FEDERAL COURT OF AUSTRALIA

Clorox Australia Pty Ltd v International Consolidated Business Pty Ltd [2005] FCA 1135

PATENTS – Grant of licence to exploit invention – Obligation to register – Licence not registered before infringement proceedings instituted – Effect of failure to register

Patents Act 1990 ss 187, 189, 195, 196, definition of “exclusive licensee”.

Vulcan Australia Ltd v M L D’astoli & Co Pty Ltd (1995) 32 IPR 25 cited

Berlei (UK) Ltd v Bali Brassiere Co Inc [1970] RPC 469 cited

Lidden v Composite Buyers Ltd (1996) 139 ALR 549 cited

Vitamins Australia Ltd v Beta‑Carotene Industries Pty Ltd (1987) 9 IPR 41 applied

CLOROX AUSTRALIA PTY LTD and LOURENCE CORNELIUS JOHANNES GREYVENSTEIN v INTERNATIONAL CONSOLIDATED BUSINESS PTY LTD and PHILIP CRAIG WITHERS

VID 712 of 2005

SUNDBERG J

18 AUGUST 2005

MELBOURNE

THE COURT ORDERS THAT:

1.                  The application be stayed pending delivery of judgment in proceeding No V558 of 2002.

2.                  There be no order as to costs.

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

REASONS FOR JUDGMENT

1                     By motion notice of which was filed on 8 August 2005 the respondents apply to stay this proceeding pending the delivery of judgment in proceeding V558 of 2002.

2                     The first applicant (Clorox) and Garfuse BV (Garfuse) commenced V558 of 2002 against the present respondents on 27 August 2002 (the first proceeding). In the first proceeding the applicants alleged that the respondents had infringed each of claims 1 to 6 of Australian Patent No 611639 entitled “Bags with tie parts at opened end” (the first patent), by importing, supplying and selling garbage bags described as “Hercules Wing Top” bags (the Hercules bags). The applicants sought a permanent injunction to restrain the respondents from importing, supplying or selling the Hercules bags, and damages or an account of profits. Garfuse is the patentee and Clorox the exclusive licensee of the first patent. The trial of the first proceeding was heard by Stone J between 22 and 24 June 2005. Her Honour reserved her decision and has not yet delivered judgment.

3                     Clorox and the second applicant, Mr Greyvenstein, initiated the present proceeding (the second proceeding) on 11 July 2005. In the second proceeding the applicants allege that the respondents have infringed claims 1 to 17 and 19 to 22 of Australian Patent No 658688 entitled “Refuse bags” (the second patent), by importing, supplying and selling the Hercules bags. The applicants seek an injunction and damages or an account of profits. Mr Greyvenstein is the patentee and Clorox the exclusive licensee of the second patent.

4                     The exclusive licence granted by Mr Greyvenstein was executed on 30 May 2005, about three weeks before the trial of the first proceeding commenced. On 27 June the solicitors for Clorox and Mr Greyvenstein wrote to the respondents’ solicitors advising that on 22 June 2005 Clorox had been recorded in the Register of Patents as exclusive licensee of the second patent, and stating that in view of the recording date their clients had not thought it appropriate to raise the alleged infringement of the second patent at an earlier time. The letter went on to demand that the respondents cease importing the Hercules bags. The respondents’ solicitors replied that it was wholly unreasonable for Clorox and Mr Greyvenstein not to have raised the claimed infringement of the second patent in the first proceeding, and that they were estopped from now relying on the second patent. In reply the solicitors for Clorox and Mr Greyvenstein repeated that the licence had not been recorded until 22 June 2005, which was after the trial of the first proceeding had commenced. They also said that the first and second patents were different patents, and that the patentees were different people.

5                     The grant of a stay such as that sought by the respondents is a discretionary order. To obtain a stay an applicant must show that the interests of justice would be best served by its grant: Vulcan Australia Ltd v M L D’astoli & Co Pty Ltd (1995) 32 IPR 25 at 27; Berlei (UK) Ltd v Bali Brassiere Co Inc [1970] RPC 469 at 477. In Lidden v Composite Buyers Ltd (1996) 139 ALR 549 at 559 Finn J expressed the view that

“where proceedings are pending in a court, a separate action in the same court should at least be stayed where both actions involve the same parties and the same subject matter and where the hearing of the first will effectively dispose of the need for the hearing of the second.”

6                     In my view it is appropriate to grant the stay sought. If the applicants in the first proceeding are successful, they can be expected to obtain the relief they seek. The injunction will continue until 22 July 2007, when the term of the first patent expires. On this view the applicants will have obtained all the relief that is sought in the second proceeding in relation to the same infringing articles. In those circumstances, to give directions at this stage of the second proceeding requiring pleadings, discovery and affidavits would be shown to have been a wasteful exercise. This is the more so because in the second proceeding the respondents propose to file a cross claim alleging invalidity of the second patent.

7                     If the applicants are unsuccessful in the first proceeding, the only consequence of a stay in the second proceeding is that there will be a delay in the commencement of the interlocutory steps, directions for which would, but for the first proceeding, have been given today.

8                     If the applicants succeed in the second proceeding the sale of the Hercules bags will be enjoined until the term of the second patent expires on 4 November 2012, and the applicants will recover damages or an account of profits.

9                     The applicants in the second proceeding have claimed they will suffer prejudice because there will be a gap between the lapsing of any injunction granted in the first proceeding (occasioned by the expiration of the term of the first patent) and the grant of any injunction obtained in the second proceeding. I doubt that there will be a gap for three related reasons. The first is that I think it unlikely that the second proceeding will not be heard and determined before 22 July 2007 even if a stay is granted. The second is that the applicants will have every reason to ensure that the second proceeding advances expeditiously. The third reason is that the respondents have undertaken to facilitate the efficient progress of the second proceeding. Even if there is a gap as feared, any sales of the Hercules bags in that interval will attract an award of damages.

10                  There is no precise identity of parties in the two proceedings. Clorox and the respondents are the same in both. However Garfuse is an applicant in the first proceeding but not the second, and Mr Greyvenstein is an applicant in the second but not the first. However:

·                 there is evidence that in 1994 Mr Greyvenstein referred to Garfuse as “my company”

·                 he is the inventor named in the first patent, though he is not the patentee

·                 he was the person who, by his patent attorneys, completed the specification of the first patent application for registration on Garfuse’s behalf

·                 the same solicitors, Callinan Lawrie, acted for the applicants in each proceeding

·                 the same patent attorneys (R K Maddern) acted for Garfuse and Mr Greyvenstein on each patent application

·                 the claim made by the respondents’ counsel that Garfuse is Mr Greyvenstein’s company was not controverted by counsel for the applicants

·                 the applicants advanced no evidence to explain the relationship between Mr Greyvenstein and Garfuse.

In those circumstances, it is appropriate to infer that Mr Greyvenstein is the moving spirit behind Garfuse.

11                  Reverting to the passage in Lidden set out at [5]: both proceedings involve essentially the same parties, the subject matter of both is the same (infringing of the patents by the importation etc of the Hercules bags), and the determination of the first proceeding in favour of the applicants will effectively dispose of the need for the hearing of the second proceeding. It is true that the determination of the first proceeding will not have that effect if the respondents are successful. However Finn J does not stipulate conditions that must be satisfied in order for there to be a stay. Rather his Honour was positing the clearest case for a grant. See the words “should at least be stayed where …”. In the circumstances, in the exercise of my discretion, I think the interests of justice require the stay that is sought.

12                  The respondents placed considerable emphasis on the applicants’ failure to seek to add their claimed breach of the second patent to the first proceeding. Since I am satisfied that there should be a stay because of what I have already said, it is not necessary to dwell on all aspects of this issue. Only one might usefully be mentioned. As the correspondence earlier recited shows, the applicants sought to excuse themselves for not “combining” the two proceedings by the claim that they could not really do so because their licence of the second patent had not been registered until the very day the hearing of the first proceeding began. I do not accept this submission.

13                  Section 187(1) of the Patents Act 1990 provides:

“Particulars of standard patents in force, and other prescribed particulars relating to standard patents (if any), must be registered in that part of the Register dealing with standard patents.”

The regulations have made “entitlement as licensee” a prescribed particular. See reg 19.1. Section 189(1) provides in part that

“A patentee may, subject only to any rights appearing in the Register to be vested in another person, deal with the patent as the absolute owner of it ….”

Section 195(1) provides that the Register is prima facie evidence of any particulars registered in it. Section 196 provides in part that

“A document in respect of which particulars have not been entered in the Register is not admissible in any proceedings in proof of the title to a patent or to an interest in a patent unless:

(a)         the court or tribunal before which the proceedings are brought otherwise directs ….

…”

14                  Section 189(1) enables a patentee to licence another person to exploit the invention. Unless the terms of the grant otherwise provide, the grant is effective upon the execution of the licence. Section 187 requires the licence to be registered, and s 196 contains the sanction that, unless the court otherwise directs, an unregistered licence is not admissible in any proceedings in proof of the licensee’s interest in the patent. That section is concerned with proof of title in court. It contains no indication that an executed licence agreement is ineffective unless registered. This was explained by the Full Court of the Supreme Court of Western Australia in Vitamins Australia Ltd v Beta‑Carotene Industries Pty Ltd (1987) 9 IPR 41, especially in the judgment of Kennedy J at 52‑54. Speaking of the Patents Act 1952, his Honour said (at 53):

“It is abundantly clear that registration is not necessary to the creation of the rights of an exclusive licensee. That this is so is apparent from the wording of s 23, which calls upon a licensee who has already become entitled as a licensee to an interest in the patent to apply to register that title, that is, his pre‑existing title. It is the instrument, and not registration, which is referred to in the section as creating the interest. Furthermore, the definition of an exclusive licensee makes no reference to registration. In addition, s 27 recognises unregistered interests, although they are postponed to bona fide purchasers for value, and s 31 recognises that title can be proved by an unregistered document.”

The counterpart in the current Act of s 23 of the 1952 Act is s 187(1) in combination with reg 19.1, that of s 27 is s 189(2) and (3), that of s 31 is s 196, and the definition of “exclusive licensee” is essentially the same in both Acts.

15                  I will order that the second proceeding be stayed pending the delivery of judgment in the first proceeding.

Associate:

Dated:              18 August 2005