Buchanan v Alba Diagnostics Ltd
| Jurisdiction | UK Non-devolved |
| Judge | LORD NICHOLLS OF BIRKENHEAD,LORD HOFFMANN,LORD HOPE OF CRAIGHEAD,LORD WALKER OF GESTINGTHORPE,LORD BROWN OF EATON-UNDER-HEYWOOD |
| Judgment Date | 05 February 2004 |
| Neutral Citation | [2004] UKHL 5 |
| Docket Number | No 2 |
| Court | House of Lords |
| Date | 05 February 2004 |
[2004] UKHL 5
The Appellate Committee comprised:
Lord Nicholls of Birkenhead
Lord Hoffmann
Lord Hope of Craighead
Lord Walker of Gestingthorpe
Lord Brown of Eaton-under-Heywood
HOUSE OF LORDS
My Lords,
I have had the advantage of reading in draft the speech of my noble and learned friend Lord Hoffmann. For the reasons he gives, with which I agree, I would dismiss this appeal.
My Lords,
This appeal arises out of an action raised by Mr Nigel Buchanan, the registered proprietor of UK Patent GB 2 287 321 ("for a fluid boiling point measuring device"), against Alba Diagnostics Ltd ("Alba") alleging infringement by the manufacture and sale of an implement called the Brake Fluid Tester. Alba denies infringement but takes the preliminary point that Mr Buchanan has no title to sue, having assigned his rights in the patent in suit ("the 321 patent") to a Mr Mills, who in turn assigned them to Alba. The Lord Ordinary (Lord Hamilton) and the Inner House (the Lord President (Rodger) and Lords Marnoch and Clarke) were unanimously of the opinion that the preliminary point was well founded and although they went on to find that Alba's device did not in any event infringe, it was not necessary for them to do so.
Mr Buchanan is an inventor and was in 1992 the managing director and majority shareholder in a company called Liquid Levers (Innovations) Ltd ("Innovations"). He was put in touch with Mr Mills, who had recently sold his engineering company and was looking for another in which to invest.
Innovations was marketing a device called the Brake Fluid Safety Meter which Mr Buchanan had invented for measuring the boiling point of brake fluid. This is a necessary part of vehicle maintenance because a reduction in boiling point (which may occur on account of the hygroscopic nature of the alcohols used in brake fluid) impairs its efficiency. Mr Mills decided that Innovations was a suitable company in which to invest.
The arrangements between Mr Buchanan and Mr Mills were not at first attended with a great deal of formality. Mr Mills simply wrote Mr Buchanan a cheque for £500,000. Afterwards Mr Mills sought legal advice; he asked for the return of his money, which was refused; thereafter the parties dealt with each other more warily. Documents were executed. The first of these was a Minute of Agreement dated 20 August 1992 made between Mr Buchanan, Innovations (called "the Company") and Mr Mills by which it was agreed that £100,000 would be repaid to Mr Mills and the remaining £400,000 treated as an interest-free loan to Innovations repayable on demand on six months' notice on or after 31 December 1995. Mr Mills was granted an option exercisable on the same notice to exchange the debt for interests in Innovations, another company controlled by Mr Buchanan and certain intellectual property rights vested in Mr Buchanan personally. Clause 8 of the Minute provided:
"As security for the said loan of £400,000 the Company and Mr Buchanan shall assign to Mr Mills their respective interests in the Patent rights to the Brake Fluid Safety Meter details of which are annexed and signed as relative hereto."
The Schedule listed two national patents and an International Application published under the Patent Co-operation Treaty numbered WO90/ 12311 with a priority date of 8 April 1989 and a filing date of 30 March 1990. It is only this application ("the 311 patent") with which this appeal is concerned. It led eventually to the granting of a European patent to Alba on 15 July 1998.
In order to assign the security agreed by the Minute, Mr Buchanan and Innovations of the one part and Mr Mills of the other part entered into a deed of assignation which was last executed on 29 January 1993. It described Mr Buchanan and Innovations as "the Assignors" and recited that they were the proprietors of various patents and patent applications relating to Brake Fluid Analysers, including (by reference to a schedule) the application for the 311 patent. The operative clause (1.1) declared that—
"(1) In security of the sum of £400,000 owing by [Innovations] to [Mr Mills] … the Assignors hereby:- (1.1) assign to [Mr Mills] …their whole right, title and interest past present and future in and to the Patents and the Applications…and all improvements, prolongations and extensions…relating therein and thereto…(hereinafter referred to as "the Charged Assets")…Provided always that there is excluded from the assignation under this clause the Assignors' reversionary interest and rights to have the Charged Assets reassigned to them in terms of this Assignation."
By clause 1.2, the Assignors undertook various obligations in respect of the rights forming part of the Charged Assets: to maintain the patents in force, pay the necessary fees, take reasonable steps to sue infringers and so on.
Clause 5.1 provided that if, among other things, Innovations went into receivership—
"[Mr Mills] may, without further intimation or procedure, sell the Charged Assets either by public auction or by private bargain…or may retain the Charged Assets for his own benefit."
Clause 5.3 provided that if a sale of the Charged Assets by Mr Mills should not realise enough to repay the debt, he would—
"have no further or continuing claim against the Assignors in respect thereof, nor in respect of the Assignors' obligations hereunder, and will, within seven days of being requested to do so by the Assignors, grant an unconditional discharge in respect of the obligations of the Assignors under these presents and the said Minute of Agreement."
Clause 5.4 provided that if Mr Mills elected to retain the Charged Assets for his own benefit?
"he will have no further or continuing claim against the Assignors in respect of the said sum of £400,000 due under the said Minute of Agreement, nor in respect of the Assignors' obligations hereunder and will, within seven days of being requested to do so by the Assignors, grant an unconditional discharge in respect of the obligations of the Assignors under these presents and the said Minute of Agreement."
By clause 6, Mr Mills granted Mr Buchanan and Innovations an exclusive licence to use the Charged Assets to manufacture and sell products derived from them during the currency of the agreement.
The collaboration between Mr Buchanan and Mr Mills was not a success. On 1 December 1993, less than a year after the execution of the assignation, Innovations went into receivership. Mr Mills left to join another venture which is now incorporated as Alba. Pursuant to clause 5.1 of the 1993 assignation, Mr Mills sold the whole of the Charged Assets to Alba for £5,000. The sale was completed by a deed of assignation dated 9 May 1994 which purported to assign to Alba the whole of the Charged Assets which had been the subject of the 1993 assignation to Mr Mills. There is no challenge to the validity of this sale; the dispute is over the extent of the rights which were included.
It is necessary at this point to explain the nature of the invention disclosed by the specification in the application for the 311 patent. It said that the disadvantages of existing devices for measuring the boiling point of brake fluids and the like were, first, that they were not particularly accurate and secondly, that they formed noxious vapours when they brought the fluid to boiling point for the purposes of measurement. It then described the invention, reciting, as is customary, the prior art before the consistory ("characterised in that") clause which describes the inventive step:
"According to the present invention there is provided an indicating device for indicating the boiling point of fluid especially a hygroscopic fluid such as hydraulic fluid comprising a meter preferably of the portable hand-held type including a probe portion for insertion into fluid in a fluid reservoir, heating means being provided in the probe portion for heating fluid in which the probe portion is immersed, said meter additionally including monitoring means for monitoring the temperature rise of fluid heated by the said heating means so as to indicate the boiling point temperature of the fluid, characterised in that said probe includes a casing defining a housing wherein a portion of the fluid to be tested is semi-encapsulated, the temperature monitoring means sensing the temperature of fluid in the housing heated by the heating means, and in that fluid inlet means are provided permitting fluid flows to and from the housing."
It is clear from this description that the inventive step claimed in the application (and reproduced in the first claim) is the semi-encapsulation of some of the liquid within a housing which contains the heating means and the temperature monitoring means, only limited fluid flows to and from the housing through the inlet means being allowed.
It appears, however, that the embodiment marketed by Innovations had the defect that maintenance of the correct flows of liquid and vapour into and out of the housing was heavily dependent upon the probe not being plunged too deeply into the liquid. In early 1994, after Innovations had gone into receivership and Mr Buchanan's functions as a director and employee had ceased, he applied his mind to solving this problem. The solution which he devised was to arrange the inlet means in the housing in such a way that air would be trapped in the upper part and thereby prevent the liquid from rising above a certain level, however deeply the probe was inserted. He applied for a patent for this invention which was granted on 27 March 1996. This is the 321 patent, the patent in suit.
The specification for the 321...
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