The Court disagreed that the second invention was a replacement for the first invention.  Allsop P considered that a “replacement” did not broadly mean any commercial alternative. Rather, in this context “replace” properly meant something that replaces the claims of the patent covering the first invention, in the sense that the replacement encompasses the claims of the first invention and thereby takes the place of or substitutes for them: a new product or process with one or more further integers in addition to the relevant claims would be a replacement.  In reaching the same conclusion as Allsop P, Handley AJA also interpreted “replacement” by reference to the claims of the patent covering the first invention.  His Honour reasoned that a replacement meant a new product or process which omitted one of the essential integers of a claim in the patent for the first invention, or one which added a new essential integer to a relevant claim, to give a better result.  As the second invention was not part of the claims of the first invention and only used some of the integers of those claims, the second invention was not found to be a “replacement”.

This case provides a good illustration of how an ordinary word used in a contract (in this case, the word “replace”) may be construed more narrowly by a Court than one of its broad ordinary meanings, in light of the context of the contract.  The case also highlights the need to precisely identify the nature of any future improvements which are the subject of an assignment.