G S Technology Pty Ltd v Brisbane City Council

THE PREVIOUS PROCEEDINGS 9 In the further amended and consolidated statement of claim, Stack claimed to be the "nominated person" and, at one stage, patentee of each of petty patents 645740 and 662284. The expression "nominated person" as used in the Act means 'the person identified in a patent request as the person to whom the patent is to be granted.' As I understand it, Stack claimed to be the sole inventor of the relevant inventions. GST claimed as assignee from Stack although it may also have been suggested that GST was entitled to the original grant. The applicants pleaded that the Council was a person authorized to exploit inventions pursuant to s 163 of the Patents Act and that it had authorized various persons to exploit the inventions contained in petty patents 645740 and 662284 and in 'the Applications for Patents concerning water meter assemblies PK 2036; PK 5286 (filed 26 March 1991); 85236/91 (filed 30 August 1991) (PCTAU 91/00404); and number 44897/93, giving rise to divisional patents 645740 and 662284'. 10 As far as I can see, the Council defended the proceedings upon the basis of its further amended defence and cross-claim filed on 4 August 1997 (ex JFW 10 to Ms Whiting's affidavit), notwithstanding the fact that such pleading was delivered prior to the further amended and consolidated statement of claim filed on 6 October 1997. Although, in that document, the applicants relied upon two patents, the Council's defence related only to patent 645740 (the "previous patent"). It seems that the previous proceedings originally concerned the previous patent, whilst action No QG 21 of 1996 involved a similar claim based on petty patent 662284. See Stack v Brisbane City Council [2004] FCA 354 at [13]-[15]. Both petty patents were based upon patent application 85236/91 which, in turn, was based upon two provisional applications, PK 2036 and PK 5286. The temporal history of these documents was as follows: '30 August 1990 - provisional application PK 2036 filed 26 March 1991 - provisional application PK 5286 filed 30 August 1991 - patent application 85236/91 filed 25 August 1993 - petty patent application 645740 filed 20 January 1994 - petty patent 645740 issued 17 February 1994 - petty patent application 662284 filed 24 August 1995 - petty patent 662284 issued.' 11 Shortly before the trial of the previous proceedings, the applicants sought to consolidate them with action No QG 21 of 1996. Consolidation was granted. However the trial which followed was, as Cooper J held, only concerned with the previous patent. It seems that for present purposes only the previous patent and application 85236/91 are relevant. 12 The Council denied the validity of the previous patent and denied that it had exploited, or would exploit the alleged invention. This latter allegation appears to have involved a denial that the relevant water meter assemblies were within any claim in the previous patent. By its cross-claim the Council sought revocation of the previous patent. Its grounds were said to appear in particulars of objection which do not appear in Ms Whiting's affidavit. However the grounds ventilated at the trial appear from the reasons for judgment (Stack v Brisbane City Council [1999] FCA 1279) and from the reasons of the Full Court (Stack v Davies Shephard Pty Ltd & Ors [2001] FCA 501). One ground of invalidity was that neither Stack nor GST was entitled to the patent because Stack was not the sole inventor. 13 Following the trial, on 15 September 1999, his Honour declared that Stack was not, at any material time, entitled to the grant of a patent based upon provisional specification PK 2036 or upon application 85236/91. His Honour further declared that Stack was not entitled to the grant to him of petty patent 645740, and that GST (who claimed through Stack) was also not so entitled. Such declarations were based upon his Honour's finding that Stack and Grieves were joint inventors of the relevant invention, and that it was not competent for one of two co-inventors to apply for and obtain a patent. His Honour also concluded that both Stack and Grieves had, at the relevant time, been employed by a company, Russell Plastics Pty Ltd, and that they had performed the invention in the course of such employment, so that neither Stack nor Grieves individually, nor Stack and Grieves jointly, was or were entitled to apply for, or receive, the previous patent. As GST's claim depended upon Stack's claim, it also failed. On appeal the Full Court took a different view as to the effect of Stack and Grieves' employment by Russell Plastics but upheld the finding that Stack, alone, and therefore GST, was not entitled to the previous patent. 14 The matter again came before Cooper J on 10 May 2000. On that occasion his Honour ordered that the previous patent be revoked and that the remaining proceedings be adjourned to a date to be fixed. On 30 March 2004 Cooper J ordered that the previous proceedings be dismissed, save for outstanding claims for breach of copyright, breach of contract and breach of confidence. Other proceedings, including action No QG 21 of 1996 were also dismissed. The applicants in that action sought to continue those proceedings in connection with petty patent 662284. His Honour concluded that his decision in the previous proceedings raised an issue estoppel which would prevent the applicants in action No QG 21 of 1996 from succeeding in their claims. The relevant issue was the entitlement of Stack, alone, to a patent based on provisional specifications PK 2036 and PK 5286 and on applications 85236/91 and 44897/93. His Honour dismissed the proceedings but declined to revoke petty patent 662284 on the ground that nobody had sought such relief.

THE CURRENT PROCEEDINGS 15 As I have said GST now claims to be the patentee under the current patents in respect of an invention known as a water meter assembly. They are patents 708782, 781173 and 781174, all of which appear to be based upon application 85236/91 filed on 30 August 1991. The previous patent was also derived from that application. I was told that following the proceedings before Cooper J, application 85236/91 was amended to identify Grieves and Stack as joint inventors. The current patents were subsequently issued in their joint names. Those patents have now been transferred to GST. There is no doubt that the invention is the same as that which was the subject of the previous proceedings. GST alleges that the Council has installed, or caused to be installed, numerous water meter assemblies 'in circumstances which amount to the exploitation of the invention for the services of the State of Queensland within the meaning of section 163(1) of the (Act).' It then alleges that the Council failed to notify it 'or the nominated person' pursuant to s 164. The expression "nominated person" is not otherwise used in the current statement of claim. It may be that the reference was inadvertently carried over from the previous proceedings, or it may be that it was intended to reflect the fact that some of the alleged exploitation occurred prior to the grant of the current patents. However the identity of the nominated person is not pleaded.

CHAPTER 17 16 There is little authority concerning Ch 17. It operates in the context of an Act which authorizes and regulates the grant of statutory monopolies to inventors. Such a monopoly is created in favour of a patentee by s 13 of the Act which provides: '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.' 17 Generally, a patent will take retrospective effect from the date of filing of the complete specification on which it is based (ss 65, 67 and 68), subject only to the operation of reg 6.3 of the Patents Regulations 1991. I infer that the three presently relevant patents are dated 30 August 1991, the date of filing of application 85236/91. Thus, subject to specific statutory exceptions, any exploitation since that date would infringe GST's patents. The patentee would be entitled to relief pursuant to s 122 of the Act. 18 The Act binds the Crown (s 11), but ss 162 and 163 provide that use by the Commonwealth or a State, a person authorized by, or any authority of, the Commonwealth or a State is not an infringement of either 'the nominated person's rights in the invention' (when a patent application is pending) or, if the patent has been granted, of the patent. Section 164 requires that any such exploitation be reported to the applicant and nominated person or patentee. Section 165 provides for agreement between the exploiting party and the nominated person or patentee as to the terms of such exploitation, including remuneration for such exploitation. In the absence of any agreement the terms are to be as determined by a prescribed court 'on the application of either party'. Although the section expressly confers power to fix such terms, it does not expressly confer power to determine any other matter arising between the parties such as whether there has been exploitation of an invention and whether a patent is valid. On the other hand s 169 authorizes a patentee to apply to a court for a declaration that a patent has been exploited pursuant to s163. In such proceedings the exploiting authority may counter-claim for revocation, raising the question of validity.

THE COUNCIL'S SUBMISSIONS 19 The Council submits that the current proceedings relate to the same "invention" as was the subject of the previous proceedings. The invention in those proceedings was that disclosed in the previous patent, based on application 85236/91. It is said that: 'It follows that [the current proceedings are] an attempt to re-litigate one of the causes of action in respect of which judgment was given by Cooper J in favour of the (Council) on 30 May 2004 and against which there has been no appeal.' 20 It is also pointed out that the cause of action asserted in the current proceedings 'is not one said only to have arisen after the judgment of Cooper J … . The exploitation is said to have occurred from 30 August 1991.' It is true that the application seeks remuneration 'which … has accrued since 30 August 1991'. However, in the statement of claim, it is alleged that the Council has exploited the invention since 1994.

GST'S SUBMISSIONS 21 Principally, GST submits that the previous proceedings concerned rights arising under the previous patent whereas the present proceedings concern rights arising under the current patents. GST also relies upon the fact that Grieves was not a party to the previous proceedings.

RES JUDICATA 22 The present motion depends solely upon a plea of res judicata. Issue estoppel is not raised. The difference between the two defences was addressed in the reasons of the majority of the High Court (Gibbs CJ, Mason and Aickin JJ) in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 597 as follows: 'The distinction between res judicata (in England called "cause of action estoppel") and issue estoppel was expressed by Dixon J. in Blair v. Curran … in these terms: "In the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence, while in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order." The distinction was restated by Fullagar J. in his dissenting judgment in Jackson v. Goldsmith … . His Honour expressed the rule as to res judicata by saying: "where an action has been brought and judgment has been entered in that action, no other proceedings can thereafter be maintained on the same cause of action. This rule is not, to my mind, correctly classified under the heading of estoppel at all. It is a broad rule of public policy based on the principles expressed in the maxims 'interest reipublicae ut sit finis litium' and 'nemo debet bis vexari pro eadem causa.'" His Honour went on to discuss issue estoppel, citing the comment of Dixon J. in Blair v. Curran …: "A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or other privies." ' 23 The Council does not presently rely on the extended notion of estoppel for which the decision in Anshun is authority. 24 At par 15 of its written submissions, the Council identifies the various elements necessary to establish its plea of res judicata: '(a) the judgment was a final judgment on the causes of action it addressed. The fact that there are some other causes of action yet to be litigated in that action does not change the status of the judgment; a fortiori given the Court's separation of issues, by order, in the earlier proceedings. (b) it was a judgment on the merits, following a trial. (c) there was relevantly an identity of parties - the present Applicant was an applicant in the previous proceedings and the present Respondent was one of the respondents. The relevant cause of action was pursued against the present Respondent. Other causes of action were pursued against other respondents. (d) The causes of action were the same in each proceeding.' For present purposes, elements (c) and (d) are of primary relevance.

OPERATION OF CH 17 25 For present purposes it may be accepted that the Council is an authority of the kind contemplated in s 162 and that it has engaged in, or authorized conduct which amounts to exploitation of the invention as disclosed in the current patents. The Council's submission is that the question of GST's entitlement to remuneration for such exploitation was determined against it in the previous proceedings. This submission seems to depend upon the proposition that a patentee's rights pursuant to Ch 17 are derived from the "invention" rather than from the relevant patent. The chapter certainly contemplates exploitation of an invention prior to grant of a patent and the fixing of the terms for such exploitation, including remuneration. In the course of argument the parties identified numerous difficulties in understanding the operation of the chapter. In the end, they may not matter for present purposes, but I will set out my understanding of the chapter and say a little about comparable legislation in the United Kingdom. 26 The word "exploit" as defined in Schedule 1, '… in relation to an invention, includes: (a) where the invention is a product - make, hire, sell or otherwise dispose of the product, offer to make, sell, hire or otherwise dispose of it, use or import it, or keep it for the purpose of doing any of those things; or (b) where the invention is a method or process - use the method or process to do any act mentioned in paragraph (a) in respect of a product resulting from such use.' 27 The term "invention" is defined in Sch 1 to the Act to mean: '… any manner of new manufacture the subject of letters patent and grant of privilege within section 6 of the Statute of Monopolies, and includes an alleged invention.' 28 Such a manner of new manufacture may not necessarily be a patentable invention under the Act. See the decision of the High Court in N V Philips Gloeilampenfabrieken & Anor v Mirabella International Pty Ltd (1995) 183 CLR 655. Other requirements of the Act must also be satisfied. The inclusion in the definition of an 'alleged' invention is also relevant. It is arguable that s 165 contemplates remuneration for exploitation of an invention which is not patentable. However such an interpretation seems unlikely. The notion of remuneration for exploitation implies some recognizable "right" in the invention which is protected or recognized by the Act. An applicant may, prior to grant, have a right to such grant and a right to assign, but it is difficult to see how Crown use could, absent s 161, "infringe" such rights. The primary rights conferred by the Act are those conferred by s 13 and supporting sections such as those contained in Ch 11. Those rights are conferred upon patentees. If an applicant has, prior to grant, any rights in connection with exploitation of the invention, they are inchoate. Infringement before grant may be actionable after grant because the patent will probably have retrospective effect pursuant to ss 47 and 39. As the Act confers no rights in connection with the exploitation of a non-patentable invention, it seems unlikely that s 165 does so. Of course the parties may agree terms of exploitation upon a mistaken belief as to the patentability of an invention, but this case concerns legal rights and obligations, not freedom of contract. 29 As I have pointed out, the section does not expressly confer power to determine whether a patent is valid or whether an application is likely to result in a valid grant. Nor does it expressly authorize an enquiry as to whether there has been exploitation of an invention. This suggests that it assumes acceptance by the parties of the validity of any patent or anticipated patent and that the relevant authority's conduct or proposed conduct amounts, or will amount to exploitation. On the other hand s 169 empowers a patentee (but not an applicant) to apply for a declaration as to exploitation and an exploiting authority to counter-claim for revocation. 30 Whilst it would be impossible for anybody to commence proceedings concerning the validity of a patent in advance of grant, it would be possible to seek to determine entitlement to a grant. However proceedings of that kind would compromise the Commissioner's power and duty to grant patents and might lead to embarrassing results. Proceedings as to infringement in advance of grant might also pose problems. It is presumably for this reason that in a slightly different context, a declaration under Part 2 of Ch 11 may not be made prior to grant (s 126(1)). 31 The United Kingdom legislation concerning Crown use has never been in precisely the same form as Ch 17, but the two schemes have historical similarities. The history of the relevant aspects of the United Kingdom legislation appears from various editions of Terrell on the Law of Patents. Prior to the Patents, Designs and Trademarks Act 1883-1888 (Imp) the Crown could exploit an invention without consent and without remuneration, although an ex gratia payment was often made. In the 4th edition of Terrell at15, the author observes that s 27 of the 1883 Act provided for Crown use of an invention 'for the services of the Crown on such terms as may, either before or after the use thereof, be agreed on, with the approval of the treasury.' Such use could occur at any time after application. 32 As appears from the 6th edition of Terrell, by 1919, s 29 of the Patents and Designs Acts 1907 (Imp) provided that disputes '… as to the making, use or exercise of an invention under this section, or the terms therefor, or as to the existence or scope of any record or trial as aforesaid … shall be referred to the court for decision …' It was further provided that the court might 'with the consent of the parties, take into consideration the validity of the patent for the purposes only of the reference and for the determination of the issues between the applicant and such Government department.' Concerning this passage the author observes at 400: 'Pausing here for a moment it is not clear what effect, if any, is to be attributed to the last sentence. It does not give the patentee the right to insist on the question of validity being determined by the Court … if the Crown does not admit validity, and the Crown may still maintain the attitude adopted by the Treasury in the past that nothing is payable by the Crown for the user of an invention, the validity or infringement of which is not admitted.' 33 It may be that this Crown "attitude" is reflected in s 165 of the Act. In 1919 there were still difficulties in taking proceedings against the Crown. The author observes that Sargant J suggested that a patentee might proceed by petition of right for a declaration as to validity. It seems that this practice was adopted. In the 7th edition, at 429, the author observes: 'In the past in respect of use of an invention prior to the coming into force of this portion of the Act of 1919 it has been the practice where there has been a substantial question of either infringement or validity for the Treasury to refuse to settle the matter under the old section 29, but instead for the department concerned to nominate some person who will act as defendant in an action brought by the patentee in the High Court for a declaration upon the questions of validity and infringement, and thereafter if the patentee has been successful to award terms.' 34 It seems likely that the s 169 procedure was based on this practice. Thus, by 1921 (the date of publication of the 6th edition of Terrell), the United Kingdom system provided for exploitation by the Crown after application and before grant. Any dispute as to exploitation or terms could be referred to the court. The court might consider validity if the parties agreed. If not, a patentee might apply for declaratory relief. In such proceedings disputes as to exploitation might also be considered. There is no suggestion that an applicant could seek to establish the validity of a claim to a patent in advance of grant. 35 The historical provisions in the legislation of the United Kingdom concerning the fixing of compensation prior to grant appear to have created problems which have been progressively remedied. They are discussed in successive editions of Terrell. The present UK Patents Act (the 1977 Act) demonstrates steps which have been taken to deal with such problems. Thus subs 55(5) provides that remuneration is only to be recoverable: '(a) after such a patent is granted; and (b) if (apart from this section) the use would, if the patent had been granted on the date of the publication of the application, have infringed not only the patent but also the claims (as interpreted by the description and any drawings referred to in the description or claims) in the form in which they were contained in the application immediately before the preparations for its publication were completed by the Patent Office. …' 36 Subsection 58(6) and subs 58(7) place limits upon the availability of compensation where specifications have been amended or where part of a patent is held to be invalid. Subsection 58(10) provides: 'In considering the amount of any compensation for the use of an invention for the services of the Crown after publication of an application for a patent for the invention and before such a patent is granted, the court shall consider whether or not it would have been reasonable to expect, from a consideration of the application as published under section 16 above, that a patent would be granted conferring on the proprietor of the patent protection for an act of the same description as that found to constitute that use, and if the court finds that it would not have been reasonable, it shall reduce the compensation to such amount as it thinks just.' 37 These provisions appear to be directed towards ensuring that compensation is only paid for the utilization of inventions which are patentable or reasonably expected to be patentable. It is likely that some of the problems dealt with in these sections are avoided under the Australian system by excluding the fixing of terms for exploitation where the parties have not agreed as to validity or as to the fact of exploitation. 38 I conclude that s 165 authorizes the court to fix terms of exploitation but not to determine whether there has been exploitation of an invention or the validity of the patent. Section 169 authorizes the court to determine, on the application of a patentee, questions as to exploitation and, on a counter-claim, questions of validity. In the present case, the Council has consistently disputed validity and that it has exploited the invention. Terms of exploitation might only be fixed after recourse to s 169 (and therefore after grant), with the probability that the Council would counter-claim for revocation.

IS RES JUDICATA AN AVAILABLE DEFENCE? 39 The previous proceedings were superficially complicated by the fact that there were two applicants, Stack, claiming as nominated person and former patentee, and GST, claiming as current patentee. Perhaps it was thought necessary to claim as nominated person because some exploitation occurred prior to grant. However, as far as I can see, all exploitation occurred after the date of the previous patent, assuming that such date was the date of filing of application 85236/91. Thus, assuming validity and exploitation, the patentee at the time of any such exploitation was entitled to remuneration in that capacity. 40 In the previous proceedings Cooper J determined that Stack was not entitled to a patent 'in consequence of the filing of application 85236/91' and therefore was not entitled to the grant of the previous patent. GST was also not entitled to a grant of that patent and took no valid patent as a result of the assignment by Stack of his invalid patent. Those determinations led to the conclusion that neither Stack nor GST had established a claim to remuneration for exploitation of the invention by the Council. Cooper J did not determine that neither of them was entitled, on any basis, to such remuneration. The grant of the current patents created new rights which are capable of enforcement. It is no answer to the assertion of those rights that the previous patent was invalid. To decline to enforce rights conferred by the current patents would be to ignore the statutory mandate for their grant. 41 To put the matter in a slightly different way, it might be said that in the previous proceedings it was determined that Stack was not individually entitled to a grant pursuant to application 85236/91, and that GST had not derived a valid patent from him. That says nothing concerning the entitlement of Stack and Grieves jointly, or GST claiming through them. Some support for this proposition is to be found in the decision of the Privy Council in Singh v Singh (1897) LR 24 Ind App 50. In that case, it was held that dismissal of a claim for want of a necessary plaintiff (a joint claimant) did not justify a plea of res judicata in subsequent proceedings by all necessary plaintiffs. That decision concerned procedural matters, namely the joinder of necessary parties. The decision in the previous proceedings was not based on procedural considerations but on the absence of substantive rights. Nonetheless any different result in the present case would mean that if Grieves were to claim, he could not join Stack as an applicant. Presumably, he might join him as a respondent and, in any event, would presumably hold the benefit of any judgment on trust for the two of them. Such an unlikely result suggests that the better view is that Stack would not be prevented from claiming with Grieves as joint applicants, and that GST may claim through them jointly. 42 There is another approach to the question which leads to the same result. At par 383 in Spencer Bower, Turner & Handley, The Doctrine of Res Judicata (3rd edition) the learned author observes: 'There is substantial authority that there can be no res judicata in a changing situation.' 43 Various authorities are cited in support of the proposition. It is necessary to refer to only three of them. In Mills v Cooper [1967] 2 QB 459 at 470, a divisional court considered a prosecution in which it was alleged that a particular person was a gypsy, that term being taken to mean, not a person of the Romany race, but a person leading a nomadic life with no fixed employment and with no fixed abode. At 470, Diplock LJ said: 'Once it is recognized that being a gipsy [sic] is not an unalterable status but depends upon the way of life which a person is leading at any particular time, it is plain that the incorrectness of the assertion made in the previous proceedings is not inconsistent with the correctness of the assertion made in the proceedings now under appeal. The justices accordingly would not have been right in holding that the prosecution were not entitled to, or were estopped from asserting that the defendant was a gipsy [sic] on March 13, 1966, and from proving it if they can.' 44 Similarly, in Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] AC 853, the House of Lords was concerned with the question of whether a local authority (the council of Gera) was the legal representative of a German corporation at a particular date. In earlier proceedings in West Germany it had been held that the council was not authorized to represent the corporation. At 913, Lord Reid observed: 'The second requirement for res judicata is identity of subject-matter. As to this, it has become common to distinguish between cause of action estoppel and issue estoppel. There is certainly no cause of action estoppel here. The question before the German court was whether the Council of Gera were the legal representatives of the Stiftung at one date. The question here is whether at a different date the solicitors had the authority of the Stiftung to raise this action. An answer, yes or no, to the first question does not necessarily imply a similar answer to the second.' 45 Finally, the learned author refers to the decision of the High Court in O'Donel v Commissioner for Road Transport and Tramways (1938) 59 CLR 744 at 763, where Evatt J said: 'The argument involves and is based upon the fallacy that, where an issue between A and B relates to a state of things which is capable of subsequent alteration, the conclusive determination in A's favour of that state of things as at one day plus conclusive proof that up to a later day there has been no alteration of such state of things establishes in A's favour as against B and estoppel as to the state of things existing at the later day. ...' 46 At 578-579, Latham CJ said: 'Now it cannot possibly be said that the Supreme Court, by a judgment relating only to a period which ended on 15th February, thereby made any direct or actual decision or determination as to any matter or state of affairs whatever which existed at a later date. That judgment did create an estoppel as to one proposition - but that estoppel cannot operate to establish by estoppel another proposition which follows from the former proposition only when that proposition is combined with others the establishment of which depends upon evidence or assumption.' 47 Whilst the language of estoppel is used, those considerations should lead to a similar conclusion in the case of res judicata. In the present case the finding that GST was not entitled to remuneration for exploitation at the time of the previous proceedings did not preclude the possibility that it might, at some later stage, derive such a right. This it did by obtaining the current patents.

ORDERS 48 In the circumstances the motion must be dismissed with costs. I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett.

Counsel for the Applicant: Mr A Vasta QC Mr D Eliades

Counsel for the Respondent: Mr R Bain QC Mr A Duffy

Solicitor for the Respondent: Brisbane City Council Legal Practice