Spencer Industries Pty Limited v Collins

Federal Court of Australia|2003-06-04|Before: Branson J

introduction 1 This proceeding calls for consideration of the sometimes difficult question of when an employer has a right, enforceable against an employee, to take the benefit of an invention made by the employee. 2 The applicant ('Spencer Industries') has lodged a notice of appeal from a decision of a delegate of the Commissioner of Patents ('the Delegate') whereby it was decided that: '(a) the First Respondent made the invention the subject of Petty Patent No. 719,185 outside the course of his normal duties as an employee of the Applicant; (b) ownership of the invention the subject of Petty Patent No. 719,185 vests in the First Respondent alone; (c) that the Application for Extension of Term of Petty Patent No. 719,185, filed by the Applicant on 30 March 2001, be refused; and (d) costs be awarded against the Applicant.' 3 As I observed in EI Dupont de Nemours & Co v Imperial Chemical Industries PLC [2002] FCA 230; 54 IPR 304 at [12], the powers given to the Court by s 160 of the Patents Act 1990 (Cth) on an appeal from a decision of the Commissioner of Patents make it plain that the appeal is a hearing de novo. 4 Spencer Industries' principal contention on the appeal is that the Delegate should have found that the first respondent ('Mr Collins') made the invention the subject of Petty Patent No 719,185 ('the Patent') in the course and scope of his employment by Spencer Industries. On the basis of that contention Spencer Industries argues that the ownership of the invention the subject of the Patent ('the Invention') vests in Spencer Industries. The respondents deny that Mr Collins made the invention the subject of the Patent in the course and scope of his employment by Spencer Industries. They deny that the applicant has any entitlement to the Invention. 5 I have concluded, for the reasons set out below, that the appeal from the decision of the Delegate should be dismissed and the decision of the Delegate affirmed.

The Invention 6 The complete specification for the Patent discloses that: 'The present invention is in the field of tyre retreading and relates to improvements in both the process and apparatus used for the retreading of tyres. In particular, the invention relates to rasp blades and in an improved assembly of such blades on tyre rasp hubs for buffing away the tread on worn tyres.' 7 As the Delegate observed, the specification is directed to an assembly for removing the tread from worn tyres. Tread is removed from a worn tyre by a buffing machine. A critical part of the buffing machine is the rasp hub on which blades are mounted. It appears that prior to the Invention all blades used on any particular rasp hub were of identical shape, size and distribution of teeth. The Invention provides for blades to be assembled on a rasp hub so as to present a particular form of staggered teeth array across each stack of the rasp hub.

patents act 1990 (Cth) 8 The petty patent system was abolished from 24 May 2001 when the Patents Amendment (Innovation Patents) Act 2000 (Cth) ('the Innovation Act') came into operation. However, the transitional provisions contained in Schedule 2 of the Innovation Act have the effect that the law to be applied on this appeal is the Patents Act 1990 (Cth) as in force immediately before the commencement of the Innovation Act. The Patents Act 1990 (Cth) as in force at that time will hereafter be referred to as 'the Act'. 9 Section 15(1) of the Act is concerned with who may be granted a patent. The subsection provides: '(1) Subject to this Act, a patent for an invention may only be granted to a person who: (a) is the inventor; or (b) would, on the grant of a patent for the invention, be entitled to have the patent assigned to the person; or (c) derives title to the invention from the inventor or a person mentioned in paragraph (b); or (d) is the legal representative of a deceased person mentioned in paragraph (a), (b) or (c).' 10 The Act does not deal expressly with the circumstances in which an employer of an inventor is entitled to the grant of a patent. It is accepted by the parties in this case that if Spencer Industries was entitled to the grant of the patent it was because, although Mr Collins was the inventor, Spencer Industries would, on the grant of a patent for the Invention, have been entitled to take an assignment of the patent within the meaning of s 15(1)(b) of the Act. 11 Section 28(1) of the Act relevantly provides: '(1) A person may, within the prescribed period after the grant of a petty patent, notify the Commissioner, in accordance with the regulations, that the person asserts, for reasons stated in the notice, that the petty patent is invalid on one or more of the following grounds: (a) that the patentee was not entitled to be granted the petty patent; … .' 12 Extension of the term of a petty patent is governed by s 69 of the Act which relevantly provides: '(1) A patentee of a petty patent may apply to the Commissioner, in accordance with the regulations, for an extension of the term of the petty patent. … (3) The Commissioner must not grant an extension without giving each person who has given the Commissioner a notice under section 28 in relation to the petty patent a reasonable opportunity to be heard. … (6) Where the Commissioner refuses to grant an extension, the Commissioner must: (a) give the applicant written notice of the refusal and of the reasons for it; and (b) publish a notice of the refusal in the Official Journal. (7) An appeal lies to the Federal Court against a refusal by the Commissioner to grant an extension.'

Factual Findings 13 There is little dispute between the parties as to relevant basic facts. The dispute between them relates principally to the inferences to be drawn from, or the ultimate facts to be derived from, the basic facts. Where there are relevant disputes as to the basic facts I deal with them below. 14 Spencer Industries was incorporated on 1 November 1963 and began to trade shortly thereafter. It is a family company which was until about March 2002 controlled by the late Mr James Spencer Pincott ('Mr Pincott'). At all relevant times the business of Spencer Industries has been the manufacture of equipment used in the tyre retreading business, particularly rasp blades, hubs and spacers and pins for hubs. The company, Bijay Pty Limited ('Bijay'), which is referred to below, shares the same registered office as Spencer Industries and has the same two current directors as Spencer Industries. For many years Bijay has paid the wages of the senior employees of Spencer Industries. 15 Janice May Boorer ('Mrs Boorer') is the Managing Director of Spencer Industries and a director of Bijay. She is the daughter of Mr Pincott and the mother of Noel Harold Boorer ('Mr Boorer'), the General Manager of Spencer Industries. Mrs Boorer has been employed by Spencer Industries, or another of the companies in the 'Pincott Group', since 1972. She held the position of General Manager for approximately fourteen years, becoming Managing Director following the death of her father. 16 Mr Boorer has had a long connection with Spencer Industries although between 1988 and 2001 his principal employment was elsewhere. I accept that, during the life of Mr Pincott, Mr Boorer was being groomed by his grandfather to take over Spencer Industries. In July 2001 Mr Boorer returned to the employ of Spencer Industries becoming General Manager of the company upon his grandfather's death in March 2002. 17 Sometime in 1989 Mr Pincott decided that Spencer Industries should employ a Sales Manager to reduce his (i.e. Mr Pincott's) workload. Both Mrs Boorer and Mr Boorer gave affidavit evidence that Mr Pincott reached this decision in 1990. However, I am satisfied by contemporaneous documents that they are mistaken as to the year. After Mr Pincott's decision, Mrs Boorer contacted Catalyst Executive Pty Limited ('Catalyst'). The Sydney Morning Herald of 9 December 1989 carried an advertisement placed by Catalyst. The advertisement was headed: 'Sales Engineer International $50K + Car + Commission · Overseas Travel · Late 20's to Late 40's'

The body of the advertisement included the following statements:

'You will enjoy total responsibility for sales and contracts and the authority to negotiate new agencies both in Australia and overseas. Ideally you will have qualifications in a mechanical engineering or related discipline, but more important will be your industry experience and motivation to succeed in a demanding "hands-on" industrial environment.' 18 Mr Collins was one of the individuals who responded to the above advertisement. He was interviewed by Mr Pincott and Mrs Boorer. By letter dated 22 February 1990, from Catalyst to Mr Collins, Catalyst confirmed an offer by Spencer Industries to Mr Collins. The letter's only reference to Mr Collin's terms of employment was: 'Your job title will be Sales Manger, your starting salary will be $40,000 per annum and you will have full use of a fully maintained company Toyota Cressida, including private use and petrol card. Paid holiday comprising four weeks per annum with normal office hours 8.30am to 5.00pm. Your business expenses will be chargeable to a company credit card expense account. As discussed there will be considerable overseas travel involved.' 19 Mr Collins indicated his acceptance of the offer contained in the letter of 22 February 1990 by signing a copy of the letter and returning the signed copy to Catalyst. 20 Mr Collins is a qualified first class machinist. At the time that he responded to the advertisement referred to above he had considerable experience as a sales representative. Between April 1989 and the commencement of his employment with Spencer Industries he was employed as a sales manager. 21 Mrs Boorer gave evidence that Mr Collins was offered a salary of $40,000, rather than the salary of $50,000 referred to in the advertisement, because he did not have the engineering qualifications for which Spencer Industries was looking. Mr Collins' Group Certificates record that from 2 April to 1 August 1990 his employer was Spencer Industries but that thereafter his employer was Bijay. I infer from the Group Certificates that after 1 August 1990 Mr Collins' salary was paid by Bijay. 22 Mr Collins gave affidavit evidence on which he was not cross-examined that, at about the time that he commenced employment with Spencer Industries, Mr Pincott said to him: 'I want you to double sales in 12 months. You will be judged by your sales results. You will be on probation. You will be employed and paid on a weekly basis.' 23 Mr Collins also gave affidavit evidence on which he was not cross‑examined as follows: 'In my position as Sales Manager, I was responsible for selling the products manufactured by the Employer. Although the job was described as "sales manager", I was the only person employed in a sales position and I was not responsible for any other employees. Even as sale manager I did not have complete autonomy. I was required to seek approval from Mr Pincott for any sales tips and any appointment of new distributors. I was not involved in decisions concerning the management of the Employer's business. … No one suggested to me at any time before or after I was offered or commenced employment that I was employed to improve the products of the Employer or to invent new ones or that this formed any part of my employment duties. At no time did anyone at the Employer discuss with me anything about ownership of inventions and in particular I was never told by any person at the Employer that if I made any invention it would be owned by the Employer. … I was also not instructed at any time by anyone of the Employer to make any improvement to any existing product or to invent any new product.' 24 Mr Collins agreed during his cross-examination that during the course of his employment by Spencer Industries he made suggestions, which were acted upon, that Spencer Industries expand its product range. Mr Collins further agreed that he made his suggestions as part of the performance of his duty to Spencer Industries to increase sales. Mr Collins acknowledged that during his employment with Spencer Industries he was the only person from Spencer Industries to have regular contact with customers and distributors so that he was the person in the company who knew what the market wanted. 25 In 1990 an overseas customer of Spencer Industries raised with Mr Collins the issue of Spencer Industries designing its own tyre rasp hub. At that time blades and spacers sold by Spencer Industries were used on hubs manufactured by its competitors in the tyre retreading equipment industry. Mr Pincott subsequently either instructed or authorised Sidney George Smith ('Mr Smith'), a machinist and toolmaker employed by Spencer Industries as its Factory Manager, and Mr Collins to work together towards the design of a new hub. No importance, in my view, attaches to the understandable difference in recollection of the witnesses as to precisely what was said by Mr Pincott in 1990 on this topic. Mr Collins acknowledged in his evidence that he was interested in advancing the development of the hub as he believed that it would increase his sales. He further acknowledged that he contributed to the design of the new hub and, to a limited extent, utilised his skills as a machinist in doing so. 26 A patent application in respect of the new hub, which was designed to be air‑cooled, was filed in 1991 in the name of Spencer Industries. Mr Collins had earlier described the new hub to a patent attorney at Mr Pincott's request. Both Mr Collins and Mr Smith signed an undated deed of assignment of their interest in the invention of the new hub in favour of Spencer Industries. The document, which the evidence suggests was never dated or stamped, recites that Mr Collins and Mr Smith had devised an invention relating to tyre rasp hubs as part of their employment by Spencer Industries. The patent application in respect of the new hub was allowed to lapse. 27 Mr Collins gave affidavit evidence, which was not challenged, that he signed the deed of assignment concerning the tyre rasp hub without reading it because Mr Pincott asked him to, saying that he needed the document to tidy up his paperwork. Mr Collins' evidence that Mr Pincott said to him at this time: 'Remember Anthony, don't get sidetracked on non-sales issues.'

28 Subsequently Mr Collins and Mr Smith worked together on the design of a tyre rasp spacer. On 24 February 1994 the Registrar of Designs issued a certificate of registration of a design under the Designs Act 1906 (Cth) in respect of the tyre rasp spacer. The certificate gives the name of the owner as Spencer Industries, the name of the author as Mr Collins and the article in respect of which the design is registered as a tyre rasp spacer. Mr Collins gave affidavit evidence that his involvement in the design of the tyre rasp spacer was significantly less than the involvement of Mr Smith. Mr Smith gave affidavit evidence that he and Mr Collins contributed equally to the design. Precise evaluation of contributions to a design process where more than one person has been involved in the process will rarely be easy. It is not necessary for the purposes of this appeal for me to do more than find, as I do, that Mr Collins and Mr Smith both contributed significantly to the design of the tyre rasp spacer. I accept Mr Collins' unchallenged evidence that in 1994 he did not know what a registered design was and what rights a registered design gave an author. 29 In 1996 Mr Collins thought about designing a more efficient and effective tooth for a rasp blade. He formed the idea of staggering the teeth of adjacent blades to produce a more uniform cutting action across the rasping surface of the hub. Between May and November 1996 he made paper cut outs, and subsequently transparencies, of the prototype invention in his own time. By November 1996 Mr Collins had prepared a note, which incorporated a simple diagram, outlining the Invention. 30 In November 1996 Mr Collins sought to interest Mr Pincott in the Invention but was effectively rebuffed. 31 However, in early 1998 Mr Pincott expressed interest in Mr Collins' ideas concerning offset rasp teeth and thereafter asked Mr Collins to prepare enlarged drawings of the offset rasp teeth he had in mind. Mr Collins prepared enlarged drawings of the Invention in his own time using equipment that belonged either to him or to his wife. 32 At a meeting held on about 2 December 1998 at which Mr Pincott, Mr Collins and Mr Smith were present, Mr Collins gave Mr Pincott the enlarged drawings. Mr Pincott directed Mr Smith to check the dimensions of the drawings and directed Mr Collins in words to the effect: 'Draw a full size 1:4 print of the general layout of the off set rasp blade in your spare time.' 33 Mr Collins prepared the full size drawings partly during working hours, when he was free of sales work, and partly outside of working hours. The size of the drawings necessitated the use by him of Mr Smith's drawing board. In early 1999 Mr Pincott advised Mr Collins: 'I have ordered a dye so that we can do some trial samples of your off set tooth design.' 34 In late September 1999 Mr Collins was requested by Mr Pincott to attend a meeting with George Griziotis ('Mr Griziotis'), a patent attorney. The foreshadowed meeting took place on 30 September 1999. Present at the meeting were Mr Pincott, Mr Collins, Mr Boorer and Mr Smith. I am satisfied that Mr Griziotis and Mr Collins have the most detailed recollection of the meeting of 30 September 1999 and of the later meetings at which the same individuals were present. I entertain doubt about the evidence of Mr Griziotis only to the extent that it touches on circumstances surrounding the filing by him of the notice of entitlement referred to in [50] below. While I make no positive finding that Mr Smith sought to mislead the Court, I have formed the view that at least his affidavit evidence discloses an anxiety to assist Spencer Industries at the expense of Mr Collins. 35 At the meeting held on 30 September 1999 Mr Pincott advised Mr Griziotis that his opinion was required on whether the new rasp blade assembly was patentable. When Mr Griziotis asked for the invention to be explained Mr Griziotis' evidence is that Mr Pincott responded: 'Well Anthony invented it for us and he should tell you about it.'

Mr Collins' evidence is that Mr Pincott's response was:

'Well, Anthony invented it so I'll ask Anthony to tell you about it.' Mr Smith's affidavit evidence is that at some time during the meeting Mr Griziotis asked who the inventor was and Mr Pincott said to use Mr Collins' name. Mr Smith also gave evidence that either before, during or after the meeting, Mr Pincott said words to the effect: 'Anthony has been a bit down lately, so we should put Anthony's name on it (the patent application). It will be good for his ego.'

Mr Boorer's evidence concerning this aspect of the meeting of 30 September 1999 is that he specifically recalled Mr Griziotis asking who was the inventor and his grandfather replying 'Anthony'.

36 Mr Smith's evidence did not provide support for Mr Griziotis' recollection of Mr Pincott's response to his request for the invention to be explained. Nor does Mr Boorer's evidence. I conclude that Mr Pincott did identify Mr Collins as the inventor of the new rasp blade assembly but that it is more likely than not that Mr Pincott did not say: 'Anthony invented it for us.' 37 I reject Mr Smith's evidence that Mr Pincott responded to Mr Griziotis' inquiry concerning the identity of the inventor by telling him to 'use Mr Collins' name'. Nor am I satisfied that Mr Pincott said to Mr Smith at the meeting, or at any time, that: 'Anthony has been a bit down lately, so we should put Anthony's name on it (the patent application). It will be good for his ego.'

The evidence does not suggest any name other than Mr Collins' name that could have been given as the inventor of the Invention. Mr Smith, who gave evidence that it was part of his duties at Spencer Industries to design new products, agreed that the Invention was complete when Mr Collins first told him about it. There is no evidence of any other person contributing to the Invention.

38 During the meeting of 30 September 1999 Mr Collins explained the Invention to Mr Griziotis and answered his questions concerning it. Later in the meeting Mr Griziotis expressed the view that the Invention looked patentable and provided advice with respect to the making of the patent application. 39 Mr Griziotis gave affidavit evidence as follows: 'I then said to Mr Pincott:- "OK, so I'll draft a petty patent application to be filed in the name of Spencer Industries identifying Anthony as the inventor. Once I've done a draft I'll send it to you so you, Anthony and Sid can check the technical details and make sure I have included everything." to which Mr Pincott replied:- "Good." I then looked at Mr Collins and said:- "Well, we'll need to have an assignment from you to Spencer Industries executed at some stage as a matter of routine." to which Mr Collins nodded. Mr Pincott then said:- "Yes, it can be assigned for a single dollar" to which I replied:- "That's the nominal sum for consideration."' 40 Mr Collins agreed with the above evidence of Mr Griziotis subject to two matters. Mr Collins denied that he nodded in response to Mr Griziotis' statement concerning an assignment. Even if Mr Collins did nod as suggested by Mr Griziotis, I am not satisfied that he did so with the intention of conveying his willingness to make such an assignment. It is at least equally likely, in my view, that he nodded (assuming that he did nod) simply to acknowledge that Mr Griziotis' remark was addressed to him. 41 Mr Collins also denied that Mr Pincott said words to the effect of: 'Yes it can be assigned for a single dollar.'

The difference between the three versions has, in my view, no present significance.

42 On 27 October 1999 a further meeting was held at the Spencer Industries premises. The same people were present as had attended the meeting held on 30 September 1999. A draft petty patent specification, which had earlier been sent by Mr Griziotis to Spencer Industries by facsimile transmission, was discussed. Mr Collins played a significant role in the discussions. 43 On 29 October 1999 Mr Griziotis wrote to Mr Pincott advising him that an Australian petty patent application had been prepared and filed. A copy of the petty patent specification was enclosed with the letter. The petty patent specification named Spencer Industries as the applicant and Mr Collins as the actual inventor. The invention title was given as 'tyre rasp blade and assembly'. Mr Collins did not learn at this time of the filing of the petty patent application. Nor, I find, did he ever see the application while employed at Spencer Industries. 44 In late October 1999 Mr Pincott instructed Mr Collins in words to the effect 'get out of the office and sell overseas for a few months.' Mr Collins commenced an overseas sales trip on 1 November 1999. He did not return to Australia until 24 December 1999 and did not return to work until after the Australia Day weekend in January 2000. 45 By letter dated 15 November 1999 Mr Griziotis advised Mr Pincott of the filing particulars of the application which had been assigned the application number 58,291/99. The letter concluded: 'In order to complete the formalities of the application, I am enclosing a Deed of Assignment which should be completed where indicated and returned to me at your earliest convenience.' 46 The incomplete deed of assignment which was enclosed with Mr Griziotis' letter was drawn between Mr Collins as the assignor and Spencer Industries as the assignee. It purported to record an agreement between the assignor and the assignee for the transfer to the assignee of all of the right, title and interest of the assignor in the tyre rasp blade and assembly of which the assignor was the actual inventor. Consideration was expressed in the sum of one dollar. 47 On 1 December 1999 an Examiner of Patents from the Patent Office wrote to Mr Griziotis' firm providing the examiner's first notification on the petty patent application. Among the matters raised by the examiner was that there was no notice of entitlement on file. By letter dated 29 December 1999 Mr Griziotis advised Mr Pincott, amongst other things, that: 'We shall attend to the preparation and lodgement of a Notice of Entitlement'. 48 On about 1 February 2000 Mr Pincott handed Mr Collins the incomplete deed of assignment. Mr Collins affidavit evidence as to the conversation that then took place is as follows: 'We had a conversation in words to the following effect: Pincott: "Anthony, here is a Deed of Assignment for you to sign. It is part of the drafting requirements for the petty patent application." Me: "Mr Pincott we need to talk about payment. You said you would look after me if I invented something useful for Spencer." Pincott: "I'm not going to talk to you about payment." Me: "In that case Mr Pincott, I will not sign the Assignment." 49 Mr Pincott died shortly after this appeal was instituted. As a consequence he could not be called to give evidence. However, some paragraphs of a statutory declaration signed by him on 2 May 2001 for the purposes of a hearing before the Delegate were received in evidence. By his statutory declaration Mr Pincott asserted that Mr Collins first raised any objection to executing the deed of assignment in April 2000. I presume that Mr Pincott intended to refer to the meeting held on 19 April 2000. It seems to me to be unlikely that Mr Pincott would have waited from mid November 1999 (when he received the incomplete deed of assignment from Mr Griziotis) until 19 April 2000 to ask Mr Collins to sign the deed of assignment. Indeed, the paragraphs of Mr Pincott's statutory declaration received in evidence carry the implication that Mr Collins had been presented with the deed of assignment before the meeting of 19 April 2000. I therefore accept Mr Collins' evidence that Mr Pincott first asked him on about 1 February 2000 to sign the deed of assignment. It is not in dispute that Mr Collins did not sign the deed of assignment. In my view, it is more likely than not that Mr Collins would have given Mr Pincott a reason for his failure to sign the deed of assignment. I therefore accept the totality of the evidence of Mr Collins concerning the conversation between him and Mr Pincott which Mr Collins says took place on or about 1 February 2000. 50 On 3 February 2000 a further meeting was held at the Spencer Industries premises at which Mr Pincott, Mr Griziotis, Mr Collins and Mr Smith were present. The first notification of the Patent Office examiner was discussed. However, the topic of the proposed deed of assignment was not discussed. Mr Griziotis gave affidavit evidence that during the meeting he raised the topic of the filing of a notice of entitlement. However, under cross-examination he appeared to agree that neither the topic of entitlement nor the need for assignment was raised. Mr Collins gave evidence, which I accept, that he does not recall the topic of a notice of entitlement being raised. I think it likely that Mr Collins would recall any remark made by Mr Griziotis concerning the filing of a notice of entitlement. Mr Smith's recollection was that he did most of the talking at the meeting. His evidence provides no positive support for that of Mr Griziotis. I find that the topic of a notice of entitlement was not raised during the meeting of 3 February 2000. 51 On 21 February 2000 Mr Griziotis signed a notice of entitlement on behalf of Spencer Industries acting in his capacity as the company's patent attorney. The notice of entitlement is in the following form: 'We SPENCER INDUSTRIES PTY LIMITED being the applicant in respect of Petty Patent Application No. 58,291/99 state the following:- The person nominated for the grant of the patent (SPENCER INDUSTRIES PTY LIMITED) has entitlement from the actual inventor ANTHONY COLLINS on the basis of Assignment.' 52 In cross-examination Mr Griziotis said that the notice of entitlement was 'erroneous'. He gave evidence that at the time that he signed the notice of entitlement he had a false understanding of the nature of the term 'assignment'. While this seems a little unlikely, both by reason of Mr Griziotis' professional training and because he had provided a form of deed of assignment to Mr Pincott, it is not necessary for me to make a finding as to the truthfulness of this aspect of Mr Griziotis' evidence. 53 Mr Griziotis provided the notice of entitlement to the Commissioner of Patents under cover of a letter dated 22 February 2000. By the same letter he provided responses to other objections earlier raised by the examiner. 54 On 18 February 2002 Mr Collins sent, by facsimile transmission, a memorandum to Mr Chuck McGee, an American distributor of Spencer Industries products. The memorandum included the following assertions: 'You have been aware that we have been working on a new blade for some time. I thank you for your patience and now wish to share our new development with you. It is not a new tooth blade, it's all about the position of the teeth on the blade. … We have found that by Offsetting the teeth positions on the blade body or to the mounting holes, has changed the importance of the blades being stacked with the Part Number (NAME) Upwards or Downwards. In the interest of not confusing Offsetting with Spacer issues, we will refer to this new development as STAGGERED teeth blades. … Please find next pages titled PINCOTT STAGGERED TEETH and a performance chart titled R4-20S TESTING and note the following: … 8. We have a Patent Application in progress and will keep you advised. … 11. I am now starting to test R115-25 with Staggered Teeth and waiting for the Ultra 11 to be available for testing. … .' 55 Mr Collins gave affidavit evidence that he sent the memorandum of 18 February 2000 following a conversation with Mr Pincott. His evidence, which I accept, as to the conversation is that it was to the following effect: 'Pincott: "I am fed up with Chuck McGee always insisting on new products. Send Chuck a fax to pacify him. Tell him about the new product." Me: "Is it wise to unveil the project before we apply for a patent and work out my compensation." Pincott: "I trust Chuck. Send him the fax."' 56 Later in February 2000 Mr Collins prepared some pictorial representations of the Invention which he intended to use to promote sales of the Invention. The presentations clearly identify the offset rasp blades as products of Spencer Industries. 57 At about the same time Mr Collins prepared a draft agreement for the assignment by him of Australian Petty Patent No 719,185 to Spencer Industries. It is unclear whether the draft was intended to result in an assignment for a term of one year or two years. The fee for the assignment is given as one Australian dollar. The draft provides for Spencer Industries to indemnify Mr Collins against 'all claims, liabilities, cost, and expenses including unlimited attorneys' fees'. The draft seeks to restrain Spencer Industries from assigning its rights under the agreement without the consent of Mr Collins. 58 The Petty Patent Application No 58291/99 was accepted on 6 March 2000. By memorandum dated 15 March 2000 the Patent Office advised Mr Griziotis' firm of the acceptance. There is no evidence that Mr Collins was advised of the acceptance of the application. 59 In late March 2000 Mr Collins telephoned Mr Griziotis. There is no dispute as to the content of the conversation between them. The relevant paragraph from Mr Griziotis' affidavit reads: 'In late March 2000 I received another telephone call from Mr Collins. He said:- "I want to talk to you about the assignment document you sent us. Is it possible to add royalty payments to the Deed of Assignment." I replied:- "Yes, Deeds of Assignment can include royalty payments or other considerations. If we were going to do that in this case we would need to totally redraft the Deed of Assignment and have a tailor made Assignment." Our discussion ended with me saying:- "If you want to be paid a royalty you should speak to Jim about it."' 60 It is convenient to reproduce Mr Collins' affidavit evidence of what happened thereafter:- 'On 19 April 2000, I had a meeting with Mr Pincott and Ms Boorer during the course of which he gave me an assignment to sign. We had a conversation in words to the following effect: Pincott: "Anthony you must sign the patent assignment or resign." Me: "Can we discuss payment and increased employment security." I then presented him with a draft agreement I had prepared and which is at page 112 [see [57] above]. Pincott: "Just sign or resign. Your sales trip to USA and Europe is cancelled. You are to stay in Sydney until I return from USA and Europe." On 26 April 2000, Mr Pincott telephoned me at home during the Easter vacation and said words to the following effect: Pincott: "Anthony your sales trip to the United States is reinstated." On 29 April 2000, I met with Mr Pincott at the factory immediately prior to my departure to the United States. We had a conversation in words to the following effect: Pincott: "I want you to sign the assignment before you go." Me: "Do you want to discuss my agreement?" Pincott: "No. I want you to sign or resign." For part of the sales trip in the United States, I was at the ITRA Retreading Exhibition in Nashville on the stand of Spencer's US distributor. The stand was close to the stand of the Second Respondent (B&J). During the course of the exhibition, James Graninger, the CEO of B&J approached me and we had a conversation in words to the following effect: Graninger: "Your wife has told us you have invented a new rasp blade. We would be interested in buying your invention if you have the right to sell it. Have you assigned it to Spencer Industries?" Me: "No." Graninger: "Would you consider assigning it to us if you have the right to do so." Me: "Sure. Providing I get paid for it." On 3 June 2000, I returned to Sydney. On 5 June 2000, I gave notice of resignation ….' 61 Mrs Boorer's recollection of the meeting of 19 April 2000 is simply that Mr Pincott said: 'Anthony here's this document, would you please sign it?'

to which Mr Collins replied 'No' and then left the room.

62 The extract from Mr Pincott's statutory declaration which was received in evidence includes the following passage: 'At our meeting, Mr Collins requested that a substitute Assignment Agreement he had prepared in draft be executed imposing additional terms and conditions in his favour to replace the Deed of Assignment already presented to him before he would execute any assignment. I rejected the additional terms and conditions specifically proposed by Mr Collins and [said] to him that, as an employee, his intellectual property rights in the invention created in the course of his employment automatically pass to his employer. We left that meeting in disagreement over the issue of ownership of Petty Patent No. 719,185.' 63 The above passage seems to me to be more likely to have been drafted by a legal representative than by Mr Pincott. It does not purport to record the actual language used by Mr Pincott and Mr Collins respectively at their meeting. I consider it to be unlikely that Mr Pincott spoke in the terms outlined in the above paragraph although it is not inherently unlikely that Mr Pincott would have asserted that Spencer Industries was entitled to the benefit of the Invention. However, as neither Mr Collins nor Mrs Boorer has given evidence that Mr Pincott did make such an assertion at the meeting of 19 April 2000, I find that he did not. 64 I accept Mr Collins' evidence that he raised the issues of payment and increased employment security at the meeting of 19 April 2000. The draft agreement which Mr Collins had prepared tends to confirm that at least the second of these topics was on Mr Collins' mind at this time. I find that Mrs Boorer's recollection of the conversation is less detailed than Mr Collins and that this is probably because the meeting was of less immediate concern to her than to Mr Collins. It is not necessary for me to make a finding as to whether it was at this meeting, as Mr Collins believes, or shortly thereafter as Mrs Boorer believes, that Mr Pincott told Mr Collins that his trip to the United States and Europe was cancelled. Nothing presently turns on this question. 65 By a notice dated 15 August 2000 Mr Collins and the second respondent ('B & J Manufacturing') acting under s 28 of the Act, notified the Commissioner of Patents that they asserted that the Patent was invalid on the ground that the patentee was not entitled to be granted the petty patent (see s 28 of the Act). The Notice included the statement: 'Anthony Collins, being the inventor of the invention disclosed in said petty patent, did not assign any rights in the invention to the alleged patentee Spencer Industries Pty Ltd. Anthony Collins has agreed to assign his rights in the said invention to B & J Manufacturing Company.' 66 Spencer Industries, by their patent attorneys, applied to the Commissioner of Patents under s 69(1) of the Act for an extension of the term of the patent by a written application dated 30 March 2001. The application was refused by a decision dated 18 January 2002. It is from the decision of 18 January 2002 that Spencer Industries has appealed to the Court.

reasons of the delegate 67 The decision of the Delegate includes the following statement of the relevant principles: 'Employers' rights in the inventions of employees are not governed by statute but by common law and equitable principles which clearly show that in the absence of any express contractual obligation there is no rule that an invention made by an employee is inevitably the property of the employer. It is instead necessary to determine whether the employment relationship suggests that the invention concerned was made in the course of employment or, in other words, whether it is something it was the employee's job to invent. The law applying in these situations has been summarised in Fine Industrial Commodities Ltd v Powling 71 RPC 253 as follows: "The law relating to the position of officers or employees who make an invention affecting the business of the company which they serve is well settled. The principles applicable are stated in Worthington Pumping Engine Co v Moore (1902) 20 RPC 41; British Reinforced Concrete Co v Lind (1917) 34 RPC 101; and Triplex Safety Glass Co v Scorah [1938] Ch 211; 55 RPC 21. The mere existence of a contract of service does not in itself disqualify the officer or employee from taking out a patent for an invention made by him during his term of service, even though the invention may relate to subject matter germane to, and useful for, his employers in their business, and even though the employee may have made use of his employer's time and servants and materials in bringing his invention to completion, and may have allowed his employer to use the invention while he was in their employment. But all of the circumstances must be considered in each case. It is very material to see what is the nature of the inventor's position in regard to the business, and it may be a term of his employment, apart altogether from any express covenant, that any invention or discovery made in the course of the employment of the employee in doing that which he was engaged and instructed to do during the time of his employment, and during working hours, and using the materials of his employers, should be the property of the employers and not of the employee, and that, having made a discovery or invention in the course of such work, the employee becomes a trustee for the employer of that invention or discovery, so that as a trustee he is bound to give the benefit of any such discovery or invention to his employer."'

The Delegate carefully reviewed the extensive evidence which was placed before him. That evidence included the statutory declaration of Mr Pincott dated 2 May 2001 referred to in [49] and [62] above.

68 The Delegate concluded that the invention was not made by Mr Collins in carrying out his normal duties. The Delegate found that there was no satisfactory evidence to support the contention that it was incumbent on Mr Collins to provide solutions to problems identified by the customers of Spencer Industries. The extension sought by Spencer Industries of the term of the patent was refused by the Delegate.

consideration 69 The principal issue for determination in this proceeding is whether Spencer Industries has a right, enforceable against Mr Collins, to take the benefit of the Invention. It is not suggested that Mr Collins has assigned his interest in the Invention to Spencer Industries. The parties are in agreement that the relevant approach is that articulated in Patchett v Sterling Engineering Coy Ltd (1955) 72 RPC 50 (HC) by Lord Reid at 58 in the following passage: '… No doubt the respondent was the inventor and in the ordinary case the benefit of an invention belongs to the inventor. But at the time when he made these inventions he was employed by the Appellant as their Chief Designer and it is, in my judgment, inherent in the legal relationship of master and servant that any product of the work which the servant is paid to do belongs to the master. I can find neither principle nor authority for holding that this rule ceases to apply if a product of that work happens to be a patentable invention. Of course, as the relationship of master and servant is constituted by contract, the parties can, if they choose, alter or vary the normal incidents of the relationship, but they can only do that by express agreement or by an agreement which can be implied from the facts of the case.'

Subject to the issue of the identity of Mr Collins' employer, which is discussed below, it is not here suggested that the normal incidents of Mr Collins' relationship as an employee with his employer was relevantly varied by express agreement or by an agreement that can be implied from the facts of the case.

70 Spencer Industries submits that the evidence reveals that Mr Collins made the Invention within the course and scope of his employment by Spencer Industries with the consequence that the benefit of the Invention vested in Spencer Industries. 71 The respondents submit first, that on 1 August 1991 Mr Collins' employment with Spencer Industries ceased and that his employer thereafter until his resignation was Bijay. On that basis the respondents contend that the Invention could not have been made by Mr Collins in the course of his employment by Spencer Industries. Secondly, the respondents submit that the Invention was not made by Mr Collins within the course and scope of his employment. 72 It is convenient to deal first with the submission that Mr Collins' employer at the time that he made the Invention was Bijay and not Spencer Industries. 73 It does not appear that it was claimed before the Delegate that Mr Collins was not, at the relevant time, an employee of Spencer Industries. It seems clear that Mr Collins at all relevant times regarded himself as an employee of Spencer Industries. By way of example, his notice of resignation, which is dated 5 June 2000, advised Mr Pincott that: '… I wish to relinquish my position as Sales Manager and terminate my employment with Spencer Industries.' 74 The parties' submissions assumed that the question of the identity of Mr Collins' employer (i.e. whether he was employed by Spencer Industries or Bijay) was a critical question. I am inclined to doubt this assumption is correct. It is accepted by all parties there is no enforceable written or oral assignment of the benefit of the Invention to Spencer Industries. For this reason I consider that Spencer Industries will be entitled against Mr Collins to the benefit of the Invention only if Mr Collins held the benefit of the Invention on a constructive trust in favour of Spencer Industries (Electrolux Ltd v Hudson [1977] FSR 312 per Whitford J at 325-326; Sterling Engineering Co Ltd v Patchett [1955] AC 534 per Viscount Simonds at 543-544 and Lord Reid at 547; Worthington Pumping Engine Co v Moore (1902) 20 RPC 41 per Byrne J at 49). If Mr Collins had made the Invention within the course and scope of his employment as Sales Manager of Spencer Industries, I incline to the view that it would be immaterial that Mr Collins was technically employed by Bijay; the constructive trust would arise in favour of the company entitled to the benefit of his work, not the company which technically employed him (see, for example, Avtex Airservices Pty Ltd v Bartsch (1992) 107 ALR 539 per Hill J at 561-562). 75 However, I do not regard it as clear that the fact that Bijay commenced to pay Mr Collins' salary in August 1991 had the legal consequence that Mr Collins ceased at that time to be an employee of Spencer Industries and became an employee of Bijay. In circumstance that the authority to direct, and if occasion arose to dismiss, Mr Collins remained, as I find that it did, in the Managing Director of Spencer Industries acting in that capacity, it is arguable, in my view, that Mr Collins remained employed by Spencer Industries and that Bijay paid Mr Collins' salary for and on behalf of Spencer Industries. 76 However, as I have concluded that Mr Collins did not make the Invention within the course and scope of his employment as Sales Manager of Spencer Industries, I need not give further consideration to the issue of the true identity of Mr Collins' employer after 1 August 1990 or to any related issue. 77 I turn to consider whether the Invention was made by Mr Collins within the course and scope of his employment as Sales Manager of Spencer Industries. The case of Spencer Industries is that the Invention was made by Mr Collins: '… in the course of the execution of his general duty to Spencer to make technical improvements to Spencer's retreading equipment, and in particular rasp blades.' 78 There is no written employment contract between Spencer Industries and Mr Collins which defines with precision the scope of Mr Collins' employment. I accept the submission of Spencer Industries that in this circumstance, in considering the scope of Mr Collins' employment, it is necessary to give consideration to the nature and seniority of the employee's position with Spencer Industries, the nature of his duties as Sales Manager and whether he received a specific directive relating to the invention. 79 In my view the evidence makes it plain that the position that Mr Collins held within Spencer Industries was principally a sales position. However, as might be expected in a relatively small, family owned, company he occasionally undertook tasks outside his area of principal responsibility. I find that it was in the nature of Mr Collins' employment that he could be given reasonable directions to perform duties outside of the area of sales that were within the area of his technical skills and that were not incompatible with his principal responsibility for sales. 80 More particularly, I find that it fell within the scope and course of Mr Collins' employment as Sales Manager for him to recommend expansion of the product range of Spencer Industries where his contact with purchasers and potential purchasers suggested that expansion would be in the interest of Spencer Industries. I further find that it fell within the scope and course of Mr Collins' employment as Sales Manager for him to use his technical skills to demonstrate the function and utility of the products that it was his responsibility to sell. 81 I find that Mr Collins in fact contributed to the invention of the air-cooled hub and the design of the tyre rasp spacer. These activities, I find, fell outside his ordinary duties as Sales Manager but within the residual area in which it was open to Spencer Industries to direct him, whether expressly or implicitly, to use his technical skills to undertake additional duties. 82 However, I reject the submission of the appellant that because Mr Collins had a duty as Sales Manager of Spencer Industries to advance the sales of Spencer Industries any invention made by him which was capable of advancing Spencer Industries' sales was an invention made by him within the course and scope of his employment. This submission is, in my view, unacceptably broad in ambit. 83 It was no part of Mr Collins' ongoing duties to invent products for Spencer Industries. Mr Pincott, the evidence discloses, on more than one occasion reminded Mr Collins that his ongoing duties were exclusively sales related. Nor was the Invention the outcome of a direction given to Mr Collins within what I have described as the residual area in which he could be directed to perform tasks other than sales tasks. Mr Collins was not directed by Mr Pincott, or anyone, to invent a new rasp blade or to undertake any inventive activities which resulted in the Invention. Mr Collins advised Mr Pincott of the Invention, which he had conceived and developed in his own time, only when the inventive steps concerning it had been completed. The Invention was not, in my view, the product of the work which Mr Collins was paid to do (Sterling Industries Co Ltd v Patchett per Lord Reid at 547). 84 In arguing to the contrary of the above, the respondent placed weight on Mr Collins' seniority within Spencer Industries. As is mentioned above, Spencer Industries is a family owned company. The evidence satisfies me that at all relevant times actual authority within the company vested almost exclusively in Mr Pincott and members of his family ('the family'). Mr Collins did not in any way control the business of Spencer Industries. Nor was his relationship with Spencer Industries of the close and confidential character considered by Byrne J in Worthington Pumping Engine Co v Moore at 46. The fact that Mr Collins' salary exceeded that of the Managing Director and the General Manager, both members of the family, does not indicate to the contrary. It was for the family, and particularly I assume Mr Pincott, to determine how, when and in what form family members should reap the benefit of the company's success. 85 The respondent also placed weight on conduct of Mr Collins by which he appears to have acknowledged that Spencer Industries was entitled to the benefit of the Invention. The fact that Mr Collins envisaged, as I find that he did, that the Invention would be exploited by Spencer Industries does not establish that he undertook the invention within the course and scope of his employment by Spencer Industries. I am satisfied that Mr Collins had little understanding of intellectual property law while he was employed by Spencer Industries. I am also satisfied Mr Collins hoped that he and Spencer Industries would work together to exploit the Invention; that it would be added to the Spender Industries range of products which he was responsible for selling. However, I am also satisfied that Mr Collins expected that Spencer Industries would appropriately reward him if the Invention proved a commercial success. It was when Mr Pincott made it quite clear to Mr Collins that Spender Industries proposed to assume complete control of the benefit of the Invention without negotiating any financial reward for Mr Collins that Mr Collins unequivocally refused to sign the deed of assignment offered to him by Mr Pincott. 86 In my view, the decision of the Delegate that the Invention was made by Mr Collins outside the course of his duties as an employee of Spencer Industries should be upheld. Mr Collins has not assigned the benefit of the Invention to Spencer Industries. Spencer Industries would not, on the grant of a patent for the Invention, have been entitled to have the patent assigned to it within the meaning of s 15(1)(b) of the Act. 87 The appeal will be dismissed with costs and the decision of the Delegate affirmed. I certify that the preceding eighty-seven (87) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Branson.

Patents Amendment (Innovation Patents) Act 2000(Cth)

Patents Act 1990(Cth)ss 15(1), 28, 69, 160

At a glance

Court

Decision date

Before

Source

Judgment (23 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (2)