A thing does not become confidential merely because it is supplied confidentially. It was open to a claimant to allege that there were secrets over and beyond the public information that ought to be protected, but equally it was open to a defendant to argue that it had not used that material and had only used material in the public domain. In this case the claimant's claims failed except that (i) the defendant had breached the consequences of termination provisions which required the licensee to stop holding themselves out as licensee of the trade marks and cease manufacturing; and (ii) claimant entitled to nominal damages as defendant had failed to return know how and materials.

See judgement at: http://www.courtservice.gov.uk/View.do?id=2993

Cambridge Antibody Technology ("CAT") won its High Court battle against biopharmaceutical company Abbott regarding the level of royalties due on sales of the potential blockbuster drug Humira. CAT argued successfully that it was due a royalty of just over 5% of sales, rather than the 2% which Abbott had been paying. It is believed that CAT is due back payments from Abbott as well as future royalty payments at the higher rate on sales predicted to rise to over $2bn per year.

The dispute was founded on two licence agreements, entered into in 1993 and 1995, in which CAT licensed its patented library creation and bacteriophage display technology to Knoll (which was subsequently acquired by Abbott). Abbott used inter alia the licensed technology to design and manufacture a product called Humira, which is used as a treatment for rheumatoid arthritis.

At the heart of the dispute between the parties were the royalty stacking provisions of the agreements. The agreements provided that Abbott would pay CAT a royalty of just over 5% of net sales, but was permitted to off-set half of royalties paid to third parties in respect of other patented technology which Abbott licensed in order to develop the product (in this case, Humira). The off-set was subject to a cap which guaranteed a minimum royalty of 2% for CAT. The relevant clause in the agreements was clause 5:

"Royalties paid to third parties…to practice or have practiced the technology claimed in [CAT's patents] will be borne equally by the parties provided that CAT's royalty pursuant to [the royalty clause] is not less than two per cent of [net sales of Humira]." Abbott claimed that it was entitled to apply the off-set and pay CAT the minimum royalty, as it had licensed various patents from third parties during development of Humira. CAT contended that the royalty stacking provision did not apply to the third party licences taken by Abbott because these were only for parts of the Humira production process that did not involve CAT's technology.

Abbott argued that, had the parties agreed that the off-set would apply only to licences needed in order to exercise CAT's technology, the agreements would have been drafted accordingly, for example by using the phrase "phage antibody technology" instead of "the technology claimed in [CAT's patents]". The term "to practice or have practiced the technology claimed in CAT's patents" should be interpreted by reference to the claims of the relevant patents, which contained reach-through claims to a method of production of the antibodies comprised in Humira and to the antibodies themselves. The off-set should therefore apply to those patents which Abbott licensed in order to produce the Humira antibodies by expression from the host cell. "To practice or have practiced the technology claimed in [CAT's patents]" meant that the off-set right only ended at the point where Abbott had produced a whole antibody which binds to the protein in question (TNFa). If Abbott was unable to make the antibody, it would not be able to "practice or have practiced" the relevant technology.

It was held that CAT's construction of the royalty sharing provisions of the licence was correct. It was consistent with all the other provisions of the licence and it made commercial sense. It made obvious sense that CAT's obligation to offer at least partial protection to Abbott against the impact of third party licence demands should be limited to the areas of the program for which CAT was responsible. The only technology which CAT brought to the table under these agreements was its own technology and all activities downstream of that were to be undertaken solely by Abbott. Abbott was not required to notify CAT of the technology it proposed to use in the downstream stages of development, nor to discuss the royalty rates Abbott would pay such third parties.

Another relevant consideration was that Abbott's obligation to pay royalties was totally independent of eventual grant of CAT's patents (which were only at the application stage when the agreements were entered into). This would mean that, according to Abbott's interpretation of the relevant clauses, if CAT did not obtain any patents, the off-set provisions could never apply and Abbott would have to pay the full royalty throughout the term of the agreements.

The trustees were held not to be the owners of the right to use the trade marks, the exclusive licensees were the owners of the right to use. The exclusive licensees were paying an annual royalty at full market value for the right to use the trademarks and had no capital asset in respect of which depreciation could be claimed. The exclusive licensee could not claim a depreciation allowance in respect of the rights they had acquired under their respective deeds of user and deeds of licence. They were entitled to, and no doubt did, deduct the annual royalty, together with all other business expenses, from their gross income in order to arrive at their net taxable income. They had no capital asset to depreciate. If, instead of the grant of a seven year licence at an annual royalty, they had been granted a seven year licence in consideration for the payment of a premium, there was no reason why they should not have been entitled to a depreciation allowance in respect of the wasting value of the capital asset they had acquired.

The trustees' claim to a depreciation allowance failed for the reason that for the seven year period the trustees did not own any "depreciable intangible property". The trademarks, of which the trustees were the owners, were not depreciable intangible property. The right to use the trademarks was depreciable intangible property but during the seven year period the trustees did not own that right. That right belonged to the exclusive licensees.

See judgement at: http://www.privy-council.org.uk/files/other/simkin.jud.rtf

The defendant, the copyright owner of the International Accounting Standards (IAS), had permitted the claimant to translate a version of the IAS into Russian and publish the translation. The licence also provided that the defendant was the author of the IAS and was entitled to copyright thereof in all countries and languages and that any dispute was subject to the jurisdiction of the English court. It was held that the defendant was the author of the English version of the IAS and the copyright owner of the IAS. The defendant had licensed the use of the IAS for translation. The Russian translation was as a translation by the claimant and the claimant was the copyright owner of its translation of the IAS.

View the Pre-Budget Report at: http://www.hm-treasury.gov.uk/pre_budget_report/prebud_pbr04/prebud_pbr04_index.cfm

See the programme at: www.dti.gov.uk/technologyprogramme/

The claimants (C) were the three surviving members of a rock group. In 1976 C had agreed with the defendant (D) for their royalties to be paid to a Guernsey bank. The agreements contained (1) accounting clauses which provided for the bank to account to C for the royalties so paid by D, and C's right to appoint an accountant to audit the accounts provided by the bank and D. The agreements also contained an arbitration clause (clause 7) that provided that any dispute arising under or in connection with the agreement should be referred to a single arbitrator, that the sole obligation of the other party in respect of a claim would be to pay such sum as might be awarded by the arbitrator and that the arbitration or award was a condition precedent to the institution of any action. C had exercised the right of audit and sought the specified documents from D which D had refused to supply. C issued proceedings. D submitted that the action should be stayed having regard to the existence of the arbitration clause in the agreement and that, since C could obtain in an arbitration all the information and documents which they should have obtained under clause 6, there was no reason why the arbitration clause should be held not to extend to a breach of clause 6.

It was held that the wording of the arbitration clause could hardly be wider and the words "in connection with" on their own would be sufficient to catch any allegation of a breach of clause 6. The dispute referred to arbitration was the breach of the obligation to permit the audit on the materials to which C were contractually entitled, and it followed that those materials would have to be disclosed and considered in any arbitration. The breach of clause 6 had to be arbitrated and the proceedings stayed.