Precismeca Ltd v Melco Mining Supplies (Pty) Ltd (395/2001) [2002] ZASCA 119 (25 September 2002)

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[2002] ZASCA 119
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Precismeca Ltd v Melco Mining Supplies (Pty) Ltd (395/2001) [2002] ZASCA 119; 2003 (1) SA 664 (SCA); 2002 BIP 79 (SCA) (25 September 2002)

THE SUPREME COURT OF
APPEAL
OF
SOUTH AFRICA
Reportable
CASE
NO: 395/2001
In
the matter between:
PRECISMECA
LIMITED APPELLANT
and
MELCO MINING SUPPLIES (PTY) LIMITED
RESPONDENT
Before: HEFER AP, NAVSA, NUGENT JJA, JONES
et
LEWIS AJJA
Heard: 12 SEPTEMBER 2002
Delivered: 25 SEPTEMBER 2002
Summary: Jurisdiction of high court in
respect of common law licensing agreement
________________________________________________________________
J
U D G M E N T
________________________________________________________________
LEWIS AJA:
[1] The single issue for determination in this
appeal is whether the jurisdiction of a high court to determine the
right of the appellant
to a statement and debatement of account, and
payment of licence fees under a contract, is ousted by s 18 of the
Patents Act 57 of 1978
.
Section 18
(1) provides:
‘
Save as otherwise provided in this
Act, no tribunal other than the commissioner shall have jurisdiction
in the first instance to hear
and decide any proceedings, other than
criminal proceedings, relating to any matter under this Act.’
The
court
a quo
(Mlambo J) upheld a special plea of absence of
jurisdiction filed by the respondent (‘Melco’) on the basis that
the remedies
sought depended on the validity of a contract, which in
turn depended on the validity of certain patents – an issue that
could
be determined only by the Commissioner of Patents under
s
18(1).
This appeal is brought with the leave of the High Court.
[2] In
terms of the agreement in issue the appellant (‘Precismeca’)
granted Melco the right to manufacture certain items known
as
‘rollers and idlers’ in return for the payment of a royalty.
Precismeca sued Melco for disclosure of the number of items
manufactured
by it under the agreement, and for payment of royalties.
These claims, it contends, are based on the common law rights to
claim a
statement and debatement of account and royalties in terms of
the agreement. (Precismeca had taken cession of all rights under the
agreement between Melco and the cedent, an associated company, prior
to the institution of the action.) The agreement, concluded
in 1975,
required Melco to account on a half-yearly basis for payments due
under it, in respect of every ‘idler and roller’
of the product
manufactured and sold by Melco, as licensee. The ‘product’ is
defined in the agreement as ‘roller and idler
set design and
technology, such as they are manufactured by Precismeca’.
[3] The
preamble to the agreement explained that Precismeca had applied for
registration of the trademark ‘Precismeca’ in relation
to the
product; wished to grant to Melco an exclusive right to manufacture
the product within specified areas (the ‘territory’)
‘in
accordance with the Patents applied for’ and to sell the product
under the name Precismeca. Melco undertook to make payments
to
Precismeca in respect of the manufacturing and sales of the product
in accordance with the provisions of the agreement. Clause
3.3
provided that on the execution of the agreement Precismeca would
grant ‘an exclusive Licence to manufacture, use and sell the
Product in accordance with the . . . secret knowledge and secret
formula the subject of the Patents applied for and the Trade Mark
‘Precismeca’ in the Territory’. Clause 3.4 imposed an
obligation on Precismeca to apply ‘diligently’ for the
registration
of the patents and the Trade Mark, and, if granted, to
license Melco under the patents, and to enter into a user agreement
in respect
of the registered Trade Mark. Clause 3.5 provided inter
alia that until the licences were granted and the user agreement
registered,
the licensing agreement itself would operate as a
‘licence in respect of the patents applied [for]’. I shall
examine this provision
more closely later in the judgment since in my
view it is decisive of the dispute as to the nature of the contract
in issue.
[4] It
is common cause that no licences in respect of patents that were to
be applied for were ever granted and that the trade mark
user
agreement was not concluded. The licensing agreement, Precismeca thus
argued, accordingly took effect as a licence itself in
respect of the
product manufactured, and retained that status.
[5] It
is also common cause that the patents referred to in the agreement by
reference to the schedule (as opposed to those still
to be applied
for) had expired at the time of action, two before the conclusion of
the agreement and one thereafter. It was accordingly
argued for Melco
that the litigation in the court a quo constituted a dispute between
the parties as to their rights ‘to make,
use, exercise or dispose
of an invention’ as contemplated by
s 28(1)
of the
Patents Act,
which
should have been referred to the commissioner of patents to
determine. And it was on this basis that the court of first instance
upheld the special plea as to jurisdiction. The issue was
characterized by the court as an enquiry into patents and their
effect
on a licensing agreement when they lapse.
[6] Melco
contended on appeal that because there were no patent applications
pending at the time of the conclusion of the contract,
the agreement
was void for vagueness. (It should be noted that the patents
supposedly extant were said to be listed in a schedule
attached to
the agreement, but that no such list was in fact attached, at least
when the agreement was signed for Melco.) And the
question whether
any patent application was in fact pending, Melco argued, is a matter
that can be determined only by the commissioner
in terms of
s 18(1)
of the Act. That question is, however, not before us.
[7] Melco
submitted further that even the liability to account and pay
royalties to Precismeca in respect of the product manufactured
is
dependent on the licence in respect of the patents applied for
(defined in the agreement as ‘the Patents when granted relating
to
the Product in respect of which applications are at present pending .
. .’. It should thus be determined, the argument continued,
whether the product Melco has manufactured is one that has used the
patents applied for. Again, it was argued, the determination
of that
question is one that falls within the exclusive jurisdiction of the
commissioner of patents.
[8] Precismeca,
on the other hand, argues that it claims relief under the common law
and not in terms of the
Patents Act. The
claims for payment of
royalties and for an accounting are remedies that the common law
provides and that the ordinary courts have
jurisdiction to entertain.
Even if a patent is in issue, in an incidental though perhaps
essential respect in the determination of
the dispute, Precismeca
submits, where the relief sought is not statutorily based, a high
court will have jurisdiction.
[9] Precismeca
claims support for these contentions from the decisions in
Buckingham
v Doyle & others
1961 (3) SA 384
(T) and
Helios Ltd v
Letraset Graphic Art Products (Pty) Ltd
1973 (4) SA 81
(T). In
Buckingham
Cillie J, dealing with the predecessor to s 18(1)
(s 77(1) of the Patents Act 37 of 1952, which was in substantially
the same terms
as s 18(1)), in ruling on a point taken in limine in
an action for the settlement of a dispute by partners in connection
with the
partnership, held that although the partnership ‘has as
its basis the joint ownership of a patent’, the court had
jurisdiction
to hear the matter. The action was not one, the court
held, where it would be asked to decide on the ownership of the
patent, or
on the parties’ respective rights in it. The court held
also that the person alleging that it has no jurisdiction must show
that
the action contemplated ‘falls under the provisions of the
[Patents] Act and has been allocated to the jurisdiction of the
Commissioner’s
court’.
[10] In
Helios Ltd
the court was asked to interdict the respondent
from publishing a circular letter that purported to explain a
decision of the Appellate
Division relating to a patent infringement.
It was argued for the respondent that the determination of the
application involved a
decision on the validity of the patent itself,
and therefore fell within the jurisdiction of the Commissioner.
Rejecting the argument,
Margo J said that what was being sought was
relief afforded by the common law for an injurious falsehood (the
letter being inaccurate
about the findings of this Court), which the
court was competent to grant. Margo J approved the decision in
Buckingham, saying that
‘[s]ec. 77(1) was obviously not intended to
subsume all possible forms of relief, common law or otherwise’ (at
87C—D).
[11] Melco,
in contending that the payment of the royalties and the right to
claim an accounting, is indeed dependent on the validity
of the
patents and of the agreement, has in turn relied upon
Maxicorp
Holdings (Pty) Ltd & others v Pearman & others
1997 BIP
256, in which Heher J found that the relief claimed by way of an
amendment to an application could not be granted because
that which
was sued for initially fell within the exclusive jurisdiction of the
commissioner. The court considered that ‘the determining
factor’
was that whatever patent rights the applicants laid claim to
originated in and were ‘solely dependent upon’ the validity
of an
agreement of sale, the purpose of which was to provide for the
disposal of the respondents’ patent and trademark interests,
and
for a consideration. At issue were the rights of the applicants to
the patents, and that fell within the exclusive jurisdiction
of the
commissioner. Heher J considered that
Buckingham
and
Helios
Ltd
were accordingly of no assistance to him. (See also the
unreported judgment of Spoelstra J in
Flexitainer International
(Pty) Ltd v Flexitainer SA (Pty) Ltd & another,
unreported,
case 32503/00 Pretoria High Court, 25 May 2001.)
[12] It
is not necessary to consider the correctness of these apparently
different approaches in light of the view I take in this
matter. The
jurisdiction of the high court is excluded only where the proceedings
relate to ‘any matters’ under the Patents Act.
Whatever the
limits of this phrase might be, the claim in the present case clearly
falls outside its terms.
[13] The
agreement, properly construed, is not a licensing agreement in terms
of the Patents Act: it is not a contract to make a patented
article
or to use a patented process. The agreement is a common law licensing
agreement and the reference to the patents does no
more than describe
the product. The fact that the list of patents was not attached shows
that it was not intended to be a patent
licensing agreement.
Moreover, although two of the patents had lapsed before the
agreement was concluded, and the third shortly
thereafter, the
parties in fact performed in terms of it for a period exceeding 20
years. And the initial period of the agreement
was to be 10 years,
renewable for further periods of five years at a time, without
limitation. It could thus endure for an indefinite
period, whereas
the life of a patent is limited. A number of other features of the
agreement were also argued to be indicia that
a patent licensing
agreement was not intended. In my view, these obligations are not
patent-related, but are exigible in return
for the payment of licence
fees in terms of the agreement.
[14] The
decisive provision, however, is clause 3.5 of the agreement. It
reads:
‘
The
exclusive Licence hereinbefore referred to and the Licence under the
Patents applied for and the registered User Agreement shall
be in the
standard form and shall be subject to the terms and conditions
contained in this Agreement and until such Licences and
registered
User Agreement are granted this Agreement shall take effect as a
Licence in respect of the Patents applied [for].’
The
clause contemplates three different licences: the technology
licensing agreement - that which is referred to as the exclusive
licence; the licence under the patents applied for; and the
registered user agreement. In my view, since it is clear that patents
were not granted (although there is apparently a dispute as to
whether they were ever applied for), and that a user agreement was
never concluded, the agreement can be no more than a technology
licensing agreement, for the manufacture of the products described
with reference to patents previously in existence, enforceable under
the common law.
[15] Accordingly,
the rights under the agreement for an accounting and for payment of
royalties arise at common law and the high court
has jurisdiction to
enforce them.
[16] The
appeal succeeds with costs, including those of two counsel. The order
of the high court upholding the respondent’s special
plea is set
aside.
__________________________
C
H LEWIS
ACTING
JUDGE OF APPEAL
HEFER
AP )
NAVSA
JA )
NUGENT
JA ) CONCUR
JONES
AJA )