Re General Tire and Rubber Co's Patent [1968] HCA 26

Re General Tire and Rubber Co's Patent [1968] HCA 26 - HCA 1968 case summary — Zoe

[9]

The story of what the petitioner has done in Australia since obtaining patent rights can be told very shortly. Before 1961 it did nothing. In October 1961, as a result of moves made as early as 1958, the manufacture of oil-extended synthetic rubber was begun in Australia by a company called Australian Synthetic Rubber Co. Ltd. at Altona, Victoria. In this company the petitioner had no part, although one of its world-wide competitors had and has. The petitioner, no doubt suspecting that the company's production was an infringement of its patent, conducted certain tests in 1962 which, it is said, showed a strong probability that at least three Australian tyres manufactured were infringing Australian patent 152,872. The petitioner, disregarding Australian Synthetic Rubber Co. Ltd. altogether, caused its patent attorneys to write letters to the Hardie Rubber Co. Pty. Ltd., Goodyear Tyre & Rubber Co. (Aust.) Ltd. and The Olympic Tyre & Rubber Co. Pty. Ltd. which stated that, in the opinion of the patent attorneys, tyres manufactured by those companies would constitute an infringement of the patent. Each letter contained this paragraph: "We have been requested to communicate with you, draw your attention to the patent No. 152,872 and inquire as to whether you wish to take a licence under the patent. The obvious alternative is immediate cessation of user of the patent and an undertaking to not infringe the patent at any time during its currency." These letters brought no response and the petitioner did nothing more. Two other letters were written, one to Dunlop Rubber Australia Ltd. on 23rd September 1963 drawing attention to Australian patent specification no. 152,872, quoting claims 1 and 2 and concluding: "This is not to be construed as an allegation of infringement." Finally, on 15th February 1966 the petitioner's patent attorneys wrote to the patent attorneys for S.A. Rubber Mills Pty. Ltd. of South Australia - a general manufacturer of rubber goods which in 1963 started manufacturing tyres in association with a large U.S. associate, Uniroyal - inquiring whether that company wished to accept a licence under patent 152,872 and stating: "If your client company is desirous of considering the question of taking licence please let us know." Nothing eventuated. The petitioner had clearly enough decided not to assert its Australian rights for the time being.

[13]

So far as appears, the petitioner took no real interest in the Australian market until proceedings for the extension of its patent were instituted. It seems that it conducted no market surveys; it appointed no agents for the sale of products covered by the patent; it brought to Australia nothing covered by the patent; it did not investigate the position in Australia about imports or currency restrictions; it did nothing, either by itself or with others, to embark upon the manufacture of synthetic rubber or tyres in Australia. In one affidavit in support of its petition, the following paragraph appears: "General has for many years been aware of the rapid growth of the Australian economy and for a number of years has given consideration to entering Australia on a large scale. General has entertained hopes of entering Australia by acquisition of an interest in an existing tyre-manufacturing company. When the Hardie affiliation was established in 1961, General Tire first commenced to export tyres to Australia. General Tire was led to believe that Hardie was not interested in any closer tie for the time, but General hoped that through continued profitable efforts, a common ground for a more substantial affiliation might develop. It was very much to General's surprise and disappointment when, in the latter part of 1966, it was announced that Firestone had acquired a majority shareholding in Hardie." This I am not prepared to accept at its face value, principally because the petitioner's whole case has been that as a matter of deliberate policy it has always looked to licensing agreements as its chosen means of exploiting its Australian patent. The statement that The General Tire and Rubber Co. was led to believe that "Hardie was not interested in any closer tie for the time" is, of course, so vague and general that I cannot attach importance to it. Presumably it refers to 1961 but, as is apparent, it was not until the latter part of 1966 that The Firestone Tyre and Rubber Co. acquired a majority holding in the Hardie Rubber Co. Pty. Ltd. by the purchase of shares. Whether the petitioner made any advances in the intervening five or six years is left to speculation. Furthermore, it does not appear whether whatever it was which led the petitioner to believe that the Hardie Rubber Co. Pty. Ltd. was not interested in any closer tie in 1961, had anything to do with the shareholders from whom The Firestone Tyre and Rubber Co. acquired a majority holding in 1966. Whatever the position may have been, there is no evidence that the petitioner's ephemeral interest survived 1961, notwithstanding its "surprise and disappointment" in 1966.

[25]

At this point it is convenient to consider the place of the Australian Synthetic Rubber Co. Ltd. in the Australian industry. This company was formed as part of a petro-chemical complex at Altona, Victoria. It was planned in 1958 and incorporated in 1959 by Mobil Petroleum Co. Inc., Esso-Standard Oil (Aust.) Ltd. and Goodyear Tyre & Rubber Co. (Aust.) Ltd. - each holding approximately one-third of the shares. Its associates were Altona Petrochemical Co. Pty. Ltd. and C.S.R.C.-Dow Pty. Ltd. In 1961 it began the production of synthetic rubber - including, it seems, oil-extended rubber containing 37.5 parts of oil to 100 parts of rubber. By 1964, oil-extended rubber accounted for more than two-thirds of the company's production. Its plant is capable of producing 30,000 tons of S.B.R. (polybutadiene styrene synthetic rubber) annually - a quantity substantially in excess of the Australian usage. The company has had the advantage of a substantial tariff rising to sixpence per lb. in 1964. It supplies all Australian rubber-tyre manufacturers. It seems that the petitioner has never concerned itself with the activities of the Australian Synthetic Rubber Co. Ltd. and, in particular, has disregarded any infringement by this company of its Australian patent. The explanation put forward for this disregard of Australian Synthetic Rubber Co. Ltd. is that the petitioner has at all times been concerned exclusively with the licensing of tyre manufacturers to use its patent. It appreciated, so it is said, that it could not get a double royalty and chose to obtain royalties from users rather than the manufacturers of oil-extended synthetic rubber. This policy I regard as a very important consideration in this case. An industry has been established in Australia which by December 1963 was using funds of about £5,000,000 making synthetic rubber and employing about 150 men. Its accumulated loss on the production of S.B.R. to 1963 was £778,000. The company's principal line is Austrapol 1712, an oil-extended S.B.R. used mainly in vehicle tyres. Notwithstanding manufacture by the Australian Synthetic Rubber Co. Ltd., there have been imports of synthetic rubber into Australia. In 1963-1964 these amounted to about 11,000 tons as compared with 26,917 tons in 1961.

[28]

In 1950, as an aftermath of the war, synthetic rubber production in the United States of America was still under the control of a government agency known as the Rubber Reserve which owned the producing plants established during the war years. It had arrangements with private enterprise, including the petitioner, to run those plants, on a fee basis, in accordance with the policy of the Rubber Reserve and as an integrated system. The synthetic rubber so produced belonged to the Rubber Reserve, and consumers, including the petitioner, obtained their requirements of synthetic rubber directly from the Rubber Reserve. Sales to foreign customers were usually made through agents. This system, by virtue of a congressional decision, remained until 1955 when the plants were sold to private enterprise by tender. Shortly after 1950 the petitioner attempted to make an arrangement with the Rubber Reserve for remuneration for the use of its invention of oil-extended rubber but its advance was rejected, seemingly because the Rubber Reserve considered that the petitioner was not prepared to make adequate disclosure before fixing its remuneration, and because the Rubber Reserve claimed, in effect, that the invention belonged to it. The opposition of the United States government to the granting of the U.S. patent to the petitioner was based upon this latter contention, which failed when the patent was finally granted in 1960. During the period 1950-1955 the GR-S market abroad "while substantial was not actively exploited" and "highlevel domestic demand for GR-S limited the volume of rubber available for the exploitation of markets abroad". These quotations are made from the first report of the Attorney-General on competition in the synthetic-rubber industry, dated 1st May 1956. The national policy so indicated of looking after the home market first was the general policy of the industry, to which the petitioner conformed. During part of the time there was some rationing of consumers by producers. In 1955, when the synthetic-rubber plants were sold to private industry, the petitioner did bid for the plant which it had operated for the Rubber Reserve, viz. Baytown, Texas, but it was not an enthusiastic bidder and its eyes were already elsewhere. The Baytown plant was sold to a competitor, and the petitioner established a new plant of its own at Odessa, Texas, which came into operation in 1957. It seems that up to 1960, at any rate, the petitioner itself absorbed the major portion of the oil-extended rubber which it produced both at Baytown and at Odessa. From 1951 the petitioner used oil-extended rubber in the tread of tyres manufactured by it, and from 1953, certain technical difficulties having been overcome, the bulk of its tyres have been so produced. Indeed the petitioner has adopted the policy that it should never be a synthetic-rubber producer, except where it could utilize a large percentage of its own production in the manufacture of tyres. From 1955 the production of synthetic rubber in the United States of America increased by leaps and bounds, as did exports. The actual figures are of no importance. By 1957 the petitioner was exporting some oil-extended rubber tyres to other countries, including South Africa, but, not including Australia.

[34]

As to the quality of the inventive step, I rely principally upon the two affidavits of Dr. W. J. S. Naunton although I should say that after hearing Mr. Shaw and reading Exs. 187-193 and 254 relating to the use of Shell Dutrex; Ex. 289, the Wilmington patent; and Exs. 294-295, I would have been more assisted if Dr. Naunton had discussed the material appearing in these exhibits - which had been relied upon by the opponents of the application before Dr. Naunton came to swear his second affidavit - rather than confining himself, as he did, to an emphatic reiteration of his astonishment that - as the invention disclosed - over twenty parts by weight of oil could be used in making synthetic rubber and the quality could nevertheless be maintained. Nevertheless I accept Dr. Naunton's statement that: "in 1951 I first heard of the invention by The General Tire & Rubber Co. which is disclosed by the said letters patent and I was greatly interested in and impressed by the revelation that The General Tire & Rubber Co. in the United States of America were actually proposing and indeed proceeding to process a raw rubber of higher viscosity than could, in the light of the information then available anywhere in the world be processed, and to extend this by the addition of large quantities of oil and normal quantities of black or other filler to a level where it could be extruded without difficulty". I also accept the opinion expressed by Dr. Naunton that "the said invention was one of outstanding importance in the rubber industry. It overcame a long-standing problem and produced a solution which has revolutionized the manufacture of car tyres and the treads therefor". In so doing I am fortified by the report of the Subcommittee on Patents, Trademarks, and Copyrights of the Committee on the Judiciary, United States Senate, in 1959 (Ex. 117), which treats the manufacture of cold rubber and oil-extended GR-S as the two major developments in the rubber industry in the ten preceding years. Indeed, of the utility of the invention there is really no question. It has been generally adopted and it makes possible the production of high-quality tyre treads at a very substantial saving in cost.

[40]

Had the petitioner been anxious to exploit its Australian patent, and had it been diligent in doing so, it would have found it no easy matter up to the year 1960. Indeed, when it obtained its Australian patent, it must have been obvious that the possibility of exploiting it for some years was very remote. In the U.S.A. the invention still needed some practical development, e.g., to overcome the splicing problem, and United States production was committed to United States demands. Upon investigation of the position in Australia, the petitioner would have found that established tyre manufacturers had capacity to meet the expected increase in the Australian requirements of tyres. Had it decided to manufacture tyres in Australia, it would, therefore, have had either to add a new plant to an already competitive industry, or to have made an arrangement with one or other of the two independent Australian companies. Had it decided in 1955, or thereabouts, to do what Goodrich did three or four years later, and establish its own factory, it would have had to obtain a licence to import synthetic rubber and this, up to 1957 at least, would have been a discouraging difficulty. Had the petitioner decided to attempt to establish, in conjunction with others, a plant to manufacture synthetic rubber, it would no doubt have faced problems of great difficulty. It would, as the founders of Australian Synthetic Rubber Co. Ltd. did in 1958, have had to take the initiative in establishing a petro-chemical complex with which to co-operate. This would not have been a simple task, but I am not satisfied that it would have been an impossible task after 1955. A few years later it was found practicable. The practicability of exports must also be considered. Had the petitioner, after consideration, put aside any thought of embarking upon manufacture in Australia, it would, in accordance with its established policy, have had little inducement to export synthetic rubber to Australia. That policy, it will be recalled, was to provide synthetic rubber for the purpose of its own manufacture. In accordance with that policy, the import of synthetic oil-extended rubber would have had to be preceded by the petitioner embarking upon, or participating in, tyre manufacture in Australia. Another course which might have been considered was the establishment of an export market for tyres within Australia. Again there would have been difficulties, but I am satisfied that the difficulties which would have been experienced would not have been insurmountable. Curiously enough it seems that the petitioner has come to the conclusion that the Australian market - unlike other markets - is not willing to pay for highquality goods.

[42]

The policy which was adopted has not been altogether a failure, as the agreements with Goodyear, Goodrich and Dunlop demonstrate. The policy has not, however, been an unqualified success. I am not very concerned with Firestone and the Hardie Rubber Co. Pty. Ltd. because the petitioner is pursuing in the United States of America its settled policy and, if it succeeds, it will no doubt obtain some recompense for the use by the Hardie Rubber Co. Pty. Ltd. of its Australian patent, if such use should be established. However, while the petitioner has been following its settled policy in the United States of America, where its patent had many years to run, in Australia time has been running out and its patent has expired before the petitioner has made any profits from the use (if any) of its patent by The Olympic Tyre & Rubber Co. Pty. Ltd., by the Australian Synthetic Rubber Co. Ltd., and by those who have sold imported tyres which infringe the patent. So far as The Olympic Tyre & Rubber Co. Pty. Ltd. is concerned, the matter is fairly straightforward. This company does not currently infringe the patent and it will not do so if the patent is extended, although it would like to be free from the limitations which the patent imposes upon its manufacture. Furthermore, the petitioner has, since 1966, had its own commercial arrangements with The Olympic Tyre & Rubber Co. Pty. Ltd., and it has been in a position to protect its patent rights in the event of their being infringed. Turning to imports, I have no information about current importation of tyres, and whether or not tyres imported do infringe the patent, nor do I know whether the manufacturers of imported tyres which do infringe the patent are being pursued by the petitioner in foreign proceedings or have reached settlements with the petitioner. If so the petitioner will, no doubt, continue with its actions, and, it can still sue for any infringements by importers into Australia, except to the extent that it has incapacitated itself by agreement or delay. The possibility of the petitioner obtaining some profit from future imports is not, I think, a consideration of much weight in favour of granting an extension of the term of the patent.

At a glance

Court

Decision date

Before

Source

Judgment (46 paragraphs)

Cited By (1)