CANON KABUSHIKI KAISHA v. GREEN CARTRIDGE COMPANY(HONG KONG) LTD AND ANOTHER

IN THE COURT OF APPEAL

1995, No. 152
(Civil)

Headnote

Intellectual property - Copyright in engineering drawings - Copy of parts of Canon's cartridge used in printers and photocopiers by reverse-engineering - whether replacement of cartridge in machine amounted to "repair" of the article within the principle in British Leyland v. Armstrong [1986] AC 577.

Patents - Whether Canon's patent claim concerning the use of a cover to protect the photosensitive drum in the cartridge amounted to an inventive step within the meaning of s3 of the United Kingdom Patents Act 1977 - Whether the inventive step was "obvious" at the priority date of the patent, having regard to the state of the art.

Personal liability of managing director where company has committed tortious acts - Criteria for establishing personal liability examined.

IN THE COURT OF APPEAL

1995, No. 152
(Civil)

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J U D G M E N T

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Litton, V.-P.:

Introduction

1. This is an appeal against the judgment of Rogers, J. in an action for infringement of five patents and for infringement of copyright in a number of engineering drawings.

2. The plaintiff, Canon Kabushiki Kaisha, designs and manufactures printers and copiers which operate with cartridges. The subject-matter of the action is the plaintiff's process cartridge which is designed to operate in the plaintiff's "desk-top" laser-printers and photocopiers. A number of models of cartridges are involved: the PC, PC-30, FC and EP-S cartridge. Nothing turns on these differences in models. For the sake of convenience I will refer to the plaintiff's cartridge as the EP-S cartridge. A number of other manufacturers of such machines also use the plaintiff's process cartridges under licence.

3. The second defendant Mr Colin O'Brien was at one time the Chief Executive Officer of Gilman Business Systems, a division of Inchape Plc, a well-known publicly-listed group of companies. Gilman was then one of the largest micro-computer and laser-printer retailers in Asia.

4. The writ was issued on 2 September 1993. The hearing took place before Rogers J between mid-November and mid-December 1994. By his judgment given on 31 March 1995 the judge held that the defendants had infringed the plaintiff's copyright in engineering drawings relating to a total of 48 parts or components in the EP-S cartridge. In relation to the patents, he held that 3 patents were valid and infringed (namely Patent No. 2,006,054, No. 0,226,454 and No. 0,251,693). In respect of the other two patents he found one invalid (No. 2,101,933) and one partially valid (No. 0,096,261); both were infringed.

5. The judge also held that the second defendant was personally liable in respect of the patent and copyright infringements.

6. In June 1995, a further hearing took place before the judge in relation to the form of the order. He gave his ruling on 22 June 1995 and by his order:

(i) restrained the defendants from selling cartridges or copyright parts with the exception of three parts in relation to which there was evidence that they might be used for repair;

(ii) gave the defendants liberty to apply to add parts which might be within the "repair" exception;

(iii) declined to suspend the injunction pending appeal; and

(iv) made a limited order for delivery-up of infringing items, which he suspended pending the appeal.

7. On 16 August 1995 the injunction itself was suspended upon terms by the order of Liu JA, pending the appeal. In December 1995 the defendants made a further application to Rogers J to vary the order of 22 June 1995. This resulted in four further components being excepted from the injunction as "repair parts".

The issues on the appeal

8. The issues on this appeal fall under three main headings:

(1) Copyright: Whether the defendants are entitled to reply upon the decision in British Leyland v. Armstrong [1986] AC 577 as a defence to the allegation of infringement of copyright. Subsidiary points arise. For instance: (i) Whether the injunction was properly framed so as to exclude only 7 components in the cartridge as "repair" items; (ii) Whether the British Leyland defence can in any event apply where the device is patented; (iii) Whether the order for delivery up of moulds and tools was properly limited by the judge.

(2) Patents: (i) Whether the judge erred in finding Patent No. 2,101,933 ("933") invalid for obviousness; (ii) Whether the judge erred in finding Patent No. 0,096,261 ("261") partially invalid. The determination of the issue on Patent "933" would determine the issue on "261" as well. Accordingly, there is in essence only one point on patents in this appeal.

(3) Personal liability: Whether the judge erred in finding the second defendant personally liable for the infringements.

Background facts: An over-review

9. In late 1989 the second defendant and a Mr Christopher Mercer conceived the idea of developing a "green cartridge". Mr Mercer had, for about three years prior to that time, worked on the design and production of high-speed laser-printers. Mr Mercer's expertise was in the technical field. The 2nd defendant and Mr Mercer after discussion reached the following conclusion: Laser-printers using disposable cartridges were becoming increasingly popular; it was a waste of resources to throw away a cartridge simply because the toner powder was used up; they should embark upon the business of acquiring used cartridges on a world-wide basis and have them "re-cycled": that is, replacing such parts in the cartridges as needed replacing, refill the cartridges with new toner, have them resealed and sell the cartridges to end-users.

10. In 1990 the second defendant resigned from Gilmans to work full-time on the new venture. As the venture required considerable capital - including money for designing and building tools and moulds for the replacement parts - Mr Michael Sanders was approached. Mr Sanders was at one time the Chief Executive Officer of Dodwell Industries, another company within the Inchape Group; he had resigned from the Inchape Group in 1990 to form his own technical consultancy group. Mr Sanders accepted the invitation to join the venture.

11. Mr Sanders and, to a lesser extent, the second defendant were able to raise between them US$200,000. But this was not enough to fund the venture. The second defendant, with assistance from Mr Sanders, prepared a private placement memorandum ("business plan") with a view to approaching third parties for additional capital. The "Introduction" to the business plan states:

" In the modern office there is a high technology product of which over 50 million will be sold in 1991 with a price tag of well over a US$100 each that can be recycled almost indefinitely with minimal replacement parts. Surprisingly there is as yet no industrial unit capable or willing in the world to take advantage of this opportunity.

The product is the disposable imaging cartridge used in laser printers, photocopiers, fax machines, and microfilm printers. The company that is going to turn recycling this product into a world class industry is The Green Cartridge Company."

12. In early 1991 the first defendant company was formed, the shares being held by a British Virgin Island company, Green Cartridge Company Limited and by the second defendant as a nominee shareholder. Mr Sanders and a Mr Penwarden between them owned about 51% of the shares and the second defendant held 30%. The first defendant's directors were, until Mr Sanders withdrew from the venture in October 1992, as follows: Mr Sanders (Chairman), the second defendant (Managing Director), Ms Fiona Stewart, Mr Gurka, Mr Azido (an accountant and an alternate director to Mr Gurka), Mr Penwarden.

13. The company was successful in raising the additional capital. This enabled it to move into premises at Wong Chuk Hang and to commence operations in March 1991.

14. The company was initially concerned with the "refurbishment" business: That is, producing spare parts for the EPS-cartridge, and to a lesser extent the recycling of old cartridges: that is, replacing worn and damaged parts, refilling the toner, re-sealing the cartridges and selling them to end-users. The spare parts manufactured by the company were either supplied to overseas refillers or (to a lesser extent) used in its own recycling operations. The plaintiff has never complained of those activities. It was only when, in 1993, the plaintiff learnt of the defendants' sale of "Jumbo" cartridges - that is, complete cartridges manufactured largely by reverse-engineering - that the plaintiff took action. The defendants claimed a number of superior features in the "Jumbo" cartridge over Canon's: It had a large hopper and contained more toner; it produced double the prints of a standard cartridge; it had an innovative system for easy re-sealing of the cartridge after refilling. The defendants also offered "semi-knocked-downs" (SKDs). As described in the company's catalogue: "An SKD consists of three major components: the Supply and Toner Brush Assemblies, the Cleaning and Corona Assemblies and the Top Cover Assembly. Also included are all the parts needed to complete the assembly process."

15. It was when the plaintiff realised that the defendants were not simply selling refurbished cartridges but completely new cartridges (and SKDs) that legal proceedings were brought.

The xerographic process

16. The process by which images are copied onto paper is as follows:

(i) Charge A "corona wire" charges the surface of a photosensitive drum. In the absence of light that surface is an insulator.

(ii) Exposure Light reflected from an image in the photocopier or printer discharges the charge on the surface of the drum selectively to produce a latent image in the form of a charged pattern on the photosensitive surface that mirrors the pattern to be transferred.

(iii) Development Electrostatically charged toner particles are brought into sufficient proximity to the drum for the toner to be transferred to the latent image, transforming it into an actual image.

(iv) Transfer The toner image on the drum is transferred to the paper.

(iv) Cleaning The drum is cleaned by a blade of any excess toner.

(vi) Fusion The toner is embedded onto the paper by heating.

17. In essence, the mechanism for performing the first five steps are contained in the EP-S cartridge. However, the photocopier (or laser printer) as a consumer product contains many other parts necessary to make the copying process complete. The photocopier cannot operate without the cartridge. In functional terms the cartridge is an integral part of the product which the customer buys: although, in Hong Kong, the Canon dealers in fact sell the cartridge separately when a customer wishes to buy a Canon photocopier or printer.

The EP-S cartridge

18. The EP-S cartridge can be broken down into a number of sub-assemblies: for instance, the top cover which itself comprises a number of parts, including two flaps or covers which are spring-loaded, which protect the photosensitive drum from light and from damage when the cartridge is removed from the photocopier. Once inserted into the photocopier, the flaps are pushed open to enable light reflected from the image to be copied to shine onto the surface of the drum.

19. The EP-S cartridge comprises a total of 108 components - mostly of moulded plastic parts but also some steel springs, metal strips felt pads and things of that kind - of which no more than about 13 would require replacement during the expected life of the photocopier or printer.

20. What we are concerned with in this case are low-volume photocopiers and laser printers: that is, machines which are capable of producing less than 10 copies per minute. Such a printer (marketed by the plaintiff as the SX printer) can be expected to produce about 400,000 copies during its effective life, but the toner in the hopper is sufficient to make only about 3,000 copies before it needs refilling. In the process of dismantling the cartridge for the purpose of refilling, some parts would necessarily be damaged - for instance, the plastic lugs and pins in the top cover unit. Other parts can be damaged by rough handling. Also, parts such as the wiper blade for the drum and the coroner wire need replacing as a matter of routine maintenance, because they would sooner or later be damaged or worn out. Further, it may not be practicable to simply replace one part because that part is assembled in such a way that its removal for replacement may damage other parts.

21. Before the introduction of the Canon printer with the EP-S cartridge to the market, printers and photocopiers were bulky machines and were regularly serviced by trained technicians who attended the offices where the machines were located. Many problems arose. Not all service personnel were properly trained; in the course of replacing one part, another part could be damaged. The photosensitive drum was particularly vulnerable. It would need regular cleaning, to rid the surface of foreign material or excessive toner. But exposure to light could reduce its efficiency and the handling process itself could cause damage; for instance, having dirty finger-marks on the surface.

22. The Canon printer with the EP-S cartridge was a major technological breakthrough. As described by Mr Masashi Kiuchi, one of the plaintiff's directors, the cartridge made business machines like photocopiers and printers more compact, by bringing together in one container the components and chemicals necessary to carry out the process of forming an image. It ensured reliability because once the toner was used up the cartridge could simply be replaced. This obviated the previous need for trained engineers to attend at the office to service and repair the machines. This applied only to the low-volume machines, producing less than 10 copies per page: In effect, the desk-top models. The high-volume machines do not use the EP-S cartridge and the old regime of servicing and repair by trained engineers attending at the users' office still prevails.

The recycling industry

23. Since about 1986 there has grown-up, particularly in the USA, many small-scale refilling and recycling operations. These have carried on business without complaint from the plaintiff. Whilst the plaintiff claims a monopoly in the design of its printers and cartridges, it has never claimed a right to prevent third parties carrying out repair and maintenance work on its cartridges.

24. As mentioned earlier, one of the advantages of the Canon printer with its EP-S cartridge is reliability. Some components in the xerographic process do fail from time to time: the wiper blade, the corona wire, the drum itself, the magnetic roller (which transfers the toner onto the surface of the drum), among others: perhaps not before the hopper is refilled for the first time, but quite possibly before the second time. The advantage to the user in replacing the entire cartridge when the toner runs out is that, in effect, the majority of the parts necessary for the xerographic process is replaced, ensuring therefore that the printer is in perfect working order when the toner is refilled. In one of the plaintiff's brochures they described the advantage of their printer thus:

"The [printer] utilizes Canon's unique interchangeable cartridge system. The main consumptive elements of the machine -photo-conductor, toner, corona and cleaning station - are contained in a single sealed disposable cartridge. Thus maintenance is cut down to an absolute minimum".

The first defendant's business development

25. The first defendant's operations began in March 1991. The business got off to a bad start. Within a few months, it was apparent that the original concept of recycling used cartridges was not viable. There were a number of reasons for this, including the fact that the collection of re-used cartridges was "minimal". Also, the market went against the defendants: There was a substantial reduction in the price of new cartridges.

26. In mid-1991, a discussion document headed "Problems" (which went through various versions) was produced by the second defendant and Mr Sanders. It was put to the shareholders for the purpose of raising further funds. The document stated, inter alia, as follows:

"Original Businessplan

Bearing in mind the following factors, no matter which way that the numbers are manipulated, I do not believe that GCC [Green Cartridge Company] has a viable business following the original strategy unless there is a fundamental decrease in the cost of our components....

Bulk Sales of Green Cartridges to Europe

To state the obvious, bulk sales of recycled cartridges means that we need bulk supplies of used cartridges to be processed. These used cartridges simply do not appear to be available in the quantities that we require to be profitable...."

27. In the same document, the second defendant went on to state:

"Sub-Assembly Sales

We have also had interest expressed for complete sub-assemblies from Lasers Edge as well. They wish to set up an assembly line in the USA to turn one cartridge into four or five.

As we know from our own costings, the economics are seductive - if you are able to overcome the roadblocks that are holding us back....

Whilst GCC are quite advanced on producing many of the sub-assemblies, we by no means have them all available currently. We would need to invest more money (HK$800K) into getting to the point that we can supply all parts and sub-assemblies (With the exception of Drum and Toner) from our own moulds and tools.

The two sub-assemblies that are the furthest from completion are the Corona and the Top Cover. We have not yet committed any cash to these sub-assemblies. (Except getting them quoted). Should we decide to go for them as well it will be at least 90 days before we could produce these products.

The one that I have the most hope for is the redesigned Toner Hopper and Supply Mechanism. This should be ready in Mid-September...."

28. The position was that, by about mid-1991, a substantial part of the company's business was in supplying the refilling and refurbishing industry overseas with spare parts of the EP-S cartridge.

29. The evidence before the judge was that, at this time, there were frequent though informal directors meetings: Not surprisingly, since the directors were also shareholders, and the company had virtually exhausted its original capital and was having to raise further funds. Moreover, there was no lack of expertise concerning intellectual property within the board: Mr Gurka was a professional investigator specialising in that field and Ms Stewart, a barrister, was married to another barrister who specialised in intellectual property. The company had, by about mid-1991, commissioned the moulds and tools for many of the parts of the cartridge but lacked money for the remaining parts, in particular three major parts: the corona, magnetic core and top cover.

30. The effort to raise funds was successful.

The manufacture of complete cartridges

31. As found by the judge it was in the autumn of 1991 that the defendants decided to move into the business of making new cartridges by reverse-engineering: that is, by copying 48 of the components of the plaintiff's cartridge - reproducing in a 3-dimensional form the engineering drawings on which the plaintiff's parts were based - and producing new ones.

32. The idea evolved from the business the defendants were then engaged in. As time went on they produced and supplied to the refurbishing business overseas more and more spare parts.

33. In the September 1991 issue of a trade magazine called the "Recharger", an article published by the second defendant entitled "Green Cartridge Company - A Better Way" stated:

" We formed a company, called it the Green Cartridge Company and set out to make out all the necessary metal, plastic, foam, and other parts that comprise an SX cartridge.

I am happy to report that we succeeded. It took over a year and more than $2,000,000. We can now make available to the American recharging industry a complete range of repair parts for the SX cartridge.

I must stress that I am not talking about the commonly available drums, wands, toner and wiper blades. Sure, we can supply those. What I am talking about is all the plastic parts, the metal part, the foam parts, the felt parts and all of the other parts that make an SX cartridge.

All of the Green Cartridge Company parts can be used side by side with the original OEM components. They meet or exceed the specifications of the parts that you are accustomed to using both from used cartridges and from your favourite industry suppliers.

They are available as either components or repair assemblies....

We have put together a 40 page illustrated catalog of our range of repair parts. The catalog also contains some suggestions on the desirable life of the components contained in the original cartridge. This catalog is available free simply by contacting us on the following numbers....

We actually make all of these parts. We have a factory based in the Orient, which is solely dedicated to this business. That's right, apart from our own recharging business that's all we do - make SX parts. We could not focus our business more than that."

34. The second defendant said in cross-examination that there was "poetic licence" involved in this article. That may be so. The article shows the direction in which the company was going. There, the second defendant was still talking of supplying the refilling industry with parts and sub-assemblies: From which, presumably, those refillers could assemble complete cartridges if they so wished. The defendants' case is that, after consultation with the shareholders and taking legal advice, the company decided to go into the business of manufacturing a reverse-engineered cartridge in competition with the plaintiff.

Copyright

35. It is common ground that except for the common law right of "repair" laid down in British Leyland v. Armstrong, the 1st defendant has infringed the plaintiff's copyright in engineering drawings relating to 48 parts of the EPS cartridge. The argument therefore boils down to (i) the scope of the principle inBritish Leyland v. Armstrong and (ii) whether the defendants' activities come within that principle.

British Leyland v. Armstrong

36. The litigation in British Leyland v. Armstrong was concerned only with exhaust pipes for the Marina car manufactured by British Leyland. As Lord Bridge said at p615F:

"The exhaust pipe is the part of a car which is likely to require the most frequent replacement. In the lifetime of a car the exhaust may need to be renewed as many as ten times."

37. Moreover, although the references in the judgments are sometimes to the "exhaust system", in fact the silencer components were excluded from copyright and the House of Lords was, on the facts of that case, concerned only with the sections of pipe which connected to each end of the silencer box. But, in the spare-parts market, the entire exhaust system (including brackets, baffles, expansion chambers and of course the pipes), was in fact supplied as a unit. It would seem therefore that the decision in the House of Lords would have gone the same way even if the silencer box were an item covered by copyright and itself needed no replacement.

38. It is unnecessary in this judgment to search for the juridical foundation of the right recognised in British Leyland. It is a common law right: The right of the owner of an article (the car in British Leyland) to do whatever is necessary to keep it in running order and to effect whatever repairs may be necessary in the most convenient and economical way possible: And, as Lord Templeman said at p625E in relation to the car, "what the owner needs, if his right to repair is to be of value to him, is the freedom to acquire a previously manufactured replacement exhaust system in an unrestricted market": Hence the right of the person in that market (Armstrong) to supply the replacement exhaust system to the owner.

39. As regards the scope of the British Leyland principle, Mr Kitchin QC, counsel for the plaintiff, emphasizes the repeated use of the expression necessary repairs in the judgments, suggesting that the replacement of parts not worn out or defective cannot constitute "repair". Mr Thorley QC, counsel for the defendants, argues that the right is wider than that: It is the inherent right of the owner (as Lord Bridge puts it at p627A-B) to repair the car by "replacing the exhaust whenever necessary in the most economical way possible": Accordingly, if the most economical (or convenient) way was to have the entire exhaust system replaced by purchasing it from the spares market, rather than to have the broken length of pipe repaired (say, by a blacksmith), that was the owner's right: The supplier was accordingly entitled to supply the exhaust system, by copying if necessary, irrespective of British Leyland's copyright in the engineering drawings. On the facts in British Leyland v. Armstrong copying was necessary because the shape of the bottom of the Marina was such that there was virtually no tolerance for a different configuration for the exhaust pipe.

40. Applying the British Leyland principle, Mr Thorley QC puts the defendants' case thus: The purchaser of a photocopier or a laser-beam printer is entitled to enjoy the full benefit of the article for its projected life unaffected by copyright; the plaintiffs have produced an appliance with a removable cartridge and have incorporated all those parts involved in the xerographic process which are likely to need periodic replacement in that cartridge; it is both convenient and economical to the user to purchase a compatible replacement cartridge from the first defendant when the toner runs out, thereby replacing all the damaged and worn parts at the same time and obviating the risk of any of the components wearing out in the course of use; by replacing the cartridge they have restored the article (the photocopier or print) to its full use. Mr Thorley emphasized the fact that if only one part needed replacing (say the corona wire) the machine would not function; and even if a part did not fail altogether but merely malfunctioned, say the toner brush, the machine would not operate to the standard the owner would expect. To replace the cartridge is to repair the printer; in exactly the same way as the replacement of the exhaust system repairs the Marina car in British Leyland.

41. It is not easy, as an isolated concept, to draw the line between legitimate repair and the replacement of parts which go beyond repair. Often, mechanical parts inter-relate in such a way that both economy and convenience would require the replacement of the unit: this might well constitute repair within the British Leyland principle.

The judge's approach

42. The judge approached the matter in this way:

" The reality of the situation may be considered thus. What there is notionally is first of all a laser printer which has a spent cartridge. The cartridge has been removed. The cartridge is then discarded though the vast majority of the parts are still usable. Once the cartridge has been discarded obviously the machine is unusable until another cartridge has been obtained. But that does not give the owner of the printer a right to go and obtain replacement parts for those which have been deliberately discarded. The British Leyland decision does not say that the owner of a machine is entitled to discard perfectly good parts if it is unnecessary. In so far as it says that the owner is entitled to effect repair in the most economical way, it is not saying that a third party may not only make an exhaust pipe which needs replacing but a lot of other parts as well, even though those are in no danger of wearing out. It is economy to the owner of the printer that must be considered and that is economy given the fact that he has, in this instance, an existing machine and cartridge.

In my view the practical realities of the situation are perhaps stronger. The Defendants wish to have an offer complete cartridges so that the owners of printers can be encouraged to throw away cartridges which either are in perfectly good condition or which need only a few parts replaced. Convenient it may be to be able to be in the market supplying new cartridges, but one only has to consider the Defendants' own justification in section 6B of their business plan to appreciate that they are supplying a large number of parts which are unnecessary. Convenient it may be, but economical it is not."

43. The reference in the judgment to "section 6B" of the business-plan is an error. The judge must have meant section 5A which says:

"5.A. Key Components

Drums

The drums are normally extruded aluminium which is then diamond machined to achieve the necessary smoothness on the surface which is to be plated with the photosensitive coating.

Drum Coatings

Dependent upon the drum type used there are various suppliers who can be used to coat drums to the specification required.

Toner

Dependent upon the type of toner specified there are various toner manufacturers who will make toner to the specification that is required.

Plastic Parts

These need to either be made internally or to be subcontracted out to specialist injection moulding firms.

Corona Wire

Corona wire is available from various manufacturers.

Plastic/Metal notes

For the vast majority of the cartridges and for most of the components there is no need to make the parts as they will be totally recycled.

Should it be necessary to manufacture any of the small plastic or metal pieces in the cartridge it is worth noting that the plastic and metal components which form the bulk of the product are ordinary mouldings and stampings with tolerances similar to the parts of cassette recorders or other similar consumer goods frequently manufactured in Hong Kong."

44. The judge in effect took a narrow view of "repair" in British Leyland and concluded that, upon the facts, the present case fell outside that principle.

45. He was much influenced by the fact that, within the cartridge, there were 108 components, of which approximately 95 never wear out.

46. In this regard, the judge (p126-R of his judgment) said:

"It is not correct to say that the replacement of the whole, i.e. including all the perfectly good parts, will be done because that is the most economical way of going about the replacement of those parts which can be anticipated to be near the end of their useful life. In the first place there is no evidence that it is cheaper to do things that way, rather than take a spent cartridge and replace those parts which need replacing. In the second place when Lord Bridge was referring to repairing in the most economical way possible he was referring to copying those parts which had worn out, not those parts which had not worn out.

What in reality is happening is that the Defendants are not repairing anything..."

47. Where the judge said "there is no evidence that it is cheaper to do things that way, rather than take a spent cartridge and replace those parts which need replacing" he seems to have misunderstood the effect of the evidence.

48. The case concerns products which are mass-produced. The attraction of the EP-S cartridge - and the reason for its commercial success - is that it eliminates costly and labour-intensive maintenance and repair. The plaintiff's own brochure refers to the key parts as the "main consumptive elements of the machine", contained in a single sealed disposable cartridge.

49. The plaintiff's expert witness Dr David Tabak (described by the judge as "a particularly enlightening witness" whose "notable experience shone through in what he said") testified as follows: When the printer or copier stopped working, in 95% of the time, all the user needed to do was to take the old cartridge out, "slap in a new unit" and the machine worked; that is all the customer cared about; he did not care about what failed or did not fail. And he added:

" All he wants is his machine to be working and he surely does not want to have to spend $200 to call the service man to come and fix his machine. By the simple expedience of replacing the cartridge he now has the opportunity of getting his machine working again."

50. There was no evidence before the judge to the effect that the customer could in fact have obtained the services of an engineer at a reasonable price - or indeed at any price - to break open the cartridge in order to find out what caused the failure of the printer or photocopier. The fault which causes a machine to break-down might be the failure of a relatively inexpensive component: say, the corona. But how is the customer to know that? In practical terms, the only practical alternative offered by the plaintiff when the machine fails is to replace the cartridge.

51. In relation to the repair of printers and photocopiers using the EPS-cartridge, there is not even the equivalent of the "local blacksmith" who might conceivably have repaired the car-owner's exhaust pipe in British Leyland (see Lord Bridge at 625-D), however inconvenient that might have been.

The customer's rights

52. The judge was much impressed by the evidence that when a cartridge is discarded the vast majority of the parts are still usable - p125N of his judgment. From this he concluded that the replacing of an old cartridge with a new one, when the printer failed, was not "repair" of the printer. But this misses the point in British Leyland. Lord Bridge was at pains to emphasize that the court is concerned in the first place with the rights of the owner. As he said at p625C, whilst it might be right in the field of patent law to start from the patentee's express monopoly and see how it is limited by exceptions, in the field of law applied to machinery which enjoys no patent protection, it is appropriate to start from a consideration of the rights of the owner of the machinery and then see how far the law would permit some conflicting legal claim to impinge upon those rights.

53. The customer's legitimate expectation, when he buys a printer, is to have it functioning properly for its projected life. When the printer stops working he is not concerned with why it failed or how many components failed.

54. The judge considered it relevant that of the 108 parts in a cartridge 95 would be in perfect condition when the toner powder was used up. This in my view is beside the point. It would be of great interest to the refiller that a vast majority of the parts in the cartridge is re-usable: He "cannibalises" old cartridges and assembles refurbished ones: The more undamaged parts there are in the old cartridge, the better for him. But of what possible interest is this to the customer?

Repair of printer or repair of cartridge?

55. At p127G the judge said:

" What in reality is happening is that the Defendants are not repairing anything. If a user, or even perhaps the Defendants, were to have a cartridge all the parts of which were totally and utterly unusable then there might be justification to replace the whole cartridge."

56. Here the judge's focus is upon the cartridge and not the printer. The judge is saying, in effect, that where it is possible to replace a few components in the cartridge to make it work again, the replacement of all the components (in effect making a new cartridge) is not repair of the cartridge. He is right as far as this goes. But why is the replacement of the old cartridge with a new one not repair of the printer? It would be absurd to say that the owner is only entitled to replace the old cartridge with one procured from the defendants if all the components in the old cartridge has failed, or a majority has failed, particularly as he would have no idea what caused his printer to break-down in the first place.

57. The fact that the judge was focussed on repair of the cartridge rather than the printer is shown graphically by reference to the injunction ordered. The defendants are restrained from:

"... manufacturing, offering or exposing for sale etc ... any parts which are substantial reproductions of drawings etc ... otherwise than for the purpose of the bona fide repair of the ... EP-S cartridges ... or the supply to bona fide repairers of ... EP-S cartridges ...." (Emphasis added.)

58. We have received no submissions as to whether it is cheaper and more convenient for the customer to seek to repair his printer by buying a new cartridge from the defendants rather than to acquire a refurbished one from a refiller. Presumably this is so, otherwise the defendants would soon go out of business. And if it were so, the effect of the injunction is to make it more expensive for the customer to repair his printer, thereby diminishing the value to him of his machine. I should add that, in the course of the hearing, we tried to explore with counsel this aspect of the case: The "Problems" document referred to the "seductive" prospect of a U.S. firm called Lasers Edge buying sub-assemblies, turning "one cartridge into four or five". Whatever this means - it was never satisfactorily explained - it suggests that the recycling of old cartridges is a healthy business in the U.S.A. It seems odd in these circumstances that a manufacturer of new replacement cartridges, who has to bear the cost of making all the parts, could successfully compete with the refillers.

Applying the facts to British Leyland

59. As mentioned earlier, the plaintiffs have designed a machine where the "main consumptive elements" are contained in a single sealed disposable cartridge. This makes for easy and convenient repair of the machine. The owner of the machine (which cannot function without the cartridge) has an inherent right to do whatever is necessary to keep it in repair and working order. The plaintiff cannot dictate the terms on which the machine is to be kept in repair and working order, and it is for the owner of the machine to determine the most convenient and economical way of doing so. The failure of any one component in the cartridge will cause the machine to breaking down. If this happens, the way most economical and convenient to the owner - in fact the only way - is for him to get a replacement cartridge.

60. Linguistically, this is replacement of the cartridge, but repair of the machine. The fact that, invariably, the owner would replace the old cartridge with a new one when the toner runs out is neither here nor there: The evidence is that before the next time the toner runs out some of the components in the cartridge would have failed. Hence, the replacement of the cartridge each time the toner runs out is, in effect, the way the owner keeps his machine in repair, in the way most convenient and economical to him.

61. The plaintiff's argument is that the British Leyland principle only allows copyright to be over-ridden when it is necessary to restore a machine to good condition by the renewal or replacement of decayed or damaged parts. This is an amorphous statement, and fails to address the precise issues in the case. What is meant by "parts"? Nor does it address the owner's difficulties: the fact that, generally-speaking, the owner has no idea what "part" is decayed or damaged when his machine breaks-down. If he goes to the plaintiff he is simply told: "Replace the cartridge". That is in fact the unique concept of the Canon "desk-top" printer and photocopier and the reason why it was such a technological break-through when first introduced to the market. It eliminated the role of the maintenance technicians.

62. Just as the exhaust system in British Leyland must, in practical terms, follow the configuration of the bottom of the Marina, and fit exactly into the exhaust manifold, so the replacement cartridge must fit exactly into the printer: the moving parts in the cartridge are driven by gearing in the machine itself. Moreover, the photosensitive drum - an essential component - is not a copyrighted part; it is generally available in the market. Hence, the dimensions and shapes of the other parts must accommodate that as well. And, of course, the light source is outside the cartridge, and the mechanism in the cartridge must be compatible with the mechanism for moving the paper. Given these constraints, it would seem that the requirements as to shape and dimension of the cartridge are comparable to those of the exhaust system in British Leyland: even if the defendants were able to design a cartridge marginally different from the plaintiff's, it might not escape the charge of reproduction by copying of a substantial part of Canon's drawings (compare Lord Bridge at 627G concerning the shape of the exhaust pipe). Presumably, the defendants' "Jumbo" cartridge is different from Canon's because the hopper is bigger and contains twice the amount of toner. Yet it has not escaped the charge of copying.

63. Mr Thorley QC accepts, of course, that the defendants are only entitled to supply replacement cartridges to owners who have already purchased a Canon printer and cartridge: The defendants' right to supply cartridges is derived from the owner's right to "obtain replacement parts in an unrestricted market" (Lord Bridge in British Leyland at 625E). This means, of course, that by selling their printers and photocopiers the plaintiffs are in fact also enjoying the primary benefits of the copyright relating to their cartridges: a fact which Lord Bridge considered relevant in British Leyland: see p627A. The fact that in Hong Kong the plaintiff's agents Jardine Office Systems sell the machine and the cartridge separately is irrelevant. The machine cannot function without the cartridge, and Jardines must obviously take their cartridges from Canon. Canon can always insist that their machines be sold with cartridges manufactured by them.

Practical working-out of the Judge's order

64. The judge handed down his judgment on 31 March 1995. It then took several months before the form of the orders consequent upon his judgment to be drawn up. Difficulties arose concerning the scope of the injunction against infringing the plaintiff's copyright in their engineering drawings relating to some parts of the cartridge. At first, the judge excluded three components from the injunction as "repair" parts: That is, parts which the defendants would be entitled to supply as repair parts. But this was too narrow. Upon a further application to the judge to vary the order, and by concession by the plaintiff, four further parts were excluded from the injunction.

65. The difficulty with this approach is that the formal order was, in a sense, contradicting the judge's own findings because there were other parts, not specifically excluded in the order, which might break or become damaged. In effect, the injunction restrained not just infringing activities but also lawful activities, even upon the judge's own findings. This demonstrates the difficulty of a "partial" application of the British Leyland principle to the facts of a case such as this.

Does British Leyland apply to a part which is patented?

66. A point in the plaintiff the respondent's notice, not taken before the judge, is formulated as follows:

(i) The defendants' cartridge infringes one or more patents belonging to the plaintiff.

(ii) The British Leyland defence does not extend to machinery which is the subject of patent protection. Accordingly it is not open in law for the defendants to contend, by reference to the British Leyland defence, that the defendants' cartridge is a repair/replacement part for the printer, in circumstances where the making or assembling of such a cartridge without the plaintiff's consent constitutes infringement of the plaintiff's patents.

67. The point arises from the speech of Lord Bridge in British Leyland at p628B-C as follows:

"The position seems to me to be this. Where a specific part of a car which is the subject of a patent or registered design needs repair not amounting to replacement, it will be repairable under the well established doctrine of implied licence. Where the part requires complete replacement, it can, if practicable, be replaced by any alternative part, which will not infringe the patent or registered design. If only a new part made in accordance with the patent or registered design will provide a satisfactory replacement, the express statutory monopoly of the patentee or design proprietor will prevail. In contrast with the copyright in drawings, the monopoly conferred by the patent or registered design could be invoked not only against other manufacturers making infringing parts and offering them for sale, but also against the car owner, to prevent him making in his own workshop or commissioning from a third party a replacement part which infringed the monopoly." (Emphasis added).

68. In considering this point, it is important to note that there are three rights involved: (i) patent rights derived from statute, (ii) the owner's inherent right to repair and keep an article in working order, which provides a defence to a copyright claim and (iii) the rights of the copyright owner derived from statute.

69. Assume, for instance, that the patentee and the copyright owner were different persons. It would be extraordinary if the copyright owner could invoke the rights of a stranger, the patentee, to defeat the common-law right of the owner of the article. In my judgment Lord Bridge was doing no more than to show how, in respect of a part of an article (there, the car) which is patented, the rights of the patentee bite, in contrast with the wider position in copyright law - where the rights of the copyright owner must yield to those of the owner.

70. In my judgment, this point taken on behalf of the plaintiff must fail.

Conclusion on British Leyland

71. As mentioned earlier, the defendants are restrained by the judge's order from dealing with parts otherwise than for the purpose of the bona fide repair of the EPS-cartridge and otherwise than for the purpose of supply to bona fide repairers of the EPS-cartridge (but the order as worded only allowed the supply of seven parts to come within the exception).

72. As far as the owner of the printer is concerned, the repair of the cartridge is of no interest to him. He has asked no one to repair the cartridge. He is only interested in the repair of his machine, to restore it to working order. Can the defendants be restrained by injunction from dealing in parts (or complete assemblies) for the purpose of the bona fide repair of the printer, in order to restore it to working order?

73. In my judgment, the answer must be No. It seems to me that in supplying replacement cartridges to enable printers and photocopiers (and other similar machines) to continue in good working order, the defendants come squarely within the defence in the British Leyland case. The plaintiffs cannot assert their copyright in their drawings against the defendants. I would respectfully differ from the judge in this regard.

Personal liability of the second defendant

74. To consider whether the judge was right in concluding that the second defendant had incurred tortious liability in this case, both counsel were content to adopt the statement of principle by Slade LJ in Evans v. Spritebrand Limited [1985] FSR 267 at 277 as follows:

"... a director of a company is not automatically to be identified with his company for the purpose of the law of tort, however small the company may be and however powerful his control over its affairs. Commercial enterprise and adventure is not to be discouraged by subjecting a director to such onerous potential liabilities. In every case where it is sought to make him liable for his company's torts, it is necessary to examine with care what part he played personally in regard to the act or acts complained of ...."

75. As pleaded in para 4 of the plaintiff's Statement of Claim the case against the second defendant is as follows:

" The 2nd Defendant directs, controls, procures and is responsible for, all the acts of the 1st Defendant complained of in this action, the 2nd Defendant being deliberate or reckless as to whether such acts would constitute infringements of the Plaintiff's patents and copyright. Further or in the alternative, the 2nd Defendant established the 1st Defendant with the purpose that the 1st Defendant should do or perform the acts complained of against it in this action, the 2nd Defendant being deliberate or reckless as to whether such acts would constitute infringements of the Plaintiff's patents and copyright. In the premises the 2nd Defendant is jointly and severally liable together with the 1st Defendant for all acts about which the Plaintiff complains in this action."

76. The alternative averment, that the 2nd defendant "established the 1st defendant with the purpose that the 1st defendant should do or perform the acts complained of" was never proved, so only the first averment remained.

77. The judge made no finding of deliberate infringement or recklessness against the second defendant, so we are left with the bare averment that the second defendant directed or procured the acts constituting the alleged infringements. Mr Kitchin for the plaintiff says that if proved that is enough. Mr Thorley for the second defendant says No, there must be something more: otherwise, in a small company like the first defendant, the managing director would in effect be personally liable each time the company is found to have infringed a patent or copyright: for there will be few acts of infringement about which it cannot be said that they were "directed" or "procured" by a managing director.

78. Mr Kitchin relies upon a passage in Atkin LJ's judgment in Performing Rights Society v. Ciryl Theatrical Syndicate [1924]1 KB 1 at 14-15:

" Prima facie a managing director is not liable for tortious acts done by servants of the company unless he himself is privy to the acts, that is to say unless he ordered or procured the acts to be done...."

79. That was a case where a company was the lessee of a theatre. When the managing director was abroad, and without his knowledge, a band engaged to perform musical works at the theatre infringed the plaintiff's copyright. The managing director had legal authority over the band though they were not employed or paid by him. The court held in these circumstances that the managing director was not liable.

80. In Performing Rights Society v. Ciryl Theatrical Syndicate the question of the managing director's state of mind regarding the infringing acts was never in question. It is not possible to conclude that, by the passage quoted, Atkin LJ was intending to lay down the circumstances generally under which a managing director might be personally liable for the tortious acts of the company. What that case was concerned with was the question whether a managing director, who had legal authority over the band, but was not "privy" to the infringing acts, could nonetheless be liable. It did not say that if he was "privy" to the act, he must necessarily be liable.

81. InWhite Horse Distillers v. Gregson Associates [1984] RPC 61 at 91 Nourse J said:

"Before a director can be held personally liable for a tort committed by his company he must not only commit or direct the tortious act or conduct but he must do so deliberately or recklessly and so as to make it his own, as distinct from the act or conduct of the company. It is unnecessary for him to know, or have the means of knowing, that the act or conduct is tortious. It is enough if he knows or ought to know that it is likely to be tortious."

82. It may be that this statement of the law puts too high a threshold for liability and that the word "deliberately or recklessly" should be omitted: as is suggested in Slade LJ's judgment inEvans v. Spritebrand Ltd. [1985] FSR 267 at 277. Nevertheless, as I understand the law, the mere fact that a director gave instructions for an act which turned out to be tortious would not, by itself, be sufficient to establish liability. There must be something more: for example, he knew that it is likely to be tortious, and nevertheless directed the infringing acts to be performed, making it his own.

The second defendant's role in the company

83. The second defendant was the managing director until he was "demoted" to marketing director on 1 July 1992 when Mr Sanders became managing director. The evidence however shows the second defendant involved with the major decisions of the company at every step. He, with Mr Mercer, first conceived the idea of the "green cartridge" and of forming the first defendant. He approached Mr Sanders to become a founding investor and, together with Mr Sanders, raised US$200,000 by way of initial capital (Mr Sanders contributing the major part). The second defendant with Mr Sanders prepared the "business plan" (which went through various versions) which was used to raise further finance. This was successful and they succeeded in raising a further US$750,000.

84. When it became apparent at a fairly early stage that the original concept of recycling used cartridges was not viable the company sought alternative avenues of business. The idea of producing all the parts for a complete new cartridge evolved gradually: it did not spring from one dominating mind. Rogers J's judgment is somewhat sparse on findings of primary fact in this regard, but I do not understand him to have made any finding to the contrary effect. When the drawings and moulds of some parts were commissioned, it was necessary to have drawings of other parts made - not necessarily because a decision had been made to manufacture those other parts, but because the tolerances of the various parts were so fine that additional drawings were necessary to ensure that the earlier parts fitted. The second defendant was the person who authorised some of the expenditure for the preparation of drawings and the making of moulds. That was in the summer of 1991 when Mr Sanders was away on holiday.

85. When the "Problems" document was prepared by the second defendant in collaboration with Mr Sanders a range of options was put forward, and this eventually led to the decision to manufacture complete cartridges.

The decision to manufacture complete cartridges

86. The judge said (p97-Q of his judgment):

" In the Autumn of 1991 when the decision to manufacture cartridges as opposed to refilling or repairing them was taken, in addition to the 2nd Defendant being a director of the 1st Defendant there were some 4 other directors including in particular Mr. Gurka. Mr. Gurka has considerable experience in the investigation of activities of those who are alleged to infringe industrial property rights. As a result therefore he is well-known amongst industrial property practitioners. Hence, it is not surprising that Mr. Gurka contacted Mr. Rackham who was the senior partner of Lloyd Wise in Hong Kong."

87. At the trial three letters of advice from Mr Rackham of Lloyd Wise were put in evidence: Those of 11 September, 7 and 15 October 1991. They were all addressed to Mr Gurka.

88. The first letter, that of 11 September, dealt with the patent position and concluded that there was no relevant patent in the plaintiff's favour. The judge noted that the primary searches were conducted by Mr Rackham under the name of "Cannon" and not "Canon" and concluded from this that the advice was "causal" and "friendly" and, applying his own experience in such matters, thought that the searches were not as thorough as they should have been. That might well be so, but it is difficult to see how a lay person in the position of the second defendant was to know that. His evidence was to the effect that intellectual property issues, and their impact on the company's activities, were delegated to Mr Gurka who was, himself, professionally involved in that field. Mr Gurka in turn sought the advice of Mr Rackham of Lloyd Wise. If they both concluded, as they apparently did, that there were no patent problems, it is difficult to see why the second defendant should be singled out for criticism when later there were problems.

89. As for copyright, the letters of 7 and 15 October 1991 addressed the British Leyland defence on the basis of a refurbishment business: making spare parts for cartridges.

90. On these letters, the judge concluded as follows (p100-J of his judgment):

"... the 1st Defendant should have appreciated 2 matters on reading the letters. In the first place the operation was going to be very different from a purely refurbishing operation. Page 2 of the letter of 7th October makes quite clear that a repair defence will not be viable if what is being done is to make what is effectively a new item. In the second place, the 1st Defendant should have appreciated that the primary searches had been done using the wrong spelling of the Plaintiff's name."

91. As regards the first of the judge's conclusions, this depends upon a proper view of the ambit of the British Leyland defence - a matter upon which lawyers and judges could well differ. As to the second matter, it is difficult to see what the company and its officers should have done in light of the advice from Lloyd Wise (conveyed through Mr Gurka) that searches were conducted in both names, "Cannon" and "Canon", and yielded nothing.

92. When the second defendant came to be cross-examined on these letters from Lloyd Wise, he agreed with counsel that it was not the new business which was being discussed but the recycling business. The second defendant was then asked by counsel:

"Q. He [Mr Rackham] was telling you that repairing was all right, but making a new cartridge was risky, was he not, Mr O'Brien?

A. Yes."

93. And the second defendant was further asked:

"Q. It was quite clear to you, was it not, that Mr Rackham thought that the advice he was being asked to give was only in relation to your existing business, not in relation to the business which, after a fundamental change, you were going to embark upon; correct?

A. He is talking here clearly about the repair of a patented item, I think.

Q. Not the making of a new one which he said would be a risky business; correct?

A. Correct."

94. The "risk", as can be seen, related to "patented items": and, as far as Mr Rackham was aware, there was no relevant patent applicable.

95. The decision to make complete cartridges was put thus in para 17 of the second defendant's first witness' statement:

"... it was decided by myself, Christopher Mercer and Michael Sanders at an informal meeting in late 1991 that the 1st defendant would directly compete with Canon in the SX repair cartridge market place by producing a toner cartridge which:

(a) was designed to be recycled, not disposed of;

(b) would contain more toner, providing the consumer with a lower cost per printed page; and

(c) would compete with Canon's product with respect to quality, price and value."

96. This meeting was described at the trial as the "3-way nod" to go ahead to manufacture the complete cartridges.

The second defendant's relationship with the company

97. In considering the second defendant's personal liability, these facts must be borne in mind: the company had a board of five directors and there was no evidence to the effect that the board had delegated to the second defendant - or to him and Mr Sanders - all the decision-making functions. When it was put in cross-examination to the second defendant that he was "the major decision maker as to the directions in which the company should move", this was his answer:

"A. I was one member of a board. If I can go through the board, one was a qualified barrister. Mr Sanders was the Chairman of the Hong Kong Institute of Directors, 55, an ex-Army Colonel, I believe. One of the other directors, Mr Azido, is the managing partner of one of the top 10 accounting firms in Hong Kong, Byrne. Gerry Penwarden, I believe, was a director of either Dragon Air or Cathay Pacific Airways. To suggest that I could, in some way, manipulate this board or to get them to do something or pull wool over their eyes I would suggest is preposterous."

98. Moreover, the member of the board who was a barrister was herself married to a barrister specialising in the intellectual property field. There is no suggestion that the company through its board had not fully evaluated the risks before it was decided to go into the manufacture of complete cartridges.

99. From the evidence, Mr Sanders was a dominant personality. He seemed to have acted in concert with Mr Penwarden and between them they held over 50% of the shares. The second defendant said in evidence that he "reported" to Mr Sanders.

100. In considering the personal liability of a director, it must be kept in mind that, in law, a director owes fiduciary duties to the company and is answerable to the company through its board.

101. It is, of course, trite law that each person is also answerable for his own tortious acts: but when a legal person such as a company commits a tort (say, breach of copyright) it can only do so by the acts of its servants and agents. If the law were that every time a managing director gives instructions (on the board's behalf) for an act which turns out to be tortious, he becomes liable personally, this would go a long way to eroding the principle of limited liability, particularly with regard to small companies.

The judge's conclusion

102. The judge's conclusion with regard to the second defendant's personal role in the activities constituting breaches of copyright and patents are set out at p137J-R of his judgment:

" The 2nd Defendant was at the very least a joint prime mover of the 1st Defendant in relation to the matters which are the subject of this Action. He was the person who was a main, if not the main, protagonist in establishing the 1st Defendant. At best it can be said it was a '3 way nod' to go ahead to manufacture the cartridges. I incline however to the conclusion that the move to manufacture the complete cartridge was something that the 2nd Defendant had in mind as an ultimate or potential venture right from the start. Mr Mercer was clearly someone who in my view was working for the 1st Defendant on the technical side. Obviously if he said something could not be done from a technical point of view then whatever it was that was under discussion would have had to be reviewed. Nevertheless from a commercial aspect I have no doubt that the 2nd Defendant must be credited as a prime mover in the conception of the idea of making complete cartridges and the decision to go ahead to make them."

103. Mr Thorley QC rightly argues that the judge's "inclination" to the conclusion that the second defendant had in mind the manufacture of the complete cartridge "right from the start" was not a finding of fact. I agree; and if it were, it would in my judgment be a wrong finding.

104. Plainly, upon the evidence, the initial concept of the "green cartridge" was to assemble a cartridge from recycled parts, replacing with new components only those which needed replacing. Conceivably, this might have been stretched to sub-assemblies. But there was no evidence to the effect that the second defendant had, right from the start, in mind the manufacture of a complete cartridge "as an ultimate or potential venture". On the other hand, the evidence clearly established that even before the "3 way nod" (which took place in late 1991) the company was making increasingly more parts for the refurbishment trade.

105. With reference to the second defendant's personal liability, the judge made few findings of primary fact. He stated his broad conclusions, using labels such as "at the least a joint prime mover" and "instigator" to describe the second defendant's participation in the company's affairs, but there are no clear findings concerning his state of mind: in particular, did the second defendant know that the manufacture of complete cartridges was likely to be tortious: or were the circumstances such that he ought to have known? The furthest the judge went was (at p139P of his judgment) as follows:

"He has taken a business risk in putting the company into the venture. As between himself and the company no doubt the company takes the consequences of that risk. As between the wrongdoers and the injured third parties I see no reason why the third party should not recover from either wrongdoer."

106. This is an echo of the judge's earlier finding - made in relation to the defence of innocence with regard to the existence of the plaintiff's patents - that in September/October 1991 the defendants were going ahead to copy a product knowing that there were probably patents which covered the product. And the judge went on [103-B-H]:

"I consider they took the risk to go ahead not because they thought that no patents existed but because they thought they could rely on the repair defence. In this respect they did not take proper advice. They seem to me to have taken informal advice. They did not take care to tell those from whom they were taking that advice exactly what they were proposing to do. In my view the Defendants went ahead and copied hoping if things took a bad turn and they were challenged to rely on the repair defence. I do not consider that they were in a position where they can say that they had no reasonable grounds for supposing that a patent such as the '054 patent existed."

107. The '054' patent referred to in the above passage relates, in essence, to the functioning of the magnetic doctor blade. The judge's finding as to the company's risk-taking vis-à-vis the existence of patents seems questionable in the light of Mr Rackham's advice conveyed through Mr Gurka, but the defendants are stuck with these findings as they have not appealed against the judge's rejection of their defence of innocence under the Patents Act.

108. The question is then whether these findings are sufficient to establish personal liability on the part of the second defendant in relation (i) to the infringement of patents and (ii) to breach of copyright. The judge found the second defendant personally liable in respect of both. These two matters must be viewed separately.

Damages for breach of copyright

109. There can be no personal liability on the part of the second defendant if the British Leyland defence prevails.

110. But, in any event, the judge was in my view wrong to have held the second defendant liable. This was a difficult area of law and, in effect, the board had delegated to the one director who had expertise in the field, Mr Gurka, the task of seeking advice. Mr Gurka then turned to Lloyd Wise, a respected firm of patent agents. It would seem inconceivable that the company would have gone ahead to incur the enormous cost of tooling up to make complete cartridges, essentially by reverse-engineering, without being reasonably satisfied that they could sell those cartridges without breach of copyright. The directors were also shareholders and were committing their own money to the project. The decision to go ahead must, on the evidence, have involved the whole board. The fact that the 2nd defendant was active in the management of the company's business is only one factor in holding him personally liable for the company's tortious acts.

Damages for breach of patent

111. Here the 2nd defendant has a particular difficulty: the judge's findings on the "innocence" defence under the Patents Act against which the defendants have not appealed.

112. All the activities which ultimately constituted the tortious acts were done openly. On the evidence before the court, by the summer of 1991 the company was running out of cash and had to seek further finance, principally from the shareholders. The "Problems" document was prepared as a means of approaching the shareholders. When, eventually, the company was able to offer a complete range of components for the cartridge, printed brochures were published and distributed.

113. In the light of this evidence, counsel for the plaintiff invited the judge to make the finding that the second defendant had procured the tortious acts deliberately and recklessly: a finding which the judge declined to make. The only reasonable inference to draw, in the light of all these facts, is that, at the relevant time, the second defendant did not think that competition with the plaintiff was likely to be tortious.

114. Accepting, as the defendants must, that they had failed to establish the defence of innocence to the patent infringement charge, it does not necessarily mean that the plaintiff has proved facts sufficient to land the 2nd defendant with personal liability.

115. In my judgment, the judge's findings of fact were insufficient to establish personal liability on the part of the second defendant. Moreover, upon all the evidence as has been explored in this court, the foundation of personal liability for patent infringements has not been established.

116. I should add in parenthesis that there is strength in Mr Thorley's submission that the judge's approach at the outset was wrong. The judge said he had "absolutely no doubt that the 2nd defendant should be subject to the same injunctions as the 1st defendant" (p137-G) but felt "reluctance" to burden him with damages for acts in respect of which the company stood to gain (p13G-G). This, Mr Thorley says, puts the 2nd defendant on a sliding scale of liability: something not provided for in the law; the 2nd defendant either, upon the facts proved against him, has incurred personal liability or he has not; the facts do not change according to the nature of the reliefs sought by the plaintiff. I agree. It is upon those facts, barely adumbrated in the judgment with reference to the 2nd defendant's personal liability, that I have come to the conclusion that he is not personally liable.

Patents

117. The two patents in issue on this appeal are Patent No. 2,101,933 ("933") registered in Hong Kong by Certificate of Registration of Patent No. 463 of 1988 and EP Patent No. 0,096,261 ("261") registered in Hong Kong by Certificate of Registration of Patent No. 841 of 1993. At the trial it was accepted that the defendants' cartridge infringed "933" and "261". The question before the court was whether the patents were valid.

118. In relation to "933" the defendants alleged in the court below that the patent was invalid on the grounds (i) of anticipation on the basis of two Japanese utility models and (ii) obviousness over a specification filed by Minolta in 1975 and published in October 1976: about five years before the priority date of "933" which was 2 June 1981.

119. Whilst rejecting the defendants' challenge on the ground of anticipation, the judge nevertheless held that "933" was invalid for obviousness. It is against that finding that the plaintiff cross-appeals.

120. In relation to "261", this was also alleged to be invalid for obviousness. It is common ground that the cross-appeal on "933" and "261" stand and fall together.

"Obviousness"

121. Underlying the cross-appeal is the United Kingdom Patents Act 1977 as applied to Hong Kong, the relevant provisions of which state:

"Patentability:

Patentable inventions:

1.(1) A patent may be granted only for an invention in respect of which the following conditions are satisfied, that is to say -

(a) the invention is new;

(b) it involves an inventive step;

(c) ....

(d) ....

and references in this Act to a patentable invention should be construed accordingly.

....

3. An invention shall be taken to involve an inventive step if it is not obvious to a person skilled in the art, having regard to any matter which forms part of the state of the art by virtue only of section 2(2) above (and dis-regarding section 2(3) above)."

 

122. Section 2 is the section which deals with novelty and provides that an invention shall be taken to be new if it does not form part of the state of the art. What is meant by "the state of the art" both for the purposes of section 2 and section 3 is defined in s2(2):

"(2) The state of the art in the case of an invention shall be taken to comprise all matters (whether a product, a process, information about either, or anything else) which has at any time before the priority date of that invention been made available to the public (whether in the United Kingdom or elsewhere) by written or oral description, by use or in any other way."

The state of the art

123. What the court is concerned with is the state of the art as at the priority date of Canon's patent "933" which, for the purposes of the appeal, is 2 June 1981. The question boils down to this: Did the relevant claim in "933" involve an inventive step, having regard to the state of the art at that time? That is, whether the invention was obvious to a person skilled in the art?

124. For a long time it has been known that a key component in the xerographic process is the photosensitive drum: a device used in automated electrographic machines as early as the 1960s.

125. Photoreceptors have always been vulnerable in two ways: (i) To physical damage; for example, a scratch or fringe print will produce an image defect; (ii) they are vulnerable to "light fatigue". If exposed to light for a prolonged period there will be an excessive build up of charge which cannot quickly be dissipated. The receptor loses its photosensitivity - which may be temporary, depending on the duration of exposure. The photoconductive material would degrade after being exposed to light for a few minutes.

126. Accordingly, machines carried warning notices, and the servicing of machines was restricted to trained technicians who took care not to touch the drum. Machines generally had panels or doors for access to the drum; there were also "clam-shell" designs, where the top of the machine was hinged, to enable access to clear paper jams. The drum was often surrounded by components such as the corona charging unit or the cleaning system, which had to be removed to enable the technician to reach the drum. Servicing would be done in dimmed lighting if possible; and if the drum had to be removed - with the use of special tools - it would be put immediately into a container.

The Minolta patent

127. In October 1976 Minolta published their specification as described in their US patent No. 3,985,436 ("436").

128. This Minolta patent is referred to in the "933" specification in the following terms:

" Further, recently, as shown in U.S. Patent No. 3,985,436, it has been proposed to construct a unit in which process means such as a photosensitive drum, a developing device, a cleaner, a charger, etc. are incorporated into a unitary structure and to interchange the whole unit when the photosensitive drum needs to be changed, thereby reducing and simplifying the maintenance procedure. By adopting the above-described construction, the interchange of process units can be carried out by the user of the apparatus, so reducing the maintenance work which has to be done by the service man. Further, by interchanging the currently used unit with a process unit which contains toner of another colour, selection of image colour becomes possible."

The inventive step

129. The claimed invention in "933" is to have put a cover on the "member for carrying an image to be formed" (i.e. the photosensitive drum), which is movable between a "first position for exposing said member and a second position for shielding such member" (claim 2 of the "933" specification.)

130. The question before the judge in the court below was in essence this: Having regard to the disclosure in the Minolta specification and the state of the art as at the priority date of the Canon patent "933", was the claimed invention in "933" - claim 2 in the plaintiff's patent - "obvious"?

131. The Minolta patent describes a copying machine where the photosensitive drum, a developing device and the cleaning device are all incorporated in a casing as one unit. That unit can be taken out of the copying machine. The point of it is said to be to help the efficient replacement and maintenance of the components. The Minolta specifications were never put into practice, either by Minolta or anyone else. They remained "paper proposals".

132. At the time of the publication of the Minolta specification, in October 1976, no one in the industry had contemplated the incorporation of a cover to protect the photosensitive drum. It was common place in the industry, when a photocopier is serviced, for the technician to protect the drum from exposure to light: for example, by placing it in a container when the drum was removed in the course of servicing the machine. The incorporation of a cover, which would automatically retract when inserted into the machine and spring shut to protect the drum when removed, had simply not occurred to anyone in the industry: until the plaintiff produced the Canon cartridge system manufactured in accordance with the specifications in "933". The Canon invention, in effect, revolutionised the industry.

The approach to the question of "obviousness"

133. As Rogers, J. rightly observed (p35-G of his judgment) the onus is clearly upon the person attacking the validity of a patent to establish obviousness. He said (p34-S to p35-D):

" One important matter of approach which to my mind ties in with the hypothetical skilled man being unimaginative is that the court must be wary of what has been termed the ex post facto analysis giving a false impression of obviousness. Many good inventions have been deceptively simple. In colloquial terms it could be said of many inventions, some of which might have made fortunes for their inventors, that anybody could have thought of them. Nevertheless even the most deceptively simple invention may still not be obvious."

134. This follows the approach of the English Court of Appeal in Molnlycke v. Proctor and Gamble [1994] RPC 49 where, at 115 the Vice-Chancellor said:

" The burden of proof is upon the person attacking the validity of the patent to show that no inventive step was involved. It is therefore for him to make out the case of obviousness and prove it by appropriate expert evidence. Accordingly in any given case it will be for that person to marshal and prove those aspects of the state of the art which he alleges make the relevant step obvious."

Evidence as to the state of the art

135. The question of obviousness depends, then, upon the evidence - the expert evidence - bearing upon the state of the art as at the priority date.

136. Here, the evidence was all one way. For instance, the unchallenged statement of Mr Harold Bogdanoff who during the 1970s (and until he retired in 1988) was in charge of the Competitive Evaluation Group at Xerox. The role of this group was to evaluate the products of competitors: including Canon, Minolta, Ricoh, Sharp and Toshiba in Japan. Mr Bogdanoff, in the early part of his career, had worked closely with Mr Chester Carlson, the person credited with having invented electrophotography, and was co-inventor in some of Mr Carlson's later patents. Mr Bogdanoff was, for many years, engaged in research into electrophotographic processes at Xerox. His evidence was to the effect that, until Canon's cartridge system was introduced in the early 1980s, the perception of the industry was to deal with the vulnerability of the photosensitive drum by the better training of service technicians and repairmen.

137. Dr David Tabak, another highly qualified expert witness, testified as to the "tremendous stir" when the Canon cartridge was introduced. He said that at Xerox they probably had one thousand of the best people in xerographic process technology. It never occurred to him or the thousand other people - all of whom were aware of (i) the Minolta idea of a removable process kit and (ii) the need to protect the photoreceptor from light - to combine the process kit with a cover: So that the process kit could be made "idiot-proof": That is, removable by a totally unskilled person without damage to the photoreceptor by exposure to light. This enables the customer to have, for instance, inter-changeable cartridges with different coloured toner.

138. The reason why the Canon invention caught the industry by surprise is simple: It would, as Rogers J puts it at p66-L of his judgment, "be a mistake to regard what is described in the Minolta specification as a cartridge ... It is a replaceable unit ... something heavier and more cumbersome": And the reason why it was perceived in the late 1970s in that way was because photocopying machines were by definition large and cumbersome, and they required the attendance of service technicians and repairmen: No-one had thought of desk-top machines with handy removable cartridges which were "idiot-proof".

139. In fact, the Minolta specifications gave no dimensions, and column 2 of the Minolta document described the process kit (incorporating the photoreceptor, the developing device and the cleaning device) as one unit which could be "releasably inserted into the copying apparatus housing for efficient replacement ...".

140. If the "mind-set" of the industry at that time had already shifted to desk-top models and "handy-sized units which could be easily taken out and replaced by anybody with a minimal knowledge of things mechanical", as the judge described the Canon cartridge at p67-T, then the incorporation of a cover to protect the photosensitive drum would have been obvious. It needed the introduction of the Canon machine and cartridge to make that obvious.

141. The judge, in effect, came to the same conclusion, for at p68-C to N he said:

" There was much evidence given some in writing from Mr Bogdanoff, who was not cross-examined, and some orally from Mr Malcolm and this brought out in his cross-examination. Mr Bogdanoff gave evidence as to the enormous number of patent abstracts and indeed full patents which he read week by week and the research and the development that went into the photocopier field at Xerox at the relevant time. Mr Malcolm gave evidence that he was working for Gestetner in Australia on the development of new photocopying machines. Neither of these two companies came up with the idea of a cartridge such as the Plaintiff's. Nor did they think of making a replaceable unit of the type described in the Minolta patent. Indeed Mr Malcolm specifically said that he was aware at the time of the Minolta patent.

From that evidence, I take it that despite knowledge of the Minolta patent and even without it, the idea of producing a small cartridge such as Canon produces did not occur to those in the industry."

142. The Mr Malcolm referred to in the passage above was in charge of the development department at Gestetner at that time.

The judge's conclusion on obviousness

143. Once one arrives at this point, as the judge did in the passage above, the conclusion seems inevitable that, having regard to the state of the art at the relevant time, the incorporation of a cover to protect the photoreceptor was not obvious to the hypothetical skilled person. As the judge himself puts it (at p68-S to 69-A): "If one were to say was it obvious in 1981 that a light, compact and easily usable cartridge system could be used for photocopiers and one used as the starting basis the Minolta patent, I could say that the evidence as to what happened at the time in the industry clearly indicated that it was not obvious."

144. Mr Thorley QC rightly emphasizes that the inventiveness as claimed in claim 2 of "933" is not restricted to a cover which slides open when the process kit is inserted in the machine and snaps shut when removed: The claimed inventiveness is much wider and includes for instance a cover that can be moved manually. Hence it is important that the court, in considering the understanding of the hypothetical skilled person, be not too swayed by the "surprise" in the industry when the Canon cartridge first appeared: The court is not concerned with commercial obviousness but technical obviousness. Is the incorporation of a cover in Canon's specification in "933" a mere workshop variation to what was already described in the Minolta specification? Or is it an inventive step?

145. The judge looked at the Minolta "paper proposal" and asked himself quite rightly this question: What would the published specification have taught the hypothetical skilled person and what would that person have derived from a careful reading of the specification? Then he went on (p69-M to p70-J):

" There are some things which must simply go without saying. Even the most uninitiated layman would appreciate the necessity of a connection to an electric supply of apparatus that needs it. So too, one might expect any photocopying machine to have a movable top cover to go on top of the transparent member on which the matter to be copied is supported. Unless I am mistaken neither of these two things are shown in the Minolta patent specification. That is not to say however that these matters would not be obvious.

One then comes to how a skilled man would construct the removable unit. It is pertinent to note here that the description in the body of the specification describes a preferred embodiment of the invention as being built in a casing as one unit1. The specification further goes on to describe it as being of a box like shape2. It can be seen with reference to the embodiment as shown in the figures and described that the only openings in that box like shape appear to be above and below the photosensitive drum. Since the unit is described as being intended for use for a predetermined period of time and thereafter can be collected by the manufacturer of such units for reclamation of the same, it seems to me to follow almost inevitably that some kind of protection must be provided for the photosensitive drum during the time of transport and storage when it is not inserted into the machine." (Emphasis added).

146. Here, in my judgment, is where the judge went wrong. Of course it goes without saying that where there is a photosensitive component like the drum which must be protected from prolonged exposure to light in some way, a form of cover - like the movable flap of a VHS video recording cassette - is easily conceivable. But persons skilled in the state of the art as at a priority date of "933" never thought of the need for any form of cover. As Dr Tabak, who studied the Minolta specifications at the time described it: the Minolta machine was a "kludge": clumsy, inelegant, impractical. Since all photocopiers and printers were conceived at that time as large machines requiring the attendance of service technicians it simply never occurred to anyone to incorporate a cover into the photoreceptor unit. There was no need for it. The Minolta specifications - which showed the drum exposed in two places, top and bottom, when the process kit was removed - would have required radical amendment if covers were to be accommodated. Why design something which served no practical purpose? No one in the industry at that time had thought of the possibility of a cartridge to be handled by untrained and unskilled persons: It was this shift in perception which made the incorporation of a cover obvious.

147. The judge, as I see it, went against the evidence and his own findings when he said (at p70-M):

" It seems to me that if one were to ask the question how a hypothetical skilled addressee would go about constructing a machine with a unit as described in the Minolta patent, the answer must be that he would wish to put some kind of shield device to protect the photosensitive drum. This may well not have been one which was automatically movable on insertion of the unit into the photocopying machine but may well have been one or rather two which were manually slidable or movable. Whether such a unit with a movable cover of the type used on the VHS cassette or with a slidable cover of the type which had hitherto been used in photographic equipment were constructed, it would clearly, it seems to me, fall within claim 2 of the '933' patent. In the circumstances, it seems to me in the light of the Minolta patent claim 2 of the '933' patent is clearly obvious."

148. The hypothetical skilled addressee, on the evidence, would not have wished to put "some kind of shield device" to the drum. On the evidence, he would more likely have said: "What's the point? Why make the machine more complicated and incur more expense? The technicians are trained to protect the drum, and if need be they can pop it in a box". The Minolta patent would not have been, to the hypothetical skilled person, a starting point to produce a compact machine and cartridge system, requiring a cover to be incorporated into the cartridge. It needed a skilled and inventive person to take the next step.

149. The only possible conclusion on the evidence, in my judgment, is this (borrowing the words of Whitford J in Intalite International v. Cellular Ceilings (No. 2) [1987] 537 at 547): When skilled and inventive individuals, looking for improvements in the field, failed to arrive at the claimed construction it is impossible to suggest that it would have been obvious to the hypothetical skilled man, not necessarily inventive.

Danger of hindsight

150. It seems to me that the judge, having warned himself earlier of the danger of hindsight, failed to heed his own warning and used hindsight to judge the state of mind of the hypothetical person. The incorporation of a cover became obvious once the Canon invention of the cartridge became known. It was not obvious at the time when the machines were, in Dr Tabak's term, "kludges".

Conclusion

151. In my judgment, the appeals of the 1st and 2nd defendants, and the plaintiff's cross-appeal, succeed. The judge erred in holding:

(i) that the defendants have infringed the plaintiff's copyright in the drawings relating to the forty-eight parts of the cartridge as particularised in the amended particulars of infringement;

(ii) that the 2nd defendant was personally liable for breaches of patent and copyright;

(iii) that the privileges and rights conferred by Hong Kong Certificate of Registration of Patent No. 463 of 1983 (the "933" patent) have not been acquired by the plaintiff;

(iv) that the privileges and rights conferred by Hong Kong Certificate of Registration of Patent No. 841 of 1993 (the "261" patent) have not been acquired by the plaintiff.

152. Having reached this point, it is unnecessary to deal with an ancillary issue arising from the form of the injunction against breaches of copyright as ordered by the judge: namely, whether the injunction was in any case too wide. If it had been necessary I would have upheld para 2(a) of the amended notice of appeal and replaced the judge's order by an injunction in the wider terms as proposed by Mr Thorley QC.

153. I would discharge such of the judge's orders as are relevant to the above findings, including his order that the defendants pay to the plaintiff 73% of the plaintiff's costs of the action.

154. The most appropriate course now would be for the defendants' solicitors to prepare a minute of judgment for our approval, consequent upon the findings of this court, by agreement with the plaintiff's solicitors if possible; time for any further appeal to run from the date when the minute of judgment is approved.

155. We have been greatly assisted on this appeal by the input of counsel and solicitors on both sides and I wish to extend my thanks to them.

156. We should hear counsel on the question of costs, both in this court and in the court below.

Mayo, J.A.:

157. The first issue on this appeal is whether Rogers, J. was correct in coming to the conclusion he did that the appellant was not entitled to rely on the decision in British Leyland v. Armstrong [1986] AC 577 in defence of the claim that they had infringed the respondent's copyright in the drawings for their SX Model Laser Beam Printer.

158. The infringement alleged related to the respondents' EP-S process cartridge which is designed to work in the said laser beam printer. The appellant's green cartridges are very similar to the EP-S process cartridge. Indeed it is accepted that design of the green cartridge was based upon reverse engineering of the EP-S process cartridge.

159. There was evidence to the effect that the green cartridge comprises a photosensitive drum, a magnetic roller, wiper blades and corona discharge. There is also a reservoir which contains toner.

160. There are important differences between the parties on factual issues. It is the appellant's case that in very approximate terms the supply of toner is sufficient for about 3000 copies of documents. The items above described all have a useful life for rather more copies than this. The corona discharge has a longer life but it needs to be cleaned if the copier is to continue to function satisfactorily.

161. The cartridge is a separate unit to the copier. The idea behind the cartridge is that when toner is being replenished the parts of the copier which have a limited life expectancy are at the same time replaced thus obviating the necessity for the copier to be serviced at frequent intervals.

162. Another way of assessing the relationship between the cartridge and the copier is to consider the price of the copier and its component parts. There was evidence that the complete copier costs approximately US$6000. The engine to the copier which is manufactured by Canon costs US$4000 and the cartridge costs US$80. The total life of the copier is estimated at 5 years or 300,000 copies. This needs to be borne in mind in the context of the life expectancy of the cartridge.

163. The respondents contend that the copier and the cartridge have to be considered as a single unit. They claim that the process which is performed by the component parts of the cartridge constitute the heart of the copier.

164. While they accept that replacing the cartridge is a highly convenient means of maintaining the copier they claim that the vast majority of parts in the cartridge last for a long period of time sometimes even as long as the copier as a whole.

165. In support of this the respondents' point to the active industry in the USA where there are over 5000 businesses who refurbish Canon cartridges. Toner is replenished and in the event of any of the component parts needing to be replaced this would be done. In many instances it would not be necessary for any of the component parts to be replaced.

166. Indeed according to the appellant's initial business plan it was their intention to undertake work of this nature. It was only when they perceived that this would be insufficiently profitable that they decided to embark upon the manufacture of complete cartridges.

167. Rogers, J. heard a considerable amount of evidence on the copier, the cartridge and the overall surrounding circumstances.

168. He summarised the evidence in this way at p107 of his judgment:

"Summary of evidence relating to replacement of cartridges

The evidence of all the witness really amounts to this:-

1. The normal event which causes a laser printer or copier to stop producing copies is the depletion of toner.

2. The normal event which requires a replacement of the cartridge in a laser printer or copier is the depletion of toner.

3. The cartridge in a laser printer or copier is sometimes replaced because the cartridge has failed otherwise than because the toner has run out.

4. When the toner has run out, or the cartridge has ceased to work for some other reason, the majority of the parts of the cartridge are usually in proper working condition.

5. Even though a depleted cartridge may function if refilled it may be legitimate to replace some of its parts on a 'preventive maintenance' basis, i.e. to make sure that the cartridge lasts for another full toner load. The parts which would or may require replacing are generally speaking:-

(a) the photo-sensitive drum;

(b) the corona wire;

(c) the seals;

(d) the wiper blade;

(e) other parts.

In addition, in the course of handling a used cartridge, some of the plastic parts may become damaged or broken. Whilst I do not rule this out it does seem to me that the construction of the cartridge is reasonably strong and it can withstand firm handling.

Prima facie, therefore, when the Defendants are supplying and assisting others to supply complete cartridges, they are providing the user with a new supply of toner. The existing cartridge has not become broken or defective other than by reason of the fact that there is no more toner. The cartridge is in a condition where it can be re-used, although it may be advisable at that stage to replace a few of the parts, not because they have become defective, but because they may become defective.

There is a subsidiary use for replacement cartridges and that is as an element of repair, but that I hold to be a minor element or in other words, a subsidiary use of the defendants' cartridges. Even then the cartridge which is causing problems will no doubt have the majority of its parts in working order and will thus be repairable."

169. Having regard to the evidence which was before the judge it is difficult to see how he could have come to any other conclusion.

170. The significant part of these findings of fact is the finding that overwhelmingly it was the case that toner was being replenished and an opportunity was taken to replace parts which may wear out in due course. In the majority of situations none of the component parts of the cartridge had to be replaced. In these cases all that could be said was that the parts may need to be repaired at some time in the future.

171. These findings were consistent with the evidence of the extensive market for refurbishing cartridges.

172. One of the central matters which has to be determined on this issue was whether replacing cartridges constituted "repairing" a copier in the context of British Leyland.

173. The House of Lords was involved in what has been described as a balancing exercise. That is balancing the legitimate interests of the owners of copyright against the interests of purchasers of articles who are seeking to keep their purchases in good repair and who might be in danger of being held to ransom if they had to have the repairs undertaken by the owners of the copyright.

174. Lord Bridge considered this problem at p625 of his speech in British Leyland:

" It seems to me that when one is considering machinery which is not the subject of any patent protection, it is unnecessary and may be misleading to introduce the concept of an implied licence. The owner of a car must be entitled to do whatever is necessary to keep it in running order and to effect whatever repairs may be necessary in the most economical way possible. To derive this entitlement from an implied licence granted by the original manufacturer seems to me quite artificial. It is a right inherent in the ownership of the car itself. To curtail or restrict the owner's right to repair in any way may diminish the value of the car. In the field of patent law it may be right to start from the patentee's express monopoly and see how far it is limited by exceptions. In the field of law applied to machinery which enjoys no patent protection, it seems to me appropriate to start from a consideration of the rights of the owner of the machinery and then to see how far the law will permit some conflicting legal claim to impinge upon those rights.

I can see no reason to doubt that any owner of a BL car might exercise his right to repair the car, whenever the exhaust pipe needs replacement, by producing an exact copy of the original pipe in his own workshop or by instructing the local blacksmith to do the same. But in practical terms, of course, if the owner's right to repair is limited to these activities in a world of mass-produced goods, it is quite valueless. What the owner needs, if his right to repair is to be of value to him, is the freedom to acquire a previously manufactured replacement exhaust system in an unrestricted market. Here, then we come to the heart of the issue, where there appears to be a clear conflict of legal rights, the car owner's right to repair on the one hand, the copyright owner's right, on the other hand, to use his copyright in such a way as to maintain a monopoly in the supply of spare parts. It may be a novel, but seems to me to be an unavoidable, issue for the law to decide which of the two rights should prevail over the other.

It is, I think, conceded that in certain situations resort to copyright to starve the market of necessary spare parts for a car would be legally unacceptable. As it is put in one of the written summaries of counsel's submissions which have been such a helpful feature of the presentation of counsel's arguments in this appeal:

'The respondents recognise that the owner of a vehicle or other apparatus must be able and free to deal with that article as he or she so wishes and must be able to buy spare parts lawfully on the market for that article.'

Thus, to take an extreme example, suppose a car manufacturer, to encourage early obsolescence, decided to discontinue his own supply of spare parts for every model five years after it ceased production and sought to enforce his copyright in spare parts drawings to stifle any alternative source of supply. I cannot believe that in those circumstances the law would be prepared to sustain the copyright claim, nor did I understand counsel for BL to argue seriously to the contrary."

175. He went on to say at p626:

" These considerations drive me to the conclusion that there is no such half-way-house solution to the problem as has been urged upon us for BL. Either the court must allow the enforcement of the copyright claim to maintain a monopoly in the supply of spare parts for the copyright owner and his licensees, regardless of any adverse effect of the monopoly on car owners; or the right of car owners to a free market in spare parts necessary for economical repair should prevail and the court should accordingly decline to enforce copyright claims as against the manufacturer of spare parts intended exclusively, as are Armstrong's exhaust systems, to be available as replacement parts for cars in need of repair. As I have already indicated, the first alternative would be unacceptable at one end of the spectrum of possible consequences. But, apart from this, it seems to me that there are sound reasons in principle why the second alternative should be preferred. By selling cars fitted with exhausts based on their copyright drawings BL have already enjoyed the primary benefit which their copyright protects. By selling those same cars BL have also created a large community of car owners who, quite independently of any contractual rights derived from BL, enjoy the inherent right as owners to repair their cars by replacing the exhaust whenever necessary in the most economical way possible. To allow BL to enforce their copyright to maintain a monopoly for themselves and their licensees in the supply and replacement of exhausts is, to a greater or lesser extent, to detract from the owner's rights and, at least potentially, the value of their cars. There is an inconsistency between marketing cars and thereby creating whatever rights attach to their ownership on the one hand and acting to restrain the free exercise of those rights on the other. The law does not countenance such inconsistencies. It may be a novel application of the principle to preclude a plaintiff from enforcing a statutory right to which he is prima facie entitled. But, as my noble and learned friend, Lord Templeman, demonstrates, the application of the principle to the relationship between the mass car manufacturer and those who at any time acquire cars of his manufacture is no more than an extension to a non-contractual relationship of the considerations which underlie the classical doctrine of the law that a grantor may not derogate from his grant. Subject to two further grounds of objection canvassed on behalf of BL, which I have yet to consider, it seems to me within the capacity of the common law to adapt to changing social and economic conditions to counter the belated emergence of the car manufacturer's attempt to monopolise the spare parts market in reliance on copyright in technical drawings by invoking the necessity to safeguard the position of the car owner."

176. Lord Templeman at p641 approached the problem in a slightly different way although his conclusion was similar to Lord Bridge's:

" I see no reason why the principle that a grantor will not be allowed to derogate from his grant by using property retained by him in such a way as to render property granted by him unfit or materially unfit for the purpose for which the grant was made should not apply to the sale of a car. In relation to land, the principle has been said to apply

'beyond cases in which the purpose of the grant is frustrated to cases in which that purpose can still be achieved albeit at a greater expense or with less convenience': per Branson, J. in O'Cedar Ltd. v. Slough Trading Co. Ltd. [1927] 2 K.B. 123, 127.

The principle applied to a motor car manufactured in accordance with engineering drawings and sold with components which are bound to fail during the life of the car prohibits the copyright owner of the drawings from exercising his copyright powers in such a way as to prevent the car from functioning unless the owner of the car buys replacement parts from the copyright owner or his licensee.

BL own the car and the copyright in a drawing of an exhaust pipe fitted to the car. BL sell the car and retain the copyright. The exercise by BL of their copyright in the drawing will render the car unfit for the purpose for which the car is held. BL cannot exercise their copyright so as to prevent the car being repaired by replacement of the exhaust pipe."

177. Mr Thorley, QC for the appellants submitted that Rogers, J. had failed to adhere to these principles when he had concluded that the British Leyland doctrine did not apply to the activities which had been conducted by the appellants.

178. What needs to be appreciated at the outset is the very different nature of the facts of this case to the facts of the British Leyland case.

179. What was being considered in that case was whether it was permissible for Armstrong to infringe British Leyland's copyright in the drawings of exhaust pipes of their Marina model motor car.

180. That was a comparatively simple drawing and no complex machinery was involved. There was no dispute that the life of exhaust pipes was much shorter than the life of the car as a whole. In due course it was virtually inevitable that the pipes would deteriorate and need to be replaced.

181. In the present case the cartridge contains 108 parts. On the findings of fact the vast majority of these parts - if not all of them - do not need to be replaced when the toner becomes depleted.

182. Mr Thorley placed reliance upon the passages in the speeches to the effect that it is the right of a purchaser of goods to have them repaired in the most convenient way possible and that included doing so in an economical manner.

183. This is quite true. However this does not extend to a right to replace parts which do not need to be repaired and may only need to be repaired at some future date.

184. Also this submission overlooks the fact that it is possible to have the cartridge refurbished by companies offering this service.

185. One of the main difficulties encountered by Mr Thorley in this connection was his attempt to equate the cartridge with the exhaust system of the Marina car. The recent case of Flogates Ltd. & Others v. Refco & Briggs (unreported being case No. 220 of 1994 judgment delivered by Jacobs, J. on 4 March 1994) did not in my view assist him. There the question being considered was whether the refractory material which had to be replaced formed part of the machinery. What distinguished that case from the present one is that the life expectancy of the refractory material was highly predictable whereas on the judge's findings of fact the majority of the components in the cartridge did not have a predictable life span and could not realistically be regarded as consumable items.

186. I have no doubt that on a fair reading of the speeches in British Leyland what was contemplated was necessary repairs being undertaken to enable the purchaser of an article to continue to use it in a practical and convenient manner. By no legitimate stretch of the imagination can this extend to producing a cartridge which contains what has been described as the heart of the copier for installation when the toner is depleted. The undisputed fact that it is possible to refurbish a cartridge more economically than providing a new one is in my opinion fatal to the contentions being advanced by the appellants.

187. To hold that the present case comes within the scope of British Leyland would significantly extend its parameters. I can see no justification for this.

188. Before leaving this aspect of the case there are some further observations that I would wish to make.

189. Even if Rogers J's judgment was to be upheld I have no doubt that the order he made together with subsequent modifications could not be permitted to stand. At the conclusion of the case Rogers, J. indicated to the parties that the order he was making could be modified so as to enable the appellants to manufacture components which would only be used as repair items and thus come within the British Leyland defence. There were several attempts to modify the order to this end.

190. With respect to the learned judge this whole procedure was misconceived. Although he was clearly attempting to be constructive and helpful I have no doubt that problems were likely to arise in dealing with the matter in this way.

191. It is conceptually wrong for a court to attempt to inform a party what it can and what it can't do.

192. All that the court should have attempted to do in the present case was to order the appellant in clear terms to refrain from specified acts or conduct. It should not in any way attempt to supervise or police the appellants' activities.

193. The decision to manufacture further components is one which has to be made by the appellants in the light of the court order. If the respondents think that the order is not being complied with it is always open to them to apply to the court for committal proceedings for contempt of court.

194. It would then be for the court to decide whether there had been any non-compliance with the order.

195. The other matter that I would wish to refer to is the fall back submission made by Mr Kitchin that the appellants should not be entitled to come within the doctrine of British Leyland on account of the existence of the patents.

196. I have had the advantage of reading Litton, V.-P.'s judgment on this and with respect I find myself in complete agreement with the observations he has made. I also am satisfied that the existence of the patents is a separate and distinct issue.

197. The second issue on this appeal was whether the second appellant should be held personally liable for the first appellant's acts and defaults. He appeals against Rogers J's determination that he should.

198. One of the difficulties facing us is that the judge did not condescend to particularise the findings of fact upon which he made his determination. He states at p137 of his judgment:

" The 2nd Defendant was at the very least a joint prime mover of the 1st Defendant in relation to the matters which are the subject of this Action. He was the person who was a main, if not the main, protagonist in establishing the 1st Defendant. At best it can be said it was a '3 way nod' to go ahead to manufacture the cartridges. I incline however to the conclusion that the move to manufacture the complete cartridge was something that the 2nd Defendant had in mind as an ultimate or potential venture right from the start."

199. Mr Kitchin quite properly did not place reliance upon this conclusion. He painstakingly took us through the relevant evidence in conjunction with a chronology from which he argued that Rogers J was right to make the determination he did.

200. In fairness to the judge he does also make observations upon the role assumed by the second appellant when considering the subject of damages at p139 of his judgment:

" Nevertheless I can see that if a person is in the position of a prime mover, to the extent of being an instigator as well as being the person who has the ultimate say as to whether the company should undertake a course of action then it may be right that he should be made liable for the consequences of those acts which he has instigated. Provided the company is able to pay the damages no consequences would presumably follow from such a holding. If the company is not able to pay the damages then in the circumstances of a director I see no reason why he should not be responsible for the damage caused by the acts which he has instigated to be performed by a company that he has been controlling. He has taken a business risk in putting the company into the venture. As between himself and the company no doubt the company takes the consequences of that risk. As between the wrongdoers and the injured third parties I see no reason why the third party should not recover from either wrongdoer."

201. At the trial it was agreed that the law was satisfactorily stated in Evans v. Spritebrand [1985] FSR 267.

202. Slade LJ's judgment at p277 and p278 reads:

" The propositions of law on which the appellant relies in the present appeal are derived more or less verbatim from this passage in the judgment of Nourse J. If this passage represents an accurate and comprehensive statement of the English law relating to the personal liability of the director of a company for his company's torts, there must be great fore in this striking out application. For Nourse J., in his statement of principle, appears to have gone further than the Federal Court of Appeal in Canada in at least two material respects, namely, (1) because he expressed it as applicable to all torts while, as I read the Mentmore decision, it was in terms limited to cases of patent infringement and (2) because he did not accept that flexible considerations of policy would be capable of overriding the 'basic principles of liability' according to the facts of a particular case. As I read his judgment, Nourse J. regarded the basic principle as being that it is a condition precedent to the personal liability of a director for a tort committed by his company that 'he must not only commit or direct the tortious act or conduct, but he must do so deliberately or recklessly and so as to make it his won, as distinct from the act or conduct of the company.' It is not therefore surprising that Mr. Watson referred to the White Horse decision as his 'best case'.

The authorities, as I have already indicated, clearly show that a director of a company is not automatically to be identified with his company for the purpose of the law of tort, however small the company may be and however powerful his control over its affairs. Commercial enterprise and adventure is not to be discouraged by subjecting a director to such onerous potential liabilities. In every case where it is sought to make him liable for his company's torts, it is necessary to examine with care what part he played personally in regard to the act or acts complained of. Further, I have considerable sympathy with judges, particularly when dealing with commercial matters, who may be anxious to avoid or discourage unnecessary multiplicity of parties by the joinder of directors of limited companies as additional defendants in inappropriate cases. As Mr. Watson emphasised, the very fact of such joinder could in some case operate to put unfair pressure on the defendants to settle. In some instances, where the joinder is demonstrably a mere tactical move, a striking out application may well be justified.

Nevertheless, in my judgment, with great respect to Nourse J. (and to Whitford J. who has since followed him), in expressing a principle in the White Horse case said to be applicable to all torts, he expressed it in terms which were not sufficiently qualified. I readily accept that the statements of Lord Buckmaster and Atkin L.J., to which I have referred, themselves cannot be regarded as a precise and unqualified statement of the principles governing a director's personal liability for his company's torts; I do not think they were so intended. In particular, I would accept that if the plaintiff has to prove a particular state of mind or knowledge on the part of the defendant as a necessary element of the particular tort alleged, the state of mind or knowledge of the director who authorised or directed it must be relevant if it is sought to impose personal liability on the director merely on account of such authorisation or procurement; the personal liability of the director in such circumstances cannot be more extensive than that of the individual who personally did the tortious act. If, however, the tort alleged is not one in respect of which it is incumbent on the plaintiff to prove a particular state of mind or knowledge (e.g. infringement of copyright) different considerations may well apply."

and then at p279:

" In contrast, on other hypothetical facts, difficult questions of degree might arise as to whether a director had ordered or procured the relevant acts to be done in the sense of the principle broadly expressed by Atkin L.J. - simply, for example, if the sole part which he had played in the relevant tortious act had been that of voting in favour of a relevant resolution at a board meeting. The Federal Court of Appeal of Canada in Mentmore eschewed any attempt to give a precise definition of the nature and extent of participation in the tortious act which will render a director who has directed or authorised it personally liable as a joint tortfeasor. As it rightly observed, this is an 'elusive question,' a 'question of fact to be decided on the circumstances of each case.' Nor, with respect, do I dissent from that court's assumption that under English law, at least in some cases, broad considerations of policy may be material in deciding on which side of the line his participation fell. If there has been no 'knowing, deliberate, wilful quality' in his participation, the court may naturally be more reluctant to hold the director personally liable. Lord Salmon himself observed in the Wah Tat Bank case that 'each case depends upon its own particular facts."

203. From these passages it would appear that a director can be held responsible for the acts of the company by virtue of his close involvement in a tortious activity. However where it can be established that there is a reckless element in the acts it is far more likely that the director will be held liable.

204. The first question to consider is whether the respondents have been able to establish that the second appellant has acted in a reckless manner. I do not think that this has been established.

205. Mr Kitchin drew our attention to significant disparities in the second appellant's evidence. It was suggested with a measure of justification that at least the decision to manufacture parts of the cartridge had already been taken and the first appellant had been committed to this manufacture some months before an opinion had been obtained from Lloyd Wise that the first appellant might be able to conduct its activities with impunity.

206. It was further suggested that when an opinion had been sought from Lloyd Wise the instructions which had been given to them were less than satisfactory. Again there is considerable force in this contention.

207. What is important is to have regard to what was being considered by the court. It was not simply attempting to ascertain whether the second appellant had given a full and truthful account of everything he had done over the relevant period. The fact that there were undoubtedly some inconsistencies in his testimony both before the court and in the affidavits he swore does not of itself prove that he was guilty of reckless conduct.

208. In this connection it also needs to be stated that an application was made by the second appellant to admit further evidence pursuant to the principles enunciated in Ladd v. Marshall [1954] 1 WLR 1489. This was not pressed vigorously by Mr Thorley. Having regard to the evidence which was before Rogers J I do not think that the additional evidence is of assistance to the second appellant and that being the case the application should be refused.

209. What has to be considered is whether it was reckless to proceed with the plans which had been made without first obtaining legal advice that it was unlikely that the company would be held to have infringed the respondent's intellectual property rights.

210. Mr Thorley submitted that if this was the case it would be tantamount to holding that a party could always be held to have been negligent if they embarked upon a course of conduct without first obtaining a legal opinion.

211. Although I am mindful that in the present case it is common ground that the first appellant did engage in reverse engineering I am not satisfied that the directors can properly be held to have been reckless simply on the ground that they may not have obtained clearance from Lloyd Wise that they would not encounter legal problems. In this connection it is to be observed that one of the directors of the company Miss Stewart was a practising barrister and would have had some idea of the implications of what was involved. There was also the evidence of the discussions with two other barristers who are acknowledged experts in this field of law.

212. What is also important is that by no stretch of the imagination can it sensibly be argued that the law on this subject is clear cut and straightforward. As is apparent from the submissions from counsel which have been made over a number of days there is considerable merit in the submissions which have been made to the effect that the first appellant can bring itself within the scope of what can be described as the British Leyland defence.

213. Having rejected the allegation of recklessness it is now necessary to consider whether the second appellant sufficiently made the acts and conduct of the company his own so as to render himself personally liable. As indicated in a number of cases it is necessary to consider each case on its own particular facts.

214. We were taken at some length through the early history of the first appellant and the roles assumed by each of the main participants in the activities of the company.

215. It must be said immediately that there was overwhelming evidence that the second appellant had not "right from the start" contemplated the manufacture of complete cartridges. Rogers J's "inclination" of this must almost certainly have been misconceived.

216. The preparation of the literature referring to ecological concerns is entirely consistent with the second appellant's evidence that initially the idea was to refurbish cartridges. There is then the lengthy report upon the difficulties which had been encountered in implementing these ideas and the arguments being advanced initially in favour of manufacturing component parts of the cartridge and then subsequently the manufacture of complete cartridges.

217. Much of this evidence was derived from contemporaneous documents and it would stretch credulity too far to believe that all of these activities were a charade to conceal the intention to manufacture complete cartridges.

218. What is apparent from the evidence which was before Rogers J was that the second appellant assumed a prominent role in the plans which were unfolding but that at all relevant times the Directors were acting together in concert.

219. It is necessary to consider the age, background and experience of all of the directors of the company. It is almost inconceivable that the other directors would have permitted the second appellant to embark on a frolic of his own without keeping them fully informed what he was doing and obtaining their concurrence.

220. It is significant to add that the other directors do not appear to have attempted to distance themselves from the second appellant's activities.

221. From the passage above cited from the judgment of Slade LJ it is not enough to show that the director was a director at the time when the tortious acts were committed and that he participated in the decision to commit the acts. Something more is required.

222. The Privy Council considered this problem in Wah Tat Bank Ltd. v. Chan Cheng Kum [1975] AC 507 at 514:

" No doubt the fact that the respondent is chairman and managing director of H.S.C. does not of itself make him personally liable in respect of that company's tortious acts. A tort may be committed through an officer or servant of a company without the chairman or managing director being in any way implicated. There are many such cases reported in the books. If, however, the chairman or managing director procures or directs the commission of the tort he may be personally liable for the tort and the damage flowing from it: Performing Right Society Ltd. v. Ciryl Theatrical Syndicate Ltd. [1924] 1 K.B. 1, 14, 15 per Atkin L.J. Each case depends upon its own particular facts. In the instant case the uncontradicted evidence proves that early in 1961 the respondent, as chairman and managing director of H.S.C., agreed with the directors of T.S.C. the terms upon which H.S.C. would continue wrongfully to covert goods consigned to the banks just as they had done in the past. Their Lordships consider that, in all the circumstances, there is no answer to the appellants' contention that the respondent was personally liable for the conversion in respect of which judgment has been entered against H.S.C."

223. I do not think that on the facts which were before Rogers, J. it could properly be said that the second appellant procured or directed the acts complained of. He was simply acting as one of the directors of the company.

224. It is possible to go further than this. If the second appellant was to be held personally liable on the basis of the facts which were before Rogers, J. this would amount to a significant erosion of the principle that a director is not in normal circumstances personally liable for the acts and defaults of the company he is a director of.

225. For these reasons I am satisfied that the respondents have failed to make out their case that the second appellant should be held personally liable and that this part of the appeal must be allowed.

226. The third main issue on this appeal was the respondent's cross-appeal relating to Patent Nos. 2,101,933 (933) and 0,096,261 (261). It was common ground that the appellants' cartridge infringed these two Patents. However at the trial Rogers J held that Claim 1 of 933 and 261 were invalid for obviousness. It is agreed that similar considerations arose in relation to both these Patents and that if one was found to be invalid the other would also. The respondents cross appeal against this determination.

227. The respondent's grounds of appeal in this connection are as follows:-

"1. The learned judge's holding that the '933 patent was obvious was against the weight of the evidence.

2. If and insofar as the learned judge based his finding of obviousness on U.S. patent No. 3,985,436 ('the Minolta patent'), the learned judge failed to exercise any or any proper caution against 'proper proposal', namely machines and processes which experience subsequently shows have never been put into practice. The learned judge:-

(1) ought to have found, on the evidence, that the Minolta patent was a mere 'paper proposal'; and

(2) in consequence thereof, ought not to have placed any or such weight on the Minolta patent.

3. The learned judge erred in holding that 'if one were to ask the question how a hypothetical skilled addressee would go about constructing a machine with a unit as described in the Minolta patent, the answer must be that he would wish to put some kind of shield device to protect the photo-sensitive drum'. In so holding, the learned judge disregarded, alternatively failed to have any or any proper regard to, evidence to the effect that it was not inevitable or obvious that the invention disclosed by the Minolta patent be provided with a cover alternatively a cover of the kind claimed since other means for protecting photo-sensitive drums were known.

4. For the above reasons the learned judge also erred in finding that claim 1 of the '261 patent was obvious.

5. In all the circumstances the learned judge ought to have found and wrongly failed to find that the '933 patent was valid and that the privileges and rights conferred by the Hong Kong Certificate of Registration of Patent No. 463 of 1988 have been acquired by the Plaintiff in respect of the present claims and that the Defendants have infringed the said patent as alleged.

6. Further and in all the circumstances the learned judge ought to have found and wrongly failed to find that the '261 patent was wholly valid and that the privileges and rights conferred by the Hong Kong Certificate of Registration of Patent No. 841 of 1993 in respect of the present claims 1 to 4 inclusive, 6, 7 and 10 have been acquired by the Plaintiff and that the Defendants have infringed the said patent as alleged."

228. Mr Kitchin made no complaint concerning Rogers, J.'s findings of fact on this aspect of the case. The complaint which is made is that the determination made by Rogers, J. was against the weight of the evidence.

229. The background to the respondent's invention is relevant to a consideration of this issue. The photocopying industry is and was a highly competitive industry. The major companies employ a large staff of highly qualified researchers who in addition to undertaking their own research keep under close scrutiny the products and patents of their competitors.

230. At the priority date in June 1981 no one conceived the idea of having a separate cartridge which would largely obviate the necessity for servicing machines. The main feature distinguishing the respondent's cartridge and copier from other copiers is the fact that when for any reason the Canon copier ceases to function efficiently an unskilled person can remove the cartridge from the copier and replace it with another cartridge. The machine will almost invariably then immediately continue to work without the necessity for a skilled technician to attend upon the copier and make a diagnosis as to what had gone wrong with the machine and then effect the necessary repairs.

231. In most cases a cartridge would need to be replaced as a consequence of the toner in the cartridge becoming depleted.

232. No other copier on the market anywhere had this feature.

233. One of the issues which had to be considered by Rogers J was whether the invention of the cartridge was an obvious extension of Patent 436 which had been assigned to Minolta one of the respondent's competitors. The specification for this Patent was filed in 1975 and published in 1976. Minolta never marketed a copier incorporating all the features described in the specification to the Patent. It could accordingly be described as a "paper proposal".

234. Minolta have however marketed a copier which has some of the specifications referred to. The main distinguishing feature between the copier on the market and what is described in the specification is that the removable casing which is approximately half the size of the copier is designed to be made accessible like a drawer and is not detachable like the unit referred to in the specification.

235. It is however significant to note that dimensions are not included in the specifications of either 436 or 933 and so size cannot of itself be a factor.

236. The main difference between the removable casing in 436 and the cartridge in 933 was that provision was made in 933 for a cover to protect the photoreceptor from light or from being damaged as a consequence of being touched by a person having access to the equipment.

237. It is important whether the cartridge has a cover. If the cartridge has a cover it can be handled by unskilled people who have had no relevant training. As it would appear that it had never previously been envisaged that copiers would not be serviced by trained technicians the necessity for a cover being provided had not been a matter of much importance as the technician would take appropriate measures not to handle the photoreceptor or expose it to excess light.

238. It was the appellants' contention at the trial below that adding a cover to the Minolta design would have been an obvious extension of the idea.

239. The respondents argued that this was not the case if the correct approach to the problem was adopted.

240. The law is conveniently encapsulated in the judgment of Millett LJ at p312 of PLG Research Ltd. and Another v. Ardon International Ltd. and others [1995] RPC 287:

"The law

The approach which the court should adopt in considering whether a claimed invention is obvious has recently been considered by this court in Mölnlycke AB v. Procter & Gamble Ltd., [1994] R.P.C. 49. The following principles were established

(i). The criterion for deciding whether or not the claimed invention involved an inventive step is wholly objective and is defined in statutory terms in section 3 of the Patents Act 1977, i.e. whether the step in question was obvious to a person skilled in the art having regard to any matter which forms part of the state of the art.

(ii). The test is qualitative, not quantitative, and paraphrases of the statutory test in other cases do not assist.

(iii) The court must make findings of fact as to what was included in the state of the art at the priority date, and whether, having regard to the state of the art. the alleged inventive step would be obvious to a person skilled in the art.

(iv). Assessment of obviousness with hindsight must be avoided.

(v). The burden of proof lies upon those attacking the validity of the patent to show that no inventive step was involved.

(vi). Although formulated with reference to the Patents Act 1949, the analysis of Oliver L.J. in Windsurfing International Inc. v. Tabur Marine (Great Britain) Ltd, [1985] R.P.C. 59 at 73 continues to provide assistance. The value of that analysis is not that it alters the critical question; it remains the question posed by the Act. But it enables the fact-finding tribunal to approach the question in a structured way.

The approach recommended in the Windsurfing case comprises the following four steps:

(i) identifying the inventive concept alleged to be embodied in the patent in suit;

(ii) assuming the mantle of the normally skilled but unimaginative addressee in the art at the priority date and imputing to him what was, at that date, common general knowledge in the art in question;

(iii) identifying what, if any, differences exist between the cited prior art and the alleged invention; and finally

(iv) asking whether, viewed without any knowledge of the alleged invention, those differences constitute steps which would have been obvious to the skilled man or whether they required any degree of invention.

The philosophy behind the doctrine of obviousness is that the public should not be prevented from doing anything which was merely an obvious extension or workshop variation of what was already known at the priority date. Accordingly the skilled man is treated as having access to every example of the prior art, and must be considered as sufficiently interested in the information which he is deemed to have to consider its practical application whether he would have done so in practice or not.

The Windsurfing case establishes that an example of the prior art cannot be rejected on the ground of obscurity. But knowing of a piece of prior art is one thing; appreciating its significance to the solution to the problem in hand is another. In the Windsurfing case Oliver L.J. expressly approved the warning of Whitford J. in Sandoz Ltd.(Frei's Application), [1976] R.P.C. 449 at 457, against too ready an assumption that the significance of existing published material in relation to the problem dealt with by the patent in suit would necessarily be apparent to the hypothetical skilled man.

The Windsurfing case was a case of what is sometimes called 'workshop variation'. It was not a case like the present of finding a solution to an identified problem. We do not consider it to have thrown any doubt on the many warnings given in previous cases such as General Tire & Rubber Co. v. Firestone Tyre & Rubber Co. Ltd., [1972] R.P.C. 457 at 505 against the danger of assessing obviousness in the light of carefully selected pieces of the prior art only. There are many cases in which obviousness has been held not to have been established, even though the prior art relied upon was very close, where the prior art had been selected by the defendants with the benefit of hindsight out of a wide range of other equally plausible starting points. Where the prior art yields many possible starting points for further development, it may not be obvious without hindsight to select a particular one of them for the development which leads to the invention claimed. If the patentee has come up with a solution to his problem which is no more than an obvious extension or workshop variation to some piece of the prior art, he cannot have a monopoly for his solution whether or not the skilled man would be likely to have known of the prior art in question. On the other hand, if it is found that, even if he had known of it, the skilled man would not have regarded it as the obvious starting point for the solution of the problem with which he was confronted, this will usually demonstrate that his discovery was not an obvious extension or mere workshop variation of that prior art.

For the meaning of 'obvious' in this context, it is sufficient to refer to the test formulated by Lord Herschell in Siddell v. Vickers, Sons & Co. Ltd., (1890)7 R.P.C. 292 at 304, i.e. whether what is claimed is

'... so obvious that it would at once occur to anyone acquainted with the subject, and desirous of accomplishing the end...'

In considering whether the claims in the present case contained any inventive step, it is important to appreciate that (i) the inventive concept consisted of the selection and combination of a number of features, (ii) there was a multiplicity of possible starting points in the prior art each of which differed from the patented invention but in a different way and (iii) the relevant features of the prior art are interdependent, so that changing one of the features invalidates the teaching of the prior art in respect to others."

241. Mr Thorley, placing reliance upon the judgment of Aldous, J. inHallen v. Brabantia Ltd. [1989] RPC 307 argued that technical rather than commercial considerations should be borne in mind in deciding whether a step was an obvious step.

242. What was necessary in the present case was to disregard the marketing implications of the respondent's cartridge and only consider the feasibility of adding a cover to the proposal in 436. Having regard to the sensitivity of the photoreceptor to light and its vulnerability to damage it was an obvious step to add a cover to the cartridge.

243. With respect I do not think that this submission is sustainable. It overlooks a number of the matters which have to be borne in mind if the principles referred to by Millett LJ are to be adhered to.

244. Perhaps the most important is the starting point for a "normally skilled but unimaginative addressee in the art at the priority date". According to the evidence which was before Rogers J no one had had the inspiration of inventing a cartridge or removable casing which would be primarily handled by unskilled users rather than trained technicians. This being the case why should anyone direct their attention towards the necessity for providing a cover to the cartridge? There was no need to do so.

245. It is relevant to have regard to the expert evidence on this.

246. The novelty of the idea comes across well in a passage from the transcript of the cross-examination of Dr Tabak on Day 9 of the trial starting at p39:

" At Xerox we have arguably one thousand of probably the best people in xerographic process technology and xerographic engineering technology, with respect to my folks from Canada over here. It did not occur to me or the thousands of other people who were aware of the idea of a process kit, who were aware of the idea of protecting the photoreceptor from light, to combine those two elements, the idea of combining a process kit with a cover, so that it would be operable, insertable and removable by a user. We did not come up with the idea at Xerox.

I can report that when the PC10 was introduced by Canon, and that came out before we saw the patents, it created a tremendous stir. I mean all hell broke loose. I can personally recall many of our most prominent individuals, for example Bob Gundlach, who has already been mentioned in this case, going around saying: 'God, why did I not think of that? What a great idea.' Nobody at Xerox thought of it.

We also got very nasty letters from our management, directed to people in the research and engineering community saying: 'Holy smokes, why did you guys not think of this?'

My conclusion, based on that experience is that people at Canon, for either of two reasons, either somebody at Canon had the idea of, saying: 'Oh, here is a process kit, let us put a cover on it and then we can use it in a low volume machine where the user can provide the service, or maybe it came -- I do not know which came first. Maybe the management of Canon said: 'Ah ha, what we need is a process kit that can be inserted and removed by the user'. Then they came up with this combination.

We did not think of it, though. Nobody else I know thought of it. Therefore, my conclusion is that it was not obvious to me, and it was not obvious to literally thousands of people at Xerox, who arguably, I would say, were the best in their field at the time. That is the reason why I say it is not an obvious thing to do."

247. This evidence was not seriously challenged. Mr Malcolm, the principal expert witness for the appellants was only prepared to state on oath that he would have thought of incorporating a cover into the design of the cartridge if his brief had been to design a cartridge for the purpose required. The essential requirement of conceiving this idea on the basis of the specification in 436 and the existing state of act would have been a different matter.

248. It is evident from the judgment that Rogers J did accept the expert evidence. At p68 of his judgment he says:

" From that evidence, I take it that despite knowledge of the Minolta patent and even without it, the idea of producing a small cartridge such as Canon produces did not occur to those in the industry. Indeed Dr. Tabak gave evidence as to the consternation which senior management at Xerox expressed when the Canon cartridge system first came on the market. This fact, however, does not necessarily show that line 933 patent is valid and not obvious. It may show that to have a handy cartridge like Canon's was not obvious but that may be a different matter.

It seems to me that there are two aspects to the question of obviousness. If one were to say was it obvious in 1981 that a light, compact and easily usable cartridge system could be used for photocopiers and one used as the starting basis the Minolta patent, I would say that the evidence as to what happened at the time in the industry clearly indicated that it was not obvious."

249. Having accepted the expert evidence Rogers, J. then went on to consider the matter himself. He decided that if you have a portable cartridge with a photosensitive drum it was obvious that it should be protected by installing some kind of shield device to protect the drum.

250. In other words he was setting himself above the expert evidence and substituting his own opinion for those of the experts. This he was clearly not entitled to do. The conclusion he reached was indeed against the weight of the evidence which was before him and his decision cannot be permitted to stand. The consequence of this is that 933 and 261 are both valid and subsisting Patents. As stated earlier they have been infringed and this cross appeal must be allowed.

Ching, J.A. :

251. The Plaintiff is a well known manufacturer of office copying machines including a compact laser bean printer which has a special feature. It makes use of a replaceable cartridge which contains everything but the light source and the elements of the fusion process necessary for the xerographic process. The cartridge contains 108 parts which include, for present purposes, a compartment filled with toner and a photosensitive drum which receives the image and then transmits it by way of the toner to the copying paper. It must therefore have openings in it through which the drum can both receive and transmit the image. There are three such openings, each with a flap or cover. When the cartridge is not in the printer the covers are held in the closed position by a system of springs. Once it is inserted into the printer the covers are forced and held open by a system of levers. When it is removed the covers automatically shut. The amount of toner is sufficient for about 3,000 copies and when it is depleted the cartridge must be replaced by a new one. There is no access to the interior of the cartridge through which the toner can be replenished.

252. The printer itself contains other machinery including what has been described as the engine. The printer will not work without the cartridge and the cartridge is useless in itself. There was no evidence that any other cartridge would fit the printer nor that the printer would accept any other cartridge. Clearly the cartridge and the other machinery in the printer complement each other to provide a copier which is what the customer wants. The main advantage of the use of the cartridge is its convenience. A printer other than one which makes use of a cartridge such as that produced by the Plaintiff will probably need the attentions of a technician whenever the toner needs replenishment or when parts of the machinery, including those put into the cartridge by the Plaintiff, needs maintenance or service. There may be periods of time while the machine is not usable when it is awaiting the technician and while the technician is attending to it. With the use of the cartridge all of this is avoided so far as the toner and the parts in the cartridge are concerned, for the cartridge is simply removed and replaced. The photosensitive drum is protected at all times during that process and is not at risk of exposure or damage by contact with fingers or other instruments. The process of removal and replacement is simple, effective and idiot-proof.

253. The Plaintiff sells the cartridges as an item separate from the printer. It was common ground that other manufacturers of this type of printer buy the engines from the Plaintiff, with or without the cartridges. The Plaintiff has no way of ensuring that the end-user will purchase a cartridge with the printer but it is not difficult to assume that he will buy at least one when he purchases the machine if he is not given one as a gesture of good will. On the other hand I assume also that there may be occasions, relatively few, when the end-user may decide to sell the printer to a friend without selling a cartridge at the same time. The friend then will have had only a part of the whole machine, that is to say without a cartridge.

254. The 1st Defendant is a limited company in which the 2nd Defendant was always a shareholder and director. At one time he was also the managing director. The Plaintiff's printer and the cartridge came to his attention. He realised that although the toner in the cartridge was sufficient for about 3,000 copies the printer had an expected life of about five years giving about 300,000 to 400,000 copies. When the toner in the cartridge has been depleted a vast majority of the other components within it were still in good working order. The idea was therefore conceived of collecting the used cartridges for refurbishment and sale. It is in contention whether the 2nd Defendant intended from the beginning to reproduce completely new cartridges rather than to refurbish them but it suffices for the moment to say that eventually that was what the 1st Defendant did. Using the process known as reverse engineering it produced the drawings for moulds, the moulds themselves and thereafter made and sold completely new cartridges at a price cheaper than that of the Plaintiff.

255. The Plaintiff took exception to this. It claimed the copyright in the original 45 drawings for 48 of the 108 parts and it claimed the patent rights in some of them and other parts. It claimed that the Defendants infringed both the copyrights and the patents and issued proceedings. It claimed injunctions, orders for delivering up and an account of profits or damages. The matter came on for hearing before Rogers, J., who found for the Plaintiff on the copyright questions and on all but two of the patents, namely patents no. 2101933 and No. 0096261, which he declared invalid. He also ordered damages which, importantly for the 2nd Defendant, included damages for infringement of copyright on a conversion basis. He made consequential orders some of which were later the subject of variation. The Defendants appealed against all the findings adverse to them but eventually abandoned their appeal in relation to those patents found to be valid. The Plaintiff cross appealed on the finding that two of their patents were invalid.

256. It would be convenient to deal with the copyright questions first. It was accepted at all times by the Defendants that copyright in the original drawings subsisted and was owned by the Plaintiff. It was also accepted by them that they had reproduced those drawings in three dimensional form by way of reverse engineering. They claimed, however, that they were entitled to do so under the principles laid down in British Leyland Motor Corporation, Ltd., v. Armstrong Patents Co., Ltd., (1986) 1 AC 576. The relevant law at the date of that decision was as it is in this appeal. It is necessary to guard against construing that decision as if it were a statute but, at the same time, it is necessary to ascertain exactly what was decided and then to apply the law there laid down. It was a decision of the House of Lords by which this Court is bound.

257. British Leyland were manufacturing a number of different motor cars for which they used some parts bought in and others manufactured by or for them in the drawings for which they owned the copyright. They sold not only the cars but spare parts for them. One of the motor cars was the Morris Marina for which they manufactured or caused to be manufactured the exhaust system including the lengths of exhaust pipe. Other manufacturers were producing spare parts for the cars, including Armstrong who were producing exhaust pipes for the Morris Marina. British Leyland had persuaded some of those manufacturers to enter into licensing agreements but Armstrong refused to do so. British Leyland took proceedings against them for breach of copyright. It is important to an understanding of the judgment to bear in mind the parts of the exhaust the copyright in the drawings of which were alleged to have been infringed. An exhaust system for an internal combustion engine generally begins at the exhaust manifold. To the outer edge of the manifold pipe there is attached another pipe which is the exhaust pipe which leads to an expansion box commonly called the silencer. From the silencer protrudes a tail pipe. Where there is a secondary silencer, as in the Morris Marina, there will be another pipe connecting the primary and the secondary one. It is clear from the report of the proceedings at first instance at (1982) FSR 481 that it was not alleged that Armstrong had infringed the copyright in the original drawings of the entire exhaust system. There was no allegation of infringement of the copyright in relation to the exhaust manifold or either of the silencers. The allegations of infringement related to the pipes alone. The copyright in a drawing of a pipe of given dimensions will almost necessarily be infringed by a third party producing a pipe of the same dimensions without authority.

258. It is clear that the House of Lords were not restricting the principles they laid down to the peculiarities of motor cars and the needs of their owners. At page 615, Lord Bridge speaks of the issues turning on broad principle. At page 629, Lord Templeman said,

"This appeal has wide implications because the injunction granted to BL creates or recognises a monopoly in replacement parts enjoyable not only by BL and by all vehicle manufacturers, but also by all manufacturers of mass produced machinery in respect of repairs."

An exhaust pipe or an exhaust system is generally a relatively simple piece of machinery. The cartridge in the present case is not but that is a matter of degree.

259. The House of Lords affirmed the principle that the purchaser of an article has the right to keep it in repair but must not produce a new article under the guise of repair. To be meaningful the right of repair must be one that can be exercised in a way most economical to the purchaser. That is simply logical and it has a necessary consequence. In bygone times it may have been possible for a purchaser to repair the article himself or to seek the assistance of his neighbourhood artisan to fabricate the necessary part. Many articles to-day are so complex that that is no longer possible. No one, for instance, would think of repairing a silicon chip and no one, I suspect, would think of repairing the cartridge in this case by himself or by the neighbourhood artisan. In other cases a repair may be possible but would involve so many hours of work or other expense as to be uneconomical. So it is necessary that the purchaser should be able to purchase a replacement part in the mass market. That means that, although the right of repair is that of the purchaser, third parties must be allowed to mass produce the part. The House of Lords held that the right of repair is such that a part may be made notwithstanding that the making of it may amount to an infringement of copyright. The principle is easily stated but its application causes difficulties. The crucial question is the scope of the word "repair".

260. Where an article consists of a single component the distinction between its repair and its replacement is obvious. Where, however, the article consists of a number of components one of which needs replacement a difficulty arises. If the component is regarded as an article in itself its replacement would be forbidden. Thus, in British Leyland it was the exhaust pipe or pipes, one or more of many components in a motor car, which were to be replaced in the repair of the motor car as a whole. It is a logical conclusion that such a part may be replaced, for the purchaser is interested in having the article work whether it be a motor car or an office printer. I conclude, therefore, that where an article consists of a number of components one or more of them may be replaced for the purposes of repair. In British Leyland the article being repaired was the car or the exhaust system, not the exhaust pipes.

261. It would be impossible for the Courts to police the question of whether or to what extent a repair may be necessary. This must be left to the owner of the article. Equally, a third party supplier of replacement parts may be able to advise but cannot dictate whether a part should be repaired rather than replaced. Nor can he know or concern himself with what the purchaser may do with the part once he has purchased it. Exhaust pipes, for instance, can be repaired by lagging or by welding rather than replacement but that is a matter for the owner. This leads inevitably to the conclusion that it must also be a matter for the owner to decide whether any given part may be nearing the end of its working life and should therefore be replaced even though it is still working. A ready example is to be found in the replacement of brake pads in a motor car. In turn, this leads to the conclusion that an owner must be permitted to purchase a stand-by spare. The only limits to this appear to be that repair must stop short of replacement of the article as a whole and that the repair must be an economical one. I need only add that the latter of these limits is difficult to reconcile with the right of the owner to decide the extent of the repair. One may decide that lagging the exhaust pipe will do. Another may decide that only a new one will do, at far greater expense.

262. Both Mr. Thorley, for the Defendants, and Mr. Kitchin, for the Plaintiff, referred us to LNER v. Berriman (1946) AC 278 where Lord Simonds said at 314,

"Repair is an ordinary English word meaning, 'to restore to good condition by renewal or replacement of decayed or damaged parts' ....."

That was a case concerning the Railway Employment (Prevention of Accidents) Act 1900 by rules under which measures were to be taken for the protection of men repairing the permanent way. A workman who had been killed while routinely lubricating apparatus connected with signal boxes was held not to have been repairing the permanent way. Mr. Thorley points out that there is a distinction between a machine which is in working order and a machine which will work. A new motor car in a salesroom is in working order but will not work unless fuel is introduced. Equally, the Plaintiff's printer in a showroom will be in good working order but will not work without toner. I would not regard the supply of toner as a repair any more than I would regard the supply of fuel but what the Defendants are supplying is not merely the toner. They supply in the cartridge other essential components without which the printer will not work at all.

263. The evidence was that when the toner in a cartridge supplied by the Plaintiff is depleted, about 95 of the 108 parts would still be in good working order. It is, perhaps, easy to say that with the large majority of parts still in working order there is no necessity for a completely new cartridge, but how long each of them would last after the toner has been replaced must be a matter of speculation. The Plaintiff itself, of course, expects the cartridge to be discarded after the original fill of toner has been used. However that may be, some of the parts will have worn out by the time that happens and they must be replaced. If one were to look to the cartridge alone then replacement of these parts and those which might be considered as nearing the end of their working life would be permissible although a complete replacement would not. The purchaser however, is not interested in having a cartridge by itself. He is interested in having his printer work. The cartridge is an essential part of the printer just as much as the engine of a motor car is essential for its propulsion. In my view, having regard to the breadth of the principles laid down in British Leyland, once it is accepted that some parts of the cartridge need repair then it follows that the printer is in need of repair. If, as here, the economical repair is by the replacement of the cartridge then it follows that a new replacement cartridge is permissible. Mr. Kitchin argued persuasively that the effect of British Leyland is that only those parts actually in need of repair can be replaced. That runs directly contrary to what was said by Lord Bridge at page 626. I regret that I must find against him on the view that I have taken of the decision.

264. It was common ground and common sense that a purchaser cannot repair an article that he does not have. Mr. Kitchin pointed out that the evidence was that the cartridges were sold as items separately from the printer. Indeed, it was common ground that the Plaintiff sells the engine to other manufacturers such as Hewlett Packard who produce their own version of the printer. He says that where a purchaser buys only the printer but not the cartridge there is therefore no question of repair. It would appear to be extremely unlikely that any purchaser would buy a printer without buying or being given a cartridge at the same time but I accept that this could happen even though there was no evidence that it had. It is possible, too, that an end using purchaser may wish to sell the printer to a friend without a cartridge. The purchaser or his friend buying without the cartridge could not be said to be repairing the machine when he buys one of the cartridges produced by the 1st Defendant. This point has caused me some difficulty. Given that British Leyland were selling spare parts as well as motor cars a purchaser could buy an exhaust pipe from them for use in the building of a "special". If that exhaust pipe should need replacement it could not then be said that he was repairing a motor car sold to him by British Leyland. The reproduction of the same exhaust pipe would not be excused under British Leyland. In the end, however, I am impelled to conclude, with much misgiving, that buying a printer without a cartridge would be like buying a Morris Marina without an exhaust pipe. Neither would work without those components. To make them work would be to repair them in the broad sense and therefore the purchase and use of one of the 1st Defendant's cartridges would, even in the circumstances envisaged, mean a repair of the printer within British Leyland. This conclusion could have wide ranging implications and I regret that I must come to it. I derive some comfort from the fact that, although it cannot change the principle, the number of persons buying a printer without a cartridge must be relatively infinitesimal.

265. Rogers, J., in the Court below came to the conclusion that the facts in this case do not fall within the principles laid down in British Leyland. He held that the main reason for the Defendants' cartridges was the new supply of toner. Any repair of the Plaintiff's cartridges was minor and supplying new parts not in need of replacement was unnecessary and therefore not economical. As to the economy, it seems to me that the simple fact that the Defendants' cartridge costs less than the Plaintiffs is sufficient to show that he was wrong on that point. As to the rest, for the reasons I have attempted to give, I am of the view that the facts are within the decision in British Leyland. I agree with him that the law as to copyright has taken a wrong turn. It is in need of urgent attention but we must apply the law as it is. I would therefore uphold the appeal insofar as the Judge found against the Defendants on copyright.

266. It would be convenient here to dispose of an argument briefly made by Mr. Kitchin although it was not made in the Court below, in which he did not appear. It was that where a part is subject not only to copyright but to patent protection then the patent will prevail so far as a replacement part is concerned. He relied upon a passage in the speech of Lord Bridge at 628 B-C in British Leyland where he said,

"Where a specific part of a car which is the subject of a patent or registered design needs repair not amounting to replacement, it will be repairable under the well established doctrine of implied licence. Where the part requires complete replacement, it can, if practicable, be replaced by any alternative part, which will not infringe the patent or registered design. If only a new part made in accordance with the patent or registered design will provide a satisfactory replacement, the express statutory monopoly of the patentee or design proprietor will prevail. In contrast with the copyright in drawings, the monopoly conferred by the patent or registered design could be invoked not only against other manufacturers making infringing parts and offering them for sale, but also against the car owner, to prevent him making in his own workshop or commissioning from a third party a replacement part which infringed the monopoly."

With respect, Lord Bridge was contrasting the protection given by patents and registered designs on the one hand with that given by copyright on the other. He was not considering a position where both existed in relation to the same article. Mr. Kitchin's argument would run contrary to the decision of the Court of Appeal in Solar Thomson Engineering Co., Ltd., v. Barton (1977) RPC 537 where there was both patent and copyright in the same part. It was held that there was an implied licence under the patent to repair and therefore there was also an implied licence under the copyright to enable necessary repairs to be carried out. I therefore reject the argument.

267. Having regard to the conclusion I have reached on the question of copyright it is strictly unnecessary to deal with the personal liability of the 2nd Defendant for damages in that respect. The question of his personal liability for infringement of patents would remain. The Plaintiff is content to proceed on the basis that these damages commenced on 21st June, 1994. I add my views very briefly. I find the law on this unsatisfactory. An employee of a limited company who complies with his instructions to do an act which has been found to be tortious is liable for it. In the matter of copyright a defence of innocence is provided by sections 17(2) and 18(2) of the Copyright Act, 1956, as to damages. Yet questions have arisen as to the personal liability of a director, perhaps the very organ of the company instructing the work to be done. We are told that at the trial all parties accepted that the law is as was set out in Evans v. Spritebrand (1985) FSR 267. The decision is authority for the proposition that a director of a limited company is not per se liable for infringement of copyright by the company. This is readily understandable where the infringement has taken place without the knowledge of the director. Whether he should be liable simply because he voted in favour of a resolution or otherwise participated in a decision that the act should be committed is more difficult. It would appear from the authorities that something more than that is required, although what that something more may be is difficult to say. Slade, L.J., in concluding his judgment at 880 was content to adopt Lord Salmon in Wah Tat Bank, Ltd, v. Chan Cheng Kum (1975) AC 507 where he said that "each case depends upon its own particular facts".

268. The matter was pleaded against the 2nd Defendant at two levels. The first was that

"..... the 2nd Defendant established the 1st Defendant with the purpose that the 1st Defendant should do or perform the acts complained of against it in this action, the 2nd Defendant being deliberate or reckless as to whether such acts would constitute infringements of the Plaintiff's patents and copyright."

The Judge below did not find the 2nd Defendant liable on this basis. The furthest that he went was to say, at page 137 of his judgment, was that

"I incline ..... to the conclusion that the move to manufacture the complete cartridge was something that the 2nd Defendant had in mind as an ultimate or potential venture right from the start."

In the circumstances nothing further need be said as to this allegation.

269. The alternative allegation against the 2nd Defendant, as managing director of the 1st Defendant, was put as follows:-

"The 2nd Defendant directs, controls, procures and is responsible for, all the acts of the 1st Defendant complained of in this action, the 2nd Defendant being deliberate or reckless as to whether such acts would constitute infringements of the Plaintiff's patents and copyright."

It was upon this basis that Rogers, J., found the 2nd Defendant personally liable. He said, at page 137 of his judgment,

"The 2nd Defendant was at the very least a joint prime mover of the 1st Defendant in relation to the matters which are the subject of this Action. He was the main, if not the main, protagonist in establishing the 1st Defendant. At best it can be said it was a "3 way nod" to go ahead to manufacture the cartridges ..... (F)rom a commercial aspect I have no doubt that the 2nd Defendant must be credited as a prime mover in the conception of the idea of making complete cartridges and the decision to go ahead to make them."

Later, he continued,

"..... I am satisfied that the 2nd Defendant was at all times intimately involved in, if not the person who took every decision as to the nature of the business that the 1st Defendant would undertake. In particular I am quite satisfied that he authorised the spending of the money necessary to manufacture the moulds and tools. From what I can see that was a mighty proportion of the 1st Defendant's available capital. Without his instigation and approval the company would not have turned to the manufacture of cartridges. At least since the departure of Mr. Sanders in October 1992 all commercial decisions of the 1st Defendant have been taken by him albeit possibly with the approval of the other directors and shareholders and Mr. Mercer. Nevertheless the continued activities of the 1st Defendant were under his ultimate control."

With respect, insofar as these may be findings of fact they are not findings of primary facts but rather of conclusions.

270. I have found it impossible to come to any findings of fact on the materials before us. A brief history of the Defendants' version of events is as follows. As already stated, the 2nd Defendant conceived the idea of refurbishing the cartridges. He consulted two friends, both members of the bar, one now a member of the inner bar, who practise in the field of intellectual property. The wife of the other eventually became a shareholder in the 1st Defendant. She herself is of counsel. The consultation was a friendly one over lunch when inevitably the subject of British Leyland arose for discussion. The value of any advice must depend upon the accuracy of the instructions given, but nevertheless the favourable nature of the advice can be gathered not only from the evidence of the 2nd Defendant but from the fact that the wife of one of the members of the bar became a shareholder.

271. One of the persons invited to join the company was a Mr. Sanders who with a friend Mr. Penwarden took up about 51% of the issued shares. Mr. Penwarden was in the United Kingdom, his task being to locate used cartridges. He regularly gave his proxy to Mr. Sanders who therefore held effective control of a majority of the shares. A business plan was drawn up to attract investors and accountants were consulted. The plan was to enlist the help of, for instance, boy scouts who would be paid US$10 for each discarded cartridge they could provide. Unfortunately, the supply of used cartridges was insufficient. The 1st Defendant then turned to making spare parts for the cartridges, there being many other companies for instance in America engaged in the refurbishing business. Difficulties continued. A meeting took place amongst Mr. Sanders, the 2nd Defendant and Mr. Mercer who was not a director but who was in charge of the technical side of the business. At this meeting it was decided to go into the business of manufacturing complete cartridges, hence the "3 way nod" referred to by the Judge. Another shareholder and director, Mr. Gurka was deputed to seek advice from Lloyd Wise, a well known patent agent. Mr. Gurka was amongst other things a private investigation agent very active in investigations into infringements of intellectual property rights. It need only be said of the advice given by Lloyd Wise that clearly they had not been given accurately the basic facts upon which their advice was sought. The 2nd Defendant said in evidence that Mr. Gurka had told him that the advice from Lloyd Wise was favourable. Mr. Gurka had no recollection of that but did not deny saying it.

272. So far as the 2nd Defendant's formal position in the 1st Defendant was concerned, he began as a shareholder and managing director while Mr. Sanders was the chairman of the board. There was dissension in the company and the 2nd Defendant was demoted to the rank of sales and marketing director. Eventually, Mr. Sanders and Mr. Penwarden resigned and sold their shares.

273. The allegations upon which the Plaintiff relies to fix the 2nd Defendant with personal liability revolve mainly around these factors. First, the original idea of refurbishing the cartridges was his even if he did not intend to make complete cartridges from the start. Secondly, he was in charge of the finances of the company and had caused the 2nd Defendant to spend almost all of its available funds in the production of moulds, preceded by drawings, of all or substantially all of the parts. Thirdly, he had caused those moulds and drawings to be made even before the "3 way nod". There were other matters, such as an article written by the 2nd Defendant for a trade magazine for which he claimed poetic licence. Clearly the Judge disbelieved the 2nd Defendant but that is far from proving in a positive way facts upon which his personal liability would depend.

274. No doubt there may be weaknesses in the 2nd Defendant's version of events. It seems to me, however, that there is nothing inherently improbable in the progression from refurbishment to provision of spare parts and then to production of complete cartridges especially when difficulties in the first two stages were encountered. Although it is a matter of degree, spare parts are necessary at each stage and the making of moulds for them would be equally necessary. If there is a genuine business of supplying parts for repair then it must be necessary to have the moulds for all of those parts. I am struck by the fact that the 2nd Defendant sought legal advice, albeit on a friendly basis, from the outset. Then, when the stage of making complete cartridges arrived it was Mr. Gurka who was given the task of seeking advice from Lloyd Wise and it is his uncontradicted evidence that the 2nd Defendant understood from Mr. Gurka that Lloyd Wise had given the green light. It is true that the 2nd Defendant was the managing director at the time of the "3 way nod" but it appears to me that if any one person was directing the activities of the company it may have been Mr. Sanders who was not only Chairman of the Board but who owned over 25% of the issued capital and who controlled another like amount. It is not to be forgotten that the 2nd Defendant was demoted. It does not seem to me, so far as I can see, that the 2nd Defendant did anything more than any other director and shareholder would have done in his position. I bear in mind that all of the directors could have been presumably liable for damages if the appropriate facts had been found. If they had been found then they are fortunate not to have been sued. Absent findings of fact which would depend upon the advantages of the seeing and hearing Judge I would not have found the 2nd Defendant personally liable for damages for infringement of copyright. Indeed, absent the appropriate findings of primary fact no more can he be personally liable for damages for infringement of patent.

275. I turn then to the question of the validity of the two patents found to be invalid. They both had to do with the covers on the cartridge. The Judge found that they were invalid on the grounds of obviousness. I must say that I have considerable sympathy for his view. Once given that there is an object which is photosensitive to any degree, it would seem to be obvious that it should be protected from exposure to light. Once given that when in use the photosensitive material requires exposure to light it would seem obvious that whatever covers it should be made to move aside, preferably automatically, upon use and then for the covers to spring shut, again preferably automatically, when not in use. It is not, however, for the Judge to come to such a conclusion without due regard to the evidence.

276. Section 1(1)(b) of the Patents Act, 1977, provides that a patent may be granted for an invention only if it involves an inventive step. Section 3 provides that

"An invention shall be taken to involve an inventive step if it is not obvious to a person skilled in the art, having regard to any matter which forms part of the state of the art by virtue of section 2(2) above [and disregarding section 2(3) above].

Section 2(2) provides that

"The state of the art in the case of an invention shall be taken to comprise all matter (whether a product, a process, information about either, or anything else) which has at any time before the priority date of that invention been made available to the public (whether in the United Kingdom or elsewhere) by written or oral description, by use or in any other day."

One must therefore first look to the priority date. In the case of the two patents in question they were 2nd June, 1981 (patent No. 2101933) and 20th May, 1982 (patent No. 0096261). Secondly, one identifies the invention claimed, in this case the covers. Thirdly, one ascertains what the state of the art was at the time. Then, one considers whether a person, at the relevant dates, skilled in the art, having regard to the state of the art at that time and as defined, would have regarded the inventive step as being obvious or not.

277. It is not for any court to decide entirely on its own common sense what is or is not obvious. Regard must be had to the evidence of the person envisaged in the sections quoted. So, in Intalite International NV v. Cellular Ceilings (No. 2) (1987) RPC 537, Whitford, J., was dealing with a question of false ceilings which made use of channel sections rather than the already well known grid construction. He had obviously formed his own initial view but after hearing the evidence said at 547,

"My initial impression, I am satisfied, was quite wrong. Viewed against the historical background, in the light of the evidence called, I am satisfied that the objection based on an allegation of obviousness is unsustainable. When skilled and inventive individuals, looking for improvements in the field, fail to arrive at the claimed construction it is impossible to suggest that it would have been obvious to the hypothetical skilled man, not necessarily inventive."

In Mölnlycke AB v. Proctor & Gamble, Ltd., (1994) RPC 49 the Vice Chancellor referred, at 112, to sections 3 and 2(2) as the statutory code and described the criterion as being wholly objective. He then went on to say at 113,

"The Act requires the Court to make a finding of fact as to what was, at the priority date, included in the state of the art and then to find again as a fact whether, having regard to that state of the art, the alleged inventive step would be obvious to a person skilled in the art.

In applying the statutory criterion and making these findings the court will almost invariable require the assistance of expert evidence. The primary evidence will be that of properly qualified expert witnesses who will say whether or not in their opinions the relevant step would have been obvious to a skilled man having regard to the state of the art. All other evidence is secondary, to that primary evidence."

Finally, in PLG v. Ardon (1995) RPC 287 it was said at 314 that the question was whether or not the inventive step was

"so obvious that it would at once occur to anyone acquainted with the subject and desirous of accomplishing the end."

278. The primary evidence in the present case, from both sides, was of experts with very high qualifications and enormous experience in this field. The evidence is to the effect that the manufacturers, at least the major ones, have their own patent and development departments. They follow very closely what their competitors are doing. They receive and they read an enormous number of patents as and when they are published and they even examine the products of each other. None of this evidence was controversial. Witnesses such as these are in the best position to say what the state of the art in their field was at the relevant time and whether or not an inventive step was obvious. The evidence was all one way. No one had ever thought of using the covers for which the Plaintiff claimed patent protection. That must mean that the inventive step was not an obvious one.

279. Much discussed in argument and in evidence in the Court below was a patent issued to Minolta in the United States of America many years ago. It was for a printer which made use of a replaceable unit. That unit had no covers. It was never produced but a patent, of course, protects the inventive step. It was pointed out that if a cover were to be put on the unit to protect the photosensitive drum there would not be enough space and so the whole printer would have to be redesigned. In my view that is not the point. The point is whether or not the Minolta patent would have suggested the use of covers as an obvious step. The argument of the Plaintiff was that no one had thought of making a cartridge such as theirs. It enabled the purchaser of the printer largely to dispense with the services of a technician in replacing the toner or for servicing. The technician would have sufficient knowledge and training to avoid damage to the photosensitive drum wherever he was called upon to do anything to the machine, but not so the usual secretary. Thus the idea of the covers was born. The Judge below found that once the idea of the cartridge was formulated the covers were obvious. The Plaintiff accepts that that is so, but argues that the covers were an integral part of the cartridge which was, broadly, certainly an inventive step. I accept that argument. I am of the view that the finding of the Judge that the two patents are invalid for obviousness must be reversed. It was admitted that if they were valid they had been infringed and the consequences of injunctions and damages must follow.

280. I would therefore hold that there was no infringement of the Plaintiff's copyright and there is therefore no question of damages, an account or other consequential relief in relation thereto. I would also hold that the 2nd Defendant is not personally liable for damages for infringements by the 1st Defendant of the Plaintiff's patents. I would hold further that the Plaintiff's two patents, No. 2101933 and No. 0096261 are valid with consequential relief. I would invite the parties to formulate the necessary order.