FEDERAL COURT OF AUSTRALIA

Advanced Building Systems Pty Ltd v Ramset Fasteners (Aust) Pty Ltd [2001] FCA 1098

DAMAGES – assessment of damages - Ramset supplied to customers a clutch without any or adequate warning that use in certain ways could infringe the appellants’ patent - Ramset by its conduct procured its customers to infringe patent and contravened s 52 of the Trade Practices Act 1974 (Cth) - infringing and contravening conduct ceased after order of Full Court in 1999 - assessment of damages arising from patent infringement - assessment of damages arising from breach of s 52 of the Trade Practices Act 1974 (Cth) – alternative calculation of royalty

PATENT – damages for infringement – relevance of ability to develop non-infringing clutch – whether damages limited to period required to develop non-infringing clutch or whether this is only relevant if the non-infringing item is in fact on the market

Advanced Building Systems Pty Limited v Ramset Fasteners (Aust) Pty Limited (1998) 194 CLR 171

Walker v Alemite Corporation (1933) 49 CLR 643 at 658 cited

Ramset Fasteners (Aust) Pty Ltd v Advanced Building Systems Pty Ltd (1999) 164 ALR 239

Grain Processing Corporation v American Maize-Products Company 185 F 3d 1341 (Fed Cir 1999) distinguished

Gerber Garment Technology Inc v Lectra Systems Ltd [1995] RPC 383 considered

Meters Ltd v Metropolitan Gas Meters Ltd (1911) 28 RPC 157 considered

ADVANCED BUILDING SYSTEMS PTY LIMITED AND THE BURKE COMPANY v RAMSET FASTENERS (AUST) PTY LIMITED

NG 717 of 1990

THE COURT ORDERS THAT:

1.      The applicants instruct Mr Penklis to calculate the damages and royalty amounts in accordance with these reasons.

2.      The matter be relisted 21 days after the date of these orders at 9.30 am to consider the calculation.

3.      An affidavit of Mr Penklis as to the calculations be filed and served no later than 14 days from the date of these orders to enable Mr Whitear to respond to it.

4.      That both Mr Whitear and Mr Penklis confer prior to the relisting of the matter in the event there are disagreements between them on the calculations.

5.      Any submissions as to costs be filed and served two days before the matter is relisted.

6.      The applicants file and serve draft short minutes of order to give effect to these reasons and that the draft minutes include proposed orders dealing with the related matter Ramset Fasteners (Aust) Pty Ltd v Advanced Building Systems Pty Ltd NG 706 of 1993.

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

REASONS FOR JUDGMENT

1                     This application to the Court has had a long and troubled history. The present phase of the proceedings may be but another stage in the contest between the parties.

2                     Before the court is the assessment of the damages suffered by the first applicant, Advanced Building Systems Pty Limited (“Advanced”), and also a United States corporation The Burke Company (“Burke”), the second applicant, arising from infringements by the respondent, Ramset Fasteners (Aust) Pty Limited (“Ramset”), of a standard patent issued under the Patents Act 1952 (Cth) (“the Patents Act”) or, in the alternative, arising from breaches by Ramset of s 52 of the Trade Practices Act 1974 (Cth) (“the Trade Practices Act”).

3                     The parties are wildly apart in their calculation of damages. The divergence is such that any possibility of compromise was impossible. Prior to the hearing, Advanced claimed damages, depending upon which “scenario” was accepted, as high as $9,578,551 for past loss (including interest on past loss) and diminution in value of business. This figure was later revised downwards to a maximum, assuming all matters in Advanced’s favour, of $6,473,100. Ramset put the figure at a maximum “best estimate” of $546,374, but with a “best estimate” of $340,129 if Ramset’s activities subsequent to the Court’s order on 3 May 1995 do not constitute an infringement, for past and future loss, plus interest, assuming that any damage at all was suffered or proved and, if any diminution in the value of Advanced’s business was maintainable, this was calculated at an amount of $242,691 (in place of the $111,646 for future loss included in the first “best estimate” figure above). These amounts were varied during the course of the hearing, although the parties remained widely apart.

4                     To understand the issues which arise in the present phase of the proceedings it is necessary to say something of the proceedings to date and particularly the findings made in prior proceedings.

THE BACKGROUND AND EARLY LITIGATION

5                     The application was filed on 17 December 1990. The applicants sought, inter alia, damages for infringement of a patent or alternatively for loss suffered as a result of misleading and deceptive conduct on the part of the respondent proscribed by s 52 of the Trade Practices Act. The respondent cross-claimed for revocation of the patent on various grounds of invalidity.

6                     The patent (standard patent no. 544832) was initially issued under the Patents Act to Burke and was for a term of sixteen years commencing on 27 August 1981 but ultimately that term was extended to 20 years. Burke assigned the patent to Advanced on 22 November 1990 for a nominal consideration of $100. Accordingly, it is common ground that Burke could have no claim against Ramset after the date of the assignment. Both Advanced and Burke were represented by the same counsel. Burke’s claim, in essence, involves no different issues from that of Advanced and it is convenient to deal with it but briefly. Accordingly, the discussion which follows will largely concentrate on the claim by Advanced.

7                     The invention the subject of the patent relates to what may be described as a clutch designed to be attached via anchors (referred to as “inserts”) to a precast concrete slab at the bottom and to a cable from a crane at the top and used to lift the slab at building sites. There are four, potentially five, methods of lifting employed in precast concrete construction. Two (face-lift tilt-up and edge-lift tilt-up) involve what are referred to as tilt-up systems, that is to say systems which involve lifting a panel or slab from a horizontal into a vertical position. Two (edge-lift non-tilt and straight face-lift) involve lifting a panel or slab vertically so that it remains in a vertical position or lifting a slab from a horizontal position where it is not necessary to tilt it to a vertical position. There may be a fifth method, top-lift non-tilt construction, but that is really no different to edge-lift non-tilt and can for present purposes be ignored. The present case is concerned only with face-lift tilt-up construction. Unless otherwise stated, reference in these reasons to face-lift construction will refer to face-lift tilt-up construction and reference to edge-lift to either or both of edge-lift tilt-up and edge-lift non-tilt construction.

8                     The face-lift method involves a concrete wall or panel poured at the site. Lifting inserts, also called “anchors”, are cast into the wall or panel symmetrically about a point called “the centre of lift” which lies between the centre of gravity of the wall or panel and its top edge. The crane rigging is attached via the clutch to the anchors embedded in the face of the wall or panel so that when the crane commences to lift the load of the panel the panel lifts clear of the casting bed except along its bottom edge. As the crane continues to lift, the panel rotates from the horizontal position to a position typically ten to twenty percent from the vertical. At this point the line of the crane is, by virtue of the panel rotation, directly above the centre of gravity of the panel and the bottom edge of the panel can be lifted clear of the casting bed and into the final position for the wall or panel. The wall or panel is then braced and the crane disconnected from the anchors. While it is possible to disengage the clutch from the anchors manually after climbing a ladder, perhaps many metres high, safety, convenience, speed and, consequently, saving of expense in crane time suggests that a system of remote (or ground) release is highly desirable.

9                     In an edge-lift operation the crane is linked, again via a clutch, to lifting inserts or anchors embedded in the edge of the wall or panel. The wall or panel is then lifted into position. Where edge-lift construction is used the concrete wall or panel is usually poured away from the site where it is to be erected. It is more difficult to release edge-lifted panels and in consequence manual release is (if not invariably, then certainly usually) used.

10                  The present dispute concerns a clutch which is primarily intended for face-lift tilt-up construction. It can, however, be used for edge-lift construction.

11                  The invention to which the patent relates is a ring clutch which connects with the anchor embedded in the concrete wall or panel. The clutch is not, itself, the subject of the patent. A principal object of the invention, the subject of the Australian patent, is stated in the patent to be:

“… to provide a method for using a quick release hoisting attachment of the type described for tilt-up walls characterized by the fact that release of the attachment is not possible until the hoisting shackle part of the attachment is lowered out of its normal upright position.”

12                  It is not necessary here to set out in full the terms of the patent or all the claims in it. They can be found set out in my previous judgments on validity and infringement at (1993) AIPC 91-017 and (1995) AIPC 91-129. It suffices here to set out the first claim:

1. Apparatus for putting up a tilt-up wall section comprising a hoisting cable, a shackle connected to the cable, a ring clutch interconnecting the shackle with an anchor emplaced in the wall section, the ring clutch comprising a ring having a split therein and an arcuate locking bolt rotatable relative to said ring between a locked condition extending across the split and a released condition removed from the split, said bolt having an elongated lever arm extending generally parallel to the wall section during lifting and in the direction of the upper end thereof, a release cable attached to the distal end of the lever arm too remotely operate the lever arm by rotating it outwardly and downwardly to a predetermined degree relative to the wall section to rotate the bolt to the released condition and disconnect the ring clutch from the anchor, and hoisting cable-controlled means to selectively block or allow rotation of the lever arm to said predetermined degree, said means being operated responsive to the application of lifting force to the hoisting cable to block rotation of the lever arm upon the application of lifting force to the hoisting cable and release the arm for rotation upon slacking off of the hoisting cable.”

13                  By agreement of the parties the question of the validity of the patent (the cross-claim) was decided as a separate matter. I found the patent to be valid. A Full Court of this Court found it to be invalid (cf Ramset Fasteners (Aust) Pty Ltd v Advanced Building Systems Pty Ltd (1996) 66 FCR 151). An appeal to the High Court was allowed. The High Court was of the view that in respect of the matter argued before it the patent was valid. Other issues going to invalidity which had not been decided by the Full Court of this Court were remitted for consideration. The decision of the High Court is to be found reported at (1998) 194 CLR 171.

14                  In the meantime, I heard the main application. I found that the respondent had not infringed the patent but had contravened s 52 of the Trade Practices Act. It must immediately be noted that the case for patent infringement was not that Ramset by manufacturing the clutch thereby infringed the patent. Rather the case sought to be made by Advanced was that in supplying clutches to customers Ramset engaged in a common design with those customers that the customers would use the clutches in a way which infringed the patent. Advanced also alleged that Ramset procured or induced infringements of the patent by its customers. The reason I held that the respondent had not infringed the patent was that I was of the view that the decision of the High Court in Walker v Alemite Corporation (1933) 49 CLR 643 and related authorities dictated that infringement was not established merely by the supply of an item, not itself a breach of the patent, in circumstances where the person supplied might use the item in a way which breached a patent. I thought that the evidence did not establish that the respondent had, in the sense used by the cases, made itself party to a patent infringement by others, that is to say the persons to whom it supplied the clutches. However I granted injunctive relief, based upon the Trade Practices Act, and ordered that Ramset notify customers that use of its clutch in such a way as to add an extended lever arm and release cable would infringe the patent. At the request of Ramset I accepted that the notice could state that use of the clutch in other ways would not infringe the patent. However, I did not, on the evidence before me, award damages as I was of the view that damages were impossible to calculate. It will be necessary to refer in more detail to that judgment later.

THE APPEALS

15                  Ramset appealed against the s 52 finding (in addition to the already referred to appeal against the finding that the patent was valid). The applicants cross-appealed against the failure to award damages and the findings on infringement. The appeals and cross-appeals were then heard by the Full Court. Because the Full Court initially held the patent to be invalid it was unnecessary for it at that time to decide the questions of infringement, breach of s 52 and damages. When the matter was remitted to the Full Court by the High Court, a Full Court differently constituted (Burchett, Sackville and Lehane JJ) were of the view that the remaining issues of invalidity should be decided against Ramset and held accordingly, affirming my original decision on the cross-claim, that the patent was valid. The Full Court dismissed Ramset’s appeal on the question of liability under s 52 and allowed Advanced’s cross-appeals on the question of damages and the issue of infringement. The judgment of the Full Court is to be found reported at (1999) 164 ALR 239. It was delivered on 5 July 1999. However, the Full Court was of the view that not merely the attachment of an extended lever arm and rope release would constitute an infringement of the patent but also that the patent would be infringed where a chain was attached to the clutch in such a way as to drag the shorter lever arm into a blocking relationship with the shackle with release occurring, generally, through the addition of a rope. Accordingly, it amended the order relating to communication to customers of Ramset to require Ramset to notify customers that use of its clutch in such a way would also constitute an infringement.

16                  The orders ultimately made by the Full Court on the question of damages were that the calculation of damages be remitted to me for further decision and that further evidence be taken on the question. It is hard to believe that the Full Court contemplated that the filing of additional evidence would take two years and that the hearing would occupy yet another 14 days. It certainly would not seem to have been in the contemplation of the Full Court that matters involving infringement would be yet again relitigated. That, in effect, is what happened with Ramset calling evidence from individual contractors and others to the effect that they had not used clutches supplied by it in such a way as to infringe the patent.

The judgment on infringement at first instance and factual findings

17                  From mid-1988 until September 1989, Ramset supplied to customers clutches manufactured overseas and purchased from a German company which owned the patent in respect of these clutches. The clutches so supplied are referred to as “Frimeda clutches”. I use the word “supplied” because clutches were not only sold, but sometimes gifted, lent or hired out to customers.

18                  From about September 1989, Ramset manufactured its own clutch upon which the name “Ramset” prominently appeared. The Ramset manufactured clutch is hereafter referred to as the “Ramset clutch”. Save for the length of the lever arm (the Ramset clutch had a relatively short lever arm which, when positioned parallel to the wall section in the direction of the upper end thereof during a face-lift tilt-up lifting operation, was not blocked by any hoisting cable-controlled mechanism), the Ramset clutch was otherwise identical to the Frimeda clutch. Both could be attached to the same type of anchor or insert. The Burke clutch supplied by Advanced had a more elongated lever arm, but was otherwise identical to the Frimeda clutch and the Ramset clutch. It, likewise, fitted the same kind of anchor or insert as the Ramset or Frimeda clutches did. Both Advanced and Ramset sold these inserts and related hardware and both made such profit as they made from these sales and not, to any significant extent, directly from the supply of clutches.

19                  When there was an addition to the Ramset clutch so that the lever arm was extended, the Ramset clutch and the Burke clutch could each be used in a way that resulted in the lever arm producing the blocking effect referred to in the patent.

20                  As already noted Ramset supplied initially the Frimeda and later the Ramset clutches to its customers by way of loan, hire, gift or sale. Any profit it made directly on the supply of the clutches was insignificant. Commercially, the profit to Ramset, like the profit to Advanced, arose from selling other components for use in face-lift tilt-up operations. While clutches had a long life span (they required only cleaning and servicing from time to time) and were capable of reuse, each face-lift tilt-up operation utilised other items such as anchors or inserts, braces, brace inserts, bondbreakers etc. The number of anchors that might be used for a particular face-lift tilt-up operation would vary depending upon the size of the panel to be lifted. Evidence in the present phase of the proceedings suggested that there were on average four face-lift anchors used per panel as well as another two anchors of a different kind used to anchor the braces which maintained the panel in an upright position when the lift was completed. As will be seen there were other items as well which were used in a face-lift operation which were sold by both Ramset and Advanced and which could be used with either Ramset/Frimeda clutches on the one hand or Advanced clutches on the other.

21                  I found in my judgment on infringement that prior to June 1993, in New South Wales, Ramset “frequently, perhaps normally” supplied clutches (the Frimeda and Ramset clutches) with extended lever arms, use of which would breach the patent. After June 1993, Ramset supplied clutches (the Ramset clutch) with a short lever arm and chain. As will later be seen from the discussion of the Full Court in its judgment in the infringement proceedings, use of Ramset clutches in such a way that the chain wrapped around the shackle operated to block the lever arm likewise constituted a breach of the patent, in the same way as would the addition of an extension to the lever arm. The phrase “elongated lever arm” in the patent was not to be given a narrow construction.

22                  I accepted the evidence of witnesses called by Advanced in the original infringement proceedings to the effect that they had observed in New South Wales the use of clutches supplied by Ramset with extended lever arms in a way which would be in breach of the patent. I found that in 1988 Ramset had itself fixed extended lever arms to clutches which it had sold or otherwise distributed. In the result Brambles Crane division, for example, had used Ramset clutches with extended lever arms in breach of the patent. Further Ramset had prepared and made available to customers promotional material with photographs which made it clear how the clutches could be used in a way that would involve a breach of the patent.

23                  The situation was different in Victoria where the normal method of precast concrete construction involved edge-lift rather than face-lift. Nevertheless, there was substantial face-lift construction. At a trade show in Geelong, a Ramset representative had said that clutches would be supplied with extended lever arms and ropes attached to allow for ground release. I found that while it was common place, at least prior to June 1993, for modified clutches to be supplied with extended lever arms and ropes or chains attached in New South Wales, this was not the case in Victoria. However, some unquantified, and unquantifiable, number of users made the modifications themselves.

24                  In Queensland, there was evidence of one witness who had seen Ramset clutches used with extended lever arms and ropes at two sites. I found that it was standard practice for rope release to be used in Queensland and clutches supplied from Sydney for use in Queensland often had extended lever arms and ropes attached. The Ramset brochure containing photos illustrating how the clutch could be used with extended lever arm and rope release was available in that State.

25                  I found that in South Australia Ramset products were little used. Edge-lift was the main means of lifting concrete panels. Frimeda clutches were supplied without release cable chains or ropes attached and after mid-1990 Ramset clutches were supplied without extended lever arms. There was no supply by Ramset of clutches with extended lever arms and ropes in Western Australia or the Northern Territory, although users there did fit extensions to the lever arm and ropes themselves. In the Australian Capital Territory, Ramset had supplied components for about six face-lift tilt-up operations, the clutches being modified by the addition of an extended lever arm and chain. These were supplied from Sydney. The Ramset brochure which showed how the clutch could be used in a way that would be an infringement of the patent was available to customers in the Territory from 1994.

26                  A fair summary of the evidence adduced and what one could say of it appears in the following paragraph of the judgment (at 39,199):

“The evidence … shows, at the most, that on an unknown number of occasions, more numerous in New South Wales than elsewhere, Ramset supplied clutches with extended lever arms. Where clutches without extended lever arms were sold, they were capable of having attached to them extended lever arms. The persons to whom clutches were sold might, but not necessarily would, use them with ropes attached. Although this seems to have been the general manner of use, clearly a significant number of users preferred manual detachment of clutches from anchor inserts.”

27                  It has generally been accepted to be the law that mere sale, even with knowledge that the person using would infringe a patent, would not of itself make the supplier an infringer: Best Australia Ltd v Aquagas Marketing Pty Ltd (1988) 83 ALR 217 at 219-220. Indeed, so much was accepted by Advanced. As I have already noted, I was of the view, however, that the evidence before me did not establish an infringement by Ramset because a finding of such an infringement would require a common design such that Ramset made itself a party to the infringement. Indeed, this view was, before me, accepted by Advanced. The evidence, in my view, did not establish the necessary common design.

28                  However, I found that Ramset had breached s 52 of the Trade Practices Act by not informing customers that use of clutches and components, without the licence of Advanced, as described in the patent would constitute an infringement. Accordingly, I granted an injunction restraining Ramset, unless with the licence of Advanced, from supplying clutches or anchors of a kind similar to the Frimeda clutch without disclosing that use in the manner set out in the patent would be an infringement of the rights of Advanced as owner of the patent.

29                  Finally, I considered the issue of damages which arose, there being in my view no patent infringement, only under the Trade Practices Act. I expressed the view that the calculation of damages was an impossible task because I was of the opinion that Ramset had not established that even if it made a loss that loss arose from the misleading and deceptive conduct complained of. For example, it was not possible, on the evidence, to determine just how many persons who acquired clutches from Ramset (“Ramset customers”) would have acquired clutches from Advanced had Ramset given a warning; which Ramset customers used the clutches supplied with extended lever arms or themselves added an extension; or which Ramset customers used the clutches in a non-infringing way. I said at 39,202 (and I repeat what I said only because it is still part of the Ramset case despite being rejected by the Full Court):

“All one can say on the evidence is that it is possible that an unquantifiable number of purchasers would have switched to purchase some, at least, of their supplies from Ramset. However, I am wholly unable on the evidence before me to make any finding as to how many would, on the balance of probability, have done so, or indeed if any would more probably than not have done so.”

In so writing I noted that, as a matter of principle, the calculation of damages was not an exercise required to be undertaken with mathematical precision and that the Court must do its best on the evidence before it.

30                  Among the difficulties I noted (and they remain present still) were the following (see at 39,203):

“First, it would be necessary to determine the number of customers in fact purchasing from Ramset who would, had all the facts been revealed to them, have switched to make purchases thereafter from Advanced. Second, it would be necessary to determine the extent to which those persons would have purchased the whole of their supplies from Advanced rather than merely some of them.

…

Third, it is clear that those customers who received from Advanced the circular which Advanced sent to its customers … could not be said to have been thereafter misled as a result of the non-disclosure by Ramset as and from the date of the circular. …

Next, the calculation of loss, even if all these matters were known, depends upon assumptions most of which were not proved by the evidence.”

The Judgment of the full court on infringement

31                  Because the meaning of the Full Court’s judgment, and in particular the question of what was found to constitute an infringement of the patent and to be the relationship between the patent claim and the trade practices claim, is a matter which is of significance to the assessment of damages it is necessary here to set out in more detail than might ordinarily be expected just what the Full Court said.

32                  First, the Court summarised just what the patent was concerned with. It will be convenient to quote precisely what the Full Court said at 245:

“It claims to provide ‘a method for using a quick release hoisting attachment … for tilt-up walls characterised by the fact that release of the attachment is not possible until the hoisting shackle part of the attachment is lowered out of its normal upright position’. This is done by providing a longer lever arm, the movement of which can be blocked by the shackle unless it is lowered out of position, and by providing a simple pull rope or cable to release the shackle remotely by rotating the lever arm outwardly and downwardly. The method involves pre-positioning the lever arm, at the time of attaching the shackle, so that it will extend towards the top of the wall slab when it is erected. What distinguishes the apparatus and method of the invention from the device described in the Fricker patent, in addition to the provision of the pull rope, is the deliberate blocking of any releasing movement of the lever arm by the shackle, which enables the lever arm to be placed in an upright position, rather than a downwards position, so as to facilitate the use of a mere pull rope for release after erection, eliminating the need for complicated release mechanisms. In other words, the Burke patent involves a conjunction of two ideas – that if the lever arm could be pre-positioned to point vertically upwards when release was required, a simple pull rope would suffice for quick release; and that, despite the Fricker patent’s insistence on the safety of positioning the lever and bolt at the bottom of the gravitational pull, the opposite position would be safe if the arm were long enough to be blocked from moving into the position of release by the shackle itself.”

33                  As I had pointed out earlier, and the Full Court agreed, a pull rope was an essential integer of the combination described in the patent. It was this integer which led the Full Court to the conclusion that the patent had the element of novelty necessary for validity. However, because the infringement alleged against Ramset consisted, in essence, of procuring an infringement it was necessary for the Full Court to determine what adaptations to the clutches of Ramset would constitute a breach of the patent. As already noted, I had held that use of a Ramset clutch with an extended lever arm and rope release would constitute an infringement of the patent. With this the Full Court agreed. However, the Full Court was also of the view that use of Ramset clutches with a short lever arm and chain (that is to say, without an extended lever arm fitted) together with a rope release, would likewise constitute a breach of the patent if used so as to create a blocking action. This was important because on the evidence, as and from June 1993, Ramset had supplied only clutches with a short (that is, unextended) lever arm to which a length of chain was attached. The chain made a convenient connection for a release cable or rope. On this model the lever arm was, as the Full Court observed at 263-264:

“just short enough to pass through the centre of the bail of the shackle, so that if it were held in that central position it would not be blocked by the shackle from moving downwards to release the ring clutch. (The bail of the shackle is the steel hoop by which the main part of it is attached to the ring clutch.)”

34                  The fit between the lever arm and the body of the ring clutch was a loose one so that if the chain passed to the side of the shackle (and that was the way it was, so I had found, generally used in practice) it would pull the arm over into a blocked position, holding it there by virtue of the weight of the chain. This use involved, so the Full Court said, at least if together with a rope release, a breach of the patent. In other words, it was an integer of the patent that there be a blocking of the lever arm by the shackle brought about by either the lever arm as extended, or something else such as a chain. So long as a blocking action arose so as to make possible remote release by means of a rope or cable the lever arm was, in the sense used in the patent, “elongated”. The Full Court did not consider whether the use of a rope on its own, but wound around the side of the shackle so that it would pull the lever arm over into a blocked position holding it there now just by the weight of the rope, which likewise could provide a blocking action might infringe the patent. On one view of the matter it might, although it is hard to see, however broad a construction is given to the word “elongated lever arm”, that the addition of a rope could amount to an extension of the lever arm. The Full Court’s order would seem only to contemplate, in the case of a clutch with a short (and non-extended) lever arm, the use of a chain to which a rope was attached as constituting an infringement, not the mere use of a rope.

35                  The Full Court found that there was an infringement of the patent by Ramset in that Ramset had made itself a party to the infringement. In doing so, the Full Court, on one view of the matter, read down what had been said by Dixon J in Walker v Alemite Corporation (1933) 49 CLR 643 at 658 in a passage set out in the Full Court’s judgment at 252. After a discussion of a number of the authorities referred to in that judgment and numerous more recent authorities their Honours said at 258-259:

“These authorities show that liability for infringement may be established, in some circumstances, against a defendant who has not supplied a whole combination (in the case of a combination patent) or performed the relevant operation (in the case of a method patent). The necessary circumstances have been variously described: the defendant may ‘have made himself a party to the act of infringement’; or participated in it; or procured it; or persuaded another to infringe; or joined in a common design to do acts which in truth infringe. All these go beyond mere facilitation. They involve the taking of some step designed to produce the infringement, although further action by another or others is also required. Where a vendor sets out to make a profit by the supply of that which is patented, but omitting some link the customer can easily furnish, particularly if the customer is actually told how to furnish it and how to use the product in accordance with the patent, the court may find the vendor has ‘made himself a party to the [ultimate] act of infringement’. He has indeed procured it. So to hold is not in any way to trespass against the established line of authority which, as Dixon J made clear in Walker v Alemite, is based upon the need to confine a monopoly to the precise area in which it operates. That protects the mere vendor of an old product, though selling with knowledge of the purchaser’s intention to infringe a combination patent; but it affords no excuse to the person who sets out to induce customers to do what falls fairly within the area of the monopoly.”

36                  In their Honour’s view, the evidence established that, in the sense explained, Ramset had procured others to breach the patent. The evidence to which their Honour’s referred can be briefly summarised as follows:

1.                  The fact that Ramset determined to enter into competition with Advanced, aware of the patent and not producing a different ring clutch or anchor, or a different method of use.

2.                  The nature of the product supplied, the nature of the work in connection with which it was to be used and the circumstances of the sales all of which pointed to the probability that it would be so used as to infringe the patent.

3.                  The brochure demonstrating infringing use and a product bulletin drafted by Mr Finlay and handed out referring to ground release by a rope.

4.                  The initial supply with extended lever arms and/or rope attachments.

5.                  The later supply with chains attached to the short lever arm which could block the lever arm.

37                  The Full Court, having found that Ramset had procured a breach of the patent and therefore itself infringed the patent, regarded it not to be necessary to consider in any detail whether the finding I had made that Ramset was in breach of the Trade Practices Act was correct. The Full Court assumed, presumably having regard to what had been argued before it, that every occasion which involved a breach of the Trade Practices Act necessarily would involve an infringement or the procurement of an infringement on the part of Ramset. However, their Honours found no error in the way I had approached the issue under the Trade Practices Act. In fact, their Honours stated that they agreed with the reasons I had given for concluding that failure on the part of Ramset to warn its customers that use of clutches with extended lever arms and remote release would constitute an infringement of Advanced’s patent was conduct which breached s 52 of the Trade Practices Act.

38                  After referring to Como Investments Pty Ltd v Yenald Nominees Pty Ltd (1997) ATPR 43,617 at 41-550 their Honours said of the issue of causation at 269:

“In the present case, the inference should be drawn that Ramset’s misleading conduct did cause damage to Advanced, but it is unnecessary to pursue this point further.”

39                  As part of the orders I had made on 3 May 1995, I ordered that there be attached to any Ramset clutch supplied (by that time there were no Frimeda clutches being supplied, only Ramset clutches) a tag which stated:

“Modification of this clutch by the attachment of an extension to the lever arm and attachment of a release cable to the extended arm to effect remote release of the clutch will result in an infringement of Letters Patent Number 544832 if:

(i)                 the modified clutch is attached to a crane hoisting cable; and

(ii)               the modified clutch is used in a face-lift tilt-up operation; and

(iii)             the release cable is used to effect remote release of the clutch.

Use of this clutch as supplied by Ramset without modification is not an infringement of any patent.”

40                  The last two lines, it is important to note, were inserted in the order at the request of Ramset.

41                  I also ordered Ramset to give a notification to all persons to whom it had supplied since 3 May 1994 Frimeda or Ramset clutches and/or anchors for use with them, a notice in similar terms which stated additionally that use of a Frimeda clutch in the same way without the licence of Advanced would constitute an infringement of the patent.

42                  The Full Court, by orders made on 16 August 1999, reflecting its view that use of the clutch where it had a short lever arm to which was attached a chain and rope release was an infringement even though no extended lever arm had been added, required notification to all Ramset customers that they should disregard the original notice and advising that the use of a Ramset clutch with a Ramset face-lift tilt-up anchor in a face-lift tilt-up operation in which the clutch is released by a rope or cable attached to a chain attached to the release arm of the clutch would likewise be an infringement of the patent, even though no extension was attached to the release arm of the clutch. The Full Court required also a tag to be affixed to any Ramset clutch of the type exhibited in the proceedings which, in addition to notifying that use of the clutch by the attachment of an extension to the lever arm and release rope or chain was a breach of the patent, stated that use of the clutch by “the attachment of a chain to the lever arm and the attachment of a release rope or cable to the chain to effect remote release of the clutch” would be an infringement.

43                  In summary, therefore, it can be said that in the period from the commencement of supply of clutches by Ramset until the order made by me in 1995, Ramset procured customers to infringe the patent and breached the Trade Practices Act in supplying clutches in such a way as procured an infringement by either fitting, or encouraging the fitting of, extended lever arms together with a cable or rope release or chains with release cables or ropes. From the time of the order in 1995 until the order of the Full Court in August 1999, it continued to breach the Trade Practices Act by its failure to warn customers that use of the clutch by fitting a chain and release cable or rope would infringe the patent and, to the extent the evidence showed that it supplied clutches with chains and release cables or ropes or otherwise showed that it encouraged the fitting of chains and release cables or ropes, continued to procure infringement. After the order in 1999, as will be seen, Ramset turned to the development of a new clutch which it claims does not infringe the patent. There is no suggestion that after the Full Court’s order it supplied clutches other than with the notice ordered by the Full Court, so that it is clear that there was no breach of the Trade Practices Act after the date of the Full Court’s order. There is also no evidence of Ramset procuring infringement after that date. However, that does not, so it is submitted by Advanced, mean that loss consequent upon earlier infringements of the patent or breaches of the Trade Practices Act did not continue to be suffered. It is submitted by Advanced that the loss suffered by it continued even after the making of the orders in 1999 as a result of continuing sales of components made by Ramset. This loss was said to be able to be traced to the infringing and misleading and deceptive conduct of Ramset earlier which resulted in customers moving from Advanced to Ramset and Advanced losing sales of components which, but for the procuring of infringement or the misleading and deceptive conduct, Advanced could have made.

The starting point for the calculation of damages

44                  The case for Advanced now made (it is substantially different from that made at the original hearing), is said to be a simple one. It commences with the proposition that because the supply of clutches by Ramset without the 1999 warning constituted misleading and deceptive conduct, Ramset as an honourable company would, had it realised that it would breach s 52 absent a warning, never have entered the market at all. Indeed, it is submitted that Ramset would never have sought to enter the market for face-lift clutches and components for face-lift tilt-up operations if to do so would have required it to attach a notice in the form required by the 1999 order to all clutches so as to ensure that it did not engage in misleading or deceptive conduct. That would be commercially impossible. Evidence of Professor Layton, a marketing expert, which I accept, was advanced in support of this proposition.

45                  It was said to follow, therefore, that the consequence of Ramset not breaching s 52 of the Trade Practices Act would have been that Ramset would have made no sales. Accordingly, if this is accepted, damages should be calculated on the basis that either all sales in fact made by Ramset, or all sales until at least the date of the Full Court order in 1999, had not been made by it but would have been made by Advanced. In the alternative, it was submitted, that if Advanced would not have made all sales otherwise made by Ramset, at least the sales would have been made by Advanced and the other two companies which supplied clutches and componentry in the market, namely, Tilt-Lift Equipment (“Dayton”) and Alan H Reid Pty Limited (“Reid”), and in the proportion between them that they had of market share prior to Ramset entering into the market. In principle the clutches supplied by Dayton and Reid were similar but their design differed substantially from the Burke/Frimeda/Ramset clutches. Use of either the Dayton or Reid clutches involved no infringement of the patent.

46                  The premise upon which the submission was based was said to have been supported by a number of matters. First, it was pointed out that in 1999 Ramset had set about urgently to develop what it claimed to be a non-infringing clutch. This was said to show that Ramset would, rather than give a warning, have not gone into the market at all. It may, in passing, be said that, to the contrary, it merely suggests that Ramset would possibly have entered the market, although its entry would have been delayed by the time it would have taken it to design and manufacture a clutch the use of which would not infringe the patent. Secondly, it was said that Ramset would not have attempted to enter the market with componentry, but not a clutch, or with a clutch not capable of being released remotely because the market demanded an entire system, clutch and componentry, and a clutch capable of remote release. Finally, the inference being open, it was said that the failure on the part of Ramset to call any person relevantly a decision maker with Ramset permitted the inference that Ramset would never have entered the market, which was said to be mere commonsense anyway, more comfortably to be drawn.

47                  If it be correct to approach the question of quantification of damages in this way it is necessary to first determine what proportion of Ramset sales should be attributed to Advanced. There remains then only the question of determining what profit Advanced would make on so many of the sales actually made by Ramset in the period until 1999 (and indeed, causally, beyond) as I might determine would have been made by Advanced and not by the other two existing companies which marketed remote release clutches and componentry, namely the Reid system and the Dayton system. Accordingly, accounting evidence was called to assist in the making of these calculations. Competing evidence was led by Ramset. There was considerable agreement between the accountants on many matters, but there were left for decision by me a number of matters on which the accountants differed. To assist this process the two accountants were sworn together and discussed their competing views.

48                  The correctness of this approach was not accepted by Ramset. The submissions made by Ramset, rather than concentrating upon breach of s 52 of the Trade Practices Act, commenced with the question of damages for the patent infringement. Somewhat non- controversially, the principle to be adopted was, it was said, to ascertain what profits, if any, Advanced would have made as patentee but for the infringement. This involved, it was submitted, identifying the extent to which Ramset infringed the patent after Advanced became the proprietor of it on 22 November 1990 and reconstructing the market to determine what additional sales Advanced would have made but for the infringement. This determination had to be made against the prospect, it was said, of Ramset adopting, as it ultimately did, so it was submitted, in 1999, a non-infringing commercial alternative, namely, a different clutch. Other significant difficulties were, so it was submitted, that Advanced’s accounting records were so unreliable that it was impossible to show what profits might have been earned but for the infringement and, in any case, it was submitted, Advanced was insolvent and so would not have been in the position to expand its business to make the sales which Ramset in fact made.

49                  It was further submitted by Ramset that there could be no infringement where end users did not use the clutch supplied in a way which infringed the patent. The submissions accepted that the Full Court had found infringement to arise where Ramset had procured users to use a clutch with the attachment of an extended lever arm but then proceeded to argue that although the Full Court had held use with a chain to which a release cable or rope was attached in such a way that the chain, wrapped around the bail of the shackle, operated to block the movement of the lever arm was an infringement, it had given little attention to what evidence there was to show that Ramset had procured infringement in this way. It was accepted that there would be infringement where Ramset itself supplied a clutch with chain attached and instructions for passing the chain around the shackle or without chain attached but with oral instructions to add it and pass it around the shackle. It was also accepted that infringement might occur where Ramset supplied a clutch with a chain leaving it to the user to pass the chain around the shackle or where Ramset left to the user the addition of a chain, in both cases in accordance with an earlier operating practice established by Ramset. There was, it was submitted, no evidence that any such oral instruction had in fact been given. Further, it was said, the evidence did not establish use of the Ramset clutch in this way to be an invariable practice because there was evidence that it was perfectly workable to pass the chain through the shackle without the blocking effect. So, too, there was evidence before the Full Court and supplemented by further evidence in the current phase of the proceeding that the clutch was used extensively, or perhaps mostly, with only a rope which passed through the shackle. Such use was not, on any view of the matter, an infringement and a supply by Ramset to customers who used a clutch in this way could not be procurement. Finally, no finding that Ramset had established any such operating practice was said to have been made, nor was there said to be evidence to support any such finding.

50                  It may be noted that the Full Court had in the course of its judgment said that passing the chain to the side of the shackle was the way the clutch was used in practice. In effect, the submissions of Ramset seek to challenge that conclusion and point to the fact that in the earlier infringement hearing I had found that there were a number of persons, to whom Ramset had supplied clutches, who had not used the clutch in a way which infringed the patent, but had, indeed, elected to release the clutch manually.

51                  In a submission reminiscent of the approach that had appealed to me at the earlier hearing but was rejected by the Full Court, Ramset submitted that Advanced had led no evidence to identify the total number of infringing end uses of the Ramset clutch but rather had confined itself to anecdotal evidence of occasional infringing use. In parenthesis it may be said that Ramset had likewise led anecdotal evidence of non-infringing use, even in the present rehearing. The Court should not, it was submitted, fill the gap by extrapolating “generously” from the anecdotal material the extent of infringing use. In oral submissions, the difficulties I had previously stated in relation to establishing any figure for damages were referred to, notwithstanding that they had been found, implicitly at least, erroneous by the Full Court.

52                  Both sets of submissions, so far as they address this initial step in the calculation of damages, conceal a difficulty. While it is clear that the Advanced submissions look at the matter through the eyes of contravention of s 52 of the Trade Practices Act, whereas the Ramset submissions look at the matter through the eyes of patent infringement, they both fail to appreciate that the relevant contravention, whether for a breach of the Trade Practices Act or for patent infringement, is not a single act constituted by a course of conduct. At least strictly, each supply of a clutch by Ramset involved a separate contravention of the Trade Practices Act,just as each supply that constituted procurement involved a separate patent infringement. Both, although in different ways, involve a reconstruction of the market as a consequence of breach or procurement of infringement, rather than concentrating upon the loss of profits brought about by Ramset procuring infringement or failing to warn at the time of supplying a clutch as the case may be.

53                  While no doubt it is correct to conclude that failure to warn would constitute a breach of the Trade Practices Act, it is also correct to say that there could be no loss to Advanced where the supply was made to a person who did not use the clutch in a way which would infringe the patent. Such a person, if warned that use in a particular way would infringe the patent, would presumably have obtained clutches anyway from Ramset because that person did not propose to use the clutches in the infringing way. To ignore that fact and argue that no supply would have occurred if there was a requirement to warn is not, in my view, what is meant when the cases require that damages be considered on the basis that what is required to be determined is what an applicant’s position would be if the tortious (or more accurately the proscribed) conduct had not taken place. The proscribed conduct is not the supply. It is the failure to warn. The fact is that Ramset did make each and every one of the clutch supplies complained of until 1999 in circumstances which breached the Trade Practices Act. It seems to me that in a case such as the present it is assumed that the respondent would make a supply, but would do so in a way that is not misleading or deceptive. The approach which assumes no supplies at all would be made overcompensates Advanced for it ignores the fact that Advanced suffered no loss as a result of the misleading or deceptive conduct in cases where persons who used the clutches were not misled or deceived by the failure to warn.

54                  Associated with the problem just identified is the assumption that because the Full Court referred with approval to the case law on inferring reliance it can be assumed that the Court was holding that a loss arose to Advanced on the occasion of every supply of a clutch or sale of componentry by Ramset. As I have already noted, there was evidence both in the initial infringement hearing and in the present phase of the proceeding that not all persons who purchased or were otherwise supplied clutches used the clutches purchased in a way which infringed the patent. As will appear from my discussion of the evidence adduced before me (and there was not dissimilar evidence adduced at the first hearing on infringement) it is clear that there were persons who did not rely on the representation constituted by the failure to warn when they acquired clutches without the warning. These were the persons whose use of the clutches would be a non-infringing use. To compensate Advanced for profits which it is suggested Advanced lost when Ramset made a supply which did not result in an infringement of the patent would, in my opinion, be unfair and hardly within the contemplation of the Full Court.

55                  The conceptual problem is even greater when one comes to consider the submissions of Ramset. A considerable part of the Ramset case turns upon the argument that Ramset could, in a relatively short time, have constructed a clutch which did not infringe. So, it is said, one starts with the first infringement, determines the time it would take to manufacture a clutch the use of which would not involve an infringement, and damages are then limited to any profit that is shown might have accrued to Advanced had Ramset not made supplies during that time. I shall discuss later the evidence dealing with the actual development of what may hereafter be referred to as the “non-infringing clutch”. Suffice it to say here that I would find that it would have taken around one year for Ramset to design and have on the market a non-infringing clutch.

56                  However, it does not follow, in my opinion, that damages are limited to such profits, if any, as Advanced may have made if Ramset had not procured infringement and thereby the acquisition by infringers of clutches (and through that further supplies of components) in that 12 month period. Since each supply of a clutch with extended lever arm or chain attached could constitute an infringement, the period of 12 months is of no assistance to Ramset. That period runs from the time of each such supply and each occasion of loss was the purchase of supplies for use with that clutch in an infringing way. Had the non-infringing clutch been available at the time of each such supply then, perhaps, the existence of the non-infringing clutch would be an answer to an action for infringement. But, it was not.

57                  This is not to say that the approach of taking Ramset sales, treating them as being allocated to Advanced and other persons in the market on some reasonable basis, and then applying the rate of profit which it could be expected Advanced would make, had it made the sale, is not a useful starting point. However, what it means is that the figure arrived at must be adjusted downwards to allow for an estimate, as best as can be made, of the sales which were made to persons who did not use clutches in a way which would infringe. It will also be necessary to take into account matters such as the geographical absence of Advanced in some markets in Australia (as Advanced concedes) or an overall Australia wide market share of Ramset which takes that into account. These, however, are matters of detail, not matters of principle.

58                  So far as I understand the judgment of the Full Court and its rejection of the difficulties which I pointed out as existing in calculating damages where not all clutch supplies were infringing supplies and not all users in fact infringed the patent, it was the Full Court’s view on the evidence as it existed at the end of the first infringement hearing (and there is really nothing in the evidence adduced in the present phase of the proceedings which dispels that impression) that Ramset did both infringe the patent and breach the Trade Practices Act and that Advanced did suffer substantial damage, no matter how difficult it may be to calculate with any precision, or indeed on any scientific basis, the quantum of that loss. So it is the task of the Judge charged with assessing damages to do the best he or she can with the evidence at hand and to come up with a figure which compensates, but not over-compensates, Advanced for the loss it suffered. In principle, it is difficult to see that the result should differ whether the loss compensated for is the procurement of others to infringe or the misleading and deceptive conduct.

59                  Having now dealt with the approach to be taken in a general way it will be necessary to turn to the very many matters which divide the parties. Some of these are as follows:

(a)                What was the situation that should prevail in respect of the period prior to the date Burke assigned the patent to Ramset, namely, 22 November 1990?

(b)               Accepting there was both a procurement of infringement and misleading or deceptive conduct by Ramset, what was the extent of loss suffered by Advanced between November 1990 and June 1993 at which time Ramset ceased to supply, so it is said, clutches with extensions fitted to the short lever arm?

(c)                What, if any, was the extent of the loss Advanced has proved was suffered by it between June 1993 and the date of the judgment at first instance in the infringement proceedings, namely, 13 April 1995?

(d)               What, if any, was the extent of the loss which Advanced has proved was suffered by it in the period between 13 April 1995 and the date of the Full Court judgment on 5 July 1999?

(e)                Whether damages can be awarded from 5 July 1999 to the date of judgment when in that period there was neither infringement nor misleading and deceptive conduct.

(f)                 In respect of sales of anchors and other componentry to persons to whom Ramset supplied clutches in circumstances constituting procurement of an infringement of the patent or misleading and deceptive conduct were such sales lost solely to Advanced or did Ramset take sales from other competitors in the market as well or, in fact, increase the market so that if Ramset had not made the componentry sales, no additional sales would be made by Advanced at all? This question also requires consideration of the basis (if at all) on which lost sales should be allocated among Advanced and the other competitors.

(g)                How long would it have taken Ramset to design and have available for marketing a non-infringing clutch? Tied up with this question is an issue raised by Advanced that the clutch in fact currently being marketed by Ramset itself infringes the patent.

(h)                Was Advanced at any time in the period insolvent so that it would not have been able to finance the increased outgoings that it would be necessary for it to make if the potential Ramset sales had been available to it?

Pre November 1990 damages

60                  Ramset submits that the question of damages should commence with the identification of the extent to which Ramset infringed the patent after the date of assignment of the patent from Burke to Advanced on 22 November 1990.

61                  Clearly, if the present were merely a claim by Advanced as registered owner of the patent for damages, the Ramset submission would need to be accepted. However, Burke is a party to the proceedings and would be entitled to damages for infringement by Ramset in the period to assignment. As Burke had licensed Advanced to use the patent prior to assignment on payment of a royalty, Advanced, likewise, would be entitled to damages subject, of course, to adjustment between Advanced and Burke in respect of licence fees. Senior Counsel who appeared for both Burke and Advanced requested that I not, at this stage, consider any question of adjustment between Burke and Advanced by way of royalty or otherwise, but that I proceed on the basis of calculating damages as if Advanced were the assignee of the patent from the date when Ramset first marketed the Frimeda clutch and that at some time after judgment, but presumably before judgment is entered, an adjustment be made between Burke and Advanced in accordance with the agreement of these companies. I am prepared, at this stage therefore, to put aside any adjustment necessary to be made between Burke and Advanced and proceed on the assumption that the rights of those parties will be adjusted in due course. Accordingly, damages need to be assessed from the date of the first occasion when Ramset procured infringement by its customers consequent upon supply of Frimeda clutches some time in 1988. For practical purposes this can be taken to be 1 July 1988.

1 JULY 1988 to June 1993 Damages

62                  Since I found initially that in this period Ramset engaged in behaviour that was misleading or deceptive by failing to warn persons to whom it supplied either the Frimeda clutch or the later Ramset clutch that use in the way dealt with in the patent would constitute an infringement of the patent of which by this time Advanced was the proprietor, and since I do not read the judgment of the Full Court as suggesting that this finding was other than correctly made, it may be said not to be strictly necessary to consider what, if any, infringements may have occurred in this period in the sense of acts of Ramset which might be said to be or amount to procurement of an infringement. However, Ramset submits that my conclusion on the s 52 issue was not accepted by the Full Court (although clearly it was not rejected either) and that I should proceed for present purposes to ignore s 52.

63                  I do not think that the judgment of the Full Court in any way casts doubt on my conclusions in respect of s 52 of the Trade Practices Act and I certainly do not think that I can just ignore the consequences of the misleading and deceptive conduct which Ramset engaged in. It is obviously the case that each supply by Ramset of a clutch in circumstances which involve it procuring an infringement will likewise involve a breach of s 52 and damages for any loss suffered as a result of the breach. However, not all breaches of s 52 will involve loss. It will be only those breaches which involve procurement. The damages for procurement or breach of s 52 should be identical. However, the case made under s 52 is wider in that the supply by Ramset of all clutches in the period involved conduct that was misleading and deceptive whether or not Ramset procured an infringement of the patent. This is so, notwithstanding that not all persons who acquired clutches from Ramset used them in a way which infringed the patent. Nevertheless, it was only where they did that Advanced suffered loss.

64                  It is convenient now to consider the issue of infringement in this period and to determine the extent to which Ramset made sales of components in this period to persons who used clutches supplied by Ramset in an infringing way.

65                  The matters said by the Full Court to show infringement were:

(a)                That Ramset with knowledge of the patent determined to enter into competition with Advanced, selling or otherwise supplying initially an almost identical clutch and later a clutch similar to that specified in the patent, save that it involved a shorter lever arm.

(b)               The nature of the product, the persons to whom it was marketed, the nature of the work for which it was used and the circumstances of the sales pointed to the probability that the clutch would be used in a manner which would infringe the patent. By way of amplification, it should be said that remote or ground release was the safe method of operation of the clutch, although it would seem that some users released the clutches manually, climbing a ladder to do so. If remote or ground release was used it would most likely be in a way that would infringe the patent, whether or not it was possible to release the clutch from the ground by attaching a rope to the lever arm and threading that through the bail of the shackle in a way that would not infringe the patent.

(c)                A brochure of which there were 6000 copies, printed in 1988, which demonstrated the use of the clutches with an extended lever arm

(d)               The fact that Mr Finlay, Ramset’s Manager of Research and Development, promoted the use of rope release in seminars.

(e)                A product bulletin prepared by Mr Finlay in mid-1990 and made available to be handed out to interested persons which promoted the concept of ground release for face-lift tilt-up. The brochure made no reference directly to extended lever arms.

(f)                 That prior to June 1993, the Sydney office of Ramset always supplied ring clutches with extended lever arms. In the early days there were ropes attached as well but, in any case, it could be expected that contractors would add ropes themselves.

(g)                The Queensland branch of Ramset received clutches from Sydney with extended lever arms affixed in April 1993 and also with chains attached to the lever arms to which it was understood ropes were to be attached in use.

(h)                The brochure demonstrating use with an extended lever arm was continuously available in South Australia and was distributed from time to time. The brochure was also supplied by Ramset to customers in the Australian Capital Territory.

(i)                  After June 1993, clutches were supplied with a short lever arm and chain. I shall return to that matter under the next heading.

66                  On the basis of these matters, and considering the issue up to June 1993, the Full Court said at 263:

“On the evidence and the findings of the trial judge, the conclusion is inescapable that when Ramset supplied the equipment complete with release ropes and instructions for use, it procured the infringements which followed. The position was not materially different when it left to the contractor the mere attachment of a rope (or when it left to the contractor, as well, the attachment of an extension to the lever arm) in accordance with the instructions for use it had given (through the brochure, through Mr Finlay’s product bulletin and seminars, and through its technical advisers), and in accordance with the operating practice it had established. Accordingly, a finding of infringement should have been made.”

67                  It is submitted by Ramset that despite these findings, Ramset’s liability in damages is limited solely to the occasions when it either supplied Ramset clutches with extensions fitted to the short lever arm prior to June 1993 or when it supplied clutches to customers who, as a result of an operating practice that had been established by Ramset (those customers having received earlier clutches with extended lever arms fitted), thereafter made their own extensions which they fitted to a Ramset clutch supplied with a short lever arm. However, and leaving aside the question of the burden on Advanced in demonstrating who such customers were, it is submitted that there is no basis upon which I should, or presumably could, infer that this occurred to any significant extent.

68                  It was ultimately submitted that I should conclude that no sales by Ramset of face-lift anchors between November 1990 (that being when Advanced became the assignee of the patent) and June 1993 involved infringing activity by Ramset’s Victorian or Queensland branches and that at most only 40% of Ramset sales of anchors in New South Wales could be found to arise from any infringement at all. The Ramset New South Wales anchor sales in the period from 1 January 1991 to 30 June 1993 were (on certain assumptions) $115,916. On this basis, damages, if anything, should be limited, so it is submitted by Ramset, for the period to $28,979.

69                  The matters said to lead to this conclusion were varied. In part they related to the limited number of occasions on which Advanced had been able to prove acts of Ramset involving clear infringing conduct. So, for example, it is said that Ramset clutches with short lever arms to which extensions had been fitted were only proved to have been sold by Ramset’s Silverwater sales branch to eleven construction projects in New South Wales. There were only twenty such clutches that had been shown to be available for hire or loan in New South Wales. Only one occasion had been proved where 9 clutches had been supplied ex Sydney for use in Queensland. Clutches supplied by Ramset’s Newcastle sales branch had no modifications to the short lever arm. Only six cases of supply of short lever arm clutches to which extensions had been added had been proved to have been made by Ramset’s Canberra sales branch for use in construction projects in the area of the Australian Capital Territory and there was no evidence to support a finding of supplies in Victoria at all.

70                  Further, use of the brochure was said to be limited. It was said to have been introduced for the Ramset Building Products Division which was wound down and ceased to exist altogether in May 1990. In parenthesis, it may be said that while this is so, this was purely an internal reorganisation and hardly impacts upon the brochure or the effect it was capable of having and, clearly, must have had. It was suggested that the brochure was often not given to contractors as they would only throw it away and, without discussing in detail the submissions made about the brochure, Ramset otherwise sought to diminish the effect which the brochure might be said to have.

71                  The Product Bulletin PB108, introduced in around mid-1990, made no reference to the possibility of extending the short lever arm and should, it was submitted, be ignored. The fact that it spoke of use of a rope for remote release was treated in the submissions as immaterial. Treating it as immaterial ignores the practicality that the most effective way of remote release of a Ramset clutch by rope would involve an infringement of the patent. The fact that the Product Bulletin went to engineers, architects, technical libraries and students, not being users of clutches (although clearly it went to or was seen by such users as well), was said to diminish to this extent the significance of the bulletin since many, at least, to whom it went (for example, architects or engineers), would not be in a position to modify or use Ramset clutches. Later brochures or bulletins, starting with LR132/A (a Concrete Lifting Systems (“CLS”) bulletin) which replaced what was said to be the “superseded brochure of the defunct Building Products Division and PB 108” could not, it was submitted, involve procurement of infringements by Ramset.

72                  Reference was made in the submissions of Ramset to the training and seminar program conducted by Mr Poole around Australia in 1992 introducing the CLS product bulletins. In these, Mr Poole said that he stressed the importance of not modifying the Ramset clutch by adding pipes, D shackles, chains or ropes. I formed an unfavourable impression of Mr Poole’s evidence in the present proceedings. So far as he claimed that in his seminars he suggested that no modifications be made, either because so to do would jeopardise Department of Labour and Industry approval ratings of the Ramset clutch or because of possible infringement of another (perhaps Advanced, perhaps not) patent, I do not believe him. I accept he probably did say, although not stress, that modifications to the clutch should not be made but I would find also that he was concerned to promote remote rope release of the Ramset clutch, if only because that was the only sensible and safe way the clutch could be used. Without remote release as a possibility Ramset would, in my view, have made few sales at all. I would find that, at the most, Mr Poole’s evidence merely suggests that those who attended the seminars at which he participated would go away with mixed messages and far from prompted, as Ramset sales personnel, to discourage use of the clutches in a way which would infringe the Advanced patent. Indeed, it is clear that both Mr Lasker and Mr Henry from the Sydney office of Ramset supplied clutches with extended lever arms or otherwise promoted use of the clutch in this way in the period and after the seminars had taken place.

73                  Then it is suggested that while the Full Court may have been correct to speak of the “operating practice” which Ramset had initially established by promoting use of a clutch in a way which infringed the patent, that was only correct in the days before October 1989 when the evidence showed that the Sydney office of Ramset supplied Frimeda clutches with extended lever arms and ropes attached and to the period between October 1989 and June 1993 when Mr Lasker supplied Ramset clutches with an extension arm and chain. However, Mr Lasker’s evidence was that such supply ceased in June 1993. The practice was limited to New South Wales and it was submitted that changes in personnel in the industry (the evidence was that employed persons moved in or out of the industry) made the continuation of the operating practice insignificant with time.

74                  Reference was made to the lectures and seminars on tilt-up construction given by the Cement and Concrete Association of Australia (CACA) at which information relating to both the Burke and the Dayton systems was disseminated, as suggesting that Ramset could not be responsible (and had, therefore, not procured infringement) if persons modified clutches as a result of what they had learned from other systems, other information dissemination sources, or for that matter from Advanced itself. The evidence makes clear that Advanced had been most active in promoting face-lift tilt-up through CACA from as early as 1982 and had promoted remote ground release. This promotion had given exposure to the method in the patent in Victoria and indeed throughout the country. Information about ground release was available in industry journals from at least 1982 or 1983. So, it was submitted, Ramset should not be held liable for the adoption by persons in the industry of an operating practice in fact promoted by Advanced itself, CACA and others dating back to the early 1980s.

75                  There are a number of answers to the last submission. First, it is no answer to, and in fact makes out a good argument for, the finding of misleading and deceptive conduct. Clearly, Ramset set out to manufacture and sell a clutch closely resembling the Advanced clutch, save with a shorter lever arm. It did this only after selling the Frimeda clutch, a clutch that was nearly identical to that marketed by Advanced. It did so also against the background that a clutch would not be viable unless it could be used or adapted for use with remote or ground release. Sales of anchors and other componentry would only be made by Ramset in significant volume if Ramset had a clutch on the market so that purchasers could, if they wished, buy the whole, or substantially the whole, face-lift tilt-up system from it. Secondly, there is much to be said also for the view that the matters which go to a finding on s 52 likewise, in the present case, go to a finding of infringement. In fact, the judgment of the Full Court so suggests. Thirdly, the submission ignores the obvious, that persons induced, originally, by Ramset, into buying or hiring or otherwise obtaining the Ramset clutch and using it in a way which infringed the Advanced patent, pass that knowledge on by word of mouth or example. Even if it be the case that there is a high turnover in the industry, it is highly likely that persons leaving, or remaining after a colleague left, would impart their knowledge to new personnel, assuming the new personnel were new to the industry. The loss of sales through such activity is a consequence, and not a remote consequence, of the procurement by Ramset. But, the evidence was not as clear as may be suggested about turnover anyway. Indeed, it seems that while there is turnover in the industry those who leave often return. Further, while personnel may change there are only a small number of substantial players in the industry (eg Brambles) which, while they may employ different people from time to time, are likely to continue with an operating practice originally developed as a result of the Ramset procurement. In other words, the apparent high level of turnover is far from as high, or as significant, as it at first sight may seem to be.

76                  In my view, there is evidence, as the Full Court said, that Ramset did promote a practice of using its clutch in breach of the patent and that it established that practice. The fact that Advanced and others had established a practice of use of the Advanced clutch or similar systems by way of remote release is not to the point because Ramset built on this practice in promoting its own clutch as being able to be used by way of rope remote or ground release and in a way that would infringe the Advanced patent.

77                  It follows that I would reject the Ramset submission in respect of the period commencing November 1990 (the real starting point should, in any event, be 1 July 1988) that the damages should be limited to approximately $29,000. Subject to the many other arguments yet to be resolved (including the question whether Ramset grew the market and the question of what percent of the sales made by Ramset could be expected to have been made by Advanced had there been no infringement or, for that matter, no misleading and deceptive conduct) I am of the view that in this period, at the very least, Advanced should be entitled to receive damages by reference to the proportion of sales which Advanced had made prior to Ramset entering into the market as against the proportion of sales made by Burke and Dayton of their clutches or componentry.

78                  On the market share estimate made by Ramset itself at or around the time it set out on its course of putting a Ramset clutch on the market that figure is 50% of the Australia wide sales of Ramset made in this period. It is appropriate here to say something about the Advanced market share at the time Ramset set out on its course of marketing a clutch either identical or similar to the Advanced clutch.

Advanced Market share as at 1988-9

79                  In evidence at the initial hearing was the Ramset Frimeda Marketing Plan of August 1987. The purpose of the document being created was, inter alia, to show to recipients results of an initial investigation Ramset had made into the tilt panel market in Australia in the period up to the time the report was prepared. In that document, Ramset estimated, as a result of the market research it conducted, the sales made by each of Advanced, Reid and Dayton and the projected sales by these companies thereafter. On extrapolation of the figures shown for market share projections through to 1988 and an assessment of the then market, the estimate shows that Advanced had approximately 50% of the market in 1988. While the absolute sales figures estimated by Ramset do not coincide with the actual sales figures of Advanced for the period, so that it is clear that the calculation was not an accurate prediction, but, at best, an estimate, there is no reason to doubt the validity of the proportionate estimation. This is particularly so where the proportion accords with Mr Davis’ own estimate of Advanced market share as being between 50 and 60 percent in 1988. Of course Mr Davis has a real interest in the result of the proceedings so that his evidence should be treated with caution. Nevertheless, the coincidence is of some significance, particularly when it is supported, at least in general terms, by estimates made by other witnesses in the proceedings.

80                  A number of witnesses in the present hearing gave their estimates of market shares at particular times including, for present purposes, the time Ramset entered the clutch market. Mr Sim, the Managing Director of Reid from the mid 1980s estimated the Advanced share of the market nationally at between 50 and 60%. Mr Metham, who worked under Mr Sim, thought the Advanced share of the market overall was around 45%. He said that in New South Wales Reid had about 20 to 25% of the market, Dayton 10% with Advanced about 65%; in Queensland Reid had 60% and Advanced had most of the rest; and in Victoria Reid had 10%, Dayton 45% with Advanced also around 45%. Mr Henry, a principal in the firm of Henry & Hymas, who had for approximately a year been employed by Advanced in 1984, said that in 1989 Reid had a small share of the market (about 5%, a percentage which he did not believe had changed), Advanced had 80% and Dayton 15%.

81                  There is no doubt at all that Advanced did, at the time Ramset came into the market, dominate the market in New South Wales, Reid dominated the market in Queensland and if Advanced did not dominate the market in Victoria (Mr Sim said that Advanced had 65% of the market, whereas Mr Metham suggested that Dayton and Advanced had 45% each of the market with Reid coming in with 10%) it certainly had a substantial part of the Victorian market. The face-lift tilt-up market in the remaining States appears to have been small. The Australian Capital Territory appears to have been largely serviced from New South Wales and perhaps included in the New South Wales figures.

82                  It is submitted on behalf of Advanced that the appropriate percentage of Ramset sales to adopt over the entire period for which calculation is required is 67%. This figure is arrived at on the basis that despite volatility in the market on the whole, Reid did not lose market share to Ramset but Advanced and Dayton did. It is submitted that it would not be reasonable to merely apportion Ramset’s sales between Advanced and Dayton (assuming none at all went to Reid) since, pre Ramset, Advanced’s overall market share was some three to four times that of Dayton which it is suggested should be seen to be in the order of 15 to 20% nationally. While an apportionment on this basis would result in Advanced having attributed to it approximately 80% of Ramset sales, Senior Counsel for Advanced submits that a reasonable figure to take overall would be two thirds of Ramset sales (ie 67%), which allows for what are said to be contingencies adverse to Advanced.

83                  While the evidence does suggest that on the whole Reid’s market share in unit terms did not change, it showed that Reid received a lower dollar amount for sales. It was forced to drop prices significantly as a result of Ramset embarking on a price war to promote its clutches. That is to say, I would infer that had Ramset made no sales at all Reid should have attributed to it the same percentage of Ramset sales as it previously had of the national market and that the same basis of apportionment should be assumed as between Dayton and Advanced. On this basis I think it more closely approximates what is just if only one half of the Ramset sales are attributed to Advanced in the first period. To the extent that other factors may intervene in later periods it may be necessary to reduce the percentage.

84                  This is a convenient place to note an aspect of the market in componentry upon which Ramset relies. There was considerable evidence adduced by Ramset, either in chief or in cross-examination, that users deciding to purchase face-lift tilt-up products would take into account the price of the product, the quality of the product, the service which is available from the supplier, the reputation of the supplier as an established supplier and the delivery of the product by the supplier. I would not think that this evidence would be controversial, although the weight which might be given to a particular factor could vary from purchaser to purchaser.

85                  The evidence also suggests that the market for face-lift tilt-up construction is price sensitive. Hence, when Ramset entered the market and engaged in a price war the sales of Advanced were likely to be affected because Advanced was reluctant to give discounts. In part, Advanced sought to disguise its pricing by quoting all-up prices for components rather than particular prices for some of them, for example, inserts. Dayton and Reid on the other hand were prepared to reduce prices and take on Ramset in a price war. Indeed there was some evidence that both Dayton and Reid themselves initiated price competition. While this latter matter is relied upon by Ramset, I do not think it has much significance. The share which Advanced had in the market was so much greater overall than either Dayton or Reid.

86                  It is submitted for Ramset that Advanced did not, at least after the closure of the Victorian and Queensland offices in January and September 1991 respectively, qualify as having a reputation as an established supplier, and perhaps given its lack of geographical reach thereafter could not give the service or delivery customers required. By comparison, relevantly Reid had branches and staff in Melbourne, Sydney and Brisbane and Dayton in Melbourne, Brisbane and North Queensland. Hence, it was submitted these companies were more likely to make sales in these areas in the event that Ramset had not been in the market.

87                  I do not find the submission particularly compelling. The price war which Ramset engaged in and the length of time in which it did so were quite different from price changes from time to time adopted by Dayton and Reid. Secondly, I would find that the Advanced product (and the Ramset product, that being virtually identical) was considerably more convenient and less clumsy than the Dayton or Reid product. While, no doubt, it was open to customers to use either the Dayton system (or the Reid system, since both were virtually identical) or the Advanced system, I am satisfied that generally speaking it was likely that had Ramset not entered into the market the relative market shares, while no doubt fluctuating from time to time in what was a volatile market, would more probably than not have remained much the same. I will discuss in more detail the significance of Advanced’s closure of its offices in Melbourne and Brisbane later. No doubt, as Ramset submits, there would be likely to be purchasers who might object to the quotation of an all-up price, or object to having to purchase the entire componentry from one source, or even not wish for some reason or other to deal with Mr Davis or Advanced. The requirement of Advanced that directors of companies guarantee trade accounts as a condition of credit might have lost, as Ramset submits, customers, although the requirement of trade guarantees is hardly unusual. All, or at least most, of these matters existed before Ramset came into the market. It may be accepted that from time to time Advanced had some problem with its bondbreaker as, indeed, did Ramset. However, in my view, none of these matters can be taken overall to militate against Advanced retaining its relative percentages in the event that Ramset had not been in the market.

88                  The calculation of damages in the present case is far from scientifically accurate. If it were, it might be possible to descend into greater specificity and calculate relative percentages in each State or Territory market and apportion sales within each market. Advanced concedes that its damages are linked to New South Wales, Victoria, Queensland and the ACT. It would quite likely be the case that even if Reid overall maintained the same market share, the impact of Ramset on Reid’s sales in some States differed from the impact in other States. Since the monetary value of sales in each State differed, the overall calculation would most likely not reflect a division of sales made on an overall country basis.

89                  The evidence does not permit me to descend into this level of detail. If one did, for example, one would see, as Mr Fairburn, a distributor for Advanced in the area of southern New South Wales said in his evidence, that in that area, which included Canberra, Reid maintained an overall share of less than 1% and the rest of the sales made by Ramset came from Advanced. However, I am of the view that overall it is an appropriate starting point to proceed on the basis that sales made by Ramset in the first period should be apportioned among Advanced, Reid and Dayton on the basis that had Ramset not procured infringements or engaged in misleading and deceptive conduct each would approximately have maintained the share of the overall market which it had as at the time Ramset entered into the market, but allowing for a slightly greater percent for Advanced in this first period since it is my impression of the evidence that the damage, at least at the outset, to Advanced was greater than it was to Reid. In other words, I propose to proceed on the basis that in this period Advanced was entitled to damages on the basis that had Ramset not infringed the patent or otherwise engaged in misleading or deceptive conduct Advanced would have made, say, approximately 50% of the sales which Ramset in fact made Australia wide. This percentage takes into account both the territorial limitation which is conceded and the apportionment of sales lost among Advanced, Reid and Dayton.

Should the calculation be made on the basis that Ramset would not have made any sales in Victoria or Queensland?

90                  In the period from August 1987 until January 1991, Advanced had an office in Queensland and from December 1986 to September 1991 an office in Victoria. In January and September 1991 respectively the Queensland and Victorian offices were closed by Advanced. It is submitted that given this closure, damages should be calculated on the basis that Advanced would not have made any of the sales which Ramset made in these states, so that the percentage of sales to be attributed to Advanced should be substantially reduced.

91                  In the course of cross-examination in the present proceedings, Mr Davis gave the recession which came at the end of 1990 and continued until early 1992 and bank pressure as two reasons for closing these offices. No doubt these two matters were relevant to the decision. However, he also said that the offices were closed as a result of the impact which Ramset’s entry into the market had on the Advanced business. In his affidavit evidence Mr Davis attributed the closure of both the Victorian and Queensland offices wholly to Ramset coming into the market. No doubt the recession affected all participants in the market. However, it is clear that when Ramset came into the market with the Frimeda clutch and procured customers to breach the Advanced patent it engaged as well in a price war. It sold at prices considerably less than those at which Advanced had previously sold. The price war would aggravate for Advanced the effect of the recession.

92                  Mr Metham, a structural engineer at the time working for Reid, said in this period inserts which Advanced sold for about $11.50 were sold by Ramset for $6.50 to $7.50. Reid reduced its prices in an attempt to compete with Ramset and so maintained its level of sales although the dollar value of the sales was reduced. It would seem that Advanced was reluctant to reduce its prices and in the result suffered in the price war. Not surprisingly, therefore, if only psychologically, the entry of Ramset into the market impacted on the decision of Advanced to retain offices in the two cities.

93                  There is a difficulty in endeavouring to predict what would have happened in Victoria or Queensland had Ramset not entered the market or, more accurately, neither infringed the patent nor engaged in conduct that was misleading or deceptive. By its nature, the premise upon which the prediction has to be based never happened. There is no doubt that the recession and bank pressure both existed and were factors in the decision to close the two branches. The financial evidence to which reference will later be made reveals the latter and the sales figures of Advanced, in both Victoria and Queensland around the time of closure, the former. I accept Mr Davis’ evidence that Ramset market entry played a significant part in the decision to close both offices.

94                  Senior Counsel for Ramset submitted that I should infer from the fact that Advanced did not thereafter attempt to reopen the offices in Victoria and Queensland that, after 1991 when the two offices closed, Advanced would not have been in the position to make sales in these two States. But the submission ignores the fact that the Ramset infringement and breach of s 52, coupled with the price war in which Ramset engaged, had a debilitating effect on Advanced and made reopening these branches financially difficult if not impossible. On the whole, I am of the view that it is more probable than not that had Ramset not entered the market and embarked on the price war it did Advanced would have retained the offices in Queensland and Victoria after 1991 and even if it might have closed them for reasons of the recession it would have reopened them once the recession ceased to have an impact.

95                  I might add that it is clear that Ramset had a much larger sales force and distribution network than Advanced. This is a matter also relied upon by Ramset in submitting that Advanced would not have made sales in Victoria and Queensland and, perhaps, elsewhere. However, the evidence shows also that more important than a large sales force engaged in sales of drills and the like is the existence of specialist technical advice available to users of face-lift tilt-up construction methods. Matters such as the number and positioning of inserts, not to mention the load rating of clutches and inserts, are clearly significant to users of these methods who require advice on such things. Ramset’s own sales performance suffered as at 1995 from the lack of such technical representation. This was a matter that led ultimately to a reorganisation of the CLS division. Advanced recognised the importance of, and provided, technical services, while Ramset did, so Mr Sim said in evidence, little but offer products for sale. Mr Hutchinson, another employee of Ramset (and also a civil engineer) said that every tilt-up job required a design engineer, but that Ramset engineers did not “sign off” on a project. They merely supplied the lifting point locations on the panels.

Damages in the period from June 1993 to the first infringement hearing

96                  The evidence establishes that in this period there were sales or supplies out of NSW of Ramset clutches to which there were attached a short chain. (Where I use in these reasons the word “sale” in respect of either Ramset or Advanced clutches I include transactions that might be termed loan, hire or gift.) Mr Lasker and Mr Henry, who gave evidence at the original hearing, confirmed they had sold clutches with chains attached during this period. Mr Lasker spoke of sales of 14 short lever arm clutches in New South Wales in the period from June 1989 to the time of the first infringement hearing. On any view of the matter these sales involved procurement. It is submitted, however, that there is no evidence of any other such sales, nor evidence of instructions given orally or in writing by Ramset to users advising that they pass the chain around the shackle (or, for that matter, themselves add a chain) so that the blocking action which results in an infringement of the patent would occur. The conclusion I should draw was, as submitted for Ramset, that in this as indeed in all subsequent periods Advanced could not show anything more than a minimal loss of sales or, indeed, any damage at all.

97                  I do not accept this submission. First, it does not take into account at all that Ramset had instructed users in the earlier period how to use Ramset clutches and that the consequences of that conduct in the first period would continue to manifest themselves throughout this second period. So far as it is appropriate to look at the matter in the light of s 52, Ramset continued in this period to breach that section. Had it in fact warned potential customers, it is highly unlikely that many of its customers would have purchased Ramset clutches. Clearly, some would have ignored the warning, purchased or otherwise acquired clutches, and used them in breach of the patent. A very much smaller number of purchasers might have been prepared to purchase or acquire clutches and use manual release, despite the danger inherent in that, or use a rope release in a manner not in breach of the patent, ie by passing the rope through the middle of the bail of the shackle, notwithstanding that this would seem to be a most inefficient means of ensuring trouble free rope release. On the whole, and doing the best I can, but accepting that the damages in this period can be seen to be somewhat less than in the initial period, I think it is appropriate to adopt a figure of 40% of Ramset’s Australia wide sales of face-lift componentry to reflect the territorial limitation of sales conceded by Advanced, the fact that sales would be distributed among Advanced, Reid and Dayton and also that there were some customers of Ramset who did not use clutches in an infringing way.

The period between the first infringement hearing and the date of the Full Court judgment in 1999

98                  A matter that had an impact in this period was the order I made that Ramset warn against use of its clutches by affixing a release cable and extended lever arm by attaching a tag to this effect to clutches thereafter supplied. The warning proved to be inadequate, as the Full Court found, in that it did not warn against the possibility of infringement by the use of a chain in such a way as to block the lever arm. Customers might well have inferred that use of a clutch in that way would not have resulted in an infringement of the patent. It follows, therefore, that Advanced continued to suffer loss in this period, although not to the same extent as it had previously suffered loss.

99                  Evidence was adduced as to the experience of particular witnesses who had either observed tilt-up construction in the period or had in fact used clutches in the period. So far as that evidence was adduced by Ramset it was intended to show that there was either no infringing use in the period or, alternatively, very little. In particular, it consisted of persons who said that clutches were released manually and with the use of a ladder, or that ropes attached to clutches were fed through the bail of the shackle, rather than wrapped around it in such a way as to cause a blocking action. Except so far as I will indicate in summarising that evidence I accept the truthfulness of the persons who gave it. The more difficult question is what conclusion I am able to reach from it.

100               The evidence showed that in some areas of Queensland users of clutches found it simpler to climb ladders. So much was said by Mr Metham, formerly employed by Reid. To the contrary was the evidence of Mr Price of CDA Products Pty Limited, an agent of Advanced and employed as a sales representative from 1988 to 1995 by Ramset (not involved in Queensland sales) that in almost all circumstances clutches of the type marketed by both Advanced and Ramset were released from the ground with a rope or rope and chain combination. Mr Henry of Henry & Hymas said that without ground release the time associated with having to release clutches manually could easily double or triple crane costs, which are one of the main costs of tilt-up construction. He said he could never recall having seen a clutch released manually except when it had jammed. Mr Sim said that the market demanded a ground release system.

101               Mr Wilson of Wilsons Mobile Cranes gave evidence that in the Sydney metropolitan area it was rare for a clutch to be released manually, unless the clutch jammed. Mr Toniolo of Everest Concrete Construction Pty Limited said it was common industry practice for clutches to be released remotely. Indeed, he had also never seen an occasion where the rope and chain had been passed through the bail of the clutch as opposed to around it. His experience was mainly in Victoria. His evidence suffered from some confusion as to whether he was speaking of Frimeda clutches or Ramset manufactured clutches. On his evidence, he had seen Ramset clutches with short pieces of chain attached to the lever arm and ropes attached since 1995. He said, however, that at least in the four years until the hearing in 2001 clutches had not been supplied by Ramset with chain attached. Mr Hymas, who also operated in the Sydney metropolitan area, said he had never seen Ramset clutches used other than with remote release. Mr Orchard, formerly with CACA and now with Queensland Cement Ltd said that while in the early part of the 1980s manual release had been used in Queensland there had been a couple of accidents there in the mid 1980s which focused the attention of the authorities on the safety problem. By the end of the 1980s he said that almost nothing else than ground release was used and that from the mid 1980s there was a virtual ban on manual release. Mr Corbett, a tilt panel constructor in Queensland, likewise gave evidence that it was almost universal for there to be remote release. This he said was carried out either by use of a rope or a rope and chain. He had earlier used an extended lever arm. He said that Ramset had supplied a chain for a while and that the chain had been passed around the outside of the bail of the clutch. Most revealingly, he said that despite the warning attached to clutches his experience was that “no-one really changed. You had to use the product”. It would seem that he was of the view that the clutches were useless without a rope and chain or extended lever arm because they just did not work. Although there was a question whether the warning he was referring to was the Advanced letter or the later warning attached by Ramset by tag to clutches supplied after the first infringement hearing, I think it is most likely that he was referring to the latter warning. Clearly, and this was to be expected, when Ramset supplied clutches without chains, those using them simply attached their own chains. I would infer that Ramset probably expected that result.

102               Mr Poole, a technical consultant with Ramset who had given evidence at the first hearing that he had seen manual release, now agreed that he had been talking there about precasting not face-lift. However, he said that hand release was still standard practice for face-lift. His evidence to this effect, which I reject, was rather diminished by cross-examination which suggested that his only observation of any standard practice was in the context of edge-lift or top-lift. There was, indeed, the possibility that he had attempted to mislead the court in his earlier evidence. I also do not accept his evidence that he was unaware that Messrs Lasker and Henry were supplying clutches to contractors with pipes or chains attached and release lines. I likewise reject his evidence that he had never seen remote release used. He knew that there was a need for Ramset to manufacture a clutch which permitted remote release and without the possibility of a blocking action.

103               Mr Hutchinson, a former employee of Ramset, had the view after the first proceedings that customers could rope release a clutch without infringement so long as no extended lever arm was used. His understanding was that the normal way in which the Ramset clutch was released involved feeding the rope or cable around the back of the bail of the clutch’s shackle and that this did not change until Ramset finally marketed its new clutch.

104               Evidence of manual release, adduced on behalf of Ramset, included a Mr Herbert of Toowoomba, an employee of Ramset, who said that he had seen many clutches released manually, although it seems not in face-lift operations. He had never seen remote release for face-lift tilt-up clutches. I was left with the impression that he had seen few face-lift operations and I gain little assistance from his evidence.

105               Mr Hunter, a director of Cambar Precast Pty Ltd of Port Melbourne, sought to convey, or certainly that was the impression he gave, that he had never seen a face-lift clutch used in a face-lift operation released with ropes on-site. However, under cross-examination it became apparent that his use of clutches was for edge-lift operations, rather than face-lift operations. Somewhat confusingly he appeared to regard the clutch ultimately developed by Ramset for use as a face-lift clutch which operated without a blocking action, ie the non-infringing clutch, as an edge-lift clutch. I gain no assistance from his evidence.

106               Mr Tathem of Tony Tathem Constructions Pty Ltd gave evidence that he had never used an extended lever arm and had always used rope release. In his view, the use of a ladder for manual release was dangerous. However, he said that he had attached a rope to the lever arm and passed it through the centre of the bail, rather than wrapping it around the bail. He claimed to use a whipping action to release the clutch this way. He suggested that if the rope went around the back of the shackle there would be a greater danger of severing the rope unless a chain was used. His credit rather suffered in cross-examination and his oral evidence at times conflicted with the affidavit he had sworn. I do not accept his evidence.

107               Mr Riddell was a director of Fetosa Pty Ltd. He said that he used an extension arm from around 1990 to 1992 but not thereafter. He said that he had been told by a Ramset representative in 1995 that he should not attach a rope to the small lever arm because so to do was an infringement. It is highly unlikely that this was so, particularly as the state of the law at that time, at least as I had decided, was that it was not and that it was only where an extended lever arm was fitted that there was an infringement of the patent. Although he said that he had not used a rope with the Ramset clutch since 1995, I do not accept this evidence. However, I do accept that it is possible that he did use a ladder from time to time to release clutches manually. His evidence that where a chain and rope were attached to the clutch the intended use was to feed the chain through the centre of the bail and that it really made no difference whether or not the chain was wrapped around the bail I do not accept.

108               Mr Casey was from Queensland. He had used Dayton clutches before changing to Ramset clutches in 1998. He said that rope release was standard practice in Queensland as indeed I find it was. His evidence was that when he had met Ramset representatives he had asked about rope release and had been told that there was no way the Ramset clutch could be released from the ground. I find it highly unlikely that he was told this. It is possible he was told, as he said in his affidavit, that Ramset had no system available that would enable ground release, which was strictly true in that Ramset short lever arm clutches were generally not provided with a rope or chain, although clearly it was obvious that attachment of a rope and/or chain was a good starting point. Ultimately, in cross-examination, he conceded that perhaps all that he was told was that Ramset did not supply the rope or an attachment to the lever arm and that he could provide that himself. His evidence was that his organisation came up with a rope and chain. He said that the rope just dropped down and did not go through the shackle. Hence, when the clutch was lowered to approximately 45 degrees from the vertical so that pressure was taken off the cable attached to the clutch the lever arm could be pulled and the clutch released. This part of his evidence I accept, although it is clear that the most efficient use of a clutch with chain and rope attached was to wrap the chain around the bail of the shackle of the clutch and thereby promote a blocking action but thereby also breach the Advanced patent. I also find it hard to understand why a chain would be used at all if the clutch was used this way when a rope alone would presumably suffice. The point of the chain was to promote a blocking action.

109               Mr Sprecak had commenced as a director of G & M Panel Constructions Pty Ltd in 1994. He had formerly been a concrete finisher and in that capacity had observed remote release of clutches. His evidence was that it was common for clutches to be released from the ground. He too had previously used Dayton clutches but had switched to Ramset. He said that he had not wound the rope around the back of the shackle but had rather used it in the same way as Mr Casey. In releasing the clutch he said he used a whipping action. He said that he had been told by the Ramset representative when he changed from Dayton that the clutch could be released from the ground and that the representative had shown him how this was done. Presumably the Ramset representative had, so his evidence implied, demonstrated the method of not passing the rope around the bail of the clutch’s shackle, but rather through it.

110               Evidence was also adduced from Mr O’Connor who had worked for Ramset originally in Newcastle and later as Manager for the Northern Region of New South Wales. Mr O’Connor is currently Manager responsible for Ramset’s National Service Centre. He said that he had attended construction sites from time to time (this is highly likely) but could remember only one face-lift operation which he had seen where the clutch was released manually using a ladder. No doubt there is a possibility that his memory was poor, but his oral testimony did not wholly coincide with the evidence on affidavit which he had given in the previous hearing. He suggested that remote release should be effected in the same way as Mr Casey said was used. I would not, having regard to his cross-examination, place any weight on this part of his evidence.

111               As I have already indicated, there is a difficulty as to what conclusions to draw from this evidence. I would find that there were customers of Ramset who did use manual release, relying on a ladder to effect that. However, it is obvious enough that so to do was dangerous. This was appreciated in Queensland, although apart from accidents some may have continued to release clutches manually in face-lift operations. In Victoria, the evidence shows there was actually a safety standard issued by the Department of Labour as a Code of Practice for Tilt-Up Construction which required that there be a remote release function for clutches. That was issued in October 1987. It would obviously have come to the notice of persons in the industry. I would not infer from the evidence of isolated witnesses that a significant number of users ignored the safety aspect as well as the increased crane time cost involved in manual as compared to remote release and continued to release clutches manually.

112               The evidence does establish that some users, while not releasing clutches manually, did attach a rope (or rope and chain perhaps) to the lever arm and use the clutch in a way that did not involve a blocking action. While this is possible, it does create problems that in my view the evidence establishes would not exist if the clutches were used with an extended lever arm or with a chain and rope in a way that would be wound around the shackle to provide a blocking action. Just as evidence of non-infringing use by individual witnesses does not prove the extent of infringement, so too evidence of non-infringing use does not prove that non-infringing use to be the norm or even to be the manner of use in a significant percentage of cases, particularly where use in such a way seems illogical. I am conscious that the burden lies with Advanced to show not only infringement but the extent of it. While the extent of infringement is not shown by the evidence of individual users, such evidence as has been adduced, including evidence as to the way Ramset marketed the clutch and the steps it took when it brought the clutches on the market, coupled with common sense as to the way the clutches were designed to be used, lead me to conclude that even in this period there was a substantial infringing use by Ramset customers that was procured by Ramset, whether by continuing their infringing use, notwithstanding the warning, or using the clutches with chain attached, but in such a way as would constitute an infringing use.

113               I would find, therefore, that in this period infringing use continued and likewise damage to Advanced in the form of lost componentry sales continued, although to a somewhat lesser extent. In this period, also, the warning given by Ramset was both incomplete and misleading, as has already been noted, in that while the warning dealt with the extension of the lever arm it did not deal at all with the addition of a chain and/or rope and consequent use in a way which infringed the patent. The terms of the warning probably suggested or at least implied that any modification other than the addition of an extended lever arm would not infringe the patent. As I have already noted, the warning was in a form acceded to by Ramset (which had suggested some of its language) and it might be inferred took that form because Ramset contemplated that users would follow the example set by it in supplying clutches with chains attached and themselves attach a chain and rope and take advantage of the blocking action that could thereby be produced. Further, the fact that the misleading and deceptive conduct on the part of Ramset was engaged in in accordance with a court order would provide no defence to a breach of s 52. That section is not concerned with motivation or indeed justification for conduct, it is concerned with the conduct itself.

114               In my view, however, it would overcompensate Advanced for lost sales to calculate the damages, as Advanced would have it, on the assumption that the same percentage of lost sales that I adopted in relation to the periods prior to my judgment in the first infringement hearing should continue to be applied in the period between the hearing at first instance and the delivery of the decision of the Full Court on the appeal. Some allowance must be made for the fact that there would be persons who came into the industry and did not use the Ramset clutches in a way that would infringe the patent and other persons who were unaffected by the incomplete failure to warn either because they used Ramset clutches by passing a rope/chain attached to the lever arm through the bail of the clutch or effected manual release. It is not insignificant to note that it was only after the Full Court decision that Ramset decided that it could not continue to market the clutch with the short lever arm and went about, urgently, designing and, ultimately, marketing a new clutch which it hoped, at least, would not infringe. For this reason, I would find that the percentage of Ramset sales that should be attributed to Advanced in this period is 35% of Australia wide sales. Again, the percentage allows for the territorial limitation of sales conceded by Advanced.

Did Ramset “grow” the market?

115               An issue that has to be resolved is whether Ramset by entering the market with a large established sales force could be said to have grown the market so that some of the sales which it effected over the various periods could be said to be sales which would never have been effected by any of Advanced, Reid or Dayton. The Full Court judgment at 259, albeit in a somewhat different context, refers to the issue. Their Honours say:

“One of the consequences of a large company, such as Ramset, entering the market may well have been a greater expansion than would otherwise have occurred of the number of contractors learning about and using the system it espoused. That is relevant to damages, as a factor tending to show that not all the sales effected by Ramset would, in any event, have been effected by Advanced…”

116               There is little doubt that the extensive sales network of Ramset gave it an advantage in making sales. I have already referred to the countervailing argument that specialist engineering advice may have been more important than a large and relatively untrained sales force.

117               It is submitted for Advanced that the sales figures for Advanced in the period up to the entry of Ramset showed that year by year the market was increasing naturally as persons in the industry, whether through seminars, literature, word of mouth or experience, adopted face-lift tilt-up as a means of construction. Up to 1989, the evidence of Advanced sales figures, to the extent that those figures are accepted (and I shall deal with that problem later) indicate sales increases of 62% between 1985-6, 48% between 1986-7, as low as 40% between 1987-8 and an increase of 52% in the period 1988-9. Thereafter, it is clear that Advanced sales declined as Ramset introduced first the Frimeda clutch and later the Ramset clutch and in circumstances which constituted procurement of infringement or misleading and deceptive conduct, so that it was not until 1998 that the actual level of sales achieved by Advanced might be said to have returned to the levels they were in 1988-9.

118               The submissions of Advanced on other aspects point to problems that Ramset had in the period with low profit margins which could have affected the motivation of the sales force to promote the Ramset CLS products, problems which Ramset had with the manufacturing process and with the bondbreaker it had used and the fact that Ramset did not supply braces in some of the period so that customers did not have the ease of being able to purchase or otherwise obtain from Ramset the entire range of products needed for face-lift tilt-up operations. These submissions sit uneasily with the sales figures of Ramset which show very considerable growth.

119               No doubt, as Mr Davis argumentatively suggested, the market growth was a consequence of increased building work, at least following the recession of 1990-1992. Ramset indeed, in its 1987 marketing plan, observed that the market was growing at an exponential rate and estimated that this growth would continue. There seems little doubt that tilt-up construction is cost effective and an economical means of construction. It had been heavily promoted before the entry of Ramset both by Advanced and CACA through seminars. It could, therefore, be expected that the market would grow and grow considerably in the period until the date of the present hearing, although it seems that, at least in Victoria, there has been now for some years a shift to edge-lift, rather than face-lift construction and consequently, it might be expected, there has been a gradual decrease in the market for face-lift tilt-up components in that State.

120               As Senior Counsel for Advanced pointed out there was no evidence sought to be led by Ramset of persons who were introduced to, or persuaded to adopt, face-lift construction as a result of Ramset being in the market. However, I have no doubt that Ramset’s entry into the market had an impact on the size of the market even if, as in so many matters in the present case, it is difficult with any confidence to determine the percentage factor. To ignore this increase would, in my opinion, produce a result that is unfair and overcompensate Advanced when, in truth, had Ramset been absent from the market some sales would simply not have been there. It is for this reason that I would, in the period from the date of the first judgment, apply a discount factor of 5% per annum to the percentage figures I have found to allow for increased sales generated solely by Ramset’s presence in the market.

The likelihood that Ramset would develop a non-infringing commercial alternative

121               I have already noted the submission of Ramset that the Advanced damages should be limited, or taken to be virtually nil, because it was always open to Ramset to develop a non-infringing alternative and relatively quickly. In support of this submission, evidence was given by Ramset of the development and ultimate manufacture and sale of a new clutch, no longer similar in design to the Advanced clutch, the use of which was claimed not to infringe the Advanced patent.

122               The starting point of the submission is the decision of the United States Circuit Court of Appeals for the Federal Circuit of Grain Processing Corporation v American Maize-Products Company 185 F 3d 1341 (Fed Cir 1999) (“Grain Processing”). In that case the appellant sought damages for lost profits for infringement of a patent for a food additive purchased in large quantities by food manufacturers annually. The respondent defended the damages claim, successfully, on the basis of findings that a non-infringing substitute was available, although not on the market for sale during the period of infringement because while it was capable of being produced it was not. The substitute was found to be acceptable to purchasers and accordingly it was found that damages should not be awarded because the loss had not been shown to be caused by the infringement when applying a “but for” test of causation.

123               There are a number of problems with the submission in my opinion. First, if such a defence is available in Australia, a matter which I will later discuss, it would only be where the factual circumstances were such as they were in Grain Processing, namely that the development and production time for the alternative and non-infringing substitute was, as found to be in that case, “practically instantaneous” for large-scale production. The case stands for the proposition, at least in American jurisprudence, that to recover damages for lost profits the complainant must show, on the application of a “but for” test of causation, that but for the infringement the complainant would have made additional profits. To do this the patent owner has the burden of showing a reasonable probability that he would have made the asserted sales “but for” the infringement. Where, as in the United States case, the alleged infringer has available at the time of infringement, although not on the market, an acceptable non-infringing substitute then the complainant has not shown the requisite loss of profits.

124               Senior Counsel for Advanced submits that a defence of this nature is not available under Australian law. He cites a number of cases as authority. I shall note these cases in a moment. I do not find it necessary, however, to determine finally whether such a market reconstruction theory operates as a defence in Australia to an action for infringement. I should say that I do not think it does, if only because it ignores the fact that even if there had been an alternative product, the infringer has chosen to market the infringing product. The damages for infringement commence with the sale of the infringing product. However, it is clear that, even if it is appropriate to adopt a “but for” test of causation of damages (and the Australian authorities advocate a common sense approach to causation rather than the adoption of a rigid “but for” test: cf March v E & M H Stramare Pty Ltd (1991) 171 CLR 506) and to reconstruct the market as is suggested, the principle can only apply if at the moment of infringement (or perhaps where the damages sought are secondary damages, the time the secondary products are marketed) there is available on the market instantaneously the appropriate substitute. As the evidence which I will shortly set out shows, that was not the case. It was not until July 2000 that there was available for marketing by Ramset a substitute clutch which Ramset claimed not to infringe the Advanced patent. It should be noted here that Advanced submits that use of the substitute clutch would still infringe the Advanced patent

125               I have no doubt and find that it was possible for Ramset, or for that matter, anyone else, to develop a clutch for use in face-lift tilt-up operations with a system of remote release which did not infringe the Advanced patent. The Dayton (and Reid, for the two are, as I have noted, virtually identical) clutch is an example. Most probably the clutch which Ramset ultimately developed, manufactured and marketed is not, when used for remote release, an infringement, although there is an argument to the contrary. That argument depends upon whether it is right that what does not look like an extended lever arm which could have a blocking effect, is. I do not think it appropriate to decide that question. I am happy to accept, for present purposes, that it does not infringe the patent. But, logically, on each occasion Ramset clutches were supplied and it procured infringement by its customers or when inserts were sold, at least until the clutch was released, the substitute clutch was not available to be marketed. The fact that such a non-infringing clutch might have been after a period of time, be it three, six or twelve months, available for sale is not the same as saying that it was available. Until it was available, Advanced is entitled to argue that had Ramset not infringed the patent, Advanced would have made a proportion of the sales actually made by Ramset. Ramset could not have made any non-infringing clutch supplies until the new clutch in fact became available to market.

126               The most recent of the United Kingdom cases relied upon by Senior Counsel for Advanced is Gerber Garment Technology Inc v Lectra Systems Ltd [1995] RPC 383, a decision of Jacob J in the Patents Court. The case concerned damages for secondary losses in an infringement case. The secondary losses included, as indeed the present case does, sales of unpatented articles which went with the patented item as a commercial matter. The alleged infringer had approached potential customers and advertised that he was willing to supply an article which would, if supplied during the term of the patent, have infringed. At 394, Jacob J said:

“Sometimes defendants have sought to evade substantial liability by contending that they could have avoided infringement, for instance by using some other equally efficacious but non-infringing device. They suggest that they could have inflicted the same economic ‘injury’ by lawful competition. The courts have consistently rejected this approach. The rejection follows from the compensation principle. One is concerned with compensation for what the defendant has done by acting ‘improperly’. Thus Lord Macnaghten in United Horse-Shoe and Nail Co Ltd v Stewart (1888) 5 RPC 260 at 268 said:

It appears to be beside the mark to say that the respondents might have arrived at the same result by lawful means and that, without infringing the appellants’ rights, they might have produced a nail which would have proved an equally dangerous rival of the Globe nail. The sole question is, what was the loss sustained by the appellants by reason of the unlawful sale of the respondents nails.”

127               In Meters Ltd v Metropolitan Gas Meters Ltd (1911) 28 RPC 157, another case relied upon, the United Kingdom Court of Appeal discussed the calculation of damages in an infringement suit. It was argued that there was no inference of any damage because the patent concerned a merely trivial matter which the defendants could have got around. Cozens-Hardy MR at 160 said no more than that this was an irrelevant consideration, although on the facts of the case it was not accepted that the invention was of little importance. In the course of argument, however, Fletcher Moulton LJ referred with approval to the passage from United Horse-Shoe and Nail Co Ltd cited with approval by Jacob J and set out above.

128               The English cases referred to do not, of course, bind me. Much of what is said is, in any event, dicta, albeit very strong dicta. I do not find it necessary to decide whether Grain Processing would be decided differently in Australia. It is sufficient that it is completely distinguishable on its facts. Whether correctly decided by reference to Australian law, it has no relevance to the present case. The other difficulty I have with Grain Processing is that even if it were the case that a clutch could be designed and put on the market in a matter of weeks, and this was, on the evidence, not the case, the issue of damages would need to be considered in respect of each infringing circumstance or, perhaps, at the time of each component sale. In either case, on the day the infringement took place there would always be another few weeks before the new clutch would be available. So, it would only be where the infringer had available for sale at the relevant time the non-infringing article that the argument could have any logical foundation.

129               The facts, and the evidence on this matter occupied a substantial amount of time, were far from suggesting immediate availability, at least prior to July 2000.

130               In 1989, at the Ramset International Sales Conference in Manila in February of that year, a presentation suggested that Ramset had considered developing its own system through research and development and made a conservative estimate that to do so would have taken three to five years. As has already been stated, Ramset originally entered into the market with the Frimeda clutch. It did not, presumably for good commercial reasons, then develop its own clutch. In about 1989, there was designed and then marketed a clutch (the Ramset clutch). That development was undertaken by Mr Finlay and a Mr Paterson presumably following Advanced complaining of infringement and in an attempt, it may be inferred, to avoid the possibility that customers using the clutch for remote release in face-lift tilt-up construction would infringe the Advanced patent. Abandonment for the time being of further development work to produce a non-infringing clutch coincided with the recession and the shutting down of the then separate Ramset Building Products Division which had been the division responsible for marketing the components for use in concrete lifting operations.

131               For approximately one year between late 1992 or early 1993 to1994 Mr Clark worked with Mr Finlay and, from time to time, the engineering staff of Ramset to produce a new and non-infringing clutch. The incentive to do so was given some impetus as a result of the initial decision in 1993 that the Advanced patent was valid. The result of their endeavour was the production of a design for a clutch with an articulated lever arm. In about July 1994 a standard patent application was filed for the new clutch design. It took advantage in part of Mr Finlay’s earlier work. Prototypes were prepared and field trials conducted at two building sites. Mr Clark said the new clutch worked well and without any significant problems. Arrangements were made for it to be manufactured and distributed to customers. This clutch was put on the market around July 1994. In April 1995, I delivered judgment in the infringement proceedings. Apparently, Ramset regarded the Ramset clutch with short lever arm commercially more acceptable than the new design. It would appear that only a few of the new style clutches were sold. It decided, presumably, that it could live with the infringement judgment and took at that time no further steps to promote the new style clutch. It was only after the judgment of the Full Court in 1999 that the project to put a new style clutch on the market was resurrected. By then there was some urgency to do so.

132               It must be said that the clutch developed by Messrs Clark and Finlay and that ultimately put on the market, a clutch designed by a Mr Ferrier, are both somewhat clumsy in comparison to the Ramset clutch the distribution of which involved Ramset in procuring infringement. The new style clutch did not come onto the market, in its final form at least, until July 2000 (the FLTC050 clutch). The 1994 clutch design was rejected. The initial design underwent what may be called minor modifications, such as adding a chain which could be seen to be an additional safety feature, although whether it was necessary was disputed by Ramset after Advanced made official safety complaints to the New South Wales authorities. Mr Ferrier, according to time sheets, spent some 800 hours working on the design of the new clutch. There is little doubt that the time taken in getting the new clutch to market in 1999-2000 was facilitated by the fact that Ramset was already in the market with its infringing clutch and was able to get feed back from customers. It otherwise could have taken more time and certainly would have come at a greater cost. It was no doubt also facilitated by the earlier design attempts.

133               In my opinion, the evidence suggests that far from being available on the market at any time between 1989 and 1999 a non-infringing commercially saleable clutch, whether of the present design or otherwise, would take something in the order of twelve months at the least before it could be designed, tested, manufactured and made available for sale on the market. Factually, the initial version of the 1999 clutch, assuming it did not infringe, was not in fact marketed until after the Full Court decision in 1999. It could only be then, if not later in the year 2000, that Ramset was in the position of having a non-infringing clutch available for sale.

ThE period from the Full Court judgment to hearing

134               As has already been noted, the Full Court ordered that the warning Ramset was required to give customers should be extended so that it encompassed not only the extension of the lever arm, but the use of a chain and rope as well, so long as that was used in such a way as to block the lever arm. It is submitted that from and after the date of that judgment and the implementation of the second warning no damages at all could accrue to Advanced.

135               Advanced, on the other hand, submits that while it can be accepted that persons not in the industry prior to the decision of the Full Court and becoming aware of the warnings which the Full Court mandated would not use Ramset clutches in any way which infringed the patent, nevertheless, there were others in the industry at the times Ramset did procure infringements of the patent and who were given no warnings, or inadequate warnings, in breach of s 52 who remained in the industry after the decision of the Full Court and who would continue to use Ramset clutches in a way which infringed the patent. It is important to remember that the life of a clutch, at least one adequately cleaned and serviced, could be lengthy. New clutches were not regularly attained.

136               As a matter of principle what Advanced says can be accepted, but subject to qualification. If the evidence was that all existing Ramset clutches had been returned to Ramset and new clutches delivered, thereafter, assuming the new clutches involved no infringement, Ramset could no longer be said to procure and those who were procured to infringe in the past would no longer infringe for they would be using the new clutch and in a non-infringing way. However, the evidence does not suggest that all clutches were returned and not thereafter used. For that matter, there is no evidence either way that persons who were procured or not warned continued to use the old Ramset clutches in a non-infringing way. It may be possible to infer that persons supplied with a notice warning of infringement in either of the two ways might not infringe, although I think that human nature and the evidence both suggest that warnings could never be 100% effective in stopping the conduct which is warned against.

137               However, it is quite apparent that the lost sales to Advanced would be likely to be quite minimal in this period, if indeed any loss at all was suffered. I am prepared to assess the loss to Advanced as being one half of one percent of the overall sales of Ramset for the period.

What items sold by Ramset should be taken into account in calculating the lost profits of Advanced?

138               To this point, I have written of the Advanced loss in relation to sales of componentry. Ramset submits that it is only loss of sales of anchors for which compensation should be payable. However, more than one component is required for face-lift tilt-up operations and all were supplied by Advanced. Most, although not all, were sold by Ramset. Some components sold by Advanced were not sold by Ramset.

139               The components required for face-lift tilt-up construction are, in addition to the anchors or lifting inserts, ferrules, shims, bondbreaker, a hand sprayer, chamfer strips, braces, brace anchors or inserts, and what are referred to as Burke Bars. A description of each, the use to which it is put and the numbers generally used, where applicable, will be found in my judgment of 13 April 1995 at 39,197-39,198. As I have already noted, on average, four anchors or inserts can be expected to be used for one lift, although the number of lifting points varies with the size of the panel to be lifted. Advanced’s commercial practice was to supply as a package all the requirements for a face-lift operation, other than clutches which were re-used and braces which it normally hired out and which likewise could be re-used. If pressed, Advanced would probably supply individual components. Ramset in some, but not all, of the period did not supply braces itself. It did supply all the other requirements. Customers who used Ramset clutches in a non-infringing way might not necessarily purchase all their requirements other than braces from Ramset. The components were freely available to purchase or hire, whether from Advanced or other suppliers, and many users of them might be expected to obtain them from the source which offered the best price. There was, necessarily, a convenience in acquiring all components from the one source.

140               The problem is more complicated than so far suggested, in that the anchors which both Ramset and Advanced sold could be used by persons engaged in edge-lift construction. No question of infringement could be involved in the use of Ramset clutches for edge-lift construction. Further, Ramset from and after 1997 sold stainless steel ferrules. Advanced did not hold stainless steel ferrules in stock, although presumably it could get them in if required by a customer. The total sales of stainless steel ferrules would not appear to have been substantial.

141               Clearly, it is impossible to make an accurate calculation. It is possible that some customers of Ramset who used the Ramset clutches in an infringing way could have purchased componentry supplies from Advanced, although given that the Ramset prices were lower than those charged by Advanced that is probably unlikely. It is also possible that such customers of Ramset may have purchased some of their supplies from other suppliers and not Advanced. Some customers of Ramset may have used some supplies for edge-lift just as some customers of Advanced did. Taken on an overall basis, I do not think that these matters are likely to be substantial. For present purposes, matters of this kind can be ignored. In my view, in making the calculation of damages, sales of componentry other than anchors by Ramset should be apportioned in the same way as sales of anchors. Since braces would need to be acquired by Ramset customers from Advanced or others for some of the period there is a need to make an allowance in the damages for the profit Advanced would have made on the hire of braces at least to customers of Ramset who did not have their own braces. Some did. The monetary amounts would not overall be large in respect of customers of Ramset who had their own braces. That leaves open the question of the prices at which Advanced might be expected to sell anchors and other components, and hire anchors. On that question, there was considerable debate on accounting principles.

The Accounting issues relevant to the calculations of loss of profits and loss of goodwill/FUTURE LOSS

142               It is now necessary to turn to what may be described as the accounting issues. An accountant, Mr Penklis, of Green Penklis & Lawson, Chartered Accountants, gave evidence for Advanced and Mr Whitear, of PricewaterhouseCoopers gave evidence for Ramset. After exchanging reports on the calculation of damages, they produced a joint document which summarised the key issues upon which they agreed and disagreed. The issues upon which they disagreed were then explored in a process of discussion which took place between the Court and the accountants. It was clear that, subject to some matters of principle, the end result of this process was that there was substantial agreement between them. Ultimately, in the course of oral argument, Senior Counsel for each of the parties suggested that rather than the Court attempting the mathematical computations necessary there be given a decision on the matters of principle which divided the accountants following which it was expected that a figure could be calculated. Although this has the disadvantage that I cannot, after delivering judgment, make orders to give effect to my reasons culminating in a monetary sum for damages, it does seem to be the appropriate way to approach the issue having regard to the complexity of the calculations which have been undertaken.

143               I have already in the judgment to this point dealt with a number of the matters of principle which required resolution and which were necessary assumptions to be made before a calculation could be made, for example, the question of apportionment of lost sales between Advanced, Dayton and Reid. In the remainder of these reasons, I will seek to deal with the outstanding matters of principle which divided the accountants. In so doing I do not descend to the mathematical detail which is set out in the two reports as supplemented.

144               It may, however, be helpful to note that the starting point of the debate between the parties was the second report of Mr Penklis which took the Ramset sales figures as a basis for calculation and then sought to reach a figure representing the profit which might reasonably have been expected to have been made by Advanced had it made all or a percentage of the sales in fact made by Ramset in the period with which the present proceedings are concerned. Mr Whitear’s preferred approach was that damages should be no more than nominal for a number of reasons, including that in his view Advanced was insolvent and could not for that reason have made any additional sales. However, Mr Whitear also considered Mr Penklis’ approach and subjected it to analysis and criticism. Some of these criticisms were accepted by Mr Penklis. Similarly, some of Mr Penklis’ views were later accepted by Mr Whitear. It is in that sense that I refer to there being considerable agreement between them. I think both found the process, including the debate in Court, valuable, as indeed did I. I would record my thanks to them for the assistance which they have given to the Court in the process of computation.

145               I turn now to deal with the matters which need to be decided before the mathematical calculation of loss can be finalised.

Are the accounting records of Advanced so unreliable that they cannot be used for the purpose of determining the price at which Advanced would have sold components in fact sold by Ramset and thus the profit lost to it?

146               Mr Penklis, in his calculation, used as a starting point sales figures supplied by Ramset covering sales that company had made of componentry in the relevant period up to 30 June 1999. Figures for the 2000 year were not available to him, but an extrapolation was made. Mr Penklis then proceeded to calculate what the parties referred to as a “price uplift” factor, this being a figure used to take into account the effect of the suggestion that Advanced would have sold componentry and undertaken brace hire at a higher price than Ramset had it made the sales or hires Ramset in fact made. The price uplift factor required as an element in its calculation the sales figures to be found in the financial statements and other records of Advanced for the period to 30 June 1999. Likewise, the financial statements of Advanced were the essential starting point for computation of ultimate loss of profit.

147               It was submitted by Ramset that the accounting records of Advanced were so unreliable that they should not be used as a basis for computing the damages and that the calculation of the price uplift factor and for that matter lost profits by Mr Penklis should thus be rejected. The criticism of the records, which were the financial statements, management accounts and sales summaries was put on two bases. The first was that it was said that the management accounts and other internal records of Advanced could not be reconciled with the financial statements. The second was that the financial statements did not fairly represent the result of Advanced’s business for the period they covered for reasons taken up argumentatively by the expert accountant for Ramset.

148               The first of these matters was said to arise because there were different amounts shown for sales in each of the financial statements, the management accounts and the sales summaries. The financial statements for the years ended 30 June 1989, 1990 and 1991 were prepared and audited by Mr Hurst, a partner in Weston Woodley and Robertson during the period 1978 to 1994. He also prepared, as an external accountant, the accounts for the years ended 30 June 1992, 1993 and 1994. He undertook the same checks for the preparation of the non-audited accounts as he did for the audited accounts. In preparing them, he used internal computer generated trading statements, profit and loss statements, balance sheets and trial balances. He prepared a general ledger, posting to it, item by item, the income and expenditure accounts. In relation to the so-called discrepancy, he commented that it was not unusual that a discrepancy would exist where preliminary accounts were prepared before adjustments and ledger balances were properly recorded. Mr Golding, an employee in the same firm, prepared the financial accounts for the years ended 30 June 1995 to 1999. He took similar steps to Mr Hurst. I accept, without question, their evidence. Both presented explanations for some of the reconciliations. There were, for example, adjustments in 1995, 1998 and 1999 to sales for sales of tilt-up manuals recorded in the accounts of Advanced as “other income”. One item, which attracted both cross-examination and comment, was a transfer of stock at cost to a related company. This related to a loan from Mrs Davis. It does not suggest the accounts were unreliable.

149               Mr Mow, the internal accountant for M J Davis Holdings Pty Ltd, also gave evidence. He had been responsible for the preparation of internal accounts for the group, which includes Advanced, since 1983. He dealt with the procedure adopted by him regarding posting sales. It is unnecessary to set out his evidence. Perhaps the only matter of concern in this evidence was that the sales summary for the period 1 February 1991 to 30 June 1992 used by Mr Penklis setting out total face-lift sales in that period was incomplete when examined against the total recorded in the sales invoices for the whole year. Mr Mow was unable to explain why it was incomplete. He suggested that the summary could have been printed from a restored file from the hard drive of the computer, since it had been the practice at the time to purge files from the hard drive as storage space on the drive was limited. He was subject to cross-examination which threw some doubt on this explanation. There would seem little doubt that the sales summary is incomplete. What is not clear is how that came about. I agree with the comment made by Senior Counsel for Advanced that there was no logical reason for overstating sales in a year and in any event the accounts for the year were checked in the same way as audited accounts and it is likely that any real discrepancy would have been picked up. I would accept the financial records as being correct, so far as the entries made in them are concerned.

150               The other matters are in a quite different category, for they go to adjustments which Mr Whitear says should be made to the profit and loss accounts of the relevant period when computing face-lift component sales, and ultimate loss of profit. These matters are:

(a)               The financial statements of Advanced do not relate solely to the sale of face-lift tilt-up products but include edge-lift components.

(b)               An allowance should be made for financial support provided by Mr Davis and related entities at no cost, or at less than market cost.

(c)               There were, so Mr Whitear argued, substantial and unexplained variations in the gross margins of Advanced from year to year.

(d)               Salaries and wages of all persons employed in the Advanced business were not included in the accounts, but paid by related entities.

(e)               A management fee was charged to Advanced, but there was no basis for determining whether that fee was commercial.

(f)                 There was no allowance for warehouse rent before Ramset entered the market, yet warehousing would be necessary to accommodate the additional stock required to complete the hypothetical lost sales.

I will deal with each of these matters briefly.

The Advanced Reporting of global lifting system sales

151               This matter occupied a considerable amount of time during the hearing. As I understand it, the issue is particularly relevant to the calculation of the up-lift factor which will be discussed in detail later.

152               Mr Penklis had prepared from the accounts of Advanced a summary of sales of what were said to be face-lift products during various periods. His report stated, presumably representing his instructions, that “[a]part from the sale of items, such as chemicals, which are not material, the Applicant’s sales are of face-lift products”. However, the Advanced business included sales of items not used in face-lift operations, but rather in edge-lift operations.

153               The matter was dealt with in oral evidence by Mr Davis. He conceded that sales of a concrete screeding machine included in the sales figure had nothing to do with face-lift. Hire of braces could relate to both face-lift and edge-lift as could lifting inserts and concrete repair material. However, the reference to concrete repair material was to chemicals that were for patching and epoxy resins for fixing cracks in concrete buildings and to patch voids left by the void formers of the face-lift inserts (not the edge-lift inserts). Mr Davis said that the proportion of sales of concrete repair material related to face-lift tilt-up operations was very minor. According to Mr Davis he made a calculation of the proportions of sales relating to face-lift and edge-lift (when asked he was unable to produce the calculation) and that he came up with a figure of 2% of hiring revenue (ie for braces) related to edge-lift and 4% of revenue representing hardware sales related to edge-lift. This evidence must be treated with some caution. A memorandum in relation to a sales review, prepared by a Mr Boniface, a sales engineer employed by Advanced and relating to the 1988-9 year, however, suggested that, at least on a unit (although not dollar value) basis edge-lift sales were 20% of total sales of inserts. Mr Davis was cross-examined about this discrepancy which is unlikely to be explicable solely by the fact that Mr Boniface’s figures were on a unit, rather than a value basis.

154               While I accept Mr Davis’ evidence that the main business of Advanced was the sale of face-lift system products, it is clear that a substantial part of his sales were edge-lift sales. I think that I have little alternative than to accept the figures contained in the Boniface memorandum, but reduce them slightly to take into account that number and value are not the same. However, it was for Advanced to come up with the precise sum, and it did not. Doing the best I can, I would find that the Advanced sales figures relate in dollar terms 15% to edge-lift and 85% to face-lift.

Allowance for interest for group support

155               Advanced operated in the period in question by receiving substantial interest free loans from related entities controlled by Mr Davis. Mr Whitear was of the view not merely that such additional capital as may be required to fund the increased level of sales notionally to be attributed to Advanced, but also the capital in fact used by Advanced in the business it conducted, should have applied to it a notional market interest rate. Mr Penklis took an opposing view. Mr Whitear’s view, if applied, would reduce Advanced’s profit to zero or, worse, would create substantial losses.

156               In my view, it is appropriate so far as concerns existing sales to take Advanced as it is. In essence, its accounts show it does not ordinarily pay interest on related party loans. Shareholder (or related party) loans are but a substitute for capital upon which interest is likewise not paid. It would, in my view, be wrong to charge interest on related party loans where none has been charged in the past and unduly reduce the profit of Advanced that might be expected to be made on increased sales. The question is, however, different when one considers the calculation of the additional working capital that Advanced would have required if it had made the sales which as a result of the Ramset conduct it lost to Ramset. As will be noted, that could only have been provided by Mr Davis withdrawing money a company controlled by him had on deposit with a financial institution and which earned interest. In these circumstances, I am of the view that the figure determined by me to represent the capital necessary to fund the additional sales and associated expenses should be computed allowing an interest rate on the additional working capital required; the interest rate according with that received by that company on the deposit so far as that interest rate is known. Since, so far as I am able to tell, the rate of interest actually paid is not known for the whole period, ordinary commercial bank interest rates should be used in the calculation to the extent that the actual interest rate is not known.

157               Salaries of some persons employed in the Advanced business, for example, Mr Davis, his secretary and Mr Mow, were paid by M J Davis Holdings Pty Ltd, a company controlled by Mr Davis. Clearly an adjustment needs to be made by way of charge against profits for these salaries in computing lost profit. Mr Penklis adopted a 10% figure in his calculation to take these and other expenses into account. I am content to accept this percentage, although I doubt the possibility of arriving at any accurate figure.

The solvency of Advanced

158               It is the position of Mr Whitear that at all times Advanced was insolvent and thus could not have made any additional sales at all.

159               The balance sheet of Advanced shows that as at 30 June 1988 there was a deficiency of net assets of $1,091,466. This reflected that in the years before, Advanced had introduced the face-lift tilt-up building system to the market and incurred considerable expense in developing the market. Thereafter, Ramset came into the market and, not surprisingly, given that sales it might expect to have made profitably went to Ramset, that position continued. Hence as at 30 June 1995 the accounts showed a net assets deficiency of $3,866,730 and a warning in a note to the accounts that the company was dependent on the continued support of its bankers. Without that support (the support in fact came largely via bank finance to a related company but it in fact continued through the period, although the bank was hardly happy about the situation as bank correspondence in evidence showed), Advanced would have ceased to be a going concern and the company would not have been able to pay its debts as they fell due.

160               Before discussing the bank correspondence, there is one important matter to be noted. Although Advanced in the period lost the chance of the sales, or at least a proportion of them, made by Ramset, it incurred very considerable legal fees in the present litigation which it has funded. The accounts of Advanced showed that in the period from 1989 to 1999, Advanced had spent some one and a half million dollars in legal fees, a large proportion of which inevitably related to the present litigation. Evidence of Ramset that it had spent a similar sum reinforces the point. Had Ramset not embarked upon the course it did that amount would readily have been available to finance the Advanced business. It has to be taken into account in the consideration of the question whether Advanced could have financed the additional sales that in fact it lost. However, it ill behoves Ramset in such a case to suggest that Advanced could not have traded in the period when Ramset’s conduct substantially created the Advanced financial difficulties and when to a substantial extent the additional sales required only an incremental cost and of themselves were clearly profitable. Since the cash necessary to finance the present litigation was not made available to Advanced at interest, it is my view that no interest should be charged against profits of Advanced to the extent that the additional capital is derived from the source which actually provided these monies.

161               Mr Davis was cross-examined on correspondence passing between himself and the Commonwealth Bank in the period from 2 February 1988 until July 1996 when certain real estate within the group was sold and the accounts of Advanced and related companies were moved to another bank. The tone of some of the overdraft or bill discount correspondence was acrimonious.

162               In general terms, it may be said that facilities were for a time granted or extended. In June 1990, Mr Davis wrote that the group’s cash flow had not been substantial and that he had been making endeavours to market land which the group owned. This land was not ultimately sold until 1998. By December 1990, borrowings had risen to $5.3 million secured over various parcels of real estate. In early 1991, the bank had apparently rejected a request for additional funding of $800,000. Complaining of this, Mr Davis pointed out that the group was “asset rich and cash poor” and had been for many years, except in 1988 where there was a surplus of funds of $4.5 million which had been used to complete a land purchase. The correspondence alleges that the group had assets of at least $16 million and liabilities of $5.7 million. Although there was some debate as to the value of the assets, a figure of $10.4 million was suggested as the value of assets if a compulsory sale were necessary, it is clear that there was probably an excess of assets over liabilities of $5 million on a conservative valuation of the assets. Clearly at that date and thereafter, Mr Davis was looking at realising real estate and reducing liabilities. The correspondence confirms that the bank pressure had played a part in Mr Davis closing the Advanced offices in Brisbane and Melbourne and reducing staff in Sydney. It shows also that the present litigation was, at least to some extent, a drain on revenue.

163               The group’s liquidity was clearly tight by 1993. Correspondence shows that Mr Davis was for a time at least unable to pay his accountants for completion of the 1992 financial statements. In March 1993, the bank cancelled an accommodation limit for discounted bills of $1.38 million. Attempts to realise assets were continuing. They were still not successful by February 1996 by which time the indebtedness to the bank for the group had increased to $6.7 million. In April 1996, the bank served letters of demand on M J Davis Holdings Pty Ltd for $4.3 million. Similar letters for slightly different amounts were served at other dates during that month. Ultimately, in July 1996 after a refinancing prior to sale by another financier, Mr Davis offered the bank $6 million in full satisfaction of all amounts owing to the bank. The relevant letter records that there had been repayment of a total of approximately $1.5 million in 1993 and 1995.

164               I would not, however, conclude from this correspondence that Advanced was unable to pay its debts as they fell due. There was always available to Mr Davis an amount of $536,473.19 which in 1992 was on deposit with Esanda Finance in the name of Blair Investments Pty Ltd, a company clearly controlled by Mr Davis and in which he and his wife were the only shareholders. It represented the proceeds of deposits that, at one stage, had been in the name of M J Davis Holdings Pty Ltd with a subsidiary of the Commonwealth Bank. This amount was never security for any money owing to the Commonwealth Bank and appears to have been always available to Mr Davis should it be required. It would have been available to fund any additional working capital requirement of Advanced.

165               In my view there is no reason to conclude that Advanced would have been unable to continue to trade, or indeed fund working capital requirements, in the period to the date of hearing. I reject Mr Whitear’s view to the contrary.

166               Mr Whitear was also of the opinion that a proprietor of Advanced would not have ventured monies on deposit and earning interest, or for that matter any monies, to fund an increase in Advanced’s working capital because to 1989 at least it had been a loss making venture and in Mr Whitear’s view there was no way to justify a return on further investment. There is, however, a difficulty about this. The figures prepared by Mr Penklis (and they depended on which assumptions are adopted) showed, for example, that by putting into the business an amount less than that held on deposit (one suggestion was $200,000, another possibility $300,000 to $400,000), there was the promise of increased sales at an incremental profit and cash flow was undoubtedly going to be improved as amounts such as certain royalty payments and legal fees outlaid on the present litigation were added back, not to mention the inclusion of cash proceeds of additional sales. I reject, too, Mr Whitear’s suggestion that Advanced could not have funded the working capital necessary, which could never have been greater than $500,000 after taking into account amounts such as legal fees which would never have been required to have been outlaid had Ramset not embarked on the course it did.

The working capital requirement

167               Very detailed calculations were prepared by Mr Penklis on various assumptions to seek to arrive at the amount of additional working capital Advanced would require to finance the increased activity and sales which the computation of lost profits required. The calculations proceeded upon the basis that the figure to be determined should be calculated with scientific accuracy. This is not a criticism of Mr Penklis in any way or of his calculations. Obviously, the amount of additional working capital must take into account the funding of increased outgoings such as warehouse facilities, the reopening and staffing of offices in Queensland and Victoria, additional staff, the financing of additional stock on hand (a matter which requires computation of the number of days stock which would need to be on hand at particular times) and so on. An amount would likewise need to be taken into account to reflect bad debts. Ultimately, all these matters depend upon the level of sales to be financed, that is to say, the number of sales of each item of componentry and the calculation of the price at which it might be expected that Advanced would have sold these items (ie calculation of the price uplift factor). Since the sales figures I have determined would have been lost to Advanced differ from those used by Mr Penklis in his calculations and the uplift factor will itself really be arbitrary, it is clear that none of the figures arrived at by Mr Penklis can be adopted. In any event, the calculation is by its nature not such that accuracy can be demanded to the last dollar, or for that matter the last $1000 dollars.

168               In my view, to require yet another calculation of additional working capital to be made on figures which on no view can really be precise is to give a greater appearance of accuracy than the process requires. Having considered the various schedules prepared by Mr Penklis, the comments he made in evidence upon them and the comments made by Mr Whitear, I would find that working capital of approximately $400,000 would be required to fund the additional Advanced business through the period. No doubt, and depending on timing, the amount might be required at the beginning of a month but might not be required at the end of a month. No doubt it is also true that as greater sales and profits are generated the working capital could be retired. But equally, depending upon assumptions, there could be times when capital in excess of $400,000 might be required. Mr Penklis’ calculations, which in this respect I accept, suggest that while amounts greater than this would from time to time be necessary, the additional amounts could be financed out of cash flow and without additional borrowing. He has taken the add backs, to which reference has already been made, into account. I would propose to take the figure of $400,000 as applying to the whole of the period (ie adopting a straight line approach) from 1989 to 1999. Since the figure is significant only for the purpose of calculating interest as a charge on profits, it will be necessary to take into account interest on the $400,000 at the rate earlier proposed, that is to say, the actual rate paid on the deposit available to Mr Davis where applicable or known, and otherwise at ordinary commercial bank interest rates applicable to overdrawn accounts in the period as used by Mr Penklis in his calculations.

169               As I have already noted, Mr Penklis made a number of calculations of the additional working capital required on various assumptions, such as the quantum of sales which could be expected to flow to Advanced, the number of days stock required to be held, whether bank overdraft or Federal Court rates of interest should be used and so on. Allowance was made by him for warehousing costs and, at least in some calculations, for additional staff. In principle the calculation is based on determining the incremental variable costs of additional sales to arrive at the loss of profit on those sales. The initial calculations of working capital made no attempt to calculate precisely when cash was required and, accordingly, the time when interest was required to be taken into account and when interest would not need to be taken into account (ie when working capital would not need to be funded by borrowings because cash flow was available to fund it).

170               As I have already indicated, I have found that Advanced would need to have found an additional $400,000 in cash. Having regard to this finding, it is unnecessary to make detailed findings on other matters which were relevant to the working capital calculation. Nevertheless, since it may be assumed that the present judgment will be the subject of appeal by one or both of the parties, I propose to indicate conclusions on two matters that were the subject of submissions and which are necessary, in any event, to the calculation of profit. The first relates to the time taken by debtors to pay and the second to the holding period to be adopted for stock.

171               It was agreed that the time taken by debtors to pay should be taken into account in the calculation of the additional working capital required. One approach would be to adopt the Ramset debtor experience. The contrary approach would be that the projected bad debt experience take into account both the bad debt behaviour of purchasers (reflected in the Ramset experience) and the bad debt experience of the vendor (reflected in the Advanced experience). A third approach would be to adopt the Advanced bad debt experience only, either before Ramset came into the market or over the period in which Advanced suffered a loss. Logically I agree with the second approach, although one would expect that the solvency or delayed payment practices of the purchaser are more important than the nature of the seller, although the time and money put into debt collection and the efficiency of that collection are not irrelevant. Since, however, I have no reason to expect that Advanced would be less likely to collect debts than Ramset, I am content to use the Advanced experience.

172               Mr Whitear was of the view that a period of 81.9 days should be adopted as the average time for debt collection, that being the average time debtors of Advanced took to pay in the period between 1984 and 1988 before Ramset entered the market. Mr Penklis used a period of 57.4 days being the average time debtors took to pay over the period between 1990 and 1999, stating that it was his preference to take the actual Advanced experience, qualifying that with the observation that this would be so unless the actual experience was affected by Ramset coming into the market. Clearly, the longer the time taken to collect debts, the more working capital required. I would accept Mr Penklis’ evidence on this point. I shall deal later with the question of bad debts to be written off.

173               The next matter is the question of the holding period to be adopted for stock. Mr Penklis suggested a number of alternatives, one of which was 146.4 days, that being the figure on which Advanced operated in 1988, the year immediately before Ramset entered the market. Given that an accurate calculation is impossible and that this figure was not regarded by Mr Whitear to be totally unreasonable but rather “as good as any”, it should, in my view, be adopted.

What if any allowance or adjustment should be made to take into account the fact that Advanced may not have made the sales which Ramset did if it sold at amounts equal to Ramset’s prices increased by the uplift factor?

174               It may be accepted that in a market where price is a consideration, not all purchasers will purchase regardless of price. In other words, it does not follow that all persons who purchased from Ramset at prices less than those adopted by Advanced would purchase the same product and in the same quantities from Advanced at a higher price. Hence, it can be argued that a further discount on sale proceeds has to be made to take into account the possibility that Advanced would lose sales because of price factors.

175               It is not possible to derive a precise figure. There is no evidence upon which I can call for assistance. The whole question is merely a matter of judgment. If the sales had not been made by Ramset and the project was one for which face-lift tilt-up was to be used, the prospective customer wishing to undertake face-lift construction necessarily would have to purchase componentry from one of Advanced, Reid or Dayton. It does not seem that the active price war that in fact existed after Ramset entered the market existed before that time. Indeed, I have the impression that up to Ramset’s entry into the market the choice of which system would be used was largely determined by reference to preference for the system rather than by reference to substantial price differentials. It is known, of course, that the price war had an impact on the prices at which Dayton and Reid sold. If those lower prices had been maintained in a market where Ramset was not a player, then clearly sales would have been more likely to have flown to Dayton or Reid than to Advanced.

176               On the whole, I do not propose to make any adjustment for the possible effect of the higher prices which it might be expected that Advanced would charge, other than the apportionment I have already made of Ramset sales among the three companies Dayton, Reid and Advanced. I do not think that any such adjustment would be likely to be material.

The calculation of the uplift factor

177               Since the sales by Ramset (to the extent that there were common or comparable products, for example, as noted, Ramset did not hire or sell braces for some of the period) were made at prices somewhat less than the prices at which Advanced could be expected to have sold the same or comparable products it is necessary in computing the gross revenue which Advanced might be expected to have realised had Ramset not infringed the patent or breached s 52 to increase the Ramset prices, ie by an uplift factor.

178               Mr Penklis commenced with the price differential on anchors which the accountants agreed was approximately 34%. It is perhaps more accurate to say that Mr Whitear’s agreement was qualified by a reservation that Ramset’s sales volume was greater than the sales volume of Advanced, so that it might be expected that some volume sales, if made by Advanced, would need to take into account volume discounts and could not be made at 34% higher prices than charged by Ramset. No evidence enabled that calculation to be done. I would accept the percentage of 34% but apply a discount factor of 5% to the figure arrived at to take into account the fact that Advanced would probably have been required, at least on some sales, to give discounts whether to match prices charged by Dayton or Reid, or otherwise. Because some Ramset sales of anchors would have been for edge-lift operations, the 34% of anchor sales uplift factor should be applied to the percentage of anchor sales said to be attributable to Advanced but reduced by a further 15% to allow for edge-lift sales.

179               However, Mr Penklis proceeded in his calculation to uplift the price of each item sold by Advanced by the same percentage. In other words, his calculation assumed that all face-lift components would have been sold by Advanced at prices 34% greater than they were sold by Ramset. This calculation was criticised by Mr Whitear and rightly.

180               The calculation of lost brace hire revenue was an even more difficult exercise. Mr Penklis proceeded to calculate it by taking the 34% price differential on anchors to which reference has been made and applying it to the entire gross revenue of Ramset from face-lift sales using the figure he assumed represented this. Having grossed up these Ramset sales by 34% he calculated the percentage of brace hire income to other tilt-up sales revenue which, on Advanced’s records, was 43%. Assuming that for this purpose all Advanced figures were for face-lift items (they clearly were not as the evidence discussed above showed) the percentage would be correct. Mr Penklis then took the 43% figure and applied it year by year to Ramset sales, which he had already increased by the 34% price uplift factor. The result was to suggest that Advanced would year by year have received brace hire income equal to approximately 60% of Ramset’s gross face-lift revenue. This, so Mr Whitear said, brought about a result that for every $100 of Ramset sales Advanced would have expected to receive $214 of revenue representing sales revenue from tilt-up sales and brace hire income. A reasonableness check suggested there was something wrong with this result.

181               Mr Penklis’ methodology was heavily criticised by Mr Whitear and for a number of reasons. First, he said that since the end result was to attribute as revenue to Advanced an amount more than twice the sales revenue of Ramset the approach was clearly wrong. Secondly, the mix of actual sales of Ramset and Advanced was clearly different. Advanced had more hire income, since Ramset did not hire braces for some of the period, but Ramset sold products such as bolts which were not sold in the same quantities by Advanced. Hence to add to Advanced projected revenue hiring fees calculated based on Ramset gross face-lift revenue was permissible only if there was deducted an amount representing items not sold by Advanced, or at least not sold historically in the same quantities. Thirdly, Mr Whitear criticised applying the 34% factor to all sales (he was not in disagreement that it should be applied to anchor sales). But, his greatest criticism was reserved for the methodology used to calculate the lost brace hire income.

182               Mr Whitear’s criticism of applying the 34% figure to all sales really depended upon his saying that Advanced had not established that all products other than anchors would have been sold at prices 34% higher than the prices adopted by Ramset. Neither had really attempted a comparison of prices for comparable products over the period, although Mr Whitear had attempted to take a small sample of products (14) to compare prices and had found that some were sold by Advanced at higher prices than Ramset and some at lower prices. Mr Whitear’s calculation could not directly be accepted, given that the only accurate way of using a sample would be to look at the volume of each item sold and the price differential to come up with what one might term a weighted average.

183               Mr Penklis then attempted this calculation and derived a percentage of 21%. There was further criticism by Mr Whitear of the calculation. Nevertheless, the figure so calculated is the best evidence there is. I would accept it. I would thus find that the uplift factor to be adopted for sales of face-lift products comparable to those sold by Ramset (excluding brace hire revenue) should be calculated as 34% for anchors and 21% for the other items. I would apply a similar 5% discount to the figure arrived at using the 21% uplift factor, as was applied for anchors, to allow for volume or other discounts in the final calculation of these figures.

184               Clearly, it would be inappropriate in calculating the lost brace hire income to apply whatever uplift factor is ultimately used for prices of non-anchor components to all Ramset component sales if some of the products (for example stainless steel ferrules) sold by Ramset were not sold by Advanced. In fact, in at least one of Mr Penklis’ calculations he eliminated, properly, stainless steel ferrules. It is also wrong to assume the figures in the records of Advanced represented only face-lift sales. I have held that 15% of these figures in fact related to edge-lift sales. The better calculation, as Mr Penklis conceded in the course of discussion, would be to take anchor sales, look at the ratio of anchor sales to brace hire income using Advanced’s records and then apply the factor arrived at just to the Ramset anchor sales increased by 34%. He made this calculation, although it still proceeded on the basis that the figure for anchor sales in the Advanced accounts related solely to face-lift sales when it did not. Mr Penklis’ other calculations proceeded too on the basis that the Ramset sales figures used, while excluding stainless steel ferrules not sold by Advanced, did include items like other types of ferrules which could be used either for face-lift or edge-lift and there was no way to distinguish the purpose for which the purchaser intended to use the item. In my view, and considering the overall difficulties of the calculation, this problem can be ignored. To determine its effect would require evidence and for whatever reason (and this is not intended as in any way a criticism) Ramset did not produce any evidence which could enable its sales figures to be apportioned between sales of componentry for use in face-lift operations and sales of the same componentry for use in edge-lift operations.

Summary of the calculation of loss of profit

185               The calculation required to be made should proceed on the following basis:

1.                  The additional sales which Advanced could be expected to have made but for the conduct of Ramset should be calculated commencing with the Ramset sales figures as agreed and taking the percentages found for each period. The percentages have been calculated taking into account the concession by Advanced that it would not have made sales in South Australia, Western Australia and the Northern Territory, and that damages were linked to lost sales in NSW (and the ACT), Victoria and Queensland.

2.                  Sales of anchors should be uplifted by 34% to represent the price differential between Ramset and Advanced. Sales of other componentry made by Ramset should be uplifted by 21% to represent the price differentials between Advanced and Ramset. To allow for the fact that Advanced would, necessarily, have been required to give some discount for volume sales (and the Advanced figures indicate that it did give discounts from time to time) I would then, as I have already indicated, discount the figures arrived at by 5% to determine the gross sales to be attributed to Advanced.

3.                  An amount for lost brace hire revenue should be calculated by the following process. Advanced’s sales of anchors should be taken in each year and a ratio established between anchor sales and brace hire revenue. In doing this, the brace hire revenue shown in Advanced sales records should be reduced by 15% to reflect the fact that some braces would be for edge-lift operations (see para 154) and also that the ratio of hirers with braces and those without might not be the same with Ramset customers. The percentage arrived at should then be applied to the Ramset anchor sales figures, reduced by 15% to take into account the fact that some anchors were used for edge-lift. The resultant figure should then be increased by the uplift factor of 34% (see para 184).

4.                  The incremental cost of the additional sales then needs to be calculated. Generally, I have not in these comments referred to matters on which the parties agree. The calculation, so far as these matters are not mentioned, should proceed on the basis that the accountants have agreed or, in default of agreement, in accordance with the method adopted by Mr Penklis.

However, if it is possible to determine comparable costs of purchases for Advanced these should be used. If not, and in the absence of evidence to the contrary, the gross margin disclosed in the Advanced annual accounts should be used, notwithstanding criticism by Mr Whitear that there are fluctuations evident. The expenses of sale should be calculated by including interest on the additional working capital required, which I have calculated to be $400,000. No interest should be taken into account for existing related party finance. Amounts allowed by Mr Penklis for additional warehousing expenses ($20,000 per annum per branch for two branches), office expenditure for Queensland and Victoria, and additional staff (agreed between the accountants to be 10% of additional sales revenue) should also be taken into account. Other items agreed between the accountants should be taken into account, for example, payroll tax and superannuation, insurance (agreed to be 1% of additional sales revenue), and additional royalty payments of 5% of additional sales revenue in 1989 and 1990 should be included in the calculation. A deduction for bad debts expense should be taken into account of 3.7% of sales revenue. I have adopted this figure, (the Advanced experience during the period 1990-1999), rather than the 2.25% suggested by Mr Penklis based on the Advanced experience prior to Ramset entering into the market, as the former figure takes into account, inter alia, the fact that there was a recession in the 1991-2 fiscal years which might be expected to increase the bad debt figure after that time. The figure and calculation differs from the question of when debtors could be expected to make payment dealt with at [172].

5.                  Finally, as I think ultimately was agreed, interest on lost profits should not be double counted (Mr Penklis conceded this occurred in his calculations), but calculated in accordance with the Federal Court rates, once the damages have been determined.

Loss of Goodwill/Loss of Future Profits

186               There is, as would be expected, a level of disagreement about the computation of lost goodwill. The accountants agree that the methodology to be adopted is to determine loss of future maintainable earnings and apply to it a multiplier being derived from the rate of return a prospective investor would require from the business.

187               The major dispute between the accountants lay in the question whether a period of three years’ historical accounts should be used to predict future maintainable earnings as Mr Penklis suggested, that being a basis commonly used when calculating goodwill or whether a longer period (say 5 years) should be adopted, as Mr Whitear suggested, having regard to the fact that there were profit fluctuations and also that there were likely to be cyclical factors which could affect profits, particularly in the building industry. In my view the period of five years, commencing with the 1995 year, should be used. As Mr Penklis conceded, both periods are in common use. Both agree that an appropriate discount rate to adopt would be 30.14%, ie a multiplier of 3.32.

188               There was a disagreement between the accountants on whether, as Mr Whitear said, a future loss of profits method should be adopted or, as Mr Penklis said, a diminution in value method should be adopted. It appeared from the evidence that by “future loss method” was understood the making of a calculation by first determining a period of years for which the damage to the business would be expected to continue and then calculating the present value of the expected profits to be lost over the period. The “diminution in value” method assumes a permanent loss of value of the business. Both calculations involved discounted cash flow.

189               As I said in the course of argument, a difficulty in the present case in calculating loss of goodwill is that it was open at any time for Ramset or, for that matter, another competitor to design a clutch for use in the same face-lift tilt-up operations and that Ramset or another competitor could be in the market in something like a year. Hence, it is difficult to see that a large sum should be fixed for loss of future profits or goodwill. However, the Full Court was adamant there was loss of goodwill and that it should be quantified. This factor suggests use of the diminution in value method.

190               A discount rate of 30.14% was agreed between the two accountants. However, it seems to me that an investor in a business such as that conducted by Advanced, with the knowledge that at any time Ramset could come onto the market and establish itself in a year, or perhaps two, would require a much greater return than that reflects. I would accordingly find that the calculation should proceed on the basis that the discount rate to be adopted should be 40% in the peculiar circumstance of the present case.

The alternative royalty calculation

191               Since I have proceeded on the basis of calculating the loss which Advanced suffered, there is no need for me to proceed in the alternative way of endeavouring to calculate a royalty. Such a calculation is relatively simple where the infringement consists of the sale of an item the subject of a patent. It is not then a difficult task to determine by means of evidence of comparable royalties the royalty per infringing item sold and to multiply that by the total number of items sold.

192               The present case, as in so many ways, differs from the normal case. As we have seen Ramset itself did not sell the infringing item. It procured others to infringe the patent. It benefited from the sale of other items not the subject of the patent, not by the sale of the infringing item itself.

193               There was no evidence of the amounts which might be charged by patentees at arm’s length in comparable situations, cf Meters Ltd v Metropolitan Gas Meters Ltd (1911) 28 RPC 157 at 164-5. And not surprisingly, since comparable situations are likely to be rare. Such evidence as there was on this matter consisted of assertions by Mr Davis of what would be reasonable and by Mr Connell, Marketing Manager for Ramset, who said it would be unreasonable to charge a royalty on items not the subject of a patent.

194               Senior Counsel for Advanced submitted that to the extent that I took the view that not all of Ramset’s sales should be attributed to Advanced, Advanced was entitled to a royalty on the remaining anchors and other componentry sold at the rate of 10% of gross sales in addition to the damages for procurement or breach of s 52. In my view, to do so would be to grossly overcompensate Advanced. I do not think that the decision in Watson, Laidlaw & Co Ltd v Pott, Cassels and Williamson (1914) 31 RPC 104 requires this conclusion.

195               It is probable that parties negotiating at arm’s length would agree a royalty on all Ramset sales of components, notwithstanding that some sales would be to persons who did not use or intend to use the items in question in a manner which infringed the patent. But, if any royalty were to be agreed, the consequence would be to reduce what otherwise would be the royalty rate by a factor that would take into account non-procuring sales, or sales to persons who would not infringe. Such an agreement would be reached by a potential infringer to guard against infringement proceedings.

196               Senior Counsel for Advanced submitted that I should calculate the royalty taking into account amounts which Ramset had to pay in the present proceedings to defend its position which were estimated to be something like 20% of the dollar value of componentry sales. This was said to make a 10% royalty on Ramset total sales of face-lift products clearly reasonable. I do not follow the logic. It is not as if the costs incurred by Ramset were voluntarily incurred. The present proceedings arise because Advanced claimed that Ramset had infringed the patent. The costs of clutch development were also said to be a relevant factor. One must say that the evidence of these costs was far from precise. The submissions of Advanced suggest the figure to be in the order of $400,000. While, on the evidence, this is rather on the high side, it may be accepted for present purposes. It does give some support for an overall royalty of an amount which is somewhat less than 10% given that gross face-lift sales of Ramset for the period year ended 30 June 1989 to year ended 30 June 1999 were something in the order of $10 million.

197               Computation of a reasonable royalty in the present case seems to me even more a matter of guess work on the evidence than the calculation of loss which I have undertaken.

198               It was submitted for Ramset that that company would never have agreed to pay any royalty at all or, alternatively, if it had to pay a royalty the amount would have been nominal and applied only to the sale of clutches and face-lift anchors and not other componentry, and be for a limited duration. In my view the question of duration is immaterial for even if initially a three year licence might be expected it would have to be renewed from year to year so as to continue until July 2000 when Ramset was able to market a non-infringing clutch.

199               The royalty would necessarily be payable on all anchor sales. I suspect that for simplicity the licensor and licensee would agree on a royalty payable only on anchor sales rather than all componentry sales since there is a mathematical relationship between anchor sales and componentry sales. Since profit is made on both, the royalty would necessarily take this into account. However, I am prepared to calculate the royalty by reference to the sale of all componentry because I do not know what mathematical relationship there is between anchor sales and total componentry sales.

200               Ramset points out that Burke assigned the patent in 1990 for $100. That is so, but Advanced bought its componentry from Burke, so Burke was able to make its profit in other ways. In other words, the sale price of the Burke patent says nothing of its real worth and does not demand that the royalty rate should be nominal.

201               It was submitted also that Ramset’s gross profit margin was approximately 40% in the period so that it would be unlikely that its gross margin could have suffered a reduction to 30% to allow for a 10% royalty payable on all componentry. Further, Ramset had sold some of the items being components before it had entered into the market for the sale of clutches. Why, it is said rhetorically, would Ramset agree to pay a royalty on its sales of these products? The royalty submitted as appropriate by Ramset is 3% of the net invoice value of clutches and face-lift anchors sold by it for a three year period commencing in November 1990. This would achieve, so the submissions said, a figure of $15,276. It may be noted that Ramset paid a royalty of 6% of the net invoice value of anchors for the Frimeda patent. Burke, under a 1980 agreement for three years, paid a royalty of 5% on sales up to $US 500,000 and 4% on sales above $US 1 million for its licence.

202               If I am ultimately wrong in my computation of loss so that it is necessary to compute a royalty I would adopt a royalty running throughout the period up until Ramset put onto the market the new clutch in its final form ie until July 2000. In my view, the rate of royalty payable by Burke should be adopted. Converting in broad terms to Australian dollars (at a conversion rate of $1AUD = $US0.50) that would mean a royalty of 5% up to sales of $AUD 1,000,000 and thereafter a royalty of 4%. The royalty should be applied to sales of all anchors and clutches by Ramset (whether or not the particular item sold was already sold before the clutch was introduced). The 5%/4% rate both allows profit on sales to Ramset and takes into account the fact that some components were already sold by Ramset before the Frimeda and Ramset clutches were marketed by it.

203               I would order that the applicants instruct Mr Penklis to calculate the damages and royalty amounts in accordance with my reasons. I direct that the matter be relisted before me 21 days after delivery of these reasons at 9.30 am to consider the calculation. An affidavit of Mr Penklis as to the calculations should be filed and served no later than 14 days from the date of these reasons to enable Mr Whitear to respond to it. I would direct that both Mr Whitear and Mr Penklis confer prior to the relisting of the matter in the event there are disagreements between them on the calculations. I will then hear any brief submissions that may arise out of the calculations. In due course, I will make cost orders. Any submissions as to costs should be in writing and filed and served two days before the matter is relisted. In so saying I am not inviting submissions on costs unless it is thought that there is a good reason that costs should not follow the event. As presently advised I can see none.

Associate:

Dated: 13 August 2001