LENNOX V BURLEY HC AK CIV 2001-404-002020

LENNOX V BURLEY HC AK CIV 2001-404-002020 23 November 2007IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2001-404-002020BETWEEN LENNOX HEARTH PRODUCTS INC Plaintiff AND BURLEY APPLIANCES LTD Defendant Hearing: 26, 27, 28, 29 March & 2 April 2007 Appearances: A C Sorrell for Plaintiff D K Wilson for Defendant Judgment: 23 November 2007JUDGMENT OF KEANE JThis judgment was delivered by Justice Keane on 23 November 2007 at 4.45pm pursuant to Rule540(4) of the High Court Rules.Registrar/ Deputy Registrar Date:Solicitors: Macky & Co, Auckland for Plaintiff R S Walker, Auckland for Defendant[1] This case concerns what royalties, if any, remain payable by Burley Appliances Limited, an English manufacturer and distributor of electric and gas heaters, under a licensing agreement dated 6 January 1997, which ceased principally but not completely on 22 April 1999. [2] This licence enabled Burley to manufacture and sell in Europe a range of gas heaters from New Zealand, some of which were then unique, and to manufacture such heaters in housings of its own design. What distinguished those of the heaters licensed that were then unique, and their related technology, was that they consumed their fuel and toxic emissions completely. In contrast to other gas heaters, they did not require an exterior flue. [3] The 1997 licence, granted by the Queenstown Trust, was the second that Burley had enjoyed. The first had been given in 1995 by Control Automation Limited. Both the Trust and the company were vehicles of the inventor and developer, John Fleming. Lennox Hearth Products, the present licensor, acquired that interest in December 2000 from Superior Fireplace Company, another United States corporation, to which the Trust had assigned its interest in June 1999. [4] By then the 1997 licence in its primary sense had ceased. On 22 April 1999 the Trust had cancelled Burley's right to manufacture and distribute the New Zealand product range; and just as the case began Burley paid all royalties then still owing in that respect. The licence, though, continued after 1999 to have a half life. Burley remained entitled, subject to a lesser royalty, to manufacture in housings of its own design heaters incorporating the three interrelated elements that enabled complete combustion, the burner, the catalyst and the control element. [5] Burley has never considered that the range of flueless heaters that it manufactures itself lie within the licence. To Burley the licence conferred two rights. The right to manufacture and distribute particular products, and the right to use particular technology, the three components in the products primarily licensed; either the very components or others substantially similar. Though the heaters it manufactures rely on the same principle, Burley says, the critical components that it uses are to a different design.[6] To Lennox, by contrast, what was licensed was the process that made the licensed heaters then unique, to which the three interrelated elements were integral; not the precise components used, one of which, the catalyst, was completely proprietary. In June 2001 Lennox brought this claim then seeking royalties totalling GDP ₤1M, including those still owing in a primary sense that have since been paid; also an order for account. [7] Any issue as to the primary royalty has, as I have said, been resolved and during the hearing the scope of the case as it related to the lesser royalty also narrowed. It was agreed that if Burley is liable to pay that royalty, as at 30 March 2007 Burley owed GDP £606,075 and as from that date 7.5 % per annum interest. [8] Whether Burley has any liability to pay the lesser royalty comes down to a narrow but subtle point, which arises only because the licence has proved to be less particular than such licenses usually are and need to be. That point is whether Burley, as clause 5.2 of the licence has it, "sells a product comprising a burner assembly, catalytic technology and control element in accordance with the products"; those products being, as clause 1.1 has it, 'gas heating appliances or parts thereof incorporating any and all aspects of the designs and/or inventions embodied' in the New Zealand models, the primary subject of the licence. [9] In issue principally is to what extent the three interrelated elements licensed had to be 'in accordance with the products'. Did the licence encompass any components that Burley used serving the same functions, or only the very or substantially similar components? And entwined with that issue, as the case has been argued, is a second. In what sense, if at all, did the elements licensed need to embody 'designs and/or inventions'? [10] Do those last words confirm any more than that the parties then assumed that the three elements were novel or inventive? Or do they incorporate into the licence as a further point of reference Mr Fleming's patents then existing or claimed? And do they mean that the three elements are only capable of licence if they were inventive or novel? However these issues are answered, the products licensed mustbe compared with those Burley now manufactures, as it says independently of the licence and as of right.History of licence[11] In 1992 John Fleming, then living in Auckland and now in Lubbock, Texas, in the United States, began to develop the range of gas heaters that became the primary subject of the licence. He was then principal shareholder and director of Superior Fireplaces Limited. His later company, Control Automation Limited, became the first licensor. The Queenstown Trust, which he and his wife settled in 1996, granted the second, the 1997, licence. [12] The gas heaters licensed, like others then in the market, were designed to look, when in use, like fires in open fire places. They differed in a critical respect. Like flued heaters, they consumed their fuel emitting heat. Unlike such heaters, they consumed by catalysis the emissions remaining, mostly toxic and principally carbon monoxide. Any emissions left could be discharged quite safely into the room where the heater was, without any need for an exterior flue. [13] Mr Fleming wished, as soon as he was able, to reach beyond the domestic market to those in Australia, North America and Europe but to do that had first in those countries to protect his concept and designs, as best he could, by securing patents. As importantly, he needed in those countries partners to manufacture and distribute the heaters under licence, but first to have them certified as safe. Otherwise those markets were denied him. [14] In late 1992, or early 1993, Mr Fleming and Steven Barson, now Burley's managing director, met for the first time. Burley then manufactured and distributed throughout the United Kingdom electric fires with fire surrounds and accessories. Mr Fleming purchased two Burley models, and in 1994 was appointed Burley's New Zealand and Australian distributor. [15] In turn, in late 1994, Mr Fleming offered Burley the opportunity to sell in Europe two models of gas heater, the G9000, which required a flue, and the G4000,the model central to this case, which did not. It was a flueless gas heater similar in exterior design to one of Burley's products. Mr Barson, no less intent on Burley extending its product range to gas heaters, wished to be assured that Burley would obtain an exclusive market advantage. As from April 1995, the two began to negotiate the first licence entered into. [16] The marketing advantage Mr Fleming offered Burley lay clearly enough in the G4000, the flueless gas heater that was then novel. Essentially he offered Burley a novel process using conventional technology: the three interrelated elements that the heater housed that enabled complete combustion. Two of those elements were to his own design, the burner, and the control element central to which was a circuit board with a carbon monoxide sensor able to shut off the fire if need be. Each included some proprietary components. The third element, a catalyst, was a Corning proprietary product. It had not been used in this way before. [17] Patent protection was also important but seemingly less critical. Mr Fleming did not claim to be able to assure Burley of complete protection. As at 12 September 1995, he said, he had applied for patents in Germany and the United Kingdom and anticipated obtaining four patents in all. As he then summarised the position, some protection only could be anticipated: 'there will be some protection in some markets on some aspects and complete protection in all markets for some aspects.' [18] Of greater concern was what latitude Burley would have to house the definitive technology in heaters of its own design and at what cost. The G4000 model derived, in part, in exterior design, from a Burley electric fire. Burley was engaged in having the G4000, especially, certified as safe for manufacture and sale in Europe. It wanted to be able to use the definitive technology that model embodied without having to pay the same level of royalty. The outcome was cl 5.2 of the licence, the term principally in issue. [19] The initial licence, dated 6 October 1995, between Control Automation and Burley, did not prove lasting. It had a life of 14 months. On 1 November 1996 Mr Fleming, who then held and holds still such patents as there then were and now are, confirmed in writing that Control Automation's interest as licensor had beenassigned to the Queenstown Trust. He declared that as from that date the trust granted to Burley an identical licence. [20] On 6 January 1997 the Queenstown Trust granted Burley the licence now in question, to run until 1 January 1999 unless ended earlier, but able to run on year by year. That did not happen. The licence ran only for its initial term. Before 1 January 1999 Mr Fleming proposed a fresh licence, but Burley declined. The Queenstown Trust terminated the primary licence on 22 April 1999; a decision confirmed by Superior Fireplace Company on 22 June 2000. [21] By January 1999 Mr Barson, on Burley's behalf, and Mr Fleming notionally on behalf of the trust but actually on his own behalf, were irreconcilably at odds; and perhaps the most pervasive theme in the evidence, in one guise or another, was as to how that came to be. Who was in the right and who was in the wrong, however, is not in issue in this case. That does not help to resolve the question with which this case is concerned, whether Burley remains under any residual liability to pay the lesser royalty for manufacturing and selling heaters of its own design that rely on the definitive technology in the products primarily licensed. I need only outline what each camp says. [22] By January 1999, Mr Barson says, Burley was completely disenchanted. The G4000 had taken from 1995 in the Netherlands until August 1997, in England, to be certified as safe for manufacture and sale. The certifying agencies had found it difficult to establish whether it was reliable and safe. It cut out unpredictably, they had found, not as and when it was meant to. The fault was thought to lie in the central aspect of the control element, Mr Fleming's circuit board. [23] When in late 1997 Burley began to market the G4000, assembled from New Zealand components, Mr Barson says, Burley found they were neither well designed and constructed nor safe. The circuit board was especially problematic. Burley sold 40 heaters but faced constant calls for repairs or refunds. (Burley also called evidence to show that these problems were endemic in Australia.) It concluded that the model was not worth persisting with. The flueless gas heaters it nowmanufactures and markets embody the same concept, it says, but not the same technology. The design process for its own heaters began in July 1998. [24] Mr Fleming rejects these criticisms of the G4000, a large number of which, as he says, were manufactured and marketed without difficulty in New Zealand and Australia. The technology was new. Unsurprisingly, he says, both the testing agencies and Burley had difficulty. He did what he could to assist him. They ignored his advice. Burley could and would, he says, have resolved such problems as there were had it persisted. It chose not to. [25] The advantage Burley has taken from the licence, Mr Fleming says, lies in the designs and know-how it acquired, essential to the flueless gas heaters it now manufactures and markets in such significant numbers. It is only just, Mr Fleming says, that Burley should pay the royalty it undertook to pay. That, however, depends on the terms of the licence.Principles of construction[26] There is no issue that the licence was of technology not of any patent and that, like any agreement commercial in character, it is to be construed objectively, as the parties would then have understood it, against the context in which it was entered: Investors Compensation Scheme Ltd v West Bromwich Building Society[1998] 1 All ER 98, 114–5, see also Boat Park Ltd v Hutchinson (1999) 2 NZLR 74;Pyne Gould Guinness Ltd v Montgomery Watson (NZ) Ltd [2001] NZAR 789. [27] A recent instance of a technology licence construed on those principles, should any example be called for, is Cambridge Antibody Technology v Abbott Biotechnology Ltd & Abbott GmbH & Co KG [2004] EWHC 2974 (Pat). There Laddie J unhesitatingly adopted Lord Nicholls' succinct statement in BCCI v Ali[2002] 1 A.C.251 at para [26]:The meaning to be given to the words used in a contract is the meaning which ought reasonably to be ascribed to those words having due regard to the purpose of the contact and the circumstances in which the contract is made.[28] To the extent that this licence incorporates any concept or term deriving from related patents, or claims, an issue in itself, the words used still carry their objective meaning; a meaning that may be fixed with the help of a skilled reader: Peterson Portable Sawing Systems Ltd (in liq) & Peterson v Lucas & G W Lucas & Sons Pty Ltd [2006] NZSC 20; Catnic Components Ltd v Hill & Smith Ltd [1982] RPC 183, 243: Kirin-Amgen Inc v Hoescht Marion Roussel Ltd [2004] UKHL 46, para 78, (2005) [RPC 9]. [29] Mr Fleming and Mr Barson each gave extensive evidence as to the history of the licence to which I have referred in part. But their evidence did not assist me to bring sense to the bargain they struck, which in retrospect undoubtedly is less explicit than each would now like. In interpreting the agreement I have been assisted by the submissions of their counsel, founded on the expert opinion evidence of Clive Elliott, barrister and patent attorney, for Lennox, and Kenneth Moon, solicitor and patent attorney, for Burley. Once again, however, I found, those submissions and that evidence took me only so far. [30] At this point the most that I need say is this. Burley's liability, if any, springs, I consider, only from the agreement and turns on its evident idiosyncrasies. A licence may be of known technology in a new interrelation: AB Consolidated Ltd v Europe Strength Food Co Pty Ltd [1978] 2 NZLR 515, 522, CA. And the agreement does not, I consider, incorporate Mr Fleming's patents and registered designs either expressly or as an implicit point of reference. Their place in the analysis is, at most, contextual.Royalty terms[31] There are two terms of the licence defining Burley's liability to pay royalties, the first of which presents no issue in itself but is essential to context. It relates to Burley's liability, now settled, to pay a royalty for the New Zealand range of products sold on the European continent. Paragraph 5.1 says:The licensee shall pay to the licensor a royalty at the rate of 10% of the United Kingdom list price less 34%, less 20% for the products sold within the territory.[32] The products to which cl 5.1 relates are defined in cl 1.1. They are:Gas heating appliances or parts thereof incorporating any and all aspects of the designs and/or inventions embodied in G2000, G4000, G9000 and G10,000 models of the licensor.[33] The issue this case presents arises from the second way in which Burley became liable to pay royalties, that liability relating to the products that it has designed and manufactured itself. Clause 5.2 says this:In the event that the Licensee sells a product comprising a burner assembly, catalytic technology and control element in accordance with the products and housings and other portions of the appliance solely of the design for the licensee, the licensee shall pay to the licensor a royalty at the rate of 5% of the United Kingdom list price for the entire product less 34% less 20%.[34] Clause 5.2 is awkwardly expressed but there is no issue as to its general intent. Burley remains liable to pay the lesser royalty for any product it manufactures and sells that has at its core the technology that set the products licensed apart, 'a burner assembly, catalytic technology and control element in accordance with the products.' In issue is what that phrase, enlarged by cl 1.1, means. [35] Nor is there any issue that this liability, notional or real, survived the licence ceasing in its primary sense. Clause 11.3, so far as it is relevant, it is agreed, applies:Upon termination of this Agreement the licensor shall revoke any licence to manufacture or sell the products and the licensee shall refrain from such manufacture and sale with the exception of an ongoing non-exclusive licence for products as defined in clause 5.2 in return for royalties and payment as provided for in clauses 5.2 and Section 6 of this Agreement.Competing thresholds for liability[36] The one thing on which Lennox and Burley agree is that the licence was of technology – the products primarily licensed embodying the three definitive elements enabling complete combustion. It was not a licence of any patents or registered designs that Mr Fleming then had or was then seeking. But there they part company.[37] Lennox contends, first, that what was licensed was a novel process for the complete combustion of gas and toxic emissions, then embodied in the three interrelated elements in the products primarily licensed: the burner assembly, the catalytic technology and the control element. Not of the components as such one of which, the catalyst, was a proprietary product, the other two of conventional design. The licence embraced rather any use by Burley of the three element concept deriving from the licensed products. [38] Burley contends, by contrast, that the licence was of particular technology, the three elements in the products primarily licensed, in their fixed relation, each incorporating their distinguishing 'designs and/or inventions'. Nothing less and nothing more. The process, to which three such elements serving their respective functions are generic, was not the subject of the licence. It can only be liable, Burley says, if the three critical components in its heaters are either identical to, or practically indistinguishable from, those in the licensed products. [39] Lennox contends, secondly, that though what was licensed was a concept embodied in the products primarily licensed, described abstractly as 'designs and/or inventions' that did not mean that each element had to be novel or inventive and worthy of patent or registration as a design. Only some of the components were novel or inventive. What was novel or inventive was their relation one to another. That sufficed. That was what Burley wished to have the right to use, a right that it continues to exercise and for which it remains liable. [40] Burley contends, by contrast, that each of the components had to be novel or inventive and goes further. The licence may not have been of Mr Fleming's then existing or claimed patents or registered designs, Burley says, but it does incorporate them to define what was licensed; and with two consequences the more modest of which is this. It can only be liable if the critical components in its heaters are identical to, or practically indistinguishable from, not just those in the licensed products, but their equivalents in the process for complete combustion both claimed and depicted in Mr Fleming's United Kingdom patent, dated 20 August 1997. Mr Fleming had claimed that patent on 23 February 1994. The claim was published six months later and was on the table when the licence was negotiated.[41] Burley also makes a more radical claim. What was licensed, in essence, it says, was Mr Fleming's 'designs and/or inventions' embodied in the components in the licensed products. To the extent that those components were neither novel nor inventive, they were incapable of licence. Burley's trump card lies in the two Kline patents granted in the United States in 1928 and 1930 for an attachment to a gas heater and for a gas heater, each embodying the process for complete combustion for which Mr Fleming claims credit. His claim to have been inventive, the premise on which the entire licence depends, has no objective basis. [42] My own conclusion is this. There is, I consider, a single threshold for Burley's liability and that is not, as Lennox contends, whether the critical technology in Burley's products embody the process for complete combustion, to which generically the three elements are integral. Nor does it depend, as Burley says, on whether each was individually inventive or novel. Nor does it turn on Mr Fleming's patents. [43] Burley's liability depends, I consider, on the answer to the less ambitious question with which Burley began: on whether the three components in the Burley products are to the same design, or a design deriving from, those in the products licensed.Licence of products and parts[44] That this was a licence of products and parts, which happened also to enjoy some but a not complete measure of patent protection, is spelt out in the three recitals to the agreement:The licensor is engaged in the design and manufacture of products being gas fuelled heating appliances as hereinafter defined and has developed a variety of such products and is the owner of various intellectual property rights in connection with such products in the United Kingdom and other parts of the world. The licensee is engaged in the manufacture, marketing and promotion of various heating appliances in Europe. The licensee wishes to undertake the marketing and manufacture of the products as set out below.[45] That Mr Fleming did have patents and was seeking more is confirmed implicitly by cl 1.2 which defines his intellectual property rights:All inventions (subject to letters patent, pending applications or otherwise), designs (whether or not subject to a design application or registered design) or any copyright vesting in any works relating to the G2000, G4000, G9000 and G10,000 models of the licensor.[46] That Mr Fleming also had materials relevant to the design and manufacture of the products, to which he claimed ownership, is confirmed implicitly in the definition of proprietary data in cl 1.3:All inventions, designs, methods, techniques, formulae, specifications, copyright subsisting and (sic), published or unpublished material in the nature of plans, drawings, sketches, photographs, models, three-dimensional reproductions of the products or the like, data and information which are, or at any time after the date of the agreement come to be, owned by the licensor and which relates to the products or their design, manufacture, installation, commissioning or operation.[47] That Mr Fleming did indeed have the intellectual property rights he claimed and that Burley recognised that he did and agreed to respect them, is recognised in the reciprocal warranties given in cls 8.1 and 8.2:The licensor warrants that to his knowledge and to the best of his belief that he is the owner of all intellectual property rights in the inventions and the designs. The licensee warrants that all intellectual property rights forming the basis for this Agreement are the property of the licensor and undertakes not to challenge any intellectual property right of the licensor in any country in the territory.[48] Consistently, also, each agreed to notify the other of any threat to Mr Fleming's intellectual property rights and on a regime to govern how such rights might be defended: cls 7.2 – 7.5. Clause 3.4 required Burley to mark products it sold with markings identifying such intellectual property rights as there were. The most telling term governing intellectual property seems to me to be, however, cl 7.1 concerning Mr Burley's duty to pursue patent protection in Europe:The licensor shall file and pursue such patent protection within the Territory at the licensor's discretion and the licensor shall use their best endeavours to pursue patent protection in at least the United Kingdom although such best endeavours shall not extend to the pursuit of a granted patent or renewal of a patent should the licensor receive advice from their patent attorneys thatsuch action is unlikely to result in an enforceable patent to cover the Products at a reasonable cost.[49] This assurance can only have been included for Burley's benefit and Mr Fleming clearly intended it to be very limited, as Burley must have understood. Any duty that he assumed was highly conditional and consistent with his assessment in September 1995 that complete patent protection was then unattainable; that Burley's market advantage would lie rather in its exclusive licence to manufacture and sell his then novel products. With that Burley must be taken to agree. [50] There is also this oddity. The definition of proprietary data serves no function that I can identify. In encompassing 'inventions' and 'designs' it overlaps with the definitions of intellectual property rights and products, but not so as to become a species of either. It extends beyond the compass of both. Nor does it independently inform any right or obligation. Even cl 11.2, which governs termination for breach, an event that did not happen, does not employ that definition. Then, as well as refraining from manufacture, sale or marketing of any aspect of the products licensed, Burley was to return 'all copies of any information supplied to the licensee by the licensor for the purpose of this agreement'. More importantly, Burley came under no such obligation however expressed when, as happened, the agreement came to an end under cl 11.3. [51] In short the agreement as a whole is consistent with the preamble. This licence was a licence of technology. It did not licence Burley to manufacture to its own design gas heating appliances embodying an inventive concept protected, or capable of being protected by patent. It licensed Burley to manufacture specified models, or heaters with derivative elements, to which the patents and any proprietary data related. [52] Mr Fleming's intellectual property rights may have underpinned the products licensed but those rights were not critical. They were neither the subject of the licence, nor incorporated expressly or necessarily implicitly to define what was licensed. To the extent that Lennox's claim to the residual royalty now rests on any allied claim to proprietary data given to Burley and never returned, that has nosupport in the agreement. That this was a licence of products and parts is confirmed ultimately, I consider, by cls 5.2 and 1.1, the terms which are finally critical.Critical terms[53] In one fashion or another Lennox and Burley each argue that the question posed by cl 5.2, whether the three elements in Burley's heaters are 'in accordance with the products' must import from the definition of products in cl 1.1 whether they incorporate 'any and all of the designs and/or inventions embodied' in the licensed products. I do not read cl 5.2 as so wholly incorporating cl 1.1. [54] Clause 5.2 does not call for that to make sense, and the principal purpose that cl 1.1 serves is not to complement cl 5.2. It is to define the products licensed during the life of the licence that attracted the full royalty under cl 5.1. That life did not inevitably end on the date specified in cl 2.1, 1 January 1999. Had it been agreed, the licence could have continued year by year under cl 2.2 indefinitely; and cl 1.1 defines the products licensed in a sufficiently expansive way to cater for that prospect. [55] At the date the licence was given there were four existing models licensed and they were specified in cl 1.1 But to allow for the possibility that they might cease to be the subject of the licence, the definition embraces also what was licensed in essence – the inventions and designs that the licensed models embodied. Burley was to be entitled to manufacture any such future products, in place of the named products. The licensor, now Lennox, was to be entitled equally to the primary and secondary royalties. [56] So long then as the models specified in cl 1.1 remained extant they remained the products primarily licensed and the immediate point of reference for the secondary licence. They embodied the inventions or designs licensed and thus there is no call under cl 5.2 to inquire into whether they did embody those inventions or designs or into whether those inventions or designs were worthy of patent. The fundamental premise of the licence was that they were worthy of licence and of the two species of royalty.[57] Burley's liability under cl 5.2 is then, I consider, to be assessed by comparing the critical elements in the Burley models, for which the lesser royalty is claimed, against the products then or last licensed, which happen still to be those specified in cl 1.1. Burley's products will be 'in accordance with the products' only if they are identical or plainly derivative. Were then Burley's products the result of a demonstrably distinct design process? And, even if they were, are the critical components in Burley's products truly distinct?Critical comparison[58] The answer to the first of those two questions is straightforward. Mr Barson's evidence, which I have no reason to question, is that in mid 1998 Burley decided that, to preserve its reputation and market share, it needed a flueless gas heater of its own design and engaged Duncan Spokes, a consultant engineer, to complete that design. Mr Spokes first designed the 4121 model, launched in March 1999, and then the 4240 model, launched in 2001, each deriving in exterior design certainly from Burley's then existing range. Mr Spokes' evidence is consistent and is equally, I consider, beyond question. The decisive question, however, is whether Burley's products are truly distinct. [59] Burley does accept that its heaters contain the three distinctive elements, a burner, a catalyst and a control device, but points out that these are generic. The first and the third are essential to any gas heater, flued or flueless. Burley accepts also that the first 4121 heaters manufactured contained two proprietary components it had acquired stocks of to manufacture the G4000, the Corning catalyst and the pilot light. Otherwise, Burley's evidence is, its new models did not in any sense derive from the licensed products. [60] Mr Fleming, speaking for Lennox, and for the purpose of this case only, concedes that the new Burley models for which the royalty is claimed may have Burley housings. But in the respects that are critical, he contends, they derive from his design. They rely on his inventive concept enabling complete combustion. They are also more particularly derivative. One Burley model, he says, uses the same style of burner as the G4000 and G10,000 models. Another uses the same control valve.Another uses glass with an integral printed black trim band, then new even if commonplace now. [61] Mr Fleming's evidence, however, and that of the two other witnesses on whom Lennox relies, Richard Stokes, the technical director of one of Burley's English competitors, and Gordon Knight, a certification engineer employed by one of the English certifying agencies, suffers this deficiency. Their focus is on whether the Burley products embody Mr Fleming's inventive concept, not on any more detailed comparison. Nor does it help Lennox that both sets of products contain proprietary components designed by neither. [62] By contrast, I found the evidence of the Burley witnesses, Mr Barson, Mr Spokes and Kenneth Porter, a technology development and quality engineer, at one time the testing and certification manager of a large English certifying laboratory Gastec, far more particular and telling. [63] The principle on which the Burley model burner operates, Mr Spokes says, differs from that of the G4000 burner. In the Burley burner gas and air mix over a venturi tube not present in the G4000. That gas-air mixture then leaves the burner box through burner ports, meshed to prevent back lighting. In the G4000 the gas air mixture leaves through chopped glued ceramic fibre. [64] The Burley catalyst, Mr Spokes accepts, is indistinguishable from that used in the G4000. Indeed the first 4121 models manufactured, he confirms, used the Corning catalyst in stock for the G4000. But then Burley purchased from another manufacturer a different catalyst with a finer honeycomb more suited to gas. The point is, Mr Spokes says, that a catalyst is generic to the process and the catalysts used in both product series were and had to be proprietary. That they are identical or very similar was inevitable. [65] The Burley and licensed models also have this in common as regards the control element, Mr Spokes accepts. Each relies on a pilot light and gas valve which are industry standard components. Again, he confirms also, when the earliest examples of the 4121 model were manufactured, Burley used up a large stock ofEurosit 630 gas valves acquired for the G4000. It then changed. The pilot lights were never the same. That used by Burley is to its own specification. Most importantly, Mr Spokes says, the Burley models do not have a control circuit board to govern the thermocouple and electro-magnetic valve that regulate gas supply, or an audible alarm or carbon monoxide sensor. Burley found the circuit board highly problematic. [66] Mr Porter, the primary focus of whose evidence was to answer Mr Fleming's claim to have been inventive, concludes that Burley does not use either of the elements in Mr Fleming's design that were unique or inventive, his burner and his circuit board. Burley uses proprietary components in heaters to its own design. His evidence is fully consistent with that of Mr Spokes and I accept their evidence. [67] I find that the Burley products in their critical respects are neither identical to the licensed products, nor substantially similar. In those critical respects the Burley products do not derive from the licensed products except to the extent that they use the same or similar proprietary components. But that was inevitable and is of no moment. The Burley products are, in all the respects that count, truly distinct. They do not attract the royalty in cl 5.2.Conclusion[68] For these reasons I conclude that Burley is under no liability to pay to Lennox the secondary royalty claimed. There will be judgment for Burley carrying the consequence that Burley is entitled to costs, as I should have thought at scale 2B, and disbursements as fixed by the Registrar. Burley's memorandum as to costs is to be filed within ten working days of the date of issue of this decision and Lennox's reply within the succeeding ten working days. _____________ P.J. Keane J