QR Sciences Ltd v BTG International Ltd
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Park |
| Judgment Date | 15 April 2005 |
| Neutral Citation | [2005] EWHC 1500 (Ch),[2005] EWHC 670 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC 04 C01354 |
| Date | 15 April 2005 |
[2005] EWHC 670 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Honourable Mr. Justice Park
Case No: HC 04 C01354
MR. C.H. JONES and MR. PETER COLLEY (instructed by Messrs. Tarlo Lyons for the Claimant)
MR. PUSHPINDER SAINI (instructed by Messrs. Bird & Bird for the Defendant)
Approved Judgment
Transcript of the Stenographic Notes of Marten Walsh Cherer Ltd.,Midway House, 27/29 Cursitor Street, London EC4A 1LT.Telephone No: 020 7405 5010. Fax No: 020 7405 5026
Mr. Justice Park:
OVERVIEW
In this judgment I will refer to the claimant as "QRS" and to the defendant as "BTG".
The case arises in connection with a subclause, clause 14.4 in an agreement between the two parties dated 27th September 200BTG is an English company, the essence of whose business is the acquisition and exploitation of intellectual property and technology rights, especially patents. By the agreement of 27th September 2002 it granted to QRS (an Australian company which was then called Thorlock International Limited) an exclusive licence of a large portfolio of patents subsisting in many different countries. They all related to a particular type of technology known as nuclear quadrapole resonance technology, which has applications for the detection of explosives and for related uses. Clause 14.4 gave to QRS rights, the nature of which is in dispute in this case, to have an assignment of the patents offered to it in certain circumstances.
In March 2004 BTG informed QRS, its exclusive licensee from some 18 months earlier, that it was in negotiation to sell or assign the patents by way of a commercial transaction with a third party. The issues in this case arose in consequence. It appears to me that four main questions arise. In outline the questions and my answers to them are as follows:
(1) As a pure matter of contractual construction of the disputed subclause 14.4, did BTG's negotiations with the third party trigger QRS's rights under the subclause?
In my judgment, as a matter of construction they did not. Rights would have arisen in favour of QRS if BTG had been proposing to abandon the patents, but they did not arise where what BTG was proposing was not to abandon the patents but to assign them.
(2) Given that answer to question (1), should clause 14.4 be rectified so that QRS's rights under it arose in circumstances where BTG was proposing to effect a commercial assignment of the patents as well as in circumstances where BTG was proposing to abandon the patents?
In my judgment, the answer is yes, not on grounds of mutual mistake but rather on grounds of unilateral mistake.
(3) On the basis of the agreement as so rectified, was either of two proposals ("proposals" being a deliberately neutral word at this stage) which BTG made to QRS on 10th March 2004 and on 8/9 April 2004 sufficient to discharge BTG's contractual obligation and to satisfy QRS's contractual rights?
In my judgment, the answer is no. The proposals, though offers of a sort, were expressly made subject to contract and were not capable of being accepted so as immediately to create binding contracts. They were not contractual offers but rather, in the jargon of the textbooks, invitations to treat. As such, in my view, they did not by themselves satisfy BTG's obligations under the subclause as rectified. I would however add that, in my view, it was sensible for BTG to have made the "offers" on the subject to contract basis as it did, doing so, however, not as a compliance with clause 14.4 at that stage but rather as a forerunner to compliance at a later stage.
(4) Are the answers to the foregoing questions or any other relevant questions affected by a meeting which took place on 16th March 2004?
In my judgment, the answer is no.
THE PRINCIPAL FACTS
The portfolio included 77 patents or patent applications for 14 inventions. There were patents or applications in a significant number of different countries. The exclusive Licence Agreement of 27th September 2002 was preceded, as one would expect, by quite lengthy and detailed negotiations. Mostly the negotiations were conducted by exchanges of emails, telexes, letters, telephone conversations, and the like, but there was one occasion in July 2002 when two persons from BTG travelled to Perth, Western Australia, for two days of meetings. The two persons were Dr. Cole, who has a scientific background and holds a senior position within BTG, and Mr. Ali, who is a barrister and at the time was a member of BTG's in-house legal department. I shall have to say a little about the meetings in Perth in July 2002 at a later stage in this judgment. The negotiations also included, among of course a great many other matters, an exchange of certain draft subclauses in September 2002. One of the drafts became the critical clause 14.4, and I shall also have to expand on this later.
The agreement was entered into on 27th September 2002; including schedules, it occupies 25 pages of small single-space print. The core of it is the grant of an exclusive licence of the patent portfolio by BTG to QRS. There are provisions for royalties, sublicences, and the like. There are also provisions about improvements to the patents in so far as improvements come into existence while the licence remains in force. As regards termination, QRS, the licensee, can terminate the licence on six months' notice. BTG can only give notice of termination in limited circumstances such as non payment of royalties by QRS or QRS entering into some form of insolvency procedure. There are various other provisions dealing with detailed matters, and one of them is clause 14.4, which I now read:
"14.4 In respect of the Patents, prior to abandoning any of the Patents which are issued, or any of the Patents at the application stage (other than a superseded application) BTG will not, (in so far as it is able to) assign, withdraw, abandon or cause [or] allow to lapse any Patent without first offering to assign such Patent to the Licensee."
Where I have read "[or]" the agreement reads "to" but I think that that is an obvious slip. Henceforth in this judgment I shall assume that the word is "or".
At some time in 2004, which I do not think I know exactly, BTG became involved in negotiations with a third party company, a United States corporation called InVision Technologies Inc. There was a confidentiality agreement which for some time precluded BTG from telling QRS, or anyone else, about the negotiations. However, on 5th or 6th March 2004, Mr. Kshatri of BTG was able to telephone Mr. Russeth, the Chief Executive Officer of QRS, to tell him that BTG was in negotiation with InVision and to arrange a meeting.
The first meeting took place on 10th March 2004 at a New York hotel. All those involved were in the United States at the time. Present were Mr. Kshatri, Mr. Lando, and Mr. Donofrio of BTG, and Mr. Russeth and Mr. Nulsen of QRS. At the meeting the BTG representatives handed to Mr. Russeth and Mr. Nulsen a letter dated 10th March 2004 which offered to assign BTG's patents and patent applications (being only those patents and patent applications which were the subject of the licence) to QRS for a substantial specified sum plus a royalty. The offer was to remain open until 19th March, which did not give QRS much time.
Three other features of the letter are, in my view, important. First, it contained this sentence:
"BTG's offer is made in accordance with and completely discharges BTG's obligations under Section 14.4 of that certain Licence Agreement, dated 27th September 2002, between BTG and Thorlock International Limited (now known as QR Sciences Limited)."
Second, the letter was headed "Subject to Contract". Third, in a box at the end of the letter the following words appeared:
"For the avoidance of doubt, it is BTG's intention that there will be no binding agreement between the parties until a formal contract has been finally approved and executed by both parties and that all future communication between the parties, whether oral or in writing, will be made on that basis, regardless of whether or not the words 'Subject to Contract' are stated in any such communication."
Mr. Russeth and Mr. Nulsen were greatly concerned by this turn of events. InVision was a major competitor of QRS, and Mr. Russeth and Mr. Nulsen viewed with alarm the prospect of InVision becoming the owner of patents which QRS was using or proposing to use, and of the probable loss of confidentiality which might follow. They were also taken aback by the short period, only nine days, which BTG's letter gave for the offer to be accepted. On the evidence I find that it did not occur to them at that stage that there was anything objectionable in the letter being headed "Subject to Contract" and having the words which I have quoted in the box at the end.
QRS did not accept or reject the "offer" at that stage. Instead the matter was revisited at a further meeting six days later on 16th March 2004. By that time most of the persons concerned were in England, and the meeting took place at BTG's offices in London. QRS had by then instructed English solicitors, Tarlo Lyons. The BTG representatives at the meeting were Mr. Kshatri, Mr. Lando, Dr. Cole, and Miss Georgiou, the head of BTG's in-house legal department. The QRS representatives were Mr. Russeth, Mr. Nulsen, and two partners in Tarlo Lyons, Mr. Wilson and Mr. Stokes. I might mention in passing that Mr. Ali was not present at the meeting. I believe that by then he had left BTG. He now lives and works in Saudi Arabia.
The meeting appears to have begun in a somewhat confrontational manner, with Mr. Wilson, on behalf of QRS, complaining that the period of nine days, which the 10th March letter allowed for BTG...
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