- The first Plaintiff ("QHCL") is a company specialising among other things
in the stabilisation and delivery of biological molecules. An important part
of QHCL’s business is concerned with products which exploit the preservative
properties of a naturally occurring sugar called trehalose. The man
responsible for the inventions upon which this part of QHCL’s business is
built is the second Defendant, Dr Roser. This action is in reality a dispute
between Dr Roser and QHCL about Dr Roser’s activities after his dismissal from
QHCL, in which the first Defendant ("QRF") played an important role. Until the
events with which I am concerned Dr Roser had been a director of QHCL, and he
has been a director of QRF at all material times.
- There are three main disputes between the parties. The first concerns the
manner in which an agreement between QHCL and QRF called the Funding Agreement
was terminated. The second is a dispute relating to alleged infringement of UK
Patent 2,187,191. The third is a claim by QHCL to be entitled to the invention
which is the subject of two patent applications in the names of the third and
fourth defendants ("ARF" and "Eastbridge"). A considerable amount of
specialist terminology has been employed, and in the Annex to this judgment, I
have attempted, in the absence of some introduction to the technology agreed
between the parties, a glossary of the terms used.
- In order to understand the dispute, it is necessary to set out a brief
history of Dr Roser’s career. Dr Roser is a physician and a research
scientist. He qualified (MB BS) in 1958 and obtained his Ph D in 1967. Since
the middle of 1986, he has specialised in what he calls applications of
trehalose technology. In very general terms, trehalose is a naturally
occurring sugar which has the interesting and potentially important property
that it appears to stabilise biological materials against the adverse effects
of drying. Before 1986, Dr Roser had carried out enough investigations in this
area to enable him to file some patent applications, and in 1986 he filed the
application which matured into the patent in suit. Entitled "Protection of
proteins and the like" this patent is concerned with the use of trehalose to
protect proteins and other macromolecules against losing their activity as a
result of having been dried.
- Before 1985, between dates of which I am uncertain, Dr Roser worked at the
Institute of Animal Physiology at Babraham, and by 1985 he was a Senior
Principal Scientific Officer. In 1985, he set up a partnership with a friend
called Michael Luxton and his chief technician, Jeff Herbert. This partnership
he called Quadrant Bioresources, and in 1986 it seems that the business of the
partnership was taken over by a company called Quadrant Bioresources Limited.
The business of the partnership and of the company was the sale of
sophisticated reagents which had been developed at the Institute. Quadrant
Bioresources Limited paid 25% of its turnover from selling reagents to the
Institute. As I understand it, some of these reagents contained biological
molecules and were unstable. Dr Roser’s evidence is that during a presentation
of some of the unstable reagents at the Royal Society, he was made aware of
the phenomenon of anhydrobiosis by a retired scientist from the Institure of
Animal Physiology.
- Generally speaking, when biological macromolecules are dried at room
temperature from solution in water, they lose their activity, and if they are
dissolved again in water they do not regain their activity. Professor
Mackenzie, who gave evidence on behalf of the plaintiffs, said that the reason
for this behaviour is that the water molecules interact with various groups of
atoms on the surface of the macromolecule, and that when the water is removed
the groups of atoms are free to act either with other groups on the same
molecule or with other molecules. These interactions distort the structure of
the biological macromolecules and deprive them of their activity. Professor
Mackenzie says that the loss of activity arising from a change in the
three-dimensional conformation of the macromolecules is called "denaturation"
and occurs also when the substance is heated. He give as another example of
denaturing the effect of heat on albumin in egg white: it changes from a
viscous liquid to a white solid.
- Multicellular organisms generally die on dehydration, but there are
organisms which can survive. The phenomenon is called anhydrobiosis. The
examples given in the patent in suit are the resurrection plant,
Selaginella lepidophylla, brine shrimps and the familiar baker’s yeast.
Yeasts are multicellular organisms, and baker’s yeast is commonly dehydrated
for convenience in selling. When dehydrated baker’s yeast is reconstituted
with water, it comes back to life. There are other examples of this
phenomenon.
- Dr Roser said that it was known that organisms exhibiting this phenomenon
contained various sugars and polyhydric alcohols in their cells, and that it
was thought that the mixture of materials present in combination enabled the
cellular materials to resist denaturing on dehydration. He says that these
organisms produced trehalose. He discovered that anhydrobiosis was a property
of this sugar. He says that he discovered that the natural process could be
copied and could be used to stabilise products. This action is concerned with
Dr Roser’s efforts to exploit his work in relation to trehalose.
The Quadrant companies
- QHCL now owns Quadrant Bioresources Limited, Dr Roser’s first company, and
is in turn owned by Quadrant Healthcare plc to whom I shall refer as
"Healthcare". In 1988, Dr Roser established QRF. As its name suggests, this
company was founded for the purpose of carrying out scientific research, and
it is a company limited by guarantee. It was a vehicle for the research
carried out by Dr Roser who has always been the driving force behind QRF. Dr
Roser’s evidence was that he considered that his discovery in relation to
trehalose had opened up a window on an enormous area of future work. He
thought that it was a new development in biology which had not been seen
before, and that it was going to be so valuable that a research organisation
to deal with all the research opportunities would be a very good way to start.
He was plainly influenced by the success of other institutions, particularly
the Strangeways Laboratories in Cambridge. What he was looking for was a
laboratory which would eventually have access to sources of substantial
funding, such as the Medical Research Council, the Imperial Cancer Research
Fund and the Wellcome Trust. In fact, QRF never did obtain substantial
third-party funding to support its research work (it seems never to have had
more than three or four employees). Substantial funding was however obtained
from third parties for the establishment of QHCL, which in 1989 became the
principal vehicle for the exploitation of Dr Roser’s research work, and in
particularly his trehalose discovery.
- On 18 January 1991, Dr Roser entered into an agreement described as a
"Service Agreement for a Scientific Director and President" with QHCL. On the
same day, the Funding Agreement was entered into between QHCL and QRF. This
agreement provided for the payment by QHCL of certain funds to enable research
to be carried out by QRF. The Funding Agreement contained certain provisions
which on their face were designed to enable QHCL to exercise a degree of
control over the activities of QRF, and to keep the companies closely
associated.
- In October 1995, Mr Ross was appointed Managing Director of QHCL at the
instance of investors. He had previous experience of bringing research-based
companies to the market, and it was one of the purposes of his appointment to
bring the business of QHCL forward to the stage on which it could be floated.
Healthcare was the vehicle chosen for this flotation, and it achieved a full
listing in February 1998. For reasons which are not entirely clear to me, but
which I suspect may have their roots in their very different approaches to the
business of QHCL, Dr Roser and Mr Ross fell out. The outline of the events can
be briefly described. As the relationship between Mr Ross and Dr Roser
deteriorated, Dr Roser met the co-chairman of the company, Mr Lyman, on 20
June 1996. It is clear that the possibility of Dr Roser’s departure from QHCL
was discussed at that meeting. On 24 June there was a farewell barbecue for a
departing employee of QHCL, at which Dr Roser announced that he was leaving
QHCL, giving as his reason that the Board and Mr Ross wished it. On 26 June
negotiations started between Mr Ross and Dr Roser over the terms of the
latter’s departure. On the 28 August, the negotiations having been unfruitful,
the Board of QHCL decided to dismiss Dr Roser. He was dismissed by letter
signed by Mr Uppal, the finance director of QHCL on that date, the dismissal
being stated to take effect from 30 August 1996. On 28 November 1996 Dr Roser
started proceedings in the industrial tribunal for unfair dismissal, that were
compromised on 14 May 1997. In those proceedings, QHCL acknowledged that Dr
Roser had been unfairly dismissed, and by way of compromise agreed to pay Dr
Roser, and Dr Roser accepted, £30,000 "in full and final settlement of all and
any claims which [Dr Roser] may have against [QHCL] arising out of his
employment by [QHCL] or the termination thereof."
- Throughout this dispute, the Funding Agreement between QHCL and QRF had
remained on foot. It is QHCL’s case that it wished the agreement to continue,
but it says that Dr Roser continually tried to manoeuvre it into making him a
substantial payment to be free of the funding agreement. Dr Roser denies this
and says that QHCL constantly applied pressure to him to bring the
relationship to an end, in particular by depriving QRF of access to the
facilities which it shared with QHCL at Maris Lane in Cambridge.
- On 7 November QHCL became aware of facts which showed, it says, that Dr
Roser and QRF were deliberately depriving it of the fruits of research for
which it had paid under the Funding Agreement. There was a flurry of Notices
under the funding Agreement, but I need to refer to one only in particular.
QHCL was taking steps to ensure that the research carried out pursuant to the
Funding Agreement was under its control, and to this end on 9 December 1996 it
purported to require QRF to appoint its nominee, Dr Hetzel, as Director of QRF
pursuant to clause 16 of the Funding Agreement. It had already attempted to
appoint Mr Uppal, but Dr Roser, while making the appointment, stated that Mr
Uppal would have a serious conflict of interest and no executive authority,
and Mr Uppal never took up his appointment. QRF refused to appoint Dr Hetzel
either as "Director" of QRF or to appoint him to the board. Notice was given
alleging that this refusal was a breach of the agreement and requiring its
remedy, and ultimately a notice of termination was given. As might be
expected, QRF and Dr Roser say that the notice concerning Dr Hetzel was
defective, as were the notice requiring remedy and the notice to terminate and
the Funding Agreement was repudiated by QHCL who are liable for its breach.
The agreement being of indeterminate duration and providing for constantly
increasing funding, the claim advanced for breach of contract is substantial.
As a result of matters discovered on and since 7 November, it is also said
that QRF were guilty of a repudiatory breach of the Funding Agreement and that
QHCL were at all times entitled to accept this repudiation and did so by their
letter terminating the Agreement for breach. I can refer to the issues
relating to the termination of the Funding Agreement as the contractual
issues. Those of QRF’s actions which are alleged to entitle QHCL to bring the
Funding Agreement to an end also give rise to the second set of claims in the
action, which relate to patents.
- While still at Babraham, Dr Roser made the discovery which I have
described. He made patent applications on 9 July 1985 and on 29 May 1986, and
on 9 July 1986 he made the application which resulted in the patent in suit,
which claims priority from the earlier applications (there seems to be no
dispute that it is entitled to the earlier date). The patent was granted to
the second plaintiff, Quadrant Bioresources Limited. There was a dispute
between Dr Roser and the Department of Animal Physiology concerning the
ownership of this patent, which was resolved by agreement.
- From August 1996, the plaintiffs say that Dr Roser and QRF were actively
treating the Funding Agreement as at an end. On 27 August 1996 Dr Roser and Dr
Tunnacliffe, the principal employees of QRF, prepared a proposal for a joint
venture with a Danish company to produce a product which it is alleged would
infringe the patent in suit, a proposal in which QHCL would have no part. A
proposal for funding from the EC Commission for this proposed joint venture
was prepared by Dr Tunnacliffe in early September 1996. Furthermore ARF and
Eastbridge, companies formed by Dr Roser, are the applicants for patents for
an invention which, it is said, was plainly made during the subsistence of the
Funding Agreement and which is QHCL’s property.
Dr Roser’s contract of employment
- It is convenient to start with Dr Roser’s
contract of employment with QHCL, since it is not possible fully to understand
the provisions of the Funding Agreement without referring to it. He was
employed as the Scientific Director and President of QHCL, and the phrase
"Scientific Director and President" is used to denote Dr Roser throughout the
agreement. Clause 11 is as follows:
Time and attention
During the continuance of his employment under this Agreement the
Scientific Director and President shall unless prevented by Incapacity devote
seventy-five per cent of his time and attention to the business of the company
and shall not without the prior written consent of the Board:-
11.1 engage in any other business except the business of [QRF] to which he
shall devote the remainder of his time; or
11.2 be concerned or interested in any other business of a similar nature
to or competitive with that carried on by [QHCL] or any of its associated
companies except the business of [QRF]…
This agreement was accompanied by a letter from Dr Colaço, who was an
employee and director of QRF in the following terms:
I write to confirm that the terms of your Service Agreement with Quadrant
Holdings Cambridge Limited ("QHCL") are known to the Board of Directors of QRF
and that you will spend at least seventy five percent (75%) of your time
working for QHCL.
On behalf of the Board of QRF I confirm that all of the remainder of your
working time will be committed to work at QRF. Fees paid to you by QRF will be
no more than £10,000 in the first year, index linked thereafter by reference
to the annual RPI or its equivalent.
The same terms and conditions regarding ownership of all intellectual
property rights (except clause 12.4) shall apply to QRF as to QHCL and
otherwise clause 12 of your service agreement with QHCL shall apply mutatis
mutandis to the terms of your agreement with QRF.
In any negotiation between QRF and QHCL you shall act only as a
representative of QHCL and not as a representative of QRF.
This letter was countersigned by Dr Roser. His contract of employment with
QRF was entered into on 8 February 1989, replacing what appears to have been
an informal contract entered into on 1 August 1988. This letter offers an
"appointment on the staff of Quadrant Research Foundation". By clause 1.1 of
this contract of employment
You will be expected to perform duties and undertake assignements for QRF
to the best of your ability and it is hoped that you will devote such of your
time and attention to the interests of QRF as the work requires. You should
not be directly or indirectly engaged in any other business than that of QRF
except with the written consent of the Scientific Director.
- So far as both companies were concerned, ownership of intellectual
property rights was accordingly governed mutatis mutandis by clause 12
of Dr Roser’s contract with QHCL, which, so far as material was as follows.
Inventions
12.1 The parties foresee that the Scientific Director and President may
make discover or create Intellectual Property in the course of his duties
under this Agreement and agree that in this respect the Scientific Director
and President has a special obligation to further the interests of the
company.
12.2 Subject to the provisions of the Patents Act 1977 … if at any time
during the course of his employment under this agreement the Scientific
Director and president makes or discovers or participates in the making or
discovery of any Intellectual Property relating to or capable of being used in
the business for the time being carried on by [QHCL] or any of its
Subsidiaries or Associated Companies full details of the intellectual Property
shall immediately be communicated by him to [QHCL] and shall be the absolute
property of [QHCL]. At the request and expense of [QHCL] the Scientific
Director and President shall give and supply all such information data
drawings and assistance as may be requisite to enable [QHCL] to exploit the
Intellectual Property to the best advantage and shall execute all documents
and do all things which may be necessary or desirable for obtaining patent or
other protection for the Intellectual Property in such parts of the world as
may be specified by [QHCL] and for vesting the same in [QHCL] or as it may
direct.…
12.4 If the Scientific Director and President generates or creates any
Intellectual Property otherwise than whilst carrying out his duties under this
Agreement subject to the prior rights of any third party to that Intellectual
Property and to the Provisions of the Patents Act 1977 … the Scientific
Director and President shall offer [QHCL] the right to acquire for itself or
its nominee the Scientific Director and President’s rights in the Intellectual
Property within three months after disclosure pursuant to clause 12.2 on fair
and reasonable terms to be agreed or settled by agreement between the parties
in the absence of agreement by a single arbitrator to be mutually
appointed
12.5 Rights and obligations under this clause shall continue in force after
termination of this Agreement in respect of Intellectual Property made during
the Scientific Director’s employment under this Agreement and shall be binding
upon his representatives
- The relationship between QHCL, to which Dr Roser was intended to devote
75% of his time, and QRF, to which he was to devote 25% of his time, was
governed by the Funding Agreement. In any agreement of this nature, the
parties hope that the result of the work will be inventions or discoveries
which are capable of commercial application. In the present case, QRF was
entitled to 25% of Dr Roser’s time, and the agreement had to regulate the
ownership of the results. This was achieved by identifying work by its source
of funding. There are thus three categories of work defined in the agreement:
QHCL funded work, QRF funded work and other funded work. The definitions are
as follows:
|
"Annual Funding" |
means the annual sum specified in clause 2.1 or such other sum as may
be agreed between the parties from time to time, payable in four equal
instalments on the Accounting Dates |
|
"QHCL Funded Work" |
means all work (excluding the QRF Funded Work) which is carried out
by [QRF] (or on the instructions of [QRF]) and is funded by QHCL
including the work funded by the Annual Funding |
|
"QHCL Intellectual Property" |
means Intellectual Property which arises out of or forms part of QHCL
Funded Work and all Intellectual Property which arises out of or forms
part of improvements and/or modifications which are made to any QHCL
Funded Work whether or not the work giving rise to those improvements or
modifications is funded by QHCL |
|
"QRF Funded Work" |
means all work which is carried out by [QRF] (or on the instructions
of [QRF] and is funded otherwise than by QHCL or from the Annual
Funding. |
|
"QRF Intellectual Property" |
means all intellectual property arising out of or forming part of QRF
Funded Work, excluding QHCL Intellectual Property and Other Intellectual
Property, and all Intellectual Property which arises out of or forms
part of improvements and/or modifications which are made to any QRF
funded Work whether or not the work giving rise to those improvements or
modifications is funded by QRF but provided that it is not funded by
QHCL either from the Annual Funding or otherwise |
|
"Other Funded Work" |
means all work which is carried out by [QRF] subject to clause 9
[which deals with financing by non-profit and profit-making
organisations] (or on the instructions of [QRF]), and is funded by a
person or organisation other than QHCL. |
|
"Other Intellectual Property" |
means Intellectual Property which arises out of or forms part of
Other Funded Work. |
- The definitions are not quite complete. They have to be read with clause
5:
Assignment of QHCL Intellectual Property
5.1 [QRF] agrees that, so far as legally possible, the QHCL intellectual
Property, immediately upon its creation shall vest in QHCL. Any QHCL
Intellectual Property that is not capable of vesting in QHCL upon its creation
shall be assigned to QHCL as soon as possible thereafter.
5.2 [QRF] agrees that all research in the field of preservation of
biologicals undertaken by [QRF] will be carried out on behalf of QHCL whether
or not such research is funded by QHCL, and for such purpose all such research
will be deemed to be QHCL Funded Work and the relevant provisions of this
agreement whall apply to such research, including but without limitation
clause 5.1.
- The Funding Agreement provides QRF with guaranteed funding. The amount of
the funding is determined in accordance with clause 3. While the minimum
payment (provided that QHCL is solvent) is comparatively modest that clause
provides for a payment to QRF of a prescribed percentage of QHCL’s Net
Revenues, a payment which is not to exceed £1m.
- The close connection between QRF and QHCL pervades the whole agreement.
The provisions of clause 21 are of central importance. They are as follows:
Nature of the relationship
21.1 The Scientific Director of QHCL shall be the Director of [QRF].
21.2 Two members of the Board of Directors of QHCL one of whom shall be the
Scientific Director of [QRF] and the other a Director appointed by the
Investment Consortium led by Prelude shall also be members of the Board of
Directors of [QRF].
21.3 Notwithstanding the provisions of Clauses 22.2 and 22.3 [these clauses
do not exist] nothing in this agreement shall constitute or be deemed to
constitute a partnership between the parties or constitute [QRF] as agent for
QHCL or QHCL as agent for [QRF] for any purpose and neither [QRF] nor QHCL
shall have any right or authority to and shall not do any act, enter into any
contract, make any representation, give any warranty, incur any liability or
assume any obligation, whether express or implied, of any kind on behalf of
the other or binding to the other in any way.
When the Funding Agreement was signed, the articles of QHCL did not provide
for the office of "Scientific Director". It is clear, however, from the
extracts from Dr Roser’s contract of employment which I have quoted above that
he certainly was described in this way. It was not suggested that these words
were apt only to refer to Dr Roser, and it seems to me that they must refer to
the person for the time being so described by QHCL.
- The agreement has an indefinite term subject to termination in accordance
with clause 16. I am only concerned with the provisions relating to
termination for breach, which are to be found in clause 16.1(b). The clause
provides for immediate termination upon notice by either party to the other if
the other
commits any breach of any of the terms of this agreement and fails to
remedy that breach (or insofar as the breach is not capable of remedy fails to
furnish adequate compensation for the breach) within sixty (60) days after
notice from the first party requiring it to do so.
Events down to the termination of the Funding Agreement
- I must now deal with the events down to the termination of the Funding
Agreement in more detail. It is clear that whatever its scientific strengths
may have been, QHCL was unsuccessful commercially from the date of the
agreements. Dr Roser says that Prelude, the investor referred to in clause 21,
dismissed the first chief executive officer after only three months. It
appears that an attempt was made to sell dried reagents for use in genetic
engineering which was unsuccessful, and that during this time the search for a
new chief executive officer was unsuccessful. The dried reagents would have
made use of Dr Roser’s invention. Until the events which gave rise to the
present dispute, QRF was more or less inactive, in the sense that little
scientific work was being performed on its behalf. It had at most three
employees, Dr Colaço, Dr Tunnacliffe and Dr Roser. Its financial history is
strange. By 31 December 1995, QRF was plainly insolvent on a balance sheet
basis, its current liabilities exceeded its total assets by some £56,000. It
seems that QRF was kept afloat by QHCL. At the same time, substantial payments
were made in respect of directors’ emoluments (including pension
contributions). In draft statements prepared for the year ended 31 December
1996, very substantial director’s fees and pension contributions are shown,
but Dr Roser denied being the recipient of any of these payments. The amount
of these payments confortably exceed the Annual Payments made by QHCL to QRF
under the Funding Agreement, and they must accordingly have represented a
substantial subsidy to Dr Roser (or whoever received the sums) from QHCL.
- It was regrettable, but to be expected, that when they came to give their
evidence, Dr Roser and Mr Ross could not agree on the cause for their final
falling-out. Mr Ross was plainly generally worried that if QHCL was to be
offered to the public the existence of the Funding Agreement, which was signed
by Dr Roser on behalf of QHCL and by Dr Roser on behalf of QRF was
unsatisfactory and needed to be replaced. Dr Roser had become convinced that
Mr Ross wished to rid QHCL of Dr Roser. It is not necessary that I should
decide between their respective contentions. It is not disputed that there was
a meeting between the Mr Richard Lyman, one of the co-chairmen of QHCL and Dr
Roser at which the suggestion was made that Dr Roser would leave QHCL. The
upshot is that Dr Roser announced his departure at the barbecue for Mr Maki’s
departure from QHCL on 24 June 1996.
- On 25 June there was a meeting of the Board of QHCL. There is a minute of
that meeting. It says that Dr Roser informed the board of his position. Dr
Roser says that he was not allowed to do so. He says that he asked for
permission to inform the board of his position, and that the members present
said that he could not. The minute records that Dr Roser remained a director
of QHCL and that he remained a member of the executive committee. He says that
he cannot remember that happening. The secretary present at the meeting was a
solicitor and a partner in QHCL’s solicitors, and there is no reason to
suppose the minute is inaccurate. Mr Ross was authorised by the Board to
negotiate with Dr Roser and to return to the board with a proposal. Dr Roser
knew that he remained a director of QHCL.
- Thereafter, I am satisfied on the evidence that Dr Roser really did all he
could to maximise the value to QHCL of breaking all connection with him. Some
of his actions were petty. Thus on 19 August he was asked to sign off the
half-yearly accounts. He refused to do so. His reasons are set out in a
memorandum of 20 August 1996:
…I feel I cannot sign these accounts as a true and accurate representation
of the financial position of the company.
The accounts make no reference to an ongoing, permanent and increasing
liability on the company, namely the 18 January 1991 Agreement between
Quadrant Research Foundation (QRF) and Quadrant Holdings Cambridge Limited. As
you know this Agreement provides for substantial annual payments to be made to
QRF out of net revenues. As the future net revenues of Quadrant Healthcare plc
are predicted to rise substantially I belive that we have an obligation to
draw the contingent increase in payments to QRF to the attention of our
Quadrant Healthcare plc shareholders in these accounts.
On 29 August 1996 Dr Roser was dismissed with effect from 30 August. He
repeated his comments on the Funding Agreement at QHCL’s AGM on 12 September
1996, at which he also pointed out that the circumstances of the cohabitation
of QRF and QHCL made research activity impossible, a subject to which I shall
return. Later, he wrote to Mr Cazalet of Cazenoves, who was handling the
flotation of Quadrant stating his claim and seeking to induce Mr Cazalet to
advise QHCL, as Dr Roser put it, to buy QRF off. Equally, in circumstances to
which I shall have to revert he refused on spurious grounds to complete
assignments of patent applications and to sign declarations of inventorship.
Dr Roser considered that he was entitled, if not to a golden parachute, at
least to a pewter one. He was quite frank about this. He was concerned to
maximise the nuisance value of QRF and of the Funding Agreement.
- It was a term of the Funding Agreement (clause 7.3) that QRF should
procure that its Scientific Director should provide QHCL with a written report
on the work of QRF twice yearly, and a monthly report to the QHCL management
committee of the existence of any technical or other know-how in his opinion
of commercial value. In October 1996, Dr Roser appears to have started to send
"nil returns". An example is that sent on 7 November 1996, which merely states
that "In my opinion the technical and other Know-how which is of commercial
value or potentially licensable developed by Quadrant Research Foundation in
the month of October 1996 was:- Nil". The 6-month report covering the period
July – December 1996 was provided in December 1996. This paper describes work
done under a number of headings: The Olfactory Recognition of Genetic
Individuality; Molecular Genetics Research; Maillard Reaction and Disease;
Stabilised Dry Agarose Dressings and "Gedanken experiments". Work was only
reported under three of these headings. Under two of them, the supporting
papers had plainly been written before the 6 month period to which the report
related. The Stabilised Dry Agarose Dressings work was done between November
and December, is not recorded in any notebook and appears to be very
insubstantial. It seems to me to be quite clear that no work of any kind was
done between July and December by Dr Roser involving trehalose technology on
behalf of QHCL. Paragraphs 65 and 66 of Dr Roser’s witness statement are
misleading in this respect.
- While I accept that it was difficult for Dr Roser to do useful work at
QRF, it is clear from the history of the STASIS applications, which I consider
below, that work at QRF was possible. Its other employees, Dr Colaço and Dr
Tunnacliffe, had been seconded to work with QHCL and were doing little work on
behalf of QRF. Dr Roser was, I suspect, mainly engaged in his dispute with
QHCL, which was conducted on a day-to-day basis with Mr Uppal. Both men
behaved childishly on occasion, although I am left with the impression that Mr
Uppal was gravely provoked by Dr Roser. Letters such as that of 10 September
1996 from Mr Uppal to Dr Roser, dealing with a large number of administrative
issues arising out of what appeared to be Dr Roser’s declared intention to
keep QRF at Maris Lane, do not seem to me to have their origin in a desire to
drive Dr Roser out, which Dr Roser contends was Mr Uppal’s intention.
- When Dr Roser was dismissed, he increased his salary from QRF to £90,000,
which had been his QHCL salary. On 2 October he wrote to a Mr Silby in the
United States a letter which stated that he was now working full time with
QRF. This suggests that Dr Roser considered that he was employed by QRF on a
full-time basis, and no longer on the 25% of time basis which had prevailed
during his years with QHCL. I should observe that his letter contains the
assertion that because of his wrongful dismissal Dr Roser was not bound by any
restrictive covenants in his contract of employment (which was no doubt
correct) and that in consequence QRF was free to exploit the trehalose
technology in all countries where QHCL had no patent cover. This claim was
refined until it reached the form set out in a document called the ‘Legal
Position’ paper, in which the contention that QRF enjoys a perpetual royalty
free licence in respect of all QHCL’s rights is advanced, essentially on the
basis of a particular construction of the Funding Agreement. This claim was
abandoned by the Defendants one month before trial, but I am certain that the
thinking set out in the legal position paper informed a number of Dr Roser’s
acts and is in part responsible for this action.
- While the dispute with QHCL was proceeding, Dr Roser started to take other
steps, which I think were intended to protect his position. He had started to
represent to others that all connection between QHCL and QRF had come to an
end as early as 12 August 1996. In a letter to a consultant on technology
transfer, Ms Firlej, of that date, he says that QRF was "formerly associated
by a contract with" QHCL. At this stage, of course, there was no end to the
Funding Agreement in sight. Ms Firlej’s advice was being sought in relation to
a project which Dr Roser had to produce dry, stable diagnostic kits in China.
In this project, he proposed to collaborate with a Danish manufacturer of
diagnostic kits called Eldoncard. A proposal for funding a joint venture was
completed and submitted to the Commission of the EU in September 1996. It was
clear that this proposal would certainly have involved the use of the
trehalose technology had it been pursued, and I shall deal with this when I
consider threatened infringement of the patent below. QHCL became aware of the
letter to Ms Firlej and the communications with Eldoncard when they looked at
the contents of the computer which had been Dr Roser’s on 6 November 1996.
- After June 1996 Dr Roser also took steps to set up the third and fourth
defendants, to which I shall refer as ARF and Eastbridge. ARF is another
research foundation and Eastbridge another company intended to exploit the
results of ARF’s research. The relationship is similar to that which Dr Roser
wished to exist between QHCL and QRF. Dr Roser’s evidence is that his
contracts with QHCL and QRF had required him to work 25% of his time for QRF
and 75% of his time for QHCL, and from his dismissal in August 1996 he says
that he had 75% of his time free. I cannot accept this. There was undoubtedly
an arrangement between Dr Roser, QHCL and QRF relating to the allocation of
his time, but when his employment with QHCL came to an end he must, in my
judgment, have been obliged to work for QRF, of which he was a director, until
some further arrangement was made with some other employer with the consent of
QRF. The fact that Dr Roser increased his salary at QRF to the same sum as
that which he had received with QHCL is consistent with this view.
- So far as the other principal worker, Dr Tunnacliffe is concerned, his
evidence is that he was employed by QRF as a molecular biologist in May 1994.
His projects were aimed at producing dried but viable cells, initially
mammalian but subsequently bacterial. This was referred to as the Cell
Stabilisation Programme. He was seconded to QHCL in January 1996 for 90% of
his time, and the Cell Stabilisation Programme appears to have been carried
out on behalf of QHCL. My reason for saying this is that the work was
concerned with the preservation of biologicals and is therefore caught by
clause 5.2 of the Funding Agreement. He says, and this evidence is
unchallenged, that his working environment changed dramatically when the
dispute between QRF and QHCL arose, and that his work on the Cell
Stabilisation programme came to an end in November 1996 after his dismissal
from it by Mr Ross. Thereafter he conducted work on the molecular genetics of
chromosome abnormalities. It is not clear to me how much work Dr Tunnacliffe
did actively on this subject, but he exhibits a considerable number of e-mails
and other communications with his collaborators, whom it seems he did not
meet. I do not know who actually drafted the paper Most Jacobsen Syndrome
Deletion Breakpoints Occur Distal to FRA11B to which he refers, and this
was not pursued in cross-examination. He also worked with Dr Roser in setting
up QRF as an entity independent of QHCL.
- Dr Tunnacliffe was also responsible for grant applications. He is
responsible for the application to the EU Commission for funding for the
proposed venture with Eldoncard, the Danish company. He wrote the proposal
before 12 September 1996. There were two parts to the venture: funding from
the EC (the so-called INCO-DC application) and an R&D agreement with
Eldoncard. Eldoncard’s draft of this agreement was between QHCL and Eldoncard.
Dr Tunnacliffe’s revised draft is between Eldoncard and ARF. I have no doubt
that the change was made at the instance of Dr Roser. There would have been no
objection to this had QHCL been kept in the picture as to what was happening,
but they were not. The draft mentions ARF which had not at that date (and not
for two months afterwards) been incorporated. It recognises that ARF is free
to exploit the technologies covered by the patent in suit in countries where
patents are not granted or pending and implicitly accepts that it is not so
free elsewhere. It recites, necessarily untruthfully, that "ARF has
demonstrated the efficacy of its technology by stabilising a number of
biological structures including antibodies and enzymes." I think that any
reader of the later draft of this agreement would have been alerted to the
fact that ARF were unlicensed by QHCL. This was obviously a matter of concern
to Eldoncard, who were, as Dr Tunnacliffe put it, confused. Dr Tunnacliffe was
quite clear that ARF was substituted for QRF in the proposal so that any
intellectual property arising out of the research and development should
belong to ARF so as to avoid the effects of the Funding Agreement.
- It is not clear what Dr Roser did between June 1996 and January 1997.
Undoubtedly his dispute which QHCL took up a large amount of his time. He
seems to have spent the rest on "Gedanken Experiments" until January 1997,
when he started work which culminated in the ARF patent application. Certainly
the work proceeded quickly since he reported in a fax of 28 January 1997 on
QRF headed paper to one John Lloyd at the World Health Organisation that he
had "a new patent in preparation on powder delivery via a liquid jet
injector".
- Ms Sen appears to have done little but seek other employment and do some
experimental work which she describes for Dr Roser. I consider the nature of
this work when I consider her contribution to the STASIS applications.
Events after funding came to an end
- On 18 March 1997 a patent application was filed in the United Kingdom
Patent Office for an invention entitled ‘Stable particle in liquid
formulations’. The application was filed in the name of ARF. A second
application under the Patent Co-operation Treaty was filed on the 18 March
1998, this time in the name of Eastbridge (and of Dr Roser for the purpose of
the United States) claiming priority from the UK application. The two patent
applications filed after the Funding Agreement was brought to an end have been
referred to as the STASIS applications, and to avoid confusion with the patent
in suit I shall refer to them in the same way.
- The plaintiffs say that the subject matter of the STASIS applications is
the formulation of fine particles consisting of a biomolecular product in a
sugar glass (preferably made from trehalose) within non-aqueous liquids such
as sesame oil, using a surfactant to prevent the particles clumping together.
They also say that the practical application of the subject matter of the
invention is to produce a stable liquid containing a biomolecule, for example
a vaccine, which would be capable of storage for long periods, would not need
to be rehydrated and which could be directly injected into a patient. They
also contend that this development was not made in the period between the end
of the funding agreement and the filing of the UK application. They say that
it was made by employees of QRF including Dr Roser and that but for the
Funding Agreement it would belong to QRF. They say further that it is
concerned with the preservation of biologicals and falls within clause 5 of
the Funding Agreement; and that it accordingly belongs to QHCL. Finally, they
say that it is merely an invention which had previously been made by Dr Jakob
Kampinga who is the R&D director of QHCL.
- Dr Roser and Dr Sen say that all the work which resulted in the first
STASIS application was done by them beginning after Christmas 1996. They say
that they did the work not on behalf of QRF but on behalf of ARF. Dr Roser was
very conscious that if the work was done in QRF time it would belong to QHCL
under the provisions of the Funding Agreement, but he considered that he got
over the problem of his contract of employment with QRF by saying that it
obliged him to work only 25% of his time for QRF, and he did the work in his
ARF time, noting the results in his ARF notebook. He accepted, however, that
in doing the work he used QRF equipment, and QRF consumables on QRF premises,
and he was a director of QRF from which he was drawing his only income and
whose business consisted in the conduct of research into matters such as those
the subject of the patent . I shall consider this question when I consider the
ownership of the inventions.
- An application was made by Eastbridge under the SMART scheme for a grant
to pursue the STASIS invention, and the proposed work is described in a
document entitled "Stable Liquid Forms of Drugs and Vaccines — A Feasibility
Study" submitted to the DTI for an award under the SMART scheme. The grant
application was explained by Dr Tunnacliffe. He explained that there were two
SMART projects, which he called SMART 1 and SMART 2, and that the SMART 1
project is the one that is the subject of feasibility study. Both projects
were research based, and SMART 2, the later project, which is described in a
document entitled "Development of Stable liquid vaccines" was submitted in May
1998. The SMART 2 project is concerned only with freeze drying of vaccines,
and I shall consider the significance of this fact when I come to consider
infringement.
The issues
- The issues which now arise are these:
A. Was the Funding Agreement lawfully terminated by QHCL pursuant to clause
16.1(b) by reason of the failure to appoint Dr Donald Hetzel as director
QRF?
B. Alternatively, was the Funding Agreement lawfully terminated by QHCL’s
acceptance by its letter of 13 February 1997 of the repudiation of the Funding
Agreement by QRF?
C. Alternatively, did QHCL unlawfully repudiate the Funding Agreement, and,
if so, what damage?
D. Construction of the patent in suit, 2,187,191.
E. Should the patentee have leave to amend the patent?
F. Validity of the patent in suit, as proposed to be amended.
G. Have the defendants either infringed the patent or threatened to
infringe it?
H. Is QHCL entitled to the invention the subject of UK application
9705588.3 and/or the invention the subject of the PCT application either
because the invention was obtained from QHCL or because QHCL is entitled to it
by virtue of the provisions of the Funding Agreement?
I. Trademark infringement.
A. —TERMINATION OF THE FUNDING AGREEMENT
On 18, 19, and 21 November 1996 QHCL gave
QRF some eight notices relating to alleged breaches of the Funding Agreement,
requiring remedy under clause 16.1(b). On 22 November 1996, QRF riposted,
giving three notices by a single letter alleging breaches of the Funding
Agreement by QHCL and requiring remedy under the same provision. It seems
clear that these notices were sent after the discovery on 7 November of the
documents on Dr Roser’s computer to which I have already referred. On 25
November 1996 QHCL appointed Dr Hetzel as Scientific Director with a view to
invoking clause 21.1 of the Funding Agreement. Dr Hetzel had been a member of
the board of Becton Dickinson, the American corporation which had been an
early and substantial investor in QHCL. He had been the man with whom Dr Roser
had negotiated an investment in QHCL of $1m in 1988. Dr Roser could point to
nothing against him. The letter requiring appointment was sent by Bristows to
Lovell White Durrant, then acting for QRF and was as follows.
On 25th November 1996, Dr Don Hetzel was appointed the Scientific Director
of QHCL. To avoid the need for any requests for proof of this (notwithstanding
that there is no entitlement to such proof) we enclose a copy of the Form 288
filed in relation to such appointment. Please ask QRF to appoint Dr Hetzel as
the Director of QRF, pursuant to clause 21.1 of the Agreement and as the
Scientific Director of QRF pursuant to clause 21.2 of the Agreement. Kindly
confirm by 4pm on 10th December that the appointment will be made without
delay. We will let you have a Form 288 shortly.
Lovell White Durrant refused to make the appointment in the following
terms:
12. In relation to Dr Hetzel you ask three things. Firstly, that he be
appointed the Director of QRF; secondly that he be appointed as the Scientific
Director of QRF; and thirdly that he be appointed to the Board of QRF. We
comment as follows:
12.1 Dr Roser is the Director of QRF. As such clause 21.1 entitles him to
be appointed the Scientific Director of QHCL. Please request your client to
carry out this appointment forthwith. It follows that our client does not
intend to appoint Dr Hetzel as the Director of QHCL.
12.2 We fail to see how clause 21.1 entitles Dr Hetzel to be appointed as
the Scientific Director of QRF whilst also entitling Raj Uppal to be appointed
to the board of QRF. The construction upon which we assume you rely in support
of your request would require that the words "shall be" as they appear in the
first line of clause 21.2 be interpreted in one way when applied to "…the
Scientific Director of the Foundation…" and in a wholly different manner which
applied to "a Director appointed by the Investment Consortium…".
By requesting that Mr Uppal be appointed to the board of QRF you have taken
a view on the meaning of the words "shall be" as they appear in the first line
of clause 21.2. This meaning is inconsistent with that required to allow Dr
Hetzel to be appointed Scientific Director of QRF.
Our client does not intend to appoint Dr Hetzel as the Scientific Director
of QRF.
12.3 We see nowhere in clauses 21.1 and 21.2 any provision entitling Dr
Hetzel to be appointed to the board of QRF. Our client does not propose to
make such an appointment.
QHCL must show that there is a breach of clause 21 which gave it a right to
serve its notice under clause 16.
- The first question is the nature of the obligation under clause 21. It
seems to me that the first question is the meaning of the terms "Scientific
Director of QHCL", "Director of the Foundation" and "Scientific Director of
the Foundation". These are not terms defined by the Funding Agreement itself.
It is not suggested that the Articles of either of the companies create such a
post. There are a number of shareholders’ agreements concerning QHCL but in
none of these is the term defined. It is clear, however, that the Dr Roser
considered himself to be the Scientific Director of QHCL, and this is one
aspect of the post to which he was appointed by his contract of employment
with QHCL to which I have referred in paragraph 15 above. So, as of the date
of the Funding Agreement, there was a post known as the Scientific Director of
QHCL and it was occupied by Dr Roser. Equally it is clear that there was a
post known as the Scientific Director of the Foundation, since that is the
person who was to give Dr Roser consent to undertake work for third parties,
as Dr Roser’s contract of employment with QRF makes clear (see again paragraph
15 above).
- The next question is the meaning of the words "Director of the
Foundation". In Mannai v Eagle Star [1997] AC 749, Lord Hoffmann said:
It is of course true that the law is not concerned with the speaker's
subjective intentions. But the notion that the law's concern is therefore with
the "meaning of his words" conceals an important ambiguity. The ambiguity lies
in a failure to distinguish between the meanings of words and the question of
what would be understood as the meaning of a person who uses words. The
meaning of words, as they would appear in a dictionary, and the effect of
their syntactical arrangement, as it would appear in a grammar, is part of the
material which we use to understand a speaker's utterance. But it is only a
part; another part is our knowledge of the background against which the
utterance was made. It is that background which enables us, not only to choose
the intended meaning when a word has more than one dictionary meaning but
also, in the ways I have explained, to understand a speaker's meaning, often
without ambiguity, when he has used the wrong words.
When, therefore, lawyers say that they are concerned, not with subjective
meaning but with the meaning of the language which the speaker has used, what
they mean is that they are concerned with what he would objectively have been
understood to mean. This involves examining not only the words and the grammar
but the background as well. So, for example, in Doe d. Cox v. Roe, 4 Esp. 185
the landlord of a public house in Limehouse gave notice to quit "the premises
which you hold of me . . . commonly called . . . The Waterman's Arms." The
evidence showed that the tenant held no premises called The Waterman's Arms;
indeed, there were no such premises in the parish of Limehouse. But the tenant
did hold premises of the landlord called The Bricklayer's Arms. By reference
to the background, the notice was construed as referring to The Bricklayer's
Arms. The meaning was objectively clear to a reasonable recipient, even though
the landlord had used the wrong name.
In ISC v West Bromwich BS [1998] 1 All ER 98 Lord Hoffmann described
the process of construction as being the ascertainment of the meaning which
the document would convey to a reasonable person having all the background
knowledge which would reasonably have been available to the parties in the
situation in which they were at the time of the contract.
- There can be no doubt that the parties were aware at the time of this
contract that the purpose of the agreement was to provide QRF with a
guaranteed source of income to finance research, and to ensure that the
results of all research concerning trehalose technology and any other research
financed by QHCL should be for the benefit of QHCL. Clause 21.2 states in
effect that the Scientific Director of QHCL and another director of QHCL
appointed by the investors are to be members of the board of QRF. This
necessarily entails that the Scientific Director of QRF should be a member of
the board of directors of QRF. The parties sought to ensure that QHCL was in a
position to exercise a degree of control over the scientific activities of QRF
by appointing the Scientific Director of QRF and at the same time taking steps
to represent the interests of the investors in QHCL. In my judgment,
therefore, the reference to "the Director of the Foundation" is a
reference to the post of Scientific Director of the Foundation.
- When the Funding Agreement was entered into, Dr Roser was both the
Scientific Director of QHCL and the Scientific Director of QRF. The purpose of
the clause is to ensure that this arrangement continues, and there is little
point unless the clause refers to the person who is Scientific Director of
QHCL for the time being. Mr Hollander submitted on behalf of QRF that the
clause either contemplates a joint appointment by QHCL and QRF to both posts,
or that in some way the Scientific Director of QHCL automatically becomes the
Scientific Director of QRF. This construction overlooks the fact that both
positions existed independently of the Funding Agreement.
- The real question is whether and to what extent clause 21 can impose any
obligation on QRF. So far as membership of the board of directors is
concerned, I do not see that QRF can be placed under any enforceable
obligation, since the company does not appear to have any power to appoint
directors otherwise than by resolution of the members or by the other
directors, in the usual way. But appointment to the position of Scientific
Director is a different matter. This is an obligation which the company can
assume. The parties seem to have seen the question under a different light. On
12 November 1996, Prelude Technology Investment Limited appointed Mr Uppal as
their nominee to the Board of Directors of QHCL. On 12 November 1996, Bristows
wrote to Lovell White Durrant asking that QRF appoint Mr Uppal to its Board of
Directors, in compliance with clause 21.2. QRF accepted this obligation and
appointed Mr Uppal a non-executive director, notifying him of his appointment
on 25 November 1996. Earlier, Lovell White Durrant had requested QHCL to
appoint Dr Roser a member of the Board, also in purported compliance with
clause 21.2. The letter which I have quoted in paragraph 40 above refusing to
appoint Dr Hetzel to any position makes the same assumption. Both parties
addressed me on the basis that an obligation placed on QRF alone to appoint a
particular individual to the board of directors was capable in principle of
imposing an enforceable obligation on QRF, although of course the QRF
contended that the Funding Agreement had not done so. Because of the view
which I take of the notice given, it is not necessary for me to decide this
point, but I think that since the parties have throughout proceeded on the
footing that such an obligation was capable of subsisting and being complied
with, that is the background against which the notice requiring remedy should
be construed.
- Mr Hollander submitted that the Notice under clause 16.1(b) must give
clear directions to remedy the breach which is relied on. I think that it is
perhaps better to say that the Notice must identify the breach relied on with
sufficient clarity to enable it to be remedied. The notice, albeit a
unilateral communication, is to be construed in accordance with ordinary
principles, as stated in Mannai (supra) and ISC v West Bromwich
BS (supra). The notice was sent by Bristows direct to QRF, in the
following terms:
By our letter of 9th December to your solicitors, we requested them to ask
you to appoint Dr Don Hetzel inter alia as the Director of QRF pursuant to
clause 21.1 of the Agreement. By your solicitor’s letter of 10th December
1996, they informed us that you do not intend to appoint Dr Hetzel to the
Board of QRF. This constitutes a refusal to comply with and is therefore a
breach of clause 21.1 of the Agreement.
On behalf of QHCL we hereby give you notice pursuant to clause 16.1(b) of
the Agreement requiring you to remedy the abovementioned breach within the
time specified in clause 16.1(b) of the Agreement.
In my judgment this is a notice concerning a breach alleged to consist in
the non-appointment of Dr Hetzel to the post specified in clause 21.1 of the
agreement. If Dr Hetzel had been so appointed, I have no doubt that the
plaintiffs would have been satisfied. Under cross-examination Dr Roser said
this (page 441):
Q. What did you think had to be done if you were to comply with
the
notice or did you not give that any thought?
A. What we had done with Raj,
appoint him to the board. I did
not think he needed to be appointed as the
director of QRF. I
thought that was automatic. If we had to do anything, if
we
had to comply with that notice, which I do not believe we did,
then
we would have had to have had a board meeting as we had
done with
Raj.
Q. It would be fair to summarize the position like this. When
you
receive the notice you realize that something would have
to be done if you
were to comply with it and you deliberately
decided not to do
anything.
A. Yes.
There is no doubt, therefore, that Dr Roser declined to comply with the
notice.
- The notice of termination was given by letter of 13 February 1997. This
letter merely states that notice had been given pursuant to clause 16.1(b) of
the Agreement that QRF’s failure to appoint Dr Hetzel as a director of QRF was
a breach of clause 21.1 of the Agreement, required QRF to remedy that breach
within 60 days, states that the breach has not been remedied and determines
the Funding Agreement. The 60 day period had expired on 10th February 1997.
After receipt of the letter of 13 February 1996 QRF took steps to remedy the
breach, and appointed Dr Hetzel as "a/the Director" of QRF. In my judgment,
this attempt to comply with the notice to remedy was ineffective, the contract
having been terminated by the giving of the notice to terminate in accordance
with the first clause 21 of the Funding Agreement.
B. — Repudiation of the Funding Agreement by QRF
- QHCL allege that QRF treated the Funding Agreement as at an end well
before Dr Roser’s dismissal from QHCL in August. Dr Roser accepted that he
treated the Agreement as at an end in his dealings with third parties such as
Ms Firlej, Mr Silby (a letter which he described as a bit premature) and
Eldoncard. QHCL were aware of the communications with Ms Firlej and Eldoncard
as early as 7 November 1996, and I believe that their subsequent notices
requiring appointment of Dr Hetzel and to remedy the breach constituted by the
non-appointment of Dr Hetzel are not consistent with their having accepted Dr
Roser’s dealings with Ms Firlej and Eldoncard as amounting to repudiatory
conduct. It is true that the letter to Mr Silby was unknown to QHCL, but on
its own I do not think it can be considered to be repudiatory conduct on the
part of QRF.
- QHCL also submitted that acts committed by QRF of which it was unaware at
the time the notice of 13 February 1997 were repudiatory breaches which it can
now rely on to justify termination as of that date. Mr Seymour QC bases
himself on the dictum of Lord Sumner in British & Benningtons Limited v
North Western Cachar Tea Company Limited [1923] AC 48 at 71-72, summarised
in the following terms by Mocatta J in Scandinavian Trading Co A/B v Zodiac
Petroleum SA [1981] 1 Lloyd’s Rep 81 at 90:
… if a party refused to perform a contract on the basis that the other
party had repudiated it, in not doing this or doing that, and that allegation
was ill-founded but that there was in fact, unknown to the first mentioned
party, a good ground for saying that the other party had repudiated the
contract by his conduct, there was no reason in law why the first mentioned
party, if sued, should not defend himself by saying:
What I told you at the
time in self-justification was ill-founded, but I am going to justify my
conduct … by treating you as having repudiated the contract on another ground
which I now proceed to prove.
This principle has been articulated in a number of cases. It is subject to
the qualification that if the conduct subsequently relied on could have been
put right at the date of the refusal to perform, the principle will not apply:
see Glencore Grain Rotterdam BV v Lebanese Organization for International
Commerce [1997] 4 All ER 514.
- In the end, QHCL relied upon the work which Dr Roser says was done on
behalf of ARF and resulted in the STASIS patent applications. Mr Seymour QC
for QHCL says that Dr Roser was the controlling intelligence of QRF and that
he took steps designed to ensure that QRF did not own the results of the work.
This, says Mr Seymour is a plain repudiation of the Funding Agreement. I think
that this is right. Dr Roser was operating QRF so that QHCL was deprived of
the Intellectual Property arising from the Eldoncard proposal, and he was
failing to ensure that QHCL benefited from the work on the STASIS application,
which was undoubtedly concerned with the preservation of biologicals and was
accordingly within clause 5.2 of the Funding Agreement. In effect, the monthly
and 6-monthly reports were misleading and did not comply with clause 7.1 of
the Funding Agreement, which relates to all work carried out by QRF.
C — Repudiation by QHCL and damages
- It follows from my findings in relation to termination and repudiation of
the Funding Agreement that this issue does not arise.
D — Construction of the patent in suit
- In the discussion which follows, I have indicated those words which have a
definition in the Annex to this judgment by marking them with a superscript
GL.
- The patent in suit is concerned with an invention entitled "Protection of
Proteins and the like". This is the invention which was made by Dr Roser
during his time at Babraham. Biological molecules in general derive their
efficacy from the shape of these molecules which are generally hydrated. The
invention is concerned in particular with the preservation of the shape of the
structure of complex biological molecules when the molecules are dehydrated.
On dehydration they lose their shape and on rehydration do not regain it. So
they lose their activity.
- At the priority date the only commonly known way of preserving biological
molecules was the process known as freeze-dryingGL, or
lyophilisation. This process is described by Professor Mackenzie, who gave
helpful and objective evidence on behalf of QHCL as involving three distinct
steps, viz. (i) the conversion of water in the solution of
macromoleculesGL into ice (ii) the sublimationGL of that
ice under vacuum and (iii) the evaporation of part or all of any water not
converted to ice during freezing. Freeze-drying is successful in preserving
the activity of certain biological molecules, but ineffective with others.
Professor Perham, the professor of Structural Biochemistry at Cambridge, was
not challenged when he said that freeze-drying does not result in all
freeze-dried proteinsGL retaining their activity, and that at the
priority date it was a question of trial and error.
- The patent in suit is clearly addressed to a reader who is interested in
the preservation of the activity of biological macromoleculesGL
after drying. As the patent itself makes clear, the potential field of
application of the invention is very wide. The addressee of this specification
will nonetheless have to possess sufficient skills to be able to perform the
examples and carry them into effect. Professor Perham identified such a person
as being of Ph D level, having a background in biochemistry or in biology or
physical chemistry applied to biology. If Professor Perham’ had to place a
small ad for the addressee it would include the words "experience in
freeze-drying an advantage". He was not challenged in this assessment and I
consider it to be correct.
- The patent acknowledges (page 2) that trehalose has previously been
associated with cell protection. It seeks (page 3) to distinguish its known
effect on living cells with that of macromoleculesGL in the
following passage:
While there is no consensus view as to how trehalose exerts its protective
effects on cells, one hypothesis is that it substitutes for the bound water on
membrane components of the living organism and prevents denaturation due to a
loss of bound (structural) water. We have now found that the effect is
exhibited not only in living cells, but surprisingly also in macromolecules
themselves in a purified, isolated state.
The specification then goes on to acknowledge a number of publications
which disclose the use of trehalose for stabilising delicate materials
(including macromoleculesGL) in the context of
freeze-dryingGL.
- A further discovery is described in the specification at page 5. There, it
is said that it has not previously been realised that trehalose can not only
provide total protection during drying at ambient temperatures as high as 37°
or 40°C, but also permits intramolecular electronic processes such as
fluorescence and photoconductivity to occur in the dry state. The claim is
plainly based on this discovery, and the proposed amendment limits it further
to the drying of purified isolated compounds with a minimum ratio of
trehalose:macromolecular compound (the proposed amendments are in italics):
A method of drying a macromolecularGL compound which is subject
to deactivation on drying at temperatures above freezing, or a mixture of such
compounds, the compound or compounds being in a purified, isolated state,
comprising subjecting an aqueous system containing the
macromolecularGL compound or mixture to drying at a temperature
above freezing point in the presence of sugar, characterised in that the sugar
is trehalose and in that the ratio of trehalose to macromolecular compound
is at least 1.4:1 by weight.
The specification provides from page 6 an extensive set of examples of
applications of the invention, including preservation of fixed whole red blood
cells, agaroseGL gel, fluorescent proteins, antibodies (both
monoclonal and serumGL), whole serumGL, and so on.
- The claim before amendment gives rise to no difficulties of construction.
In its context, the word "macromolecular" is apt to refer to the
macromolecules which, with associated molecules and macromolecules, constitute
"supramolecular structures" which are identifiable biological entities. An
example is the cell membrane and its associated proteins. The specification
itself refers to preservation of fixed whole red blood cells by use of the
invention (page 9). Claim 1 is a method claim, and it follows that as proposed
to be amended, the words "purified, isolated state" reduce the scope of the
claim to structures removed from the environment in which the structure is
found in nature. The sense of "purified, isolated state" seem to me to refer
merely to macromolecules which have been sufficiently isolated that they are
no longer part of an identifiable structure found in nature. It is to be
observed that the claim contemplates that a mixture of macromolecules may be
in a purified, isolated state.
E.— Amendment of the patent in suit
- Although a case against amendment was pleaded, it was not persisted in at
the hearing, the defendants sensibly recognising that the amendments were
plainly supported by the disclosure of the specification prior to amendment
(the numerical limitation comes from claim 3) and that there were no reasons
why the discretion to amend should not be exercised in the patentee’s favour.
They point out that claim 2 also contains a limitation on the quantity of
trehalose (0.05% to 20% by weight of trehalose) and the result of the
introduction of the weight ratio from claim 3 into claim 1 is that a
previously undisclosed limitation of the amount of macromolecule is
introduced into the dependent claims. This is correct, and claim 2 must be
deleted. Subject to this condition, the motion for leave to amend the
specification succeeds.
F.— Validity of the patent in suit
- Whilst QHCL do not accept that the patent would be invalid if not amended,
Mr Carr QC only addressed me on it validity as proposed to be amended. I shall
accordingly consider the claim only in its amended form. Only one document is
relied on in addition to the common general knowledge to support the
allegation of invalidity. This is the paper referred to as Tokai, which is a
Japanese-language publication published in Bull Tokai Reg Fish Res Lab in
March 1974. The abstract is in English, and it summarises the disclosure as
follows:
Abstract: It was previously reported that acidic amino acids and basic
amino acids as well as salts of hydroxy carbonic acids such as citrate or
malate have shown preventive effects on the protein denaturation in washed
fish muscle by dehydration. This paper deals with the preventive effects of
sugars and sugar-alcohols.
To washed minced muscle of sea bass, Lateolabrax japonicus,
various sugars or sugar-alcohols were added and then the muscle was embedded
in silica gel at 2°C for dehydration. The preventive effects of these
additives on the protein denaturation by dehydration were evaluated by means
of extractability, streaming birefringence and ultracentrifugal sedimentation
of the protein extracts from the dehydrated muscle.
It was found that sugars had preventive effects on the protein denaturation
by dehydration in the following order; trisaccharides> disaccharides>
monosaccharides. Among monosaccharide, pentose, especially xylose had a less
preventive effect. The mixture of monosaccharide constituting disaccharide or
trisaccharide had a less effect than that of the corresponding
oligosaccharide; saccharose> glucose+ fructose; raffinose>
galactose+glucose+fructose. There were no differences between preventive
effects of reducing sugars and those of non-reducing sugars. Sugar-alcohols
had also preventive effects though their effects were weaker than those of the
corresponding sugars. Sugar-alcohols with the larger molecular weight had
stronger effects. No difference was found between the effect of cyclic
sugar-alcohol such as inositol and that of linear sugar-alcohol such as
sorbitol with the same number of OH groups.
The results obtained suggest that not only the concentration but also the
spatial structure, the size of the sugar and sugar-alcohol make important
factors for the preventive effect on the protein denaturation in fish muscle
by dehydration.
- The paper has been aptly described as the fish paste paper. The general
method described is to take some part of the meat of the sea-bass (which part
was a matter of dispute to which I must return), crush the meat in a meat
grinder and wash the resulting paste with six changes of 10-fold amounts of
cold water. "Prescribed amounts" of the substances being tested are then added
to the fish paste in a low temperature room at 5°C. The amounts in question
were again a matter of dispute. The samples were thinly spread and placed
between cellophane sheets which were then embedded in a drying silica gel in a
polyethylene bag and sealed, and then dried in a refrigerator at 2°C. After 2
days, the moisture content reached about 5-6%. Three techniques are referred
to as being used for the purpose of determining whether the protein in the
fish paste had denatured: protein extractability, streaming birefringence of
the extracted protein and ultricentrifugal sedimentation of portions of the
samples.
- Trehalose is mentioned in a number of places in the paper. On page 2 of
the translation it is mentioned in a list of materials added to the fish paste
in the method to which I have referred. It is described (correctly) as a
disaccharide. In the report of the results on page 4 of the translation, the
following is said:
The greatest preventive effect was found with the trisaccharides. However,
some difference in effect was found with different sugars even of the same
molecular weight. For example, although a pentose, xylose had a poorer effect
than arabinose. Also, among the trisaccarhides, saccharose, trehalose and
particularly melibiose exhibited high effects.
Although this passage wrongly identifies trehalose as a trisaccharide (it
is a disaccharide) it points to trehalose as exhibiting a "high effect".
- When the paper comes to present the results in a tabular form, trehalose
is idenfied as having a particular rate of preventive effect in Figure 1, and
it is pointed out on page 11 that there is no obvious difference in the
denaturation-preventing effects of non-reducing disaccharides such as
saccharose and trehalose and reducing disaccharides such as maltose and
fructose.
- The defendants’ case is that Tokai teaches that "on the addition of
trehalose and other sugars, purified and isolated actin and myosin
macromolecules retain the activity of forming actomyosin complexes and myosin
complexes on dehydration above freezing". Further, they say that Tokai makes
it clear that the activity would be lost on drying without suitable sugars.
Thus, they say, anyone mincing fish and carrying out Tokai’s method as
described will fall within the claim, at least if unamended. Before I deal
with this allegation in detail, I should set out the applicable legal
principles. A claim will be anticipated (i.e. cover matter forming part of the
state of the art) if the prior publication contains a clear description of, or
clear instructions to do or make something falling within the claim. In a
passage which still represents the law of anticipation, in General Tire v
Firestone [1972] RPC 457 at page 485 the Court of Appeal put it this way:
When the prior inventor’s publication and the patentee's claim have
respectively been construed by the court in the light of all properly
admissible evidence as to technical matters, the meaning of words and
expressions used in the art and so forth, the question whether the patentee’s
claim is new … falls to be decided as a question of fact. If the prior
inventor’s publication contains a clear description of, or clear instructions
to do or make, something that would infringe the patentee’s claim if carried
out after the grant of the patentee’s patent, the patentee’s claim will have
been shown to lack the necessary novelty, that is to say, it will have been
anticipated. The prior inventor, however, and the patentee may have approached
the same device from different starting points and may for this reason, or it
may be for other reasons, have so described their devices that it cannot be
immediately discerned from a reading of the language which they have
respectively used that they have discovered in truth the same device; but if
carrying out the directions contained in the prior inventor’s publication will
inevitably result in something being made or done which, if the patentee’s
patent were valid, would constitute an infringement of the patentee’s claim,
this circumstance demonstrates that the patentee’s claim has in fact been
anticipated.
If, on the other hand, the prior publication contains a direction which is
capable of being carried out in a manner which would infringe the patentee’s
claim, but would be at least as likely to be carried out in a way which would
not do so, the patentee’s claim will not have been anticipated, although it
may fail on the ground of obviousness. To anticipate the patentee’s claim the
prior publication must contain clear and unmistakable directions to do what
the patentee claims to have invented … A signpost, however clear, upon the
road to the patentee’s invention will not suffice. The prior inventor must be
clearly shown to have planted his flag at the precise destination before the
patentee.
- The first question is what Tokai teaches. I have summarised the teaching
above, and, so far as the method is concerned, I believe that I have omitted
nothing material. Tokai discloses the separation of some part of the fish
muscle from some other part (the hardening or bloody meat is to be used),
grinding it up and washing the result. This the defendants say, will
inevitably result in the disruption of the muscle tissue, and will expose
actin and myosin, the principal muscle proteins. I think that Professor Perham
accepted that the process described in Tokai was a preliminary stage in
purification, and would leave behind what he described as a rather ill-defined
mess of protein which was insoluble in pure water. There would be membrane
fragments. There would be other connective tissue fragments insoluble in pure
water. He did not not regard the macromolecules as being purified or isolated.
It seems to me that although the claim prior to amendment would cover such a
mixture, the amended claim, with its reference to the macromolecules being in
a purified, isolated state, does not.
- Mr Moody-Stuart, who argued this part of the case on behalf of the
defendants with ability, contended that the claim after amendment still
covered the result of grinding and washing disclosed by Tokai. He pointed to
the various complex materials, such as serum, referred to in the
specification. He said that even if the actin and myosin protected from
deactivation by addition of sugar in Tokai are contained in residual
supramolecular fragments of ruptured muscle cells, as a supramolecular
structure they fall within the scope of the invention. I think that this is
wrong, since the claim is in my judgment talking about the mixture to which
the sugar is added when the method is performed. Even if there are present in
the mixture certain isolated fragments of macromolecule, there are many other
materials present as well, and the result is neither purified or isolated.
Professor Perham’s evidence was that purified serum was a familiar commodity,
produced in thousands of laboratories by standard methods. Thus, the mixture
of macromolecules in purified serum could fairly be described as being in a
purified, isolated state.
- Professor Vadgama gave a number of interesting interpretations as to what
was happening as the grinding and washing steps of Tokai were performed. I
approach this evidence with caution, since as he himelf freely acknowledged he
was having to provide what seemed to him to be sensible interpretations of the
paper in order to make sense of its inconsistencies and lacunae. I have come
to the conclusion that there is no description of or instructions to do
anything which would necessary result in a mixture of macromolecular compounds
in a purified isolated state.
- There is no teaching in Tokai as to the amount of sugar to use, let alone
the amount of trehalose to use. Professor Hough says that there is a direction
to use the same amount of sugar in all experiments, but neither the quantity
of ground muscle nor the quantity of sugar is stated. The reference to the
molar concentrations of sugar (page 4 of the translation of the paper) is
unhelpful since there is no indication of the volume of solution added or of
the quantity of fish paste. Thus the concentration is unclear. Professor Hough
put it as follows.
"The Tokai report does not specify how much protein was present in the
different molarities of sugars or sugar alcohols tested for their preservative
ability. Sugar could have been added either as a solid or as a solution. If
added as a solution, the Tokai report does not state the volume added and it
is impossible to calculate the ratio of sugar to protein. If it is assumed
that the concentration of minced and precipitated muscle material mixed with
the sugars was kept at the same level as in the washing steps, the
concentration of precipitate was 10%. On this basis the largest weight of
solid sugar or sugar alcohol added was to achieve a concentration of 0.3 Molar
saccharose or maltitol, which … is a concentration of about 10%, or a weight
ratio of 1 to 1."
This is unsatisfactory as the basis for an allegation of anticipation, as
the cross-examination of Professor Hough confirmed. His 10% was just the
initial concentration of myosin in muscle tissue. If other materials are taken
into account, the ratio falls, and in any event the 10% figure is approximate.
And finally he can only reach the figure of 1.4:1 by using a greater sugar
concentration (0.4M) than that disclosed anywhere in Tokai, and a figure which
is four times that disclosed for trehalose. Professor Perham’s rival
calculation, which he accepted was a guess, was that Tokai was talking about
some sort of non-standard molarity based on the unit volume of fish paste. If
that is right, the weight ratio appears to be 0.034:1, which is 40 times less
than that called for by the amended claim.
- It follows that claim 1 as proposed to be amended is not anticipated. I
turn to consider the question of obviousness. The law is stated by the Court
of Appeal in Windsurfing International v Tabur Marine [1985] RPC 59 at
73 in the judgment of Oliver LJ:
There are, we think, four steps which require to be taken in answering the
jury question. The first is to identify the inventive concept embodied in the
patent in suit. Thereafter, the court has to assume the mantle of the normally
skilled but unimaginative addressee in the art at the priority date and to
impute to him what was, at that date, common general knowledge in the art in
question. The third step is to identify what, if any, differences exist
between the matter cited as being "known or used" and the alleged invention.
Finally, the court has to ask itself 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 require any degree of
invention.’
- What was the common general knowledge? I have identified the addressee of
the specification above. Is he to be taken as knowing anything about the
properties of trehalose, and in particular about its role in anhydrobiosis?
The defendants say that this knowledge was part of the common general
knowledge of the skilled man. In my judgment, the evidence does not begin to
support this contention. Indeed, until Dr Roser’s invention it is far from
clear to me that there was any general appreciation that the phenomenon of
anhydrobiosis depended upon the prevention of the denaturing of protein by
trehalose. Dr Roser himself described it in this way: "When the trehalose
discovery was made it was abundantly clear to me, but at that time mainly only
me, that this had opened up a window on an enormous area of future work. It
was a new development in biology that had not been seen before. It seemed to
me that it was going to be so valuable that a research organization to deal
with all of those research opportunities was a very good way to start." This
is not, in my judgment, consistent with an assertion that any aspect of the
relevant properties of trehalose were common general knowledge.
- I am strengthened in this view by the way in which the expert witnesses
for the defendants have approached their task. Professor Hough referred to a
large number of papers in support of his conclusion of obviousness. He
followed references. The only paper (Crowe) put to Professors Mackenzie and
Perham as representing the common general knowledge was rejected by them for
what seem to me to have been convincing reasons. I should mention that it was
unfortunate that in developing his argument of obviousness, Professor Hough
referred in his report to a number of publications from after the priority
date which were not merely illustrative of steps which he said were obvious to
take. This was something from which he should have been protected by proper
instructions. The plaintiffs say that in any case to employ Professor Hough,
an extremely experienced and knowledgeable carbohydrate chemist is to employ a
degree of hindsight, and with this contention I agree. On the whole, while
both Professor Vadgama and Professor Hough are distinguished scientists, on
this aspect of the case I found the evidence of Professor Perham and of
Professor Mackenzie to be of most assistance.
- If the invention is to be obvious, the defendant must show that the
skilled man will with the use of nothing more than pertinacity, sound
technique and a reasonable amount of trial and error arrive on the basis of
the prior disclosure at a method within the claim. In my judgment, the
objection of obviousness must fail. The difference between the disclosure of
Tokai and the inventive concept of claim 1 of the patent in suit may be
identified as a change from washed fish paste to proteins in a purified,
isolated state, the use of trehalose in preference to any other sugar and in a
quantity greater than the minimum weight ratio of 1.4:1. There is no teaching
in Tokai in this direction. So far as fish paste is concerned, there can be no
doubt that Tokai is concerned with fish as a food, and the changes which occur
when it is dried. Second, there is no teaching in the Tokai suggesting that
trehalose is preferable, and no evidence from the defendants to suggest that
it is a selection without advantage from an available range of sugars.
- A great deal of evidence was taken up with Tokai’s teaching in respect of
trehalose. The defendants say that the teaching of Tokai is that trehalose is
at least as effective as raffinose and melibiose: that it was known as the
preservative in cryptobiotic plants, and that it was known to be a
non-reducing sugar. This is, in my view, an analysis from hindsight. Tokai is
an unsatisfactory document, in the sense that it only imperfectly
communicates: Professor Vadgama said that if one of his students had produced
it it would need qualification before it was accepted. For example, Table 1
(which has to be relied on as showing the superiority of trehalose) also shows
extraction of protein in greater quantities from the dried muscle than from
the controls, which cannot be correct. The results are not consistent (in
Figure 1, raffinose is shown as giving an extraction of 175%, but only 100% in
Table 1) and Professor Vadgama could not explain this. Figures 2 and 3 are
relied on to show that the more sugar that is added, the better (the "no
plateau" argument), but these Figures do not relate to trehalose and again
show a protein recovery of more than 100%.
- Finally, I should deal with a specific aspect of Tokai which is said to
point to the invention, and that is the contention that Tokai discloses that
trehalose preserves the ability of actin and myosin to form a complex called
actomyosin against drying. Professor Perham did not accept that this effect
was shown by Tokai at all. The contention depended on Table 4, but this table
is itself unsatisfactory, as the cross-examination of Professor Vadgama made
clear.
- In my judgment, the invention of claim 1 of the patent cannot be viewed as
obvious in the light of Tokai, an obscure, contradictory document. Certainly,
the general inventive concept is not described in Tokai, and the evidence
failed to satisfy me that any particular method falling within the claim could
be arrived at on the basis of Tokai without both work and insight.
G.— Threatened Infringement
- There is infringement, and threatened infringement in the work recorded in
the SMART award final progress report. The work reported as having been done
in respect of alkaline phosphatase is on Professor Perham’s unchallenged
evidence within the claim, and this work is preparatory to a program to
develop products. As Dr Tunnacliffe accepted, it was to make money for
Eastbridge. I am less confident that the Eldoncard proposal was still a threat
to infringe at the date of the Writ, as it had not been proceeded with. But it
was quite clearly within the claim, insofar as preserved monoclonal antibodies
were used. I am very concerned at the lateness of the disclosure of the
material which underlay the work on alkaline phosphatase: although the final
report goes down to 17 July 1998, the work was manifestly performed at an
earlier date and should have been disclosed.
H.— Obtaining.
- QHCL’s entitlement to the STASIS applications is put in two ways. First,
it is said that the work was done while the Funding Agreement was on foot.
Second, it is said that the invention is derived directly from work done by Dr
Kampinga, to which QHCL is entitled. The allegation is therefore that Dr Roser
copied or made use of Dr Kampinga’s invention.
- This allegation is an allegation of fraud, and it must be distinctly
pleaded and proved. It must be established that the invention which is the
subject of the Eastbridge applications is the invention made by Dr Kampinga:
that Dr Roser had an opportunity to copy: and that he did copy Dr Kampinga’s
work.
- The basic idea of the earlier of the two STASIS applications can be taken
from the specification at pages 6-8:
Based on the phenomenon of anhydrobiosis, we have devised and validated
processing conditions which ensure the formation of stable glasses which fully
mimic the anhydrobiotic phenomenon. They can be used for stabilisation and
preservation of most types of molecules and biological systems, including many
vaccines, without the need for freeze-drying or refrigeration.
We now describe a process which can be used for formulating even the most
unstable of drugs in a liquid formulation that is as stable as the best
trehalose-dried formulations but has all the safety and convenience of ready
to use liquid preparations.
A drug may be dried as a fine powder under conditions which ensure its
optimal stabilization in trehalose or other stabilizing excipient in the glass
state. Other sugars which work well are palatinit (a mixture of glucopyranosyl
sorbitol and glucopyranosyl mannitol made by reducing palatinose
(isomaltulose) with Hydrogen and Raney nickel catalyst by Sudzucker AG in
Germany). The pure isomers glucopyranosyl sorbitol and glucopyranosyl mannitol
are also good, as is lactitol (the reduced product of lactose or milk sugar) .
This may be achieved directly by spray drying or by some other drying process
including standard processes like vacuum or freeze drying followed by a
grinding step such as jet-milling, to reduce the dried formulation to a fine
powder. This fine powder of sugar glass, containing the drug in a stable solid
solution in the glass is then formulated as a suspension in a two phase system
containing, as the continuous phase a biocompatible non-aqueous liquid in
which the sugar is insoluble. The exclusion of water from this system
preserves the stabilising effect of the trehalose or other stabilising
excipient used. We have previously reported that trehalose-dried actives
remain stable for several days in non-aqueous liquids in which the trehalose
itself is insoluble. Providing the non-aqueous vehicle is stable and providing
the preparation does not absorb significant amounts of water, it seems
probable that such formulations would be as indefinitely stable as the
trehalose-dried material itself. While experiments using non-aqueous
laboratory solvents like acetone or dichloromethane establish the principle of
the stability of active molecules in suspended sugar glass microspheres, such
preparations are, of course, not injectable because the vehicle is toxic.
There are, however, various non-aqueous vehicles which are approved by the
regulatory authorities for parenteral injection and which have demonstrated
safety and convenience. The liquid phase can be any injectable hydrophobic
solvent such as an injectable sesame. arachis or soya oil, ethyl oleate or a
water miscible non-aqueous solvent like polyethylene glycol. Since most of the
suitable non-aqueous liquids are themselves very stable at room or elevated
temperatures and do not need refrigeration, the resulting two phase
preparation is inherently stable.
However, the fine particles of sugar glass have an inherent tendency to
form clumps in many non-aqueous liquids because of phase separation. Since the
sugar glass is intensely hydrophilic, the particles have a strong tendency to
be excluded from a continuous hydrophobic phase and are forced together in
clumps. These aggregates settle out of suspension and cannot be readily
reconstituted as a monodisperse suspension by shaking or sonication. This
leads to non-uniformity of drug dosage in the suspension and in the worst
cases the formulation is not injectable due to large clumps which can block
the needle. Although the ideal suspension is anhydrous or nearly so, we have
found that surprisingly simple procedures derived from the field of
stabilisation of water in oil (WIO) emulsions, can produce a smooth,
monodisperse single-particle suspension of microspheres in a non-aqueous
liquid.
The specification proceeds to describe how to eliminate clumping by the use
of surfactants. The specified surfactants are all well known commercially
available materials.
- The invention is thus the incorporation of a dehydrated active material in
sugar glass microspheres and the dispersion of such microspheres in a
physiologically acceptable oil to render them injectable. The specification
says (page 10) that the dispersions of microspheres are stable, as are the
stabilised molecules within the microspheres. The summary of the invention,
which in this application stands in place of claim 1, is as follows.
The present invention provides a process for producing stable particle in
liquid (PIL) formulations together with the products of the processes. The
particles are in fine powder form, preferably being microparticles of 10
microns diameter or less. Preferably the particles do not exhibit a wide
variation in particle size. The particles are essentially dry, having a very
low water content of less than about 1%. The particles may either contain a
biomolecular product or may consist of biomolecular product itself. The
biomolecular product is preferably a drug or other biologically active
ingredient, but does not exclude other biological materials, (e.g. foodstuffs,
dyestuffs, beverages and the like).
According to the invention there is provided a formulation of fine dry
powder particles which comprise a biomolecular product, the particles
constituting a monodisperse suspension in a continuous phase of non-aqueous
liquid in which the particles are not soluble, wherein the continuous phase
includes a low HLB lipid-soluble surfactant.
The suspension formulation may, for example, contain about 10% particulate
product although a loading of more or less may be preferred depending on the
chosen application and the chosen ingredients of the mixture.
Preferably the particles comprise or consist of molecules of the product in
solid solution in a sugar glass. Preferably the sugar glass is formed from
trehalose.
- The second STASIS application was filed with claims. Claim 1 is very
broad, omitting even the surfactant:
A stable particle in liquid formulation comprising a discontinuous phase of
microparticles suspended in a continuous phase which is a non-aqueous liquid
in which the microparticles are insoluble, wherein the microparticles comprise
finely powdered sugar glass holding at least one biomolecular product, the
biomolecular product in the sugar glass either being in stable solid solution
or being itself in suspension in the sugar glass.
The surfactant is introduced in claim 2. Certain specific sugars (including
trehalose) are claimed in claim 3, and their nature is further explained in a
short passage on page 14 of the specification. This passage explains that the
term "sugar glass" is used in the specification to cover not only glasses
which are readily and rapidly dissolved in an aqueous environment such as
trehalose glass, but also sugar glasses in which the sugar molecule has been
modified by the attachment of one or more hydrophobic side chains to make the
glass more slowly soluble in body fluids than the native sugar in order to
give controlled release of a biomolecular product. I should observe also that
the claim is not limited to injectable materials, since dyes, foodstuffs and
so on are possible candidates for inclusion in the formulation, as the
specification makes clear. Such materials are claimed in claim 10, and the
mention in that claim of antibodies and restriction endonuclease suggest
applications in analytical techniques.
- It should be noted that trehalose and the other sugars mentioned are
hydrophilic, that is to say, will be wetted by water. Such sugars are in
principle suitable for the preservation of hydrophilic materials. Dr
Kampinga’s work, with which Dr Roser was fully familiar, concerns the
preservation of a hydrophobic drug in microspheres of a hydrophobic sugar. The
hydrophobic sugar is a modified form of trehalose, called trehalose
octa-acetate (TOAC). TOAC is trehalose modified by the attachment of
hydrophobic side chains and in my judgment is plainly within the claims of the
broad definition of sugar in the application. Dr Kampinga proposed that a
surfactant should be used for two purposes. The first was to assist in the
formulation of the microspheres themselves. The second was to maintain the
dispersion of his microspheres in a hydrophobic mixture of glycerides (which
can be considered as oily). The initial experiments conducted by Dr Kampinga
concerned an oily dye, Oil Red O, in hydrophobic TOAC glass beads, to see if
(i) the glass beads were stable in the glycerides (they were) and if the dye
was rapidly released into the glycerides on mixing with water (it was). At the
end of the experimental report Dr Kampinga says this:
It is also expected that with the use of selected detergents hydrophilic
drugs can be loaded in or coated with hydrophobic or hydrophilic glasses, and
that after dispersing them as powder in the glycerides similar results can be
obtained as with Oil Red O.
I accept Dr Roser’s explanation that this passage relates only to the
formulation of the microspheres. But Dr Kampinga realised that the use of
surfactants would eliminate agglomeration (clumping) of the particles in the
glycerides, and this is recorded in a memorandum addressed to Dr Roser among
others dated 23 February 1996 and in a proposal addressed to the client,
which, as Dr Roser acknowledged, contemplated the use of surfactants with
hydrophobic or hydrophilic glasses.
- It is clear that if Dr Kampinga’s work were carried on today it would
infringe claim 1, claim 2 (if he found clumping and used a surfactant falling
within that claim) and claim 3 of the second STASIS patent application.
- I have already referred to the timing of the work done by Dr Roser and his
announcement of work on the patent application on 28 January 1997. It is
necessary to refer briefly to one further matter. On 12 June 1997, a number of
assignments were executed. The first is an assignment of the invention the
subject of the priority application by Dr Roser and Ms Sen to ARF. The second
is an assignment of the same invention by QRF to ARF. The third is an
assignment of the same invention from ARF to Eastbridge. It appeared from his
cross-examination that Dr Roser did not have a contract of employment with ARF
(which had no money) but he did have a contract of employment with QRF. His
answers under cross-examination as to the reasons for the assignment from QRF
(that it was out of an abundance of caution) were not satisfactory.
- Dr Roser was completely familiar with the work done by Dr Kampinga. I
believe that Dr Kampinga’s work in fact represents an attempt to solve a more
difficult problem, in that the drug with which he was concerned was
hydrophobic, with the obvious consequence that trehalose could not be used. Dr
Kampinga said in evidence that had the drug in question been hydrophilic, he
would without any doubt have used trehalose, and this was not challenged. It
seems to me that the invention (if any) was made by Dr Kampinga and that the
whole of the matter contained in the STASIS applications is obvious in the
light of Dr Kampinga’s work. It follows that QHCL is beneficially entitled to
the STASIS applications.
- I should add that that the defendants put considerable emphasis on the
contribution of Ms Sen to the STASIS invention. This work consisted of working
out the correct settings of the spray dryer (see her supplemental statement
paragraphs 13 to 16) and a verification of the properties of various
detergents. This is not in my judgment an inventive contribution to the STASIS
applications, but is routine work. It is clear from her evidence that the
essential work had been done before 13 February 1997 (see paragraph 20).
- If I am wrong in my conclusion as to the origin of the STASIS invention, I
am satisfied that it belonged to QRF subject to any rights which QHCL
possessed to it under the Funding Agreement. Neither Dr Roser nor Ms Sen were
employed by ARF. Dr Roser was employed by QRF, and was a director of QRF. I
have already set out clause 1.1 of his contract of employment in paragraph 15
above. Notwithstanding anything in his contract of employment, the ownership
of his inventions was governed by the provisions of section 39 of the Patents
Act 1977. Rights acquired by the employee by virtue of this section cannot be
diminished by provisions in his contract of employment — see section 42 of the
Act. Clause 11 of his contract of employment by QRF can be disregarded.
Nonetheless it is clear that the invention was made by Dr Roser in the course
of his employment. It was made at QRF’s premises, on QRF’s equipment, using
QRF’s materials. ARF had no employees and no money. He was plainly employed to
invent. As a director, he had a special obligation to further QRF’s
undertaking. He believed that he could deprive QRF of an invention made during
his employment by QRF and relating expressly to that company’s business merely
by recording it in a notebook which was dedicated to ARF. In my judgment
section 39 plainly operates so as to confer the invention on QRF.
- QHCL acquired rights in the invention under clause 5.2 if the Funding
Agreement was on foot. On the hypothesis that the invention was not in fact
based on Dr Kampinga’s work, it was essentially completed by 13 February 1997.
Accordingly in my judgment the invention belongs to QHCL, which is entitled to
an assignment of the patent applications.
I. — Trade Mark Infringement
- QHCL is the registered proprietor of registered trade mark 2,034,609,
which is the so-called Q device. It is the device at the top of all the
Quadrant writing paper. Use of the mark by the defendants is admitted and
there is no challenge to the registration. The pleaded case is that the QHCL
and QRF jointly own the mark, or alternatively that QHCL has acquiesced in the
user of the mark complained of.
- In my judgment there is no material on which the defendant can be said to
have a beneficial interest in the device mark. I say nothing about the word
Quadrant, as to which the considerations may be different. There is an
allegation of acquiescence, but the period of acquiesence is just (at best) 3
months (that is, from termination of the Funding Agreement to a letter
requiring that use of the device cease). I consider that any licence to use
the device must have been determinable on reasonable notice, and on any view
that period had expired by the issue of the Writ. Accordingly the allegation
of trade mark infringement succeeds.
Failure to sign assignments of patents
- There is a personal claim against Dr Roser which arises from his refusal
to sign assignments and declarations of inventorship in relation to the
various patents currently being prosecuted by QHCL. It is not disputed that
such an obligation exists by virtue of clause 13 of the Funding Agreement and
also as a matter of necessary implication from the fact that QHCL is the owner
of the relevant inventions. It is not disputed that Dr Roser is in breach of
this obligation. His reason for not signing was to put pressure on QHCL to
come to a satisfactory settlement. In his supplementary statement, he says
that there are problems with the validity of certain of the applications. He
said he could not go in breach of the provisions, for example, of US law.
Under cross-examination, it transpired that he was relying on a duty of
candour which undoubtedly does lie on him to make full disclosure of all
relevant prior art to the United States Patent Office. It was an unattractive
feature of his evidence that he showed himself quite willing to forego making
the disclosure which he considered that he was otherwise required to make to
the US Patent Office if he received a satisfactory settlement. It transpired a
period of more than one year had elapsed without his making this disclosure. I
believe that all I need to say is that I consider that he is bound to execute
the relevant assignments, if any are still needed, and make the relevant
declarations.
Conclusions
- My conclusions are these:
1. The Funding Agreement was lawfully terminated by QHCL pursuant to clause
16.1(b) by reason of the failure to appoint Dr Donald Hetzel as director
QRF.
2. Had the agreement not been terminated pursuant to clause 16.1(b), the
Funding Agreement would have been lawfully terminated by QHCL’s acceptance by
its letter of 13 February 1997 of the repudiation of the Funding Agreement by
QRF.
3. QHCL did not unlawfully terminate the Funding Agreement.
4. The application for leave to amend the specification of the patent in
suit succeeds, and as amended the patent is valid.
5. The defendants have threatened to infringe and have infringed the
patent.
6. QHCL is entitled to the invention the subject of the STASIS
applications.
7. The trademark in suit is infringed by QRF.
- I shall hear counsel on the appropriate order. I wish to express my
gratitude to all counsel concerned for the concise and helpful manner in which
they argued their respective parts of the case, and to the solicitors for
preparing the action efficiently.
