The legal battle over whether Clipsal stole the technology that allegedly transformed the C Bus home automation from being a simple rudimentary control system to a sophisticated control system, is set to be fought out in the Federal Court. However, if Clipsal lose the case the big loser could well be Robert Gerard the former head of Gerard Industries and a close friend of former Prime Minister John Howard.
Already embarrassed over his past business dealings, Robert Gerard is a former Reserve Bank board member and Liberal Party donor who shortly after selling Clipsal to French Company Schneider Electric settled a $150 million tax bill with the Australian tax office. He was also forced to step down from his position on the Reserve Bank board.
Gerard and his family are at the heart of the allegations being made by the Smart Company that back in 1995 and 1996 they stole the Smart Company technology for the advancement of the C Bus automation system. ChannelNews has been told that Schneider Electric, who aquired Gerard Industries, the Clipsal brand and the C Bus technolgy in 2005, will hold both Robert Gerard and Gerard Industries liable for any payouts if they lose the upcoming court case.
The history of C Bus goes back more than a decade with questions set to be raised as to whether Federal money that was given to Gerard Industries under a Liberal Government was actually spent in Australia on the development of C Bus technology, or whether it was channelled into an offshore Company called Clipsal Integrated Systems which was 49.3 percent owned by GP Industries Limited (“GP Industries”), a 85.7 percent owned subsidiary of Gold Peak Industries, a Singapore based Company run by Victor Lo a long-time friend and business partner of Robert Gerard.
Investigations by ChannelNews and SmartHouse have raised some interesting questions about the relationship between Robert Gerard and Victor Lo and another former employee of Clipsal, Bernard Emby, who is now based in Asia. During the past few weeks ChannelNews has obtained hundreds of pages of documents relating to the development of C Bus, Gerard Industries, reports by accounting groups on the aquisition by Scheinder Electric of Clipsal and Gerard Industries, as well as documentation on matters before the Federal Court.
(ChannelNews will run a separate story on Clipsal operations in Asia and their relationship with Emby and other Asia Pacific Companies.)
Central to the fight between Clipsal and the Smart Company (Smart) is the establishment of who developed the C Bus technology back in the early 1990s, and whether prior to the establishment of a relationship with the Smart Company whether C Bus was actually a smart system.
Clipsal claim that there is no case to answer.
Smart describe their system as a highly intelligent and sophisticated system designed for building automation. They also argue that Clipsal had a system at the time called C-Bus, which was a wiring system incapable of sophisticated decision-making based upon multiple events and capable only of performing rudimentary decision-making functions.
In documents lodged before the Federal Court ,Smart claim that their system was not simply another component that could interface with the C-Bus system, it was technology that could qualitatively enhance the C-Bus system delivering functionality for a sophisticated building automation system
Smart admit that what attracted them to a relationship with Clipsal was the ability to take advantage of Clipsal’s “considerable commercial profile and manufacturing and logistical capacity”.
The Smart Company says that on 22 May 1995, Smart and Clipsal entered into a series of agreements which included a Technology Collaboration Agreement a Supply Agreement and a Heads of Agreement on 26 September 1996.
Missing from the documents lodged before the Federal court is a mysterious Sale and Purchase Agreement, which Clipsal insiders at the time have told ChannelNews and SmartHouse made up part of the documents between the two Companies.
Under the agreements, Smart and Clipsal agreed to work together in a comprehensive project for the further development and re-design of all of Smart’s software and hardware for building control and building automation. Smart claim that as part of a heads of agreement between the two Companies, Clipsal was required to pay to Smart royalties in respect of all sales made Clipsal from the C Bus product.
The Smart Company claim that Clipsal and Schneider Electric are now selling C Bus, which includes Smart technology, and that they are entitled to global royalties from the sale of the home automation system.
ChannelNews has been told that prior to the sale of Clipsal to Schneider that Robert Gerard told friends in the Liberal Party that he had no option but to sell Clipsal and the C Bus technology because of mounting tax bills. It is also alleged that he initially told the Smart Company that the C Bus technology containing the alleged Smart technology would not be sold to the French Electric Company.
Smart has said that the C-Bus system, prior to Clipsal’s relationship with Smart, was only capable of rudimentary decision-making functions and was not capable of sophisticated decision making based upon multiple events. The first discussions between Smart Company director Robert Rohrlach and Clipsal began back in January 1994. It is expected that Clipsal will deny this.
The discussions led to the Smart Company’s Jeeves system being rebranded as C-Bus. It was the combining of this technology that rendered it capable of sophisticated decision making based on multiple events say Smart. Before the integration of the two systems the Smart Integrated Systems Solution was capable of high level home automation, claims Smart. It is also alleged that Smart developed the C Bus graphic user interface that allowed users to manage the automation process from anywhere in the world.
Prior to the commencement of the relationship with Smart the Clipsal product was marketed as Minder and Home-Minder. Later the Smart product which was manufactured by Clipsal and distributed by Smart under the HOA was marketed under the name ThinkBoxx.
Smart claim that it provided two of its engineers, David Mittnacht and Nick Efthyvoulos to work on the integration of technology into the Clipsal C Bus system and that during this period, Smart, with Clipsal’s knowledge, started selling their technology into the Greek market.
In reviewing the thousands of pages of documents lodged in this case and a recent lodgement by Clipsal it appears that a factual background to the case, which was lodged in an earlier defence document, is now missing.
Back in January 2006 Clipsal lodged a notice of defence with the Federal Court. In that document they describe what they say is a factual background to the case. However, this factual background is missing from the new defence that was lodged on September 8th 2008.
Back in 2006 Clipsal claimed that prior to 1995 Clipsal had developed the C Bus system, which was patented by Clipsal with a priority date of 21 March 1994.
The patented system they claim was for a lighting system that was to be used as a network system for the delivery of a communications protocol that controlled or monitored electrically-driven functions in a building, such as lighting, air-conditioning and the like.
Clipsal admit that from 1995 onwards Smart and Clipsal had commercial dealings with one another. They say that all Smart had was a programmable logic controller (known as the Jeeves unit), which was capable of being adapted to be a front-end device to C-Bus, provided that an interface was created to interpret the C-Bus communications protocol.
On 22 May 1995, Clipsal and Smart entered into an agreement to develop an interface to enable the Jeeves unit to become a front-end C-Bus device. They say that it was never the case that C-Bus was to be the only system to which the Jeeves device could be connected and that Smart entered an agreement with Clipsal to get access to Clipsal’s distribution network and its ability to manufacture the Jeeves device at a lower cost.
They also claim that Clipsal advanced over $810,000 against future royalties payable to Smart under the distribution arrangements. Just over $266,000 of this money is still outstanding to Clipsal after the Smart Company was placed under external administration on 13 September 2001.
They claim that the Smart Company only started their legal action against Clipsal in August 2003 following the acquisition of Clipsal and its related companies by French Company Schneider Electric and that between May 2001 and October 2003, Smart made no demand for licence fees payable on any of the C-Bus 2 products now being claimed.
In part 3 we look at the technical side to C Bus and the history of the Gerard Company as well as Clipsal’s investments in Asia.
