The starting point for the calculation of damages
44 The case for Advanced now made (it is substantially different from that made at the original hearing), is said to be a simple one. It commences with the proposition that because the supply of clutches by Ramset without the 1999 warning constituted misleading and deceptive conduct, Ramset as an honourable company would, had it realised that it would breach s 52 absent a warning, never have entered the market at all. Indeed, it is submitted that Ramset would never have sought to enter the market for face-lift clutches and components for face-lift tilt-up operations if to do so would have required it to attach a notice in the form required by the 1999 order to all clutches so as to ensure that it did not engage in misleading or deceptive conduct. That would be commercially impossible. Evidence of Professor Layton, a marketing expert, which I accept, was advanced in support of this proposition.
45 It was said to follow, therefore, that the consequence of Ramset not breaching s 52 of the Trade Practices Act would have been that Ramset would have made no sales. Accordingly, if this is accepted, damages should be calculated on the basis that either all sales in fact made by Ramset, or all sales until at least the date of the Full Court order in 1999, had not been made by it but would have been made by Advanced. In the alternative, it was submitted, that if Advanced would not have made all sales otherwise made by Ramset, at least the sales would have been made by Advanced and the other two companies which supplied clutches and componentry in the market, namely, Tilt-Lift Equipment ("Dayton") and Alan H Reid Pty Limited ("Reid"), and in the proportion between them that they had of market share prior to Ramset entering into the market. In principle the clutches supplied by Dayton and Reid were similar but their design differed substantially from the Burke/Frimeda/Ramset clutches. Use of either the Dayton or Reid clutches involved no infringement of the patent.
46 The premise upon which the submission was based was said to have been supported by a number of matters. First, it was pointed out that in 1999 Ramset had set about urgently to develop what it claimed to be a non-infringing clutch. This was said to show that Ramset would, rather than give a warning, have not gone into the market at all. It may, in passing, be said that, to the contrary, it merely suggests that Ramset would possibly have entered the market, although its entry would have been delayed by the time it would have taken it to design and manufacture a clutch the use of which would not infringe the patent. Secondly, it was said that Ramset would not have attempted to enter the market with componentry, but not a clutch, or with a clutch not capable of being released remotely because the market demanded an entire system, clutch and componentry, and a clutch capable of remote release. Finally, the inference being open, it was said that the failure on the part of Ramset to call any person relevantly a decision maker with Ramset permitted the inference that Ramset would never have entered the market, which was said to be mere commonsense anyway, more comfortably to be drawn.
47 If it be correct to approach the question of quantification of damages in this way it is necessary to first determine what proportion of Ramset sales should be attributed to Advanced. There remains then only the question of determining what profit Advanced would make on so many of the sales actually made by Ramset in the period until 1999 (and indeed, causally, beyond) as I might determine would have been made by Advanced and not by the other two existing companies which marketed remote release clutches and componentry, namely the Reid system and the Dayton system. Accordingly, accounting evidence was called to assist in the making of these calculations. Competing evidence was led by Ramset. There was considerable agreement between the accountants on many matters, but there were left for decision by me a number of matters on which the accountants differed. To assist this process the two accountants were sworn together and discussed their competing views.
48 The correctness of this approach was not accepted by Ramset. The submissions made by Ramset, rather than concentrating upon breach of s 52 of the Trade Practices Act, commenced with the question of damages for the patent infringement. Somewhat non- controversially, the principle to be adopted was, it was said, to ascertain what profits, if any, Advanced would have made as patentee but for the infringement. This involved, it was submitted, identifying the extent to which Ramset infringed the patent after Advanced became the proprietor of it on 22 November 1990 and reconstructing the market to determine what additional sales Advanced would have made but for the infringement. This determination had to be made against the prospect, it was said, of Ramset adopting, as it ultimately did, so it was submitted, in 1999, a non-infringing commercial alternative, namely, a different clutch. Other significant difficulties were, so it was submitted, that Advanced's accounting records were so unreliable that it was impossible to show what profits might have been earned but for the infringement and, in any case, it was submitted, Advanced was insolvent and so would not have been in the position to expand its business to make the sales which Ramset in fact made.
49 It was further submitted by Ramset that there could be no infringement where end users did not use the clutch supplied in a way which infringed the patent. The submissions accepted that the Full Court had found infringement to arise where Ramset had procured users to use a clutch with the attachment of an extended lever arm but then proceeded to argue that although the Full Court had held use with a chain to which a release cable or rope was attached in such a way that the chain, wrapped around the bail of the shackle, operated to block the movement of the lever arm was an infringement, it had given little attention to what evidence there was to show that Ramset had procured infringement in this way. It was accepted that there would be infringement where Ramset itself supplied a clutch with chain attached and instructions for passing the chain around the shackle or without chain attached but with oral instructions to add it and pass it around the shackle. It was also accepted that infringement might occur where Ramset supplied a clutch with a chain leaving it to the user to pass the chain around the shackle or where Ramset left to the user the addition of a chain, in both cases in accordance with an earlier operating practice established by Ramset. There was, it was submitted, no evidence that any such oral instruction had in fact been given. Further, it was said, the evidence did not establish use of the Ramset clutch in this way to be an invariable practice because there was evidence that it was perfectly workable to pass the chain through the shackle without the blocking effect. So, too, there was evidence before the Full Court and supplemented by further evidence in the current phase of the proceeding that the clutch was used extensively, or perhaps mostly, with only a rope which passed through the shackle. Such use was not, on any view of the matter, an infringement and a supply by Ramset to customers who used a clutch in this way could not be procurement. Finally, no finding that Ramset had established any such operating practice was said to have been made, nor was there said to be evidence to support any such finding.
50 It may be noted that the Full Court had in the course of its judgment said that passing the chain to the side of the shackle was the way the clutch was used in practice. In effect, the submissions of Ramset seek to challenge that conclusion and point to the fact that in the earlier infringement hearing I had found that there were a number of persons, to whom Ramset had supplied clutches, who had not used the clutch in a way which infringed the patent, but had, indeed, elected to release the clutch manually.
51 In a submission reminiscent of the approach that had appealed to me at the earlier hearing but was rejected by the Full Court, Ramset submitted that Advanced had led no evidence to identify the total number of infringing end uses of the Ramset clutch but rather had confined itself to anecdotal evidence of occasional infringing use. In parenthesis it may be said that Ramset had likewise led anecdotal evidence of non-infringing use, even in the present rehearing. The Court should not, it was submitted, fill the gap by extrapolating "generously" from the anecdotal material the extent of infringing use. In oral submissions, the difficulties I had previously stated in relation to establishing any figure for damages were referred to, notwithstanding that they had been found, implicitly at least, erroneous by the Full Court.
52 Both sets of submissions, so far as they address this initial step in the calculation of damages, conceal a difficulty. While it is clear that the Advanced submissions look at the matter through the eyes of contravention of s 52 of the Trade Practices Act, whereas the Ramset submissions look at the matter through the eyes of patent infringement, they both fail to appreciate that the relevant contravention, whether for a breach of the Trade Practices Act or for patent infringement, is not a single act constituted by a course of conduct. At least strictly, each supply of a clutch by Ramset involved a separate contravention of the Trade Practices Act,just as each supply that constituted procurement involved a separate patent infringement. Both, although in different ways, involve a reconstruction of the market as a consequence of breach or procurement of infringement, rather than concentrating upon the loss of profits brought about by Ramset procuring infringement or failing to warn at the time of supplying a clutch as the case may be.
53 While no doubt it is correct to conclude that failure to warn would constitute a breach of the Trade Practices Act, it is also correct to say that there could be no loss to Advanced where the supply was made to a person who did not use the clutch in a way which would infringe the patent. Such a person, if warned that use in a particular way would infringe the patent, would presumably have obtained clutches anyway from Ramset because that person did not propose to use the clutches in the infringing way. To ignore that fact and argue that no supply would have occurred if there was a requirement to warn is not, in my view, what is meant when the cases require that damages be considered on the basis that what is required to be determined is what an applicant's position would be if the tortious (or more accurately the proscribed) conduct had not taken place. The proscribed conduct is not the supply. It is the failure to warn. The fact is that Ramset did make each and every one of the clutch supplies complained of until 1999 in circumstances which breached the Trade Practices Act. It seems to me that in a case such as the present it is assumed that the respondent would make a supply, but would do so in a way that is not misleading or deceptive. The approach which assumes no supplies at all would be made overcompensates Advanced for it ignores the fact that Advanced suffered no loss as a result of the misleading or deceptive conduct in cases where persons who used the clutches were not misled or deceived by the failure to warn.
54 Associated with the problem just identified is the assumption that because the Full Court referred with approval to the case law on inferring reliance it can be assumed that the Court was holding that a loss arose to Advanced on the occasion of every supply of a clutch or sale of componentry by Ramset. As I have already noted, there was evidence both in the initial infringement hearing and in the present phase of the proceeding that not all persons who purchased or were otherwise supplied clutches used the clutches purchased in a way which infringed the patent. As will appear from my discussion of the evidence adduced before me (and there was not dissimilar evidence adduced at the first hearing on infringement) it is clear that there were persons who did not rely on the representation constituted by the failure to warn when they acquired clutches without the warning. These were the persons whose use of the clutches would be a non-infringing use. To compensate Advanced for profits which it is suggested Advanced lost when Ramset made a supply which did not result in an infringement of the patent would, in my opinion, be unfair and hardly within the contemplation of the Full Court.
55 The conceptual problem is even greater when one comes to consider the submissions of Ramset. A considerable part of the Ramset case turns upon the argument that Ramset could, in a relatively short time, have constructed a clutch which did not infringe. So, it is said, one starts with the first infringement, determines the time it would take to manufacture a clutch the use of which would not involve an infringement, and damages are then limited to any profit that is shown might have accrued to Advanced had Ramset not made supplies during that time. I shall discuss later the evidence dealing with the actual development of what may hereafter be referred to as the "non-infringing clutch". Suffice it to say here that I would find that it would have taken around one year for Ramset to design and have on the market a non-infringing clutch.
56 However, it does not follow, in my opinion, that damages are limited to such profits, if any, as Advanced may have made if Ramset had not procured infringement and thereby the acquisition by infringers of clutches (and through that further supplies of components) in that 12 month period. Since each supply of a clutch with extended lever arm or chain attached could constitute an infringement, the period of 12 months is of no assistance to Ramset. That period runs from the time of each such supply and each occasion of loss was the purchase of supplies for use with that clutch in an infringing way. Had the non-infringing clutch been available at the time of each such supply then, perhaps, the existence of the non-infringing clutch would be an answer to an action for infringement. But, it was not.
57 This is not to say that the approach of taking Ramset sales, treating them as being allocated to Advanced and other persons in the market on some reasonable basis, and then applying the rate of profit which it could be expected Advanced would make, had it made the sale, is not a useful starting point. However, what it means is that the figure arrived at must be adjusted downwards to allow for an estimate, as best as can be made, of the sales which were made to persons who did not use clutches in a way which would infringe. It will also be necessary to take into account matters such as the geographical absence of Advanced in some markets in Australia (as Advanced concedes) or an overall Australia wide market share of Ramset which takes that into account. These, however, are matters of detail, not matters of principle.
58 So far as I understand the judgment of the Full Court and its rejection of the difficulties which I pointed out as existing in calculating damages where not all clutch supplies were infringing supplies and not all users in fact infringed the patent, it was the Full Court's view on the evidence as it existed at the end of the first infringement hearing (and there is really nothing in the evidence adduced in the present phase of the proceedings which dispels that impression) that Ramset did both infringe the patent and breach the Trade Practices Act and that Advanced did suffer substantial damage, no matter how difficult it may be to calculate with any precision, or indeed on any scientific basis, the quantum of that loss. So it is the task of the Judge charged with assessing damages to do the best he or she can with the evidence at hand and to come up with a figure which compensates, but not over-compensates, Advanced for the loss it suffered. In principle, it is difficult to see that the result should differ whether the loss compensated for is the procurement of others to infringe or the misleading and deceptive conduct.
59 Having now dealt with the approach to be taken in a general way it will be necessary to turn to the very many matters which divide the parties. Some of these are as follows:
(a) What was the situation that should prevail in respect of the period prior to the date Burke assigned the patent to Ramset, namely, 22 November 1990?
(b) Accepting there was both a procurement of infringement and misleading or deceptive conduct by Ramset, what was the extent of loss suffered by Advanced between November 1990 and June 1993 at which time Ramset ceased to supply, so it is said, clutches with extensions fitted to the short lever arm?
(c) What, if any, was the extent of the loss Advanced has proved was suffered by it between June 1993 and the date of the judgment at first instance in the infringement proceedings, namely, 13 April 1995?
(d) What, if any, was the extent of the loss which Advanced has proved was suffered by it in the period between 13 April 1995 and the date of the Full Court judgment on 5 July 1999?
(e) Whether damages can be awarded from 5 July 1999 to the date of judgment when in that period there was neither infringement nor misleading and deceptive conduct.
(f) In respect of sales of anchors and other componentry to persons to whom Ramset supplied clutches in circumstances constituting procurement of an infringement of the patent or misleading and deceptive conduct were such sales lost solely to Advanced or did Ramset take sales from other competitors in the market as well or, in fact, increase the market so that if Ramset had not made the componentry sales, no additional sales would be made by Advanced at all? This question also requires consideration of the basis (if at all) on which lost sales should be allocated among Advanced and the other competitors.
(g) How long would it have taken Ramset to design and have available for marketing a non-infringing clutch? Tied up with this question is an issue raised by Advanced that the clutch in fact currently being marketed by Ramset itself infringes the patent.
(h) Was Advanced at any time in the period insolvent so that it would not have been able to finance the increased outgoings that it would be necessary for it to make if the potential Ramset sales had been available to it?