RPC 105 and also to part of the report in Cincinnati Grinders Incorporated  v B S A Tools Limited [1931] 48 RPC 33.  The observations made by their Lordships in that case are consistent with an order made by Gray J in this court in Westaflex (Aust) Pty Ltd v Wood (1990) 18 IPR 168 at 173.  For the reasons that are generally indicated in those decisions, the terms proposed are appropriate in relation to the grant of a stay and the solicitor for the respondent has not advanced any argument in opposition to the terms or in support of other terms, save for the question of security for the undertaking. 

There are generally two reasons advanced as to why this stay is appropriate.  The first is a technical reason.  There is concern that if the order were given effect to and the patent be revoked on the register, some doubt might exist as to the power of the Full Court to reinstate the patent.  There is no express power conferred by the Patents Act 1990 although I would be surprised if there is no inherent jurisdiction vested in the court to give effect to the determination on the appeal.

Nevertheless, in order to avoid that argument, it is desirable to ensure that the status quo be maintained pending the determination of the appeal.  The argument is not totally without substance.  In The Ritz Hotel Ltd v Parfums Yves Saint Laurent Ltd (1989) 15 IPR 328, Wilcox J dealt with an application brought under section 29 for a similar order pending the determination of an appeal.  Those proceedings related to a trade mark.  Removal of the trade mark had been given effect to and the application was made for rectification of the register pending the hearing of an appeal. Wilcox J concluded that that was not an application for a stay under section 29. However, his Honour expressly reserved the question of whether or not section 29 would authorise the making of such an order after the appeal had been determined.  I do not wish to be understood to be expressing any view about that one way or the other at the moment, other than to note that there is at least a question which might arise which will justify maintaining the status quo.

The second ground for the stay is the ground which would have justified the decisions to which I have referred earlier. Proceedings such as these are in the nature of a real action, in the sense that the determination of the validity of a patent affects not only the parties but also the community generally.  If there is a prospect that the appeal might succeed, concern could arise in relation to members of the public who, in reliance on the state of the register, altered following giving effect to Justice McClelland's orders, engaged in conduct which ultimately constituted infringement.  There is no evidence at the moment that any other member of the public is likely to suffer damage by reason of the continuation of the state of the register.  Nevertheless, it seems to me that it is appropriate, bearing in mind that the appeal is likely to be disposed of within a matter of months, that the status quo be maintained against the possibility that the appeal is successful.  While the respondents maintain that Justice McClelland was correct, their solicitor did not suggest that the appeal was vexatious.  In those circumstances, it appears to me that it is appropriate that the stay be ordered in the terms proposed by the appellants. 

The only remaining matter concerns the question of security in relation to any compensation which might be ordered pursuant to the undertaking.  I have had before me some evidence as to the financial position of the first appellant which indicates that it has shareholders funds that would enable it to meet a claim for damages in the order of $100,000 to $200,000.  I have also had some evidence that indicates that the damages that might be sustained by the respondents if they refrained from trading could approach that order.  However, I have also had some evidence indicating that the respondents do not propose to refrain from trading and their solicitor has indicated that his instructions are that his clients propose to continue to trade in the meantime.  Accordingly, the question of whether security should be ordered for the undertaking, in effect, does not arise.  It is therefore unnecessary for me to consider what seems to me to be a difficult question as to the basis upon which compensation should be ordered if the appeal fails.

One view might be that the compensation would be for the loss suffered by reason of refraining from trading because of the possibility of success in the appeal. Another view is that the compensation would only be for the consequences of ordering a stay.  However, as I have said, that question now does not arise in the light of the intimation given that the respondents propose, in a sense, to take their chances on Justice McClelland being upheld.  If Justice McClelland is upheld, of course, then no question would arise as to the damages that would otherwise flow from the respondents continuing to trade.

In those circumstances I make orders in accordance with the short minutes of order which I have dated with today’s date and initialled. I order the return of the exhibits.

I certify that this and the preceding four pages

are a true copy of the Reasons for Judgment of his Honour Justice Emmett

                                                            Associate:

                                                            Dated:              27 May 1997

Appearances:

Place of Hearing:                                                   Sydney

Date of Decision:                                                  27 May 1997