7.4 Liability of each of the respondents
264 Infringement having been established, the question is which respondent has infringed the Patents. The answer to that question, for reasons which follow, is that all respondents have infringed the Patents.
265 The applicants have advanced intricate and detailed arguments, both on the evidence and at law, in relation to the involvement of all the respondents in the infringement.
266 I have endeavoured to deal with the arguments by the parties in relation to most of those intricate arguments. But before dealing with that detail, the following fundamental factual findings need to be recorded to make the position quite clear.
267 First, I have found that Mr Kleyn deliberately set out to produce a tool which embraced or copied the features of the tool designed in accordance with the Patents in suit.
268 Having achieved that objective in design, production, sale and promotion of such a tool through corporate vehicles, he subsequently became aware of a real risk of exposure to damages for patent infringement.
269 Mr Kleyn then set about attempting to organise his corporate affairs through the respondent companies, of which he was the sole directing mind and will, so as to shelter and protect assets within the corporate structures. To this end he purported to assign and transfer assets from the primary infringing company to another company. This assignment or transfer was entirely fictitious and never occurred. His subsequent attempts to isolate and segregate the activities of the respective corporations to at least create the impression that only the corporation with no assets was involved with infringement have failed. There is ample evidence to show that all of the respondents, including Mr Kleyn personally, participated in the activities which infringed the Patents. They all participated directly as a result of his personal control, decisions and actions.
270 The respondents' attempt to show otherwise, either through the evidence of Mr Kleyn or the evidence of Mr Kenny, has failed.
271 Having summarised the above findings on the basis of oral evidence and documentation adduced in the trial which I have discussed previously, and in the passages to follow in these reasons, I turn then to the more elaborate and detailed arguments advanced by the applicants.
272 The applicants' case is that each of the respondents is liable for infringement of the Patents, although the details of the allegations against each respondent differ according to the nature and role of the particular respondent and the claims of the Patents under consideration.
273 As explained by the applicants, direct infringement occurs where a person exploits, within the meaning of the Act, the invention claimed in any claim of the Patents. In the case of a claim to a product, such as those in the System Patent, this includes making, selling or otherwise disposing of the product, as well as using the product. For a claim to a method, such as those described in the Method Patent, it includes using the method.
274 Infringement may also be indirect. Indirect infringement may arise on several bases. These bases include where a person authorises another to exploit the invention, is a joint tortfeasor in such exploitation, or pursuant to the specific contributory infringement provisions set out in s 117 of the Act. Section 117 of the Act provides as follows:
117 Infringement by supply of products
(1) If the use of a product by a person would infringe a patent, the supply of that product by one person to another is an infringement of the patent by the supplier unless the supplier is the patentee or licensee of the patent.
(2) A reference in subsection (1) to the use of a product by a person is a reference to:
(a) if the product is capable of only one reasonable use, having regard to its nature or design-that use; or
(b) if the product is not a staple commercial product-any use of the product, if the supplier had reason to believe that the person would put it to that use; or
(c) in any case-the use of the product in accordance with any instructions for the use of the product, or any inducement to use the product, given to the person by the supplier or contained in an advertisement published by or with the authority of the supplier.
275 Mr Kleyn gave evidence that he transferred the proprietary and intellectual property rights in the ORIshot Tool from Mincrest to Coretell in November 2006. The transfer is uncorroborated by documentary or other evidence.
276 Mr Kleyn also gave evidence that Mincrest, trading as Camteq Instruments, transferred all of its camera business, including the Proshot, to Kleyn Investments, trading as Camteq International Services, shortly before trial in the prior proceedings heard by Justice Barker, AMC No 1, in around February 2010, although this was an undocumented transaction.
277 The respondents argue that liability, if any, could only be as against Coretell. They rely on the argument that there was an undocumented transfer of assets from Camteq Instruments to Camteq International Services shortly before the previous proceeding. This was allegedly a transfer which took place, as far as the evidence shows, only in the mind of Mr Kleyn. There is no contemporaneous documentary corroboration of it and certainly no witness to confirm that the transfer occurred. As noted above, the applicants relied upon the expert evidence of Mr Ross to address the financial and operational involvement of Camteq Instruments and Camteq International Services in Coretell's business, and the extent to which Mr Kleyn benefited from the activities undertaken by those entities.
278 The three corporate respondents are said to have directly infringed the System Patent by making, selling and otherwise exploiting the ORIshot Tool. There are limited admissions in respect of Coretell, which are largely to the effect that Coretell did make and supply Version 2 and Version 3 of the ORIshot from 16 December 2010 onwards. In other respects, the involvement of the corporate respondents has been in contention. (As noted by Barker J in AMC No 1 (at [7]) it was acknowledged that there was no relevant difference between the operation of Version 1 and Version 2 of the ORIshot Tool.) The respondents' pleadings dispute that Coretell made and supplied Version 1 of the ORIshot Tool. The respondents also contend that the date of production of Version 1 is at a date outside the period in respect of which there is any capacity for the applicants to pursue proceedings for patent infringement. The respondents also dispute that Mincrest (Camteq Instruments) or Kleyn Investments (Camteq International Services) have engaged in any relevant conduct.
279 The applicants argue that this position is untenable. The applicants rely upon the second further amended particulars of infringement by which the following matters are listed (at [2]-[20]):
Manufacture in Australia
2. [Coretell]:
(i) from about November 2006 to about July 2007 manufactured the "Camteq ORI-tool" core orientation tool, as described in the document entitled "Orientation Tool quick user guide", formerly available at http:www.camteq.com.au\Quickuserguide (Version 1);
(ii) since about November 2008 has manufactured, and continues to manufacture, the "ORIshot" core orientation tool, model numbers CNPS100 and CNH100, as described in the document entitled "ORIshot multifunction Orientation Instrument - User Manual" (2009) (Version 2); and
(iii) since about May 2012 has manufactured, and continues to manufacture, the "ORIshot" core orientation tool, model numbers CNPS100 and CNH100, as described in the document entitled "ORIshot multifunction Orientation Instrument - User Manual" available at http://www.coretell.com.au/ppp_oritool.htm (Version 3),
(Version 1, Version 2 and Version 3 together being referred to below as the Coretell Equipment).
3. [Mincrest] manufactured Version 1 of the Coretell Equipment from before 5 September 2005 to about November 2006.
4. In about October 2008, [Coretell] entered into a development and manufacturing agreement with the entity referred to in item 1 of the Confidential Schedule, and that entity developed Version 2 and Version 3 of the Coretell Equipment in Australia pursuant to the terms of that agreement.
5. Before 5 September 2005, [Mincrest] entered into a development and manufacturing agreement with the person referred to in item 2 of the Confidential Schedule, and that person developed Version 1 of the Coretell Equipment in Australia pursuant to the terms of that agreement.
Sale and supply in Australia
6. [Coretell] has sold, supplied and offered the Coretell Equipment to customers in Australia including to the following customers on or about the dates identified in [Coretell's] confidential general ledgers (2007-2011):
(i) Macquarie Drilling Pty Ltd;
(ii) Tom Browne Drilling Services Pty Ltd;
(iii) Australian Exploration Drilling Co Pty Ltd;
(iv) Australian Mineral & Waterwell Drilling Pty Ltd;
(v) DDH1 Drilling Pty Ltd;
(vi) Budd Drilling Pty Ltd;
(vii) War (NQ) Pty Ltd;
(viii) Deepcore Drilling Pty Ltd; and
(xi) Australian Contract Mining Pty Ltd.
7. [Coretell] has sold, supplied and offered the Coretell Equipment for sale or supply to suppliers in Australia including to the following suppliers on or about the dates identified in [Coretell's] confidential general ledgers (2007-2011) under the description "Agent":
(i) Drillshop Pty Ltd (trading as the Drill Shop);
(ii) Asahi Diamond Industrial Australia Pty Ltd;,
and such suppliers have sold, supplied and offered the Coretell Equipment for sale or supply in Australia.
8. [Mincrest] has sold, supplied and offered the Coretell Equipment to customers in Australia including by:
(i) advertising Version 1 for sale or supply to customers in Australia on the website www.camteq.com.au from before 5 September 2005 to at least 3 March 2007;
(ii) offering the Coretell Equipment to customers in Australia calling the telephone number listed on www.camteq.com.au or contacting Camteq Instruments since before 5 September 2005; and
(iii) supplying the Coretell Equipment to customers in Australia requiring survey and/or core orientation equipment since before 5 September 2005, including supplies made to the entity referred to in item 13 of the Confidential Schedule on 31 January 2007.
9. [Mincrest] has since about November 2011 sold, supplied and offered the Coretell Equipment to the distribution agent referred to in item 3 of the Confidential Schedule pursuant to its obligations under a confidential agreement with that entity, and such agent has sold, supplied and offered the Coretell Equipment for sale or supply in Australia, including under the description "Camteq - Ori-Shot - Backend core orientation device".
10. [Kleyn Investments] has sold, supplied and offered the Coretell Equipment to customers in Australia including:
(i) offering the Coretell Equipment to customers in Australia calling the telephone number listed on www.camteq.com.au or contacting Camteq International since before 5 September 2005;
(ii) supplying or offering to supply the Coretell Equipment to customers in Australia requiring survey and/or core orientation equipment since November 2010, including to the entity referred to in item 15.
(iii) supplying or offering to supply the Coretell Equipment to the distribution agent referred to in item 9 of the Confidential Schedule and such agent has sold, supplied and offered the Coretell Equipment for sale or supply in Australia.
11. Further to paragraphs 6 to 10 above, to the best of the applicants' knowledge, the versions of the Coretell Equipment sold, supplied and offered by [Coretell], [Mincrest] and [Kleyn Investments] as referred to in those paragraphs were Version 1 from before 5 September 2005 to about November 2008, Version 2 since about November 2008, and Version 3 since about May 2012.
Export and supply from Australia
12. [Coretell] has, from Australia, exported the Coretell Equipment to customers outside Australia including to the following customers on or about the dates identified in [Coretell's] confidential general ledgers (2007-2011):
(i) The Indodrill Group of Companies;
(ii) The Drill Corp Group of Companies;
(iii) The Maxidrill Group of Companies;
(iv) PT Promincon Indonesia; and
(v) BintangMandiri Perkasa PT (trading as BMP Drilling).;
13. [Mincrest] has, from Australia, sold, supplied and offered the Coretell Equipment to customers outside Australia, including by:
(i) advertising Version 1 for sale or supply to customers outside Australia on the website www.camteq.com.au from before 5 September 2005 to at least 2 March 2007;
(iii) offering Coretell Equipment to customers outside Australia calling the telephone number listed on www.camteq.com.au or contacting Camteq Instruments since before 5 September 2005; and
(ii) supplying Coretell Equipment to customers outside Australia requiring survey and/or core orientation equipment, including supplies made to MTL Philippines on 31 October 2007 and Geodrill Ltd in about November 2009.
14. [Kleyn Investments] has, from Australia, sold, supplied and offered the Coretell Equipment to customers outside Australia, including by:
(i) offering Coretell Equipment to customers outside Australia calling the telephone number listed on www.camteq.com.au or contacting Camteq International since before 5 September 2005; and
(ii) supplying, from Australia, Coretell Equipment to customers outside Australia requiring survey equipment and/or core orientation equipment, including supplies made to the entities referred to in items 6 and 14 of the Confidential Schedule.
15. [Kleyn Investments] has, from Australia, sold, supplied and offered the Coretell Equipment to the distribution agent referred to in item 4 of the Confidential Schedule as the defined "supplier" in the confidential agreement with that entity, and such agent has sold, supplied and offered the Coretell Equipment for sale or supply outside Australia.
16. [Coretell] has, from Australia, supplied or offered to supply Coretell Equipment to the distribution agent referred to item 5 of the Confidential Schedule since 1 August 2012, and such agent has sold, supplied and offered the Coretell Equipment outside Australia.
17 [Kleyn Investments] has appointed [Coretell] as its defined "African Agent" in respect of the confidential agreement referred to in paragraph 16 above, which agreement relates to supply from Australia of Coretell Equipment and camera equipment outside Australia.
18. Further to paragraphs 12 to 17 above, to the best of the applicants' knowledge, the versions of the Coretell Equipment exported and supplied by [Coretell], [Mincrest] and [Kleyn Investments] as referred to in those paragraphs were Version 1 from about May 2006 to about November 2008, Version 2 since about November 2008, and Version 3 since about May 2012.
Keeping in Australia
19. [Coretell], [Mincrest] and/or [Kleyn Investments] have kept the Coretell Equipment at Lot 4 Reservoir Road, Orange Grove, Western Australia (Kleyn Family Residence) since before 5 September 2005 and 6 Davison Street, Maddington, Western Australia (Maddington Warehouse) since about September 2010.
Documents relied upon
20. Without limiting the foregoing, in respect of their allegations of against [Coretell], [Mincrest] and [Kleyn Investments], the applicants rely upon:
(i) the admissions set out in paragraph 8 of the third further amended defence dated 16 October 2013;
(ii) the manufacturing invoices from the person referred to in item 2 of the Confidential Schedule to [Coretell] dated from January 2007 to July 2007 appearing at Annexure NK-11 of the Confidential Affidavit Nicky Kleyn sworn 27 March 2013;
(iii) the manufacturing invoices from the entity referred to in item 1 of the Confidential Schedule to [Coretell] dated from December 2010 discovered as Respondents' Discovery Documents Nos 69 to 117
(v) [Coretell's] financial records set out in its confidential general ledgers (2007-2011) appearing at Annexures ZK-2 to ZK-6 of the Confidential Affidavit of Zane Kenny sworn 28 March 2013 and bundle of supply invoices in respect of Coretell Equipment dated 2007 to 2013;
(vi) [Mincrest's] supply invoice in respect of Coretell Equipment to MTL Philippines dated 31 October 2006 appearing at Annexure NK-6 of the Confidential Affidavit of Nicky Kleyn sworn 27 March 2013;
(vii) [Mincrest's] supply invoices in respect of Coretell Equipment to the entity referred to in item 13 of the Confidential Schedule dated 31 January 2007;
(xxii) the respondents' admission in WAD 132 of 2007 that Versions 1 and 2 of the Coretell Equipment adopt the same make up and manner of working.
280 First, the applicants contend that the three corporate respondents, Coretell, Mincrest and Kleyn Investments, have directly infringed the System Patent by making, selling and otherwise exploiting the ORIshot Tool. The applicants argue that the evidence above, and other matters, together constitute evidence that:
(a) each of Coretell and Mincrest (trading as Camteq Instruments) has manufactured and developed versions of the ORIshot Tool in Australia;
(b) each of the three corporate respondents has promoted and supplied the ORIshot Tool to customers, suppliers and distribution agents in Australia; and
(c) each of the three corporate respondents has exported the ORIshot Tool from Australia for supply to customers outside Australia, either themselves or through intermediaries such as distribution agents.
281 The second basis upon which the applicants assert that the corporate respondents have infringed the System Patent is that they have also authorised, procured, induced or joined in the common design with customers or end users to whom the ORIshot Tool has been supplied to use the ORIshot Tool as a core orientation tool, and have thereby indirectly infringed the System Patent.
282 With regard to this aspect of the claim, the applicants rely on s 13 of the Act, which provides as follows:
13 Exclusive rights given by patent
(1) Subject to this Act, a patent gives the patentee the exclusive rights, during the term of the patent, to exploit the invention and to authorise another person to exploit the invention.
(2) The exclusive rights are personal property and are capable of assignment and of devolution by law.
(3) A patent has effect throughout the patent area.
283 The contention that they have 'authorised' the acts of customers or end users is based specifically on s 13(1) of the Act. The effect of s 13(1) is that a patent gives the patentee the exclusive right to 'exploit the invention and to authorise another person to exploit the invention'. This exclusive entitlement was summarised by Justice Bennett in Inverness Medical Switzerland GmbH v MDS Diagnostics Pty Ltd (2010) 85 IPR 525 in the following way (at [194]):
194 It is an infringement of the patentee's exclusive rights not only to exploit an invention but also to authorise another person to exploit it (s 13 of the 1990 Act). The word "authorise" in s 13 has the meaning in the comparable context of the Copyright Act (Bristol-Myers Squibb Company v F H Faulding & Co Ltd (2000) 97 FCR 524 at [97] per Black CJ and Lehane J; see also Rescare at 155 per Gummow J). A person authorises an infringement if he or she "sanctions, approves or countenances'" the infringement (University of New South Wales v Moorhouse (1975) 133 CLR 1 at 12 per Gibbs J, at 20-21 per Jacobs J (McTiernan ACJ agreeing); Cooper at [137]-[140] per Kenny J (French J agreeing)). As Burchett J said in Kimberly-Clark Australia Pty Ltd v Arico Trading International Pty Ltd (1998) 42 IPR 111 at 129 (appeal allowed on validity, but not on infringement), s 13 at least embraces the case where a person 'made himself a party to the act of infringement' (Walker v Alemite Corp (1933) 49 CLR 643 at 658 per Dixon J).
284 The applicants also rely upon the common law principles of joint tortfeasance. Such principles are applicable to patent infringement, which is a statutory tort. French J (as his Honour then was) explained the position in Collins v Northern Territory (2007) 161 FCR 549 in the following way (at [24]-[26], [28] and [30]):
Accessorial liability for infringement before contributory infringement
24 Prior to the enactment of the Act there was no liability under Australian law for merely facilitating infringement. The same was true in the United Kingdom before the enactment of the Patents Act 1977 (UK). Suggestions to the contrary were rejected by Jessell MR in Townsend v Haworth (1875) 48 LJ Ch 770, noted in Sykes v Howarth (1879) 12 Ch D 826:
You cannot make out the proposition that any person selling any article, either organic or inorganic, either produced by nature or produced by art, which could in any way be used in the making of a patented article can be sued as an infringer, because he knows that the purchaser intends to make use of it for that purpose.
That authority was followed and applied by the Court of Appeal in Dunlop Pneumatic Tyre Company Ltd v David Moseley & Sons Ltd [1904] 1 Ch 612. See also Adhesive Dry Mounting Company Ltd v Trapp & Company (1910) 27 RPC 341 at 353 and Belegging-en Exploitatiemaatschappij Lavender BV v Witten Industrial Diamonds Ltd [1979] FSR 59 at 64-66.
25 Despite the absence of statutory provisions relating to contributory or indirect infringement it always was, as it still is, the law that a person is liable as an infringer who aids or induces or procures another to infringe a patent. In Gibson v Brand (1841) 1 WPC 627, Tindal CJ said:
… he that causes or procures to be made, may well be said to have made them himself.
To attract that accessorial tortious liability, it is not enough to sell an article knowing that it would be used in a way which would infringe the patent of another: Dow Chemical AG v Spence Bryson & Company Ltd [1982] FSR 397. What was, and still is, required was conduct of the kind that would characterise a person as a joint tortfeasor at common law. As was said in Terrell on The Law of Patents (16th ed, Sweet & Maxwell, 2006) at [8-40]:
Persons may be liable for infringement if their acts are such as would make them joint tortfeasors under the general law.
Liability as a joint tortfeasor has been said to require concerted action with another in the commission of the infringement or a "concerted design": Morton-Norwich Products Inc v Intercen Ltd [1978] RPC 501 at 513 (Graham J). There is other authority for the proposition that inducing or procuring an infringement attracts liability as a joint tortfeasor. Some of the cases seem to use the words "joint tortfeasor" to refer only to the class of persons involved in a common or concerted design to infringe and assign liability to persons inducing or procuring infringement under a wider head of accessorial tortious liability. Whatever the proper nomenclature, mere facilitation of an infringement does not amount to procuration of or involvement in it: Molnlycke AB v Procter & Gamble Ltd (No 4) [1992] RPC 21 at 29 (Dillon LJ).
26 The rejection by the English Courts of the proposition that conduct merely facilitating infringement is a species of infringement, was followed by the High Court in Walker v Alemite Corporation (1933) 49 CLR 643 at 650 (Rich J), 654 (Starke J, Evatt J agreeing) and 658 (Dixon J, McTiernan J agreeing). Dixon J put it thus (at 658):
… it is settled law that the exclusive property in a combination invention is not infringed upon by the sale of the components … that selling articles to persons to be used for the purpose of infringing a patent is not an infringement of the patent … and that sale with a knowledge that the purchaser will use the articles for infringement is not itself an infringement although the vendor gives the purchaser an indemnity: the vendor must have made himself a party to the act of infringement … Further … it is not enough that the article sold has no other use than a use in the course of what amounts to infringement. The basis upon which these rules rest is that whatever is not included in the monopoly granted is publici juris and may be freely used as of common right.
…
28 Involvement as an accessorial or joint tortfeasor continues in both the United Kingdom and Australia as a basis for imposing liability notwithstanding the enactment of statutory provisions for contributory infringement in s 60(2) of the Patents Act 1977 (UK) and s 117 of the Act …
…
30 The application of the joint tortfeasor or accessorial tortious liability doctrine to the statutory liability for infringement of a patent is referred to as background to the enactment of s 117 and for a better understanding of the mischief to which it was directed. Section 117 necessarily travels beyond the range of tortious accessorial liability for infringement.
(emphasis added)
285 The respondents have made certain admissions, but they are quite limited. For example, they have made limited admissions as to instructions being provided by Coretell for use of the ORIshot Tool. The respondents otherwise dispute the claimed authorisation or joint tortfeasance.
286 The applicant's second further amended particulars of infringement continue (at [21]-[30]):
Sale and supply of tools
21. The applicants repeat the particulars in paragraphs 4 to 18 above.
Inducements and use of tools
22. [Coretell] has since at least November 2006 promoted the Coretell Equipment and given instructions and inducements for its use on [Coretell's] website http://www.coretell.com.au/products.htm and in kits of Coretell Equipment supplied or offered to be supplied, including to the entities referred to in paragraphs 6, 7 and 12 above.
23. The entities referred to in paragraphs 6, 7 and 12 above have used, or caused others to whom they supplied the Coretell Equipment to use, the Coretell Equipment in accordance with the instructions and inducements referred to in paragraph 22 above.
24. [Coretell] knew, or ought to have known, that the Coretell Equipment would be used in the manner referred to in paragraph 23 above.
25. [Mincrest] has since before 5 September 2005 promoted the Coretell Equipment and given instructions and inducements for its use, including to the entities referred to in paragraphs 8, 9 and 13 above, and including:
(i) the instructions and inducements provided by [Mincrest] in respect of Version 1 from before 5 September 2005 to at least 3 March 2007 on the website http://www.camteq.com.au/products and in kits of Coretell Equipment supplied or offered to be supplied;
(ii) the instructions and inducements in respect of Versions 2 and 3 provided by [Mincrest] to the entity referred to item 3 of the Confidential Schedule pursuant to its obligations under confidential agreement with that entity since November 2011.
26. The entities referred to in paragraphs 8, 9 and 13 above have used, or caused others to whom they supplied the Coretell Equipment to use, the Coretell Equipment in accordance with the instructions and inducements referred to in paragraph 25 above.
27. [Mincrest] knew, or ought to have known, that the Coretell Equipment would be used in the manner referred to in paragraph 26 above.
28. [Kleyn Investments] has promoted Coretell Equipment and given instructions and inducements for its use, including to the entities referred to in paragraphs 10, 14, 15 and 16 above, and including the instructions and inducements provided in kits of Coretell Equipment supplied or offered to be supplied, including pursuant to the terms of the confidential agreements described in paragraphs 15 and 16 above.
29. The entities referred to in paragraphs 10, 14, 15 and 16 above have used, or caused others to whom they supplied the Coretell Equipment to use, the Coretell Equipment in accordance with the instructions and inducements referred to in paragraph 28 above.
30. [Kleyn Investments] knew, or ought to have known, that the Coretell Equipment would be used in the manner referred to in paragraph 29 above.
287 Again, in summary, the applicants say that the evidence shows that each of the three corporate respondents have sold or supplied the ORIshot Tool, promoted and given instructions or inducements for the use of the ORIshot Tool, and that in doing so each of them had reason to believe that the ORIshot Tool would be used by customers or end users. It follows, therefore, that each is liable for the infringing use of the ORIshot Tool by customers or end users on the principles set out above.
288 Thirdly, the corporate respondents are said to have infringed the Method Patent pursuant to s 117 of the Act by supplying the ORIshot Tool.
289 In Apotex Pty Ltd v Sanofi-Aventis Australia Pty Ltd (2013) 304 ALR 1, after discussing s 117 of the Act, the High Court addressed (at [298]-[304]) an approved product information document which contained the following statements:
INDICATIONS
Apo-Leflunomide is indicated for the treatment of:
. Active Rheumatoid Arthritis.
. Active Psoriatic Arthritis. Apo-Leflunomide is not indicated for the treatment of psoriasis that is not associated with manifestations of arthritic disease.
290 The High Court held that Apotex's approved product information document did not instruct recipients to use the unpatented pharmaceutical substance which it proposed to supply in accordance with the patented method, and therefore the product information document did not engage s 117(2)(c) of the Act. For the purposes of the application of s 117(2)(b), it was not shown, nor could it be inferred, that Apotex had reason to believe that the unpatented pharmaceutical substance, which it proposed to supply, would be used by recipients in accordance with the patented method, contrary to the indications in Apotex's approved product information document.
291 In the present case, the position was different on the evidence. Liability in this third way, the applicants say, is satisfied because the first requirement, s 117(1), is met. Namely, that the use of the ORIshot Tool would infringe the Method Patent.
292 Under s 117(2) of the Act, there are three independent heads of infringement through use, each of which is relied upon by the applicants.
293 The applicants rely upon s 117(2)(a) of the Act and contend that the evidence establishes that the product has only one reasonable use, which is obviously to orient a core in the manner disclosed in the evidence. I accept that the tool is a special purpose piece of equipment which is designed to be put to a particular specific use. It is a 'staple commercial product' for the purposes of s 117(2)(b) of the Act, that is, it is not something supplied commercially for various uses as discussed in Northern Territory v Collins (2008) 235 CLR 619 (High Court) (at [41]) per Hayne J and (at [145]) per Crennan J. Additionally, the applicants contend that the respondents had reason to believe that the ORIshot Tool would be used in a manner that would infringe the Method Patent. Namely, the use for which the tool is intended and for which the respondents instruct it to be used.
294 The applicants also say that the supply of the product infringes the Patents, contrary to s 117(2)(c) of the Act, because the supplier gave instructions or inducements for the infringing use. In this case, the ORIshot Tool instruction manuals and 'quick start guides' supplied by the respondents instruct the use of the tools in accordance with the claims of the Method Patent.
295 Fourthly, the applicants contend that all of the corporate respondents are liable for indirectly infringing the Method Patent through the authorisation of the customers of the corporate respondents and end users to use the ORIshot Tool in the method claimed in the Patents. The evidence relied upon to support this basis of liability is similar to that which is relied upon for the claims under s 117 of the Act, but also relies on general principles of authorisation and joint tortfeasance outlined above.
296 The fifth means of attaching liability is also indirect. The respondents dispute that Mincrest and Kleyn Investments were involved in the relevant conduct. The applicants contend in the alternative that, to the extent that Mincrest and Kleyn Investments did not themselves engage in the relevant conduct, they nevertheless infringed the Patents indirectly by authorising or as joint tortfeasors with Coretell. The applicants rely on the same evidence of the alleged direct infringement by Mincrest, trading as Camteq Instruments, and Kleyn Investments, trading as Camteq International Services, but based on the interdependence of the corporate entities in operating the Camteq businesses in the manner set out in the second further amended particulars of infringement (at [34]-[44]):
[Mincrest]
34. The applicants repeat the particulars in paragraphs 3, 5, 8, 9, 13, 19, 25 and 27 above.
35. [Mincrest], by payment of monies to the person referred to in item 2 of the Confidential Schedule from before 5 September 2005 to about July 2007, has funded the development, manufacture and servicing of Version 1, including on behalf of [Coretell] since about November 2006.
36. [Mincrest] has since about May 2006 provided financial and operational assistance to [Coretell] on the dates specified in the confidential financial statements for [Coretell] and [Mincrest] (2006 - 2011), including by way of:
(i) transfer of monies to [Coretell] in 2007 and 2008 totalling the amount specified in item 16 of the Confidential Schedule;
(ii) transfer of monies to [Coretell] in its capacity as trustee of the Kleyn Family Trust in the amount specified in item 17 of the Confidential Schedule;
(iii) inter-company loan payments, including deposits made under the descriptions appearing "Mincrest Loan Account"; and
(v) provision of operational assistance, including engagement of staff and payment of operational expenses such as wages, plant and equipment, office expenses and promotional expenses before February 2010,
which [Coretell] has used to do the acts referred to in paragraphs 2, 6, 7, 12, 19 and 22 above.
36A. Without the financial and operational assistance in paragraph 36 above, [Coretell] could not have carried out the acts referred to in paragraphs 2, 6, 7, 12, 19 and 22 above.
37. [Mincrest] has requested and been supplied with products and services for the repair or servicing of Coretell Equipment by the entities referred to in items 10 and 11 of the Confidential Schedule, and such products and services have been used by [Coretell] to do the acts referred to in paragraphs 2, 6, 7 and 12 above.
38. [Mincrest] knew, or ought to have known that [Coretell] would use the financial and operational assistance and products and services referred to in paragraph 36 and 37 above in the manner referred to in paragraphs 36 and 37 above.
Paragraph 9 - [Kleyn Investments]
39. The applicants repeat the particulars in paragraphs 10, 14 to 17 and 28 above.
40. [Kleyn Investments] has since at least September 2010 prominently displayed its trading name on the Maddington Warehouse wherein the respondents have kept, sold and otherwise exploited the Coretell Equipment.
41. [Kleyn Investments] has provided financial and operational assistance to [Coretell] on the dates specified in the respondents' confidential financial statements (2006 - 2011), including by way of:
(i) transfer of monies to [Coretell] in its capacity as trustee of the Kleyn Investment Trust in the amount specified in item 18 of the Confidential Schedule;
(ii) inter-company loan deposits, including deposits made under the description appearing as "Camteq International Loan Account"; and
(iii) provision of operational assistance, including engagement of staff and payment of operational expenses such as wages, plant and equipment, office expenses and promotional expenses (including to the entity referred to in item 19 of the Confidential Schedule) after February 2010,
which [Coretell] has used to do the acts referred to in paragraphs 2, 6, 7, 12, 19 and 22 above.
41A. Without the financial and operational assistance in paragraph 41 above, the first respondent could not have carried out the acts referred to in paragraphs 2, 6, 7, 12, 19 and 22 above.
42. [Kleyn Investments] has requested and been supplied with products for the repair or servicing of the Coretell Equipment by the entity referred to in item 12 of the Confidential Schedule since about January 2011, and such products have been used by [Coretell] to do the acts referred to in paragraphs 2, 6, 7 and 12 above.
43. [Kleyn Investments] knew, or ought to have known that [Coretell] would use the financial and operational assistance and products referred to in paragraphs 41 and 42 above in the manner referred to in paragraphs 41 and 42 above.
Documents relied upon
44. Without limiting the foregoing, in respect of their allegations against [Mincrest] and [Kleyn Investments], the applicants rely upon:
(i) [Coretell's] financial records set out in its confidential general ledgers (2007-2011) appearing at Annexures ZK-2 to ZK-6 of the Confidential Affidavit of Zane Kenny sworn 28 March 2013;
(ii) the matters set out in paragraphs 25 to 43 of the Affidavit of Stephen David Budiselic sworn 30 November 2012;
(iii) the Camteq / Coretell promotional video appearing as Exhibit SDB-4 of the Affidavit of Stephen David Budiselic sworn 30 November 2012;
(iv) the matters set out in the Affidavit of Andrew Murray Ross sworn 30 November 2012;
(v) the matters set out in paragraphs 6 to 88 of the Affidavit of Nicky Kleyn sworn 27 March 2013;
(vi) the matters set out in paragraphs 4 to 14 of the Second Affidavit of Stephen David Budiselic sworn sworn [sic] 13 June 2013;
(vii) the matters set out in the Second Affidavit of Andrew Murray Ross sworn 13 June 2013; and
(viii) the matters set out in paragraphs 3 to 8 of the Affidavit of Sean Stanley Coleman sworn 2 May 2012; and
(ix) the purchase orders for equipment used in the Coretell Equipment, including those appearing at pages 434, 438, 439, 446, 447 and 454 to 457 of the Fourth Affidavit of Christopher Edmund Duvall Williams sworn 30 November 2012; and
(x) the business expenses appearing at pages 513 to 517 of the Fourth Affidavit of Christopher Edmund Duvall Williams sworn 30 November 2012.
297 Finally, the liability in respect of Mr Kleyn is based on authorising, procuring, inducing or joining in a common design in the various infringing acts of the corporate respondents because of his effective total control of each of the corporate respondents.
298 The applicants place reliance on s 13 of the Act and on the principles in Collins v Northern Territory (Full Court judgment) per French J (as his Honour then was) (at [24]-[30]) and particularly at [28]). See also the discussion by the Full Court in Keller v LED Technologies Pty Ltd (2010) 185 FCR 449 where emphasis was placed by Emmett J (at [83]-[88]), Besanko J (at [292]-[293]) and Jessup J (at [404]-[408]) on the need for close personal involvement of the individual in the conduct in question as distinct from that of a person merely acting as an officer or servant of the company. The applicants' case, which I fully accept, is that Mr Kleyn was totally 'hands on'.
299 The applicants rely upon the following facts, which they argue, and I accept, have been established on the evidence, in support of the tests set out in Keller as set out in the second further amended particulars of infringement (at [45]-[55]):
45. [Mr Kleyn] is and has been at all material times:
(i) the sole director and secretary of each of [Coretell], [Mincrest] and [Kleyn Investments];
(ii) a shareholder of each of [Coretell], [Mincrest] and [Kleyn Investments]; and
(iii) engaged in and responsible for directing the conduct, management, control and day-to-day operations of each of [Coretell], [Mincrest] and [Kleyn Investments], including their activities particularised above.
46. [Mr Kleyn] has been directly and personally involved in [Coretell], [Mincrest] and [Kleyn Investments'] sale, supply and offering of the Coretell Equipment to customers in Australia, including to the entities referred to in paragraphs 6 to 10 and 12 to 16 above.
47. [Mr Kleyn] has been directly and personally involved in [Coretell], [Mincrest] and [Kleyn Investments]' provision of instructional information for the use of Coretell Equipment, including to the entities referred to in paragraphs 22, 25 and 28 above.
48. [Mr Kleyn] has been directly and personally involved in [Coretell], [Mincrest] and [Kleyn Investments]' supply from Australia of advertising and demonstration models to customers and agents, including to the entities specified in items 3 to 9 of the Confidential Schedule.
49. [Mr Kleyn] is and has been at all material times the owner as tenant in common of the Kleyn Family Residence wherein the respondents have kept, sold or otherwise exploited their Coretell Equipment.
50. [Mr Kleyn] is and has at all material times been the sole director, secretary and shareholder of the company owner of the Maddington Warehouse wherein the respondents have kept, sold or otherwise exploited their Coretell Equipment, Goldview Asset Pty Ltd (ACN 078 643 428) since September 2010.
51. In particular, without limiting paragraphs 45 to 50 above, [Mr Kleyn] has been directly and personally involved in:
(i) commissioning the person referred to in item 2 of the Confidential Schedule to design and manufacture Version 1 of the Coretell Equipment from before 5 September 2005;
(ii) commissioning the person referred to in item 2 of the Confidential Schedule to develop user guides in respect of that tool including commissioning that person to develop revised versions of the user guides in about June 2007;
(iii) correspondence with customers and agents regarding supply or potential supply of Version 1 of the Coretell Equipment, including for example correspondence with the entity referred to in item 7 of the Confidential Schedule on 11 April 2007;
(iv) commissioning the entity identified in item 1 of the Confidentiality Schedule to design and manufacture Version 2 and Version 3 of the Coretell Equipment from about October 2008;
(v) commissioning the entity identified in item 1 of the Confidential Schedule to draft user guides for the Version 2 and Version 3 of the Coretell Equipment from about October 2008;
(vi) providing demonstration kits of Coretell Equipment to the respondents' customers and agents, including for example to the entities referred to in items 3, 4 and 5 of the Confidential Schedule from about November 2011;
(vii) providing technical support to the respondents' customers and agents, including for example technical support provided to the entity referred to in item 8 of the Confidential Schedule on about January 2012; and
(viii) corresponding with the respondents' customers and agents regarding supply or potential supply of versions 2 and 3 of the Coretell Equipment, including for example correspondence with the entity referred to in item 9 of the Confidential Schedule on about February 2012.
52. [Mr Kleyn] has received dividends and drawings from the profits of [Coretell], [Mincrest] and [Kleyn Investments] arising out of their activities particularised above.
53. [Mr Kleyn] has been the principal beneficiary of [Coretell], [Mincrest] and [Kleyn Investments'] activities particularised above.
54. At all times [Mr Kleyn] knew and intended that:
(a) [Coretell], [Mincrest] and [Kleyn Investments] would carry out their activities particularised above; and
(b) he would be the principal beneficiary of those activities.
300 Shortly put, the applicants contend that Mr Kleyn is, and has been, directly and closely involved in the conduct of all three corporate respondents such as to make his conduct effectively their own conduct. As already noted, the evidence indicates that he is:
(a) the sole director and secretary of two of the three corporate respondents;
(b) a shareholder of each of the corporate respondents; and
(c) engaged in, and responsible for, directing the conduct, management, control and day to day operations of each of the corporate respondents, including their activities outlined above.
301 Equally, the applicants argue, and I accept, that the evidence also indicates that Mr Kleyn had been directly and personally involved in the corporate respondents' activities in selling, supplying and offering the ORIshot Tool to customers in Australia, the provision of instructional information for the use of the ORIshot Tool, and the advertising and demonstration of the ORIshot Tool to the customers and agents. Samples of the ORIshot Tool have been kept at Mr Kleyn's residence and he is also the sole director, secretary and shareholder of the company that owns the warehouse used by the corporate respondents. He has received dividends and profits from the corporate respondents arising out of their allegedly infringing activities, and allegedly has been the principal beneficiary of those activities.
302 There cannot be any doubt, on the evidence, that Mr Kleyn knew and intended that the corporate respondents would carry out their activities in relation to the ORIshot Tools and that he would be the principal beneficiary of those activities. No other person has identified as controlling the activities of the corporate respondents.
303 The respondents also devoted a significant amount of energy in relation to this topic in many pages of submissions. The respondents referred to the relevant law set out in [42]-[84] of the respondents' opening submissions and supplementary note. In summary they argue that:
(a) joint tortfeasorship requires two or more persons or entities having a common design to engage in a course of action, which amounts to exploitation of a patent without the licence of the patentee: Morton-Norwich Products Inc v lntercen Ltd [1978] RPC 501 (at 514) where Graham J said: 'two persons who agree on common action in the course of and to further which one of them commits a tort in this country are joint tortfeasors. There is … one tort committed by one of them on behalf of and in concert with the other';
(b) to establish joint tortfeasorship in patent infringement according to Wilcox J in BEST Australia Ltd v Aquagas Marketing Pty Ltd (1988) 12 IPR 143 (at 147): 'what is necessary is that there be participation, rather than mere facilitation, by the alleged joint tortfeasor';
(c) common directorship, which the applicants have emphasised in this case, is not sufficient, as without more, this gives sufficient weight to the fact that two companies are separate legal entities;
(d) to establish joint tortfeasorship in patent infringement, it is necessary that there be proved active participation by either of the corporate respondents in the activities of Coretell: Apotex Pty Ltd v Les Laboratoires Servier (No 2) (2012) 293 ALR 272 per Bennett J (at [23]);
(e) in relation to personal liability of a director, such as Mr Kleyn, for joint tortfeasorship with companies which he directs, the authorities establish that 'a finding that a director who held an honest belief that the acts which he or she directed or procured were not unlawful is a significant consideration telling against the director's liability', and such a finding may be decisive: Sporte Leisure Pty Ltd v Paul's International Pty Ltd (No 3) (2010) 88 IPR 242 per Nicholas J (at [118]); see also the decision of the majority of the Full Court in Keller and, particularly, to the judgment of Jessup J (at [354] to [408]) and Emmett J (at [83] and [88]);
(f) the primary support provided by the corporate respondents to Coretell was in the form of tax-effective assistance to cover the respondents' large legal expenses as a result of the applicants' threats and commencement of proceeding WAD 132 of 2007 against Coretell and Mincrest; it does not establish some joint engagement in the venture of supplying core orientation tools or some common design to do so;
(g) Mr Ross' evidence should be reviewed in light of the comments of Bennet J in Les Laboratoires Servier (at [23]) that, although it is relevant, 'a close relationship between the companies is not, of itself sufficient, even if there were overall control, both financial and voting and the companies regarded themselves as a single economic unit'; and
(h) the applicants' further allegations concerned with authorising, procuring and inducing cannot succeed.
304 The case for the respondents is that the corporate respondents have been engaged in two distinct businesses over time in the circumstances which are detailed by the respondents as follows.
305 The respondents argue that the Camteq camera business has been the 'mainstay' of the separate business which has been successfully run by Mr Kleyn. That business was originally conducted under the name 'Camteq Instruments', a business name owned by Mincrest. It was very successful as evidenced by corporate accounts produced in discovery. Nevertheless, for internal management reasons, in about February 2010, the Camteq camera business was assigned or transferred to Kleyn Investments, under the new trading name 'Camteq International Services'. The respondents say that, thereafter, the business activities of Mincrest were run down and had ceased by the time of completion of the trial, and the 'Camteq Instruments' business name was kept viable, but had recently expired at the time of the completion of the trial. Accordingly, the respondents argue that the Camteq camera business has been conducted by Kleyn Investments under the name 'Camteq International Services' and continues to be very successful. They submit that it is a corporate entity, independent of Coretell.
306 The respondents contend that, on the evidence, commencing in about late 2004 Mr Kleyn began to take steps to develop a core orientation tool of the nature the subject of proceeding before Barker J, and now the subject of this proceeding. That work was initially commissioned by Mincrest and that position remained until early 2006. In May 2006, Mr Kleyn caused Coretell to be incorporated as the vehicle by which the core orientation tool business was to be conducted. There was a period during 2006 during which Mincrest continued to conduct some activities in relation to the core orientation tool, but those activities ceased by about November 2006. After this time, the respondents contend that Coretell was the sole corporate entity responsible for all of the business activities concerning the core orientation tool the subject of the present proceeding. Like Mincrest, the business was very successful and would have been more so but for a period of some two years when Coretell (with limited exception) was out of the market by reason of its cessation of business consequent on threats of the patent infringement received from the applicants in November 2006.
307 Mr Kleyn, the respondents argue, but I reject, gave convincing evidence of the reason for the separate incorporation of Coretell and, particularly, his desire to have a separate viable entity to sell as a going concern.
308 As against that, the applicants continued to assert that the sole reason for the separate incorporation of Coretell by Mr Kleyn was to protect his other business enterprises and assets from any adverse liability finding on patent infringement. Nothing adduced in the cross-examination, the respondents argue, supported the contention raised by the applicants.
309 The respondents submit that Mr Kleyn's explanation for the separate incorporation of Coretell is entirely sensible, particularly having regard to its considerable financial success in the years since its incorporation.
310 The respondents also argue that the involvement by Mincrest in Coretell's core orientation business was already determined in AMC No 1. At least, the greater portion of the conduct in 2006 and 2007 by Mincrest and Coretell was canvassed in detail in that proceeding and dealt with in his Honour's judgment. The respondents argue that those findings are incapable of being disturbed. Without this argument being fully developed I am not in a position to accept it. The respondents contend that the applicants are seeking to challenge the conclusions reached by Barker J in AMC No 1 by pursing a collateral attack which turns essentially on joint tortfeasorship. As indicated, I do not accept this contention. The issues in their current form were not the subject of argument before his Honour. Nor has that brief submission been pleaded or raised in the parties' statement of issues.
311 The respondents submit that, on the evidence established at trial, as has always been the case, the applicants cannot establish that:
(a) either Mincrest or Kleyn Investments were involved in any direct infringement of the System Patent by making, selling or otherwise exploiting the orientation tools;
(b) either Mincrest or Kleyn Investments were involved in any indirect infringement of the System Patent by authorising, procuring, inducing or joining in a common design with its customers or end users;
(c) either Mincrest or Kleyn Investments was involved in any direct infringement of the Method Patent by supplying the orientation tools or instructions for the use thereof;
(d) either Mincrest or Kleyn Investments were involved in any direct infringement of the Method Patent by authorising, procuring, inducing or engaging in a common design with customers or end users to use the relevant core orientation methods;
(e) either Mincrest or Kleyn Investments authorised, procured or induced or joined in a common design with Coretell to do any of the conduct above;
(f) Mr Kleyn was a director of the corporate entities, Mincrest or Kleyn Investments, authorised, procured or induced or joined in the common design with either of those entities to cause or reflect the conduct alleged above; or
(g) for Mr Kleyn, any activities by him amounted to any authorisation, procurement, inducement, or common design by him other than in his capacity as a director of Coretell.
312 The respondents make the point that vast quantities of financial information had been provided to the applicants to enable them to be satisfied as to the correctness of the position as advanced by the respondents. The respondents argue that it is plain on any view of the financial statements that the corporate entities have maintained comprehensive and separate general ledgers on a 'QuickBooks' accounting basis, which have then formed the foundation for comprehensive annual accounts to be prepared by the responsible accounting firm, more specifically, by Mr Kenny, who gave evidence. The respondents refer to trading statements, profit and loss accounts and balance sheets which it says make clear that the financial position of each entity has been diligently, accurately recorded and reported, such that there can be no possible suggestion of any sham or cover up. Indeed, the respondents assert that none appears to be suggested in the expert evidence of Mr Ross. The financial statements provide compelling evidence, it is said, that at all material times relevant to any liability issues in the proceeding, Coretell is, and always has been, an independent successful trading entity in its own right. The respondents contend that the viability of Coretell as an independent trading entity, relevant to issues of liability in this proceeding, is clearly established from the respective trading statements over the years since 2009, from which it is evident that Coretell's gross revenue in 2009 was $21,556, in 2010 $358,498, in 2011 $989,900, in 2012 $2,022,540, and in 2013 $1,083,560.
313 One of the main drains on that revenue, however, were the legal expenses and the fact that Coretell was out of the market for approximately two years between November 2006 and January 2009 as a result of threats of legal proceedings concerning patent infringement made by the applicants. Coretell, it is said, has incurred massive legal expenses in successfully defending the previous legal proceedings, but also in defending the present proceedings.
314 The respondents claim that in order to maintain its viability, Coretell has received financial support from the other two corporate respondents by way of received discretionary trust distributions. Absent such distributions, Coretell would have ceased to exist and the applicants would have gained a de facto victory from the previous proceeding to which they had no entitlement. The legal expenses for each relevant financial year are indeed considerable, particularly, in 2009 $228,090; in 2010 $501,920; in 2011 $71,408; in 2012 $646,387; and in 2013 $594,219.
315 Moreover, the respondents stress, on any objective and rational review it is abundantly clear that Coretell trades as a stand-alone or single purpose corporate entity. It says that this is evidenced by the following indicia:
(a) its separate incorporation;
(b) different products, namely, core orientation tool and ancillary products unrelated to cameras and ancillary products;
(c) a separate business name and no use by Coretell of the Camteq name or any derivation thereof;
(d) its own separate corporate Coretell bank account and associated records;
(e) its own separate Coretell accounting/ledger database and financial statements;
(f) separate Coretell invoices for suppliers and hires and thousands of invoices all in the name of Coretell;
(g) as a general rule, separate invoices to Coretell from suppliers, for example from High Tech Laboratories and Precept Pty Ltd;
(h) as shown in separate Coretell outwards invoices:
(i) separate Coretell stationary/printable headers;
(ii) separate ABNs and ACNs;
(iii) separate contract emails for invoice queries;
(iv) separate bank accounts for accounts payable;
(v) separate phone lines as indicated in Coretell and Camteq invoices;
(vi) separate hire contracts with customers;
(vii) separate Coretell ORIshot instruction book;
(viii) separate websites;
(ix) separate tenancies and rent payments;
(x) separate logos for Coretell and Camteq International Services and promotional material; and
(xi) separate and promptly displayed external signage at the Maddington Warehouse.
316 The common directorship of Mr Kleyn is obviously accepted. That renders the corporations as being associated within the meaning of the CA, but such common directorship alone, the respondents submit, is insufficient to establish joint tortfeasorship. The respondents stress that it is not to the point that Mr Kleyn might attend to the business of both companies from the same office or on the same site visits, or that Mr Kleyn or Mr Scott had business cards with separate corporate logos on the same card. All that establishes the respondents contend is the fact is that there were two separate enterprises conducted by separate companies, each of which was controlled by Mr Kleyn.
317 The respondents argue that the weakness of the applicants' position is demonstrated by the emphasis on Mr Kleyn's 'two hats', which the respondents say recognises the very point that the respondents make, namely, that there were two entities. However, to be liable for joint liability in the manner asserted by the applicants, the respondents argue that the evidence must establish that the director has caused or directed a company concerned deliberately, knowingly and willingly to adopt a course of conduct likely to constitute infringement of the patent, or that the director was indifferent to the risk of that infringement.
318 There is no basis on the facts in this case, it is argued by the respondents, for a finding that there was any dimension to Mr Kleyn's role with the corporate respondents which was separate from the good faith discharge of his duties as a director in the service of those companies. Accepting that Mr Kleyn is the sole director alone is not sufficient to make him liable with the companies in any way. There is no evidence, the respondents say, that Mr Kleyn intended and procured that infringement would take place or was indifferent to such matters in the manner described by Jessup J in Keller and as noted by Nicholas J in Sporte Leisure.
319 The respondents argue that Mr Kleyn was, and is, entitled to hold the reasonable view that the applicants had put forward their best case of patent infringement against the corporate respondents in the earlier proceeding AMC No 1, and a single judge and subsequently three judges of the Full Court in AMC Full Court found that there was no basis to those allegations. In fact, on the evidence Mr Kleyn was only aware of the existence of the Patents, the subject of these proceedings after 20 October 2011 and only received correspondence in this matter through his solicitors on 2 November 2011. As a consequence, Mr Kleyn was properly entitled to continue with the business activities of these companies, notwithstanding any allegations by the applicants of patent infringement. The respondents say that Mr Kleyn's position as a director of the corporate respondents and his position as to 'non-infringement' having been upheld by four judges of the Court, means that the Court 'could not now find' that Mr Kleyn 'intended' and/or procured patent infringement through the corporate respondents or was indifferent to that position.
320 As to Mr Ross' evidence on financial support provided to Coretell by Mincrest and Kleyn Investments from 2006 onwards, the respondents say that on the evidence all such support was to keep Coretell viable through a period of significant legal costs caused by the applicants' past and present legal proceedings. The respondents contend that none of the support was demonstrated by the applicants to be for any operational matters concerning any alleged infringing conduct. The mere provision of the financial support could rise no higher than 'facilitation', which is insufficient to establish the applicants' case.
321 The respondents argue that although it is clear that the trust distributions kept Coretell alive by the payment of accruing legal expenses, it is not established on the evidence that the trust distributions assisted Coretell's business activities. Specifically, it is not established that the asserted infringing conduct was supported by this funding. The evidence simply supports the conclusion, the respondents argue, that the trust distributions were largely used to fund the past and present legal battle commenced by the applicants and their parent company against Coretell and Mincrest and now also Kleyn Investments. The distributions to the companies were at times when the companies were being sued, or being threatened with suit, as infringers of the applicants' Patents and, accordingly, each had an interest in defending its own position as well as the collective position. The respondents argue that, moreover, Coretell had a direct interest in preserving its core orientation tool business, but as a consequence of the applicants' demands, Coretell was out of the market for some two years, during which time it could not derive any revenue by which to defend itself.
322 The respondents rely on the contentions that Mr Ross accepted under cross-examination, namely, that the trust distributions were essentially tax effective, that is, if the trust distributions had not been made, the trust would have been required to pay tax penalties. Although his response was guarded on these points, it is clear that a trading trust, such as Mincrest or Kleyn Investments, would be taxed at the highest rate on any undistributed retained earnings and also the distributions from a trading trust would be liable to tax as income in the hands of the beneficiary, whereas the tax impact could be lessened or negated by allocating expenses and losses. It was therefore tax affective for Coretell to receive the distributions rather than for Mr Kleyn to receive them. Secondly, the respondents contend that Mr Ross conceded that the distributions received largely matched the legal expenses incurred by Coretell. Thirdly, the respondents submit that Coretell would have had some difficulty obtaining independent financing given its financial position. Fourthly, it is submitted for the respondents that, as consistent with Mr Ross' written evidence, the distributions made commercial sense between a group of related entities.
323 On this topic, the respondents contend that it is plain from the general ledgers and the financial statements of Coretell that in the financial years 2007 and 2008 Mincrest had made funds available or had paid invoices for services provided by others to Coretell. These were booked to the Coretell accounts as loans made by Mincrest and over those years had an accumulated carry forward value of $185,000. The respondents say that Mr Ross advanced this matter as a separate item of financial support provided by Mincrest to Coretell and further confirmed this position in evidence in chief. The inference from this evidence, it is argued, is that the funding was then in two parts, namely, loans in the initial period and, after that time, trust distributions. But this evidence was incorrect because Mr Ross properly conceded in cross-examination that the carry forward/accrued loan amounts booked in the Coretell accounts were acquitted by the trust distribution received from Mincrest in the 2008 year. Therefore the payments initially treated in the ledgers as loans to Coretell were later acquitted by reason of the trust distributions. The only funding falling for consideration, therefore, are the trust distributions themselves.
324 Mr Ross' evidence suggested that Camteq, that is, Kleyn Investments, paid Coretell's expenses in addition to paying trust distributions to Coretell. That was a theme raised in the cross-examination of Mr Kenny and, in particular, in relation to the 2008/2009 financial years. The cross-examination was not in accordance with the facts in the accounts and, to that extent, was mischievous according to the respondents. The respondents argue that the asserted entries to which the cross-examination was directed were plainly recorded in the general ledger as accruing loans and were acquitted at the end of the financial year by the associated trust distribution as recorded in financial statements.
325 The respondents argue that Mr Kenny's evidence is wholly supported by the financial records which show that:
(a) incremental payments were made as necessary to Coretell on its behalf and were accrued and recorded in the relevant loan account in the general ledger (see accruals to the 'Camteq loan account' in the 2009 general ledger); these accruals record payments to third parties as described, notably a substantial number of payments were stated as being for legal expenses;
(b) the loan amount accrued throughout the course of the year as at 30 June 2009 totalled an amount owed to Camteq of $158,507.42; these amounts are plainly recorded as owing from Coretell to Camteq;
(c) at the end of the financial year, as recorded in the financial statements, Coretell received as income a trust distribution of $242,127 from the Kleyn Family Trust, according to the 2009 financial statement; and
(d) as a result of that trust distribution and reconciliation, the Camteq loan account for that year was recorded in the Coretell balance sheet as an asset of $83,357, thereby recording an obligation on Camteq to pay Coretell the further balance of that amount.
326 The respondents say that Mr Ross should have been aware from the financial statements that the asserted non-cash benefits where he referred to were not amounts independent of the trust distributions, but were the same amounts separately referred to by him. The financial statements do not reveal payment of expenses and trust distributions, but trust distributions received to acquit accumulating loan amounts caused by the earlier payment of cash to Coretell and at times, expenses paid on behalf of Coretell. The respondents submit that the amounts are not cumulative, rather, they are individual aspects of the same transactional activities.
327 I will discuss this further below, but there was cross-examination of Mr Kenny on this topic. The respondents submit that it was based on either a mistaken or misrepresented position. This was said to arise from the snap shot financial statements of Coretell and Kleyn Investments put to Mr Kenny during cross-examination. The cross-examination proceeded on the basis that:
(a) in 2011, Coretell had a turnover of $989,800;
(b) in the same year, minimal operating expenses of around $15,000 were incurred by Coretell by excluding legal expenses of about $70,000 and rent of about $24,000;
(c) in that year, Kleyn Investments had a turnover of $1,457,911;
(d) in that year, substantial expenses of around $1 million were incurred by Kleyn Investments, which included rent; and
(e) accordingly, Coretell had a 'stellar' performance compared to Kleyn Investments.
328 The respondents argue that this was a false basis on which to proceed because those assumptions in the cross-examination did not compare like with like, in that:
(a) raw materials and consumables for Kleyn Investments of $536,384 were included as part of the expenses for Kleyn Investments; and
(b) costs of sales purchases of $408,812 were wrongly excluded from the operating expenses of Coretell.
329 Thus, the respondents argue, the propositions put to Mr Kenny excluded a substantial part of Coretell's business costs but did not exclude any equivalent substantial part of the Kleyn Investments' business costs. With a proper comparison, the respondents argue, the higher turnover business, Kleyn Investments, had the higher expenses. Nonetheless, both businesses had substantial expenses.
330 The respondents say that, properly understood, both companies reflected similar profits of about $400,000, but the major difference in the cost base between them was the lack of employment expenditure for 2011 by Coretell. The reason for that lack of employment expenditure was to do with the different operating bases of the businesses. In essence, a large difference was due to the fact that Coretell was a much simpler business. Unlike Kleyn Investments, it does not manufacture the component parts of the products, which it hires. Consequently, its cost of goods sold incorporates a great deal of the labour component for the products dealt with by Coretell.
331 Further, in his cross-examination, Mr Kleyn noted that Mincrest had provided start-up financial support in the early development of the core orientation tool. This was prior to the commencement of the subsequent Coretell business activities and occurred at a time when the proprietary rights in the core orientation tool remained with Mincrest. The respondents submit that this has no bearing upon the evidence by Mr Ross as to the claims of financial support between the entities or of any joint tortfeasorship.
332 The respondents argue that any claim of financial support is weak. The primary support provided by the other corporate respondents to Coretell was simply in the form of financial assistance on a tax effective basis to both entities in each instance to cover the large legal expenses being paid by Coretell as a result of the applicants' commencement of proceedings. According to the respondents, that sort of support cannot be relied upon to establish some joint engagement in the venture of supplying core orientation tools or some common design to do so.
333 While the applicants contend that employment support has been provided to Coretell, noting that Coretell did not incur wage expenses for the period considered in Mr Ross' evidence, the respondents say that the 2013 accounts make it clear that that is not the current position. Again, they stress that Coretell is a much simpler business operation than the Camteq camera business, that is, Kleyn Investments, and does not require significant permanent wage costs. Much of Coretell's work has been performed by Mr Kleyn or his family. Over time, intermittent paid labour has been provided as required from available employees of either Mincrest or Kleyn Investments. There are no ongoing permanent staff in Coretell.
334 Consistent with this, the respondents say:
(a) Coretell had limited business from the period in late-2006 to mid-2007 and was dormant, as far as business dealings were concerned, from mid-2007 to early-2009; Mr Kleyn ran the business and did what work was required;
(b) Coretell's business was extremely simple, mostly relying on purchasing, sub-contracted components, rather than manufacturing the core orientation tools directly; it was a much simpler business than the Camteq cameral business;
(c) broken core orientation tools are disposed of, whereas cameras are repaired;
(d) the Camteq camera business charged management fees to Coretell for work by employees of Kleyn Investments; and
(e) notwithstanding that no management fees were charged in 2010-2011 and 2011-2012, there was a charge during 2012-2013, in addition to Coretell paying its own wages for the period of Mr Scott's employment.
335 The respondents contend that there is no evidence to suggest that the management fees as paid to date do not accurately reflect the value of the intermittent paid labour provided in this manner, and that the attack by the applicants is artificial.
336 In any event, the respondents submit that the provision of intermittent paid labour from Camteq, rather than some independent third party, does not provide factual support for the allegation that the provider of the labour, whether it be Camteq or such a third party, is relevantly complicit in the activities of Coretell. At the most basic level, issues of vicarious liability must arise. The respondents allege that the position is a long way removed from any probative material supporting any joint tortfeasorship finding against the corporate respondents or Mr Kleyn.
337 Other activity and support to which Mr Ross points include rent and sundry expenses. In relation to rent, Coretell was engaged in limited or no business activity for a substantial period between the receipt of the threats by the applicants in early 2009. The respondents argue that accordingly Coretell can be expected to have taken up minimal space and to have been required to pay minimal rent in that period.
338 During the period from early-2009 until September 2010, both of the Coretell and Camteq businesses operated from Mr Kleyn's domestic premises. The respondents say that the non-payment of rent by either entity would simply have been commercially prudent, and does not establish any financial support being provided one way or the other.
339 With respect to Coretell and the Camteq business moving to the Maddington Warehouse, each shared the liability for a half share of the rent. The rent liability for Coretell was plainly recognised in the accounts, and as at the date of the evidence given by Mr Ross, Coretell had made payments for 21 out of the 24 months, and had booked a continued and accrued liability for three months of rent.
340 In relation to sundry expenses referred to by Mr Ross, they are argued to be trifling in the context, and in no way could support the alleged joint tortfeasorship claim.
341 The applicants refer to the sharing of premises at the Maddington Warehouse by the Coretell and Camteq businesses. The existence of the two separate businesses within the space is plainly stated on the external signage and the existence of the two separate businesses has been well recognised for a long time, including by the applicants' principal witness on the topic, Mr Budiselic, during cross-examination. This was contrary to his original evidence.
342 The applicants also appear to rely upon the evidence from a 'trap' telephone call. Mr Coleman, a solicitor, deposed to calling the Camteq business number and asking a number of questions about the business structure and core orientation tools. He was informed, correctly according to the respondents, that he had called the Camteq line, rather than the Coretell line and that 'Camteq does the ProShot Survey Camera and Coretell does the orientation stuff … but we are the same people'. The respondents say the information that Mr Coleman said that he received was entirely consistent with the operation of the two separate businesses from the Maddington Warehouse premises, and the entirety of the evidence given by the respondents. It has always been the respondents' position that Mr Kleyn manages both businesses and his wife and daughter assist in the administration of both businesses. The respondents assert that answers given to Mr Coleman were entirely against the applicants' case.
343 The respondents also contend that the business cards of Messrs Kleyn and Scott each sensibly show that, despite having one business card for both businesses with one telephone number to 'capture' incoming business before it is thereafter directed to the appropriate entity, the cards show the cardholder as representing the two separate businesses identified by the individual corporate logos on the card. The respondents submit that using one business card makes commercial sense, and saves expense and that the Court must accept that the purpose of business cards is simplicity of message.
344 The applicants also rely upon the conduct of third parties. Evidence was given concerning the attendance by Messrs Budiselic and Brown at separate trade exhibitions and conferences. The respondents argue that this evidence is very weak and non-probative, and that it cannot possibly support any inference against either Mincrest or Kleyn Investments insofar as it concerns business activities concerned with a core orientation tool.
345 They rely upon the Australian Drilling Fluids (ADF) pricelist, which described both Coretell and Kleyn Investments' equipment as Camteq equipment. On the other hand, there is evidence that Coretell and Kleyn Investments rendered separate invoices to ADF.
346 Another third party document is a pricelist which purports to have the Pro-Shot equipment and the ORIshot Tool equipment in the one listing. This document was of no assistance to the applicants, the respondents contend.
347 There was a quotation from 'Down Hole Surveys' (DHS) relied upon by Mr Budiselic. This document records no more, the respondents say, that, at the date of the document, DHS offered equipment from the Camteq business and the Coretell business and other sources including, apparently, one of the applicant companies on the one document.
348 There are various other documents which the respondents argue did not improve the applicants' case, including occasional invoices to the incorrect company from suppliers, an agency agreement with DHS and purchase orders from the same company, freight documents or packing lists, occasional purchase orders or inquiries by third parties, a listing on the website of the Australian Drilling Association referring to Camteq International Services dealing in orientation equipment.
349 The respondents argue that the applicants' reliance upon an 'obviously incomplete' LinkedIn profile which contains obvious mistakes, referring to Mr Kleyn as representing Camteq International Services from 1995 until the present, but with no reference to Coretell is misplaced. The applicants rely on website registration details which suggest that Mr Kleyn is the licensee for the websites for both Camteq and Coretell and the applicants rely upon freight packing slips from Coretell which include Pro-Shots.
350 The respondents say that all of the above evidence is trivial, peripheral and cannot support the serious claims asserted by the applicants. The respondents also referred to numerous additional documents which were raised by the applicants in the course of the proceeding, and which they say cannot support the applicants' claim of joint tortfeasorship. The documents to which I have not specifically made reference do not in any way alter the conclusion that I have reached on the issue of joint tortfeasorship.
351 As to the agencies and agency agreements, the respondents say that the historical accounting records for the years since 2009 plainly show that each of Coretell and the Camteq camera business have had extensive and successful business activities involving the hiring of multiple core orientation tools and ancillary equipment and Camteq camera products and ancillary equipment, respectively, to a great range of persons and entities, both within Australia and internationally. According to the respondents, there can be no dispute that as a matter of common sense business practice, where practical, common agents would be used to represent the separate business enterprise.
352 There was an agency agreement with DHS, prepared by Ms Karen Gibbons of DHS apparently at the instruction of Mr Scott, who was then an employee of DHS and did not then have an employment relationship with any of the corporate respondents. The respondents say that the document represents a mistaken view of the factual position by DHS, and although accepted by Mr Kleyn as it was signed by him, it was obviously simply a slip due to lack of care in checking its content. This document refers to the disused business name of Camteq Instrument Services that had not been in use since Mr Kleyn performed instrument service and repair work as director of Mincrest. Mr Kleyn says that he did not notice the reference to this business name and that the compelling factual position is that Camteq International Services and Coretell respectively, and separately, invoiced DHS for their respective products, and DHS has consistently paid the different companies for the different products.
353 The respondents say that the applicants' reliance on one executed and one unexecuted agency agreement between Coretell and different agents in Africa, where Coretell was to provide core orientation tools and also Camteq cameras, is also weak. The respondents submit that no reliance should be placed on the unexecuted draft agreement. As to the second document prepared by Mr Scott on behalf of Coretell, it was simply selected for business reasons as the principal entity and it had its own hiring arrangements with Camteq for the supply of any required cameras and for onward supply to the South African agent. This, again, is said by the respondents to be a sensible commercial arrangement, and non-probative in support of any inference of joint tortfeasorship in relation to the core orientation tool business.
354 The applicants also rely upon a further draft unexecuted agency agreement prepared by Mr Scott pursuant to which Coretell and Kleyn Investments were to enter into a common agency agreement with a particular agent. Mr Kleyn's evidence was that the unexecuted document was never put into effect and never adopted by Mr Kleyn and can have no probative value in support of any inference of joint tortfeasorship, say the respondents.
355 There were some remaining allegations in the evidence adduced by Mr Budiselic and Mr Robert Kleyn. The applicants' case appeared to be that Coretell was incorporated solely to avoid liability for patent infringement. That position is directly answered, the respondents say, by the evidence of Mr Kleyn, who comprehensively stated that the reasons for Coretell's incorporation were not to avoid liability for any patent infringement. I have already recorded my views as to Mr Kleyn's credit. I have rejected most of his uncorroborated evidence. Insofar as the evidence on this topic in the applicants' case is dependent upon the evidence of Messrs Brown, Budiselic and Robert Kleyn, the respondents submit that those witnesses should be disbelieved.
356 Mr Budiselic, as noted, is an employee of the applicants' group. I have already indicated the reservations that I have about Mr Budiselic's independence and impartiality. The respondents say that his written evidence was unconvincing and did not survive cross-examination. Generally speaking, I do not consider that it is appropriate that I should rely upon oral evidence of conversations by Mr Budiselic, who is clearly a partial and involved witness, for such a serious allegation.
357 As to Mr Robert Kleyn, the position is much the same. The two brothers are estranged. While I have serious reservations about any evidence of Mr Nicky Kleyn that is not corroborated, I would not rely upon Mr Robert Kleyn's evidence, taken alone, to support the applicants' case. The conversations on which he relies occurred many years ago and he was not present for cross-examination and was not cross-examined.
358 It is necessary, in my view, to look for objective indicators and clear inferences to support the applicants' serious assertions. The objective indicators I look for are the actual dealings of the businesses and the actual treatment of their finances. If the applicants' case relied upon the oral evidence of Mr Budiselic or Mr Robert Kleyn only, I would not conclude that the applicants had discharged their case on the balance of probabilities.
359 A significant factor, in my view, is the applicants' contention that it is unbelievable that Mr Kleyn could hand over rights in a device by way of an oral or mental assignment, although there is no evidence about any words being spoken from one company to another. As to this, the respondents say the contention is without merit and that even the applicants rely upon an oral assignment of the ACT Tool rights from Mr Parfitt to Chardec. The respondents say that such an 'oral' assignment is perfected by the fact, as equity would well recognise. One of the many difficulties the respondents face was that there is no evidence of any 'oral' assignment at all. At best, it apparently took place in Mr Kleyn's head. There is no evidence that he said anything to anyone - even to himself.
360 In relation to the applicants' allegation of authorisation of infringement, by which it is pleaded that the respondents have authorised, procured or induced the infringing conduct of various persons or entities, the respondents have advanced the following additional submissions on these topics.
361 In relation to authorisation of infringement, the respondents' note that 'authorise' in s 13(1) of the Act has a comparable meaning as in the Copyright Act 1968 (Cth): Bristol-Myers Squibb Company v F H Faulding & Co Ltd (2000) 97 FCR 524 per Black CJ and Lehane J (at [97]). In WEA International Inc v Hanimex Corporation Ltd (1987) 17 FCR 274 per Gummow J (at 286) it was held that 'authorised' under the Copyright Act means 'sanction, approve, countenance'. See also Inverness Medical Switzerland GmbH per Bennett J (at [199]).
362 The High Court in Roadshow Films Pty Ltd v iiNet Limited (2012) 248 CLR 42, dealt with the issue of authorisation of infringement. Although the decision involved copyright law, there is little reason to think that the principles applicable in patent law would be very different, although it should be noted that under the Copyright Act there is a separate provision (s 101(1A)), which provides guidance as to the meaning of authorisation under the Act.
363 In the iiNet case, the High Court found there was no authorisation by iiNet of the acts of primary infringement. In particular, the High Court looked at the power that iiNet did or did not have to prevent the acts of primary infringement. French CJ, Crennan and Kiefel JJ said (at [69]-[70]) (footnotes omitted):
69 Even it if were possible to be satisfied that iiNet's inactivity after receipt of the AFACT notices, and its subsequent media releases, "supported" or "encouraged" its customers to continue to make certain films available online, s 101(1A) (construed with both s 22(6) and s 112E) makes it plain that that would not be enough to make iiNet a secondary infringer. An alleged authoriser must have a power to prevent the primary infringements. Australasian Performing Right Association Ltd v Jain, Tape Manufacturers, Kazaa and Cooper all confirm that there must be such a power to prevent. So much had been recognised earlier, in any event, in Adelaide Corporation and Moorhouse.
70 As explained, the extent of iiNet's power was limited. It had no direct power to prevent the primary infringements and could only ensure that result indirectly by terminating the contractual relationship it had with its customers.
364 On the respondents' submission, it is clear that relevant 'authorisation' only occurs when the secondary infringer has some kind of residual power over the primary infringer, so as to be able to control the activities of the primary infringer.
365 The respondents argue that it cannot be said that Mincrest, or Mr Kleyn or Kleyn Investments had power over Coretell, or customers of Coretell, in the sense of dictating to Coretell or its customers what they could or could not do with respect to the relevant asserted infringing acts. The corporate respondents are run as distinct businesses and the customers of Coretell are independent persons and entities carrying out activities. Similarly, it is argued that it cannot be established that Coretell has power over its customers in the sense of dictating to customers what they could or could not do with respect to the relevant alleged infringing acts.
366 In relation to procurement and inducement, the respondents submit that these are not the same as facilitation (or supply), but require further conduct such as 'persuading' a person to do a particular infringing act: Dow Chemical AG v Spence Bryson & Company Ltd [1984] RPC 359 (at 389-391); Belegging-en Exploitatiemaatschappij Lavender BV v Whitten Industrial Diamonds Limited [1979] FSR 59 (at 66); Ramset Fasteners (Aust) Pty Ltd v Advanced Building Systems Pty Ltd (1999) 164 ALR 239 per Burchett, Sackville and Lehane JJ (at [91]). The respondents argue that it cannot be said that Mincrest, Mr Kleyn or Kleyn Investments 'procured' acts of infringement by Coretell, or customers of Coretell, in the sense of persuading Coretell or its customers to carry out the said alleged infringing acts. Similarly, it is said that it cannot be established that Coretell has power over its customers in the sense of persuading them to carry out the alleged infringing acts.
367 The corporate respondents are run as distinct businesses and the customers of Coretell are independent persons and entities carrying out activities.
368 In the respondents' submission, the allegations of authorising, procuring or inducing infringement, or engaging in a common design, are not made out on the evidence.