Humphries v Halifax Vogel Group Proprietary Limited ACN 104 808 853

REASONS FOR JUDGMENT 1 This proceeding was commenced by an application with which was filed a statement of claim in which it was alleged that the Respondent had infringed Australian Patent Number 697657 by the supply within Australia of a product which, when used by purchasers, was said to infringe that patent. There is an allegation in the statement of claim that the infringing use of the product is the only reasonable use of it, or, that the Respondent had reasonable cause to believe that it would be put to that use by its purchasers. 2 The product is described in the statement of claim in the following way: A one-way vision panel assembly which assembly has a light reflective front surface and a light absorbing rear surface, which assembly is perforated by a plurality of through-holes passing through said front surface and said rear surface and which rear surface is coated with a layer of adhesive to enable the assembly to be affixed to a display medium. 3 Also in the statement of claim one finds the claims defining the invention materially particularised to include the following: (a) claim 1 - a one-way vision panel assembly of the type whereby at least one image is visible from a first side of said assembly but whereby said image is not visible from a second side opposite to said first side of said assembly, said panel assembly including: a light reflective front surface; and a light absorbing rear surface; said panel assembly being perforated by a plurality of through holes passing through said front surface and said rear surface. (b) claim 8 - a one-way vision panel assembly as defined in, inter alia, claim 1, wherein said rear surface is coated with a layer of adhesive to enable said assembly to be affixed thereby to a display medium. 4 The Respondent, by solicitors, filed a notice of appearance in the proceeding on 3 March 2008. I am satisfied that the application and the statement of claim have been served upon the Respondent. The application made today is for judgment on default. It is brought pursuant to O 35A r 3(2)(c). On 4 March 2008, Greenwood J ordered that the Respondent file and serve its defence on or before 25 March 2008. Those orders were made with the agreement of the Respondent's then solicitors. A default has occurred in respect of the filing of that defence. It is that default which provides the basis upon which the Applicants seek relief on the notice of motion. 5 I am satisfied that the notice of motion has been served on the Respondent by service on the Respondent's then solicitors. Those solicitors have since withdrawn from the record and there has been no appearance today either by or on behalf of the Respondent. The relief sought in the notice of motion is as follows: 1. Pursuant to O 35A r 3(2); (a) in accordance with paragraphs 1 and 2 of the Application filed in these proceedings on 12 February 2008; (b) that the respondent account to the applicants for the profit it has derived by reason of its unlawful conduct as pleaded in the statement of claim filed in these proceedings on 12 February 2008. 2. Directions as to the manner in which the account of profits will be undertaken, including orders as to discovery by the respondent and allocation of hearing dates. 3. That the respondent shall pay the applicants' costs of this motion, of these proceedings to date and of the further costs of and incidental to the account of profits. 4. Such further or other orders as the Court deems appropriate. 6 The evidence before me also establishes that the claim made in the substantive proceeding has not been satisfied by the respondent. O 35A r 3(2)(c) provides as follows: (2) If a respondent is in default, the Court may: (a) ... (b) … (c) if the proceeding was commenced by an application supported by a statement of claim or the Court has ordered that the proceeding continue on pleadings - give judgment against the respondent for the relief that: (i) the applicant appears entitled to on the statement of claim; and (ii) the Court is satisfied it has power to grant; or 7 In Luna Park Sydney Pty Limited v Bose [2006] FCA 94, Jacobson J at paras 16 through to and including 18 remarked as follows: 16. It was until recently well settled that there was no presumption upon default of the respondent of the correctness of the applicant's claims: see Commissioner of Taxation v Finn (1960) 103 CLR 165. 17. It was not open to the court to make an order for default judgment except on the bringing of a motion supported by evidence as to the merits of the application: see Australian Securities Commission v McLeod (1994) 54 FCR 309 per Drummond J; see also for example Grey v Mango Prepaid Calling Cards Pty Limited [2004] FCA 1664 per Nicholson J, and Zomba Production Music v Roadhouse Productions (2001) 190 ALR 288 per Stone J. 18. However, recent authorities indicate that the introduction of Order 35A provides the foundation for a finding that in the absence of a defence where there is a pleading by way of a statement of claim then the facts in the statement of claim are admitted. 8 Examples of the recent authorities which would fall within the class described by Jacobson J are: Australian Competition and Consumer Commission v 1Cellnet Limited Liability Company [2005] FCA 856 and Macquarie Bank Limited v Seagle (2006) 67 IPR 7. Another more recent example of the type of case described by Jacobson J in terms of the ability to grant judgment under O 35A r 3(2)(c) is The Trustees of the Property of Amanda Marie Glass (A Bankrupt) v Heifer Creek Investments Pty Ltd as Trustee for the Nicholas Investment Trust [2007] FCA 1133. 9 Having regard to the terms of O 35A r 3(2)(c) and the authorities which I have mentioned, I am satisfied that it is not necessary to secure the giving of relief on the notice of motion that the allegations made in the statement of claim be supported by evidence. 10 Rather, the questions for determination are as stated in paras 1 and 2 of O 35A r 3(2)(c). The first of those requires consideration of whether the Applicant appears entitled to the relief sought on the statement of claim. The claim made by the Applicants against the Respondent for patent infringement has as its foundation the premise that s 117 of the Patents Act 1990 (Cth)("the Act") is engaged. That section is in the following terms : 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. 11 On the face of the statement of claim the pleading made is as follows: "that the applicant is the registered owner of the patent that I have mentioned, with the second applicant being the exclusive licensee". The proposition following from that is alleged to be, and it is, indeed, the case that pursuant to ss 120(1) and (2) of the Act, that they have standing to bring proceedings for infringement of the patent. The claims are of patent alleged in the way that I have described earlier, being claims 1 and 8. 12 It is pleaded in para 6 of the statement of claim that since, at least, in or about June 2007 the Respondent has supplied within Australia, and is continuing to supply a product, which takes all but one integer of claims 1 and 8 of the patent. The integer not taken is: …of the type whereby at least one image is visible from a first side of set assembly, but whereby said image is not visible from a second side, opposite to first side of set assembly. 13 The pleading in the statement of claim (para 7) is that the product is capable only of one reasonable use within the meaning of s 117(2)(a) of the Act, being the affixing or printing of at least one image onto one side of the product, which image is, or images are, not visible from the opposite side to that which the image was or images were affixed or printed, with the affixation of the printed product to a display medium. It is further pleaded that the use would infringe claims 1 and 8 of the patent, because the use of the product takes all of the integers of both claims 1 and 8. 14 It is pleaded that such use is an exploitation of the patent within the meaning of schedule 1 of the Act, and that, accordingly, the purchaser will infringe the patent by their use of the product, through the application of at least one image which is visible from the first side of the assembly, but not visible from the opposite side; this being alleged to be the only reasonable use within the meaning of s 117(2)(a) of the Act. It is further pleaded that the Act, by s 117(1), imposes liability on the respondent for infringement of the patent, by reason of its supply of the product. There is an alternative pleading. That pleading also makes reference to integers of claim 1 and 8. It is alleged that the product is not a staple commercial product within the meaning of s 117(2)(b) of the Act. 15 Paragraph 11 of the statement of claim alleges that the Respondent had reason to believe that the persons to whom it supplied the product would use it affixing or printing at least one image onto one side of the product, which image or images would not be visible from the opposite side to that on which the image was affixed or printed, and that the printed product would then be affixed to a display medium. That is alleged to be an exploitation of the patent within the meaning of schedule 1 to the Act. It is further alleged that the Respondent has, by reason of its supply of the product (which is not a staple commercial product) and its state of mind (being that it had reason to believe that the purchasers of the product would use it in a way which would infringe the patent) itself infringed the patent, pursuant to ss 117(1) and 117(2)(b) of the Act. 16 The effect of the default in the filing of a defence is that these claims are not contested by the Respondent. It seems to me, in these circumstances, that the Applicants are entitled to the relief sought in the application on the basis of the matters pleaded in the statement of claim. I turn, then, to consider whether or not the court is empowered to grant the relief which is sought today. That relief is in a narrower form than that specified in the application, in the sense that there is no relief sought in respect of a restraint from importing, particularly, the product. 17 Rather, the orders that are sought are in these terms: (1) the Respondent by itself, its servants or agents, be restrained from advertising, supplying and selling a product which is either/or both of the following: (a) a one-way vision panel assembly, which assembly has a light reflective front service and a light absorbing rear surface, and which is perforated by a plurality of through-holes passing through said front surface and said rear surface; (b) a product called, or previously described by the Respondent, as "view one way"; (2) the Respondent forthwith deliver on oath to the Applicants, or their duly authorised agent, nominated in writing, any and all of the products referred to in para 1, which are in the Respondent's possession or control; (3) the Respondent account to the Applicants for its products by reason of its supply or sale within Australia of any and all of the products referred to in para 1; (4) the Respondent, by its proper officer, file and serve on or before 19 May 2008, an affidavit setting out in respect of its supply or sale within Australia, of any and all of the products referred to in para 1: (a) the total number of such products sold or otherwise supplied by it; (b) the price at which the products were sold or otherwise supplied; (c) the cost to the Respondent associated with the manufacture or acquisition and supply of such products, including an explanation as to the method of allocating overheads, if such allocation forms part of the claim cost; (5) on or before 19 May 2008, the Respondent give verified discovery of all documents relating to the acquisition or manufacture, sale or other supply, of the products referred to in para 1, and of all other documents, if any, relied upon by the Respondent for the purpose of making the affidavit referred to in para 4. 18 Costs are also sought in respect of the proceedings to date, including reserve costs, and the costs of an incidental to today's application. 19 Section 122 of the Act provides relief for infringement of patent: 122 Relief for infringement of patent (1) The relief which a court may grant for infringement of a patent includes an injunction (subject to such terms, if any, as the court thinks fit) and, at the option of the plaintiff, either damages or an account of profits. (1A) A court may include an additional amount in an assessment of damages for an infringement of a patent, if the court considers it appropriate to do so having regard to: (a) the flagrancy of the infringement; and (b) the need to deter similar infringements of patents; and (c) the conduct of the party that infringed the patent that occurred: (i) after the act constituting the infringement; or (ii) after that party was informed that it had allegedly infringed the patent; and (d) any benefit shown to have accrued to that party because of the infringement; and (e) all other relevant matters. (2) On the application of either party, the court may make such order for the inspection of any thing in or on any vehicle, vessel, aircraft or premises, and may impose such terms and give such directions about the inspection, as the court thinks fit. 20 That section, in my opinion, provides power to the court to grant a restraint of the kind described in para 1 of the orders sought. 21 Trite though it may be, I note that s 154 of the Act confers jurisdiction upon this court with respect to matters arising under the Act. The Act does not contain a section which expressly empowers the court to order the delivery up of infringing products. This particular feature of the Act, in contradistinction to s 116 of the Copyright Act 1968 (Cth), was noted by Einfeld J in Roussel Uclaf v Pan Laboratories Proprietary Limited (1994) 29 IPR 556. 22 His Honour further noted, however, that this court has general power to make an order for delivery up of that kind in accordance with established principles of equitable relief pursuant to s 23 of the Federal Court of Australia Act 1976 (Cth). That section provides that the court has power in relation to matters in which it has jurisdiction to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of, writs of such kinds as the court thinks appropriate. I note, further, s 5(2) of the Federal Court of Australia Act 1976, which provides for this Court to be a superior court of record and a court of law and equity. 23 I am quite satisfied, having regard to ss 5 and 23 of the Federal Court of Australia Act 1976, that I have power to make order 2 of the orders sought. Power to make order 3 is derived, in my opinion, from a combination of s 122(1) of the Act and ss 5 and 23 of the Federal Court of Australia Act 1976. Orders 4 and 5, as described earlier, are ancillary, and power to make them is to be found, in my opinion, in s 23 of the Federal Court of Australia Act 1976. 24 Some further comment should be made in respect of the form in which the restraint proposed is cast. In Atkins Court Forms, Second Edition, Volume 30, 1979 issue, page 192, paragraph 67, the learned authors of that English text state as follows: Account of Profits The plaintiff in an infringement action is entitled, at his option, to an account of profits in lieu of damages. Where there is a consent or default order, there having been no full court hearing with consequent guidance as to what constitutes an infringement, the orders should be narrowly framed. 25 The position in Australia in respect of an Applicant in an infringement application being entitled by election to an account of profits in lieu of damages is no different. In respect of the last sentence in the passage quoted, the learned authors cite Walker v Wilson Doors (Sales and Contracts) Limited (1964) RPC 246. Regard to that case discloses that it reports an exchange between Lloyd-Jacob J and counsel in relation to the form of a restraint order. His Lordship was concerned in the making of an order that the restraint not be cast overly widely. The restraint that had been proposed, albeit by consent, was one whereby the defendants would be restrained, whether by their directors, officers, servants or agents, or any of them or otherwise howsoever from infringing the plaintiff's letters patent numbered. 26 His Lordship remarked, at page 247: I am aware that this has been a common form of order in the past. In fact, I know because bitter experience has taught us, that it might well result in a dispute between the parties that has to be fought in contempt proceedings and might easily arise where parties have really got a genuine difference as to what is and what is not within the scope of the patent. 27 I am conscious that this is a default proceeding. It seems to me that the form of order which is proposed in this instance does not suffer from the vice of generality of the kind which occasioned concern to Lloyd-Jacob J. 28 It may prove to be the case that upon the filing of the affidavit of the kind described in para 4 of the proposed orders that more detailed direction is needed in respect of the taking of accounts. It seems to me, therefore, that it is appropriate to adjourn the substantive application to a date to be fixed, as well as adjourn the notice of motion to a date to be fixed, and to grant to the parties liberty to apply, both particularly in respect of or in relation to the taking of an account and otherwise generally in relation to the further conduct of the proceeding.

29 At the request of counsel for the Applicants, I shall in the formal orders add the words "in Australia" after "setting" in paragraph 1 and "predicts" in paragraph 2. I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan.

Associate: Dated: 28 April 2008 Counsel for the Applicants: Ms K Downes

Counsel for the Respondent: No appearance for the Respondent