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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> QRS Sciences Ltd v BTG International Ltd [2005] EWHC 670 (Ch) (15 April 2005) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2005/670.html Cite as: [2005] EWHC 670 (Ch) |
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CHANCERY DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
QRS SCIENCES LIMITED |
Claimant |
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- and - |
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BTG INTERNATIONAL LIMITED |
Defendant |
____________________
Midway House, 27/29 Cursitor Street, London EC4A 1LT.
Telephone No: 020 7405 5010. Fax No: 020 7405 5026
MR. PUSHPINDER SAINI (instructed by Messrs. Bird & Bird for the Defendant)
____________________
Crown Copyright ©
Mr. Justice Park:
OVERVIEW
(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
"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".
"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."
(1) The offer was to remain open for acceptance by QRS until 8th June 2004, 60 days from receipt of the offer by QRS (which was to happen and did happen on 9th April 2004). This, however, was subject to a number of conditions, not all of which I would regard as innocuous milestones. One of them about which Tarlo Lyons complained, reasonably in my view, in a letter of 16th April 2004 was that BTG could sell the patents to a third party within the 60 days unless by 19th April 2004 (which was only 10 days from the receipt of the "offer" letter) QRS provided to BTG "a written confirmation that it wished to proceed to take an assignment on the financial and other terms set out in this offer."
(2) The letter contains this sentence: "In satisfaction of any obligations that it may have under clause 14.4 of the licence, BTG hereby offers to sell to QRS all the QR patents." This is not quite the same as the wording in the 10th March letter, which it will be recalled was as follows: "BTG's offer is made in accordance with and completely discharges BTG's obligations under Section 14.4......" etc.
(3) The 8th/9th April letter was headed "Subject to Contract", like the 10th March letter.
(4) Again like the 10th March letter, the 8th/9th April letter had a box at the end containing the following words: "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."
(5) The effective contents of that box at the end were further emphasised by two provisos spelt out in the body of the letter as follows: "......provided, however, that (i) nothing in this Offer will constitute a commitment to assign or transfer the QR Patents to QRS, nor will it be deemed to amend or vary the Licence in any way whatsoever (including without limitation Clause 14.4 of the Licence), and (ii) it is BTG's intention that there will be no binding agreement to assign the QR Patents to QRS until a formal contact has been finally approved and executed by both parties and that all future communications between BTG and QRS, 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."
"An order that the defendant (whether by itself, its officers, employees, agents or otherwise howsoever) shall not assign or attempt to assign the Patents to any third party without first complying with clause 14.4 of the Patent Licence and/or the agreement evidenced by the letter from Tarlo Lyons dated 17th March 2004 by first offering to assign the Patents to the Claimant such offer remaining open and capable of acceptance for a reasonable period of not less than 60 days and for a reasonable period for completion."
CLAUSE 14.4: THE CONSTRUCTION ISSUE
"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."
I should also refer to the definition of "Patents" in clause 1. It is quite a long definition which I do not think I need read out verbatim. The critical point is that the term "Patents" as used in the Licence Agreement includes also patent applications.
(1) Reading the subclause as a whole, the natural impression which, to my mind, it gives, is that the words "prior to abandoning any of the Patents ..." govern everything which comes after them, so that if the condition identified by those words does not exist in a particular case, the subsequent words specifying the consequences which would follow do not apply.
(2) Indeed, if BTG's construction is not correct, it seems that the words "prior to abandoning any of the Patents ..." have no meaning. Clause 14.4 would only have needed to say: "In respect of the Patents BTG will not, in so far as it is able to, assign, withdrew, abandon or cause or allow to lapse any Patent without first offering to assign such patent to the licensee."
(3) QRS's interpretation that the words "prior to abandoning any of the Patents", et cetera, mean only that the subclause applies to all the Patents which are still in existence at any particular time seems to me, with respect, to be an anodyne and wholly unconvincing reading.
RECTIFICATION FOR UNILATERAL MISTAKE BY QRS
"And, for the avoidance of doubt, it is expressly declared that the prohibition that BTG will not assign any patent without first offering to assign such patent to the licensee applies at all times throughout the term of the licence and not only when BTG intends to abandon such patent."
I mention, before moving on, that although Mr. Saini, of course, submits that there should be no rectification at all, he does not contest the precise wording proposed if I conclude that some order of rectification should be made.
"Also, there is an issue that we discussed quite early on and to which, as I recall it anyway, there was no great objection on BTG's part (subject to the prior rights of any other party with whom BTG has entered into legal arrangements). This is the right for Thorlock to stand in BTG's shoes as owner/controller of patent rights in the event that BTG wants to assign/dispose of its interests. The need to revisit this arises in light of the possibility of inserting a reciprocal obligation to clause 5.9. For your consideration, I have inserted a new 5.10 which is modelled broadly on 5.9, except that it countenances the possibility that the rights of BTG may be something less than as patent owner. Possibly clause 5.10.2 should appear elsewhere in the Agreement rather than as part of 5.10, but let me know BTG's reaction in principle to the suggestion. To assist your consideration, I've inserted words as follows:
'5.10. BTG shall not:
5.10.1 assign its rights in any Patents to any third party without first offering to assign such rights to the Licensee;
5.10.2. withdraw, abandon or cause or allow to lapse any Patent owned or controlled by it without first offering to assign such Patent to the Licensee.'"
The reference at the beginning to "an issue that we discussed quite early on" was intended by Miss Faulkner to be a reference to the telephone conference of 27th July 2002.
"It really came down to thinking that the clause was not great, but it did the job ... At some point you have to stop negotiations ... We felt we had a workmanlike clause. It would get us to where we wanted so we just let it lie."
Mr. Krouzecky commented that it was like pulling teeth to get BTG to change things. He deferred to Miss Faulkner as the lawyer.
"My deletion of the wording in clause 5.10.1 suggested by Stephanie was quite deliberate."
Second, there were no further exchanges between BTG and QRS on this point. The agreement was entered into a few days later. It included clause 14.4 in the terms of Mr. Ali's draft, and the sub-clause appeared at the point in the agreement where Mr Ali had placed it.
DID BTG'S LETTERS OF 10TH MARCH 2004 AND/OR 8TH/9TH APRIL 2004 COMPLY WITH CLAUSE 14.4?
"The cases (particularly the judgment of Chadwick LJ in Bircham & Co (Nominees) (2) Ltd v Worrell Holdings Ltd) stress that there can be substantial variations between the terms of different agreements all of which might be described generically as pre-emption agreements or first refusal agreements. It is necessary to consider carefully the precise terms of the agreement which is in issue in any particular case. One feature which they all tend to have in common is that they provide for a period during which the landowner's obligations are negative and the other party's rights are, in a sense, inchoate, but then they provide that, upon an event which triggers the rights of the other party, those rights assume a different content."
The cases are interesting, but I base what I am about to say simply on my view of clause 14.4 rather than on decided authorities.
THE MEETING OF 16TH MARCH 2004
CONCLUSION