Glueck v Stang

NEW SOUTH WALES DISTRICT REGISTRY NSD 1021 OF 2007

NOVAPHARM RESEARCH (AUSTRALIA) PTY LIMITED (ACN 003 086 637)

INTRODUCTION 1 This proceeding relates to an invention (the Invention) the subject of Australian Patent No 729662 (the Patent) and United States patent No 6,531,434 (the US Patent). A "continuation-in-part" (CIP) application was also made in the United States in respect of the Invention, and the subsequent patent granted was United States Patent No 7,163,914 (the CIP US Patent). Each of the Patent, the US Patent and the CIP US Patent are held by the third respondent (Novapharm). The Invention is an antiseptic cleansing composition. I will refer collectively to the Patent, the US Patent and the CIP US Patent as "the Patents". I will refer collectively to the US Patent and the CIP US Patent as "the US Patents". 2 Novapharm is in the business of developing and "commercialising" disinfectant and antiseptic technology. Novapharm was incorporated in about 1986, at which time Mr Glueck and the first respondent (Mr Stang) became directors of, and shareholders in, Novapharm. The business relationship between Mr Stang and Mr Glueck was dissolved in September 1997 when the second respondent (Mr Kritzler) purchased the shares held in Novapharm by Mr Glueck and Mr Glueck's daughter. 3 Mr Glueck claims that he was the inventor of the Invention, and that Novapharm applied for and obtained the Patents without his knowledge. 4 Mr Glueck has discontinued the proceeding against the fourth and sixth respondents. However, for convenience, I will refer to the remaining four respondents as "the respondents". 5 Mr Stang and Mr Kritzler are directors of Novapharm and the fifth respondent (Ms Ditterick) is employed by the company. 6 There are three motions before the Court. 7 The respondents move by notice of motion filed also on 15 August 2007 for an order dismissing the proceeding insofar as it relates to certain paragraphs of the application and certain paragraphs of the statement of claim. 8 The respondents also move by notice of motion also filed on 15 August 2007 for an order pursuant to O 27 r 4 of the Federal Court Rules that certain subpoenas issued on 8 August 2007 at the request of Mr Glueck be set aside. 9 Mr Glueck moves the Court by notice of motion filed on 25 October 2007 for leave to file an amended application and an amended statement of claim in the forms annexed to his notice of motion. 10 The respondents' motion for summary dismissal relates to the existing application and statement of claim. The respondents filed and served submissions in support of their motions. As noted above, Mr Glueck's notice of motion was filed subsequently. Sensibly the respondents have addressed their submissions in support of summary dismissal to the proposed amended application and the proposed amended statement of claim. It would have been futile simply to deal with the existing application and statement of claim which Mr Glueck seeks to amend. 11 At one time Mr Glueck was represented by Rhodes Legal, but they have ceased to represent him and he appeared in person on the hearing.

THE PROPOSED AMENDED APPLICATION AND THE PROPOSED AMENDED STATEMENT OF CLAIM 12 The first order that Mr Glueck would seek in the proposed amended application is an order pursuant to s 138 of the Patents Act 1990 (Cth) (the Patents Act) wholly revoking the Patent. 13 Section 138 of the Patents Act provides, relevantly, that any person may apply to a prescribed court for an order revoking a patent. This Court is a prescribed court (see the definition of "prescribed court" in the Dictionary in Schedule 1 to the Patents Act). Under s 138 the Court may make an order of revocation on one or more of the grounds set out in s 138(3) but on no other ground. The grounds to be considered in the present proceeding are: (a) that the patentee is not entitled to the patent; ... (d) that the patent was obtained by fraud, false suggestion or misrepresentation; ...

Undoubtedly, the Court has jurisdiction to entertain Mr Glueck's application in so far as it seeks revocation of the Patent on these grounds.

14 Mr Glueck did not comply with O 58 r 14(1) of the Federal Court Rules by serving a copy of the application and statement of claim on the Commissioner of Patents.

15 Mr Glueck does not suggest that the Invention was not a patentable invention. His contention is that Novapharm was not entitled to the Patents and that Novapharm obtained the Patents by "fraud, false suggestion or misrepresentation".

16 The proposed amended statement of claim begins by pleading, in paras 13-25 and 28, claims in relation to the Patent. Mr Glueck pleads that Novapharm, in trade or commerce, engaged in conduct that was misleading or deceptive in contravention of s 52 of the Trade Practices Act 1974 (Cth) (the TP Act) by misrepresenting to the Australian Patent Office (APO) that Mr Glueck had consented to Novapharm's applying for and obtaining a grant of letters patent in relation to the Invention and that it was entitled to such a grant, when he had not so consented and it was not so entitled. The contraventions of s 52 of the TP Act are pleaded in paras 14, 16, 18 and 22 of the proposed amended statement of claim. It is alleged in para 28 that in reliance on the representations the APO issued the Patent, in consequence of which Mr Glueck has suffered loss and damage.

17 Paragraphs 26 and 27 plead the claims of lack of entitlement to the Patent and the obtaining of the Patent by fraud, false suggestion or misrepresentation, relying on the conduct pleaded in paras 1-25.

18 Second, in paras 29-37 Mr Glueck pleads a claim in relation to an application filed by Novapharm with the APO under the Patent Cooperation Treaty (the PCT International Application). Again, misleading or deceptive conduct in trade or commerce in contravention of s 52 of the TP Act is pleaded (in paras 30 and 32).

19 Third, in relation to the application for the US Patent, generally similar allegations are made of misrepresentations to the United States Patent and Trademark Office (USPTO). The allegations of contravention of s 52 of the TP Act in relation to those misrepresentations are made in paras 39, 41 and 43 of the proposed amended statement of claim. It is alleged in para 47 that in reliance on various representations by Novapharm, the USPTO issued the US Patent to Novapharm in respect of the Invention, in consequence of which Mr Glueck has suffered loss and damage.

20 Fourth and finally, there is an allegation in respect of a CIP application made to the USPTO in or about February 2003 by Novapharm. Mr Glueck pleads (in paras 48-57) that Novapharm made various representations to the USPTO in relation to the application for the CIP US Patent, thereby engaging in conduct that was misleading or deceptive in contravention of s 52 of the TP Act. The pleading of contravention of s 52 occurs in paras 49 and 54. In para 57 Mr Glueck pleads that in reliance on the representations, the USPTO, pursuant to the CIP application, issued the CIP US Patent to Novapharm in respect of the Invention, in consequence of which Mr Glueck has suffered loss and damage.

21 Associated with the four groups of misrepresentations are allegations of fraud and forgery, and allegations of accessorial liability, in various combinations, on the part of Mr Stang, Mr Kritzler and Ms Ditterick.

CONSIDERATION 22 The respondents rely on two grounds for their attack on the proposed amended statement of claim and, through that document, on the proposed amended application. 23 First, they say that the pleaded representations made to the APO and to the USPTO were not made "in trade or commerce" for the purposes of s 52 of the TP Act. Accordingly, they submit that all claims founded on each alleged contravention by Novapharm of s 52 of the TP Act, including the claims of accessorial liability founded upon those alleged contraventions, cannot succeed. 24 The respondents refer to the authoritative construction of the expression "in trade or commerce" in s 52 of the TP Act given by the High Court in Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 (Concrete Constructions). In support of their submission that representations to government authorities pursuant to the requirements of legislation lie outside the notion of conduct in trade or commerce, the respondents cite Village Building Co Ltd v Canberra International Airport Pty Ltd (No 2) (2004) 134 FCR 422 (Village Building) at [57]-[58], affirmed on appeal at Village Building Co Ltd v Canberra International Airport Pty Ltd (2004) 139 FCR 330 at [50]-[55]; and my own decision in RGC Mineral Sands Ltd v Wimmera Industrial Minerals Pty Ltd (No 2) [2000] FCA 22 (RGC v Wimmera). 25 In Concrete Constructions, the High Court held that an internal communication from one employee to another in their ordinary activities in building work was not conduct engaged in by their employer company in trade or commerce (at 605). The High Court held that what is required is that the relationship between the corporation and the representee be of a trading or commercial character, and that the conduct of the corporation have taken place in the course of that relationship. 26 In their join judgment in Concrete Constructions, Mason CJ, Deane, Dawson and Gaudron JJ said (at 603): … the words 'in trade or commerce' refer to 'the central conception' of trade or commerce and not to the 'immense field of activities' in which corporations may engage in the course of, or for the purposes of, carrying on some overall trading or commercial business. 27 Their Honours also said (at 604): What the section [s 52 of the TP Act] is concerned with is the conduct of a corporation towards persons, be they consumers or not, with whom it (or those whose interests it represents or is seeking to promote) has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character…In some areas, the dividing line between what is or what is not conduct "in trade or commerce" may be less clear and may require the identification of what imports a trading or commercial character to an activity which is not, without more, of that character. 28 In Village Building, representations made in the nature of forecasts of aircraft traffic noise levels in the vicinity of Canberra International Airport were provided by the Airport's lessee and operator, Canberra International Airport Pty Ltd (CIA), to the Minister for Transport and Regional Services pursuant to the Airports Act 1996 (Cth). As well, the forecasts were published on the company's website and were used in public debate concerning, inter alia, an application to rezone land south of the airport and under the flight path as residential. 29 The applicant for relief was a developer of land in the area south of the airport. 30 Finn J held that the conduct alleged against CIA was not conduct in trade or commerce for the purposes of the TP Act, and an appeal against his Honour's decision was dismissed by the Full Court. 31 Similarly, in RGC v Wimmera, I held that representations made to the Commissioner of Patents in an opposition proceeding were not made in trade or commerce for the purposes of s 52 of the TP Act. 32 The course of authority outlined above requires me to hold that the alleged representations by Novapharm to the APO and to the USPTO were not made in trade or commerce. They were not made in the course of a trading or commercial relationship between Novapharm on the one hand, and either the APO or USPTO on the other hand. Novapharm had no trading or commercial dealings with the APO or the USPTO. Nor were they made in the course of the negotiation of contracts; cf Barto v GPR Management Services Pty Ltd (1991) 33 FCR 389. The alleged representations were made to a government instrumentality pursuant to legislation for the purpose of obtaining an exclusive right or bundle of rights made available by that legislation. 33 No doubt the alleged representations were made by Novapharm in trade or commerce in a broad non-s 52 sense. However, in Concrete Constructions the High Court (at 603) rejected the view that the expression "in trade or commerce" in s 52 referred to "the "immense field of activities" in which corporations may engage in the course of, or for the purposes of, carrying on some overall trading or commercial business, and held that it bears the narrower meaning to which I referred above. 34 Mr Glueck responded to Novapharm's first ground of attack by submitting that Novapharm did not make representations in trade or commerce to the APO or to the USPTO because all representations made to them were made by Novapharm's Australian and US patent attorneys respectively. His submission must be that the representations that were made by those patent attorneys were not in law representations by Novapharm. In making this submission, Mr Glueck was accepting, in effect, that in suing Novapharm for having made the representations, he had sued the wrong entity, since it was the patent attorneys alone who were responsible for the alleged misrepresentations. It is necessary for Mr Glueck to appreciate that it is possible for a company to make a representation through its agent. In any event, allegations that Novapharm had made the representations in trade or commerce permeate the proposed amended statement of claim and lie at the heart of Mr Glueck's claims. 35 In the result, the proposed amended application and the proposed amended statement of claim should not be allowed to be filed because the former would claim relief, including accessorial relief, based on alleged contraventions of s 52 of the TP Act, and the latter would plead claims for such relief. 36 I turn now to the respondents' second ground of attack. This is based on the proposition that the proceeding impugns title to foreign property, namely, the US Patents. 37 In The British South Africa Company v The Companhia de Moçambique [1893] AC 602 (Moçambique), the House of Lords held that the Supreme Court of Judicature had no jurisdiction to entertain an action to recover damages for a trespass to land situate abroad. Moçambique recognised a distinction between "transitory" and "local" actions. The English courts would exercise jurisdiction in respect of the former but not the latter. Actions in which title to land or infringement of rights and interest in real property were in issue were prime examples of local actions. 38 The "Moçambique rule" has been held to apply to intellectual property rights. In Potter v The Broken Hill Pty Co Ltd (1906) 3 CLR 479 (Potter), the High Court held that a cause of action for infringement in New South Wales by a Victorian company carrying on mining operations in New South Wales, of the plaintiff's patent issued under the Patents Act 1899 (NSW), was not justiciable in Victoria. 39 In Tyburn Productions Limited v Conan Doyle (1990) 19 IPR 455, the High Court of England held that an issue as to the existence or non-existence of rights under United States copyright, unfair competition and trademark laws was not justiciable in the English courts. 40 In Tritech Technology Pty Ltd v Gordon (2000) 48 IPR 52, Finkelstein J recognised that the Moçambique rule was subject to exceptions. 41 In Potter the High Court described one exception to the Moçambique rule (at 498-499 per Griffith CJ): The Courts will no doubt entertain such a question of title if it arises merely incidentally in a case in which the foundation of the jurisdiction is a personal obligation arising from contract or quasi-contractual relationship between the parties.

42 Mr Glueck would not, of course, be asking this Court to revoke the US Patents. However, as I understand the proposed amended application and the proposed amended statement of claim, I would be asked to determine that Novapharm obtained the grant of the US Patents by knowingly making false representations to the USPTO. I am not favoured with submissions as to the implications that such a finding would have for the title to the US Patents. 43 In view of my conclusion on the respondents' first ground for attacking the proposed amended application and the proposed amended statement of claim, the s 52 argument, I do not need to reach a final decision in relation to the respondents' second basis for its attack. I think it desirable not to do so in the absence of submissions on behalf of Mr Glueck addressing the legal issues involved, which are somewhat complex. 44 I note, in passing, that the existing application is more vulnerable to the respondents' second ground of attack than the proposed amended application. It seeks, for example, a declaration that Novapharm was not entitled as patentee to the US Patents and an order that Novapharm assign its interest in the US Patents to Mr Glueck.

CONCLUSION 45 I explained to Mr Glueck on the hearing that if the respondents' argument were to find favour, as it now has done, this would not mean that he lacked any remedy. In the first place, it would be possible for him simply to pursue his application in this Court to have the Patent revoked under s 138 of the Patents Act. This remedy, however, may not satisfy him. Such a reduced proceeding would not, for example, touch the US Patents. Moreover, it would not give Mr Glueck damages for Novapharm's alleged contravention of s 52 of the TP Act, and it would not give him any remedy based on the alleged accessorial liability of the individuals. 46 It may be that Mr Glueck would be entitled to pursue the remaining general law causes of action in this Court, notwithstanding the non-pursuit of those based on alleged contravention of s 52 of the TP Act. Whether he would be entitled to do so would depend upon a consideration of principles of the kind discussed in Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212, Post Office Agents Association Ltd v Australian Postal Commission (1988) 84 ALR 563 and Petrotimor Companhia de Petroleos SARL v Commonwealth of Australia (2003) 128 FCR 507. Whether Mr Glueck's general law claims can survive in this Court is better determined after he has filed any amended application and amended statement of claim. Mr Glueck would, in any event, be entitled to pursue relief in a State Supreme Court based on general law causes of action, such as fraudulent misrepresentation, against Novapharm and the individual respondents. 47 I note that I advised Mr Glueck to seek legal advice and representation. The proceeding promises to raise complex legal and factual issues, as it has already done. 48 The existing statement of claim should be struck out with leave to re-plead. The position in relation to the existing application is less straightforward. It is not practicable at this stage to distinguish between those parts that should survive and those that should not. In addition, many of the declarations sought are inappropriate. The best course is to let the existing application survive only in so far as it seeks revocation of the Patent. I make it clear, however, that in ordering that the proceeding be otherwise dismissed, I am deciding at this stage no more than that Mr Glueck will not be entitled to seek relief based on a contravention of s 52 of the TP Act in any amended application which he files. 49 The subpoenas were issued by reference to the existing application and statement of claim. In view of my conclusion in relation to those documents, the subpoenas should be set aside. 50 The orders will be that Mr Glueck's motion be dismissed, that the existing statement of claim be struck out, that the proceeding be dismissed in so far as it seeks relief other than revocation of the Patent, that leave be granted to file an amended application and an amended statement of claim within a limited time, that the subpoenas be set aside, that Mr Glueck pay the respondents' costs of the three motions, and that the proceeding be listed for directions. I certify that the preceding fifty (50) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

Counsel for the First, Second, Third and Fifth Respondents: Mr J M Ireland QC and Mr J S Cooke

Solicitor for the First, Second, Third and Fifth Respondents: Spruson & Ferguson Lawyers

Date of Hearing: 18 February 2008

Date of Judgment: 27 February 2008