Pacific Coilcoaters Limited v Interpress Associates Limited CA76/96 [1998] NZCA 273; [1998] 2 NZLR 19; (1998) 8 TCLR 235 (18 February 1998)

Last Updated: 30 December 2023

IN THE COURT OF APPEAL OF NEW ZEALAND CA 76/96

BETWEEN PACIFIC COILCOATERS LIMITED

First Appellant

AND HUNTER DOUGLAS LIMITED

Second Appellant

AND INTERPRESS ASSOCIATES LIMITED

First Respondent

AND BESALON INDUSTRIES LIMITED

Second Respondent

AND MULTI RESOURCES LIMITED

Third Respondent

AND MULTI RESOURCES HOLDINGS SDN BHD

Fourth Respondent

CA73/96 BETWEEN BESALON INDUSTRIES LIMITED

First Appellant

AND MULTI RESOURCES LIMITED

Second Appellant

AND MULTI RESOURCES HOLDINGS SDN BHD

Third Appellant

AND INTERPRESS ASSOCIATES LIMITED

Respondent

Coram: Richardson P Henry J Thomas J Keith J Tipping J

Hearing: 15 October 1997

Counsel: D G Hurd and J F Anderson for Pacific Coilcoaters Limited and Hunter Douglas Limited

R J Katz for Besalon Industries Ltd, Multi Resources Ltd and Multi Resources Holdings SDN BHD

G J Judd QC for Interpress Associates Ltd

Judgment: 18 February 1998

JUDGMENT OF RICHARDSON P and HENRY J DELIVERED BY HENRY J

These two appeals raise the short point of when time starts to run under s4(1)(a) of the Limitation Act 1950 in respect of a claim for infringement of a patent when the infringement occurred prior to sealing of the patent.

Background

Interpress Associates Limited holds a grant of letters patent covering a process for the manufacture of long run roofing steel. Application for the grant was made by the inventor on 4 February 1977, and the complete specification was published on 1 November 1979. Opposition ensued, occupying some 13 years. The patent was finally granted, and sealed on 27 August 1993, shortly after assignment to Interpress. The patent had by then expired by operation of law, its term of 16 years having run its course on 4 February 1993. Following sealing of the patent, two sets of proceedings were instituted in the High Court on 1 September 1993. The cause of action alleged against all defendants is for infringement,

the period covered being from 1 November 1979 (the date of publication of the complete specification) down to the date of issue of the proceedings. In the High Court Robertson J dismissed strike out applications directed to acts of infringement occurring more than six years before 1 September 1993. The defendants’ contention that those acts of infringement were barred by s4(1)(a) of the Limitation Act 1950 was not accepted by the Judge, and these appeals result.

The argument

Section 4(1)(a) of the Limitation Act 1950 provides:

(1) Except as otherwise provided in this Act, the following actions shall not be brought after the expiration of 6 years from the date on which the cause of action accrued, that is to say,-

(a) Actions founded on simple contract or on tort:

It is common ground that the action for infringement is an action founded on tort. The question is whether the causes of action accrued when the acts of alleged infringement were committed, or when the letters patent were later granted on 27 August 1993. The critical provisions of the Patents Act 1953 are s20(4), in its form as applies to this case, and s30(1):

20(4) After the date of the publication of a complete specification and until the sealing of a patent in respect thereof, the applicant shall have the like privileges and rights as if a patent for the invention has been sealed on the date of the publication of the complete specification: Provided that an applicant shall not be entitled to institute any proceedings for infringement until the patent has been sealed.

30(1)Every patent shall be dated with the date of filing of the complete specification:

Provided that no proceeding shall be taken in respect of an infringement committed before the date of the publication of the complete specification.

An identical question to that now posed came before the House of Lords in Sevcon Ltd v Lucas CAV Ltd [1986] 2 All ER 104. In that case letters patent were applied for, and a complete specification published in April 1971. Opposition followed, and the letters patent were eventually sealed in October 1982. Infringement proceedings were instituted in February 1984, complaining of acts of infringement between 1974 and 1977. The applicable statutory limitation period was six years. It was held the claim was statute barred because the cause of action accrued when the acts of infringement were committed, and the prohibition against instituting proceedings until sealing of the patent merely postponed the right to take action. In reaching this conclusion the House of Lords followed its earlier decision in General Tire and Rubber Co v Firestone Tyre and Rubber Co Ltd [1975] 2 All ER 173, where the issue was one of jurisdiction to award interest on damages for infringement from a date before sealing of the patent. In General Tire it was held that the cause of action “arose” for the purposes of the Law Reform (Miscellaneous Provisions) Act 1934 s3 (UK) when the acts of infringement were committed. The Patents Act 1949 (UK) contained provisions identical to s20(4) and s30(1) of the New Zealand legislation, and there are no relevant differences between the two statutes. Lord Wilberforce, after referring to authorities such as Coburn v Colledge [1897] UKLawRpKQB 62; [1897] 1 QB 702 said (at p188 ):

In my opinion these cases do not determine the present. A patent right is sui generis; the relation of relevant dates, of complete specification to date of grant, is not analogous to other dates in other situations, the whole depending purely on statutory provision. In my opinion s13(4) of the Patents Act 1949 can only be construed as the respondents contend so that the cause of action arose in 1951.

And Lord Salmon (at p192):

This section seems to me to be saying plainly that a cause of action for infringement shall be deemed to exist from the date when the invention is used without a licence after the publication of the complete specification but that the right to bring proceedings for such an infringement shall be postponed until the date when the patent is sealed.

Sevcon has been the subject of some academic criticism, as has the principle now well established by the English cases following Coburn v Colledge, that the existence of a

procedural bar preventing a plaintiff from instituting or pursuing a claim through the Courts does not prevent time from running for limitation purposes. The impression gained from such criticism is that it is based on a perception that possible injustice or unfairness may result, rather than on established principles. The matter nevertheless remains one of statutory interpretation, and it is the words of the relevant legislation which must be construed. We propose first to consider those, and then to examine the case law.

These proceedings are for infringement of the monopoly afforded Interpress by the grant to it of letters patent. The acts of infringement in question were committed prior to the grant. It is therefore necessary to ascertain the basis upon which entitlement to damages for that infringement is asserted. The thrust of Mr Judd’s submissions was that the status of a patentee was necessary before proceedings could commence, and that was accordingly an element of the cause of action for infringement. The argument was in substance that promoted unsuccessfully before the House of Lords in both General Tire and Sevcon, and essentially was based on s20(4), not, as we understood it, on a contention that the cause of action emanated from and only from the grant of letters patent, with s20(4) being irrelevant to the issue. Mr Judd relied on s20(4) as giving the patentee privileges and rights from the date of publication. We will return to this argument shortly. Assuming however that the effect of his submissions is that a grant of the patent itself, independently of any other enabling provisions of the Act, gave Interpress the right to sue for pre grant infringements, that proposition is one we are unable to accept. It is of some significance that it was not promoted in either General Tire or Sevcon nor was it adverted to by Oliver LJ in the Court of Appeal in Sevcon when discussing the merits of the case for the patentee. The argument proceeds on the basis that because the terms of the grant cover the period from filing of the complete specification to expiry by effluxion of time, and s30(1) envisages an entitlement to sue for pre grant infringement, the present cause of action is based solely on the grant and its effect. Accordingly, it is said s20(4) is irrelevant to the present enquiry. In our judgment, the argument that recourse to s20(4) is unnecessary to found a basis for pre-sealing infringement liability cannot succeed.

Two important points emerge. The first is that the provisions of the Act relating to the grant and effect of a patent (ss27-30) are not to be read in isolation but in the whole context of the legislation, including s20(4). The second is that at the time of infringement no patent was in existence which could be infringed. It would be unusual in the extreme for acts which at the time of commission are neither wrongful, nor a breach of an obligation or duty, nor in breach of another’s rights, to give rise to a liability simply because another person has subsequently acquired rights which did not previously exist. The position is even more extreme where the tort resulting from the infringement of the newly acquired rights is one where lack of knowledge or awareness of the existence of the rights is a defence. Section 68(1) precludes a patentee from being awarded damages or an account of profits for infringement if the defendant was not aware and had no reasonable grounds for supposing the patent existed. If the issue is to be determined only by the provisions of the Act which are concerned with the grant and its effect (ss27-30), there is no possible basis for imputing knowledge of the patent to an infringer. The inconsistency is apparent. In our view therefore it is erroneous merely to go to the grant (which is prescribed by regulation) and to use the words of that as creating a new but retrospective liability on the part of other persons for actions already completed. Something further must be required, and s20(4) is the only possible source.

The purpose of s20(4) is clear. What it does is to give recognition to and protection of monopoly rights during the period from publication (public disclosure) down to sealing. In its absence there would be no such protection. If on the other hand the grant alone gives that same protection, s20(4) (or at least the proviso) becomes superfluous. The proviso makes it clear that the privileges and rights include those which can form the basis of an infringement action. Vesting of those rights for the period up to sealing but postponing the term for issuing proceedings until sealing becomes pointless. There can be no logical reason for providing an applicant with a right of action for infringement under s20(4) which cannot be enforced until sealing, and at the same time providing the same right of action for a patentee. Even if the entities are separate, both cannot be entitled to sue for the same pre grant infringements. In effect, the applicant and the patentee are one and the same person, the change of status being effected by the grant and occurring at that time.

The contention for Interpress raises a further difficulty referable to the issue in General Tire. If that is not also wrongly decided and interest can be claimed for pre grant infringement, an obvious problem results. If the cause of action arises on sealing, interest on damages for infringement can be awarded only from that date (s87 Judicature Act 1908). That result would seem to be anomalous if the loss was suffered at an earlier date. If it is suggested in answer that an applicant can nevertheless invoke s20(4) after sealing to seek interest, there is the illogical result that the patentee can recover damages but no interest, and the applicant (who is the same person) can recover interest but apparently no damages. That cannot be so. Apart from anything else, it is fundamental that interest under s87 is payable only on an award of damages. If an applicant is entitled to interest under s20(4) it must follow there has been an award of damages to the applicant. That must envisage a right of action under s20(4), which again emphasises it is that provision which gives an entitlement to a remedy for pre grant infringement.

Put shortly, the action is for infringement of a right owned at the time of the infringement and that is what s20(4) provides.

What we consider to be the true position is confirmed by the legislative history. The first New Zealand Patents Act was passed in 1860. It contained no protection for pre-grant infringements during the time between publication of an application and the grant of a patent. Under the 1870 Act, an applicant had for a period of six months “like powers rights and privileges” as if the patent had been sealed. Sealing within that period was envisaged. The 1889 Act, and all following legislation, contained the equivalent of the present s20(4). Throughout that time, a patent has been dated and has run not from the time of sealing but from the date of application. That “retrospective” effect of a grant so far as we are aware has never been seen as itself giving any cause of action for pre-grant infringement, hence the need for specific protection which has now come forward in the present legislation in the form of s20(4). It follows that Interpress must rely on that provision to support the claims for infringement now in question.

Moving from that point, under s20(4) an applicant becomes vested with rights and privileges as if a patent had been sealed on the date of publication. The Act deems there to be an operative patent, and therefore by its plain words vests those rights and privileges, as from that time. Here the patent was infringed by the alleged acts of the appellants which, when committed, formed the cause of action now relied upon - there was a deemed patent which had been infringed. The argument for Interpress must therefore depend upon the proviso, and construing it as constituting sealing a necessary element of the tort of infringement between the date of publication and the date of sealing. We do not read the proviso in that way. The tort is complete when the infringement occurs - no other element of it is lacking. At that time the applicant’s vested rights and privileges have been infringed. The subsection is concerned only with a period of time before sealing, so it therefore becomes difficult to see how the cause of action which it creates is not complete, or in other words does not accrue, until after expiry of that defined period. The ability to commence an action is not a constituent part of the wrong suffered by Interpress.

It has been suggested that the subsection is to be read as vesting privileges and rights except the right to sue for infringement. We are unable to agree with such a construction. The privilege and rights referred to are those pertaining to the monopoly evidenced by a patent. The “right” to sue is something ancillary, a consequential entitlement to a remedy for an actionable wrong. The wrong here is the infringement of a vested right to a monopoly. In our judgment therefore the cause of action for infringement given by s20(4) accrues when the acts of infringement are committed. Much of the criticism of Sevcon, and indeed the primary thrust of the argument for Interpress, focuses on the fact that the ability to commence proceedings may not eventuate until the life of the patent has expired. That possibility however is something which has evolved from the practices adopted by the Commissioner in more recent times in implementing the system of provisional and complete specifications, and the objection procedure. Delays of such magnitude as six years were not envisaged by the legislation. If injustice may now result, it is not for the Court to give a strained construction to the statute, particularly when to do that is to run counter to established principles in applying limitation provisions. It is highly significant that the 1996 amendment was enacted to remedy the claimed injustice now

highlighted. It would be entirely unnecessary if the cause of action arose only on sealing. What the amendment has done if the Interpress argument is accepted, is effectively to halve the limitation period for infringements occurring more than three years before sealing.

In its terms s20(4) vests all the privileges and rights in the applicant as if a patent had been sealed. The plain meaning of the words is that the same monopoly rights which are given by a patent are owned by the applicant during the period between publication and sealing. The cause of action in question is the commission of an act which infringes that monopoly. Infringement is then complete, the right breached is an existing vested right, and the cause of action accrued at that time. The enforcement or availability of a particular remedy is something different, and does not affect whether or not the tort has been committed. In simple terms, when the applicant’s existing monopoly right has been infringed the cause of action has accrued, and nothing more is required to establish the tort. Section 68(1) then creates no difficulty for a plaintiff following sealing of the patent. The rights of an applicant become those of the patentee and can be enforced by the patentee. The defendant cannot rely on s68(1) because of awareness of the existence of the deemed patent which has been infringed.

To return to the effect of the proviso. There is a long line of statutory authority that a requirement such as that now in issue which must be met before proceedings can be commenced does not prevent time running for limitation purposes.

Mr Judd did not submit that those cases, such as Coburn v Colledge, were wrongly decided or should not be followed as representing New Zealand law. He contended that the proviso to s20(4) was not a procedural bar, but was to be read as confirming that a grant was an essential element of the tort in question. It is important not to lose sight of the fact that the tort is for acts of infringement committed before sealing. No doubt the existence of a grant is essential to and forms part of the cause of action for post sealing infringement, but that is not what is under consideration. For the reasons already expressed, we think it clear that the rights in question, now owned by Interpress were infringed and liability to account to the owner for the infringement was incurred, at the time

of infringement. Enforcement of a remedy for the wrong already completed was postponed pending some further step being taken, one which was not directly related to whether or not the tort had been committed.

To hold otherwise must require the Court to adopt a general principle that a cause of action in tort does not accrue until such time as the plaintiff is procedurally entitled to institute proceedings and to obtain a remedy. There would appear to be no reason why, if that course is run, the same principle should not apply for limitation purposes generally to all causes of action . Such a principle would be counter not only to authority but also to the Limitation Act itself. Section 24 extends the limitation period for persons under a disability. Accrual of a cause of action is deemed to accrue when disability ceases, thus for example a minor’s cause of action in tort, although accruing when the tort is committed, is deemed for the purposes of the Act not to accrue until the attainment of majority. On the principle inherent in the argument for Interpress, accrual did not occur earlier anyway. Again, the inconsistency is apparent. Absent some express statutory provision, an inability on the part of a plaintiff to commence proceedings does not control the date of accrual of the cause of action for the purposes of the Limitation Act.

The authorities in support are long standing. In Coburn v Colledge it was held that a solicitor’s cause of action to recover a debt accrued when the service had been rendered, notwithstanding a statutory provision preventing the issue of proceedings until 30 days after delivery of the bill. In Meyappa Chetty v Supramanian Chetty [1916] 1 AC 603 Lord Parker of Waddington in delivering the judgment of the Judicial Committee said at p610:

For the purpose of the English Statutes of Limitation time runs from the accruer of the cause of action, but a cause of action does not accrue unless there be some one who can institute the action. In the case of a cause of action arising in favour of the estate of a deceased person at or after his death time will at once begin to run, if there be an executor, even though probate has not been obtained: Know v Gye L.R. 5 H.L.656; but if there be no executor, time will run only from the actual grant of letters of administration : Murray v East India Co 5 B. & Ald. 204.

The fact that the executor is unable to commence proceedings until the grant of probate does not affect the accrual. The principle was therefore applied to a similar question arising under a Singapore Ordinance.

In O’Connor v Isaacs [1956] 2 All ER 417 a right of action against justices for false imprisonment was barred because time ran from the date of last imprisonment. Accrual of the cause of action was not affected by a statutory provision which required a conviction to be quashed before the defendant justices could be sued for exceeding jurisdiction. Coburn v Colledge was applied by the Privy Council in Central Electricity Board v Halifax Corporation [1963] AC 785. At issue there was a claim to funds held under the provisions of the Electricity Acts of 1947 and 1957. A necessary allegation was that the funds were held in a particular capacity, which under the legislation required a decision of the Minister, and therefore the claim could not be proved until that decision was made. It was held that the limitation period ran from the time the fund was originally vested, not from when the Minister gave his decision as to the capacity in which they were held. Lord Reid noted that the Minister’s decision created no new right of property, but merely enabled a pre-existing right to be enforced. Coburn v Colledge was also expressly applied by the House of Lords in Sevcon.

Sevcon and Central Electricity Board were applied by the Court of Appeal of New South Wales in Collector of Customs v Gaylor (1995) 127 ALR 641. The weight of Australian authority adopts the same distinction between procedural bar and the elements of a cause of action, although there are cases where a particular statutory provision requiring leave has been held to be an element of the cause of action because the action itself is founded on the statutory provision. The validity of that approach does not concern this case, which is a claim in tort for infringement of property rights. Examples where the principle has been applied, or distinguished without denying the principle are: Ceric v CE Health Underwriting and Insurance (Australia) Pty Ltd (1994) 122 FLR 123; Cambridge Credit Corp Ltd v Lissenden (1987) 8 NSWLR 411, Grimson v Aviation and General (Underwriting) Agents Pty Ltd (1991) 25 NSWLR 422, New South Wales Medical Defence Union v Crawford (1993) 31 NSWLR 469.

The principle has been doubted in Canada. In Costello v City of Calgary (1989) 60 DLR (4th) 732, the Court of Appeal of Alberta refused to follow Coburn v Colledge, and in other instances it has been distinguished or not followed.

There appears to be a dearth of New Zealand authority on the point, perhaps for good reason. In our judgment the rationale of Coburn v Colledge is to be preferred. The arguments against it are not uniform, and far from persuasive. As previously stated the alternative is to adopt a new principle, logically of general and wide application, making the ability to commence proceedings an element of a cause of action for the purposes of the Limitation Act. We do not think that is consistent with the true construction of that legislation. It is also of some relevance that the equivalent of s20(4) was in force when the Limitation Act 1950 was enacted, and the tort of patent infringement well known. The provision was re-enacted three years later in the current Patents Act, with the Coburn v Colledge line of authority well established (at least in the United Kingdom) and the Act in this respect following closely the 1949 United Kingdom statute.

In the course of argument reference was made to the use of the phrase “right of action” in the Act as being interchangeable with “cause of action”, and therefore supporting the Interpress argument. We do not agree. “Right of action” is used for example in ss7- 13, all of which relate to the recovery of land. Those actions do not depend upon the accrual of a cause of action, but are existing vested rights which it is desired to enforce. The choice of language is deliberate. Section 24 (the postponement for disability provision) speaks of “right of action”, but that term is expressly defined for the purposes of all the extension of limitation provisions, including s24, as including a cause of action (s2(7)). This clear distinction supports, in our view, the construction contended for by the appellants.

Section 24 Limitation Act 1950

In the alternative it was submitted by Mr Judd that Interpress was under a disability within the meaning of s24 of the Limitation Act pending the sealing of the patent, and

therefore its cause of action is deemed not to have accrued until that time. Section 2(2) of the Act provides:

For the purposes of this Act, a person shall be deemed to be under a disability while he is an infant or of unsound mind.

Interpress does not come within that definition provision. The wider concept of disability going outside those parameters would seem to be a novel one, and Mr Judd was unable to cite authority to support this submission. In T v H [1995] 3 NZLR 37 both Hardie Boys J (at p48) and Tipping J (at p60) considered the definition was probably exhaustive. We can see no reason for the treating the phrase as including incapacity to commence proceedings by reason of some statutory, contractual, or other provision imposed by law.

Possible injustice

We are also inclined to the view that any injustice resulting from the construction we favour can be met procedurally. The bar, as has been seen, is a procedural one in the sense that it affects the remedy not the right, and therefore does not prevent a Court from entertaining an action if the point is not taken. A resulting application to strike out a proceeding commenced before sealing could not succeed on the ground that no cause of action was disclosed. It could be based on an abuse of process, but we see no reason why the Court could not in its discretion stay the action pending sealing. In the absence of other relevant factors, no injustice would result. Stay was seen as an appropriate step to meet the position in Central Electricity Board (p801). It is also common in respect of proceedings for breach of a contract which contains a compulsory arbitration clause. Mills v S.I.M.U. Mutual Insurance Association [1970] NZLR 602 is an example. A stay could well be invoked in a situation such as the present. That aside, the Court must also resist the temptation to give a particular litigant some form of relief because of what may be perceived subjectively as an unfair result, when to do so cannot withstand a principled analysis of the implications which follow.

Conclusion

In accordance with the views of the majority, the appeals are allowed. Appropriate strike out orders are made, with leave reserved to apply by way of memorandum if the form of those orders cannot be settled by the parties.

The appellants in each set of proceedings are separately entitled to costs in the sum of $5000, together with disbursements including reasonable travelling and accommodation expenses for one counsel as settled by the Registrar.

Solicitors

Rudd Watts & Stone, Auckland for Pacific Coilcoaters Ltd and Hunter Douglas Ltd

A J Park & Son, Auckland for Besalon Industries Ltd, Multi Resources Ltd and Multi Resources Holdings SDN

Jordans, Auckland for Interpress Associates Ltd

IN THE COURT OF APPEAL OF NEW ZEALAND CA 76/96

BETWEEN PACIFIC COILCOATERS LIMITED

First Appellant

AND HUNTER DOUGLAS LIMITED

Second Appellant

AND INTERPRESS ASSOCIATES LIMITED

First Respondent

AND BESALON INDUSTRIES LIMITED

Second Respondent

AND MULTI RESOURCES LIMITED

Third Respondent

AND MULTI RESOURCES HOLDING SDN BHD

Fourth Respondent

CA 73/96 BETWEEN BESALON INDUSTRIES LIMITED

First Appellant

AND MULTI RESOURCES LIMITED

Second Appellant

AND MULTI RESOURCES HOLDINGS SDN BHD

Third Appellant AND INTERPRESS ASSOCIATES LIMITED

Respondent

Coram: Richardson P Henry J Thomas J Keith J Tipping J

Hearing: 15 October 1997

Counsel: D G Hurd and J F Anderson for Pacific Coilcoaters Limited and Hunter Douglas Limited

R J Katz for Besalon Industries Ltd, Multi Resources Ltd and Multi Resources Holdings SND BHD

G Judd QC for Interpress Associates Ltd

Judgment: 18 February 1998

JUDGMENT OF THOMAS J

Introduction

As at the time of writing this judgment I have had the benefit of reading the draft judgments of Henry and Tipping JJ, who would allow the appeal, and the draft judgment of Keith J, who would not. I would disallow the appeal. But without wishing to derogate from the reasoning of Keith J, I would do so on the basis that the House of Lords’ decision in Sevcon Limited v Lucas CAV Limited [1986] 2 All ER 104, was wrongly decided.

The facts of this case are fully set out in the judgment of Robertson J in the Court below and summarised in the judgments of Henry and Keith JJ. They need not be repeated. Suffice to say that the appellants “laboriously” opposed the first respondent’s (or its predecessor’s) application for a grant of a patent, filed a competing application for a patent, and then took what was acknowledged to be a “purely technical” point on appeal to the High Court. In all, the grant of the patent was delayed for 14 years.

It is not out of place to observe, and I do not apprehend it is in contention, that it is fundamentally unjust to prevent a patentee, who has disclosed its invention to the world at large as required by statute, from obtaining damages for the infringement of the patent when it was not in a position to institute proceedings for that infringement. This injustice is particularly acute when that position has been caused by protracted opposition proceedings. Having obtained the grant of a patent, the patentee is denied the benefit of the grant.

Having said that, however, I should at once acknowledge that the justice of the case is not determinative. Case law, legal principles, policy considerations, common-sense, and reason and logic all have a role to play in the determination of this appeal. Applying those factors as best I can, I am bound to say, and I do so with the utmost respect, that even if the justice of the case was reversed I would find it difficult to support the reasoning in Sevcon.

The question in issue

I would frame the question in issue in this appeal in these terms: when for the purposes of s 4(1) of the Limitation Act 1950 does a cause of action for the infringement of a patent accrue under the Patents Act 1953 in respect of infringements occurring after the date of publication of the complete specification and before the patent is sealed? More specifically, the critical question is whether the sealing of the patent is an integral part of the cause of action.

The question whether s 20(4) confers a cause of action on the applicant - or patentee - as at the date of the infringement may be legitimate, but is too narrowly phrased. It tends to obscure the fact that the question when a cause of action accrues is posed for the purpose of determining whether a proceeding claiming damages for the infringement is statute-barred under the Limitation Act. All too easily the nature of the monopoly conferred by the grant of a patent can be overlooked. A narrow focus also side-steps the argument developed by Keith J to the effect that it is open to the respondents to proceed without reference to s 20(4) at all.

I have deliberately used the word “accrue” when speaking of the cause of action because the word used in s 4(1) is “accrued”. In the same context, both counsel for the appellants were inclined to use the word “arose”. But I do not suggest that anything turns on the distinction. The use of the word “accrued” merely serves to emphasise that the elements of a cause of action not only must exist but also must have “accrued” to a plaintiff. A plaintiff who can sue is contemplated.

Section 30(1) - Keith J’s contribution

In my respectful view, Keith J’s judgment raises the argument to a substantive level and makes an outstanding contribution to the question in issue.

The learned Judge’s discussion relating to the rights of the patentee and the nature of a grant of Letters Patent is most persuasive. The prerogative basis for the Letters Patent is recognised. Although now subject to statutory constraints, the patentee’s monopoly in the invention which is the subject of the patent is conferred by the grant of the Letters Patent. The patentee is to “enjoy the whole profit and advantage” of the invention for the term of the grant. All other subjects within New Zealand and its dependencies are commanded to observe the patentee’s monopoly throughout its term on pain of incurring such penalties as are prescribed by law or being answerable to the patentee for damages. The patentee acquires these rights when the patent is granted and sealed pursuant to ss 27 and 29 of the Patents Act. As Keith J states, it is the patent itself which is at the core of the system and which is, by its very nature, retrospective.

This perception explains the wording of s 30(1). Every patent is dated with the date of filing of the complete specification. The term of the grant commences as at that date. But the proviso to s 30(1) then provides that the patentee cannot take a proceeding in respect of an infringement committed before the date of the publication of the complete specification. It is a statutory constraint on the patentee’s right otherwise to enjoy the whole profit and advantage of his or her invention throughout the term of the patent. The ability to sue for infringement of the patent following the publication of the complete specification is not so

much implied by the terms of s 30(1) as inherent in the grant of the Letters Patent which are then constrained by that subsection, but only in one respect: the ability to sue for infringement following filing and prior to the publication of the specification is removed.

Consequently, the respondents in this case are able to found their cause of action on the patent itself without resorting to s 20(4). Historically this had to be the position. Section 20(4) in its present form was not enacted until relatively recently, namely, in 1946. An amendment in that year replaced the provision first enacted in 1889, which provided that, after acceptance and until sealing or the expiration of the time for sealing, the applicant had “the like privileges and rights as if a patent for the invention had been sealed on the date of acceptance”. The applicant could still not undertake any proceeding for infringement following acceptance unless and until a patent had been sealed. (See s 28 Patents, Designs and Trade-marks Act 1889, s 12 Patents, Designs and Trade-marks Act 1911, and s 12 Patents, Designs and Trade-marks Act 1921-22). I join with Keith J in finding it difficult to conceive that this amendment, introduced for the purpose of protecting the applicant for a patent, was intended to diminish the primary rights of the patentee.

When it was developed by Keith J during the course of the hearing, I took the view that the learned Judge’s thesis provided a tenable and attractive construction of the Act and the respondents’ cause of action in this case. The more I have reflected on the case since then the more convinced I have become that the learned Judge has got it right. The cause of action under the subsection accrues to the applicant as applicant. He or she may, for example, bring proceedings for past infringements after the patent has been sealed where it has been assigned to a third party. See below under the heading, “The function and effect of s 20(4)?” I acknowledge that it is surprising that Keith J’s perception apparently was not noted or developed throughout the course of the proceeding in Sevcon, including argument in the House of Lords. But to my mind, this omission should not be permitted to detract from the force of the learned Judge’s judgment.

For my part, however, and notwithstanding my support for Keith J’s judgment, I propose to confront the reasoning in Sevcon head-on. The learned Judge’s view is not

inconsistent with the argument I will advance and his analysis is still relevant in that an appreciation of the rights of a patentee and the nature of a patent assists to place the question in issue in its proper context. Irrespective whether the cause of action under s 20(4) accrues to the applicant, or the patentee, or the applicant-cum-patentee, it cannot be said to have accrued until the patent has been sealed.

In the shadow of Sevcon

I would not challenge the correctness of a decision of the House of Lords lightly. My considerable respect for any decision or dicta of the House of Lords has been recorded elsewhere. Their Lordships’ views retain universal command, not only because of the historical and pivotal role of the House of Lords in the development of the common law throughout the common law world, but also because of the vast and formidable legal talent of the Law Lords who at any time tenant that pre-eminent institution. See Dairy Containers Ltd v NZI Bank Ltd [1995] 2 NZLR 30, at 92. In this case, however, I have reached the conclusion that their Lordships’ reasoning is unconvincing and that Sevcon should not be followed by this Court.

A decision of the House of Lords, although highly persuasive, is not binding on this Court. As Lord Templeman observed in Attorney General for Hong Kong v Reid [1993] UKPC 36; [1994] 1 NZLR 1, at 9, the New Zealand Courts have not regarded themselves bound by decisions of the House of Lords for many years. In that case, this Court declined to enter into the merits of Lister & Co v Stubbs [1890] UKLawRpCh 73; (1890) 45 Ch D 1 (CA), notwithstanding that the decision had been widely discredited and largely overtaken by equitable principles which had been developed since it was decided in 1890. Any departure from that decision, it was thought, should come from the Privy Council. When confronted with the question the Privy Council had little hesitation in declaring that Lister v Stubbs was not consistent with equitable principles relating to a fiduciary. It overruled the decision and held that a fiduciary who has acquired property as a result of a criminal breach of trust, and the property from time to time representing the same, is a constructive trustee for that property and cannot make any profit from his wrongdoing. Lord Templeman clarified that their Lordships

regarded the application of stare decisis in the New Zealand Court of Appeal as a matter for this Court. It should feel free to review an English Court of Appeal authority on its merits and to depart from it if the authority is considered to be wrong (at pp 8-9). Although entitled to even greater respect, the same principle is applicable to a decision of the House of Lords. This Court remains free to examine the merits of the Sevcon decision and to depart from it if it thinks it was wrongly decided.

In this regard, this Court need not be as inhibited as the English Court of Appeal in the Sevcon case (reported Sevcon Limited v Lucas CAV [1985] FSR 545). The judgment was delivered by Oliver LJ (as he then was) and agreed to by Mustill LJ (as he then was) and Sir Roualeyn Cumming-Bruce. Noting counsel for the appellant’s submission that an action for infringement of a patent is simply not possible until the patent is sealed, Oliver LJ stated that, if the matter were res integra, there would be a great deal to be said for the view that in an action for infringement of patent it is not possible, until the patent is sealed, to plead the essential fact upon which the action depends (at 549). There was much to be said, he continued, for the view that, where the plaintiff’s title to sue and recover judgment for pre-grant infringement derives from a section which says in terms that he shall not be entitled to sue until a particular condition has been fulfilled, the fulfilment of the condition is an essential ingredient in the cause of action. He thought the contrary proposition to be unattractive because it was not difficult to imagine circumstances where the practical effect would be to deprive the patentee of any benefit at all from his monopoly. For instance, by the time the patent came to be sealed the invention would have been superseded or infringers would have managed to design their way around it. In such a case, he observed, the sole value of the monopoly may lie in the ability to sue for infringements which have taken place in the past.

The matter was not, however, res integra. It was not, the Court thought, open to it to adopt that approach having regard to the reasoning of the House of Lords in General Tire and Rubber Co v Firestone Tyre and Rubber Co Ltd [1975] 2 All ER 173. In that case the House of Lords held that the Court had jurisdiction to award interest pursuant to s 3 of the Law Reform (Miscellaneous Provisions) Act 1954 (UK) on damages relating

to an infringement after the date of the publication of the complete specification but before the patent had been sealed. Section 3 provided that interest could be awarded on damages for the period “between the date when the cause of action arose and the date of the judgment”. Their Lordships considered that, on the true construction of s 13(4) of the Patents Act 1949 (UK) (the equivalent of section 20(4)) the sealing of the patent was not a condition precedent to the accrual of the cause of action. While clearly a just result in that case, the decision had a marked influence on their Lordships’ reasoning in Sevcon and, ironically, produced an unjust result in that case. One can only speculate whether the outcome would have been the same if the limitation issue in Sevcon had fallen to be decided before the question of interest in General Tire!

Notwithstanding the ability of this Court to review the merits of Sevcon and to depart from it if the Court considers it was wrongly decided, I am not confident that, even if it should do so, the ultimate outcome will be any different. The parties have a right of appeal to the Privy Council and I cannot imagine that their Lordships on the Board, while approaching the question with impeccable open-mindedness, would wish to review Sevcon or decline to follow it, certainly in the absence of a unanimous decision by this Court declining to adopt it. Sevcon is a relatively recent decision and the legislation in both the United Kingdom and New Zealand have been amended to obviate its effect. The reasoning in Sevcon has been severely criticised. (See, for example, McGee, Limitation Periods (1994) at pp 85-89; McGee, “Patent Nonsense”, (1986) 49 MLR 650, at pp 652-653 (“McGee”); and Jerrard and Beresford, “Sevcon Limited v Lucas CAV: What the Large Print Giveth the Small Print Taketh Away” [1987] 4 EIPR 115. But Sevcon is likely to remain the law for the luckless respondents in this appeal.

I therefore admit to approaching the task of seeking to demonstrate that the reasoning in Sevcon is unsound with a sense of futility, and persist only because I consider that the respondents are entitled to my dissenting opinion.

Section 20(4)

For convenience, s 20(4) can be repeated:

(4) After the date of the publication of a complete specification and until the sealing of a patent in respect thereof, the applicant shall have the like privileges and rights as if a patent for the invention had been sealed on the date of the publication of the complete specification:

Provided that an applicant shall not be entitled to institute any proceedings for infringement until the patent has been sealed.

It is clear that s 20(4) was introduced to protect the applicant’s invention pending the grant of the patent. Publication of the complete specification discloses the invention to the public. Those who might be minded to copy or use it are put on notice that they do so at their own risk. They know that the applicant will be able to recover damages in respect of any infringement if and when the patent is granted.

Reference to the purpose of the subsection serves to confirm that it was not drafted as a limitation provision or for the purpose of limiting the patentee’s right to recover damages for any infringement. The draftsperson’s mind was not directed to the question whether and when the subsection confers a cause of action on the applicant or patentee. He or she was mindful only that the applicant would not be able to institute proceedings for infringement prior to the patent being sealed. For the purposes of the Patents Act, the subsection says all that it need say to protect the applicant pending the grant of the patent.

Consequently, the question whether the sealing of the patent is an integral part of the applicant’s or patentee’s cause of action cannot be resolved by a close linguistic or textual analysis of s 20(4). Its literal meaning is clear; after the date of the publication of the complete specification, the applicant is to have all the like privileges and rights as if the patent had been sealed on the date the complete specification was published, other than that the applicant shall not be able to commence any proceedings for infringement until the patent has been sealed. But a literal interpretation cannot answer the question whether the sealing of the patent is an integral part of the cause of action. Of necessity, a literal or linguistic approach will serve only to bring the Court back to the non-contentious wording. In my view, the further question - whether the requirement in the proviso is part of the cause of

action - can only be answered by examining s 20(4) as a whole and in the context of the scheme of the Act in order to glean the substance or “sense” of the subsection.

A further preliminary point may be noted. Section 20(4) is quite different from s 30(1). Subsection 30(1) restricts the rights of the patentee acquired following the grant of the Letters Patent so as to prevent the patentee exercising his or her rights following the date of the filing of the complete specification and prior to its publication. Section 20(4), on the other hand, purports to extend those rights to the applicant following the publication of the complete specification. It is a statutory extension of rights to the applicant which would not otherwise exist rather than a statutory constraint of rights which would, by virtue of the grant of the patent, otherwise exist. It is for this reason that the proviso to s 20(4) speaks in the language of entitlement, that is, of the applicant not being “entitled” to institute proceedings for infringement, whereas the proviso to s 30(1) simply provides that no proceeding for infringement shall be taken before the date of the publication of the complete specification. It is therefore wrong to see s 20(4) as somehow filling a gap in the patentee’s cause of action in respect of past acts of infringement.

With these preliminary comments shortly dealt with, I will now turn to the reasons why I consider the reasoning in Sevcon unconvincing. I will examine the substance of s 20(4) and then touch upon the scheme of the Patents Act. The essential argument adopted by their Lordships in Sevcon, and the majority in this Court, to the effect that the proviso to s 20(4) is nothing more than a procedural bar will then be addressed. I next introduce the policy considerations relevant to the issue. Arguments founded on ss 74 and 75 and s 68(1) of the Act are referred to and rejected. So, too, is the argument based on the purported redundancy of s 20(4) unless it confers a cause of action at the time of the acts of infringement. The questions whether interest can be recovered if the cause of action does not accrue until the patent is sealed, and whether the 1996 amendment to the Patents Act is to be seen as legislatively approbating the law as declared in Sevcon, are examined. I conclude by summarising the particular respects in which I consider that the reasoning in Sevcon may be faulted.

The “sense” of s 20(4)1

To my mind, the substance of s 20(4) emerges clearly enough from a fair reading of the subsection as a whole. It is designed to protect the applicant for a patent following the statutorily directed publication of a description of his invention. To that end, he or she is vested with the privileges and rights of a patentee save one - the right to sue for infringement. Since he or she does not have that right, the applicant does not have a cause of action for any infringement. Once the patent is sealed, the right, and with it the cause of action, at once accrues. The applicant or patentee can then issue proceedings for infringement, including infringements which have occurred following the publication of the complete specification but before sealing in respect of claims which have survived the investigation and opposition processes in the Act and been included in the patent which has been sealed. Whether the patentee must rely on s 20(4) to do so or, as Keith J contends, can simply rely on the rights inherent in the grant of Letters Patent (subject to s 30(1)) does not matter for the purposes of the present argument. The point is that the applicant cannot sue for infringement until the patent has been sealed. The cause of action has then accrued.

Construing the effect of the subsection as a whole has the advantage of avoiding the pitfall of reading it in a way which devalues the effect of the proviso. It seems to be perceived as a rider to the question whether there is a cause of action and to be relevant only to enforcement. But it is not possible to devalue a statutory direction that the applicant shall not be entitled to institute any proceedings for infringement until the patent has been sealed. It plainly means that the patentee has no right of action. If the subsection had been worded so as to provide that “... the applicant shall have the like privileges and rights, save the right to sue for infringement, as if the patent for the invention had been sealed” it would be difficult to suggest that the cause of action and right of action were not one and the same and that sealing the patent was not an integral part of the cause of action. Yet, this is

¹ A past distinguished President of this Court, Sir Owen Woodhouse, who commanded universal respect, was wont to interrupt counsel bent on advancing a strictly literal interpretation of a statutory provision and invite them to pause and consider the “sense” of the section. The use of the word provides an appropriate heading and, at the same time, the opportunity to personally acknowledge the influence of this most esteemed Judge.

effectively what the subsection says; the applicant has all the rights of the patentee save the right to sue for infringement. As McGee says, supra, at p 653: “There is surely no inherent reason why the proviso should not be construed as derogating from the existence of the rights rather than merely affecting their exercise”. Common sense, he submits, requires such a construction. I agree.

I can see no sound reason to reject this substantive meaning. Bringing to bear such logic and common-sense as I possess, I proffer three principal reasons why I consider that the sealing of the patent is an integral part of the cause of action.

(1) The rights are necessarily inchoate

First, the rights conferred on the applicant under s 20(4) are necessarily inchoate. They crystallise or are perfected when the patent is sealed. Until then their fate is uncertain. They may survive, they may be amended, or they may come to nought. It is only when the patent is sealed that it can be known whether the claim alleged to be infringed is a valid claim.

Claims are critical to a patent. They define the scope of the invention claimed and, therefore, the scope of the monopoly. (See subs 10(3)(c) and (4)). Priority is determined by reference to the claims in the complete specification (s 11). The Commissioner’s search for anticipation by prior publication or by prior claim relates to the invention so far as claimed in any claim in the complete specification (ss 13 and 14). His or her power to direct that a reference be made to another patent arises where the invention cannot be performed “without substantial risk of infringement of a claim of any other patent” (s 16). Many of the grounds of opposition refer to the invention so far as claimed in any claim (s 21). The form of a complete specification is provided in the Patents Regulations 1954 and requires an explicit description of what is claimed (s 29(3) and Patents Form No. 5). A patent may be revoked on a number of grounds, many of which relate to the invention as claimed or the sufficiency of the definition of the claim (s 41; see also s 42). Proceedings for infringement are then necessarily based on alleged infringements of specific claims. In the

present case, for example, the respondents properly plead that the various respects in which the invention was used by the appellants infringes specific claims.

Thus, it is indisputable that the question whether or not any particular claim will sustain a proceeding for infringement cannot be known until the grant of the patent. As Mr Judd observed in argument, if one has regard to the substance of the matter the applicant for a patent has a right “writ in water” until such time as a patent is granted and a proceeding for infringement can be instituted. This is not to say, of course, that the applicant does not have rights. Section 20(4) clearly confers such rights. Rather, those rights in relation to a claim for infringement cannot and do not mature until the patent is sealed. The grant becomes an integral part of the cause of action establishing that a claim is a valid claim.

To exclude the fact that the patent has been sealed from the cause of action is to give the claims in the complete specification as published the force and effect of claims in a patent. Temporarily ignoring the impact of the proviso, the words “as if a patent for the invention had been sealed on the date of the publication of the complete specification” are read super-literally. The monopoly rights conferred by the patent are said to be conferred by the complete specification. Thus, on the majority view, what s 20(4) does is to give recognition to and protection of monopoly rights during the period from publication (public disclosure) down to sealing. The Act, it is asserted, deems there to be an operative patent as from that time.

With respect, this perception cannot be right. It would mean that claims which may be amended or fail to survive the investigation and opposition processes would define the scope of the invention! An applicant for a patent could enlarge his or her monopoly by wording the claims more widely than justified by the invention described in the complete specification - and then delay sealing the patent! The pre-grant “rights” would be more extensive than would be the case under the ensuing patent when the claims would have to be amended so as to be “fairly based on the invention disclosed in the specification”! In proceedings brought by a patentee, the patentee’s pleading seeking damages for infringement following the grant of the patent would be limited to claims in the patent but not

so limited in respect of claims contained in the complete specification but deleted or amended prior to sealing! The patentee may be able to recover damages for infringement of a claim up to the date of sealing but not able to recover damages after sealing because the defendant’s acts no longer amount to an infringement! These propositions only have to be stated to be seen to be, no pun intended, a patent absurdity.

Nor can the point be countered by contending that the cause of action accrues when the infringing act occurs, but only where the act infringes a claim in the complete specification which eventually appears in the patent. Once that concession is made it is difficult if not impossible to deny that the grant of the patent is an integral part of the cause of action.

Take a straightforward example. The complete specification is published. A claim in it is copied and used by a competitor of the applicant. The applicant cannot sue for infringement because of the proviso. The claim, however, is not accepted by the Commissioner and it is excluded from the patent as sealed. The patentee, of course, cannot sue for the infringement of his or her deleted claim; it forms no part of the monopoly. If, on the other hand, the claim is included in the patent as sealed, the patentee may sue for the infringement of it. The reason he or she may do so is that a previously inchoate right has crystallised into a right in the patent and so completed the cause of action.

To sum this point up, reading the words as a whole it is clear that while the applicant is vested with all the rights of a patentee, those rights are at that stage necessarily inchoate rights until the patent has been duly sealed. This is the effect of the proviso. It derogates from the existence and nature of the rights conferred on the applicant and is, therefore, necessarily an integral element of the cause of action.

(2) The cause of action accrues when a right of action exists

The second point which assists to convey the substance of the subsection is the speciousness and semantics of seeking to separate the applicant or patentee’s cause of

action from his or her “right” of action, that is, the ability to institute a proceeding and seek the judgment of the Court. Two phrases, cause of action and right of action, are used in the Limitation Act. (For example, see s 4(1) and s 24). Irrespective of its statutory usage, however, it seems to me that it is implausible to reason that time begins to run against a right when the right cannot be enforced in law. A cause of action and right of action go hand in hand. Moreover, the “right” may be lost and never be able to be enforced in law. As McGee says, supra, p 652, to say that a plaintiff’s cause of action has accrued at a time when it is not and never has been possible for him or her to bring an action offends both logic and common sense. It must be more sensible to accept that a cause of action accrues when a right of action exists.

In my respectful view, holding that there is a valid cause of action when there is no right of action is contrary to the fundamental concept of a cause of action. Possibly, the best known definition is that of Lord Esher MR in Read v Brown [1888] UKLawRpKQB 186; (1888) 22 QBD 128, at 131. The learned Law Lord adopted the definition of a cause of action as the existence of “every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the Court”. See also the speech of Lord Guest in Central Electricity Generation Board v Halifax Corporation [1963] AC 785, at 806, quoted by Lord Wilberforce in the General Tire case at 187-188. To my mind it makes a mockery of this concept to hold that all the facts exist which are necessary to support the plaintiff’s right to the judgment of the Court at a time when the plaintiff has no right to seek the judgment of the Court.

This Court has in the past accepted the sensible notion that a cause of action requires a plaintiff capable of suing. In Re Maney and Sons De Luxe Service Station Ltd, Maney v Cowan [1969] NZLR 116, at 131, Turner J, applying dicta in In re J E Hurdley & Son Ltd (In Liq.) [1941] NZGazLawRp 45; [1941] NZLR 686, and Thompson v Clanmorris (Lord) [1900] UKLawRpCh 65; [1900] 1 Ch 718, described it as a fundamental principle that a “statute of limitation cannot begin to run unless there are two things present - a party capable of suing and a party liable to be sued” (quoting Vaughan Williams LJ, in the latter case, at 728-9). To my mind, the requirement that, for a cause of action to have accrued, there must be a party capable of

suing was properly described by Turner J as a “fundamental principle”. The notion of plaintiffless causes of action at large in the community has as much appeal to me as the proverbial headless chickens running around the yard. A plaintiff, as part of the cause of action, must surely plead and prove the status, title, or right which entitles him or her to sue and, if successful, obtain the judgment of the Court. In logic, as well as principle, there can be no such thing as a cause of action in a vacuum. Yet, in this case, it is undeniable that, until the patent has been sealed, there is no party capable of suing and, indeed, there may never be a party capable of suing.

When the definition is applied to this case there are two facts, or two aspects of the one fact, which it would be necessary for the respondents to prove before they could succeed in their claim. The first is that the patent has been sealed, for without proof of that point they cannot sue. The second is that the claim on which the alleged infringement is based forms part of the patent and has not therefore been “lost” or amended in such a way as to “undo” the infringement. To my mind, therefore, it is quite unsatisfactory to construe s 20(4) in such a manner as to separate the cause of action from the right of action.

(3) The conclusion should accord with the object of s 20(4)

The third point pointing to the substance or sense of the subsection is that a finding a cause of action accrues under s 20(4) when the act of infringement occurs runs counter to the object of the subsection. It is intended to protect the applicant who has been required by statute to disclose his or her invention to the public at large in order to obtain a patent. Yet, having disclosed the invention and eventually obtained the patent, if the reasoning in Sevcon is to prevail, the patentee is then denied the fruits of his or her monopoly rights, including the extended rights conferred on the applicant under s 20(4), unless the patent is sealed and proceedings are able to be instituted within six years of the act of infringement. It is almost perverse to suggest that an applicant should be required to publish details of his or her invention, but then be prevented from suing for any infringement of it resulting from that publication.

For these reasons, the words in s 20(4), “the applicant shall have the like privileges and rights as if a patent for the invention had been sealed on the date of the publication of the complete specification”, cannot be read in indulgent isolation. The sealing of the patent must be proved to establish that the claim or claims alleged to be infringed remain valid claims being included in the complete specification of the patent. The cause of action and right of action are not to be separated. Such a conclusion then accords with the acknowledged object of the subsection; to provide the applicant with protection pending the grant of the patent.

The scheme of the Act

It is the grant of the patent which confers the monopoly on the patentee. Sections 27 to 34 relate to the grant, effect and term of the patent. The earlier sections, ss 7 to 26, which include s 20(4), relate to the application, the investigation of the application and the acceptance of the complete specification by the Commissioner, the publication of the complete specification, opposition to the grant of a patent, and other miscellaneous powers. Until the patent is granted under ss 27 and 29, the applicant has no more than an expectation or hope of obtaining a patent. Only when it is granted will he or she obtain the monopoly which a patent confers. Both the provisos to s 20(4) and s 30(1) confirm that the patentee’s ability to enforce his or her monopoly rights and restrict competition is not intended to arise until the patent has been sealed. It is only at that point that the scope of the invention is defined and the extent of the monopoly apparent.

This monopoly and the patentee’s consequential ability to restrict competition is not granted lightly. Following the filing of the application the Commissioner may refuse to proceed with the application or require it to be amended (s 12); an examiner is to investigate the application for the purpose of seeing whether it has been anticipated by previous publication (s 13), or whether it has been anticipated by a prior claim (s 14), or whether it cannot be performed without substantial risk and infringement of a claim of any other patent (s 16), or whether it is contrary to morality (s 17). Amendments may be required at any time and any amendment is subject to the same investigation procedure (s

18(2)). Once the complete specification has been accepted it is open to public inspection (s 20). After publication the grant of the patent may be opposed on a number of grounds which, for the most part, relate to the invention so far as it is claimed in any claim (s 21). But with or without opposition, the Commissioner may refuse to grant the patent (s 22).

Having regard to the context in which it appears and its chronological place in the Act, s 20(4) is clearly intended to provide the applicant with provisional protection during the course of this process. The moment the patent is sealed the privileges and rights which the applicant is deemed to have by virtue of the subsection are crystallised by the patent. The patentee has no further need of the protection. There is, therefore, no need to enlarge the scope of s 20(4) beyond its acknowledged purpose; the protection of an applicant whose invention is published to the world while the application is being investigated and subject to the opposition process.

The scheme of the Act is to vest the patentee with the monopoly rights conferred by the patent. These rights are retrospective. That has been the unchallenged position since the earliest of times. Taking the view that the cause of action does not accrue until the patent is sealed is fully in accord with this overall scheme.

A procedural bar?

I reject the notion that the proviso to s 20(4) is nothing more than a procedural bar. Rather, it converts a inchoate right to sue for infringement into a full monopoly right and thus converts what is at best a putative cause of action into a cause of action.

Yet, the decision of the House of Lords in Sevcon, and the view of the majority in this Court, depends on the perception of the proviso as no more than a procedural bar. This perception in turn rests on the assumption that it is possible and prudent to distinguish between requirements which are a procedural impediment to bringing a proceeding and requirements or elements which are integral to the cause of action on which the proceeding is founded. Thus, Lord Mackay perceives the proviso as a bar to the enforcement of an

accrued cause of action which is “merely procedural” (at 108). Henry and Tipping JJ agree. The ability to commence an action is not a constituent part of the wrong suffered by the patentee. It is not an ingredient of the cause of action.

The basic flaw in this reasoning is the failure to appreciate that the sealing of the patent does more than merely clear the way for a proceeding for infringement to be instituted. It is not a formality. The grant confirms that the claim or claims in the complete specification which the defendant is alleged to have infringed subsist at the time the proceeding is commenced. Unless they subsist there can be no valid claim on which to found the action for infringement.

Lord Mackay in Sevcon seeks to meet this point by arguing that the applicant has a cause of action from the date of the infringing act, although he may subsequently “lose” that cause of action by failing to obtain a patent or by the complete specification being amended with “retrospective effect” in such a way that the acts no longer constitute an infringement of its claims (at 108). But does that not make the patent an integral part of the cause of action? Unless the patent is pleaded it cannot be known that the cause of action has not been “lost” or that the alleged infringing acts constitute infringements.

The fallacy is perpetuated in the distinction drawn between striking a proceeding out for not disclosing a cause of action and striking it out for abuse of process. If an applicant were to commence proceedings for infringement before the invention is sealed, Lord Mackay states: “the procedural requirements of the proviso would not be satisfied but a statement of claim could not be struck out as disclosing no cause of action although it might be liable to be struck out as an abuse of a process of the court” (at 108). That may well be so if an applicant were to bring a proceeding as an applicant prior to sealing. But, with respect, we are not dealing with that situation. The question whether the sealing of the patent is an integral part of the cause of action arises where the patent has been sealed, and the question is then whether that fact need be pleaded and proved as part of the cause of action. The proceeding could not be struck out as an abuse of process because the patent has in fact been sealed. But it could, on my view, be struck out if the grant of the patent is

not pleaded on the ground that the plaintiff has not shown that the claims which are the foundation of the proceeding are extant. There would, in other words, be a significant gap in the cause of action.

To put the point another way, it is incorrect to say that the cause of action arises when the infringing act occurs and that is all the applicant has to prove to demonstrate that its rights under s 20(4) have been infringed. Before he or she can prove anything, the applicant or patentee, to succeed, must then demonstrate that the claim in the complete specification which the pleading alleges was infringed remains a valid claim. Otherwise, a patentee will be able to recover damages for the “infringement” of amended, abandoned, rejected or otherwise defunct claims not enjoying monopoly rights - the patent absurdity I referred to earlier.

Furthermore, if the notion of a procedural bar is to be incorporated in the law of this country, it should in my respectful view be restricted to cases where something clearly in the nature of a formal step is required on the part of a plaintiff before a proceeding can be filed. Common sense would suggest that the step should be something within the control of the plaintiff so that his or her right to bring the proceeding cannot be frustrated or delayed. The grant of a patent following the exhaustive investigation and opposition processes set out in the Act falls far short of meeting these criterion. There is, for example, a substantial difference between a statutory bar on the right to sue for infringement until the patent is sealed and a provision preventing a solicitor from suing to recover his or her fee for services rendered before the expiry of one month from the delivery of the bill of costs as in Coburn v Colledge [1897] UKLawRpKQB 62; [1897] 1 QB 702. The formal step required of the solicitor is that he or she render a bill of costs and allow one month to expire before issuing a proceeding to recover the fee. This is a vastly different prerequisite from a condition precedent that the plaintiff obtain the grant of a patent.

Three reasons for holding notice by the solicitor a procedural bar emerge from the judgments in Coburn v Colledge. First, the Court held that the requirement of notice did not affect the right to payment but merely barred the procedure for enforcing it in the same

manner as a limitation defence. If the solicitor had any other means of enforcing his right he could do so as soon as the work was completed. In the present case, however, the damages or profits claimed are not liquidated and there are no other means by which the patentee could enforce its rights. Indeed, the applicant could not prevent infringement of the complete specification by way of injunction, for to do so would be to institute a proceeding for infringement contrary to the proviso. In Glamgard Pty Ltd v Enderslea Productions Pty Ltd (1985) 59 ALR 740, for example, the Supreme Court of New South Wales held that, although the sealing of a patent is retrospective in effect, the applicant does not acquire monopoly rights until sealing in fact occurs. As a result, it was held to be inappropriate to grant an interlocutory injunction to enforce such rights prior to sealing.

The second reason apparent from the judgments in Coburn v Colledge is that, as a cause of action comprises all facts which the plaintiff has to plead and prove if challenged in order to obtain judgment, the solicitor could succeed without pleading or proving the service of notice so long as the point was not raised in defence. In the present case, as demonstrated above, the plaintiff would need to prove that the patent had been sealed in order to establish that the claims on which prior infringement were based subsisted in the grant. The solicitor’s notice does not verify the debt in the way that the sealing of the patent verifies that the claim in issue remains extant. Nor is it possible to conceive that a proceeding commenced by an applicant prior to sealing the patent would be allowed to proceed even if the point was not taken in defence. The Court itself would surely be obliged to raise the issue, if only to establish whether it had jurisdiction to entertain the proceeding.

Thirdly, it was observed that, if the requirement the solicitor give notice was permitted to postpone the accrual of the cause of action, the plaintiffs could delay the cause of action accruing indefinitely, thereby defeating the purpose of the limitations statute. Again, that is not the case here. Indeed, the opposite is true. It can never be in the applicant’s interests to delay obtaining a patent but will be in a competitor’s interests to do so in order to exploit the applicant’s inability to sue for infringement until the patent is granted. It is the infringer in this instance who can delay the applicant’s right to sue for

infringement indefinitely and so thwart the purpose and policy of the Limitation Act. The patentee can hardly be said to “have lain by” for six years and so should be properly deprived of a remedy it has “omitted to use”. See Board of Trade v Cayzer Irvine & Co [1927] AC 610, per Lord Atkinson at 628.

For these reasons, rather than perceive the proviso as merely a procedural bar suspending or postponing the applicant’s ability to sue for infringement, it should be recognised for what it is, an integral part of the cause of action for infringements predating the sealing of the patent.

Finally, although not necessary for the purposes of this judgment, I would indicate a strong preference for discarding the distinction between a procedural bar and an integral element of a cause of action for limitation purposes altogether. The concept has been developed by the English Courts, and the Courts of this country are not necessarily bound to adopt it. The Canadian Courts have rejected it. A detrimental feature of the majority’s decision in this case is that the distinction will have been adopted in New Zealand law without serious attention being given to its usefulness or merit.

Coburn v Colledge proceeded on the basis of the definition of a cause of action stipulated in Read v Brown, supra, at 131. Such a definition more precisely describes the content of a prima facie cause of action and was no doubt appropriate in Read v Brown which concerned the lex situs of a cause of action. In that context the focus can properly be directed at the essence or substance of the cause of action and where it occurred. For the purposes of the Limitation Act, however, the requirement is that the cause of action must have accrued to the plaintiff and for that purpose the cause of action should be complete. Nevertheless, Coburn v Colledge has been applied in England in a number of cases. See O’Connor v Isaacs [1956] 2 QB 288, at 327, Sevcon itself, and Swansea City Council v Glass [1992] QB 844. There are, however, also English authorities to the contrary. See Board of Trade v Cayzer, Irvine & Co Ltd [1927] AC 610 and Musurus Bey v Gadban [1894] UKLawRpKQB 103; [1894] 2 QB 352. (See also McGee, Limitation Periods, supra, at pp 88-89). Cases such as Central Electricity Board v Halifax Corporation

[1963] AC 785 and Re Maney & Sons Deluxe Service Stations Ltd [1969] NZLR 116, can be distinguished on the basis that the statute in issue did not bar an action until the requirement was satisfied.

The reasoning in Coburn v Colledge was found to be unconvincing by the Alberta Court of Appeal in Costello v Calgary (City) (1989) 60 DLR (4th) 732, a case worthy of mention. Delivering the decision for the Court, Cote JA adverted to the English cases and described the discussion in them as “narrow and technical”. He noted that many of them overlook earlier contrary cases. The English cases, he added, offered very little help on how to tell a condition precedent from an element in the cause of action (at 739). Nor were definitions of the phrase “cause of action”, often from a different context, thought helpful. In one case, Cote JA observed, the Privy Council had described the condition precedent argument as “this somewhat subtle point” and decided the appeal on other grounds. (See Chan Kit San v Ho Fung Hang [1902] AC 257, at 260.)

The Court in Costello concluded that the distinction between elements of a cause of action and conditions precedent appeared worse than hard to apply, it appeared not to exist. As Cote JA said, any statutory so-called “condition precedent” will make the plaintiff lose and the defendant win. It is fairer to craft a rule which aims at justice or moulds conduct, rather than relying on the difference between artificial ideas like conditions precedent and causes of action (at 739). The learned Judge pointed out that the legislature enacts limitation statutes to make plaintiffs sue promptly and operates by forcing plaintiffs to sue within a set time. As a consequence, the time to sue must be real, not illusory (at 740). Relying on the proposition propounded by the Supreme Court of Canada in Morin v Canadian Home Ass’ce Co [1970] SCR 561, at 565, Cote JA argued that the limitation statute should be interpreted as only counting time from when all the conditions set by all laws for suit are satisfied. He concluded that, as the English authorities rely solely on artificial concepts, they contain nothing to displace the cogent reasoning of the Supreme Court to that effect (at 741).

I fully agree, and regret that this Court is not taking the opportunity to resist the introduction of the distinction which is largely artificial, difficult if not impossible to apply, at odds with the function and policy of the Limitation Act, and which can lead to results which are anomalous and unjust.

The policy considerations

In determining whether or not the sealing of the patent is an integral part of the patentee’s cause of action, there are a number of considerations of a policy description which need to be noted.

The first policy consideration relates to the consequences of following Sevcon. It cannot serve the law well to accept the acknowledged injustice which will occur in this case, and which occurred in Sevcon. Pre-grant opposition has been identified as a major source of delays in patent systems, such as the regime in this country, where such opposition is permitted. Thus, in the Banks Report (“The British Patent System; Report of the Committee to Examine the Patent System and Patent Law”, CMMD 4407) the Committee recorded that opposition proceedings could be so protracted that the grant of a patent could be delayed for years. Similarly, in Australia the Industrial Property Advisory Committee’s Report entitled “Patents, Innovation and Competition in Australia” (1984) observed that opposition proceedings were often used by competitors to delay the grant of the patent. Opposition proceedings lasting five to eight years were not unusual and had been known to extend beyond the time when the patent, if granted, would have expired. The Committee also stated that opposition proceedings may have the effect of enabling competitors to pirate the invention and to compete with the inventor directly for the whole of the commercially useful life of the invention. Excessive delay also led the Ministry of Commerce in New Zealand when reviewing intellectual property statutes in 1990, in a report entitled “Review of Industrial Property Rights, Patents, Trademarks and Designs; Options for Reform”, Vol 1, (1990), to recognise the problems associated with pre-grant opposition. It indicated New Zealand should consider abandoning pre-grant opposition and amending s 20(4) so that proceedings could be instituted prior to the grant where sealing was going to be delayed

by more than six years. In 1992 the Ministry released another report entitled, “Reform of the Patents Act 1953: Proposed Recommendations” (1992), in which it recommended that New Zealand abandon pre-grant opposition. It described a five year delay as being “average”.

The second consideration relates directly to the policy of the Limitation Act. To my mind it is unacceptable in principle that time should run against a plaintiff when he or she cannot bring an action. In determining when a cause of action accrues under s 20(4), therefore, the purpose and scheme of the Limitation Act must be relevant. In Distillers Co (Biochemicals) Ltd v Thompson [1971] AC 458, at 467, the Privy Council held that the statutory phrase “cause of action” may not necessarily have the same content for the purposes of limitations as in other contexts. Accepted purposes are to protect defendants from stale claims which they might no longer have the evidence to defend or the means to meet, to encourage claimants to proceed promptly, and to secure some finality in the interests of both justice and convenience. These goals, however, are not absolute. In encouraging the timely resolution of disputes, a limitation system must strike a proper balance between the interests of potential claimants, potential defendants and society at large. Other objectives must be balanced against claimants’ rights of access to justice. (See

e.g. Searle & Co v Gunn [1996] NZCA 433; [1996] 2 NZLR 129, at 131, and the Law Commission Report No 6, Limitation Defences in Civil Proceedings (1988) paras 2-3, at pp 101-110).

Furthermore, in the context of the question when time commences, this Court has endorsed the proposition that Courts should be slow to allow time to run against a party while factors beyond the parties control prevent an action being brought. See Robinson v Bennet (23 June 1978, CA 36/77, at 4-5). These considerations reflect the underlying principle that time should not run against a plaintiff until it is within the plaintiff’s power to bring an action. It is certainly not one of the purposes of the Limitation Act to deprive claimants of their right of action. (See Invercargill City Council v Hamlin [1994] 3 NZLR 513).

In the third place, the policy of the legislation in such circumstances as the present is indicated by s 24 of the Limitation Act itself. That section provides that, if on the date any right of action accrued for which a period of limitation is prescribed under the Act and the person to whom it accrued is under a disability, the right of action is deemed to have accrued on the date when the person ceased to be under a disability in the case of certain actions and within six years of the date when the person ceased to be under disability in other cases. The same approach is adopted where the cause of action is concealed by mistake in s 28. I acknowledge that the present respondents’ inability to sue is not a disability in terms of the Act. But that is not the point. The critical point is that the section is indicative of Parliament’s policy in cases where a person is unable to sue. The right to bring an action is deferred until the person is in a position to do so. Applied to the present case, this policy would mean that the respondents would have six years from the grant of the patent within which to bring proceedings for past infringements.

Fourthly, an analogy may be drawn with proceedings in negligence and those types of tortious harm where time does not start to run until the injured party knows or could with reasonable diligence have discovered the facts giving him or her a right to sue. See, e.g., S v G [1995] 3 NZLR 681, per Gault J at 687; G D Searle & Co v Gunn, supra, per Henry J at 133; and Invercargill City Council v Hamlin, supra, per Cooke P at 524 and Gault J at 534. Consequently, time does not run when the right to sue is inaccessible through lack of knowledge. So, too, a fortiori time should not run where the right of action is inaccessible because of a statutory prohibition.

Sections 74 and 75

I can find no support for the reasoning in Sevcon, or in the majority’s position, based on the terms of ss 74 and 75.

Section 74 provides a remedy for a person aggrieved by a threat of proceedings for infringement of a patent, whether made by any person entitled to or interested in a patent or an applicant for a patent or not. The defendant is liable for damages and other relief unless he or she can prove that the acts in issue would constitute infringement of a patent or of rights arising from the publication of a complete specification in respect of a claim not shown by the plaintiff to be invalid. But the threat must relate to “proceedings for infringement of a patent” (see subs (1)), and such proceedings can only be brought after the patent has been granted. As McGee, supra, at p 653, points out, the threat complained of must be regarded as a threat to institute proceedings after the patent is sealed. The section does not indicate when the cause of action accrues.

Nor is s 75 of relevance. Section 75 authorises the Court to make a declaration that the use or sale of any article by the plaintiff does not or would not constitute an infringement of a claim in a patent. Subsection (4) provides that such proceedings may be brought at any time after the date of publication of the complete specification in pursuance of an application for a patent, and references in the section to the patentee are to be construed accordingly. Such proceedings, however, are initiated by a third party, not the applicant or patentee. It is not denied that an applicant has rights, albeit inchoate in respect of the right to sue for infringement, but this does not mean that they must provide a cause of action for the section to apply. The third party would be simply seeking to establish that his or her proposed use or sale would not infringe a claim in the complete specification if it were in a patent. Subsection (3) of the section expressly stipulates that the validity of a claim in the specification is not called in question in proceedings for a declaration and neither the making nor refusal of a declaration is to be deemed to imply that the patent is valid.

Section 68(1)

Section 68(1) has assumed much greater prominence in this Court than in Sevcon. At the close of his judgment Lord Mackay referred to counsel’s forceful argument that s 59(1) (the English counterpart to s 68(1)) would mean that no damages could be awarded for infringement prior to the grant of the Letters Patent (at 109-110). He considered that, if

the effect of s 59(1) was to deprive an applicant of any remedy in respect of such infringement this would be a strong factor against the acceptance of the appellant’s arguments in that case. The learned Law Lord declined to rely on the point, however, as it was arguable that the English provision did not preclude an applicant seeking an account of profits. But s 68(1) expressly covers an account of profits and the point therefore needs to be addressed.

The majority observe that, if the issue is to be determined only by the provisions of the Act which are concerned with the grant and effect of a patent (ss 27 to 30), there is no possible basis for imputing knowledge of the patent to an infringer. The inconsistency, it is said, is apparent. Tipping J develops the argument based on s 68(1) at greater length. In his view, s 68(1) makes it clear that damages or an account of profits for pre-grant infringements cannot be obtained. This, he states, is because before grant and sealing the infringer cannot have knowledge of the existence of the patent for the simple reason that a patent does not exist until it has been granted and sealed.

In my respectful view the argument based on s 68(1) is an example of formalism carried to an unacceptable extreme.

In the first place, it is unrealistic to attribute to Parliament an intention to create a cause of action in an applicant pursuant to s 20(4) by virtue of the wording of s 68(1). The precursor to s 20(4) enacted in 1889 related to the period between the acceptance of a complete publication, and sealing, and it was not until 1946 that the provision was extended to cover the period between the publication of the complete specification and the sealing of the patent. (See above) The precursor to s 68(1) was enacted in 1911 in s 35 of the Patents, Designs, and Trade-marks Act, at a time, therefore, when the precursor to s 20(4) was limited to the period between the acceptance of a complete specification and sealing. Apart from minor variations in wording to s 20(4), this remained the position until 1946. It seems to me to be lacking in reality to suggest that when the legislature then changed the scope of s 20(4) without amending s 68(1) in 1946, it intended to confer a cause of action on the applicant as at the time of the acts of infringement. In truth, the provisions grew like

Topsy, and it would be chimerical to expect to find a definitive coherence between the respective provisions.

Secondly, the argument based on s 68(1) leads to the absurd situation that an innocent infringer is exempt from liability for damages for the infringement of a claim in a patent, but not exempt from damages if he or she infringes a claim in a complete specification of which he or she is equally unaware prior to the patent being sealed. Such an absurdity cannot be attributed to Parliament, and I do not doubt that the Courts would, by adopting a purposive construction and by analogy with s 68(1), apply the same defence in respect of the infringement of a claim in a complete specification under s 20(4). In the context of s 68(1), the word “patent” would include the publication of a complete specification pending the patent being sealed and the patentee obtaining a right of action. Once the defence is implied in respect of s 20(4), however, any apparent inconsistency simply disappears. The argument is no more sound than it would be if the defence was expressly included in that subsection. Nor can it be legitimate to argue that the question whether similar protection exists in relation to the infringement of a complete specification under s 20(4) does not call for consideration in this case when the answer to that question would almost certainly undercut the very reliance being placed on s 68(1).

Thirdly, even if the previous point is not accepted, the argument based on s 68(1) is a non sequitur. Section 68(1) applies only to proceedings for an infringement of a patent. But so what? The defence will not be available in respect of any infringement alleged by the patentee prior to the sealing of the patent. There would be a dreadful lacuna in the Act. But how would that fact indicate that a cause of action arises at the time of the infringement and before the applicant can, as applicant or as patentee, sue under s 20(4)? The lacuna would exist irrespective whether the cause of action arises prior to the sealing of the patent or is completed by the sealing of the patent. All the argument establishes is that the defence available under s 68(1) (unless it is to be implied) is not available to an infringer under s 20(4).

Reliance on s 68(1), to my mind, tends to confuse the question of determining what s 20(4) means with the question of determining when, for the purposes of the Limitation Act, a cause of action accrues under that subsection. The plain meaning of the words is clear and I do not suggest that they should not be given that plain meaning. On the contrary, I accept that they should be. But the plain meaning does not answer the question in issue; whether the proviso derogates from the rights conferred on the applicant or is relegated to a procedural barrier to the enforcement of those rights. It is for this reason that I consider a formalistic approach to the question in issue is misplaced.

The function and effect of s 20(4)?

Nor am I prepared to accept the reasoning that proceeds on the basis that s 20(4) would have no function unless it is construed so as to give rise to a cause of action at the time of the acts of infringement. The argument, as I apprehend it, is that s 20(4) would have no effect if it was open to a patentee to simply rely upon the patent and ss 27, 29 and 30(1) of the Act.

First, as Keith J points out, this is not the case if it is accepted that the rights are the rights of the applicant and those rights are not to be taken as derogating from the rights of a patentee under the patent. The learned Judge further points out that the section would provide the patentee, as applicant, with a cause of action for interest on damages for acts of infringement prior to the sealing of the patent.

Secondly, the same formalistic approach could be adopted if s 30(1) were in contention and one was to begin with that subsection and not s 20(4). What is the function or effect of s 30(1), it could be argued, if it does not confirm the patentee’s cause of action to sue for acts of infringement accruing after the date of the publication of the complete specification? Certainly, the subsection also prevents the patentee from suing for infringements between the date of filing and the date of publication of the complete specification. So what, then, is the position? The patentee has a cause of action to sue restricted to acts of infringement after the publication of the complete specification by virtue

of s 30(1); he or she then has a cause of action as applicant-cum-patentee under s 20(4); but he or she must then revert to the cause of action arising from the grant of the patent pursuant to ss 27 and 29 once it is sealed! The futility of seeking to determine when the cause of action arises under s 20(4) on the basis of a formalistic approach is clearly exposed. Section 20(4) has the effect of protecting the applicant pending the grant of the patent; it does not require the cause of action to vest prior to the grant to give it that effect.

The third point is highly significant and should not be overlooked. Historically, monopoly rights in a patent or pending patent have been notoriously tradeable. In practice, patents are assigned with or without the right to sue for past infringements. At times the assignor covenants to bring proceedings in respect of past acts of infringement. Applicants also at times assign their rights in an application for a patent. Indeed, the inventor who filed the original application did so in the present case. In such circumstances the assignor will not be able to sue as patentee. He or she, as the “applicant-assignor”, to coin a phrase, will have no cause of action apart from s 20(4), although the patent will still need to be sealed before the cause of action accrues. The section therefore may have a substantive function or effect for applicants who assign their rights prior to the sealing of the patent, or assignees of those rights, who do not become the patentees.

A claim for interest?

One of the arguments which the respondents face is that they will be unable to recover interest under the Judicature Act 1908 from the date of the cause of action unless it accrued at the time of the infringement of the complete specification under s 20(4). The House of Lords has already made that finding in General Tire, supra, and, it is argued, there is no sound reason to adopt a different approach when determining when the cause of action arises for the purposes of the Limitation Act. But although immediately attractive, this reasoning is not necessarily beyond question. For the purposes of the Limitation Act, different considerations may arise for different statutes or different provisions in the one statute. It may be possible, therefore, to argue that a different approach should be adopted when determining when the cause of action arises for the purposes of awarding interest

under the Judicature Act. See Distillers Co (Biochemicals) Ltd v Thompson, supra. Keith J’s opinion would, of course, give an independent cause of action to the applicant. The cause of action is that of the applicant and he or she can sue for infringement once the patent has been sealed. An applicant who became the patentee would be in the same position.

But these questions do not have to be answered in this appeal. It is, as Mr Judd rightly observed, a far more substantial matter to deny a patentee the right to damages for infringement than it is to deny the patentee interest on those damages.

The 1996 amendment

For the reasons given by Keith J, I do not think that the amendment in 1996 providing for a limitation period of three years from the sealing of the patent assists the appellants. The amendment cannot be read as retrospectively declaring the law to be as stated in the Sevcon decision. Nor can it be urged, other than in the most legalistic manner, that the amendment confirms that Sevcon was correctly decided. As Keith J points out, while it ought to be assumed that Parliament knew the existing state of the law when legislating, “the mere fact that an enactment shows that Parliament must have thought the law was one thing does not preclude the Courts from deciding that the law was in fact something different”. See Birmingham Corp v West Midland Baptist (Trust) Assn [1970] AC 874, per Lord Reid at 898.

To my mind there is nothing amiss in Parliament, or the Parliamentary draftsperson, proceeding on the basis that a decision of the House of Lords is correctly decided and represents the law in New Zealand. It may not know if and when the point will arise in New Zealand, and it is unduly optimistic to suggest that Parliament, or the Parliamentary draftsperson, should be alert to the possibility that this Court will decide to depart from a decision of the House of Lords.

If anything, the amendment confirms that it was never Parliament’s policy or intent to deprive an applicant or patentee of the ability to sue for infringement where the sealing of the patent is delayed beyond six years.

Other than that, while the amendment removed the possibility of the injustice which occurred in Sevcon happening in the future, it does nothing for the injustice which will now occur in this case.

Conclusion and summary

In conclusion, the essential respects in which I depart from the reasoning of the House of Lords in Sevcon may be summarised:

• The literal meaning of s 20(4) is clear, but the essential question whether it gives rise to a cause of action for the purposes of the Limitation Act before the patent is sealed can only be determined by reading it as a whole, and in context, and thus discerning the substance of the subsection.

• In substance, the requirement in the proviso that the patent must be sealed before any proceeding for infringement can be commenced derogates from the rights otherwise vested in the applicant by s 20(4). Apart from according with plain common-sense, this view obtains support in the following respects -
  • the rights in s 20(4) are necessarily inchoate in that it cannot be known prior to the

grant whether any particular claim in the complete specification will be included in the patent;

• it is contrary to reason to vest the claims in a complete specification prior to sealing

(which may or may not survive) with the force and effect of claims in a patent, leading to the absurd consequences which follow from such an overly-literal view; and

• a subsection designed to protect the applicant for a patent should not be construed

in such a way that the applicant may be deprived of that protection, more

particularly as the delay in obtaining the patent is likely to be outside his or her control.

• It is unsound and contrary to principle to separate the plaintiff’s cause of action from the plaintiff’s “right” to bring an action and seek the judgment of the Court.

• It is in error to perceive the grant of the patent as a mere procedural impediment having regard to the application, investigation and opposition processes which must be undertaken to obtain that grant.

• It is fallacious to perceive the sealing of the patent as a procedural bar only when to obtain the judgment of the Court the plaintiff must plead and prove the grant of the patent in order to establish that the claim or claims in the complete specification which are alleged to have been infringed remain extant.
• To hold that the cause of action accrues but subsequently may be “lost” where the

applicant fails to obtain the patent or where the complete specification is amended so that what was an “infringement” is no longer an infringement, by necessary implication acknowledges that the plaintiff must establish that the patent has not been “lost” (that is, that the patent has been sealed) and that the acts of infringement continue to constitute infringements (that is, because the claims relied upon are part of the patent).

• The argument that a proceeding commenced by an applicant before the patent is sealed could be struck out as an abuse of process does not meet the situation, as here, where the patent has been sealed. Where the patent has been sealed and the proceeding alleges the infringement of claims in the complete specification which have not survived in the patent, the proceeding more properly would be struck out for failing to disclose a valid cause of action.

• The concept of a procedural bar in the context of determining when a cause of action accrues for the purposes of the Limitation Act has little or no merit.
• Coburn v Colledge is readily distinguishable. In that case the notice was a formal step under the control of the solicitor, the solicitor had other means of enforcing his right, the debt was a liquidated claim, the notice from the solicitor was not required to verify the debt as the grant of the patent is required to verify the continuing validity of the claim or claims in issue, and the solicitor could delay the cause of action accruing indefinitely by not giving notice thereby defeating the purpose of the limitation statute, whereas the opposite in all these respects is the case in the present proceeding.

.

• A number of policy considerations should not be overlooked in determining when the cause of action accrued for the purposes of the Limitation Act. First, the unjust consequences which followed from the decision in Sevcon, and which will follow in this case, do not serve the law well. Secondly, it is contrary to the policy of the Limitation Act itself and objectionable in principle that time should run against a plaintiff at a time when he or she cannot bring an action. Thirdly, s 24 of the Limitation Act relating to persons under a disability indicates that it is the policy of the legislature to defer the “right” to bring an action until the plaintiff is in a position to sue. Finally, by analogy with tort, time should not start to run until the plaintiff is in a position to sue.

For the above reasons, I would decline to follow Sevcon, and would hold that the sealing of the patent is an integral part of the cause of action which accrues under s 20(4).

Solicitors

Rudd Watts & Stone, Auckland for Pacific Coilcoaters Ltd and Hunter Douglas Ltd A J Park & Son, Auckland for Besalon Industries Ltd, Multi Resources Ltd and Multi

Resources Holdings SDN

Jordans, Auckland for Interpress Associates Ltd

IN THE COURT OF APPEAL OF NEW ZEALAND CA 76/96

BETWEEN PACIFIC COILCOATERS LIMITED

First Appellant

AND HUNTER DOUGLAS LIMITED

Second Appellant

AND INTERPRESS ASSOCIATES LIMITED

First Respondent

AND BESALON INDUSTRIES LIMITED

Second Respondent

AND MULTI RESOURCES LIMITED

Third Respondent

AND MULTI RESOURCES HOLDINGS

SDN BHD

Fourth Respondent

CA 73/96

BETWEEN BESALON INDUSTRIES LIMITED

First Appellant

AND MULTI RESOURCES LIMITED

Second Appellant

AND MULTI RESOURCES HOLDINGS

SDN BHD

Third Appellant

AND INTERPRESS ASSOCIATES LIMITED

Respondent

Coram: Richardson P Henry J Thomas J Keith J Tipping J

Hearing: 15 October 1997

Counsel: D G Hurd and J F Anderson for Pacific Coilcoaters Limited and Hunter Douglas Limited

R J Katz for Besalon Industries Ltd, Multi Resources Ltd and Multi Resources Holdings Sdn Bhd

G J Judd QC for Interpress Associates Ltd

Judgment: 18 February 1998

JUDGMENT OF KEITH J

The plaintiff, Interpress, complains of breaches of patent by the defendants. The alleged breaches happened between 1980 and 1993, the year in which the proceedings were commenced.

The issue

The only issue before this Court is whether the proceedings are barred in full or significant part by the six year limitation period fixed in respect of actions in tort by s4(1)(a) of the Limitation Act 1950. The argument has proceeded both in the High Court and in this Court on the basis that the action is one in tort. Robertson J refused to strike out the proceedings in so far as the application was based on the Limitation Act; his judgment is reported as Interpress Associates Ltd v Fisher & Paykel Production Machinery Ltd (1996) 34 IPR 390. The defendants have appealed. The parties agree that this is an appropriate case for the Court to exercise its strike out powers if it is persuaded by the appellants; no evidence is required to resolve the application.

The facts

Some dates help provide the context:

1. Filing of complete specification 4 February 1977
2. Publication of complete specification 1 November 1979
3. Alleged breaches June 1980 - 4 February 1993
4. 16 year term of patent ends 4 February 1993
5. Assignment of rights to plaintiff 25 August 1993
6. Sealing of patent 27 August 1993
7. Issue of infringement proceedings 1 September 1993
8. Further defendant added 26 November 1993

One of the defendants (Pacific Coilcoaters) claims to have ceased involvement in the allegedly infringing activities on 26 June 1987. A six year limitation period reaching back from 1 September 1993 would completely protect it and, as well, would have a substantial impact on the proceedings against the other defendants.

The period of almost 14 years from 1 November 1979 when the patent application was published to 27 August 1993 when the patent was sealed covered what Robertson J referred to “as the thorough and somewhat laborious objection process” which applied as well to a competing application which also succeeded.

The proceeding is based on the rights of a patentee and not on the rights of an applicant

Much of the argument in both Courts turned on s20(4) of the Patents Act 1953 and on a decision of the House of Lords interpreting the identical s13(4) of the United Kingdom Patents Act 1949, Sevcon Ltd v Lucas CAV Limited [1986] RPC 609. At the relevant times those provisions read as follows:

(4) After the date of the publication of a complete specification and until the sealing of a patent in respect thereof, the applicant shall have the like privileges and rights as if a patent for the invention had been sealed on the date of the publication of the complete specification: Provided that an

applicant shall not be entitled to institute any proceedings for infringement until the patent has been sealed.

Section 20(4), it will be seen, is concerned with giving an applicant for a patent provisional protection in respect of alleged infringements of the subject matter of the application in the period before a decision has been finally made on the application. The question arises at once about its relevance to these proceedings. On its face the statement of claim is not based in any way on that provision. It is based simply and solely on the plaintiff’s rights under the letters patent issued five days earlier, on 27 August 1993. All 12 breaches alleged in the statement of claim are that the defendants have “infringed the Letters patent” by one or more acts of manufacture, sale, offer for sale, use or export. As Mr Judd for Interpress said at the beginning of his oral argument, the claim is based on the plaintiff’s rights under the patent as proprietor of the letters patent (although I do accept that the oral argument focused on s20(4)). The claim is not based on the rights the plaintiff already had as applicant in the period before sealing. Accordingly I turn to the plaintiff’s rights as patentee.

The rights of a patentee

A patent is to be in the prescribed form and is to be sealed with the seal of the Patent Office; it has the same effect as if it were sealed with the Seal of New Zealand, ss29(3) and (1). The prescribed form is as follows (emphasis added):

Form of Patent (New Zealand Arms) LETTERS PATENT

ELIZABETH THE SECOND, by the Grace of God of the United Kingdom, New Zealand and Her Other Realms and Territories Queen, Head of the Commonwealth, Defender of the Faith:

To all to whom these presents shall come, Greeting:

WHEREAS pursuant to the Patents Act 1953 an application has been made for a patent of an invention for ........... (more particularly described in the complete specification relating to the application):

AND WHEREAS ............ of ............. (hereinafter together with his or their successors and assigns or any of them called "the patentee") is entitled to be registered as the proprietor of the patent hereinafter granted:

NOW, THEREFORE, We by these letters patent give and grant to the patentee our special licence, full power, sole privilege, and authority, that the patentee by himself, his agents, or licensees and no others, may subject to the provisions of any statute or regulation for the time being in force make, use, exercise, and vend the said invention within New Zealand and its dependencies during a term of sixteen years from the date hereunder written and that the patentee shall have and enjoy the whole profit and advantage from time to time accruing by reason of the said invention during the said term:

AND we strictly command all our subjects whomsoever within New Zealand and its dependencies that they do not at any time during the said term either directly or indirectly make use of or put into practice the said invention, nor in any way imitate the said invention without the consent, licence, or agreement of the patentee in writing under his hand, on pain of incurring such penalties as are prescribed by law and of being answerable to the patentee according to law for his damages thereby occasioned:

PROVIDED ALWAYS:

(1) That these letters patent shall determine and become void if the patentee does not from time to time pay the renewal fees prescribed by law in respect of the patent:

(2) That these letters patent are revocable on any of the grounds prescribed by the Patents Act 1953 as grounds for revoking letters patent:

(3) That nothing in these letters patent shall prevent the granting of licences in the manner in which and for the considerations on which they may by law be granted:

(4) That these letters patent shall be construed in the most beneficial sense for the advantage of the patentee.

IN WITNESS whereof We have caused these letters patent to be signed and sealed as of the .......... day of .......... 19.....

................

Commissioner of Patents. (SEAL OF PATENT OFFICE)

---------

The wording of the grant of the “special licence, full power, sole privilege, and authority” in the first operative provision and the command in the second denying the use of the invention to others can be traced back through earlier New Zealand and United Kingdom statutes (such as the Patent Law Amendment Act 1852 (UK)) and ultimately to the prerogative instruments issued from Elizabethan times. While the prerogative power became subject to legislative constraints beginning in the time of James I with the enactment of the Statute of Monopolies of 1623, the prerogative base of the letters patent is still recognised, as appears from s 117(1) of the 1953 Act:

Saving for Royal prerogative, etc

(1) Nothing in this Act shall take away, abridge, or prejudicially affect the prerogative of the Crown in relation to the granting of letters patent or to the withholding of a grant thereof.

According to the first operative paragraph of the patent the grant of the 16 year sole privilege is from “the date hereunder written”. That date, in terms of s30(1), is the date of the filing of the complete specification - in the present case 4 February 1977. Since under the proviso to that provision “no proceeding shall be taken in respect of an infringement committed before the date of the publication of the complete specification” - here more than two years later, on 1 November 1979 - the grant in the letters patent is not quite as extensive as at first appears. As indicated later, the rights conferred by the patent in respect of that earlier period might nevertheless be significant in proceedings other than infringement proceedings brought by the patentee. The basic point is that the patent by its very nature and wording is retrospective, and in particular infringement actions brought by a patentee may relate back to the period between publication of the specification and grant; retrospectivity is inherent as well in the process for grant. That there is nothing new in that appears from earlier legislation, such as the New Zealand Patents Act 1870 ss7 and 17 and schedule 5.

On the basis of the very terms of the letters patent themselves, supported by the provisions of the Act relating to the grant, effect and term of the patent (ss27-30), the case appears to be straightforward. On 27 August 1993 Interpress obtained the letters patent with the associated important rights and privileges relating to the period 4 February 1977 to 4 February 1993 and especially to the period 1 November 1979 to 4 February 1993 during which the alleged breaches of the patent occurred. Those rights and privileges accrued or arose on the date of the grant of the letters patent on 27 August 1993 and no earlier. On the face of it any limitation period began to run on that date and no earlier. The strike out application, it appears, must fail. But no, say the defendants. Section 20(4) as interpreted by the House of Lords in the Sevcon case dictates a different answer.

The rights of an applicant

On the defendants’ view the rights of the respondent began to arise or accrue under s20(4) from the date of publication of the complete specification, on 1 November 1979. That was the case notwithstanding the bar on infringement proceedings imposed by the proviso to that subsection, since that bar was merely procedural in terms of such authorities as Coburn v Colledge [1897] UKLawRpKQB 62; [1897] 1 QB 702 and the Sevcon case; see also General Tire and Rubber Co v Firestone Tyre and Rubber Co Ltd [1975] 1 WLR 819 HL. Accordingly, approximately the first seven years of the alleged breaches (from 1980 to 1 September 1987) were excluded by the six year limitation period.

The facts in the Sevcon case are essentially the same as those in the present case : the period from application to sealing was 15 years (a year longer than the 14 year term of the UK patent); and the proceedings were brought two years later in respect of alleged breaches occurring 7-10 years earlier. The House of Lords held that the proceedings were barred by the six year limitation period for actions in tort. Lord Mackay of Clashfern gave the only judgment in which the other four members concurred. He began with two leading authorities on the expression, “the cause of action accrued”, used in the Limitation Act, Coburn v Colledge and Central Electricity Generating Board v Halifax Corporation [1963] AC 785, 801, 806. The cases indicate that a cause of action can accrue even although a further step necessary to enable an existing right to be enforced remains to be taken.

He then turned to consider how that “definition” as he characterised it was to be applied to the relevant provisions of the Patents Act 1949. “The principal provision,” he said, “is section 13(4)” (the New Zealand s20(4)). He quoted that provision along with s19(1) about the grant of the patent (s27(1)), s102(1) about the prerogative (s117(1)), s22(1) about the dating of the patent (s30(1)), and part of s65(2) about defences to groundless threats (s74(2)). He did not mention the actual form of the patent. After summarising the parties’ arguments, Lord Mackay set out his reasons for holding that s13(4)

governed the situation. It is convenient to set out those reasons at some length. It is the first paragraph that is critical:

If the only statutory provision relative to this matter was section 22(1) of the Act of 1949 [s30(1) of the New Zealand Act], I should be inclined to think its operation would have the effect contended for by the appellants. However, section 13(4) [s20(4)] in terms deals with the situation in the period after the date of the publication of a complete specification and until the sealing of a patent in respect thereof, and provides for the applicant having rights and privileges in this period. In his opening for the appellants, Mr Gratwick very fairly recognised that the provisions to which I have already referred in section 65(2) [s74(2)] might well produce results in favour of the applicant before any patent was sealed. Indeed it is very difficult to see what effect can be given to the principal provisions of section 13(4) unless they have the meaning contended for by the respondents. So far as infringement is concerned everything which Mr Gratwick’s submission would accord to a patentee would be provided by section 22(1) alone. I conclude therefore that section 13(4) does provide rights to an applicant for letters patent immediately after the publication of the complete specification and that if he is in a position to allege that acts have been committed by a defendant which constitute infringement of any claim of the complete specification as published, he has a cause of action from the date of these acts although he may subsequently lose that cause of action by failing to obtain a patent or by the complete specification being amended with retrospective effect in such a way that these acts no longer constitute infringement of any of its claims. I consider that the proviso does not make it necessary for the applicant to allege as part of his cause of action that he is the grantee of letters patent. Indeed, the proviso itself in describing his entitlement refers to him as “an applicant”. As an applicant whose complete specification has been published he has the necessary foundation in the shape of the privileges and rights that he would have had if a patent for the invention had been sealed on the date of that publication to constitute the necessary monopoly and allegations of acts of infringement after that date would complete all that is required for a cause of action. If he were to institute proceedings for infringement before the patent for the invention was sealed, the procedural requirement of the proviso would not be satisfied but a statement of claim could not be struck out as disclosing no cause of action although it might be liable to be struck out as an abuse of the process of the court.

The appellants contend that the conclusion which, for the reasons which I have set out, appears to be the correct one would lead to results which offend the policy of Parliament as manifested in the Limitation Act as a whole. They submit that the exceptions, for example, for those under disability, show that Parliament did not intend time to run where a person was not in a position to pursue his claim. However, the true principle as

illustrated in the cases to which I have referred is that time runs generally when a cause of action accrues and that bars to enforcement of accrued causes of action which are merely procedural do not prevent the running of time unless they are covered by one of the exceptions provided in the Limitation Act itself. The appellants submit further that it is possible having regard to what may be required to happen between publication of a complete specification and the sealing of the patent that rights of action may be lost before they may be enforced. If this were bound to happen Parliament might well have dealt with it expressly but it has not done so. However, the period of six years from the date of publication of the complete specification appears amply sufficient in the light of the provisions of the relevant rules for all that Parliament might have anticipated as taking place between the publication of the complete specification and the sealing of the letters patent.

(The particular facts in the Sevcon case and the present case do not support the view about the sufficiency of the period stated in the last sentence.)

The rights of applicants and of patentees are to be read separately and not together

With respect, I do not agree with that reasoning. The broad reason for my position is that the Patents Act is concerned with two distinct sets of rights. Primary in substance are those arising from the patent itself. They are rights which can be traced back over four centuries. It is the patent itself which is at the core of the system. It is that document, as it expressly states, that is the subject of renewal, of proceedings for enforcement and revocation, and to the grant of licences under other provisions of the Act.

Section 20(4) by contrast is concerned with a second set of distinct and more limited rights, established only in relatively recent times. Over the last century Parliaments in New Zealand and the United Kingdom have, when requiring the publication of patent applications at the same time provided “provisional protection” (as it has sometimes been called) to the applicant. So the New Zealand Patents Act 1870 s7 (following the United Kingdom Patent Law Amendment Act 1852 s9) provided that for six months after deposit of the application which was to be publicly notified under s10

the applicant shall have ... the like powers rights and privileges as might have been conferred upon him by letters patent for such invention under this Act

... .

The Colonial Secretary, Hon William Gisborne, explained the twin 1870 changes to the Legislative Council in this way:

The reason why the public could not have access to the specification, under the present law, was that there was no provision for the protection of the person who applied for a patent, from the time when he deposited the plan until the letters patent were granted, and it would be unfair that a person should have access on an alleged ground of objection, and then, after seeing its nature, adapt it perhaps to his own purposes. The Bill now before the Council provided that when the plans and specifications were deposited, persons should be allowed access to them to see if there were any valid grounds of objection, and in order to remedy the other evil which would result, it provided that the applicant should have provisional protection from the time when he deposited his plan until the letters patent were granted, and, besides, the letters patent could be ante-dated to the day upon which the specifications were deposited. ((1870) 7 NZPD 31)

In 1889 the provision took essentially its present form (as one of a set of provisions headed “provisional application”) including for the first time the proviso that the applicant could not institute infringement proceedings “unless and until” the patent had been sealed, Patents, Designs and Trade Marks Act 1889 s28. I take it that until then an applicant was able to bring proceedings, before sealing, to protect its “like powers rights and privileges” conferred by the 1870 amendment.

Provisional rights which were introduced to protect the applicant as applicant in respect of the period before grants should not be used to read down the primary rights conferred by the patent itself. That would be contrary to the protective purposes of both the basic patent law and the additional protection conferred in 1870 and included to balance the new requirement that the application be accessible and publicly notified.

It is true, as Lord Mackay says in the second sentence of the first paragraph quoted above, that s20(4) “in terms deals with the situation in the period after the date of the

publication of a complete specification and until the sealing of a patent in respect thereof, and provides for the applicant having rights and privileges in this period”. But it does not follow that it is only under s20(4) that rights and privileges relating to events in that period are to be protected. First, the patent itself provides for rights and privileges in respect of that period. Second, it provides for those rights and privileges to be held by the patentee while by contrast s20(4), completely consistently with its interim protective purpose, confers rights on the applicant - both in its substantive provision and in the proviso.

Next, to refer to Lord Mackay’s fourth sentence, it is not the case that s20(4) would have no effect if the rights under the patent and the associated provisions of ss27-30 were as I contend (and as was argued by Mr Gratwick for the appellant in Sevcon). For instance, as Lord Mackay says, the rights under s20(4) (alone) are relevant in proceedings brought before sealing under s74 (the United Kingdom s65). There can be no equivalent rights under the not yet existent patent. Second, given that the rights under the patent do not “arise” until sealing, no interest would appear to be payable in respect of breaches of the patent occurring in that earlier period in terms of s87 of the Judicature Act 1908; by contrast, according to the General Tire case, the cause of action under s20(4) does arise on breach and interest is payable from that time, and accordingly a (former) applicant can (with the limitation period running from the earlier time) seek interest in respect of infringements of “like privileges and rights” by proceedings brought in terms of the proviso. That is to say the proviso does have real effect on my reading of the provisions. (There would not of course be double recovery for the same infringements and resulting losses under the patent and under s20(4).)

Again, I agree with Lord Mackay when he “conclude[s] ... that [s20(4)] does provide rights to an applicant ...”, but essentially the same points are to be made. First the rights are the rights of an applicant. And second there is no reason for these rights to be read as derogating from the primary rights of a patentee under the patent.

I would perhaps take further than he does his proposition that “the proviso does not

make it necessary for the applicant to allege as part of his cause of action that he is the grantee of the letters patent”. Since the proceeding is brought in respect of rights of the applicant by an applicant (even if that status is now in the past) it would appear to be confusing as well as unnecessary to incorporate the sealing as an element - except to defeat the procedural bar. The real point about Lord Mackay’s proposition for my purposes is that again it stresses that the rights and indeed the remedies belong to the applicant and not to the patentee (even if the applicant has become the patentee).

Finally, I refer to the scheme of the Act. Section 20(4) is included in its chronological place in the Act, as one of a set of procedural provisions (ss7-26) concerned with the making of an application for a patent, its investigation, its publication and opposition to it. By contrast the provisions about the patent itself and the force of the patent appear in the next set of provisions concerned with the grant, effect and term of the patent (ss27-30). I can see no reason for reading down the major substantive rights of the patentee by reference to the interim provisional protection of the applicant.

To summarise, the terms of the separate provisions of the patent law, their distinct purposes, their history and the scheme of the legislation all bring me to the conclusion that s20(4) does not limit the rights of the respondent as patentee under the patent. It follows that in my view the limitation period in respect of alleged breaches beginning in 1980 runs from 27 August 1993, the date of the sealing of the patent.

Because Henry and Tipping JJ mention s68 of the New Zealand Act in their judgments, I make a final reference to the Sevcon judgment. Near the end of the judgment Lord Mackay refers to s59(1) of the United Kingdom Act, the counterpart of s68(1) of the New Zealand Act. A defendant in proceedings for infringement of a patent who proves that at the date of the infringement it is not aware or had no reasonable ground for supposing a patent existed is not to have an award of damages or an account of profits against it. Lord Mackay did not rely upon the argument based on that provision. I do not think that it helps

the defendants in this case. It assumes that the patent “existed” at the time of the infringement. The defendant must prove its reasonable ignorance of a fact. At the relevant times in this case that fact - an existing patent - did not exist.

Three reasons to pause

Three matters weighed against my reaching the conclusion stated in this judgment. The first was the authority of a unanimous House of Lords affirming a unanimous Court of Appeal and the High Court, and assisted by counsel expert in patent law. But it does appear to be the case that all focused primarily, if not exclusively, on s13(4) and the issues arising from it and not on the distinct primary set of rights arising from the patent. (As mentioned earlier Lord Mackay did not refer to the actual terms of the patent.) The second reason for concern was related - the inconvenience of having an interpretation here which is inconsistent with that in the United Kingdom on a common statutory provision which regulates a matter with significant international elements. (We were not referred to any relevant provisions of intellectual property treaties.) But any such concern has been greatly reduced if not completely removed in practice by the replacement of the United Kingdom provision in 1977 and the amendment to the New Zealand provision made in 1996.

That amendment was the third matter that made me pause. It might be argued that Parliament in enacting that amendment affirmed the law as stated in the Sevcon judgment. The amendment, following modern drafting practice, first altered s20(4) to replace the proviso at the end of the provision by an exception:

(4) After the date of the publication of a complete specification and until the sealing of a patent in respect thereof, the applicant shall have the like privileges and rights as if a patent for the invention had been sealed on the date of the publication of the complete specification, except that the applicant shall not be entitled to institute any proceedings for infringement until the patent has been sealed.

That change does not appear to have had any substantive effect. But the new subs

(5) was plainly designed to make a change:

(5) Notwithstanding anything in the Limitation Act 1950 where it is alleged that an infringement has occurred in the period commencing with the date of the publication of the complete specification and ending with the date on which the patent is sealed, the period of limitation for taking an action in respect of that infringement shall be—

(a) Six years from the date of the alleged infringement; or

(b) Three years from the date of the sealing of the patent,— whichever is the later.

The Bill as introduced (Law Reform (Miscellaneous Provisions) Bill (No 5) cl 144) was to the same effect except that the period in para (b) was to be one year rather than three. The Justice and Law Reform Committee said this in its commentary on the Bill as reported back:

Clause 144 deals with the situation where a patent is sealed more than six years after publication of the complete specification and it is alleged that an infringement of the patent occurred between the date of publication of the complete specification and the date of sealing. Section 4 of the Limitation Act 1950 prevents an action for infringement being brought. The amendment as originally drafted amends section 20 of the principal Act to allow an action to be brought within six years from the date of the alleged infringement or one year from the date of the sealing of the patent, whichever is the later.

A submission was received which suggested that the one year period was insufficient to commence proceedings against any additional infringer discovered during proceedings against the first identified infringer.

We agree with this submission, and recommend that clause 144 be amended to provide that an action may be brought within six years from the date of the alleged infringement or three years from the date of the sealing of the patent, whichever is the later. (Law Reform (Miscellaneous Provisions) Bill (No 5) xii) (emphasis added)

Those responsible for that amendment were plainly and understandably proceeding on the basis of the Sevcon decision. Also relevant was the recommendation of the Law Commission in Limitation Defences in Civil Proceedings (1988 NZLC R 6) para 390 and draft s20 (pp163-165) that the limitation period, generally of three years, should run from the date of sealing of the patent.

If the position adopted in this judgment is correct, Parliament would have done the opposite of what was intended in 1996. The intention was to increase the rights of patentees by reducing the impact of the limitation period. But on the reading I propose the period running for six years from sealing would be replaced by only three years (or one on the original proposal).

Should the amendment be taken as (retrospectively) declaring the law as stated in the Sevcon case for the period before 1996? I do not think so. While it ought to be assumed that Parliament when legislating knew the existing state of the law, “the mere fact that an enactment shows that Parliament must have thought that the law was one thing does not preclude the courts from deciding that the law was in fact something different”, Lord Reid in Birmingham Corporation v West Midland Baptist Trust Association [1970] AC 874, 898. This is not a case in which the new provisions are not workable unless Parliament’s (erroneous) understanding is acted on since the two bodies of law cover distinct time periods - before and after the coming into force of the 1996 amendments; see Yew Bon Tew v Kenderaan Bas Mara [1983] 1 AC 553 which the parties agreed applied to give the 1996 Act only future effect.

Since I have concluded that the law did differ from the understanding held by those responsible for the 1996 amendment I do not consider that that provision affects the conclusion I have reached.

Conclusion

It follows that I would dismiss the appeals.

Solicitors

Rudd Watts & Stone, Auckland for Pacific Coilcoaters Ltd and Hunter Douglas Ltd

A J Park & Son, Auckland for Besalon Industries Ltd, Multi Resources Ltd and Multi Resources Holdings Sdn Bhd

Jordans, Auckland for Interpress Associates Ltd.

IN THE COURT OF APPEAL OF NEW ZEALAND CA 76/96

BETWEEN PACIFIC COILCOATERS LIMITED

First Appellant

AND HUNTER DOUGLAS LIMITED

Second Appellant

AND INTERPRESS ASSOCIATES LIMITED

First Respondent

AND BESALON INDUSTRIES LIMITED

Second Respondent

AND MULTI RESOURCES LIMITED

Third Respondent

AND MULTI RESOURCES HOLDINGS SDN BHD

Fourth Respondent

CA 73/96 BETWEEN BESALON INDUSTRIES LIMITED

First Appellant

AND MULTI RESOURCES LIMITED

Second Appellant

AND MULTI RESOURCES HOLDINGS SDN BHD

Third Appellant

AND INTERPRESS ASSOCIATES LIMITED

Respondent

.

Coram: Richardson P Henry J Thomas J Keith J Tipping J

Hearing: 15 October 1997

Counsel: D G Hurd and J F Anderson for Pacific Coilcoaters Ltd and Hunter Douglas Ltd

R J Katz for Besalon Industries Ltd, Multi Resources Ltd and Multi Resources Holdings SDN BHD

G J Judd QC for Interpress Associates Ltd

Judgment: 18 February 1998

JUDGMENT OF TIPPING J

I am in general agreement with the judgment which Henry J has delivered. I am writing separately because of the difference of opinion in this Court and to emphasise an aspect of the matter which I regard as being of importance.

In my view the solution to the issues presented by this case lies in reading the patent and the relevant sections of the Act together, rather than individually. Read that way, a reasonably coherent whole emerges. Specifically, the patent and ss20(4), 30(1) and 68(1) must be construed so as to work together. When that is done it can be seen that an infringement of the complete specification (which under s20(4) has the effect of a deemed patent) cannot found a claim for damages or account of profits as a breach of the patent itself.

The statutory provisions noted above are to the following effect:

20 (4) After the date of the publication of a complete specification and until the sealing of a patent in respect thereof, the applicant shall have the like privileges and rights as if a patent for the invention had been sealed on the date of the publication of the complete specification, except that the applicant shall not be entitled to institute any proceedings for infringement until the patent has been sealed.

30(1) Every patent shall be dated with the date of filing of the complete specification:

Provided that no proceeding shall be taken in respect of an infringement committed before the date of the publication of the complete specification.

68(1) In proceedings for the infringement of a patent, damages or account of profits shall not be awarded against a defendant who proves that at the date of the infringement he was not aware, and had no reasonable ground for supposing, that the patent existed; and a person shall not be deemed to have been aware or to have had reasonable grounds for supposing as aforesaid by reason only of the application to an article of the word "patent", "patented", or any word or words expressing or implying that a patent has been obtained for the article, unless the word or words are accompanied by the words "New Zealand" or the letters "N.Z." and by the number of the patent.

While under s30(1) a patent on sealing appears to have some retrospective effect, s68(1) makes it clear that damages or account of profits for pre-grant infringements cannot be obtained. This is because before grant and sealing the infringer cannot have knowledge of the existence of the patent for the simple reason that a patent does not exist until it has been granted and sealed.

Knowledge of a patent application can give reasonable grounds for supposing under s68(1) that a patent has later come into existence: see Wilbec Plastics Ltd v Wilson Dawes Ltd (1966) RPC 513; but s68(1) clearly protects against claims for account of profits or damages for infringement before the patent has come into existence. Whether, by analogy with s68(1), similar protection exists in relation to infringement of a deemed patent under s20(4), does not call for consideration in this case, but seems probable. The existence of such analogous defence does not logically affect the essential point.

For these reasons, the only way damages or account of profits can be obtained for an infringement of a patent which occurred before its formal grant and sealing is via a claim by the applicant (albeit now the patentee) under s20(4). On this basis it is s20(4), and s20(4) alone, which entitles a patentee to obtain such relief for pre-grant breaches. There is no independent right under the patent, either alone or in combination with s30(1), because any such claim is bound to fail by dint of s68(1).

I should add that, after sealing, an injunction obviously cannot be obtained to restrain pre-sealing infringements and thus s68(4) cannot assist. For these reasons I do not consider the issues presented by s20(4) can be circumvented simply by saying the patentee has a direct claim for pre-grant breaches without having to resort to s20(4), and in respect of which claim the cause of action arises only on sealing. It is highly unlikely that if this was the solution all the Judges and counsel involved in Sevcon v Lucas CAV Ltd [1986] 2 All ER 104, from first instance onwards, would have overlooked so obvious an answer.

Indeed Oliver LJ in the Court of Appeal was anxious to find a way of avoiding the limitation point if such were possible.

Essentially, the answer purporting to circumvent s20(4), while initially attractive, is rendered untenable when s68(1) is read into the equation. Once this apparent solution is put aside, the issue becomes, as it was in Sevcon, whether a cause of action under s20(4) arises when the infringing act occurs, or not until the patent is sealed. In my judgment sealing removes a procedural bar; it is not an ingredient of a cause of action for pre-grant infringement.

Under s20(4) the cause of action arises when the infringing act occurs. That is all an applicant has to prove to demonstrate that its rights under s20(4) have been infringed. If it were not for the proviso, the act of sealing would be wholly irrelevant. Its relevance under the proviso lies not in completing the cause of action, but rather in entitling the plaintiff to sue upon that cause of action. The proviso is premised on the basis that a cause of action already exists, but its enforcement is, to the extent of the proviso, suspended until the patent

has been sealed. The reason for such suspension, or at least a reason, must be that until sealing the final form of the patent is not known. If there have been alterations to the complete specification prior to grant, the ability to sue for pre-grant infringements, not reflected in the patent as ultimately sealed, may depend on whether the specification was framed in good faith and with reasonable skill and knowledge: see s68(3).

I agree with the decision of the House of Lords in Sevcon, both for the reasons expressed in the speech of Lord Mackay and for the reasons given above. The criticisms which have been levelled at Sevcon lie not so much in the legal principle upon which the decision was based, which are of long standing in the law relating to limitation of actions, but rather because of the potential for injustice which the decision creates. In New Zealand that potential has largely been removed by the recent amendment to s20(4) which must have been passed on the basis that Sevcon correctly stated the law. In any event, the extreme delays in the process of examination and grant apparent in recent times can hardly have been envisaged when the legislation was originally framed.

The difference between the accrual of a cause of action and the existence of a bar to the commencement of proceedings seeking a remedy thereon has been established for many years. While it may seem anomalous that time can run against a person who cannot bring proceedings until an event external to the cause of action has taken place, this facet of limitation law is so firmly entrenched that only a general amendment to the Limitation Act

can now change it.

If Sevcon was wrongly decided, General Tire and Rubber Co v Firestone Tyre and Rubber Co Ltd [1975] 2 All ER 173 (HL) must also have been wrongly decided. As Henry J has pointed out, you can hardly have a cause of action which arises at different times for different purposes. Either the plaintiff has a cause of action, or it does not. In my judgment, the causes of action in the present case arose when the alleged infringements occurred. Those occurrences were in all respects outside the limitation period in that the alleged infringements all occurred more than 6 years prior to the commencement of the

proceedings. The claims should therefore have been struck out and I would allow the appeals accordingly.

Solicitors

Rudd Watts & Stone, Auckland, for Pacific Coilcoaters Ltd and Hunter Douglas Ltd A J Park & Son, Auckland, for Besalon Industries Ltd, Multi Resources Ltd and Multi Resources Holdings SDN

Jordans, Auckland, for Interpress Associates Ltd