The Applicants (SGS Group Management SA and SGS Australia) are a Swiss multinational and its Australian subsidiary and together the biggest provider of geochemical analysis services to the mining industry in the world.

Peter Archos acted for the Respondent, Australian Laboratory Services Pty Ltd (“ALS“), which is a division of ALS Limited (formerly Campbell Brothers Limited). ALS Limited is listed on the Australian Stock Exchange and employs more than 13,000 people in 55 countries.

ALS had, for over 10 years, used a particular product (a partial leachant used to detect the presence of minerals) in the provision of ore analysis services to its customers. SGS acquired the company that provided the product to ALS and immediately terminated ALS’ right to use the product.

As a consequence, in order to continue to supply services to its customers, ALS developed its own partial leachant – “Ionic Leach”.

The central allegations made by SGS in the proceedings, which were conducted in the Federal Court of Australia (Western Australia registry) was that, in breach of its contractual and equitable obligations , ALS had copied, imitated, reverse engineered or otherwise obtained the formula of the SGS leachant and used it to develop the ALS leachant. A subsidiary allegation made by SGS was that ALS had, in the marketing of its Ionic Leach, breached the provisions of what used to be s 52 Trade Practices Act by making false and misleading representations concerning Ionic Leach.

In support of its primary allegations SGS adduced evidence from a number of experts which was to the effect that it was not possible for ALS to have developed its product in the timeframe in which it had without access to the formulae for the SGS product. The trial judge found otherwise – specifically he determined that SGS had not established a breach of ALS’ equitable or contractual obligations to SGS or any contravention by ALS of the Trade Practices Act. There were a number of basis for the finding, including:

  • In order to establish a breach of the relevant contract SGS had to establish that ALS deliberately or intentionally attempted to copy, duplicate, imitate or reverse engineer the SGS product – SGS failed to do so.
  • SGS asked the Court to infer that, because of the similarity of the products, which similarity was alleged by SGS, ALS could not have developed its Ionic Leach product in the timeframe which it took without copying, duplicating, imitating or reverse engineering the SGS product. The trial judge determined that the two products were not the same. Further, he found that ALS developed Ionic Leach using its full resources and a number of chemists. One of the experts retained by SGS to prove its case conceded under cross-examination that a leach of the kind of Ionic Leach could have been developed within the timeframe taken by ALS if the developer had access to the resources of ALS.
  • SGS contended that because the person who developed the SGS product had taken years to do so then anyone who developed a similar product in a short time period must have copied, duplicated, imitated or reverse engineered the SGS product. SGS failed in this contention. In examining the evidence of the ALS chemists who were involved in the development of Ionic Leach the trial judge determined -“Whether their achievement was quite remarkable is not the point.” and that -“The evidence simply does not support any finding that the respondent (ALS) misused the applicants'(SGS) confidential information.”
  • As to the allegation that ALS had breached the Trade Practices Act the Court determined that the representations made by ALS concerning Ionic Leach were neither false nor misleading.

The trial was conducted in Perth in December 2011. The decision was handed down in July 2012 with the decision published to the public in September 2012. The Application brought by SGS was dismissed and it was ordered to pay ALS’ costs of the proceedings.

A copy of the judgment (redacted to protect SGS’ confidential information) can be accessed at:

http://www.austlii.edu.au/au/cases/cth/FCA/2012/711.html

This information is intended to provide a general summary only and should not be relied on as a substitute for legal advice.

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