FEDERAL COURT OF AUSTRALIA

Caterpillar Inc v John Deere Ltd [1999] FCA 1503

INTELLECTUAL PROPERTY – Patents – Infringement – leave to join American parent company – whether prima facie case of liability as joint tortfeasor or for authorisation of infringement – requirements of a prima facie case for relief – whether Court should exercise discretion to grant leave to serve originating process outside Australia – whether trial judge erred in failing to consider if the requisite inferences were open on the evidence – whether trial judge erred in drawing inferences of a seemingly final kind.

Patents Act 1990 (Cth) s 13(1)

Federal Court Rules O 8 r 2(2)

Decor Corporation Pty Ltd v Dart Industries Inc & Anor (1991) 33 FCR 397 referred

LED Builders Pty Ltd v Eagle Homes Pty Ltd (1997) 78 FCR 65 referred

Hi-Fert Pty Ltd & Anor v Kiukiang Maritime Carriers Inc & Anor (No 2) (1998) 155 ALR 328 followed

Unilever Plc v Gillette (UK) Limited [1989] RPC 583 discussed

Walker & Anor v Alemite Corporation (1933) 49 CLR 643 discussed

Belegging-en Exploitatiemaatschappij Lavender BV v Witten Industrial Diamonds Ltd [1979] FSR 59 cited

Best Australia Ltd & Ors v Aquagas Marketing Pty Ltd & Ors (1988) 83 ALR 217 referred

Sydbank Soenderjylland A/S v Bannerton Holdings Pty Ltd (1996) 68 FCR 539 followed

Molnlycke AB & Anor v Procter & Gamble Limited & Ors (No 4) [1992] RPC 21 discussed

Advanced Building Systems Pty Ltd v Ramset Fasteners (Australia) Pty Ltd (1995) AIPC 91-129 cited

Morton-Norwich Products Inc v Intercen Ltd [1978] RPC 501 discussed

Murex Diagnostics Australia Pty Limited v Chiron Corporation & Anor (1994) 55 FCR 194 discussed

Sartas No 1 Pty Ltd v Koukourou & Partners Pty Ltd (1994) 30 IPR 479 cited

Rescare Ltd v Anaesthetic Supplies Pty Ltd (1992) 111 ALR 205 cited

Kimberly-Clark Australia Pty Ltd v Arico Trading International Pty Ltd & Ors (1998) 42 IPR 111 cited

Bristol-Myers Squibb Company v FH Faulding & Co Ltd (1998) 41 IPR 467 cited

Intel Corporation v General Instrument Corporation & Ors (No 2) [1991] RPC 235 cited

Cell Tech Communications Pty Ltd v Nokia Mobile Phones (UK) Ltd & Ors (1995) 58 FCR 365 cited

CATERPILLAR INC. v JOHN DEERE LIMITED (ACN 008 671 725) & ORS

VG 739 of 1997

CARR, SUNDBERG and KENNY JJ

MELBOURNE

1 NOVEMBER 1999

THE COURT ORDERS THAT:

(1)        Leave be granted to the applicant for leave to appeal, to appeal from the decision and orders of Heerey J made on 28 April 1999.

(2)        The appeal be allowed.

(3)        Paragraph 1 of the orders made by Heerey J on 28 April 1999 be set aside.

(4)        The respondents pay the appellant’s costs of and incidental to the appeal and the application for leave to appeal.

(5)        The matter be remitted to the trial judge for further consideration and the making of orders in accordance with the judgment and reasons of the Court, including orders as to costs on the hearing below.

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

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

REASONS FOR JUDGMENT

THE COURT:

introduction

1                     This is an application for leave to appeal from orders made by a judge of the Court refusing leave to join Deere & Company (“Deere USA”) as an additional respondent and to serve an amended application and pleadings out of the jurisdiction and in the United States of America (“the USA”).  As it transpired, the Court heard full submissions, not only on the leave application, but also on the appeal itself, supposing that leave were to be granted. 

2                     The applicant, Caterpillar Inc. (“Caterpillar”), is the holder of Australian Letters Patent No 578,024 (“the patent”) relating to tracked or belted tractors.  The business of John Deere Limited (“Deere Australia”) is the selling of farm machinery and other equipment in Australia.  Deere Australia is a wholly-owned subsidiary of Chamberlain Holdings Ltd (“Chamberlain”) which is, in turn, a wholly-owned subsidiary of Deere USA.  Amongst other things, Deere USA is engaged in the manufacture in the USA of tractors for the world-market, including Australasia. 

3                     By an application dated 23 December 1997, Caterpillar sued Deere Australia and two other Australian companies for infringement of the patent in Australia by the importation and sale of belted tractors (“the tractors”) manufactured in the USA by Deere USA.  The tractors are known as John Deere 8000T Series tractors.  By their defences and cross-claims, Deere Australia and the two other respondents denied the infringement, alleged that the patent is invalid, and sought its revocation.  By notice of motion dated 20 November 1998, Caterpillar sought the orders that were ultimately refused by the learned primary judge whose decision is the subject of this application. 

4                     The principles governing a grant of leave to appeal are not in dispute.  Generally speaking, leave is granted where (1) in all the circumstances, the decision of the judge at first instance is attended with sufficient doubt to warrant reconsideration by the Full Court; and (2) substantial injustice would result if leave were refused, supposing the decision to be wrong.  Leave is less readily granted where the challenged decision concerns a matter of practice and procedure, rather than substantive right:  see Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 399-400 and LED Builders Pty Ltd v Eagle Homes Pty Ltd (1997) 78 FCR 65 at 73.

substantial injustice

5                     In the present case, the effect of the decision made by the primary judge is that Caterpillar is precluded, at least for the present, from litigating its claim against Deere USA for infringement of its Australian patent in Australia.  That is, we think, a sufficient basis for concluding that Caterpillar will suffer substantial injustice if the decision remains, supposing it to be wrong.  The decision does not, it seems to us, involve a mere matter of practice and procedure:  cf Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (No 2) (1998) 155 ALR 328 at 343 per Emmett J (with whom Branson J agreed).  Supposing Caterpillar to be wrongly denied the opportunity to vindicate its rights as patentee in this proceeding, it is no answer to say, as the respondents did, that Caterpillar can bring a separate action against Deere USA now or in the future, calling in aid any additional evidence that it may have to make out the prima facie case requirement.  That answer, if accepted, would not only place an unfair burden upon Caterpillar as patentee, but it would also needlessly increase the risk of multiple proceedings. 

6                     We accept too that, as Caterpillar submitted, the effect of the decision, if it stands, is to make it very difficult for it to obtain access to documents held by Deere USA that are directly relevant to issues of infringement and invalidity.  Moreover, Deere Australia is not under any comparable disadvantage and will, it seems, be able to rely as it chooses on those documents in the hands of Deere USA favouring its interest.  These are not illegitimate considerations in the present context:  cf Unilever Plc v Gillette (UK) Ltd [1989] RPC 583 at 601 (“Unilever”).

is the decision below attended by sufficient doubt?

7                     In answering the question, whether the case is attended by sufficient doubt to warrant reconsideration, it is necessary first to consider the manner in which the matters were presented to the judge at first instance. 

(a)       The parties’ presentation at first instance

8                     The case that Caterpillar would make against Deere USA in this proceeding if it were permitted to do so is (1) that Deere USA is liable as a joint tortfeasor with Deere Australia in connection with the alleged acts of infringement in that (a) Deere USA aided, abetted, procured, assisted in and made itself a party to those acts; or (b) the acts were done by Deere Australia in concert with Deere USA, or in pursuance of a common design between Deere Australia and Deere USA; alternatively (2) that Deere USA is liable as a principal for the infringement of the patent because it “authorised” (within the meaning of s 13(1) of the Patents Act 1990 (Cth) (“the Patents Act”)) Deere Australia to commit the infringing acts.

9                     Applications for leave to serve originating process outside Australia are governed in this Court by O 8 of the Federal Court Rules (“the Rules”).  Pursuant to O 8 r 2(2), such leave may be granted where (1) the proceeding is one in relation to which the Court has jurisdiction; (2) the proceeding is of the requisite kind (i.e. a case of the kind referred to in O 8 r 1); and (3) the applicant has a prima facie case for the relief sought.  It was the last-mentioned requirement that defeated Caterpillar at first instance.

10                  In submitting that it had made out a prima facie case, Caterpillar relied on numerous affidavits sworn by its solicitor, Mr C P Thompson and, more particularly, on the exhibits to those affidavits, many of which were documents that had been produced by Deere Australia pursuant to a subpoena issued at Caterpillar’s request.  (Most of the subpoenaed documents were the subject of confidentiality orders both at first instance and on appeal.  For that reason, we refer below to their relevant effect, rather than to their specific contents.)  Deere Australia also relied on numerous affidavits sworn by its solicitor, Mr D J Ryan, as well as on an affidavit sworn on 22 January 1999 by its managing director, Mr M D Wilson.  As it happened, Caterpillar also sought to rely on that affidavit which turned out to be critical to the outcome of its application at first instance. 

11                  As is frequently the case in applications under O 8 of the Rules, there was no cross-examination of any deponent.  Mr Wilson was, it seems, initially called for cross-examination but the call was withdrawn (on the terms referred to below).

12                  Caterpillar submitted to the primary judge that the evidence before the Court established thirteen propositions.  They were:

(1)               The tractors were designed and manufactured by Deere USA in the USA. 

(2)               Deere USA sells or has sold the tractors throughout the world through its subsidiaries (which it calls “branches” or “export branches”) including in Australia through Deere Australia.  The tractors are and have been exported to Deere Australia by Deere USA.  It is common ground that sales of the tractors to Deere Australia were on c.i.f. terms. 

(3)               Deere Australia is a 100 per cent owned subsidiary of Chamberlain which is a 100 per cent owned subsidiary of Deere USA.  Deere USA thus controls Deere Australia and has the power to cause it to sell, or to prevent it from selling, the tractors in Australia.

(4)               Deere Australia required the permission of Deere USA before it could market the tractors in Australia.  Deere USA decided when and on what terms the tractors could be marketed in Australia and at all times controlled the quantities and types of the tractors to be exported to and marketed in Australia.

(5)               Deere USA has controlled and co-ordinated the marketing, export, sale and distribution of the tractors throughout the world, including Australia.

(6)               Deere USA has provided and continues to provide technical and marketing advice, assistance, know-how, instructions and services to Deere Australia to assist in the promotion, marketing, sale, use, repair and servicing of the tractors in Australia.

(7)               The tractors themselves constitute infringements of the patent in suit and cannot be used or dealt with in a non-infringing way.

(8)               Before the first tractors were supplied by Deere USA to Deere Australia, Deere USA was aware of the patent in suit and was aware that Caterpillar would allege that the importation into and sale of the tractors in Australia constituted an infringement of the patent.  Corresponding litigation between Caterpillar and Deere USA under Caterpillar’s corresponding US patent began in the USA in August 1996.  There is also corresponding litigation in Germany under Caterpillar’s corresponding European patent.

(9)               Deere USA profits from the sale and other commercial dealings with the tractors in Australia by Deere Australia.

(10)           Deere USA and its subsidiaries, including Deere Australia, are and have been conducted, at least so far as the tractors are concerned, as one world-wide organisation (controlled by Deere USA).

(11)           It was the common object of Deere USA and its subsidiaries (including Deere Australia) to introduce the tractors to the market to combat or halt loss of market share to Caterpillar in the agricultural tractor market which had occurred when Caterpillar introduced its tracked or belted tractors. 

(12)           The case for Deere Australia in this litigation is controlled by Deere USA.  The solicitors for Deere Australia take their instructions from Deere USA.

(13)           Deere USA has caused the formation of an Australian incorporated and resident subsidiary, John Deere Credit Ltd, to finance the sale or lease of Deere USA products, including the tractors, in Australia.

(At one stage, Caterpillar advanced an additional proposition in elaboration of proposition (6) above.  The primary judge did not, however, treat the additional proposition as having any independent significance, and it has not been said that his Honour erred in this regard.)  At first instance (and on appeal), Caterpillar submitted that, if those propositions were accepted, then it had made out a prima facie against Deere USA that it was a joint tortfeasor with Deere Australia.  It submitted, in the alternative, that, if those propositions were accepted, then there was a prima facie case that Deere USA had authorised the infringing conduct of Deere Australia, in contravention of s 13(1) of the Patents Act.

13                  Before the primary judge, Deere Australia did not dispute that Deere USA had sold the tractors, on c.i.f. terms, to it and that it had imported them into Australia.  Nor did it dispute its status as a fully-owned subsidiary of Deere USA.  In relation to the third of Caterpillar’s propositions, Deere Australia stated, in a written response, that:

[T]he proper generalised inference to be drawn from the material is that Deere USA as manufacturer of the tractors has the ability to decide whether or not to sell any of the tractors to Deere Australia (or any other potential purchaser).

(It made substantially the same response in relation to Caterpillar’s fifth proposition.)  As to the fourth of Caterpillar’s propositions, it stated that:

[T]he proper generalised inference to be drawn from the material is that it was necessary that Deere USA be prepared to sell the tractors to Deere Australia, before Deere Australia could obtain supply of the tractors to enable it to distribute them in Australia.

Whilst Deere Australia did not dispute that Deere USA gave it technical assistance, as well as promotional, operational and other material, it submitted that Deere USA did so as an ordinary incident of the manufacturer/distributor relationship.  Whilst the patent infringement was, naturally enough, denied, the litigation in the USA and in Germany was conceded.  Nor did Deere Australia dispute that Deere USA obtained financial advantage from the purchase of the tractors by Deere Australia.  To Caterpillar’s proposition that Deere USA and its subsidiaries operated as one world-wide organisation, Deere Australia said that: 

[T]he proper generalised inference to be drawn from the material is that Deere USA is a manufacturer supplying products, including the tractors, to distributors in various locations, including Australia.

There was no real dispute about the last three of Caterpillar’s propositions.  The result was, so Deere Australia submitted, that Caterpillar had not made out a prima facie case for relief.

14                  The response made by Deere Australia was fortified by Mr Wilson’s affidavit evidence.  His evidence, as managing director, was that Deere Australia was completely independent of Deere USA in its day-to-day operations.  The primary judge summarised his evidence as follows:

Deere Australia decides itself what products it will buy and sell, and in what quantities.  It formulates its own policies in relation to its dealers in areas such as credit and warranty provisions.  It formulates and conducts its own marketing campaigns.  It determines the prices for its products.  It is not directed or instructed by Chamberlain or Deere US as to what products it is to buy or sell, or what promotional strategies it is to adopt.  It enters into contracts to purchase products for resale from third parties on its own account without seeking approval from Chamberlain or Deere US.  It conducts its business on a day to day basis without outside direction from Chamberlain, Deere US or anyone else.

Mr Wilson deposed that he had been attending a product release for Deere USA in Mexico in August 1996 when he had first seen the tractors.  He was told, so he said, that the President of the Agricultural Division of Deere USA had decided that none of the tractors would initially be sold outside North America, and that the reason for this was that Deere USA had wanted to be sure that any problems with the tractors were identified and fixed before they were sold elsewhere.  Ultimately, so Mr Wilson said, three tractors arrived in Australia in July 1997 and, by agreement with Deere USA, they were to be used only for demonstration purposes.  It was not until 1998 that the tractors were made available for retail sale in Australia. 

(b)      The decision of the primary judge

15                  The primary judge substantially accepted Deere Australia’s submissions as to the way in which the evidence before him was to be characterised.  His Honour declined to accept Caterpillar’s submissions that it had made out a case of joint tortfeasorship against Deere USA, saying:

In summary, Caterpillar have not to my mind made out a prima facie case that there has been conduct of Deere US which went beyond the supply of goods and activities ordinarily incidental to supply of goods of this nature, such as the provision of promotional material and technical support. 

His Honour then referred to certain observations of Dixon J in Walker v Alemite Corporation (1933) 49 CLR 643 at 658, as well as to Belegging-en Exploitatiemaatschappij Lavender BV v Witten Industrial Diamonds Ltd [1979] FSR 59 at 65 and Best Australia Ltd v Aquagas Marketing Pty Ltd (“Best”)(1988) 83 ALR 217 at 220-1.  As to Caterpillar’s submission that it had made out a prima facie case of “authorisation”, his Honour said: 

As to authorisation under s 13(1) of the Patents Act, it is not yet authoritatively established whether ‘authorise’ bears the copyright law meaning of ‘sanction, approve or countenance’:  Sartas No 1 Pty Ltd v Koukourou & Partners Pty Ltd (1994) 30 IPR 479 at 492, Rescare Ltd v Anaesthetic Supplies Pty Ltd (1992) 111 ALR 205 at 243 or the more limited meaning of ‘give authority or legal power to’:  Advanced Building Systems Pty Ltd v Ramset Fasteners (Australia) Pty Ltd (1995) AIPC 91-129 at 39,200, Bristol-Myers Squibb Company v FH Faulding & Co Ltd (1998) 41 IPR 467 at 488.  But on either view I think, for essentially the same reasons, Caterpillar has not made out a case of any more than sale of goods with necessarily incidental services.

His Honour stated that he would not have dismissed Caterpillar’s application on discretionary grounds, had he been satisfied that it had established a prima facie case for relief.

16                  The basis of the decision at first instance is apparent from his Honour’s discussion of Caterpillar’s thirteen propositions.  On the basis of Mr Wilson’s evidence, his Honour declined to accept that Deere USA had any relevant control over the purchase of the tractors by Deere Australia.  His Honour said:

On the evidence of Mr Wilson I am satisfied that Deere US does not control the day-to-day business of Deere Australia, and did not at times relevant to this case.  Decisions whether to purchase Deere US products, including the allegedly infringing tractors, were made by Deere Australia free from any direction by Deere US.

His Honour accepted the account given by Mr Wilson of the circumstances preceding the sale of the tractors to Deere Australia and, in particular, that “[i]nitially in the case of the 8000T tractors there was some reluctance to sell outside North America because of perceived potential servicing problems”.  His Honour also accepted that the relationship between Deere Australia and Deere USA was not relevantly different from that which ordinarily existed between a manufacturer and an unrelated distributor.  Finally, his Honour did not consider the balance of Caterpillar’s propositions (most of which were undisputed) advanced its case because, in his view, those propositions did no more than describe usual characteristics of the manufacturer/distributor (or vendor/purchaser) relationship and were immaterial to Caterpillar’s case.

(c)       The basis of Caterpillar’s challenge

17                  Caterpillar submitted that the primary judge erred in failing to find that it had established a prima facie case for relief, in particular, by (1) placing decisive weight on the evidence given on behalf of Deere Australia by its managing director; (2) drawing inferences of a seemingly final kind against Caterpillar; and (3) failing to consider whether the inferences which Caterpillar invited the Court to draw were open on the evidence and whether they could, if translated into findings of fact at trial, make out the case Caterpillar sought to make.

(d)      The requirement of a prima facie case

18                  Whether or not Caterpillar’s submissions are accepted depends (1) on the character of the inquiry to be made in deciding if a prima facie case for relief is shown; and (2) the inquiry in fact made by the primary judge in this case.  As to the character of the inquiry, there is little room for debate.

19                  The requirement to show a “prima facie case for the relief sought” was considered in Sydbank Soenderjylland A/S v Bannerton Holdings Pty Ltd (1996) 68 FCR 539 at 549.  The Full Court said:

In addition to bringing a case within one of the paragraphs of r 1, an applicant must show a ‘prima facie case for the relief which he seeks’.  In Merpro Montassa Ltd v Conoco Specialty Products Inc (1991) 28 FCR 387 at 390, in a passage which has been cited with approval on many occasions, Heerey J said:

‘the requirement of O 8, r 2(2)(c) has to be met at the outset of the proceedings.  It does not suggest the kind of scrutiny that would occur in a submission of no case to answer following the closure of an applicant’s case at trial … It may be therefore that a court at this stage might draw inferences more readily in favour of an applicant, bearing in mind, amongst other things, that the applicant will not have had the advantage of discovery, subpoena and other procedural aids to the making out of a prima facie case at trial.’

In Western Australia v Vetter Trittler Pty Ltd (In liq) (1991) 30 FCR 102 at 110, after setting out this passage, French J said that ‘a prima facie case is made out if, on the material before the court, inferences are open which if translated into findings of fact, would support the relief claimed’.  In WSGAL Pty Ltd v Trade Practices Commission (1992) 39 FCR 472 at 476 Beaumont J said:

‘Such a preliminary question [… whether a prima facie case exists] should not call for a substantial inquiry.  The kind of evidence adduced on a preliminary inquiry of this kind should be in proportion to the nature of such an interlocutory issue … [The] purpose is to determine by way of a mini rather than a mega trial whether the applicant has a prima facie case.’

After referring to that passage, the judge at first instance added:

It only needs to be added that in the present case Caterpillar obtained on subpoena from Deere Australia a large number of documents concerning dealings between Deere Australia and Deere US.  Thus the readiness of a court to draw inferences might be pro tanto less, given that Caterpillar has already taken substantial advantage of one procedural aid.  In any event, I think the documents tend against the finding of a prima faciecase.

Whilst observing that, although it had obtained access to documents subpoenaed from Deere Australia, it had not had any relevant procedural aid vis à vis Deere USA, Caterpillar accepted that his Honour had not erred in his statement of the relevant principles.  Rather, his Honour had, so Caterpillar submitted, erred in the application of them to the present case.

20                  The question for his Honour, so Caterpillar submitted, was whether, on the material before him, inferences were open which, if translated into findings of fact, would establish that either Deere USA was a joint tortfeasor with Deere Australia, or Deere USA had relevantly authorised Deere Australia to commit the alleged infringing acts.  Instead of asking himself (as he was required to do) whether inferences were open, on the material before him to establish the requisite ingredients of those causes of action, his Honour had (so Caterpillar submitted) focussed upon whether there was anything in the material to show that the relationship between Deere USA and Deere Australia “went beyond” (to use his Honour’s words) that of supplier/distributor (or vendor/purchaser).  In focussing on the latter question, his Honour had, so Caterpillar submitted, become distracted from the real question and been led into error.  We discuss this submission below.  Before doing so, we give a sketch of the elements of the relevant causes of action.

(e)       The elements of the relevant causes of action

21                  The primary judge did not expressly mention the elements of the alleged joint tortfeasorship, although those elements are, to some extent, implicit in his Honour’s reasons.  Plainly enough, those elements are relevant to Caterpillar’s submissions that his Honour failed to ask himself whether the material before the Court permitted inferences to be drawn which would, if they gave rise to findings of fact, establish Deere USA’s liability as a joint tortfeasor with Deere Australia.

22                  Caterpillar rested its case that Deere USA was liable as a joint tortfeasor on the twin bases of “procurement” and “common design”.  These concepts were considered in the English Court of Appeal by Dillon LJ (with whom Leggatt LJ agreed) in Molnlycke AB v Procter & Gamble Limited (No 4) [1992] RPC 21 (“Molnlycke”).  His Lordship said at 29:

For a very long time there has been a dichotomy applied between ‘procuring’ and ‘facilitating’ an infringement of a patent.  …

A person who merely facilitated but did not procure the infringement, was not a joint tortfeasor with the infringer and so was not liable if, for instance, he sold articles which could be used for infringing or non-infringing purposes even though he knew that they would probably be used and were intended to be used for the infringing purposes.

The decision of the High Court of Australia in Walker v Alemite Corporation is an example of the operation of that principle: (1933) 49 CLR 643 at 654 per Starke J (with whom Evatt J agreed) and 658 per Dixon J.  See also Best at 219-220 and Advanced Building Systems Pty Ltd v Ramset Fasteners (Australia) Pty Ltd  (1995) AIPC 91-129 at 39,198 (“Advanced Building Systems”).  As Dillon LJ went on to say in Molnlycke, also at 29:

More recently however a new concept has been developed.  Parties will be regarded as joint tortfeasors if on the facts they had a common design to market in the United Kingdom articles which in truth infringe a United Kingdom patent.

The concept of common design, first appearing in Morton-Norwich Products Inc v Intercen Ltd [1978] RPC 501, was elaborated by the English Court of Appeal in Unilever.  In Unilever, the plaintiff patentee, which was suing the defendant company for patent infringement based on the importation of a product, sought to join the defendant’s parent company, a United States corporation, on the basis that it was a joint tortfeasor.  Mustill LJ (with whom Slade and Ralph Gibson LJJ agreed) identified (at 602) the critical question as “whether the court is willing to infer a common design between the two Gillette companies”.  After examining the authorities, his Lordship said at 608-609:

For my part I prefer to take the relevant part of the amendment as a whole, and to ask whether, if the allegations therein are proved to be true … and if they are set in the context of the relationship between the companies in the Gillette group, when that has emerged at the trial, a judge directing himself correctly could reasonably come to the conclusion that – (a) there was a common design between [the parent company] and [subsidiary] to do acts which, if the patent is upheld, amounted to infringements, and (b) [the parent company] has acted in furtherance of that design.  I use the words ‘common design’ because they are readily to hand, but there are other expressions in the cases, such as ‘concerted action’ or ‘agreed on common action’ which will serve just as well.  The words are not to be construed as if they form part of a statute.  They all convey the same idea.  This idea does not, as it seems to me, call for any finding that the secondary party has explicitly mapped out a plan with the primary offender.  Their tacit agreement will be sufficient.  Nor, as it seems to me, is there any need for a common design to infringe.  It is enough if the parties combine to secure the doing of acts which in the event prove to be infringements.

As we have seen, that concept of common design was maintained and applied in Molnlycke. 

23                  In this area, the law in Australia has, it seems, developed along the same path as in England:  see, e.g., Murex Diagnostics Australia Pty Limited v Chiron Corporation (1994) 55 FCR 194 at 207-209 (“Murex”) per Burchett J; Best at 220-221 and Advanced Building Systems at 39,198-9.  Murex also concerned the question whether a prima facie case of common design (or authorisation) had been demonstrated vis à vis the defendant’s United Kingdom parent company which manufactured and supplied the defendant with “the Murex Kit” (the sale of which was alleged to constitute the patent infringement).  In Murex Burchett J reached a similar outcome as the Court of Appeal in Unilever, andby much the same path. 

24                  The factors relied on in Murex and in Unilever were of the same general kind as those propounded by Caterpillar in this case.  In both Murex and Unilever, the court held that a case of joint infringement between a parent company which supplied and sold the allegedly infringing goods to its subsidiary had been sufficiently made out to warrant determination by the judge at trial.

25                  The prima facie case that Caterpillar needed to make out was that, on the evidence, a judge might reasonably infer a meeting of minds between Deere USA and Deere Australia with a view to furthering the sale of the tractors in Australia in whatever way Deere Australia might decide, having regard to its assessment of the local market.  Although Caterpillar apparently conceded below that it had to show that it was open, on the evidence, to infer that there was more than a supplier/distributor (or vendor/purchaser) relationship between Deere USA and Deere Australia, the actual question for determination was, as we have seen, a different one. 

26                  As already noted, Caterpillar’s alternative submission was that it had, at the least, made out a prima facie case that Deere USA had authorised the importation and sale of the tractors in contravention of s 13(1) of the Patents Act:  see the definition of “exploit” in Sch 1 of the Patents Act.  There is some difference in the authorities as to the meaning of the word “authorise” for the purposes of s 13(1).  The word has been said to mean “sanction, approve [or] countenance that which is done”, or “to purport to grant to a third person the right to do the act of which complaint is made.”:  see Sartas No 1 Pty Ltd v Koukourou & Partners Pty Ltd (1994) 30 IPR 479 at 493, Rescare Ltd v Anaesthetic Supplies Pty Ltd (1992) 111 ALR 205 at 243, Kimberly-Clark Australia Pty Ltd v Arico Trading International Pty Ltd (1998) 42 IPR 111 at 129.  Some authorities have expressly favoured the narrower meaning:  see Advanced Building Systems at 39,200 and Bristol-Myers Squibb Company v FH Faulding & Co Ltd (1998) 41 IPR 467 at 488.  At first instance, it was agreed by the parties that they would not invite the primary judge to determine whether the wide or narrow meaning was correct.  Caterpillar’s submission was that even if it had not established a prima facie case of common design, nevertheless it had shown, to the requisite degree, that Deere USA had sanctioned, approved and countenanced the infringing acts, or had purported to grant Deere Australia the right to do those acts.

failure to consider whether the requisite inferences were open on the evidence?

27                  In support of its submission that the primary judge’s decision did not turn on an answer to the correct question (i.e., whether the requisite inferences were open on the evidence) Caterpillar directed the Court’s attention to some of the documents produced by Deere Australia on subpoena.  It submitted that those documents permitted inferences to be drawn to the effect of propositions advanced by it and disputed by Deere Australia.  If it were, for this reason, open to a trial judge to translate those disputed propositions into findings of fact, then, so Caterpillar submitted, those findings, taken with the matters that were not in dispute, would support the relief claimed.

28                  When the documents forming exhibit “CPT-1 – Confidential” to an affidavit of Caterpillar’s solicitor (“the documents”) are read as a whole, it is, we think, open to infer the following.

(1)               Deere USA not only had the power to prevent Deere Australia from selling the tractors in Australia but, for some time prior to early 1998, had in fact done so;

(2)               Deere Australia had been required to obtain the authorisation or approval of Deere USA before it was able to sell the tractors in Australia;

(3)               Deere USA played a critical role in determining when and on what terms the tractors would be marketed in Australia;

(4)               there was consultation amongst the USA personnel as well as discussion between Deere USA and Deere Australia concerning the placement of the tractors in the Australian market;

(5)               the initial steps taken to place the tractors in the Australian market were in the nature of a joint project undertaken by Deere USA with Deere Australia;

(6)               an important object of the project was to prevent the market going to Caterpillar;

(7)               Deere USA provided special training for Deere Australia personnel in connection with the use of the tractors;

(8)               Deere USA made particular efforts to supply Deere Australia with material designed to assist in the promotion and sale of the tractors in Australia;

(9)               Deere USA wanted to be and was informed of the promotional and marketing plans being made by Deere Australia in connection with the sale of the tractors in Australia;

(10)           the authority of Deere USA over Deere Australia extended beyond the ordinary relationship of supplier/distributor into matters such as the management of exposure to changes in currency;

(11)           Deere Australia was regarded as a “branch customer” by Deere USA; and

(12)           whilst Deere Australia was to be responsible for the repair of the tractors, it was to report any breakdown to Deere USA.

29                  There were, as Deere Australia pointed out, other matters in the documents from which it might be inferred that Deere Australia was engaged in the independent development of marketing strategies for the Australian market, and that Deere Australia was to some extent “on its own” with the tractors in Australia.  This, as we have seen, tallied with the evidence of its managing director.  Looking at the documents as a whole, however, it cannot, we think, be said that the inferences that Caterpillar seeks to draw from them are not, at the least, open.  There are, plainly enough, matters in the case that tend very much against Caterpillar, and they may prevail at trial.  But that of itself is not enough to disentitle Caterpillar from receiving the interlocutory relief it now seeks:  cf Unilever at 610 per Mustill LJ.

30                  Even though the primary judge considered that the documents tended against the finding of a prima facie case, his Honour did not base his decision on that consideration, but, as we have seen, he relied very largely on the evidence of Mr Wilson.  (That evidence, it may be recalled, was to the effect that Deere Australia conducted its day-to-day business independently of Deere USA and, in particular, Deere Australia made its own decisions as to the purchase and sale of the tractors in Australia.).  We accept that, as Caterpillar submitted, the weight that his Honour placed on Mr Wilson’s evidence was decisive.  His Honour relied on Mr Wilson’s evidence to reject Caterpillar’s submissions as to the inferences that could be drawn from the documents as to the extent of the control exercisable and exercised by Deere USA over Deere Australia, notwithstanding that, as it seems to us, those inferences were open on the documents.  In this regard, we accept Caterpillar’s submission that his Honour apparently drew inferences of a seemingly final kind against Caterpillar.  The extent of the control exercised by Deere USA over Deere Australia was critical to Caterpillar’s case, as his Honour himself recognised in his reference to Intel Corporation v General Instrument Corporation (No 2) [1991] RPC 235 at 241 per Aldous J. 

31                  In the circumstances, was it open to his Honour to treat Mr Wilson’s evidence as decisive in this way?  We do not think it was.  On the one hand, there were the documents that permitted inferences on the issue of control of the kind for which Caterpillar contended.  On the other hand, there was Mr Wilson’s evidence which was directed to defeating those inferences and which treated the documents as mere commonplace expressions of a supplier/distributor (or vendor/purchaser) relationship.  Mr Wilson was not, however, subjected to cross-examination:  at the request of Deere Australia, Caterpillar withdrew its call for his attendance for that purpose upon the agreed basis that the rule in Browne v Dunn (1893) 6 R 67 in relation to any submission made by Caterpillar concerning his evidence as to the construction or effect of particular documents would not apply.  In that circumstance, it seems to us that it was not open to his Honour to treat Mr Wilson’s evidence as foreclosing inferences, open on the documents, which, if translated into findings of fact at trial, would make out Caterpillar’s case.  In that state of affairs, it could not be said that the inferences as to control that Caterpillar sought to draw were not open.  Having regard to the nature of the inquiry in which he was engaged, there was no occasion for his Honour to express any preference for the competing accounts advanced by the parties, providing the evidence would support the inferences for which Caterpillar contended.  In the circumstances, it was not for his Honour to reach any definitive conclusion as to the accuracy of those accounts.

was a prima facie case made out?

32                  In the circumstances, it seems to us that his Honour erred in failing to consider whether the undisputed matters and such inferences as the documents would support might not, in combination, support a prima facie case of joint tortfeasorship or authorisation on Deere USA’s part.  When taken together, it seems to us that those considerations make it very difficult to say that Caterpillar has not made out a prima facie case of infringement, either by participation in a common design or by authorisation. 

33                  In any event, it seems to us that his Honour ought not to have put so many of the undisputed matters to one side as not bearing on Caterpillar’s prima facie case.  Plainly enough, many of those matters were relevant to an assessment of the evidence taken as a whole, even though taken singly they might not have seemed significant:  cf, e.g., Unilever at 609-610 and Murex at 207.  In those cases, factors of the same general kind were considered sufficient to establish a prima facie case of joint infringement to be put before a judge at trial. 

34                  Further, there was, it seems to us, sufficient in the contents of the documents upon which Caterpillar relied to permit an inference that Deere USA had, at least in the broad sense, authorised the alleged infringing acts contrary to s 13(1) of the Patents Act.  As the parties had agreed to go forward on the basis that his Honour was not to choose between the two competing views of the meaning of the word “authorise”, it seems to us that Caterpillar must be taken to have made out a prima facie case for relief on the basis that it was open to infer that Deere USA had approved the importation into and sale in Australia of the tractors by Deere Australia.  It was, of course, enough for the purposes of O 8 r 2(2)(c) of the Rules that Caterpillar made out a prima facie case for relief on one (and not necessarily all) of the causes of action relied upon by it:  see Cell Tech Communications Pty Ltd v Nokia Mobile Phones (UK) Ltd (1995) 58 FCR 365 at 373. 

outcome of the case

35                  It will be apparent from what we have said that, in our view, his Honour erred in holding that Caterpillar had failed to make out a prima facie case for relief as required by O 8 r 2(2) of the Rules. 

36                  We propose that (1) leave to appeal be granted; (2) the appeal be allowed, with costs; (3) the order made at first instance on 28 April 1999, dismissing the notice of motion dated 20 November 1998, be set aside; and (4) the matter be remitted to the primary judge for the making of orders in accordance with these reasons for judgment, including orders as to costs at first instance. 

Associate:

Dated:              1 November 1999