England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT
(Mr Justice Pumfrey
& Mr Justice Laddie)

		Royal Courts of Justice Strand London WC2 Friday 2nd February, 2001

1. LORD JUSTICE ALDOUS: This is an application by Dr Gorog for permission to appeal orders of Pumfrey J of 6th July 2000 and orders of Laddie J of 16th December 1997 and 30th July 1997. The three orders arise out of litigation between the Xylum Corporation (formerly known as Questa Inc). Xylum was the claimant and there were four defendants, the applicant, his wife, Dr Kovacs, and his daughter, Dr Diana Gorog. The fourth defendant was a company called Montrose Diagnostics Ltd.
2. In the 1980s the applicant and the second defendant invented a piece of apparatus for use in medical research. The apparatus was named the haemostatometer ("HST"). They took steps to patent this device in June 1983, as well as a refined version of the device in September 1986. The applicant and his wife wished to commercialise the invention. With this end in view, in September 1987 they entered into a patent licence agreement with Questa Inc. That was a company formed for the purpose of putting the HST on the market.
3. The agreement provided for the payment of royalties in return for an exclusive licence. It also contained (in clause 7) an improvements clause which required the parties to communicate to each other full descriptions of any modifications, improvements, additions and refinements of the HST made by them upon making the same. It also required that the applicant and his wife should give to Questa Inc the right of first refusal to make and sell any product which would perform the same function as the HST. It also included a provision for obtaining intellectual property rights for protection of the improvements.
4. As described in the judgment of Laddie J of 23rd July 1997, a number of problems arose in relation to the development and marketing of the product. The main problem appears to have been the difficulty in designing a hole punching mechanism which would reliably produce holes of a consistent size and shape. In any case, the result was delay in launching of a commercially viable form of the HST. That meant the applicant and his wife's expectation of financial reward was not met, and tensions developed between the parties to the licence agreement.
5. I should just mention that at the time of the hearing before Laddie J, the product that Xylum was preparing to launch was called the Clot Status Analyser ("CSA").
6. In June 1995 employees of Xylum attended a congress in Israel where they saw that the defendant's daughter was manning a stand run by the fourth defendant, Montrose Diagnostics Ltd. On the stand was a product known as a Thrombotic Status Analyser ("TSA"). According to Laddie J, this device was said to do much of what the HST was designed to do. Xylum, having looked at the device, considered that it was a modification and an improvement on its commercial version of the HST, and they were suspicious of the applicant's daughter's claim that the TSA was her brainchild. It was that that prompted them to bring the action in August 1995, in which they claimed to be entitled under the terms of the licence agreement to the TSA and the intellectual property rights relating to it. It was the case for Xylum that the true inventors of the TSA had been the applicant and his wife, and that they had sought to use their daughter in order to evade their obligations under the licence agreement. They sought relief to enforce the agreement, including damages for interference with their contractual relationship.
7. The applicant, his wife and his daughter strongly denied Xylum's case. The applicant continues to maintain the view that his daughter, a distinguished scientist, could and did invent the TSA which has been the subject of patent applications.
8. The case before Laddie J therefore involved, in essence, a single question: who was the inventor of the TSA? An allied question was whether the TSA was an improvement within the improvement clause in the licence agreement, if it was the invention of the applicant or his wife. That issue involved a judgment as to who was telling the truth.
9. The judge's judgment was lengthy. It went to over seventy pages. It is not necessary for me to deal with all the matters that he relied on in coming to the conclusion that he did. However, he drew attention to the fact that there was not a single contemporaneous document which supported the defendants' case that it was the daughter who had invented and developed the TSA. He came to the conclusion that all three defendants had put forward a story which was a fiction and that they had done that knowingly. As to the daughter, he said:

"I find her to be a determined and capable young lady, but for reasons I have set out above her evidence before me was manifestly untruthful."

10. He concluded that the TSA was thought up and developed primarily by the applicant, but with the assistance of his wife and, in his words:

"In light of these findings in the light of the matters set out above as I have said, I have come to the conclusion that that invention was not made by Diana Gorog. I have come to the conclusion the first practical application had nothing to do with Diana Gorog and that this was, as the plaintiff suspected, nothing more or less than a cynical attempt by the defendants to deprive it of its contractual entitlement under the 1987 agreement."

11. The judge went on to find that the TSA did fall within the meaning of the improvement clause in the agreement and that there had been breaches of the agreement. His order, dated 30th July 1997, is the first order that the applicant seeks to appeal against. It is complex, but essentially it required the defendants to take steps to implement the agreement and restrained them from taking steps which would be inconsistent with the rights under the agreement. Paragraph 5 of the order required the defendants to take all steps necessary to effect the transfer into the names of the first and second defendants of certain patents. That reflected the judge's conclusion that they were in fact the inventors of the TSA.
12. Laddie J also granted a Mareva injunction against all four defendants. As I understand it, the basis for that injunction was threats made to Xylum by the applicant and his wife on 22nd July 1997 as to the action that they would take in respect of their patents if a suitable compromise was not worked out.
13. It appears from the papers that the defendants did not comply with the terms of the Mareva and final order of Laddie J. I say "it appears from the papers" because it would not be right for me to come to the conclusion that they did not. However, what happened did prompt the claimant to make an application in September 1997 to commit the applicant, his wife and his daughter and to sequestrate the assets of the fourth defendant, Montrose Diagnostics Ltd. Shortly before the hearing of the application to commit, the applicant, his wife and their daughter entered into a consent order in Tomlin form. That order is dated 16th September 1997. It is the second order that the applicant seeks permission to appeal against.
14. The papers show that the applicant was at the time in Hungary, apparently recovering from a heart attack, and he signed the settlement agreement by fax. The application to commit was not proceeded with, and it was part of the agreement that the proceedings should be settled. The terms of the Tomlin agreement provided for the actions to be stayed, save for the purpose of carrying the terms set forth in the schedule into effect. Those terms provided for assignment by the applicant and his wife of certain patents, and in consideration he was retained as a consultant. It also provided for transfer of improvements and new products made during the terms of the consultancy.
15. Clause 8 of that agreement provided:

"This Agreement shall be in full and final settlement of all or any claims of any nature between the respective parties and each of them arising under or in relation to the subject matter of the 1995 Proceedings and the 1996 Proceedings, provided that the terms of this Agreement shall be implemented and complied with in full by the parties."

16. Clause 16 provided that each party to the agreement should pay its own costs of and incidental to the agreement and its subject matter. The agreement also contained a confidentiality clause.
17. Clearly the consent order of 16th September 1997 was intended to settle all the differences between the parties. Unfortunately, it did not do so. The applicant refused to sign certain documents. It also appears from the papers that he attempted to approach various patent offices around the world, informing them that the impending patent applications by Xylum were tainted by fraudulent deeds of assignment. He threatened Xylum with various actions and he claimed that he would institute proceedings in the United States of America to challenge the validity of the patents. That - I am not sure it is established exactly what the applicant did - prompted Xylum to take further steps to enforce its rights under the licence agreement and Tomlin Order. It issued an application dated 5th June 2000 in which it sought an order directing a person authorised by the court to sign the assignments and authorisations which the applicant had refused to sign, an order that the applicant disclose products or instruments developed by him during the period of the agreement, and an order restraining the applicant from challenging the validity of the patents.
18. That application came before Pumfrey J. His order was made on 20th July, pursuant to a judgment given on 6th July. That is the third order against which the applicant seeks permission to appeal. Pumfrey J declined to make an order in the terms sought, but he did order that the defendants should execute the assignments (in an amended form that he thought was appropriate) within seven days of receipt of the assignments. He refused to make an order for disclosure, but did make an order restraining the applicant from challenging the validity of the patents. He went on to make an order as to costs against the applicant.
19. It appears from a witness statement put in on behalf of Xylum that the applicant still refused to sign the assignments. That prompted Xylum to make a further application on 4th August. It came before Jacob J on 17th August. He ordered that the assignments should be executed by a Master of the Chancery Division on behalf of the applicant, and that powers of attorney in the names of the applicant and his wife be executed by a Master on behalf of them. The applicant does not seek to appeal against that order.
20. That is an outline of the background of this litigation which started way back in 1995. The application for permission to appeal was filed on 16th August 2000. It seeks permission to appeal two orders of Laddie J made in 1997. The one made on 16th September 1997 was a consent order in the Tomlin form. Thus this application for permission to appeal those orders has been made three years out of time.
21. Dr Gorog has appeared before me today and given me the assistance of a skeleton argument. He has addressed me with courtesy. He is an intelligent, educated scientist. That must be taken into account. There is no satisfactory explanation for a delay of about three years in seeking permission to appeal. He refers in his skeleton argument to the difficulties that he had, in that he had no legal advice, but he was advised that to take the matter further he would first need to set aside the Tomlin Order. That advice may well be right, but it was not until he reached the stage of the orders of Pumfrey J and Jacob J that he concluded that he should seek permission to appeal. In my view, that explanation cannot excuse a delay of about three years. Upon that ground alone, I would refuse him permission to appeal the orders made in 1997.
22. I come to the third order, that is the order of Pumfrey J made in July 2000. An application for permission to appeal that order is out of time, but the delay is not such as mean that I should refuse the application without considering the merits.
23. Against that background, I turn to the merits of the applications for permission to appeal.
24. In the draft notices of appeal the applicant raises a number of grounds. One of the main thrusts of his appeal is that all three orders are unlawful as they are contrary to the Human Rights Act. In his submissions to me he said that the result of the order of Laddie J in July 1997 was that the property of his daughter had been taken away. He says that is contrary to the Human Rights Act 1998.
25. Leaving aside the fact that all this occurred before the Human Rights Act 1998 came into force, that argument could not succeed in this court. The dispute that came before the judge was a dispute as to the rights of parties to a contract. It is not one which involved human rights. The judge came to the conclusion that the property in the inventions was owned by Xylum. Upon that basis it could be argued, if the applicant is right, that to leave the patents with the applicant would be a breach of the human rights of Xylum. This was a dispute as to the terms of a contract between individuals. The Human Rights Act does not apply to that dispute.
26. At the heart of these applications for permission to appeal is the belief that Laddie J came to a wholly unreasonable decision. The applicant says that by coming to his conclusion on the inventorship, he did so without evidence or support of fact. It is said that vital evidence was not heard, and he disregarded the fact that the daughter was a skilled scientist quite capable of making the invention: his decision was contrary to the evidence and contrary to fact.
27. Clearly the applicant believes that the conclusion reached was wrong, but that is often the case in litigation. The judge had to decide whether he believed the applicant, his wife and their daughter. He saw them give their evidence in the witness box - an advantage which this court will not have - and concluded that they were not telling the truth. That is a finding of fact with which this court will not interfere. In those circumstances, the heart of any appeal would be ripped out.
28. In my view, the judgment of Laddie J is not capable of being overturned in this court. It is a decision based upon fact. It is a decision that he came to having seen the witnesses. This one which it would not be right to give permission to appeal. Once he decided that the TSA was the invention of the applicant and his wife and that it fell within the contractual terms, then everything else followed.
29. I come to the order in Tomlin form. That was an order by consent. There can be no appeal against an order by consent without having the order set aside. In this particular case the applicant says that it was forced upon him. It was signed under duress by grave threats at a time when he was convalescing from a heart attack. He says that he signed the settlement agreement the night before his wife and daughter were to go to prison, and that would have probably resulted in their medical careers coming to an end. He, in effect, capitulated to Xylum's demand and gave them the property rights which they were claiming. With the agreement he ended the licence agreement, and he says that he paid a big price to save his family. That, he says, constitutes duress.
30. No doubt he sees it that way. But if, as Laddie J held in his judgment of 23rd July, the TSA in fact belonged to Xylum, the duress was brought upon themselves. The applicant had refused to sign the relevant documents which would give Xylum the right to their property. In those circumstances, it was not surprising that they took steps to enforce it. It was legal duress which was perfectly consistent with the judgment which had been given. I believe it could not be subject to a successful appeal.
31. In my view, the judgment of Pumfrey J is such as could not be appealed. It followed upon the result of the original judgment of Laddie J. The order for costs was one which was within the discretion of the judge and this court does not upset a judge's conclusions on costs unless it is clear that he failed to take into account matters which he should not done or took into account matters which he should not have done or is plainly wrong. I have looked at his judgment and do not believe that this court could come to that conclusion.
32. For those reasons, I do not believe that it is appropriate to give permission to appeal on any of the applications. Further, I do not believe it would be a kindness to do so. If an appeal did come before this court, then Xylum would be represented. I believe that the appeal would fail, and the result would be that the applicant would have to pay the costs of the appeal. I do not believe that they would stand any chance of success.
33. I therefore dismiss these applications.
ORDER: Applications for permission to appeal and an extension of time refused. (Order does not form part of approved judgment)