FEDERAL COURT OF AUSTRALIA

COPYRIGHT – Infringement – Damages – Compensatory damages – Conversion damages – Applicant’s case on damages conducted on basis that infringement caused total loss of market – Claim rejected – Whether applicant at liberty thereafter to claim damages for loss of market share caused by infringer’s early entry into market facilitated by infringement and for conversion – Prejudice to infringer resulting from applicant’s change of basis of assessment – Additional damages – Flagrancy of infringement – Whether benefit derived as result of infringement – Whether infringer’s conduct surreptitious and dissimulating.

Copyright Act 1968 ss 115, 116

Hanfstaengl v W H Smith [1905] 1 Ch 519 mentioned

Raben Footwear Pty Ltd v Polygram Records Inc (1997) 145 ALR 1 applied

Prior v Lansdowne Press Pty Ltd [1977] VR 65 applied

Ravenscroft v Herbert and New English Library Ltd [1980] RPC 193 at 208 applied

Autodesk Australia Pty Ltd v Cheung (1991) 94 ALR 472 applied

Polygram Pty Ltd v Golden Editions Pty Ltd (1997) 148 ALR 4 considered

Infabrics Ltd v Jaytex Ltd [1982] AC 1 at 18 mentioned

W H Brine Co v Whitton (1981) 37 ALR 190 at 198 mentioned

Autodesk Inc v Yee (1996) 139 ALR 735 mentioned

A‑One Accessory Imports Pty Ltd v Off Road Imports Pty Ltd (1996) 34 IPR 332 mentioned

MJA SCIENTIFICS international pty limited (can 001 056 527) and BRUCE JON MORRISON v s c johnson & son pty limited

QG 126 OF 1994

SUNDBERG J

12 NOVEMBER 1998

BRISBANE

THE COURT ORDERS THAT:

1.             There be judgment for the first applicant for damages for infringement of copyright in the sum of $10.

2.             The first applicant’s application for amendment of patent number 557130 be adjourned pending determination by the Commissioner of Patents of its application for an extension of time under section 233 of the Patents Act 1990.

3.             The applicants pay the respondent’s taxed costs of the patent infringement claim.

4.             The applicants pay 70 per cent of the respondent’s taxed costs of the cross‑claim.

5.             There be no order as to costs of the copyright infringement claim.

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

REASONS FOR JUDGMENT

BACKGROUND

On 24 July 1998 I dismissed the patent infringement claim, upheld the copyright infringement claim, and invited the parties to make written submissions as to

·               the relief that should be granted on the copyright claim, in particular as to how damages, if any, should be assessed

·               the appropriate orders to be made on the revocation cross‑claim

·               costs.

Written submissions on those topics were filed and exchanged.  These reasons deal with those submissions.

COMPENSATORY DAMAGES

Australian market

In its written submissions MJA claimed compensatory damages on two bases.  The first was for the loss resulting from SCJ’s early entry into the Australian market.  The second was for loss of the opportunity to exploit the United States market.  As to the local market, it was said that SCJ’s deliberate copying of MJA’s literary work gave it an early entry through image registration.  Had SCJ not obtained early entry, MJA would have had the total market to itself for longer than it had.  MJA claimed that but for the copying SCJ would not have been able to enter the market until the 1996/1997 season.  On a total market size of 215,500 units in 1995, 119,700 in 1996 and 77,800 in 1997, MJA said it would have had the benefit of all those units in the first two years, and 67.8 per cent of the 1997 units (a market share of 32.2 per cent being attributed to SCJ in the 1996/997 season, the share it had when it first entered the market).  MJA’s actual sales in the three years were 146,000 units (1995), 59,400 units (1996) and 38,600 units (1997).  The lost sales were thus 143,950 units overall.  Since MJA’s gross margin was 64 cents per unit, its loss of gross margin due to loss of sales was $92,128.  A comparable calculation was done assuming that SCJ had “legitimately” entered the market in time for the 1995/1996 season.  This produced a loss of $58,406.  An alternative case was based on an assumed market size of 215,500 units in each of the three years.  Assuming SCJ had not entered the market until the 1996/1997 season, this produced claimed MJA sales of 577,109 units and a loss of $213,190.  Assuming it had entered in time for the 1995/1996 season, claimed sales were 361,609 units and the loss $99,974.

The trial commenced on 5 May 1998.  On 30 April 1998 MJA’s Outline of Submissions was filed and served on SCJ.  In it MJA claimed compensatory damages for copyright infringement of $3,309,704.  This was the figure that appeared in the report attached to Mr O’Dwyer’s affidavit of 6 June 1997.  The amount was made up of loss of the Australian market ($1,583,704), American market loss ($1,473,000) and other loss ($253,000).  These figures were amended in the course of Mr O’Dwyer’s evidence at the trial, but nothing turns on that.  I have described Mr O’Dwyer’s reasoning in my earlier judgment.  The basis of his assessment of the Australian loss was the complete loss of market over time.  MJA expanded its submission on compensatory damages in the Outline of Argument handed up when the trial began.  It still claimed $3,309,704.  The argument in the Outlines can be summarized as follows:

·               In assessing damages it would be wrong to regard the market as having peaked when SCJ entered in September 1994.  It was a developing market.

·               It was therefore inappropriate to adopt actual sales figures as a measure of MJA’s loss.  One should extrapolate the trend established before SCJ entered the market and assume that the MJA market was maintainable at a level of at least 230,000 units per annum.  It was therefore appropriate to calculate the future cash flow in Australia on the basis that the future maintainable earnings represented a reliable income stream.

·               It was reasonable to assume that $1.35 per unit was a reasonable gross profit.

·               SCJ’s approach took no account of the likelihood that SCJ’s conduct was designed to drive MJA out of the market.

The April and May Outlines thus reflected Mr O’Dwyer’s loss of market thesis.  His calculation of $1,583,704 is based on 230,000 units per year and a gross profit per unit of $1.35.  The report containing this calculation and the details supporting it had been in SCJ’s hands for nearly a year before the trial.  SCJ’s own evidence was led in response to Mr O’Dwyer’s evidence.  Its cross‑examination was designed to impugn his total loss of market thesis.  Mr O’Dwyer’s evidence was discredited in cross‑examination, as I have explained in my earlier reasons.  Even after this cross‑examination, in closing submissions MJA still sought compensatory damages as calculated by Mr O’Dwyer and based on the copyright infringement having destroyed the market.

The case now put forward by MJA is no longer the total loss of market over time, but loss caused to MJA by SCJ’s early entry into the market.  Mr O’Dwyer has of necessity been put aside and a fresh claim made for damages ranging from $58,406 though $92,128 and $99,974 to $213,190.  This was not the case SCJ was called upon to meet.  The assumptions on which the new claim is constructed, and the calculations and projections supporting it, would have been the subject of relevant expert evidence had it been propounded before and at the trial.  MJA’s evidence would have been the subject of cross‑examination.  The significance of the cross‑examination of experts in the present case is shown by the way in which Mr O’Dwyer’s evidence was discredited.  To allow a claim based on evidence that was not tested, because it was not relevant to the way the case was mounted, would be unjust to SCJ.

Had I allowed MJA’s fresh claim to be pursued, I would have rejected it.  In order to explain why, it is necessary to describe the image registration process.  When preparing for the launch of a new insecticide product, approval for the packaging copy must be obtained from the National Registration Authority (“NRA”).  Without that approval the product cannot be sold in Australia.  The NRA is established by the Agricultural and Veterinary Chemicals (Administration) Act 1992 (Cth).  The NRA administers the Agvet Code which, as appears from my earlier reasons, is a schedule to the Agricultural and Veterinary Chemicals Code Act 1994 (Cth).  Howard Barton was an insecticide category manager responsible for developing SCJ’s Raid Roach mat packaging.  He gave evidence that it can take up to nine months to obtain NRA approval.  This makes it difficult to meet key production and trade deadlines.  Supermarket chains have strict requirements as to when new products must be available.  Insecticide products must be available by the end of August or early September or they will not be included in the chain’s range of products during the critical summer period.  Mr Barton said that in 1994, when SCJ was dealing with the NRA in relation to its mat packaging, approval was more rapidly obtained if pack copy was substantially similar to that of already registered products, which are called “referenced products”.  The process is known as registering by imaging.  If NRA approval is required urgently, imaging is undertaken to obtain the approval as soon as possible.

Chapter II‑10 of the NRA’s Interim Requirements for the Registration of Agricultural and Veterinary Chemical Products (June 1993) dealt with “Image Products”.  An image product was defined as

an end‑use product whose formulation is closely similar to that of an agricultural or veterinary chemical product currently registered in Australia (the referenced product).  The proposed product must closely match the composition and functional features of the referenced product in the following ways:

·               active constituent(s) should be the same, be in the same concentration(s), and have the same isomer, sub‑unit or polymorph ratio (where applicable);

·               composition of non‑active constituents (or their comparable equivalents) should be in similar proportions, or should have similar formulation and toxicological characteristics;

·               control/efficacy claims and patterns of use, or part thereof;

·               dose rates/use levels and methods of application or administration;

·               other directions for use and safety precautions;

·               label limitations.

The text went on to say that an image product could differ from the referenced product only in the following ways:

·               making fewer control/efficacy claims;

·               the manufacturing sources of the active constituents may differ, provided the proposed sources have either been approved, or meet approved compendial standards;

·               the concentration of the active constituent(s) may vary within ±5% of those used in the referenced product.

Steven Jansen, a category manager with SCJ, gave evidence about the time taken to obtain NRA registration.  So long as the active ingredients of the product for which registration is sought are the same as those of a product currently in the market, and the manufacturer makes no performance claims wider than those of the image product, the average time for approval of an image registration is three months.  Where the active ingredients of the new product are the same as the image product, but more expansive claims are made, the average time is five months.  Where the mix of active ingredients in the new product differs from those in the image product the average time is eight months.  Where a totally new active ingredient is used in the new product, the average time is fifteen months.  Mr Jansen also said that apart from mandatory health warnings and disposal requirements, the directions for use of a new product are up to the applicant for registration.  The fact that the applicant’s directions for use are different from those of the image product is not an impediment to image registration.

Mr Barton said that in his experience of handling approximately ten new product (non‑image) applications and ten image applications, the average time for the former was about nine months and for the latter between one and two months.  Image registration is common.  In the period 1995 to 1997 approximately a third of all applications were image applications.

MJA’s argument was that but for copyright infringement SCJ would not have obtained NRA registration in less than sixteen to eighteen months.  On the evidence of Mr Jansen and Mr Barton I would have found that SCJ’s use of MJA’s directions had no significant bearing on the time at which SCJ would have obtained image registration and lawfully entered the market.  The only time saved by not formulating its own directions (or further modifying MJA’s) was the time it would have taken to do that.  On Mr Jansen’s evidence, which I accept, it would have taken a day for someone to write new directions that were not a substantial reproduction of MJA’s directions.

MJA’s submissions misunderstand the NRA registration process.  The evidence was that an image application took between one and three months (Mr Barton between one and two and Mr Jansen about three).  According to MJA a non‑image application would have taken between sixteen and eighteen months, and according to SCJ between nine months (Mr Barton) and fifteen months (Mr Jansen).  The difference is of no moment, because SCJ would not have had to make, and would not have made, a non‑image application if it had had to invent its own directions for use.

For those reasons I would have dismissed MJA’s claim for damages for loss caused by SCJ’s early entry into the Australian market.

American market

MJA’s case under this head is that in 1994 it was in the process of addressing the potential of the US market.  It had to desist because SCJ diminished the value of MJA’s copyright rights in the US by its conduct in Australia.  MJA had to defend its existing market, and thus was unable to compete in the US market.  Had MJA obtained NRA approval for registration “in circumstances other than by image registration”, MJA would have had the opportunity to exploit the US market.  As a result of SCJ’s early entry into the Australian market, MJA lost a valuable commercial opportunity to licence its copyright rights in the US.  Reference was made to The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64.  MJA asserts that it could have obtained a royalty of 2.5 per cent for the licence of “the MJA product, including the mats and the copyright”.  MJA’s valuation of the chance it lost to exploit its copyright “as a separate right to the licence of the technology” appears in the following table of possibilities.

I understand the percentages in the royalty rate column to be a range of rates for the copyright alone (“a separate right to the licence of the technology”).

The US copyright damages case put by MJA through Mr O’Dwyer was the loss of the opportunity to sell its US patent for $1,473,000.  Its fall back position was the lost market approach employed in relation to the Australian market, though discounted by 50 per cent to reflect the “probability” involved.  The case now put is new.  Had it been flagged as a possible approach to the assessment of copyright damages, SCJ could have led evidence regarding the US requirements for directions for use and as to the royalty, if any, that might have been payable, separate from a royalty for the product and technology, for the use of the copyright in the directions for use.  It would be unjust to SCJ for it now to be required to deal with a case which was not put against it and which it had no opportunity to answer by evidence and cross‑examination.

In any event, such evidence as there is would have led me to hold that there was no prospect at all that American companies would have paid a royalty for the use of MJA’s copyright in the directions for use.  MJA made serious attempts to licence the mats in the US.  It approached all the major manufacturers.  Clorox was the only one interested.  Clorox made an oral offer of $25,000 and a 1 per cent royalty.  The matter was never formalised.  It is clear that Clorox was interested in MJA’s patent and not its directions for use.  On the probabilities I would have found that MJA had no prospect of obtaining royalties from US manufacturers for use of its directions alone.  Furthermore, the notion that a small Australian company such as MJA could have acquired a 7 per cent share of the American market is in my view fanciful.  In one of his earlier reports Mr O’Dwyer had suggested that MJA may have been able to capture 2 per cent of the US market.  Ms Strachan, a market researcher with over thirty years experience, said this was unrealistic.  She instanced two major Australian companies, Arnotts and Meadow Lea, which had tried to enter the US market in the packaged goods area and had retreated millions of dollars worse off.  Those were established brand names with a lot of wealth and marketing expertise behind them.  Both were unable to crack the US market, which was very aggressive and defensive:

the US market does not sit there and say, “Come here and take our market share”.  They go out there and fight and defend it.  And, you know, they do play hard ball and they do play tough, and they keep other people out and there is no way that the US market would have allowed a small player from somewhere else in the world to just walk in and take 2 per cent of their market without hundreds of millions of dollars worth of investment.

Ms Strachan thought Mr O’Dwyer’s re‑assessed 7 per cent share “ridiculous”.  I accept her evidence.  It is also to be noted that MJA’s submission in relation to the US market is based on SCJ having obtained NRA approval “in circumstances other than by image registration”.  I refer to what I have said about this assumption under the heading Australian market.  There are thus several reasons why I would have rejected MJA’s claim to damages in relation to the American market if I had thought it proper to entertain the claim.

Conclusion on compensatory damages

Although MJA has not proved that it has suffered any damage as a result of the infringement of its copyright, it is entitled to nominal damages to vindicate the invasion of its proprietary right.  Cf Hanfstaengl v W H Smith [1905] 1 Ch 519.  I award $10.

ADDITIONAL DAMAGES

Section 115(4) of the Copyright Act 1968 provides:

Where, in an action under this section:

an infringement of copyright is established; and

(a)          the court is satisfied that it is proper to do so, having regard to:

(i)                 the flagrancy of the infringement;

(ii)               any benefit shown to have accrued to the defendant by reason of the infringement; and

(iii)             all other relevant matters;

the court may, in assessing damages for the infringement, award such additional damages as it considers appropriate in the circumstances.

The requirement that the court have regard to the flagrancy of the infringement does not mean that the power to award additional damages is conditional upon a finding of flagrancy: Raben Footwear Pty Ltd v Polygram Records Inc (1997) 145 ALR 1 at 6, 16.  It has been said that “flagrancy” involves “calculated disregard of the plaintiff’s rights, or cynical pursuit of benefit”: Prior v Lansdowne Press Pty Ltd [1977] VR 65 at 70; “scandalous conduct, deceit including deliberate and calculated infringement where a defendant reaps a pecuniary advantage in excess of the damages he would otherwise have to pay”: Copinger and Skone James on Copyright 13^th ed (1991), 344; “the existence of scandalous conduct, deceit and such like; it includes deliberate and calculated copyright infringement”: Ravenscroft v Herbert and New English Library Ltd [1980] RPC 193 at 208; Autodesk Australia Pty Ltd v Cheung (1991) 94 ALR 472 at 478.

MJA’s case for additional damages is based on its claim that SCJ had substantially reproduced MJA’s directions in order to obtain the benefit of image registration.  It is said that SCJ had deliberately set out to procure for itself the commercial benefits that might flow from image registration, and had derived a significant commercial advantage by using the image registration process, and by its own misconduct had been able to enter the market earlier than it otherwise could have done.  As I have explained, image registration is a speedy method of obtaining new product registration with the NRA by the use of packaging copy similar to that of an “image” product.

There is nothing scandalous or deceitful in SCJ’s use of the image registration process as such.  It is commonly used and its use is encouraged by the NRA.  It was not SCJ’s use of MJA’s directions that enabled it to obtain image registration and thus enter the market earlier than if it had had to go through the more lengthy processes involved in wider claims and/or new active ingredients.  Had it invented its own directions, or more substantially modified MJA’s, it would still have obtained fast track registration.  NRA was not concerned with the verbiage of directions for use unless they related to health and safety issues.  So it is not true to say, as MJA asserts, that by its “misconduct” SCJ was able to enter the market earlier than it otherwise could have done.  It is correct to say that SCJ derived a significant commercial advantage by using the image registration process.  But the process was there to be used, and SCJ’s use of MJA directions for use was not what enabled it to obtain the advantage of speedy registration.  The fact that SCJ’s use of the image registration was “deliberate”, and that it “deliberately” sought the commercial benefits of speedy registration, does not establish flagrancy.  It is perhaps worth nothing that s 44B of the Copyright Act, introduced with effect from 15 March 1995, provides that the reproduction on a label on a container for a chemical product of any writing on an approved label is not an infringement of any copyright in relation to that writing.  So, as from 15 March 1995, what MJA alleges to be a flagrant infringement is not an infringement at all.

As I have said, that fact that SCJ’s use of the imaging process with MJA’s directions was not a flagrant infringement is not the end of the matter, for additional damages can be awarded even in the absence of flagrancy if a case is otherwise made out.  MJA claims that SCJ made a financial gain out of its use of MJA’s directions: cf s 115(4)(b)(ii).  If the speedy entry point be put aside, as it must be, this claim can only be that SCJ’s use of MJA’s directions was what caused the Raid product to sell.  But customers did not buy SCJ’s product because of the directions for use on its packets.  Ms Strachan said that at the point of sale customers do not read directions for use.  People would buy SCJ’s product because they wanted a cockroach mat, and perhaps liked SCJ’s get up or knew of other “Raid” products.  Her evidence, which I accept, was that the fact that a Raid product bore the same directions for use as another product would be entirely irrelevant to a customer in making a judgment as to whether to purchase the first product.  In the present case, she said, SCJ’s use of directions similar to MJA’s would have had no impact at all on the sales of either product.  So I do not accept that SCJ derived any measurable financial benefit as a result of using MJA’s directions.  So MJA has not made a case under s 115(4)(b)(ii).

MJA also alleges surreptitious conduct and dissimulation by SCJ: cf s 115(4)(b)(iii).  I was referred to internal SCJ memoranda and communications with its patent attorneys and other advisers disclosing SCJ’s discovery of MJA’s success with its Dead End product, SCJ’s decision to enter the cockroach mat market, SCJ’s concern about possible patent difficulties, and its patent attorney’s advice about manufacturing an SCJ product which would not infringe the patent.  None of the documents relied on relates to copyright issues.  They disclose an interest in developing a rival product in what appeared to be a developing market, a realisation that the patent meant that SCJ could not just copy MJA’s product but would need to manufacture its own product in a different way so as not to infringe the patent, and a belief based on expert advice, correct is it turned out, that this could be done.  That seems to me to be legitimate commercial behaviour.  It is how successful corporations behave in the market place.  Moreover, it evinces a concern not to engage in unlawful conduct.  In any event, as I have said, SCJ’s conduct does not relate to the directions for use, and the “other relevant matters” in s 115(4)(b)(iii) are matters relevant to copyright infringement.  I do not regard the conduct disclosed by the documents to which I have referred as relevantly surreptitious, or that it amounts to dissimulation.

Another batch of documents was relied on by MJA as disclosing conduct which, it said, should be marked with the court’s disapproval, as a warning to others who might be tempted to infringe copyright in the way SCJ had done.  These documents relate to image registration, concerns about MJA’s patent, and supermarket shelving objectives and arrangements.  It will be apparent from what I have said about image registration that I do not regard SCJ’s use of that facility as constituting conduct worthy of punishment.  I have dealt with SCJ’s concern about MJA’s patent rights.  It will also be apparent that I do not regard SCJ’s gearing up for the launch of its product, or its concern to have maximum supermarket exposure at the launch, to be anything other than competitive commercial conduct of the type one would expect to exist in the market.

Thus I have not found flagrancy in SCJ’s infringement, though that is not a condition for the award of additional damages.  I have not found that any financial gain was derived by SCJ as a result of the infringement.  I do not regard SCJ’s concern to avoid patent infringement while developing a competing product, or its concern to enter the market at the possible expense of MJA, as worthy of censure.  For those reasons, in the exercise of my discretion, I decline to award additional damages.

There is a question whether “additional damages” under s 115(4) can be awarded when no compensatory damages (ie damages under sub‑s (2)) are awarded because an applicant has proved no loss.  In Polygram Pty Ltd v Golden Editions Pty Ltd (1997) 148 ALR 4 Lockhart J expressed the tentative view that if the owner of a copyright seeks injunctive relief under s 115(2) and conversion damages under s 116, but not compensatory damages under s 115(2), the court can award additional damages under sub‑s (4) provided the necessary preconditions are satisfied.  His Honour’s view was obiter because he had awarded nominal damages under s 115(2).  His Honour did not deal with the case where compensatory damages are claimed but not awarded.  He did, however, provisionally reject a submission that “additional” damages are an addition to an award of compensatory damages under sub‑s (2) which must first be awarded.  His Honour said (at 14):

In my view, the word “additional”, in conjunction with the word “damages” in sub‑s (4), is descriptive of the kind of damages that may be awarded, namely, additional in the sense of aggravated or exemplary damages which may contain a punitive element.

Therefore, although I recognise some attraction in counsel’s argument, I do not think it is sound.  The owner of a copyright may bring an action for infringement of copyright: s 115(1).  The court may grant various forms of relief including those mentioned in sub‑s (2), namely, an injunction and either damages or an account of profits.  The relief mentioned in sub‑s (2) is by way of inclusion and is not exhaustive of the court’s powers.  The court may also grant declaratory relief.

Since I have awarded MJA nominal damages, I need not decide whether additional damages can be awarded where no compensatory damages are awarded.

CONVERSION DAMAGES

Section 116(1) of the Copyright Act provides in part:

Subject to this Act, the owner of the copyright in a work or other subject matter is entitled in respect of any infringing copy, or of any plate used or intended to be used for making infringing copies, to the rights and remedies, by way of an action for conversion or detention, to which he or she would be entitled if he or she were the owner of the copy or plate and had been the owner of the copy or plate since the time when it was made.

The operation of s 116 has been considered in many recent cases, and its draconian nature frequently observed upon.  See, for example, Infabrics Ltd v Jaytex Ltd [1982] AC 1 at 18; W H Brine Co v Whitton (1981) 37 ALR 190 at 198; Autodesk Inc v Yee (1996) 139 ALR 735; Polygram Pty Ltd v Golden Editions Pty Ltd (1997) 148 ALR 4.  [I note in passing that the Copyright Amendment Act (No 1) 1998 replaced sub‑s (1) of s 116 by new sub‑ss (1) to (1E), though not so as to affect the present case.  Instead of the entitlement to relief which the former sub‑s (1) conferred, sub‑s (1A) gives the court power to grant relief, and sub‑s (1C) provides that the court is not to grant relief under s 116 if the relief it proposes to grant under s 115 is in its opinion a sufficient remedy.]

In its application SCJ sought “damages for infringement … and/or for conversion”.  The only evidence led at trial in support of MJA’s copyright damages was from Mr O’Dwyer.  Its case was limited to compensatory and additional damages.  There was no evidence directed to damages for conversion, and that form of damages was not relied on in argument.  In its Outline of Submissions filed before the trial MJA stated that it was entitled to injunctive relief, an enquiry as to damages or at its option an account of profits for breach of patent rights, compensatory damages for infringement of copyright ($3,309,704), and additional damages ($9,929,112).  These claims were repeated in the Outline handed up at the beginning of the trial.  An amended Outline was handed up in the course of closing address.  In none of these documents were conversion damages mentioned, they were not mentioned by MJA’s counsel in opening or closing addresses and no evidence was directed to them.  Hence SCJ filed no evidence in reply, engaged in no cross‑examination and made no submissions about such damages.  The submissions in SCJ’s written Closing Argument (pars 90‑95) and its oral submissions were limited to answering MJA’s claims to compensatory and additional damages.  Thus it is clear that although conversion damages were claimed in the application – “damages for infringement and/or for conversion” ‑ MJA chose to conduct the case on the first alternative only.

MJA has now filed a Supplementary Submission, eight pages of which are directed to conversion damages, including an exposition of the leading cases on the topic.  At trial a document – “Damages in Copyright” – was handed up which contained summaries of the leading cases on compensatory and additional damages.  To permit MJA at this late stage to make a case for conversion damages would work a serious injustice to SCJ.  Had MJA asserted such a case in its initial Outline and in its evidence filed before the trial began, SCJ could have responded with evidence about the value of the mats and packets converted, and the value of the literary work component as opposed to the product itself and the Raid trade mark to which MJA could have no claim.  MJA’s claim to conversion damages equal to the gross selling price of the packs ($2.92 per item) was not answered by SCJ because no conversion claim was pursued.  There was thus no occasion for SCJ to argue that the expression “value of the goods” in conversion discourse means something less than the converter’s gross selling price, such as its wholesale price.  Cf Polygram Pty Ltd v Golden Editions Pty Ltd (1997) 148 ALR 4.  Nor was there any occasion for SCJ to argue that since the directions added insignificantly to the value of the product, that value being determined by the intrinsic characteristics of the mats themselves sold under the Raid trade mark, this should be reflected in the value of the packages for conversion purposes.  See A‑One Accessory Imports Pty Ltd v Off Road Imports Pty Ltd (1996) 34 IPR 332 at 336 and the cases therein cited, and compare Infabrics Ltd v Jaytex Ltd [1982] AC 1 and Polygram Pty Ltd v Golden Editions Pty Ltd (1997) 148 ALR 4.

For the foregoing reasons MJA is not now at liberty to pursue a conversion damages claim.  If MJA were able to claim conversion damages, it could not do so in relation to all years from 1994 to 1997.  The infringing wording pleaded was used on the packaging and mats only during the 1994/1995 season.  The wording was changed before the commencement of the 1995/1996 season.  The effect of this on conversion damages is that MJA’s loss would have been restricted to the value of the products sold in the 1994/1995 season.

PATENT AMENDMENT

MJA has applied under s 105 of the Patents Act 1990 to amend the patent specification so as to deal with the fact that while claim 1 is anticipated, claim 2 is not, and the other claims are not solely dependent on claim 1.  However MJA subsequently informed the Court that the patent had ceased on 20 December 1997, presumably by force of s 143(a), and that it had applied to the Commissioner under s 223 for an extension of time (presumably in which to pay the renewal fee).  Since there is now no patent in existence, I will not amend the specification.  The amendment application can be pursued if the extension of time is granted.

COSTS

MJA must pay SCJ’s costs of the patent infringement claim.  SCJ has been largely successful in its cross claim for revocation.  Claim 1 was held anticipated, and it was to this claim that most attention was directed.  SCJ should have 70 per cent of its costs of the revocation issue.  MJA has established infringement of its copyright, but has not proved any substantial loss, though I have awarded nominal damages.  In the events that have happened there is no occasion to grant the injunction sought by MJA.  It did not pursue the other non‑pecuniary relief claimed in the Application.  I will hear counsel as to the costs of the copyright issues.

Associate:

Dated:              12 November 1998