Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Bramco Electronics Pty Ltd v ATF Mining Electrics Pty Ltd (No 3) [2014] NSWCA 63
• Hearing dates: 20 August 2013
• Decision date: 17 March 2014
• Before: Meagher JA at [1]; Barrett JA at [7]; Ward JA at [8]

Decision

1. Leave to appeal be granted.

2. Appellant to file within 14 days a notice of appeal in the form of the draft notice of appeal.

3. Appeal dismissed with costs.

Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: CONTRACTS - general contractual principles - construction and interpretation of contracts
• Legislation Cited: Patents Act 1990 (Cth)
• Cases Cited: Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191; Bramco Electronics Pty Ltd v AFT Mining Electrics Pty Ltd [2013] NSWCA 392; Decor Corp Pty Ltd v Dart Industries Inc (1988) 13 IPR 385; Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; Kimberly-Clark Australia Pty Ltd v Multigate Medical Products Pty Ltd [2011] FCAFC 86; (2011) 92 IPR 21; Kinabalu Investments Pty Ltd v Barron & Rawson Pty Ltd [2008] FCAFC 178; Populin v HB Nominees Pty Ltd (1982) 59 FLR 37; Re Golden Key Ltd [2009] EWCA Civ 636; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
• Category: Principal judgment
• Parties: Bramco Electronics Pty Ltd (Applicant); ATF Mining Electrics Pty Ltd (Respondent)
• Representation: Counsel: Ms J Baird SC (Applicant); C R C Newlinds SC with R D Glasson (Respondent); Solicitors: K&L Gates (Applicant); Moray & Agnew Lawyers (Respondent)
• File Number(s): CA 12/354542

Decision under appeal

• Citation: ATF Mining Electrics Pty Ltd v Bramco Electronics Pty Ltd [2012] NSWSC 1126
• Date of Decision: 2012-09-18 00:00:00
• Before: Sackar J
• File Number(s): SC 12/059118

Judgment

1 MEAGHER JA: I have had the benefit of reading in draft the reasons of Ward JA. I agree that the orders her Honour proposes should be made for the reasons that she gives.

2 The critical issue in the proposed appeal concerns the proper construction of the definition of "Sensor" in the Settlement Deed and Patent Licence Agreement between the parties. Those agreements were made as a result of the settlement of the underlying patent infringement proceedings brought by ATF against Bramco.

3 The relevant definition is set out by Ward JA at [22]. Its legal meaning is to be determined by application of principles recently summarised by the High Court in Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7 at [35]. The present case concerns the interpretation of agreements made to resolve a commercial dispute. In Woodside Energy the majority said, approving the observation of Arden LJ in Re Golden Key Ltd [2009] EWCA Civ 636 at [28], that "unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties ... intended to produce a commercial result'".

4 The definition of "Sensor" is, by the use of the word "means", expressed to be exhaustive. A sensor is a device which is capable of performing a sensing function, such as detecting and measuring some change in a physical condition or property. With the exception of the words "including a Smarty branded sensor" the language of the definition describes two characteristics which such a device must have to be a "Sensor". The first concerns its capability with respect to the storage and uploading or transmitting of data. The second concerns its intended or proposed use, namely "in accordance with the invention described in the Patent". The second characteristic ties a sensor device which has the first characteristic to the subject matter of the Patent, thereby ensuring that the agreements would be confined to devices which were alleged to or did use and apply the Patent. For that reason, and notwithstanding that those words follow the reference to "a Smarty branded sensor", they are to be read as forming part of the description which a device which is a sensor must satisfy to be within the defined term "Sensor".

5 The words "including a Smarty branded sensor" appear between the descriptions of those two characteristics. There remain questions as to what that description refers to, and whether it also is to be read as qualified by the closing words of the definition so that "a Smarty branded sensor" is not within the defined term unless it has the characteristic described by those closing words. The use of the indefinite article and the fact that at the time the agreements were made there was no device which was or had been branded "Smarty" suggest the description is of a device having the same essential characteristics and operating in the same way as that which was referred to as the Smarty and was the subject of the underlying dispute.

6 At the heart of that dispute was Bramco's contention that the sale of that device did not involve an infringement of the Patent. The principal outcome of the settlement was an agreement that prohibited the future sale of such devices other than in accordance with the licence. In that context, the obvious reason for inserting the words "including a Smarty branded sensor" was to make clear that a device answering that description was a "Sensor" and for that reason subject to the prohibition and licence provisions in the two agreements. There was no commercial sense in including those words to make clear that such a device was taken to have the first of the characteristics in the definition, but at the same time leaving it open to Bramco to argue that it was not a "Sensor" because it did not satisfy the description in the closing words. In the absence of any contrary indication in the text, the construction which does not treat the closing words of the definition as qualifying the words "including a Smarty branded sensor" should be adopted. That is the construction preferred by Ward JA (esp at [55]).

7 BARRETT JA: I agree with Ward JA.

8 WARD JA: The circumstances giving rise to the dispute between Bramco Electronics Pty Ltd ("Bramco") and ATF Mining Electrics Pty Ltd ("ATF") have been outlined in reasons published by me on 26 November 2013 in Bramco Electronics Pty Ltd v AFT Mining Electrics Pty Ltd [2013] NSWAC 392). For ease of reference I will repeat the salient details.

Background

9 Both companies manufacture electrical equipment for use in the mining industry. ATF holds the patent for an invention called a "Load Control Module" (the Patent). The invention claimed in the Patent is a device or unit that, in lay terms, enables the ordinary operating parameters associated with various machines to be set remotely through a control module.

10 The operation of the invention was described by Bramco, in submissions on the appeal (T 7-16), as involving both a device or node (the particular device over which there was dispute in the proceedings was referred to as the Smarty or SP Node) and a controller and protection module. When placed with a piece of mining equipment, for example, the function of the device or node was to identify the usual operating parameters of the equipment; to communicate information as to the actual "load during operation" of the equipment in question, by way of electrical wiring to an offsite controller and protection module; and, if the load during operation did not comply with the usual operating parameters for that piece of equipment, then the correct machine settings could be downloaded to the device or node. As I understand it, the function of the patented invention is to permit the correct machine settings to be automatically set for various pieces of mining equipment, thus minimising human error. The same device or node when placed with different pieces of equipment would identify the particular characteristics referable to each.

11 Relevantly, for the purposes of the arguments run by Bramco at the hearing and on appeal, Bramco submits that the invention claimed in the patent is one that requires the node (or sensor unit) to send a first signal transmitting load protection data to a controller and for the controller then to compare the actual load protection data so transmitted with other information (the source of which is said to be irrelevant for this purpose) in order to determine whether the actual load during operation of the equipment complies with the load protection data transmitted by the first signal. If the controller identifies that there is not compliance with that load protection data, then the controller that has received the first signal can provide a second signal to the switch gear to isolate the load from the power source.

12 Bramco places emphasis on the fact that the invention is described in the Patent claims as comprising a "sensor unit" and that the circumstance in which the second signal (isolating the load from the power source) is sent is one that involves a comparison with the very same ("said") load protection data that has been transmitted in the first signal. Thus, it is submitted, unless the comparison carried out by the controller and protection module is of the very data signal transmitted by the sensor unit (i.e., there has been nothing done to the data so transmitted, in terms of decoding or interpreting it), the device does not infringe the Patent.

13 ATF brought proceedings in the Federal Court against Bramco, contending that it had infringed the Patent by, inter alia, selling a machine recognition device referred to as the "Smarty" or Smart Pilot or SP Node. Bramco denied that it had infringed the Patent and cross-claimed for orders revoking the Patent on various grounds.

14 The parties settled the Federal Court proceedings without admission by either party. ATF released Bramco from any claims in relation to the Patent and the sale of the Sensor and Bramco agreed, inter alia, not to challenge the validity of the Patent.

15 Under the Settlement Deed, Bramco agreed to enter into a licence agreement (which it did at the same time as entry into the Settlement Deed) and agreed not to sell, repair, maintain, improve or otherwise use or apply the Patent "or the Sensor" except as expressly permitted in accordance with that licence agreement (clause 4.1 of the Settlement Deed). Under the Patent Licence Agreement, Bramco was given a limited licence in relation to the "Sensors" and agreed (clause 4.2(b)), inter alia, not to sell "any Sensor" after 31 December 2008.

16 On 31 December 2008, Bramco began to manufacture and sell a device referred to in these proceedings as the "MRD" (an acronym for "machine recognition device"). Bramco says that the MRD has no sensing functions and that what the MRD does is to send the first signal of "load protection data" by way of an index or code; that index or code being received by the controller which then uses "lookup tables" in order to assemble more complex communication information and compares the information so derived (from the lookup tables) to determine whether the equipment is operating within or outside the usual operating parameters for that piece of equipment (see T 14/15; T 29).

17 His Honour accepted (at [93]) expert evidence to the effect that the MRD did, for all practical purposes, the same thing in the same way as the Smarty or Smart Pilot (SP) Node that had been the subject of the Federal Court proceedings. His Honour noted that Bramco's expert, Mr Hollands, had conceded, in cross-examination, that there were no real differences between the SP Node and the MRD (Black 43.10-15). There is no challenge by Bramco to the findings by his Honour (at [115]) that the "Smarty" was a "Sensor" as defined in the respective Settlement Agreements and (at [151]) that any differences between the MRD and the Smarty devices were immaterial.

18 The primary judge found that Bramco was in breach both of the Settlement Deed and the Patent Licence Agreement by selling and manufacturing the MRD after 31 December 2008. Bramco seeks leave to appeal from that finding.

Application for leave to appeal

19 Leave to appeal is sought on the basis that the determination of liability (which was made separately and in advance of all other issues in the proceedings) was a final determination as to breach of the Settlement Agreements and therefore affected the substantive rights of Bramco. There was no demur from ATF to the proposition by Bramco that, on ATF's case, the damages claim will exceed $3.2 million. ATF made no submission against the grant of leave to appeal. In my opinion, leave to appeal should be granted.

Grounds of Appeal

20 Bramco raises 8 grounds of appeal, as follows:

1. The primary judge erred in deciding at [156]-[157] that the appellant's device known as an MRD was a device which can be used in accordance with the invention described in Australian Patent no. 704930 (Patent) and is thereby a device within the definition of "Sensor" in the Deed of Settlement and Release dated 17 January between the respondent and the appellant (Deed) and Patent Licence Agreement dated 17 January 2008 between the respondent and the appellant (Agreement).

2. The primary judge erred at [138] and [139] in holding that the word "sensor" need not be construed as requiring the same meaning in each of claims 1, 2 and 3 of the Patent and that the term "sensor" does not include sensing functions when used in claims 1 and 2.

3. The primary judge ought to have held, applying the principles of construction applicable to patents (summarised inter alia in the authorities referred to at [22]-[29]), and accepting as he did the evidence of the expert witnesses that the term "sensor" in the Patent did not have any special technical meaning (at [68], [72] and [76]), that the term "sensor" as used in claim 1 of the Patent had its ordinary meaning of a device that detects a change in a physical stimulus and turns it into a signal which can be measured or recorded (as stated at [76]), namely, a sensing device, and that the meaning of the term did not change when used in claim 1, 2 or 3 of the Patent.

4. The primary judge, having properly accepted that the MRD was not a sensor within the ordinary meaning of the word (at [113]-[114]), ought to have held that the MRD was not a sensor or sensor unit within the meaning of the Patent, was not a device that can be used in accordance with the invention described in the Patent and was not a device within the definition of "Sensor" in the Deed and Agreement.

5. The primary judge erred in holding at [155] that "load protection data" in the Patent, in particular claim 1, means any information directly or indirectly associated with load protection including any single value which determines the requirements for a module to operate including the initiation of the second signal.

6. The primary judge failed to take into account a material consideration, namely the use of the phrase "said load protection data" in claim 1 of the Patent, at [155] when construing the meaning of "load protection data" in the claim.

7. The primary judge ought to have held that by the use of the phrase "said load protection data" claim 1 of the Patent requires that the load protection data transmitted by the sensor unit to the controller is the same load protection data that is then compared by the controller to the load operating data to determine whether to provide the second signal to isolate the load from the power source.

8. The primary judge erred in finding at [154] and [155] that the method of communication of data by the MRD satisfies the requirements of the Patent and the term "load protection data" and that the MRD clearly stores and transmits "load protection data" to the controller as described in claim 1 of the Patent, whereas he ought to have found, on the evidence, that the data transmitted by the MRD to the controller was not the same data that was compared to the load operating data by the controller to determine whether to provide the second signal to isolate the load from the power source and that therefore the MRD did not satisfy the requirements of the Patent and did not store and transmit load protection data as described in claim 1 of the Patent.

21 Bramco contends that his Honour erred in finding that the MRD is a "Sensor" within the relevant definition: first, because it has no sensing function (and hence is not a "sensor unit") for the purpose of claim one of the invention; and, second, because the use of the MRD does not involve a comparison (by the controller or unit to which load protection data is transmitted) of the same load protection data as that which was transmitted by the MRD in the first place (hence it is said that the MRD is not "for use" in accordance with the invention described in the Patent).

Settlement Deed

22 Relevant provisions of the Settlement Deed were set out in my earlier reasons. The critical question on the present appeal is as to the proper construction of the definition of "Sensor" in clause 1 of the Settlement Deed, which is as follows:

Sensor means any sensor that:

(a) stores or is capable of storing data; or

(b) stores or is capable of storing data and uploading or transmitting the data to a controller or relay;

including a Smarty branded sensor for use in accordance with the invention described in the Patent. (my emphasis)

23 There is no definition of the term "Smarty branded sensor" in either of the Settlement Agreements. Nor is the word "Smarty" a defined term in either of the Settlement Agreements.

24 Clause 4 of the Settlement Deed, headed "Bramco's rights and obligations", includes reference variously to "the [or a] Sensor" (in clause 4.1(b), (f) and (h)), and to "the [or a] Smarty Sensor" (clause 4.1(g), which was limited to the making of promotional or marketing reference to "the Smarty Sensor" and the making of representations as to the offer of "a Smarty Sensor" for sale).

25 Clause 6 of the Settlement Deed, contains a release by ATF in favour of Bramco from, inter alia, all liability or claims in relation to the Patent and the sale by Bramco of "the Smarty Sensor".

26 Again, the term "Smarty Sensor", as used in clauses 4 and 6 of the Settlement Deed, is not defined in either of the Settlement Agreements.

27 What ATF contends has occurred is that Bramco has manufactured, marketed and sold a device (the MRD) that in essence is simply a "re-branded" Smarty Sensor. Bramco, which does not admit that the Smarty or SP Node was one that infringed the Patent, maintains that its MRD is not within the prohibition in the Settlement Agreements.

Patent Licence Agreement

28 The Patent Licence Agreement contains an identical definition of "Sensor" as that contained in the Settlement Deed and no definition of "Smarty branded sensor" or "Smarty".

29 Clause 16.7 is a standard form "entire agreement" clause, providing that the Settlement Deed and Patent Licence Agreement recorded the entire agreement between the parties in relation to their subject matter and superseded all previous communication, understandings or agreements between them in respect to such subject matter.

Load Control Module Patent

30 The invention described in the Patent is for a load control module comprising a controller and a "sensor unit" with the attributes set out in the Patent claims, which are:

1. A load control module for controlling switch gear which, in use, connects a power source to a remotely located electrical load, the module including:

a sensor unit associated with the load for providing a first signal which transmits load protection data; a controller for receiving said first signal and for selectively providing a second signal to the switch gear to isolate the load from the power source when said load during operation does not comply with said load protection data;

2. A load control module according to claim 1 wherein the switch gear and the controller are located within a protective housing and the sensor unit and load are disposed outside the housing;

3. A load control module accoding [sic] to claim 1 or 2 wherein the sensor unit associated with the load periodically provides a third signal which transmits load operating data;

4. A load control module according to claim 3 wherein the sensor unit provides the third signal when requested by the controller;

5. A load control module according to any one of the preceding claims wherein the controller and sensor unit communicate through a single wire communication link which also supplies power to the sensor unit;

6. A load control module according to any one of the preceding claims wherein the switch gear selectively connects the power source to the load via a power cable, the cable including the communication link;

7. A load control module according to any one of the preceding claims wherein the controller includes means for detecting earth leakage faults;

8. A load control module substantially as herein described with reference to the accompanying drawing.

31 Nine separate integers of claim 1 of the Patent were identified in the course of argument:

1. A load control module for controlling switch gear

2. which, in use, connects a power source to a remotely located electrical load,

3. the module including:

4. a sensor unit associated with the load

5. for providing a first signal which transmits load protection data;

6. a controller

7. for receiving said first signal

8 and for selectively providing a second signal to the switch gear to isolate the load from the power source

9. when said load during operation does not comply with said load protection data. (my emphasis)

32 By reference to those integers, what Bramco contends is that the MRD does not comprise a "sensor unit" (as required by integer 4) and what is compared by use of the MRD (for the purpose of assessing compliance of the load during operation with the applicable operating parameters for the equipment) is not the actual signal transmitted by the MRD to, and received by, the controller (i.e., the data referred to in integers 5 and 7) but, rather, other information that the transmission signal directs the controller to take into account (via the lookup codes). It contends that what the Patent requires (for the purpose of integer 9) is that the controller (referred to in integer 6) be one that tests or compares the "load during operation" against the very same "load protection data" as has been transmitted by the first signal referred to in integer 5 and received by the controller in integer 7. Emphasis is placed on the reference in integer 9 to "does not comply with said load protection data".

Primary judgment

33 I have summarised the primary judge's reasons in my earlier judgment. Suffice it for present purposes to note that his Honour broadly accepted the construction for which ATF contended, though not accepting that the Patent was irrelevant when considering what the parties objectively should be taken to have intended by the term "Sensor" in the Settlement Agreements.

34 The construction for which ATF contended was that the reference to "sensor" in the definition of "Sensor" was to be understood as a reference to the very "thing" or "device" which was the subject of the Federal Court proceedings (i.e., the SP Node or "Smarty" Node) and that any device that could be used as part of the system described in the Patent was caught by the definition (by reason of the words "for use in accordance with the invention described in the Patent"), whether or not it was a sensor in the ordinary sense of the word.

35 As adverted to earlier, Bramco accepted that the inclusion of the words "Smarty branded sensor" brings the SP (or Smarty) Node within the definition used in the Settlement Agreements (even though that Node did not have a sensing function) but it contended that those words did not otherwise expand the definition. On Bramco's construction, what the definition of "Sensor" requires is something that both comprises a sensor unit (within the ordinary meaning of the word "sensor") and is "for use in accordance with the invention described in the Patent".

36 Bramco submits that the reference to a Smarty branded sensor simply means that the parties accepted, for the purpose of the Settlement Agreements, that something that was not in fact a sensor should be treated as one, but that there is no reason to treat other non-sensing units (such as the MRD) as within the definition. Nor does it accept that the inclusion of reference to "a Smarty branded sensor" brings within the definition other sensors that (as it contends was the case with the Smarty node itself) are not for use in accordance with the invention discussed in the Patent.

Grounds 1 & 4 - is the MRD a "Sensor" within the meaning of the definition

37 The first ground of appeal goes to his Honour's ultimate determination that the MRD fell within the definition of "Sensor", from which it necessarily followed that Bramco was in breach of its contractual obligations under the Settlement Agreements. The fourth ground of appeal goes, more narrowly, to whether his Honour ought to have held that because the MRD is not a sensing device it is not a device that can be used in accordance with the invention described in the Patent and hence it is not a device within the definition of "Sensor".

38 Those grounds squarely raise the proper construction of the definition of "Sensor" in the Settlement Agreements. The remaining grounds focus more closely on the construction of the Patent.

39 Construing the definition of "Sensor" in the Settlement Agreements (without reference, for the moment, to the Patent), it is clear that to fall within the definition the first requirement is that the particular device be a "sensor". The word "sensor" is used in lower case. There is no dispute that, in the ordinary meaning of the word, what is required is that the device in question have the capacity to "sense" something.

40 Both the experts (and the parties) accepted that the MRD is not a sensor within the ordinary meaning of the word (and, relevantly, nor was the Smarty or SP Node the subject of the Federal Court proceedings). Therefore, whether or not the MRD is capable of performing the functions in (a) and (b) of the definition, if the definition had finished at the end of (b) there would be little doubt that the MRD fell outside the definition because it could not satisfy the opening words of the definition.

41 His Honour accepted (at [115]) that neither the MRD nor the SP (or Smarty) Node was a "sensor", as such, but concluded that the reference to the "Smarty branded sensor" expanded the definition of "Sensor" to include the device that was at the centre of the Federal Court proceedings. In circumstances where the contractual documents were brought into existence in settlement of the proceedings in which there had been allegations that Bramco's Smart Pilot Node/SP Node infringed the Patent, Bramco accepts that the parties may be taken to have intended, by use of the phrase "Smarty branded sensor", to refer to the SP Node (referred to also as the "Smart Pilot Node" or "Smarty" Node) the subject of those proceedings.

42 In effect, therefore, if "sensor" is to be given its ordinary meaning in the definition, what the parties have nevertheless done is to deem something that has no sensing function to be a Sensor for the purposes of their agreement. There is nothing surprising about that conclusion in the context of the litigation that was then on foot between them, which turned, at least in part, on whether the Smarty or SP Node was a sensor unit that infringed the Patent.

43 What Bramco contends, however, is that the finding (at [151]) that the MRD and the SP Node do the same thing in the same way does not lead to the conclusion that the MRD (or, for that matter, another device that would perform the same function as the SP Node) falls within the definition of "Sensor". In other words, it maintains that it is only the particular device that was the subject of the Federal Court proceedings that is brought within the expanded definition by the words commencing "including" and that since the MRD is not the same as the Smarty or SP Node the MRD cannot fall within the definition unless it satisfies the particular requirements of the definition.

44 Accepting that the particular Smarty or SP Node is brought within the definition even though it has no sensing function, the question that follows is whether the words "a Smarty branded sensor for use in accordance with the invention described in the Patent" are used in a composite sense (i.e., is it only a Smarty branded sensor that is for use in accordance with the invention described in the Patent that falls within the definition). In other words, do the closing words of the definition qualify the immediately preceding words ("a Smarty branded sensor") or should the words "a Smarty branded sensor" be read as an interpolation (such that it is irrelevant whether a Smarty branded sensor is for use in accordance with the invention described in the Patent). There is also a question as to what is meant by "in accordance with" for the purposes of the definition.

45 As noted, there is no definition of "Smarty branded sensor" to assist in this regard. His Honour's conclusion (at [112]) was that the parties must have intended thereby to refer to the particular device that was the focal point of the Federal Court proceedings. Bramco does not dispute this. However, as I read his Honour's judgment, his Honour at least implicitly found that the term, as used in the Settlement Agreements, extends beyond the particular Smarty or SP Node to a node or device that does the same thing in the same way.

46 In this regard, the use of the indefinite article "a" (as opposed to the definite article "the") in the term "a Smarty branded sensor" is, in my opinion, of significance. By using the word "a", the parties may be taken not to have limited the expansion of the definition of "Sensor" to the particular type of "Smarty branded sensor" that was the subject of the parties' then dispute but to have extended it to a device that could be described as "a" Smarty branded sensor. The term "Smarty branded sensor" thus seems to be used as a generic description broadly to cover the kind of device that was in issue in the Federal Court proceedings or something not materially different therefrom.

47 I reach this conclusion for the following reasons. First, the words "Smarty branded" cannot sensibly be read as referring only to a sensor device that was actually branded or named as such, since there was no device so branded at the relevant time. (The SP Node was not branded as a "Smarty". That was simply the manner in which the parties had referred to the device.) Second, it makes little commercial sense to resolve a dispute over a particular device, by prohibiting use of that device other than by a limited licence, if the exact same device could straight away be used with no more than a change of branding. Third, if the words "Smarty branded sensor" were intended to refer only to the actual SP (or Smarty) Node, then the following words "for use in accordance with the invention described in the Patent" are curious since Bramco was at that time denying that the SP (or Smarty) Node was one that infringed the Patent. There is no suggestion, for example, that Bramco was to be permitted to sell the Smarty or SP Node after 31 December 2008 as long as it was only used in some fashion other than "in accordance with" the invention described in the Patent.

48 In my view, the words "a Smarty branded sensor" were intended to include not just the particular device the subject of the Federal Court proceedings but also one so closely comparable to it that the device could objectively be described as "a" Smarty branded sensor in a generic sense.

49 The difficulty with Bramco's construction (namely, that all that is permitted by reference to the words "a Smarty branded sensor" is the use of the SP Node itself) is that it leaves it open to Bramco to avoid the limitation imposed under the Settlement Agreements simply by re-branding or modifying (in some inconsequential way) the so-called Smarty or SP device. Hence, the submission by ATF that Bramco's construction of the definition would flout business common sense or the obvious commercial purpose of the settlement (referring to Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 at 201 and Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [40]).

50 One answer to that, as Bramco contends, is that had the parties wished to expand the definition of Sensor to include "non-sensing" units that performed the same function as the Smarty or SP Node, they could have done so. Another is that if Bramco has done no more than re-brand or re-market the Smarty or SP device under a new guise (but the two are in effect the same device) then it might be in breach of an implied obligation of good faith (though no such argument was raised in the proceedings before his Honour).

51 However, the more likely explanation in my opinion for the use in the definition of the indefinite article is that the words "a Smarty branded sensor" were intended objectively to refer generically to the kind of device that was the subject of the Federal Court proceedings. On such a construction, the fact that the MRD and the SP (or Smarty) Node do the same things in the same way permits the conclusion that the MRD was "a Smarty branded sensor" within the definition of Sensor and gives a commercial operation to the Settlement Agreements that accords with the context in which those agreements came into existence.

52 His Honour implicitly reached that same conclusion. His Honour concluded that the parties intended to encompass within the Settlement Agreements the device that was the subject of the Federal Court proceedings. That is not controversial. His Honour implicitly found that the MRD was the same such device because it did the same thing in the same kind of way. His Honour noted that there had been some modification or updating of the device (in the "firmware" of the respective controllers). Nevertheless his Honour was satisfied, as I read his judgment, that the MRD was in substance the same device as the "Smarty branded" sensor the subject of the Federal Court proceedings so as to fall within the description of "a" Smarty branded sensor in the definition. His Honour did not in my opinion err in that conclusion.

53 As to what purpose the concluding words of the definition are to serve, I was initially inclined to think that the grammatical structure of the definition (in particular, the lack of a comma after the words "including a Smarty branded sensor") indicated that the words "for use in accordance with the invention described in the Patent" qualified only the immediately preceding words "a Smarty branded sensor". However, if that were the case (and the parties were referring to no more than the particular SP (or Smarty) Node then in contention) then there would be no work for those words to perform if, as Bramco then and now contends, the SP (or Smarty) Node was not "for use in accordance with the invention described in the Patent".

54 Moreover, if the closing words ("for use in accordance ... Patent") were not intended to apply to the whole of the definition, then the scope of the definition would be very broad. Any sensing device satisfying (a) and (b) (other than "a Smarty branded sensor") would fall within the definition whether or not the device was capable of, or intended for, use in accordance with the invention in the Patent. There seems no basis for reading the definition in such an expanded way.

55 Having regard to the context in which the Settlement Agreements were entered into, it is difficult to accept that the parties were not intending to capture, in the definition of "Sensor", a device the use of which related (or might be contended by ATF to relate) to the invention described in the Patent. Therefore, despite the lack of a comma before the closing words "for use ... Patent", I am of the view that those concluding words add a second requirement to the requirement imposed by the opening words of the definition, namely that (for anything that does not fall within the description of "a Smarty branded sensor") to be a Sensor within the definition the device must be a sensor unit; it must have the capacities in (a) or (b); and it must be for use in accordance with the invention described in the Patent.

56 On that construction of the definition of "Sensor", it is immaterial whether the MRD was "for use in accordance with the invention described in the Patent" because the parties, in effect, treated it as doing so. However, if it were necessary that the closing words be satisfied for a device that was not the particular SP (or Smarty) Node but was generically "a" Smarty branded sensor, it is my opinion that the MRD satisfies that requirement for the reasons I address in relation to grounds 5-8 of the grounds of appeal.

Grounds 2-3 - meaning of "sensor" in claims 1-2 of the Patent

57 Having concluded that the parties understood and should be taken objectively to have intended the SP (or Smarty) Node to come within the monopoly of the Patent when connected to the controller (at [115]), his Honour went on to consider what he expressly noted was an alternative submission by ATF, namely that the MRD did in fact infringe the Patent. (The fact that his Honour treated this as an alternative submission supports the conclusion that his Honour had construed the definition as referring to "a Smarty branded sensor" in the generic sense to which I have referred above.

58 The bulk of the challenges to his Honour's reasons (grounds 2, 3 and 5-8) of the notice of appeal relate to this aspect of his Honour's judgment.

59 His Honour referred (at [118]) to the expert evidence that it was only in claim 3 of the Patent that the device was required to perform as a "sensor" and referred to evidence from ATF's expert witness (Mr Ellis) to the effect that the device was called a "sensor" in other claims in the Patent because it did function as a "sensor" in the best mode of the invention. His Honour also referred (at [138]) to it having been agreed (presumably by the experts) that the term "sensor" was a misnomer in claims 1 and 2 because those claims did not involve sensing, whereas claim 3 did.

60 His Honour concluded at ([139]) that:

... it is not necessary that the word "sensor" be construed as requiring the same meaning in each of claims 1, 2 and 3, for example, when the context suggests otherwise to persons relevantly skilled. It does perform sensing functions in claim 3, the best mode of invention, and it is obvious to those with the requisite expertise that it does not include 1 and 2 for example. Meticulous verbal analysis is out of place in this context.

61 Bramco contends that his Honour erred in two respects in relation to that conclusion. First, in holding that the word "sensor" need not be construed as requiring the same meaning in each of claims 1, 2 and 3 of the Patent (and that the term "sensor" does not include sensing functions when used in claims 1 and 2). Second, in accepting the evidence of the expert witnesses that the term "sensor" in the Patent did not have any special technical meaning ([68], [72] and [76]). It is submitted that his Honour ought to have held that the term "sensor" as used in claim 1 of the Patent had its ordinary meaning of a sensing device (one that detects a change in a physical stimulus and turns it into a signal which can be measured or recorded) and that the meaning of the term did not change when used in claim 1, 2 or 3 of the Patent.

62 On its face, claim 1 of the Patent requires that the load control module include a device that has a sensing function, whether or not the device uses that function for the purposes of the invention. Claims 2 and 3 are claims dependent on claim 1 of the Patent (being introduced as dependent claims in the Patent). The distinction between claim 3 and claim 1 is that there the sensor unit, as part of the load control module, has the characterising feature that it periodically provides a particular third signal.

63 Bramco does not contend that his Honour did not correctly record what the expert evidence was as to this aspect of the Patent (at [73], [74]), namely that it was only the sending of the "third signal" that required the device to be a sensor; that the device is called a sensor because it does function as a sensor in the "best mode of invention" (in claim 3); and that the device described in the Patent is only a "Sensor" if used in accordance with claim 3.

64 Rather, Bramco contends that his Honour misinterpreted the experts' statement that the use of the term "sensor" in claim 1 was a misnomer. Bramco submits that the suggestion that "sensor unit" was a misnomer in claim 1 involved the logical fallacy that a term that in its ordinary sense required a sensing function and that was used in claims 1, 2 and 3, should be interpreted differently in claim 1 because the particular device in question did not use a sensing function. In other words, it is submitted that the experts confused consideration of whether there was an infringement of the claim with the question of what was described in the claim and that this led his Honour to fall into error in attempting to reconcile the fact that the MRD had no sensing function with the fact that in its ordinary meaning claim 1 required that there be a "sensor unit".

65 There was no dispute between the parties as to the general principles applicable to the construction of patents (as outlined in Kinabalu Investments Pty Ltd v Barron & Rawson Pty Ltd [2008] FCAFC 178 at [44]-[45]; Kimberly-Clark Australia Pty Ltd v Multigate Medical Products Pty Ltd [2011] FCAFC 86; (2011) 92 IPR 21 at [12]-[13]; [38]-[47]) to which, with other authorities, his Honour referred at [22]-[28], including that the specification must be read as a whole and, other than in cases of ambiguity, by reference to the actual terms there specified, ordinary words are to be given their ordinary meaning, unless the specification ascribes a special meaning or a person skilled in the relevant art would give them a special meaning (Decor Corp Pty Ltd v Dart Industries Inc (1988) 13 IPR 385 at 391). The patent specifications are to be construed in light of common general knowledge at the relevant date (Populin v HB Nominees Pty Ltd (1982) 59 FLR 37 at 42-43).

66 Construing the Patent, there is no basis for concluding that the claim 3 was not dependent on claim 1 or that "sensor unit" should not be given its ordinary meaning when used in claims 1-3. It follows that whether or not the device the subject of the Federal Court proceedings (the SP or Smarty node) was actually used as a sensor when transmitting the first signal to the controller is irrelevant to the construction of the Patent. In its terms, claim 1 of the Patent requires that the device comprise a "sensor unit associated with the load".

67 Therefore, insofar as grounds 2 and 3 contend that his Honour erred in construing claims 1-3 of the Patent by accepting that the word "sensor" need not bear the same meaning in each of those claims, I consider that those grounds are made out. However, in my opinion nothing turns on this having regard to the conclusion I have reached as to the construction of "Sensor" in the Settlement Agreements (and, if the closing words do impose such a requirement on a generic Smarty branded sensor such as the MRD, having regard to the conclusion I reach below as to the meaning of "for use in accordance with the invention described in the Patent").

Grounds 5-8 - meaning of "said load protection data" in the Patent

68 Grounds 5-8 go to the question whether the invention described in the Patent requires that the controller and protection module compare (for the purposes of integer 9) the very same load protection data as transmitted to it in the so-called first signal by the node or device attached to the piece of equipment in question.

69 Bramco contends that the content and form of the first signal transmitted by the sensor unit (the load protection data that comprises integer 5) must be the same content and form referred to by the expression "said load protection data" (for the purposes of integer 9), which the controller compares with the load during operation in order to determine whether to provide a second signal. It is submitted that what is to be compared must be that which is actually received, in the sense of being the particular communication that transmitted to the controller, and that if the MRD does not perform this function then it is not within the definition of "Sensor" in the Settlement Agreements.

70 As explained earlier, the distinction drawn here is between the situation where the controller compares actual data transmitted to it and the situation where the controller uses that data as an index or code in order to determine from another source the relevant data to be used for the purpose of comparison.

71 Bramco accepts that what the MRD transmits is "load protection data" for the purposes of satisfying integer 5 but contends that integer 9 is not satisfied because what the controller compares is not that data; rather, it is data obtained by reference to information obtained by using the data transmitted as a code or index or reference source.

72 Bramco submits that what his Honour found (at [155]) was that provided a message sent by the device could be acted on by the controller then the integers of claim 1 were satisfied. Bramco contends that this is not correct and that the phrase "said load protection data" in the final integer of claim 1, properly construed, requires that there be an identity of the load protection data transmitted by the sensor unit with what is compared by the controller to determine whether to provide the second signal.

73 Bramco places emphasis on the word "said" and submits that his Honour erred in considering only the first signal (what is sent by the device to the controller), not what the controller then compares in order to provide the second signal.

74 ATF contends that a purposive approach should be adopted and that the reference to "load protection data" in the Patent means any information directly or indirectly associated with load protection including any single value which determines the requirements for a module to operate (including to initiate the second signal) and does not mean the "full or "whole" set of data. AFT submits that both the MRD and the SP Node store and transmit "load protection data" to the controller as described in claim 1 of the Patent.

75 ATF places reliance from his Honour's description of the "Background to Invention" ([43] - [49]) and concedes that his Honour was mindful of the requirement for the relay to compare the operating values with the load protection data transmitted by the MRD and that (from [144]) his Honour was also mindful of the fact that the invention requires a comparison of the load protection data to the operating data.

76 His Honour (at [149]) regarded it as significant that the Patent did not proscribe the manner in which messages were to be communicated (whether analogue or digital) and said that what was important was the communication of load protection data "or what the controller interprets as such" so the system can ensure there is no overload. At [150], his Honour said:

The precise type of the message or code is, it seems to me, irrelevant. I am satisfied that both devices [i.e., the Smarty node and the MRD] participate in a similar fashion in communicating the message or code which conforms with the description of load protection data ...

77 His Honour there expressly preferred the evidence and explanation of AFT's expert (Mr Ellis) which his Honour believed accorded best with the evidence as a whole. ATF submits that his Honour must there be taken as having rejected Bramco's expert evidence to the effect that the load protection data could not be conveyed by code and that the whole of the data or information had to be conveyed by the MRD in order to satisfy the Patent.

78 I accept that as a matter of construction the use of the word "said" in claim 1 of the Patent qualifies "load protection data" such that what is required is that the controller that receives load protection data by way of the first signal is then carrying out the function of assessing compliance of the "said load during operation" with that load protection data. What I do not accept is that there is anything in the wording of claim 1 of the Patent to require that the said load protection data be in the identical form when the comparison is carried out. If what is electronically transmitted has to be converted in some fashion (say as a code whereby particular data, perhaps in a summary form, is converted to a more complete formula by reference to a "lookup table"), what is being compared is still the same data - it is the equivalent of a decryption of the coded data that has been transmitted by the first signal. To use a lay example, if the data transmitted in the signal was in a foreign language, and the controller converted it by reference to a dictionary into English, what is being compared is still the same data - just in a form that is intelligible to the controller. Similarly, if the signal transmits data in a short form code that needs to be deciphered once it is received by the controller, what is being compared is in essence the same data.

79 Therefore, I do not accept that his Honour erred in the construction of the Patent as contended for in grounds 5-8.

80 In any event, assuming there were force in the submission that what the Patent required was identity of form and content between the load protection data being transmitted in the first signal and the load protection data being compared or assessed by the controller when determining whether to provide the second signal, the issue for determination in the proceedings before his Honour was whether the MRD (assuming for these purposes that it was "a Smarty branded sensor" and that the closing words of the definition apply to a Smarty branded sensor) was "for use in accordance with the invention described by the Patent".

81 It was not suggested that "in accordance with" has a particular meaning when construing a Patent or should be given a special meaning when construing the Settlement Agreements. The invention described in the Patent was one that performed, or was capable of performing, a particular function. The MRD, as I understand the evidence and as his Honour accepted, is capable of being used in order to perform that function in the same way (though it cannot be described as a sensor unit and though the load protection data it submits may need to be converted by lookup tables into a more complete set of data for comparison or assessment by the controller). In those circumstances, it is capable of use in accordance with the invention described in the Patent, though it may not fall precisely within the description of the invention (not being a sensor unit as such).

82 Therefore, whether or not the closing words of the definition apply as an additional requirement to the MRD as "a Smarty branded sensor", I am of the opinion that they are satisfied.

Conclusion

83 For the reasons set out above, I am of the view that leave to appeal should be granted and the appeal dismissed with costs. I propose the following orders:

1. Leave to appeal be granted.

2. Appellant to file within 14 days a notice of appeal in the form of the draft notice of appeal.

3. Appeal dismissed with costs.

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Decision last updated: 18 March 2014