FEDERAL COURT OF AUSTRALIA

Prismex Technologies Pty Ltd & Anor v Keller Industries Pty Ltd & Ors [2006] FCA 1504

PATENTS – licence to exploit invention – term of licence – whether revocable – effect of liquidation of licensee

TORT – trespass to land – unauthorised entry

TORT – conversion – rights of bailor – whether bailment determined

TRADE MARKS – use of mark – mark used in promotional correspondence – whether mark used in relation to goods

TRADE PRACTICES – misleading and deceptive conduct – representation of entitlement to use trade mark

Trade Marks Act 1995 (Cth) s 20

Trade Practices Act 1974 (Cth) ss 52, 53, 75B 

City Motors (1933) Pty Ltd v Southern Aerial Super Service Pty Ltd (1961) 106 CLR 477

Muschinski v Dodds (1985) 160 CLR 583

Penfolds Wines Pty Ltd v Eiliott (1946) 74 CLR 204

Shell Co of Australia Ltd v Esso Standard Oil (Australia) Ltd (1963) 109 CLR 407

PRISMEX TECHNOLOGIES PTY LTD (ACN 069 870 542) AND X-POSITION PTY LTD (ACN 120 575 242) v KELLER INDUSTRIES PTY LTD (ACN 070 739 534), KELLER INDUSTRIES PTY LTD (ACN 070 739 534), PRISMEX TECHNOLOGIES PTY LTD (ACN 069 870 542), X-POSITION PTY LTD (ACN 120 575 242), COLIN LINDSAY TAGGERT AND JOHN ASHALL

VID902 OF 2006

JESSUP J

14 NOVEMBER 2006

MELBOURNE

THE COURT ORDERS THAT:

1.                  The proceeding be listed for further hearing on a date to be fixed.

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

REASONS FOR JUDGMENT

1                     The first applicant, Prismex Technologies Pty Ltd (‘Prismex Technologies’), is the owner of Australian Patent No 647834 (‘the patent’) for an invention referred to as a display system (‘the invention’).  In 1995, Prismex Technologies granted to Interium Pty Ltd (‘Interium’) an exclusive licence to exploit the invention, and Interium did so until June 2006, when it went into liquidation.  The principal question in this proceeding is whether the licence is revocable by Prismex Technologies, or whether it cannot be so revoked and is an asset assignable by the liquidator of Interium.  The question is important because the liquidator purported to assign all the property of Interium, including intellectual property, to the first respondent, Keller Industries Pty Ltd (‘Keller’), which was in competition with Interium, and which is still in competition with interests which were associated with Interium and which remain associated with Prismex Technologies.

2                     The primary claim in the patent specification is for –

‘… an illuminated display system composing a transparent medium having two opposing surfaces to be illuminated, wherein both of said surfaces to be illuminated have a matrix of dots substantially covering said surfaces to be illuminated resulting in an increased illumination of the surfaces to be illuminated.’

The invention is claimed to improve the evenness and brightness of the appearance of a sign, especially a large sign, illuminated by means of light sources at one or (on large signs) both of its edges, where the light radiates inwards over the surface of the transparent medium referred to. 

3                     The display system was invented by the fourth cross-respondent, Mr John Ashall (‘Ashall’) in about 1991, in which year the patent was applied for by Ashlar Screenprints Pty Ltd (‘Ashlar’), a company with which Ashall was then associated.  In July 1992, Ashlar assigned its interest in the patent application to a company called Illumination Research Group (Properties) Pty Ltd (‘IRG’), which used the invention in the manufacture of an edge-lit diffusion system called ‘Prismex’.  Also in the early 1990’s, Mr John Matyear (‘Matyear’) was in a separate business in the manufacture of edge-lit signs, called ‘Interium’.  In July 1994, he was approached by Mr Garry Buick (‘Buick’) of IRG who said that IRG was in financial difficulties, and suggested that they establish a new venture which would purchase the rights to manufacture the ‘Prismex’ panel.  Whether or not connected with these developments, on 27 January 1995, IRG assigned its interest in the patent application, and in the then prospective patent, back to Ashlar.  The patent was sealed only four days later, on 31 January 1995, in the name of IRG.  The transfer to Ashlar was registered on 15 February 1995.  By the time of important events in June and July 1995 to which I shall refer, Ashlar was the patentee.

4                     Matyear and Buick commenced to develop their new business.  They needed larger premises than were then available to them, and some factory space in Bayswater was offered by someone with whom Matyear had worked in the 1980’s, the third cross-respondent, Mr Colin Taggert (‘Taggert’).  A little later, it seems, Matyear was told by a representative of Ashlar that the patent could be purchased for $150,000.  Thus was born the idea of a business making edge-lit signs using the invention, which was referred to as the ‘Prismex technology’.  Taggert joined Matyear and Buick in the venture, as did Ashall himself, who had the technical skills required for the project.

5                     The corporate structure for the business was discussed by the four venturers (Matyear, Buick, Taggert and Ashall) at a critical meeting in the office of their accountant, Mr Peter Mews (‘Mews’) on 9 June 1995.  I was told that Buick is now deceased.  Mews was not called to give evidence, a circumstance for which no explanation was offered by any party.  The other three participants in the meeting gave evidence, but their recollections of the meeting were very general, and understandably influenced by their concept of what was the general plan at the meeting, rather than by any recollection of what was actually said or agreed.  However, all were clear that there were to be two companies involved in the business, one to trade and the other to hold the patent.  On 13 June 1995, Mews wrote a memorandum the stated purpose of which was ‘to record the matters discussed’ at the meeting on 9 June.  Each witness accepted that this memorandum did accurately summarise what was discussed at the meeting.

6                     Under the heading ‘Purpose of the Meeting’, Mews’ memorandum stated:

‘The meeting was called to consider the issues surrounding the formalising of the business associated with Edgelight Signs which is the sign system incorporating extruded aluminium framing, special lighting and the transfer of light through the Prismex Technologies Pty Ltd screens.  The work has been done by John Matyear and Garry Buick to a point where a market for the product has now been established.

The business is to incorporate the acquisition of Asher screens, the screening company which produces the Prismex Technologies Pty Ltd panels, and by way of a separate company will acquire the patent for Australia for the Prismex Technologies Pty Ltd screen technology.

The business will also incorporate the design, manufacture and installation of special signage such as the New South Wales rail project where a contract is about to be awarded to the group.’

Under the heading ‘Name and Entities’, Mews’ memorandum stated:

‘The business is to trade under the company known as Interium Pty Ltd and the patent is to be held by a separate company known as Prismex Technologies Pty Ltd.  The purpose of separating the operations and the patent is to protect the value of the patent in the event of any litigation or law suits which may arise to Interium Pty Ltd.

Two new companies are to be formed and the business name currently held by Metage Pty Ltd, John Matyear’s trustee company, is to be transferred to the new company Interium Pty Ltd.  The arrangement for the incorporation of the companies and the transfer of the name is to be between Garry Buick and John Matyear.’

7                     Mews then recorded the agreed capitalisation of Prismex Technologies and Interium.  Prismex Technologies was to have paid-up capital of $150,070, $150,000 of which was required to purchase the patent from Ashlar.  That was raised by each of Matyear and Buick contributing $30 (30 x $1 shares), by Ashall contributing $10 (10 x $1 shares) and by Taggert contributing $150,000 (30 x $1 shares at a premium of $149,970).  Interium was to have paid-up capital of $100, which was raised by contributions of $30 (30 x $1 shares) from each of Matyear, Buick and Taggert, and of $10 (10 x $1 shares) from Ashall, together with a ‘premium issued’ (as Mews described it) of $99,960, giving total capital of $100,060.  All four men were to be directors of Interium, in addition to having various working roles in that company:  Taggert was to be General Manager and responsible for accounts and finance, and record-keeping; Buick was to be responsible for sales in Victoria; Matyear was to be responsible for sales elsewhere; and Ashall and Matyear together were to be responsible for research and development, and production.

8                     Mews set out various ‘action steps’ that needed to be taken, and under the heading ‘Other Matters’, he stated:

‘Prismex Technologies Pty Ltd will also licence its patent to Interium Pty Ltd who will hold the master licence for Australia.  Interium Pty Ltd may then issue sub licences to other parties.’

9                     Prismex Technologies was registered on 15 June 1995, and Interium was registered on 30 June 1995.

10                  On 12 July 1995, two significant agreements were executed.  Each was drafted by solicitors engaged by Ashlar.  The first was an agreement to assign the patent, certain formulae and other property from Ashlar to Prismex Technologies (‘the assignment agreement’).  The sealing of the assignment agreement by Prismex Technologies was witnessed by Buick and Taggert.  The second was an agreement for the sale of business from Ashlar to Interium (‘the sale of business agreement’).  The sealing of the sale of business agreement by Interium was also witnessed by Buick and Taggert.  By these two agreements Ashlar, which had previously owned the patent and exploited the invention in its business, divested itself of the patent and the business, but each to a separate party.

11                  By the assignment agreement, in consideration of the payment of $150,000 (paid in full at execution), Ashlar assigned the patent to Prismex Technologies absolutely, together with items which were listed in a schedule to that agreement as follows:

·          CURRENT PRISMEX DOT MATRIX PRINTING INK MIXTURE

·          CURRENT DOT MATRIX PRINTING FILMS

·          COPY OF CURRENT PRISMEX DOT MATRIX PROGRAMME DISCS

·          PROVISION FOR ACCESS TO ALL INK FORMULAE FILMS AND PROGRAMME DISCS RELATING TO THE MANUFACTURE OF PRISMEX PANELS

12                  There were several provisions of the assignment agreement that recognised that Interium, not a party to that agreement, would be the trading entity that exploited the invention.  Prismex Technologies was obliged to ‘procure’ that Interium paid royalties to Ashlar for a 5-year period at the rate of 5% of the net proceeds (as defined therein) derived by Interium from sales of Prismex panels into the Australian market.  Prismex Technologies was obliged to ‘procure’ that Interium notified Ashlar of its intention to sell or dispose of the Prismex panel business over the ensuing 5 years.  If Interium went into liquidation, or if a receiver were appointed to Interium, Prismex Technologies itself was obliged, for the balance of the 5-year period, to pay an annual royalty to Ashlar equal to the average annual royalty that had been paid by Interium down to the date of liquidation or appointment of the receiver.  The assignment agreement was supported by guarantees in favour of Ashlar given not only by the directors of Prismex Technologies, but also by the directors of Interium (who were, of course, the same people).

13                  By the sale of business agreement, in consideration of the payment of $30,000 by instalments over the ensuing 12 months, Ashlar sold its business to Interium.  The ‘business’ was defined as ‘the business of screenprinting’.  Goodwill, and a wide range of specific and general assets, passed under that agreement, as did –

‘… all trade marks and trade names copyrights, inventions, discoveries, patents, other than Patent No. 647834, trade secrets, know-how and other industrial property or rights … whether the same are registered or registrable or not ….’

As noted at the outset, patent No. 647834 was the patent. Under the sale of business agreement, Interium was obliged to pay royalties to Ashlar for a 5-year period at the rate of 5% of the net proceeds (as defined therein) derived by Interium from sales of Prismex panels into the Australian market.  This was Interium’s primary obligation in relation to royalties, payment of which, under the assignment agreement, Prismex Technologies was obliged to procure.  Interium was obliged to notify Ashlar of its intention to sell or dispose of the Prismex panel business over the ensuing 5 years.

14                  In each of the assignment agreement and the sale of business agreement there were three recitals.  Recital C in the assignment agreement was:

‘[Prismex Technologies] has agreed to grant a perpetual licence under the Patent to Interium …, and to procure Interium to pay a royalty to [Ashlar]  in respect of use of the patented invention.’

Recital C in the sale of business agreement was:

‘[Ashlar] has agreed to assign its Patent No. 647834 to Prismex Technologies …, which has agreed to grant a perpetual licence to [Interium] to exploit the invention.’

15                  The sale of business agreement contained a series of warranties by Ashlar, most of which were appropriate to be given by a vendor selling a business.  However, the warranties were introduced by the statement that Ashlar ‘hereby warrants and agrees with [Interium] that ….’  One of the warranties which followed was that ‘the Recitals to this Agreement are true and accurate’.  This provision assumed some importance in the present proceeding, as it was said (on behalf of Keller) that it constituted an assent by Taggert and Buick, who witnessed the execution of the agreement by Interium and who were, at the time, also directors of Prismex Technologies, to the truth and accuracy of the statement in the above recital that Prismex Technologies had agreed to grant a perpetual licence of the patent to Interium.  The agreement to which Prismex Technologies itself was a party, the assignment agreement, did not contain such a warranty.

16                  Although it is common ground that, in those months, Prismex Technologies did grant to Interium an exclusive licence, there is no document constituting or (save for the assignment agreement and the sale of business agreement) evidencing the licence.  It is also common ground that, at the meeting on 9 June 1995, those who were to become the directors of both companies planned that Prismex Technologies would grant a licence to Interium to exploit the invention, yet it cannot be suggested that the licence was, at that meeting, granted orally, since neither Prismex Technologies nor Interium existed at the time.  What the individuals were discussing at the meeting was what would happen, not what thereby did happen.

17                  Nothing further was said or written on the subject of the licence of the patent to Interium until events of 2006 in which the subject became controversial and in relation to which the participants in the events of June and July 1995 were in dispute.

18                  From the time of those events, Interium carried on the business of developing, manufacturing, marketing and selling edge-lit signs utilising the technology protected by the patent.  The four initial venturers all had management roles in Interium:  Taggert was Managing Director, Matyear was NSW Business Development Manager/Sales Manager, Ashall was Technical Director and Buick was a director and Victorian Sales Manager.  The latter was removed as a director, and dismissed as an employee, in 1996. 

19                  In 1998, Interium applied for the registration of the trade mark ‘PRISMEX’.  Registration of the mark was achieved in 2000, and Interium remains the registered owner.

20                  To the observer, Interium was the only company involved in the ‘Prismex’ name or technology.  Not only was it Interium, not Prismex Technologies, that used the word in trade:  on a number of occasions Interium, not Prismex Technologies, took proceedings to protect its interest in the patent, including taking opposition proceedings when third parties sought to register new patents considered to be relevant to the patent.  From its incorporation in 1995 until the dispute which gave rise to the present proceeding, it seems, Prismex Technologies did virtually nothing.  It did not even have a bank account.  However, given the common shareholding and office-holdings within the two companies, Prismex Technologies must be taken to have been aware of Interium’s exploitation of the invention, thereby justifying the suggestion that there was at least an implied licence to do so;  and, given Prismex Technologies’ own state of quiescence, it would take little extra to imply that the licence was intended to be exclusive (that is to say, exclusive of the rights of any other person, including the patentee itself).  This latter aspect is not one which I am required to decide, since the existence of an exclusive licence is established on the pleadings.

21                  At this point I should say something about the manufacturing process in which the invention was exploited.  In the early 1990’s, while employed by Ashlar, Ashall caused to be printed on to a sheet of acetate film, about 1200 mm square, millions of small dots in a particular matrix.  The size and spacing of these dots was critical to the effectiveness of the invention.  This particular piece of film was referred to by Ashall as the ‘B-Dot’ film.  The next step was to engage a commercial silk screen printer to produce a pattern on a silk screen from the dots on the film.  This silk screen was then used in the process of manufacturing the clear acrylic panels, about 10 mm in thickness it would seem, which were incorporated into the signs which Ashlar, and later Interium, manufactured.  Using the silk screen, the matrix of dots was reproduced on to both sides of a panel, and the panel, with dots, was then placed immediately behind the front image of the sign in question.  Then, as Ashall said in his evidence, ‘you place the lamps down the side, the light travels through the acrylic and hits all these dots and they all light up’.  The presence of the dots on both sides of the panel is said greatly to enhance the brilliance and evenness of the spread of the illumination across the whole sign.

22                  It is evident that the physical item which is critical in the manufacturing process is the acetate film on which the dots are placed.  The original ‘B-Dot’ film which Ashall produced in the early 1990’s was used by Interium to the end.  It had not been replaced by another film of the same dimensions.  It could be, and presumably has been, used over and again for the production of silk screens with the corresponding matrix of dots.  Silk screens themselves may, apparently, be used many times for the production of acrylic panels, but they are intrinsically delicate in their main component (the screen), which may have to be replaced from time to time when it suffers damage.  The acetate film, by contrast, is quite robust.  While working for Ashlar, Ashall produced a larger film which he described as the ‘D-Dot’ film, and later in the service of Interium he produced two smaller films, the ‘A-Dot’ film and the ‘C-Dot’ film.  The production of these films from the original ‘B-Dot’ film was a relatively simple matter:  Ashall explained that he merely instructed the outside supplier contracted to produce such things to expand, or to shrink, the pattern on the film to the desired size, and this was done, proportionally in all directions, by computer.  In the result, the sizes of the dots themselves, and the distances between dots, were increased or decreased when films of different overall sizes were produced.

23                  Returning to the course of events which preceded the present litigation, in 2003 Interium encountered serious cash flow problems as a result, it seems, of the failure of a particular overseas joint venture.  This apparently left Interium with unpaid debts, and these were purchased by National Australia Bank (‘the Bank’) in June 2004 under what was described as a debtor finance facility.  By way of security, the Bank took a fixed and floating charge over Interium’s assets. 

24                  In 2003 Taggert was removed from his position as Managing Director of Interium, and in 2004 he resigned as director.  Ashall’s employment with Interium was terminated on 10 April 2006.  In May and June 2006, the only one of the original four venturers who remained actively working in the business of Interium was Matyear, although Taggert and Ashall (or interests associated with them) remained shareholders, and Ashall remained a director.

25                  On 10 May 2006, the Bank terminated Interium’s debtor finance facility and demanded that Interium immediately repurchase the debts which it had sold to the Bank in 2004, a transaction which would have involved the payment of about $128,300.  Interium could not and did not repurchase the debts, but on 11 May 2006 Matyear himself paid out the Bank and took an assignment from the Bank of its fixed and floating charge.  On the same day, Matyear demanded repayment of the sum owing by Interium, and stated that, if payment were not made by the close of business on 12 May 2006, he would ‘take such other steps as are necessary to enforce [his] Securities’.  Payment was not forthcoming, and on 15 May 2006 Matyear appointed an administrator to Interium.  At a meeting of creditors held on 22 May 2006, that administrator was replaced by a different administrator, Mr Peter Vince (‘Vince’).

26                  By letter dated 8 June 2006 to Vince, solicitors for Prismex Technologies noted that their client was the registered proprietor of the patent and was also the owner of the formulae for ink mixtures and films necessary for the manufacture of the Prismex panel.  They noted that Interium used the patent and ink formulae pursuant to the licence.  They noted (from the terms of a creditors’ report dated 31 May 2006) that there were a number of parties interested in purchasing the business and assets of Interium.  They asserted that Interium was incapable of assigning the licence or disclosing the ink formulae to interested purchasers without the permission of Prismex Technologies.  Their letter continued:

‘We note that you expect to receive a proposal from one or both of the directors of Interium.  In the event that Interium does not trade on, we are instructed that [Prismex Technologies] will immediately terminate the licence.  Accordingly, any purchaser interested in continuing to use the patent, ink formulae and films must seek permission from [Prismex Technologies].  We are instructed to respond to any enquiries in this regard.’

27                  At a meeting of creditors of Interium held on Friday 30 June 2006 it was resolved that Interium be wound up.  Vince was the liquidator.  Immediately after the meeting, he negotiated with two parties who were interested in purchasing Interium’s business and assets:  one was a company with which Taggert was associated, and the other was Keller.  Keller’s offer was accepted.  No documentary record of the agreement between Vince and Keller on 30 June is in evidence, but the Managing Director of Keller, Mr Greg Pobke, stated that, as part of the purchase, Keller was required to enter into possession of Interium’s premises ‘under licence’ from the commencement of trade the next business day.

28                  At some time about 7.15 or 7.30 am on Monday 3 July 2006, Taggert and Ashall entered the premises of Interium, by means of a rear door which was open.  Some employees were at work at that time, and Ashall spoke to one of them who was known to him from his own time working there.  Taggert uplifted cylindrical containers which he believed to contain – and which did contain – the acetate films used in the production of silk screens, and removed them from the premises.  Ashall used a piece of aluminium to slash a number of silk screens which he believed to have – and which did have – representations of dot patterns made from the films taken by Taggert.  By these steps Taggert and Ashall made it practically impossible for the purchaser of Interium’s business, Keller, to exploit the invention.  Ashall also removed an item referred to as a jig from the premises.

29                  By letter dated 4 July 2006, Vince’s solicitors wrote to the solicitors for Taggert and Ashall.  They mentioned the actions referred to in the previous paragraph, and demanded the return of the films and of the jig.  They said:

‘As you are aware, the Prismex technology is an integral part of the business of [Interium] under which [Interium] holds a perpetual licence to use the patented Prismex dot matrix printing ink mixture and dot matrix printing films relating to the manufacture of Prismex panels.’

30                  Solicitors for Taggert and Ashall – who stated that they also acted for Prismex Technologies – replied on 5 July 2006.  They referred to the assignment agreement.  They continued:

‘Recital C of the [assignment agreement] states that [Prismex Technologies] has agreed to grant a perpetual licence under the Patent to Interium.  We are instructed that no written licence between [Prismex Technologies] and Interium came into existence.  Accordingly, the terms of any licence are unclear.  At best, there was an implied licence for Interium to use the Patent and films.  On any view, it cannot be said that such a licence purported to transfer title to the Patent and films to Interium.

In accordance with ordinary commercial practice, any implied licence terminated immediately upon Interium going into liquidation.  We note that the creditors resolved that Interium be wound up at the meeting on 30 June 2006.  Accordingly, from that date Interium had no lawful entitlement to use the Patent or possess the films.  Indeed, [Prismex Technologies] was entitled to the immediate delivery up of the films.

We also note that by our letter to Mr Vince dated 8 June 2006, we advised that Interium was incapable of assigning the licence or disclosing the ink formulae to prospective purchasers without the permission of [Prismex Technologies].  [Prismex Technologies] has not provided permission.  Further, we advised that [Prismex Technologies] would immediately terminate the licence if Interium did not trade on.

….

In addition to the licence coming to an end upon Interium being placed into liquidation, our earlier letter served as notice of termination of the licence.  Interium has no further entitlement to use the Patent or the dot matrix films.  Moreover, it has no claim to ownership.  They are the property of [Prismex Technologies].  Accordingly, our clients will not return them.’

The letter concluded with a statement that the jig taken from Interium’s premises had been made by Taggert’s son-in-law, and did not form part of the assets of Interium.

31                  On 14 July 2006 a written agreement recording the sale of Interium’s business assets to Keller was executed by Interium, Vince and Keller (‘the asset sale agreement’).  By that agreement, Keller bought all the ‘business assets’ of Interium (with certain presently irrelevant exclusions).  The term ‘business assets’ was defined to include choses in action, intellectual property, licences and permits.  The term ‘choses in action’ was defined to include Interium’s rights against Prismex Technologies, Ashlar, Taggert and Ashall.  The term ‘intellectual property’ meant the rights and interests used by Interium in (inter alia) any patent.  The term ‘licences and permits’ was defined as various generically-expressed rights and interests, but limited ‘to the extent assignable or transferable’ to Keller.  The term ‘Rights’ was defined to mean (inter alia) Interium’s rights ‘to use intellectual property rights in respect of Prismex, as recorded in’ the assignment agreement.  Keller acknowledged that Interium ‘does not have absolute rights to assign or transfer the Rights’.  Interium and Vince promised ‘to use their best endeavours to assign or transfer the Rights’.

32                  The asset sale agreement also provided that the purchase price of $370,000 (subject to adjustments) would be allocated, for all purposes, as set out in a schedule to the agreement.  That schedule indicated that ‘$NIL’ had been allocated to intellectual property.  It was noted in a recital that, on 3 July 2006, Keller had been given ‘access’ to the premises on the terms set out in a licence annexed to the agreement.  That licence was described as ‘Exclusive Licence to Conduct Business of Interium Pty Limited (In Liquidation)’.  It was executed by Interium and Vince (but not by Keller) on 3 July 2006.  By the operative provisions of the licence, Interium granted to Keller a licence to conduct its business from the premises during the term of the licence.  Keller agreed to ‘use, operate, maintain and repair all of the Business Assets in a normal business manner consistent with past practice.’  It is recorded that Keller took possession of the premises at the ‘commencement of trading’ on 3 July 2006.  The term of the licence was not explicitly stated, but a recital thereto notes that Interium and Vince had agreed to grant a licence to Keller to conduct the business from the commencement of trading on 3 July 2006 until completion of the agreement, then in contemplation, which became the asset sale agreement.  On completion under the asset sale agreement, one of the obligations of Interium and Vince was to deliver to Keller an executed copy of an assignment of the lease pursuant to which Interium occupied the premises.  A copy of the lease itself was annexed to the asset sale agreement: it was a lease of the premises by a company called Berona Nominees Pty Ltd to Interium for a term of 3 years and 2 months commencing on 1 November 2004.

33                  In the meantime, on 5 July 2006, Taggert procured the incorporation of the second applicant, X-Position Pty Ltd (‘X-Position’).  He is the sole director and his own company is the sole shareholder.  He gave evidence that, on the same day, he and Ashall, being a majority of the directors of Prismex Technologies, caused that company to grant to X-Position an exclusive licence to use the invention and to exploit the invention.  It is proposed that X-Position will carry on business in the manufacture of edge-lit signs.  Ashall is its Technical Manager.

34                  Two of Interium’s former employees on the sales side, one Brendan O’Rourke and one Phil Talbot, commenced employment with X-Position.  In evidence is an email of 13 July 2006 from Talbot to someone apparently representing a potential customer for edge-lit signs.  Talbot said that Interium had been placed into liquidation, but that ‘all the Prismex technology relating to the manufacture of KFC signs has not been effected [sic] by the demise’ of Interium.  He said that ‘the company who owns all the technology relating to Prismex’ had appointed X-Position to market and promote the signs.  He sent a similar email on 14 July 2006 to someone in Thailand, in which he asserted that X-Position held the ‘exclusive rights to the Prismex edge-lit technology used by tens of thousands of customers throughout Australia and the world’.  He asserted that X-Position could ‘provide you the rights to use Prismex technology within Thailand’.  In evidence also is an email of 31 July 2006 from O’Rourke to another potential customer.  He said that X-Position ‘manufactures quality edge-lit lightboxes and displays using the No. 1 primary light diffusion technology on the market PRISMEX^TM’.  He said that X-Position manufactured ‘a wide range of standard and custom-designed edge-lit PRISMEX^TM illuminated and non-illuminated signage solutions’.

35                  At the end of July and the beginning of August 2006 correspondence passed between solicitors for Keller on the one hand and solicitors for Prismex Technologies and X-Position on the other hand in which each asserted their clients’ rights to exploit the invention.  On behalf of Keller it was asserted that Interium had, and that Keller purchased, a perpetual licence.  On behalf of Prismex Technologies and X-Position, that was denied, and it was said that the licence had been terminated by the liquidation of Interium, or by the letter from Prismex Technologies’ solicitors to Vince dated 5 July 2006.

36                  By letter dated 9 August 2006, IP Australia informed Keller’s solicitors that Keller’s name had been entered in the Register of Patents as licensee in relation to the patent.  This was said to be in accordance with a request from those solicitors received on 3 August 2006, which is not in evidence.  Also, by letter dated 22 August 2006, IP Australia informed the solicitors that Keller was entered in the Register of Trade Marks as the owner of the mark ‘PRISMEX’, with effect from 7 August 2006.

37                  The present proceedings were commenced by Prismex Technologies and X-Position against Keller on 11 August 2006.  They allege that Interium’s licence to use the patent was terminated on 30 June 2006 when it was placed into liquidation, alternatively by reason of the letter from Prismex Technologies’ solicitors dated 5 July 2006.  They refer to demands previously made that Keller cease to exploit the invention and deliver up any films etc which embodied the patent and any articles made using the patent.  They claim a permanent injunction against infringement, orders for delivery up and damages or an account of profits.  In its Defence, Keller asserts that the licence granted to Interium was both exclusive and perpetual.  As I have mentioned above, Prismex Technologies admits that the licence was exclusive, but denies that it was perpetual.

38                  By Cross Claim dated 20 September 2006, Keller makes a number of claims against Prismex Technologies, X-Position, Taggert and Ashall.  It alleges that the licence of the patent was both exclusive and perpetual, and that it passed to Keller on the sale of Interium’s business.  It alleges that the letter from Prismex Technologies’ solicitors to Vince on 5 July 2006, and the grant of a licence to X-Position, were breaches of the original licence to Interium.  It says, alternatively, that Keller is the equitable owner of the patent by reason of a constructive trust arising from a series of actions undertaken by Interium, and statements by Taggert, in relation to the patent since 1995 (which I shall mention in more detail in due course).  It alleges that X-Position has infringed the patent by manufacturing, selling etc articles made in accordance with the invention.  It alleges that X-Position, by using the trade mark ‘PRISMEX’ in the course of trade, has infringed that mark, and that Prismex Technologies authorised the use of the mark by X-Position.  It alleges that the exploitation of the invention and the use of the trade mark by X-Position, and the purported licence and authorisation by Prismex Technologies of X-Position to do these things, constituted a representation by both companies in trade and commerce that they were ‘entitled to engage in such conduct’, that that representation was misleading or deceptive, and that breaches of ss 52 and 53 (c), (d) and (g) of the Trade Practices Act 1974 (Cth) resulted.  It says that Prismex Technologies and X-Position made unjustified threats of patent infringement.  It alleges the acts of Taggert and Ashall at the former premises of Interium on the morning of 3 July 2006, and says that they amounted to trespass to land and to goods, and conversion.  It also makes a number of claims of accessorial involvement against the cross-respondents.

39                  The trial of the proceeding was expedited, and was conducted on 11, 12 and 13 October 2006.  Part of the way through the trial, it appeared that Keller was working to the assumption that the trial, at this stage, was concerned with issues of liability only, and that questions of remedy would be heard subsequently.  This assumption was not shared by the applicants or the cross-respondents.  I heard short argument on the matter, the result of which was that, on 13 October 2006, I ruled that the issue of liability on the Application and the Cross Claim be heard and determined prior to the issue of quantum.

40                  I shall consider first the main issue in the proceeding:  whether the licence to exploit the invention granted to Interium in 1995 was not only exclusive but also perpetual, in the sense of being irrevocable by Prismex Technologies.  It is alleged by Prismex Technologies, and admitted by Keller, that, by an agreement made in or about July 1995, Prismex Technologies granted a licence to Interium to use and exploit the invention.  Prismex Technologies makes no further allegation about that agreement.  There is no reference to any other terms of the agreement or to the consideration (if any) given by Interium for the grant of the licence.  Neither are such matters raised by Keller in its Defence.   Rather, in its Cross Claim, Keller alleges that, in or around June and July 1995, Prismex Technologies granted a perpetual and exclusive licence to exploit the invention to Interium.  It is not suggested that this was pursuant to a contract.  That an exclusive licence was granted in about June 1995 is admitted by Prismex Technologies in its Defence to the Cross Claim; but the grant of a perpetual licence is denied.

41                  In support of its argument that the licence was irrevocable, Keller submitted that the licence was a species of property which was assignable (Vitamins Australia Ltd v Beta-carotene Industries Pty Ltd (1987) 9 IPR 41), and that a licence ‘coupled with an interest’ was irrevocable, absent express contractual provision (Cowell v Rosehill Racecourse Co Ltd (1937) 56 CLR 605, 616).  It argued that, in this context, an ‘interest’ was an interest in property, real or personal (Hounslow LBC v Trigonum Garden Developments Ltd [1971] Ch 233, 254).  If it was intended, by these arguments, to advance the proposition that, in the absence of express provision to the contrary, a licence of a patent was necessarily irrevocable (because it was a species of property), I am bound to say that the argument strikes me as entirely circular.  If a licence arises pursuant to contract, the nature and incidents thereof will be given content by the terms of the contract in question.  As Megarry J said in Hounslow, ‘a contractual licence is not an entity distinct from the contract which brings it into being, but merely one of the provisions of that contract.’ [1971] Ch at 254.  It may be that an irrevocable licence (such as the licence expressed to be for the unexpired portion of the patent in the facts before the court in Vitamins Australia) might, in certain circumstances, be regarded as a species of property, but manifestly it cannot be argued that, simply because the phenomenon in question is a patent licence and can be regarded for some purposes as property, the licence cannot be revoked.  If it is a licence subtended from a contract, all will depend on the terms of that contract, and I can think of no reason why the express terms thereof only should be taken into account.  If it is a licence created not by contract but by the voluntary act of the patentee, the question whether the patentee reserved a power of revocation would be a question of fact from case to case.  Accordingly, the task for the court in the present case is to look at all the facts and circumstances which surrounded the grant of the licence by Prismex Technologies in 1995, and to decide, by reference to implications as well as to express terms, whether that grant was intended to be irrevocable.

42                  It is important to identify the nature of the transaction – even if implied – by which Prismex Technologies granted the licence to Interium in 1995.  There was nothing ostensibly contractual in the plans of the venturers which led to the patent being held by one company, and the trading being done by the other.  Their discussions did not clearly involve a conscious exchange.  Neither did Interium provide, on behalf of Prismex Technologies, any part of the cash consideration for the patent.  The whole $150,000 was paid by Prismex Technologies from shareholders’ equity.  However, under the sale of business agreement, Interium paid royalties to Ashlar.  Were these payments referable to the patent, or only to the business which Interium had acquired from Ashlar?  I think the former.  The purchase price under the sale of business agreement was the sum of $30,000.  Royalties were a separate matter.  Furthermore, royalties were payable specifically ‘in respect of Prismex panels sold into the Australian market’.  The business purchased by Interium, on the other hand, was something wider: it was ‘the business of screenprinting’.  Evidently, the business involved more than merely the bundle of activities involved in exploiting the invention.

43                  It must be remembered that the two-company arrangement devised in 1995 was for the benefit of the venturers and their new business, not Ashlar.  It was intended that Prismex Technologies would not trade, and would have no income.  It is, therefore, unsurprising that it was not that company upon which the primary obligation to pay royalties was imposed.  Put another way, the fact that Interium was subject to that primary obligation is not, in context, inconsistent with the proposition that those royalties were in fact part of the consideration passing to Ashlar for the assignment of the patent.  The fact that they were tied not to Interium’s total turnover but to Australian sales of Prismex panels strengthens the implication that they were.  The matter is taken further in the same direction by the terms of Recital C to the assignment agreement which refers to the royalties as being ‘in respect of use of the patented invention’.

44                  In the circumstances, I consider that the correct way to view the transactions of mid-1995 is to treat Interium’s promise to pay royalties to Ashlar under the sale of business agreement as having been made pursuant to an implied contract between Interium and Prismex Technologies, and as consideration for the latter’s implied promise to allow – ie to license – Interium to use the patent. This has two possible consequences for the resolution of the question with which I am presently concerned.  First, Keller’s task of establishing that the licence was irrevocable is made a little less daunting than it might otherwise have been by virtue of the fact that Interium was not a mere volunteer, but a party which provided consideration.  Secondly, in identifying the implied terms of the licence, it will be the presumed intentions of both companies, not those of Prismex Technologies alone, which will be relevant.

45                  Before turning to the axis of the relationship between Prismex Technologies and Interium, however, I should consider the nature of the obligations owed by each of them to Ashlar under the assignment agreement and the sale of business agreement.  Under the sale of business agreement, Interium was obliged to pay royalties to Ashlar over a period of 5 years from the making of that agreement.  I have found that those royalties were implicitly referrable to the exploitation of the invention.  Even if not, it seems to have been the common assumption of all in 1995 that the exploitation of the invention was likely to be the main driver of Interium’s sales of Prismex panels.  It may be thought odd, in those circumstances, that the assignment agreement contained no express covenant by Prismex Technologies not to revoke the licence within the 5-year period.  Had the licence been revoked, it would be a fair inference that Interium’s revenue from the sale of Prismex panels would have suffered, probably quite severely.  This would have had a direct impact on Ashlar’s receipts of royalties, something which, I infer, Ashlar would not have intended.  By what provision of either of the agreements in 1995 did Ashlar protect itself from such an eventuality?  If the circumstances were sufficiently serious to drive Interium into liquidation, Prismex Technologies would have been obliged to assume the obligation of paying the royalties.  But, short of that, the agreements did not deal with a situation in which Prismex Technologies simply chose to revoke the licence, thereby impairing Interium’s capacity to continue paying royalties to Ashlar.

46                  There are two possible explanations for the absence from the assignment agreement of any express obligation on the part of Prismex Technologies not to revoke the licence during the period of Ashlar’s receipt of royalties.  The first is that the parties’ solicitors at the time may have regarded the agreement as within the class of contracts under which the co-operation of one party was necessary to enable the other party to have the full benefit of the agreement.  For Prismex Technologies, without proper cause being given by Interium, to have revoked the licence before Ashlar had received the benefit of its 5 years of royalties would in all likelihood have been regarded as a breach of the implied term of co-operation.  If there were such a term, it would supply the deficiency to which I referred at the start of this paragraph. At the same time, if the problem were solved in that way, there would be no basis for the implication of a term to the effect that the licence could not be revoked after the end of the first 5-year period.

47                  The second explanation is that Ashlar’s concerns may have been put to rest by Recital C of the assignment agreement.  That recital is the only statement by Prismex Technologies directly on the matter now in controversy, and it contains an unqualified statement that the licence was perpetual.  Understandably, Recital C featured large in Keller’s case that the licence was irrevocable.  Keller contended that ‘perpetual’ meant for ever (ie for the remainder of the term of the patent).  It relied upon Taggert and Buick – who were two of Prismex Technologies’ directors at the time – having witnessed the execution of the sale of business agreement which contained a similar recital which Interium agreed was true and accurate.  In these respects Keller made points which were of considerable forensic effect, but ultimately they begged the questions at issue.  Those questions were, first, why did the parties to the assignment agreement include Recital C therein, secondly, what did those parties mean by the word ‘perpetual’, and thirdly (and critically) what was the content of the agreement between Prismex Technologies and Interium on the subject?

48                  It seems that neither Taggert nor Matyear has any recollection of why the licence was described as perpetual in Recital C.  When he was taken to the recital, and reminded that his signature appeared on the assignment agreement, Taggert denied that the licence was in fact perpetual, adding:  ‘It was a licence.  Neither here nor there on that perpetual part.’  This was of course, an entirely self-serving response, and I give it little weight on the matter of the parties’ intentions in 1995.  Matyear was cross-examined about the assignment agreement at some length.  When asked whether there was a practical reason for keeping the patent separate from Interium, Matyear said:

‘We never actually discussed any reasons why we did it other than it was separated into a separate entity as a precaution, basically, that is all it was.  We just - there was never any reasons given.  It was never logically thought through to say these are the conditions under which it is going to be done even to the point where Ashlar actually set the agenda for the terms under which Prismex Technologies used its own licence.  Ashlar wrote out the document that we all signed that stated the patent would be a perpetual - given to Interium in a perpetual licence.  If we had sat down and discussed the matter we would have said, thank you, sell the patent to us and then we will decide what to do with it.  We had the company selling it to us telling us what to do with our patent.’

Evidently Matyear had little or no actual recollection of the purpose of particular parts of the assignment agreement that now assume some importance.  He said that the agreement would have been considered by their own solicitors, and he presumed, in effect, that they were happy with it.  Taken specifically to Recital C, his cross-examination proceeded:

‘Well, you didn't turn your mind to that paragraph did you and consider its implications?‑‑‑I am sure I did at the time.  So, yes, we were happy to have a perpetual licence.  So we basically – the document, we were happy with and we signed it.’

This evidence too was self-serving, and of about the same utility in the present circumstances as the corresponding, but contrary, evidence of Taggert to which I referred above.  

49                  From the tenor of this part of Matyear’s evidence, I consider that he and his colleagues were ‘happy’ to have a perpetual licence only in the sense that he presumed, in hindsight, that their solicitors would have drawn attention to any provision in the agreement that was problematic, and they apparently did not do so in relation to Recital C.  Having perused the assignment agreement and the sale of business agreement, I cannot accept that each was the work only of Ashlar’s solicitors to the exclusion of any professional input on behalf of Prismex Technologies or Interium.  The agreements contain many provisions which bespeak the careful attention of solicitors engaged by the latter companies, and I am satisfied that Matyear was correct in his supposition that their own solicitors would have drawn attention to any issues that arose in relation to this recital.

50                  The fact remains that the assignment agreement was not intended to regulate the relations between Prismex Technologies and Interium.  To give content to Recital C, it is necessary to ask why Prismex Technologies and Ashlar, the parties to that agreement, would have included the recital.  I can think of no reason why Prismex Technologies would have pressed for its inclusion.  I think it much more likely that this was one provision which found its way into the agreement on the initiative of Ashlar’s solicitors, and which the solicitors for Prismex Technologies accepted. 

51                  Ashlar would seem to have had two reasons for wanting some comfort that the licence of the patent to Interium would endure.  The first was its entitlement to royalties from Interium over the initial 5 years.  That entitlement would not sustain an inference that the parties intended the licence to continue beyond that 5-year period.  And the interest which Ashlar notionally had over the first 5 years did not even, within that period, extend to a circumstance in which Interium was liquidated, since that eventuality was covered by the obligation of Prismex Technologies itself to pay royalties to Ashlar in place of Interium. 

52                  Ashlar’s second reason for wanting the licence to endure was that it had another basis for a continuing interest in the viability and manufacturing activities of Interium.  The royalties due to Ashlar under the sale of business agreement related only to Interium’s sale of Prismex panels into the Australian market.  Under the heading ‘Ongoing Relationship’ in that agreement, the parties agreed to ‘co-operate in relation to the ongoing marketing and development of framing systems incorporating the Prismex panels’.  At Ashlar’s request, Interium was obliged to make its premises available for demonstration of Prismex panels by Ashlar to its (Ashlar’s) international customers.  If requested by Ashlar, Interium was obliged to supply Prismex panels to Ashlar for export to Ashlar’s customers out of Australia.  If the parties could not agree on price, Interium was obliged to procure a royalty-free licence from Prismex Technologies for Ashlar to manufacture (but not to deal in) Prismex panels in Australia.  Each of these obligations was supported by a corresponding provision in the assignment agreement under which Prismex Technologies was required to procure Interium to perform.  Specifically, under that agreement Prismex Technologies itself was obliged to grant a royalty-free licence to Ashlar in the event that Ashlar and Interium were unable to agree on price.  These provisions were not limited by reference to the 5-year period.  Little was made of these provisions in the hearing before me, but at one point Ashall did express disappointment that, at some stage, his ex-partners had ‘stolen’ his interest in the international patent.  However that may be, these provisions seem to be based upon an assumption by all three parties that Interium would hold a licence to exploit the invention at all times while the two agreements remained in force.  The fact that the agreements were not limited in point of time might sustain the argument that an indefinite licence was intended.

53                  I infer that Recital C was inserted into the assignment agreement at the request of Ashlar, and predominantly to give Ashlar comfort that Interium would be able to exploit the invention over the period in the future in which Ashlar had a continuing interest in Interium’s operations.  That interest was strongest, and most focussed, in the first 5 years.  After that, Ashlar had no further direct financial interest in Interium’s sales of Prismex panels.  It did, however, continue to have an interest of the kind referred to in the previous paragraph.  That interest, although more general, provides a basis for inferring to Ashlar an assumption that the licence would continue indefinitely, and an intention that Recital C should reflect that assumption.  Since Prismex Technologies was the other party to the assignment agreement and was content to have this recital included therein, it too must be fixed with that assumption and that intention.  

54                  I do, therefore, hold that the inclusion of Recital C in the assignment agreement, and the terms of that recital, support Keller’s argument that the licence was intended to be irrevocable.  That support is, however, indirect, since the licence was granted not pursuant to the assignment agreement at all, but pursuant to an implied contract between Prismex Technologies and Interium.  In this respect, it is significant that Recital C did not record the fact of an existing licence: it stated that Prismex Technologies ‘has agreed’ to grant a perpetual licence to Interium.  The fact is that, although such an agreement existed, it was not constituted by any express written or oral communication between the companies concerned.  On the evidence, the only express reference to the licence occurred at a meeting which took place before the incorporation of either company.  If that reference may be taken as a basis for a finding as to the terms of an agreement which was later adopted by the companies (a construction of events which would be consistent with the way all parties conducted the case before me), the fact is that there is no suggestion that anyone said that the licence would be perpetual, or anything of the sort.  There appears to have been no other communication as between Prismex Technologies and Interium about the licence.  Indeed, on the evidence, I could only find that there was no overt act – written or oral – which constituted the granting of the licence.  It is not as though the court may look to Recital C to confirm or to provide greater clarity about some identified transaction as between the parties directly concerned.  There is, therefore, something artificial about using Recital C as a means of throwing light on the assumed transaction between Prismex Technologies and Interium.  Since that transaction existed only as an implication, I consider that the surer route to an identification of the (necessarily implied) terms thereof is to look objectively at the facts and circumstances surrounding the relationship between Prismex Technologies and Interium in 1995 with a view to imputing to them their respective intentions as to the term of the licence.

55                  Prominent amongst those facts and circumstances is the apparent purpose of the two-company structure devised in 1995.  I place no reliance on the identification of that purpose given by the three then players who gave evidence in the case:  I think that the passage of years, and the strong identification which each now has with the position of a party in this proceeding, presents such a risk of reconstruction as to make any such reliance unwise.  However, Mews’ memorandum of 9 June 1995 stated:

‘The purpose of separating the operations and the patent is to protect the value of the patent in the event of any litigation or law suits which may arise to Interium Pty Ltd.’

The only, or at least the most obvious, threat to the patent arising from ‘litigation or law suits’ affecting the patentee would be where the solvency of the patentee was thereby affected to such an extent that its assets would be at risk of being sold to third parties.  For Prismex Technologies to have granted an exclusive, and irrevocable, licence would have so closely approximated an assignment of the patent itself as to defeat the apparent purpose of the two-company structure.  The very people into whose hands the original venturers would have been most concerned to prevent the patent from falling – their competitors – would have been the ones with the greatest incentive to purchase the assets of Interium, if that company were to have failed.  Such competitors could, by buying the assets and thereby the licence, have effectively acquired the patent and have put themselves, rather than the inventor and his associates, in a position commercially to exploit the invention over many years.  This was the very thing which, according to Mews’ memorandum, the venturers sought to avoid.  I consider, therefore, that an identification of the purpose of the two-company structure points rather strongly to an implication that the licence was to be revocable by Prismex Technologies at least in circumstances where the liquidation of Interium was imminent.

56                  The other circumstance which strikes me as of considerable importance is the provision of the assignment agreement which operated if Interium went into liquidation, or a receiver were appointed, within the 5-year period.  Manifestly, if Prismex Technologies were, as was its obligation, to make the royalty payments thenceforth to Ashlar directly, the assumption would have been that Prismex Technologies would have the benefit of the invention for the purpose of generating income from which the royalty payments might be financed.  That Interium might be liquidated and lose, or be obliged to assign, the licence to a third party without Prismex Technologies being able to do anything about it, while at the same time Prismex Technologies was obliged to continue making royalty payments, could not have been intended.  Although this consideration is linked to the prospect of Interium being liquidated within the 5-year period, and is therefore of limited application, it does tell rather strongly against the argument that the licence could not be revoked in any circumstances.

57                  Taking everything into account, the one objective conclusion which shines clearly through a constructional setting which is in other respects somewhat murky is that the retention of the licence by Interium in its own liquidation could never have been intended.  I find as a minimum that, whatever the agreed term of the licence otherwise was, the licence was revocable by Prismex Technologies if the liquidation of Interium were imminent.  At the other end of the spectrum, I consider that, if Interium continued to trade normally, it was implicit that Prismex Technologies would not revoke the licence within the first 5 years, while Interium was obliged to make royalty payments to Ashlar.  The intermediate situation, in which the 5-year period had passed uneventfully and Interium was not at risk of liquidation, is unclear.   The objective circumstances do not clearly point to an implication one way or the other on the matter of the revocability of the licence.  I am somewhat disposed to the view that there is nothing which would justify the implication of a contractual restraint upon the patentee’s power of revocation, but questions would then arise as to how, and on what notice, such revocation could be effected.  I am spared the need to address such questions in the present case, since my finding that the power of revocation could be exercised when the liquidation of Interium was imminent is sufficient in the circumstances.

58                  The next question is whether Prismex Technologies did revoke the licence in the events which occurred in 2006.  It was submitted on behalf of Prismex Technologies that its solicitor’s letter of 8 June 2006 constituted a notice of termination.  On behalf of Keller, it was submitted that that letter did no more than to foreshadow some later act on the part of Prismex Technologies by which the licence would be terminated.  In my view, the distinction made on behalf of Keller is not such as would be obvious to practical business people in the industry concerned.  Within a practical context, I consider that the letter effectively notified Interium that it should treat the licence as terminated if it went into liquidation.

59                  If there were any doubt about it, that doubt was removed by Prismex Technologies’ solicitors’ letter to Vince’s solicitors dated 5 July 2006.  Although postulating a legal proposition which Prismex Technologies did not seek to defend before me (that the licence terminated upon Interium going into liquidation ‘in accordance with ordinary commercial practice’), the letter left the reader in no doubt but that Prismex Technologies, as grantor of the licence, regarded the licence as terminated upon the act of liquidation.  Although it is true that Prismex Technologies could not have terminated the licence retrospectively, when read in the light of the earlier letter of 8 June 2006, (and if that letter was not, of itself, sufficient to terminate the licence by notice), the letter of 5 July 2006 at least had that effect from the date of receipt by Vince.  I hold, however, that the licence to exploit the invention granted to Interium was terminated by Prismex Technologies on 30 June 2006.

60                  It was next contended on behalf of Keller in the alternative that Interium was, and that Keller itself now is, the owner in equity of the patent, as distinct from, or possibly in addition to, being the licensee.  The factual basis of that claim was that, over the period between its incorporation in June 1995 and its liquidation in June 2006, Interium had taken all the practical steps necessary to protect the patent, and generally represented to the world at large that it was the patentee.  Keller relied upon the following facts and circumstances:

a.                   On 7 August 1995, Interium referred the assignment from Ashlar to Prismex Technologiesto its solicitors for purposes of registration.

b.                  In 1996, Taggert prepared a company profile for Interium, in which one of the components of the business was described as ‘owners of the “Prismex” edge-lit system patent in Australia …’

c.                   On 11 August 1995, Taggert, on behalf of Interium, sent a promotional facsimile to a Chinese company in which various configurations of possible business relationships were discussed, including the grant of a non-exclusive licence, or the grant of an exclusive licence, each of which would, it was said, secure for the grantee access to Prismex technology.

d.                  On 23 October 1995, Taggert, on behalf of Interium, sent a facsimile to a company called Delta Electronics, in which he introduced himself as a director of Interium ‘the purchaser of the Australian Prismex patent along with the existing business previously operated by Ashlar Screenprints.’

e.                   At a meeting of the management committee of Interium on 9 January 1996, attended by Ashall, Buick, Matyear, and Taggert, a patent violation which had come to the attention of those present was discussed.  The minutes of the meeting noted: ‘It was agreed by all parties that infringement of Interium’s patent should be pursued.’

f.                    On 7 March 1996, Taggert, on behalf of Interium, sent a facsimile to a company called Win Win International, in which he explained why it was not possible for Prismex products to be sold into Hong Kong.  In that facsimile, Taggert said: ‘The patent we hold is for Australia, there are other patents granted and pending for various countries, these are held by other parties listed below.’  The parties appear to be interests associated with IRG, and did not include Prismex Technologies.

g.                   On 18 September 1997, Taggert sent a facsimile, on Interium paper, to a company called Phillips Lighting, in which it was stated that Interium ‘is the Prismex technologies patent holder here in Australia.’

h.                   In June 1998, Taggert caused an advertisement to appear in an information newsletter called ‘Info-link’, which opened with the words: ‘Interium P/L design and manufacture a range of ultra-slim illuminated displays, incorporating their patented PRISMEX optical system.’

i.                     On 22 April 1999, Taggert sent a facsimile to a company called ACI Acrylics in India, in which Interium’s background was described in a series of representations including the following: ‘Australian Prismex representatives and Patent owners, company formed to commercialise the Prismex technology invented by Mr John Ashall (Interium – Technical Director).’

j.                    In 1999, Taggert prepared a 32-page ‘Export Marketing Plan’ that was submitted to Austrade on behalf of Interium.  The executive summary in that presentation contained the following statement: ‘Interium … was set up in 1995 and purchased the Australian patent for the Australian invented Prismex illuminated sign technology.’

k.                  Interium, not Prismex Technologies, was the opponent to patent application No. 683874, and incurred costs of approximately $20,000 in connection with that opposition.

l.                     Interium, not Prismex Technologies, was the opponent to patent applications Nos. 720265, 755876, and 683878 and paid all costs in connection therewith. 

m.                 Interium was involved in what is described as ‘an intellectual property dispute’ with a company called 3M Australia, and paid all costs in connection therewith.

n.                   Interium paid all legal bills in connection with an action (by Interium) against a company called Australian Posters for infringement of the patent.

61                  Keller relied on the fact that Prismex Technologies had observed all this activity by Interium without a word of demur, and had silently taken advantage of the expenditure of time and effort that Interium had put into the protection of the patent, the result of which was that equity would not now allow Prismex Technologies to deny Interium’s ownership of the patent.  In this respect, Keller relied upon the following passage from the judgment of Deane J in Muschinski v Dodds (1985) 160 CLR 583, 614:

‘Viewed in its modern context, the constructive trust can properly be described as a remedial institution which equity imposes regardless of actual or presumed agreement or intention (and subsequently protects) to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle.’

Keller relied also on the following statement by his Honour (160 CLR at 621):

‘Notions of what is fair and just are relevant but only in the confined context of determining whether conduct should, by reference to legitimate processes of legal reasoning, be characterized as unconscionable for the purposes of a specific principle of equity whose rationale and operation is to prevent wrongful and undue advantage being taken by one party of a benefit derived at the expense of the other party in the special circumstances of the unforeseen and premature collapse of a joint relationship or endeavour.’

Keller submitted, in effect, that it should be regarded as unconscionable for Prismex Technologies now to seek to take advantage of the fact that it is the registered patentee.

62                  I shall consider first Keller’s claims in equity to the extent that they rely on Prismex Technologies’ acceptance of a history of representations, on behalf of Interium, to the effect that it occupied the position of patentee.  I find it difficult to see how these claims could succeed. The question here is not whether Prismex Technologies would be precluded, as against a third party who had relied upon Interium’s assertions of ownership, from denying the truth of those assertions.  The question is whether the silence of Prismex Technologies, in the face of claims to ownership by Interium, would make it unconscionable for the former to assert its ownership rights as against the latter.  The question needs only to be stated in this way for a negative answer to be obvious.  However convenient it may have been for Interium to give the impression to the world at large that it was the owner of the patent, and however much Prismex Technologies might have stood by while that impression was given, nothing involved in those matters could in any way be regarded as affecting the conscience of Prismex Technologies in its dealings with Interium.  All those involved in both companies well knew the true legal position, at least to the extent that Prismex Technologies was the patentee and Interium the licensee.  That they did not bother to inform third parties of the true position was simply the way they carried on business.

63                  Turning next to so much of Keller’s claim in equity as alleges a constructive trust based upon Interium’s considerable expenditure over the years to protect the patent, again it seems to me that this was but an incident of the way these two companies carried on business.  For its part, Prismex Technologies, although the patentee, effectively turned over to Interium, to the exclusion of itself, the opportunity to exploit the invention.  As a result, the whole commercial benefit of the patent was derived by Interium: and none of it by Prismex Technologies.  As exclusive licensee, Interium had something valuable to protect.  There is no reason to view its expenditure upon opposition proceedings and the like as done other than in its own interests.

64                  Another way to arrive at the same result is to recognise that a constructive trust of the kind recognised in Muschinski v Dodds is necessarily born of the agreements, arrangements and understandings, express and implied, in the context of which equity will examine the conscience of the putative trustee.  In that case, the original agreement between Ms Muschinski and Mr Dodds as to the purchase, and subsequent renovation, of the property which they shared was critical to the outcome, and gave content and definition to the trust which was found to exist.  In the present case, if the implied terms of the agreement between Prismex Technologies and Interium in 1995 were as I have found them, equity could hardly do other than to follow the tenor of that agreement.  It was an agreement under which Interium was the licensee only of the patent.

65                  I consider next Keller’s common law claims in trespass and conversion.  Keller first alleges that the entry of Taggert and Ashall onto the premises formerly occupied by Interium on the morning of 3 July 2006 was trespass to land.  It seems that this entry occurred before Keller itself entered into possession of the land, as alleged in the Cross Claim, at 8:30 am that day.  Indeed, there is a very real question whether, even after that time, Keller was in possession of the land, or was merely a licensee pursuant to the licence agreement made that day to which I have referred.  However, in the asset sale agreement, Keller purchased from Interium all its choses in action, and specifically its rights against various parties, including Taggert and Ashall.  Treating Interium as the occupier in possession (which it was, pursuant to its lease) with standing to sue in trespass, when it filed the Cross Claim in court, Keller was relevantly in the shoes of Interium, and had assumed that standing.

66                  There could hardly be in argument but that the entry of Taggert and Ashall onto the former premises of Interium on 3 July 2006 amounted to a trespass.  They had not been invited (expressly or implicitly) to enter the premises, they had no (express or implied) authority to be on the premises and they had no lawful purpose to make their visit.  Even if some or all of the items which Taggert recovered from the premises that morning belonged to Prismex Technologies (a matter to which I shall turn next), that circumstance would not, in my judgment, have permitted him to engage in an exercise of self-help without the prior consent of, and without even any previous consultation with, the occupier of the premises.  Even that purpose, however, would not avail Ashall, as, on the evidence, it could not be suggested that he was on the premises with a view to recovering, or that he did in fact recover, any items belonging to Prismex Technologies.  Should it be necessary to provide further reinforcement of these findings, I would add only that the circumstance that Taggert and Ashall entered the premises at an early hour of the morning, when they must have assumed that no-one in any real authority would be present, gives rise to the clearest of inferences that they well knew that their presence would not be welcome.  I find that Taggert and Ashall did trespass on these premises on 3 July 2006, and I shall defer consideration of the question of damages, if any.

67                  Turning to Keller’s claim in conversion, I deal first with the acetate film which Taggert removed from the former premises of Interium on 3 July 2006.  Prismex Technologies, and Taggert, assert that the film was never owned by Interium, but was merely bailed to that company as an incident of the licence of the patent.  As to all film except the ‘B-Dot’ film and the ‘D-Dot’ film, that contention is groundless.  It was those two films only which were made during Ashall’s time with Ashlar.  The other films were made during his time with Interium, and would be the property of Interium on any view.  They are now the property of Keller. When he removed those films on 3 July 2006, Taggert had no legitimate basis for so acting.  Manifestly he converted those films to his own use, or to the use of Prismex Technologies, and I shall defer consideration of the question of damages.

68                  By contrast, the ‘B-Dot’ and the ‘D-Dot’ films had been made by Ashall during his time with Ashlar.  Chattels which passed from Ashlar to Interium pursuant to the sale of business agreement were listed in the second schedule thereto.  Although no submissions were addressed specifically to this point, I cannot see anything there which would be appropriate to describe these films.  On the other hand, under the assignment agreement, Prismex Technologies purchased from Ashlar ‘the formulae to all ink mixtures, films and program disks necessary for the manufacture of Prismex panels’.  They were described in Schedule A to that agreement, and they included ‘current dot matrix printing films’.  I find, therefore, that the ‘B-Dot’ and the ‘D-Dot’ films taken by Taggert on 3 July 2006 were the property of Prismex Technologies.

69                  That is not the end of Keller’s claim in conversion, however.  Interium was the bailee of the ‘B-Dot’ and the ‘D-Dot’ films.  The possession of a bailee is sufficient to maintain an action in conversion: Fleming, The Law of Torts, 9^th ed, p 71.  As against even the bailor where the bailment is not at will and has not been regularly determined, the bailee may succeed in detinue: City Motors (1933) Pty Ltd v Southern Aerial Super Service Pty Ltd (1961) 106 CLR 477.  Fleming (at 71-72) treats that judgment as applicable also to an action in conversion, and there seems to be no reason in principle why it should not be so regarded.

70                  The proceeding has been conducted on the basis that Taggert was the agent of Prismex Technologies when he entered the former premises of Interium on 3 July 2006.  It follows that his removal of the ‘B-Dot’ film and the ‘D-Dot’ film should be treated as an act of the bailor.  The question arises, however, whether the bailment was then subsisting and could not ipso facto be determined by Prismex Technologies.  Like the licence, the terms of the bailment were implied.  I consider that an obvious term was that the bailment, in effect, followed the licence, such that, if the licence were regularly determined, the bailment would be likewise.  On the facts as I have found them, the licence was terminated on 30 June 2006.  From that point forward, to the extent that these films remained physically at Interium’s former premises, there was a bailment at will.  It could be, and by the actions of Taggert on 3 July 2006 it was, terminated.  Thus I would hold that the actions of Taggert did not amount to conversion of the ‘B-Dot’ or of the ‘D-Dot’ films.

71                  No attempt was made by the cross-respondents to justify the removal of the jig from former premises of Interium on the morning of 3 July 2006.  Taggert said that Ashall removed it.  Ashall was not asked about it.  No-one explained what its purpose was.  Taggert said that the jig ‘unfortunately … got tied up in all this’.  There was no reference to the statement in Prismex Technologies’ solicitors’ letter of 5 July 2006 that the jig had been made by Taggert’s son-in-law: indeed, Taggert admitted that it had been made by an employee of Interium.  In the circumstances, the jig is in the same category as the films other than the ‘B-Dot’ and the ‘D-Dot’ films.

72                  Keller also claimed that the removal of the films and the jig by Taggert and Ashall on 3 July 2006 amounted to trespass to goods.  I was not, however, favoured by any submission which illuminated how such a claim would differ in formulation, in outcome or in consequences from the claim in conversion with which I have just dealt.  In the circumstances I shall make no findings with respect to trespass to goods specifically, but I give the parties leave to address me further on the subject should any of them consider that anything turns on it.

73                  What I have said above with respect to the films (other than the ‘B-Dot’ and ‘D-Dot’ films) and the jig applies equally to Keller’s case in conversion and trespass to goods against Ashall in regard to his deliberate destruction of silk screens on the morning of 3 July 2006.  He had the clearest intent of thereby depriving the owner of those screens of their intended use: see Penfolds Wines Pty Ltd v Eiliott (1946) 74 CLR 204, 229; Fleming, p 68.

74                  I consider next Keller’s trade mark allegations. Keller alleges that the emails sent by O’Rourke and Talbot, to which I have referred in par 34 above, amounted to infringements of the mark ‘PRISMEX’.  In his evidence, Taggert frankly accepted that X-Position had no right to use the mark in this way and, as I understand it, has taken steps to ensure that such instances will not recur.  It is beyond question that the emails were used for the purpose of promoting edge-lit signs, and that the mark was used in those emails in relation to goods in respect of which the mark is registered.  As Kitto J said in the Shell Co of Australia Ltd v Esso Standard Oil (Australia) Ltd (1963) 109 CLR 407, 422:

‘A use of a mark in an advertisement of goods … is of course a use in relation to the goods advertised ….’

Keller was not registered as the owner of the mark when these emails were sent, but, under s 20(2) of the Trade Marks Act 1995 (Cth), it has the right to obtain relief ‘if the trade mark has been infringed’ and, under subs (3) of the same section, those rights ‘are taken to have accrued to the registered owner as from the date of registration of the trade mark’.  Further, by the asset sale agreement, Keller has assumed the rights, in relation to the mark, that Interium had before the transfer of registration.  Thus I consider that Keller has made good its case of infringement of the mark, and I shall receive submissions later on the question of relief.

75                  Keller makes allegations against Prismex Technologies, and against X-Position, of misleading and deceptive conduct contrary to s 52, and to pars (c), (d) and (g) of s 53, of the Trade Practices Act.  Keller puts these allegations two ways.  The first relates to the patent, where the offending conduct is said to arise from Prismex Technologies purporting to licence X-Position to exploit the invention, and by X-Position doing so.  In the light of the findings which I have made above as to the termination of Interium’s licence to exploit the invention, these allegations cannot be sustained.

76                  The second way in which Keller’s trade practices allegations are advanced is to say that Prismex Technologies, by authorising X-Position to make use of the trade mark, and that X-Position, by using the mark, represented that they were entitled to engage in that conduct (ie use of the mark).  There is no evidence, however, and, save for the allegation in the Cross Claim, there is no suggestion, that Prismex Technologies either authorised or purported to authorise X-Position to use the mark.  On the other hand, as I have found, X-Position did in fact use the trade mark, and, in context, that use conveyed also the representation that X-Position was entitled to use the mark and was, and would be, marketing edge-lit signs by reference to the mark.  I consider that this was misleading or deceptive, and thus in contravention of s 52 of the Trade Practices Act.  I do not, however, consider that any contravention of s 53 was thereby involved.  In submissions made on behalf of Keller, how the conduct of X-Position might be said to involve a contravention of s 53 was not dealt with at all and, for my own part, I am unpersuaded that the section has any operation in the circumstances of the present case.  However, I do find a contravention of s 52, and I will receive submissions as to the appropriate relief in due course.

77                  Keller has also sought findings against Taggert and Ashall under s 75B of the Trade Practices Act that might be of assistance to it when I later consider the matter of remedies.  The only findings of direct contravention of that Act which I have made are against X-Position and relate to its use of the trade mark ‘PRISMEX’ in promotional correspondence.  Although Ashall is, apparently, employed by X-Position, there is no evidence that he did anything in relation to that correspondence that would attract the operation of s 75B.  As for Taggert, although he was in day-to-day control of the business and activities of X-Position, there is no evidence that he authorised, or even knew of at the time, the correspondence which I have held to be in contravention of s 52 of the Trade Practices Act.  Indeed, Taggert gave evidence under cross-examination, which I accept, that he did not authorise, and was not at the time aware of, the offending correspondence, and that he had, since becoming aware thereof, instructed the relevant staff that they should not use the trade mark.  In the light of this evidence, and of the absence of anything to link Taggert to the sending of the correspondence, I make no finding against him under s 75B of the Trade Practices Act in relation to X-Position’s contravention of s 52 thereof.

78                  I propose to order that the proceeding be fixed for hearing on the question of the damages or other remedies, if any, to which the applicants and the cross-claimants are entitled in the light of these reasons.

Associate:

Dated:         14 November 2006