Between: Bacchus Marsh Concentrated Milk Co Ltd (in liq)
And: Joseph Nathan & Co Ltd

Judges: Isaacs J
Higgins J

Gavan Duffy J

Subject References:
Contract
Construction of
Trade mark
Assignment
Rectification
Evidence

MELBOURNE

Judgment by:
Gavan Duffy J

In my opinion the evidence shows that when the letter Exhibit B was discussed on 18th July 1910, the negotiating parties intended that the subject matter of the sale should be certain letters patent which were supposed to exist in all the States of the Commonwealth of Australia, and nothing else.  

They evidently thought that the assignment of the letters patent would prevent the vendor from importing into Australia and there selling a substance known as "Glaxo," which it sold as an infants' food, and it was provided that the purchaser should give to the vendor a licence to export "Glaxo" to Australia. It was further provided that the vendor should furnish the purchaser with all or any information, secret or otherwise, that it possessed in the manufacture; and, as the purchaser was acquiring the letters patent for the purpose of using the patented processes in what is known as the reconstituting business, it was provided that the vendor was not to enter into that business, or knowingly supply milk powder to be used in that business in any part of the world.  

In the course of the discussion it was disclosed that no letters patent existed in Victoria, but Mr. Purbrick, who was negotiating for the purchaser, does not appear to have thought that it would be necessary on that account to introduce any new term into the contemplated contract, and no new term was proposed by either party.  

Exhibit B was treated as the basis of the contemplated contract, and it was given to the purchaser's solicitor so that he might prepare an instrument embodying the contract. Such an instrument was prepared by him and ultimately executed in duplicate by the parties, and one of such duplicates is Exhibit G. We have to consider the effect of that contract on the questions now in issue between the parties, and, in doing so, I think we may ignore the subsequent agreement of November 1910. The solicitor was, of course, aware that, as no letters patent existed in Victoria, it would be necessary to make some special provision with respect to that State, for it was there that the purchaser intended to use the inventions and processes about which they were bargaining. It is not clear whether be discussed this question with the parties or their agents, but on examining Exhibit G we find that its subject matter is identical with that proposed in Exhibit B, namely, letters patent existing in all the Australian States, except that it does not purport to sell letters patent existing in Victoria as contemplated by Exhibit B, but does purport to sell all forms of provisional protection of the inventions and processes which are the subject matter of the letters patent, and the exclusive right to use the patented inventions and processes, and to sell the product in all parts of Australia, and contains an undertaking that the vendor shall do whatever the purchaser may reasonably require for the purpose of obtaining letters patent in Victoria and to assure or vest in the purchaser all or any of the rights sold.  

The first recital in Exhibit G states that the vendor is the owner of certain letters patent for certain inventions and processes of manufacture of dried milk in the form of a powder in all the States of the Commonwealth of Australia except the State of Victoria. The second recital states that the vendor is willing to sell and the purchaser is desirous of purchasing the said inventions and the right to use the same and the said processes as well in Victoria as in other States of the Commonwealth of Australia, and to sell the products of the same in all parts of the world except in the Dominion of New Zealand, and also the said letters patent and all information and knowledge of the vendor and its officers of the processes secret and otherwise of such manufacture, upon the terms and conditions thereinafter appearing. It is said that the expression "all the information and knowledge of the vendor and its officers of the processes secret and otherwise" shows that the parties were dealing with secret processes other than the patented processes, and therefore with something not contemplated by Exhibit B. But this is not so; in my opinion the words of the recital have reference to the "information secret or otherwise" mentioned in Exhibit B, and the words "secret or otherwise" must be read as qualifying the words "information and knowledge," and not the word "processes."  

Clause 1 of the agreement is as follows:

"The vendor shall sell and the purchaser shall purchase the said letters patent and all forms of provisional protection of the said inventions and processes and the exclusive right to use the same and to sell the said powder in all parts of Australia."

By this clause the vendor agrees to sell and the purchaser to buy

(1)

the letters patent for the inventions and processes of manufacture of dried milk in the form of "powder" mentioned in the first recital, and all forms of provisional protection of the said inventions and processes;

(2)

the exclusive rights to use these inventions and processes;

(3)

the exclusive right to sell in all parts of Australia the said "powder," that is to say, dried milk in the form of powder the product of such inventions and processes.

It is to be observed that the vendor purports to give to the purchaser the exclusive right of manufacturing by means of these inventions and processes, and of selling the product throughout Australia, and that the vendor had no power to do this with respect to Victoria, where no letters patent existed. The form adopted shows that the parties were anxious that the purchaser should be as far as possible in the same position in Victoria as in the other States of Australia; indeed, they probably thought that the vendor would be able to obtain letters patent in Victoria and assign them to the purchaser. There had been an application for letters patent in Victoria, but it had lapsed, and the assignment of "all forms of provisional protection of the said inventions and processes" contained in clause 1 of Exhibit G, and the undertaking contained in clause 13 that the vendor will do all things and execute all deeds, instruments and writings which the purchaser may reasonably require for the purpose of obtaining patent rights for the said inventions in Victoria and to assure or vest in the purchaser all or any of the rights thereby sold, indicate that the parties anticipated that letters patent would ultimately be obtained in Victoria and assigned by the vendor to the purchaser.

I think that the effect of clause 1 was to give to the purchaser rights which were to continue during the existence of the letters patent in the various States, and in Victoria, if no letters patent were obtained there, during such time as the letters patent which had been applied for there would have continued to exist if they had been granted. It was not intended to give greater rights in Victoria than in the States where patent rights existed, and in these States it was not intended to confer any rights which would operate after the letters patent had ceased to exist. Had the clause not contained the words "to sell the said powder in all parts of Australia," it would have been in a usual and proper form for the assignment of the patent rights then existing in Australia, and the added words were, in my opinion, designed to secure to the purchaser, so far as possible, the same rights in Victoria as it was acquiring in the other States. I shall not consider whether an attempt to preclude the vendor from manufacturing and selling in Victoria was bad as being a restraint of trade, because I think the operation of the restraint is now exhausted even if it was validly created, and for the same reason I say nothing as to the validity of clause 7, but my silence must not be taken as indicating any dissent from the view expressed in the judgment of my brother Isaacs.  

Clause 2 must, in my opinion, be read as binding the vendor to impart to the purchaser or its officers all the knowledge, whether secret or otherwise, of the inventions and processes of manufacture, in pursuance of the provision in Exhibit B, and not as binding them to impart all the knowledge of some processes secret or otherwise, other than that which is the subject matter of the letters patent.  

Clauses 3 and 4 reproduce provisions contained in Exhibit B. Clause 5 corroborates the view that the words "the said inventions and processes" in clause 1 mean the inventions and processes mentioned in the first recital, because they necessarily have that meaning in clause 5. Clause 6 reproduces a provision contained in Exhibit B.  

Clause 7 may be read as ancillary to the provisions of clause 1, and operating only during the period of its operation, or it may be read as introducing a subject matter not contained in Exhibit B or mentioned during its discussion, by permanently excluding the vendor within Australia from selling or in any way using, trading or dealing in "Glaxo," which is said to be one of the products mentioned in clause 7. In my opinion clause 7 is ancillary to clause 1, and is intended to protect the rights conferred by that clause during its operation and no longer. The inventions, processes and products which the vendor is restrained from using, manufacturing or selling are those which the purchaser is authorized to use, manufacture and sell. The right and the restraint are correlative, and are identical as to their period of operation.  

Exhibit B purported to reserve to the plaintiff Company the right to export "Glaxo" to Australia, notwithstanding the assignment of the letters patent. If my interpretation of clauses 1 and 7 be correct, and if "Glaxo" be "powder" within the meaning of clause 1 or a "product" within the meaning of clause 7, the plaintiff Company, unless it obtained permission from the purchaser, would have been unable to export "Glaxo" into any Australian State while letters patent remained in force there, and, in the case of Victoria, during the period of restraint stipulated for in clause 1 if that stipulation was valid.  

The parties evidently thought that the importation of "Glaxo" during these periods, and during these periods only, was prohibited by clauses 1 and 7, and accordingly they provided by clause 12 as follows: "The purchaser will on completion of the said purchase of the said inventions and patent rights grant to the vendor without charge a licence during the remainder of the term of the said patents to import into and sell in Australia (but as infants' food only) the preparation known by the trade name of 'Glaxo.' " As the terms of all the patents have expired, and the rights conferred by clauses 1 and 7 have now ceased to exist, it is not necessary to say whether the words "during the remainder of the term of the said patents" are to be read as giving a right to the plaintiff Company to import into and sell in each State of Australia during the term of the patent in that State, or as giving a right to import into and sell in any part of Australia until the last of such patents has expired. Whatever be the meaning of the clause, it can no longer affect the right of the plaintiff Company to import into Australia or there sell its preparation known as "Glaxo." If "Glaxo" does not come within the purview of clauses 1 and 7 of Exhibit G, the defendant Company never had any right with respect to it; if it does come within their purview, clause 12 precluded the defendant Company from obtaining any right such as it now claims with respect to "Glaxo" during the period of their operation. The result is that the defendant Company has no claim against the plaintiff Company with respect to "Glaxo" or the trade name or mark under which it has been sold by the plaintiff Company.  

In my opinion the plaintiff Company is entitled to the relief claimed in the statement of claim under clauses (b), (d), (f) and (g), and the defendant Company is not entitled to any of the relief sought by the counterclaim.  

The judgment appealed against should be varied accordingly, and the appeal should be dismissed.  

ISAACS J In view of the opinions expressed, the formal judgment of the Court will be as follows:

The judgment appealed from will be varied

(1)

by inserting in the declaration in par. 1 before the word "importing" the words "manufacturing or," and instead of the word "and" before the word "selling" the word "or," and by omitting from the said declaration all the words after the word "patents" where it secondly occurs;

(2)

by inserting in the declaration in par. 2 before the word "import" the word "manufacture";

(3)

by omitting from the declaration in par. 2 all the words after the word "Glaxo";

(4)

by inserting in the declaration in par. 3 after the word "title" the words "to the goodwill of the plaintiff's business in Australia or";

(5)

by omitting the declaration in par. 6;

(6)

by omitting the declaration in par. 7 and the order in par. 8;

(7)

by varying the order in par. 9 so as to read as follows: 

"That the defendants do pay to the plaintiff the costs of this action including the costs of matters relating to trade marks but excluding the matters raised by pars. 8 and 11 of the statement of claim and that the plaintiff do pay to the defendants the costs of the action relating to the issues raised by the said par. 8 of the statement of claim and do also pay to the defendants the costs of and incidental to the amendment made with reference to adding as a defendant the Bacchus Marsh Concentrated Milk Company Limited (in Liquidation) such costs respectively to include costs of discovery and interrogatories."