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You are here: BAILII >> Databases >> England and Wales High Court (Patents Court) Decisions >> Oxford Gene Technology Ltd v. Affymetrix Inc, Affymetrix UK Ltd, Beckman Coulter Inc [2000] EWHC Patents 111 (18th April, 2000)
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Cite as: [2000] EWHC Patents 111
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Oxford Gene Technology Ltd v. Affymetrix Inc, Affymetrix UK Ltd, Beckman Coulter Inc [2000] EWHC Patents 111 (18th April, 2000)
HC 1999 No. 02517
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT
Before: THE HON. MR. JUSTICE JACOB
B E T W E E N
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Oxford Gene Technology Limited
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Claimant |
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- and -
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(1) Affymetrix Inc |
Defendants |
Mr Alastair Wilson QC and Ms Tamsin Holman (instructed by
Messrs Manches) for the Claimant
Mr Richard Seymour QC and Mr Richard Meade (instructed by Messrs Bristows) for
the First and Second Defendants
Mr David Mackie QC and Mr Timothy Fancourt (instructed by Messrs Allen &
Overy) for the Third Defendant
Hearing date: 29 February/1, 2, 6, 7 & 8 March 2000
REVISED JUDGMENT
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This is the official judgment of the court and I direct that no further note or transcript be made |
THE HON MR JUSTICE JACOB
DATED: 12 April 2000
REVISED: 18 April 2000
This judgment will be made available on the Patents Court web site:
www.open.gov.uk/sitemap.htm
Jacob J
1. This is the trial of preliminary issues in a patent infringement action. Not all issues remain alive. Specifically a claim by the 3rd defendant ("Beckman") for rectification of a contract called the ISIS contract has been dropped. A later cross-claim by the claimant for a different rectification of that agreement has also been dropped. Unfortunately it was dropped only at the last minute with the result that the witness statements contain inadmissible evidence of details of the contractual negotiations. I have ignored that inadmissible evidence, though some of it formed part of the submissions made on behalf of the 3rd defendant.
The Parties
2. The claimant ("OGT") is a company whose principal shareholder is the eminent scientist Professor Edwin Southern of Oxford University. The other shareholders are members of the Southern family and the University. OGT now owns the important patents which lie at the heart of this dispute (the "Southern patents"). Originally the patents belonged to Isis Innovation Ltd. ("Isis"), a company set up by the University to exploit inventions made within the University, essentially by licensing patents and know-how to commercial companies for development and marketing. OGT is more ambitious: it has aspirations itself to develop and market products covered by the Southern patents.
3. The 1st defendant, Affymetrix Inc. ("Affymetrix") is a Delaware corporation based in California. It is a market leader in the production of DNA microarrays. It holds some important patents in this field and, although a relatively new company with only a few hundred employees, its present capitalisation is about US$7 billion. The 2nd defendant is its UK subsidiary. The two companies can, for present purposes, be considered as one.
4. The 3rd defendant, Beckman Coulter Inc. ("Beckman") is the successor to an old established business in a wide range of scientific equipment and particularly life science and diagnostic systems. It is a very substantial company and its products are to be found in most hospitals and medical and bioscience laboratories.
The background to the dispute
5. The Southern patents have substantial breadth and cover products embodying Professor Southern's ideas for DNA arrays. Those ideas naturally needed development if they were to be brought to market. Back in 1991, by the original ISIS Agreement, Isis granted an exclusive licence under the Southern patents to Beckman. The agreement required Beckman:
"to use all reasonable endeavours according to its resources to manufacture, promote and sell Royalty Bearing Products [essentially products covered by the patents], in order to achieve maximum benefit to both parties" (cl.5.6).
6. So Isis put Professor Southern's inventions into the hands of Beckman to develop and exploit. Over the next 4 years Beckman did some development work. This resulted in some patents (taken out in the name of Beckman) and some unpublished research information. But commercialisation was still way off and Professor Southern became increasingly dissatisfied with Beckman's performance and commitment. Whether or not there was a breach of the endeavours clause is not for me to decide. There was correspondence ultimately resulting in a re-negotiation of the ISIS Agreement, which was concluded on 17th April 1996. The amended agreement deleted the reasonable endeavours clause and made the licence non-exclusive. On the one hand Beckman were not required to press on with research and development towards commercialisation and on the other Isis became free to exploit the inventions by way of licensing others or otherwise.
7. By the time of the re-negotiation the idea of exploitation by a company
controlled by Professor Southern had emerged, OGT having been formed in 1995.
Shortly after the ISIS Agreement had been amended the benefit of the agreement
and the Southern patents were assigned to OGT who therefore now stand in the
shoes of ISIS.
8. The amended ISIS Agreement contains two clauses over which the present
controversy rages. The first of these, clause 9.2, is called the "Consortium
Clause" and was introduced by the amendment. In its unamended form the agreement
extended the licence to any "Affiliate" of Beckman: in substance to any entity
within the Beckman group. They were treated as part of Beckman, the licensee.
They were not only licensed but also their activities for all purposes were
treated as those of Beckman, for instance for royalty purposes. The amendment
somewhat widened the definition of "Affiliate" in ways which do not matter.
But clause 9.2 went outside the Beckman group. It provides:
"Following receipt of a written request from LICENSEE LICENSOR will not unreasonably withold or delay the grant to a member of a LICENSEE Consortium of a non-exclusive licence under the Licensed Patent Rights and Technical Information.
At the same time the amendment provided a definition of "Licensee Consortium":
"'LICENSEE Consortium' means any group, consortium, joint venture, partnership, alliance or corporation in which LICENSEE is a participant which has as one of its principal objectives the development and commercialisation of products and processes covered by the claims of the Licensed Patents.
The other "hot" clause (called the "Assignment Clause") is 16.2 which provides:
"LICENSEE's rights under this Agreement and the licences herein granted shall pass to any person, firm or corporation succeeding to its business in products licensed hereunder as a result of sale, consolidation, re-organisation or otherwise, provided such person, firm or corporation shall, without delay, undertake directly with LICENSOR to comply with the provisions of this Agreement and to become in all respects bound thereby in the place and stead of LICENSEE."
9. Turning back to the history, in late 1997 OGT approached Affymetrix with a view to offering them a licence. Negotiations commenced and continued for some time. By July 1998 an agreement had been reached in respect of the financial provisions though there were other problems, particularly security against leakage of the Affymetrix rights which were to be cross-licensed. The key terms were that Affymetrix would pay an immediate non-returnable signing fee of US$20m and would cross-licence OGT under its wide patents. OGT would grant a licence and the rate of royalty for licence and cross-licence would be 5% initially (but reducing over time). OGT were surprised and disappointed when they were told in August 1998 that the deal was off. The full reasons were not given at the time, but emerged piecemeal later. Essentially what had happened was that Beckman and Affymetrix had entered into arrangements whereby it was claimed that (via the Consortium clause or the Assignment clause) OGT was obliged to licence Affymetrix or Affymetrix had a licence under the Southern patents. What I have to decide is whether those arrangements were effective.
10. There were yet further negotiations to no avail. In the end, by a Claim Form of 1st June 1999 OGT commenced this action. They claim a declaration that they are, and were not, obliged by the Consortium clause to grant Affymetrix a licence and sue Affymetrix for infringement of the Southern patents. Beckman and Affymetrix do not quite take the same position. Beckman say OGT is obliged to grant a licence to Affymetrix pursuant to the Consortium clause. In that way they get US$10m and keep a licence. Affymetrix contend that they have bought the relevant business from Beckman and that accordingly the assignment clause 16.2 bites to pass the licence to them, Beckman falling out of the picture. Neither defendant actually disavows the position of the other but Beckman expressly reserved its position on the effect under Californian law of the Precedence Letter and the June 5, 1999 letter (to which I refer at paragraph 67 below), these not being in issue as between it and Affymetrix in this action.. If either route works then in broad terms Affymetrix will have acquired a licence for US$10m plus royalties to OGT at 10% and Beckman will receive that $10m. Whether that is as good commercially for Affymetrix as the near-completed licence from OGT ($20m plus 5%) is not for me to say. Plainly Affymetrix consider it more advantageous to them and OGT less advantageous, otherwise we would not all be here.
The Arrangements between Beckman and Affymetrix
11. Broadly what Beckman and Affymetrix did was to try to put in place a Consortium between themselves. Recognising that might fail they also set up a sale agreement with a view to claiming the benefit of the Assignment Clause. The two possible arrangements are, of course, inconsistent one with another. If Affymetrix is a member of a Consortium then Beckman can require OGT to grant a licence to it. If it has bought Beckman's business then it is simply Beckman's successor.
12. Two agreements were signed, a "Consortium Agreement" and an "Asset Purchase Agreement." To deal with the inconsistency there was a further agreement called the "Precedence Letter", signed on 29th July 1998. It was from an officer of Beckman to an officer of Affymetrix and read:
"This letter, with your signature below, will constitute an agreement between Affymetrix Inc. ("Affymetrix") and Beckman Coulter Inc. ("BCI") and will govern the order of precedence and effective dates of the following document sets:
I. Consortium Agreement and its Exhibits, including Exhibits thereto (jointly the "Consortium Agreement").
II. Asset Purchase Agreement and its Exhibits, including Exhibits thereto (jointly the "Asset Purchase Agreement").
III. License Agreement from Affymetrix to BCI (the "License").
Notwithstanding that each of the foregoing Agreements are signed contemporaneously with this agreement and thus, by their terms on their face have the same effective date as this agreement, it is our intent that certain of such Agreements not come into full force and effect on the above date and that this agreement decide the precedence and order of such Agreements coming into full force and effect. We have agreed as follows:
1. The Consortium Agreement will come into full force and effect on even date herewith. The parties will promptly and diligently exercise their best efforts, consistent with the limitations of Paragraph 5.3 of the Consortium Agreement, to obtain a non-exclusive license for Affymetrix under the Southern Patents (as such term is defined in such Paragraph) on reasonable terms and conditions. For purposes of this agreement "reasonable terms and conditions" means terms and conditions substantially equivalent to those granted Beckman instruments in the Isis Agreement (as that term is hereafter defined) and does not include a requirement that Affymetrix grant a license under its intellectual property to Oxford Gene Technology ("OGT"). If OGT grants the requested license under reasonable terms and conditions within the time specified in such Paragraph 5.3 then the parties shall thereupon terminate the Asset Purchase Agreement and the License Agreement and their relationship shall be bound and determined solely by the Consortium Agreement. BCI shall refund to Affymetrix $900,000 of the $5,900,000 payment made by Affymetrix under the Asset Purchase Agreement. If OGT refuses to grant the requested license under reasonable terms and conditions within the time specified in such Paragraph 5.3 or any extension thereof agreed by Affymetrix and BCI then the parties shall, subject to the next sentence hereof, thereupon, terminate the Consortium Agreement.
2. The Asset Purchase Agreement will come into full force and effect upon the termination of the Consortium Agreement in accordance with Paragraph 1."
13. Although the letter claims that the Consortium Agreement and the Asset Purchase Agreement are signed "contemporaneously with this agreement" they were actually signed two days later, on 31st July. Moreover the Asset Purchase Agreement as then signed omitted a central feature, namely a Schedule 1 which was to define what was being transferred. This remarkable omission was put right and a number of other matters in the main agreements and some associated agreements were amended by a further letter agreement of 28th August 1998. No point directly arises on the omission, since it was put right, but it is not the sort of thing that normally occurs when a business with associated assets is acquired; people take care to identify the assets being assigned in the agreement as signed.
14. Beckman notified OGT of the Consortium Agreement on 13th August and were requested to grant Affymetrix a licence pursuant to the Consortium Clause. A redacted version of the Consortium Agreement was supplied on 28th August. Thereafter there were meetings at which a proposed licence was discussed but not agreed. OGT were not told of the full picture and in particular of the Precedence Letter and the alternative back-up arrangement of termination of the Consortium and an asset sale instead. They found out about the letter from information filed by Affymetrix on the web pursuant to SEC requirements. They were not given a copy of the Asset Purchase agreement until after this action had started. This was unfortunate. Whilst I acquit Mr Grant of Beckman (the relevant lawyer) of any actual falsehood and of any intention to mislead, I have to say that to supply the Consortium Agreement without supplying the Precedence Letter and back-up asset sale agreement was to supply a misleading picture to OGT. On its face the Consortium agreement had a 10-year period to run. It also had an entire agreement clause saying that apart from a side letter the Agreement "constitutes the entire agreement between the parties pertaining to its subject matter". The side letter (which under pressure from OGT was disclosed) was an arrangement about Hewlett Packard and is irrelevant. It seems to me reasonably clear that the Precedence Letter, which provided for termination of the Consortium agreement if OGT did not grant a licence was plainly in substance a part of this agreement - a conditional termination clause which "pertained to the subject matter" of the agreement. Moreover the agreement contained a clause (5.3) saying that if OGT did not grant a licence within 6 months of a request by BCI, then the parties would co-operate to explore alternatives. In fact they had already agreed an alternative, namely the asset purchase. Mr Grant thought he had supplied all documents relevant to the Consortium agreement and was justified in holding back the Precedence Letter and the Asset Purchase Agreement. He thought so even in retrospect. I think he was plainly and manifestly wrong. His justification for non-disclosure was merely that the termination of the Consortium agreement was conditional. So it was, but the condition was in substance part of the agreement itself. Not to disclose the condition was to give OGT an incomplete and misleading picture.
15. OGT suggest their refusal to grant a licence should be held reasonable because they were misled. But, even if all had been disclosed it is clear that OGT would not have granted Affymetrix a licence on terms approximating to the Beckman licence. So the dispute between the parties would have been substantially the same as it now is. The misleading picture was not causative of anything.
16. On 8th April 1999, after further negotiations, Beckman sent OGT a draft of the licence it claimed OGT was obliged to grant to Affymetrix pursuant to the Consortium Clause. It was based on the Beckman licence but with modifications. No licence was granted and OGT started this action on June 1st. This was taken by Affymetrix and Beckman to amount to a refusal by OGT to grant a licence on "reasonable terms and conditions" within the meaning of the Precedence Letter. It clearly was such a refusal, given the special definition in the Precedence Letter of "reasonable terms and conditions." In so saying I do not make any finding that the refusal was a refusal to grant a licence on what were in fact reasonable terms and conditions. That is quite a different question, one that I am not called upon to answer. It would depend on commercial and technical factors of which I have insufficient knowledge.
17. The parties did not treat the refusal as automatically terminating the Consortium Agreement and automatically replacing it with the Asset Purchase Agreement. A question arises as to whether that was actually the effect of the Precedence Letter. Did refusal automatically operate to terminate the Consortium Agreement and replace it with the Asset Purchase Agreement? Or did the parties have to do anything to terminate the Consortium Agreement? - its language says the parties "shall ... terminate the Consortium Agreement."
18. What actually happened was that by a letter of 5th June, Beckman sent Affymetrix a letter in the following terms:
"The issues presented by the filing of lawsuits in the U.S. and the U.K. against Affymetrix and in the U.K. against Beckman Coulter leads us to conclude we are at an impasse with Oxford Gene Technology and, subject to the remainder of this letter, we are hereby implementing, effective immediately, the Asset Purchase Agreement. This transfer of the business is based on the following understandings:
We expect that Affymetrix will use its best efforts to diligently defend the lawsuits against it and to underwrite our defense of the case against Beckman Coulter in the U.K. We expect all issues to be litigated and resolved, including OGT's obligation to grant Affymetrix a license under the terms of the agreement submitted to them on April 8 and the right of Beckman Coulter to enter into the Asset Purchase Agreement with Affymetrix.
If the consortium model is affirmed, it is our understanding that it puts us back on the footing we were prior to the filing of the lawsuit, and we will, accordingly, return to the status quo ante."
19. This seeks to have it both ways – the transfer is to go through. But if the consortium model is upheld, there is to be a "return to the status quo" i.e. a transfer back. There is a real problem with this, a problem that the parties overlooked. The problem is that once the "business" is transferred to Affymetrix (so it becomes the licensee instead of Beckman) on any re-transfer clause 16.2 would apply. That would mean that Affymetrix would have to assign all its business "in products licensed hereunder". That would include all its current business in such products (i.e. that which is now said to infringe) as well as whatever had been assigned by Beckman.
20. Of course the real reason the parties were entering these complicated arrangements was that they were trying one way or another to get a licence for Affymetrix. The collection of agreements were not "shams" in sense of being so artificial that the law regards them as null and void. But the fact that the parties overlooked the re-transfer problem is indicative of the fact the parties were not concentrating on the ostensible subject matter of the agreements but on how to get Affymetrix a licence.
21. At first Affymetrix would not agree to the "conditions". But by the end of July they did and thereafter some steps were taken to transfer physical assets from Beckman's laboratory to Affymetrix.
22. The Precedence Letter, the Consortium Agreement, the Asset Purchase Agreement and the effect of the June 5th letter are all governed by Californian law. I heard evidence on this from a retired Chief Justice of the Californian Supreme Court, Chief Justice Lucas. The effect of these arrangements, so far as they matter, I have to consider later. But of course the key questions arise under the amended ISIS Agreement, which is governed by English law. It is to these I now turn.
The Consortium Point
23. Even if the Consortium Agreement has been replaced by the Asset Purchase Agreement, it is necessary to decide this point, for on any view the Consortium Agreement was in place before the Asset Purchase Agreement. So, if correct, OGT should have granted Affymetrix a licence reasonably soon after being notified of the Agreement. Affymetrix (being strangers to the ISIS agreement) cannot of course rely directly on this clause. Their position is (if the asset sale route fails) that if OGT have to give them a licence they will be glad to have it.
24. The language of the clause is curious: "will not unreasonably withhold or delay the grant" suggests some prior obligation to grant, the clause merely dealing with the obligation to grant timeously. But there is no prior obligation. And everyone agreed that the clause should be read as simply requiring OGT to grant a licence within a reasonable time. What the scope and terms of that licence should be is in dispute. OGT contend that on its true construction the licence to be granted should be limited to the purposes of the Consortium. Alternatively they contend that any purpose beyond that is not reasonable. If both those contentions fail they contend that the Agreement is too vague to be enforceable. I agree with those contentions.
25. I turn first to the question of construction. What is the licence which OGT is required to grant to a Consortium member? Whatever else its terms might be, I think it must be a licence limited to the Consortium purpose. A general licence, covering activities of the Consortium member wholly unconnected with the purpose or activity of the Consortium, cannot reasonably have been within the contemplation of the parties. It makes no sense. Why should Isis and Beckman have agreed that a third party should be licensed for activities nothing to do with them? The best that Mr Mackie QC for Beckman could suggest was that the third party might have some patent rights, which could be cross-licensed. But the clause is not limited to such a case. And there were potentially many people who might have rights which conflicted with some potential operation of the Southern inventions. Furthermore you can frequently pay for cross-licences so there is no need to have a licence under the Southern patents available as in inducement to enter the Consortium – especially since Isis was free to licence the third party directly.
26. I tested Mr Mackie with a question. Suppose the Consortium were limited to a 3-year period. Was the licence to be granted unlimited in time and if so why? He could find no adequate answer. His answer was that the clause simply did not say that the licence was to be limited to Consortium purposes. But I think that is so self-evident that the clause did not need to spell this out.
27. Putting this another way the clause is silent as to the extent of the licence to be granted and so is to that extent ambiguous. So the court in construing the clause is faced with a choice between a very unreasonable result of a licence for any purpose and a licence for the more reasonable result of Consortium purpose only. I chose the latter, applying what Lord Reid said in Wickman Tools v Schuler [1974] AC 235 at p.251:
"The fact that a particular construction leads to a very unreasonable result must be a relevant consideration. The more unreasonable the result the more unlikely it is that the parties can have intended it, and if they do intend it the more necessary it is that they shall make that intention abundantly clear."
28. In so holding I believe I am also applying the principles of contract construction most recently re-stated by Lord Hoffmann in ICS v West Bromwich [1998] 1 WLR 896. Mr Mackie submitted that the factual matrix surrounding the making of the ISIS Agreement needed no special study because the words are clear. I agree, but read them contrary to his submission. If I were wrong in my view then I think the surrounding circumstances confirm my construction. They were as follows:
(1) This was a re-negotiation of an existing contract under which Beckman had an exclusive licence and an obligation to use reasonable endeavours to develop and exploit;
(2) The licensor was Isis, whose interest was in licensing the patents rather then exploiting them itself (and so had no interest in obtaining for itself any cross-licence);
(3) The licensor was complaining of lack of progress and a breach of the reasonable endeavours clause. The parties were not agreed whether there was a breach or not, but I am satisfied that it was a real matter of concern at least for the future – the Southern inventions were well off commercialisation despite the passage of 4 years in a very fast developing area of technology;
(4) The new agreement meant that Beckman was giving up the very considerable advantage of exclusivity;
(5) It was clear that Beckman were not being given a right to sub-licence (clause 9.1 making explicit that which in any event would have followed from the general law);
(6) Beckman along with others had become involved with a consortium prior to the re-negotiation. This was called the Genosensor Consortium, promoted by the US Government. It included academic institutions as well as commercial companies. Its purpose was wide but defined. It is set out in a substantial document and involved development of novel genosensor devices and other matters. The parties would have therefore been aware of a Consortium with a defined purpose.
29. None of these background matters suggest that a licence outwith (as the Scots would say) the purpose of a Consortium was in the minds of the parties.
30. Much the same result can be achieved if one reads Clause 9.2 as requiring the grant of a "licence" on reasonable terms but without reading the word "licence" as meaning a "licence for Consortium" purposes. I see no reason why a perfectly general licence to a Consortium member would be reasonable as between Isis and Beckman. Of course if Beckman could effectively grant a licence to a third party it might be able to obtain a substantial payment for itself – as indeed it has done here. But that would be irrelevant to any reasonableness of the licence to be granted by Isis to the Consortium member.
31. I also accept Mr Wilson's submission, that if the clause is not limited as he suggests, then it is too vague to be enforceable. He relied upon Scammell v Ouston [1941] AC 251. This is the classic law student case of a clause too vague to amount to an enforceable contract. It was for the purchase of a vehicle "on the understanding that the balance of purchase price can be had on hire-purchase terms over a period of two years". There were no standard or usual terms of a hire-purchase agreement. The position was in the words of Lord Russell at page 261 as follows:
"But, in my view of the numerous forms of hire-purchase transactions, and the multiplicity of terms and details which they involve, the respondents are faced with what appears to me to be a fatal alternative, namely either (1) this term of alleged contract is quite uncertain as to its meaning, and prevents the existence of an enforceable contract, or (2) the term leaves essential contractual provisions for further negotiation between the parties, with the same result."
32. Mr Mackie submitted that OGT was obliged to grant a reasonable licence and that the courts were well able to assess what is or is not reasonable in a variety of contexts. He relied upon a number of cases to show that the courts will strain to give effect to a commercial agreement that at first sight appears to leave out vital terms. In particular he relied on the following cases, Foley v Classique Coaches Limited [1934] 2 KB 1, Bates v Wyndhams [1981] 1 WLR 505, Beer v Bowden [1981] 1 WLR 522, Greater London Council v Connolly [1970] 2 QB 100 and Didymi v Atlantic Lines [1988] 2 Lloyd's Rep 108.
33. Some of these cases involved contracts which had been partly performed and of course there are particularly compelling reasons why the court will strive to uphold such contracts rather than hold that they amount to no more than an agreement to agree. In Foley for instance a garage was conveyed on the basis that the defendant would buy its petrol "at a price to be agreed by the parties in writing and from time to time". The Court of Appeal held that there was an implied term that the petrol would be a reasonable quality and price and that the agreement was not merely an agreement to agree.
34. I fully accept that the courts will strive to enforce what purports to be a carefully negotiated contractual obligation but there comes a point when it is impossible to do so as in Scammell. I think that is so here. Anyone with familiarity of patent licences knows that there is nothing remotely like standard or usual terms. Licences are nearly always negotiated on a one off basis. Even "boiler plate" clauses, such as accounting clauses, or clauses dealing with enforcement against third parties, come in a myriad of different forms. I pressed Mr Mackie as to what a reasonable licence would be. He said I was "not being asked in terms to decide precisely what a reasonable licence would be, although I was being asked to decide whether or not there had been an unreasonable withholding or delay of the licence". I do not see how I could do the latter without doing the former, nor do I see how I could form a view as to what the reasonable terms of the licence would be. This is not just a question of fixing a reasonable price or rent which can be done on evidence, this would be conducting the whole negotiation of a contractual licence for both sides. That the courts will not do.
35. I have to say that I have reservations as to the certainty of the term even on the basis that the licence is to be limited to Consortium purposes. I say no more about it. If there was properly a Consortium within the meaning of the Agreement then the form of the licence to be granted would essentially be that of the Isis/Beckman licence with modifications such as omission of the Consortium Clause, a clause concerned with a royalty holiday and some other matters.
36. I now turn to a question of fact. Was there a Consortium within the meaning of the licence and, if so, what was its purpose? The Consortium Agreement contains the following provisions:
"Affymetrix is in the business of developing, manufacturing and selling Array Chips (as that term is hereinafter defined), and has proprietary technology and intellectual property relative to the making and using of Array Chips and instruments for using and reading Array Chips.
BCI is in the business of developing, manufacturing and selling automated instruments systems for the bioresearch and human clinical diagnostic markets. BCI has developed technology relating to the manufacture of Array Chips and has access to proprietary chemistry used in the preparation of oligomers. BCI also has proprietary technology which can be applied to automating processes which use Array Chips.
The parties agree to cooperate, each with the other, to develop Array Chips and systems for using Array Chips, to accelerate market acceptance, uses and applications of Array Chips and to develop and commercialize Array Chip products, processes and systems.
ARTICLE 1.0 INTENT OF PARTIES AND DEFINITION
The intent of the parties is to cooperate to accelerate market acceptance, applicability and use of Array Chips in the bioresearch and diagnostics markets. To this end, the parties will enter and execute the various agreements and relationships contemplated by this Agreement and use their individual strengths, collectively, to jointly develop individual arrays, and instruments and systems for processing and using arrays. This Agreement shall be construed in accordance with this intent.
For the purposes of this Agreement the term "Array Chip" shall mean a series of polynucleotides arranged in an array on a substrate to perform quantitative or qualitative analyses.
ARTICLE 2.0 RESEARCH AND DEVELOPMENT OF ARRAY CHIPS
Affymetrix Research on Behalf of BCI – Affymetrix shall, in accordance with attached Exhibit A, perform Five Million Dollars ($5,000,000) in contract research and development services for and under the direction of BCI on Array Chip technology and products of interest to BCI.
ARTICLE 3.0 SYSTEMS FOR USING AND PROCESSING ARRAY CHIPS; COMMERCIAL COOPERATION
Immediate Objectives – Affymetrix shall, within ______ (_______) days of the signing of this Agreement complete and implement the design modifications of the scanners and other instruments and systems it currently sells for use with Array Chips to efficiently and effectively interact with BCI's [SAMÔ and SILASÔ laboratory information and management systems.]"
37. Now the definition of "licensee consortium" in Clause 9.2 requires that Beckman be a participant of a "group, consortium, joint venture, partnership, alliance or corporation" which has as "one of its principal objectives the development and commercialisation of products and processes covered by the claims of the licenced patents." Mr Mackie submitted that this had a very wide meaning but it seems to me the essential notion is one of a joint venture, one which has a joint objective. The words used are "its principal objectives", i.e. the objectives of the Consortium as such. So it is not sufficient if one member of the Consortium is "majoring" on development and commercialisation, it is the group whose purpose must be development and commercialisation. In this context I bear in mind again that sub-licensing is forbidden by Clause 9.1 – Clause 9.2 is a derogation from that general rule and should be construed narrowly.
38. There is no doubt that the acquisition of the Southern Licence was, in the words of Mr Grant, a "major driver" for Affymetrix, but passing the licence cannot be a "a principal objective" within the meaning of the Consortium definition. So what else was there? I think Mr Wilson is right and that I must look at each potential item of collaboration and see what it amounts to. The answer, taken individually or collectively, is not a lot – the acquisition of a licence by Affymetrix dwarfs all other items and is the only "principal objective".
39. The first item was the SAMI and SILAS collaboration referred to in Article 3.1. Upon examination this amounted to no more than an agreement to do what Beckman would do anyway in their own commercial interest, namely collaborate with any reputable manufacturer to ensure that Beckman equipment interfaced with that of the other manufacturer. Moreover, there was no real explanation as to what this cooperation had to do with the subject matter of the Southern patents. I do not think this collaboration amounts to a principal objective within the meaning of the Consortium Clause. The same goes for Article 3.2. Next there is the provision for Affymetrix to do contract research for Beckman. That research is to be on "array chip technology and products of interest to Beckman". Even assuming that an array chip as defined necessarily falls within the scope of the Southern patents I do not think this clause amounts to a principal objective. This appears to be entirely for the benefit of Beckman. Next there is provision for manufacture by Affymetrix of array chips for sale by Beckman. But this could have been done under the ISIS Agreement in any event because that agreement confers upon Beckman a right to have products made for it by third parties. Moreover, the provision is not especially directed at arrays covered by the Southern patents. Next it was suggested that there was a possible synergy between the kind of array partially developed by Beckman and those of Affymetrix. One was in effect the coarse filter finding amongst true positives a large number of false positives, and the other a fine filter sorting out the true from the false. It was never exactly explained why there needed to be any cooperation between the companies even if this were so. Nor was it shown that this was really being pursued seriously – on the contrary, both during the period of the Consortium Agreement and thereafter, nothing or virtually nothing has been done with the Beckman technology. It is difficult to see how any use of that technology became a "principal purpose" of the Consortium Agreement. It is noteworthy that the real money, $5m payable to Beckman, was payable not on the exchange of the information but only when OGT granted a licence. It seems to me to be fair to find the real principal purpose where the money was. There were very small royalties payable in relation to use of Beckman technology but they were trivial in comparison.
40. Moreover, there was a significant deliberate separation of the two parties. Under Art. 6 Affymetrix agreed not to sell its array chips to an end user who would use them on Beckman equipment. This is hardly consistent with anything in the nature of a common purpose.
41. In the result I am not satisfied that the so-called Consortium Agreement had as a principal objective the development and commercialisation of products covered by the Southern patents. That was just Affymetrix's purpose because they wanted a licence under the patents. It follows that OGT were not obliged to grant Affymetrix a licence whatever the terms of that licence might be.
The Assignment Point
42. It follows (subject to a point below) from the failure of the Consortium route, that the Assignment clause may come into play. Is Affymetrix a corporation which succeeded to Beckman's "business in products licenced hereunder?" Again this involves a question of construction. Before turning to it I summarise the facts:
(a) The clause formed part of the original ISIS Agreement. It was carried over into the amended agreement without modification;
(b) During the 4 years of the ISIS Agreement Beckman did some useful development work. Some patents emerged and doubtless there was some unpublished material too;
(c) However, there had been no commercialisation and Beckman had made no moves towards commercialisation;
(d) Between the amendment and the coming into effect of the Asset Purchase Agreement, Beckman did some more development work. There was a dispute as to how much effort they had made (after the amendment they were not obliged to make any effort). A document called "Southern In Situ Array Technology Development at Beckman Coulter Inc" dated December 1999 purports to set out the totality of the Beckman work on the Southern patents from inception. An impressive witness, Mr Coassin, who had been a key development worker at Beckman before leaving in May 1996, said he was "under-whelmed" by what had been achieved since he left. I accept that evidence. In so doing I bear in mind the evidence of Dr Osborne (the relevant Beckman lead scientist) that 4 people had worked full-time and about 8 people had worked part time on the "Genosensor project." How much of that work related to implementation of the Southern patents is not clear from the evidence, but some was. Dr Osborne at one point referred to some DNA work which he thought was directed to products within the scope of the Southern patents. Later this was corrected but his evidence about numbers of people working on the project was given when he was still under a misapprehension as to the scope of the patents. It seems that some of the work to which he was referred was irrelevant. The best assessment of the amount of the work done is that of Mr Coassin. True it was based on the December 1999 document, but that document was put together to set forth the work done;
(e) At the date of coming into force of the Asset Purchase Agreement (for present purposes on or after June 5th 1999) what Beckman actually physically had was some laboratory equipment (including 2 array makers), some computer software and some material in laboratory notebooks. They also had some physical arrays - a few thousand. But these were only laboratory samples. One was produced in evidence. I do not know why and can only think of what Koko said to his co-conspirators in Act 2 of the Mikado – it was done "to add a touch of verisimilitude to an otherwise bald and unconvincing narrative." It is noteworthy that a strategy memorandum of 27th May 1999 very probably (the evidence was rather unclear) discussed between the parties itself recognised that the sale of business might be held a "sham";
(f) Prior to the Asset Purchase Agreement, there is only slight evidence that an investigation was made by Affymetrix into what they were buying. Mr Norviel (Affymetrix's General Counsel) says there was a "due diligence" exercise at BCI. It was by a Senior Vice President, Operations and Technology who did not give evidence. No inventory of assets was made and the only detail given is that Dr Osborne (of Beckman) gave a presentation as to what Beckman's work consisted of. Affymetrix of course intended to get the benefit of the Isis Licence, and were willing to pay US$5.9m as a price, together with a further US$5m for "contract research and development" for Beckman. And they were clearly getting the Beckman patents (though apparently with no investigation as to their commercial significance or validity);
(g) Most (but perhaps not all) of the physical apparatus and material used specifically in research was passed over to Affymetrix. Quite what they received remains murky. No-one has fully unpacked it or made an inventory of what was received. Some laboratory array makers have been unpacked but not assembled. There seems to be a discrepancy between what Beckman say they sent and what Affymetrix think they received;
(h) Furthermore after the sale none of the Beckman scientists who had been doing such development work as there was seem to have even met the Affymetrix scientists who might be taking the work on – there was no "showing of the ropes." It is true that Beckman prepared the December 1999 document for a presentation to Affymetrix, but it seems to have been prepared pursuant to instructions from the legal department. It contains some (but not a lot) of detail of unpublished research work. The document is very far from something which would teach a recipient how to manufacture a product for sale or even properly put the recipient in the picture as to what had been achieved thus far by way of research;
(i) There was an offer of a seminar but it has not yet been taken up;
(j) Relevant Beckman patents were assigned, though no-one bothered to seek registration of the patents with the US patent office until a week before the hearing before me. I do not know whether these patents are, or are likely to be of any commercial value, supposing they are valid. The most that Mr Norviel says about them is that "they could be of value in the future". I do not even know whether they have equivalents outside of the USA.
As regards the Asset Purchase Agreement itself, it provides:
WHEREAS, Buyer desires to purchase particular assets (and assume the liabilities relating to such assets) of the Seller, as more fully described in this Agreement and Seller desires to sell, transfer and convey such assets and related liabilities to Buyer, all subject to the terms and conditions of this Agreement.
Definitions.
"Acquired Assets" means all of the right, title, and interest that the Seller possesses and has the right to transfer in and to the BCI Technology, the Equipment and the business associated herewith. Buyer shall not receive or acquire any assets of Seller other than the Acquired Assets.
"Array Chips" means a series of polynucleotides arranged in an array on a substrate to perform quantitative or qualitative analyses.
"BCI Technology" shall mean and is limited to the specific patents, copyrights, software concepts and know-how set forth in Schedule 1 and relating to creating and analyzing polynucleotide sequences in accordance with the methods claimed in U.S. Patent Nos. 5,436.327 and 5.700.637 and the U.S. and foreign counterparts and specifically includes all of the Seller's intellectual property rights acquired pursuant to the Isis Agreement.
"Equipment" shall mean tools and equipment related solely to the Acquired Assets.
3. Basic Transaction.
(a) Purchase and Sale of Assets. On the terms and subject to the conditions of this Agreement, at the Closing Seller shall sell, transfer, convey, and deliver to the Buyer, and the Buyer shall purchase, acquire and accept from the Seller all of its right, title and interest in the Acquired Assets. Buyer shall not acquire any other assets from Seller.
Purchase Price. Concurrently herewith, the Buyer agrees to pay to the Seller Five Million Nine Hundred Thousand Dollars ($5,900,000) payable in immediately available funds in United States Dollars by wire transfer in accordance with Seller's Wire Instructions.
43. As I have mentioned, the parties omitted Schedule 1 when they signed the Agreement. The Agreement was amended by a letter agreement of 28th August 1998. The letter included the omitted Schedule 1. The Schedule identifies a number of patents. So far as specific property is concerned, it contains the following fairly cryptic list:
Beckman Array Assets, June 19, 1998:
Instrumentation
2 original 'Southern Array Maker' for making arrays
2 new version 'Southern Array Maker' for making arrays
1 robotic system for hybridization and staining of arrays
2 CCD detection systems
1 MicroFab printing system for making arrays
Other
Miscellaneous channel plates for array fabrication
Image analysis software
Polypropylene forms for array substrate material
Fractogel solid supports for array substrate material
EMA and acyl fluoride chemistries.
44. I can now turn to the parties' submissions. Mr Richard Seymour QC on behalf of Affymetrix submitted that I should construe clause 16.2 "within the four corners" of the Amended Agreement. He began by referring to the recitals. The first recital describes Isis as a company "formed for the purpose of exploiting inventions and know-how developed at Oxford University". He submitted that this indicated merely an interest in licensing for an income stream. I do not accept that as a matter of construction: "exploiting" can cover any manner of exploitation. I accept in reality that both parties thought of Isis as essentially a licensing company. Next Mr Seymour referred to the description of Beckman as:
"LICENSEE is in the business of designing, developing, manufacturing and selling bioanalytical and diagnostic instrument systems and is interested in acquiring rights in and to the Licensed Patent Rights and related Technical information."
He submitted that the purpose of the grant of rights was to further the business described in the recital. So much is self-evident but it by no means follows that some far-from-completed research amounts to a business. Next he referred to the third recital which reads as follows:
"UNIVERSITY and LICENSEE have on April 17, 1991 entered into the Research and Development Agreement of which a copy is attached as the Schedule to this Agreement ("R & D Agreement") which provided for LICENSEE to fund certain research and development directed toward the commercialisation of the inventions included in Licensed Patent Rights. The parties have elected not to renew the R & D Agreement.
45. The un-underlined text is that of the original Agreement. The underlinings are the amendments of 1996. Mr Seymour submitted that, because the R & D Agreement had been directed towards commercialisation, the fact that it was deliberately not renewed indicated that commercialisation was not an object of the agreement but merely a possible outcome at some indefinite point in the future. I reject that submission. With or without the R & D Agreement the ISIS Agreement was concerned with commercialisation. You do not need patent licences for any other purpose. Mr Seymour also relied upon the third recital to draw a distinction between "commercialisation" and "business". I do not think that this kind of sophisticated reasoning was in the parties' minds at all. Incidentally, both words were used in the original agreement. For reasons I will come to shortly, Mr Seymour found himself obliged to submit that the word "business" had changed its meaning as a result of the amendment. This is inconsistent with his argument based on the third recital.
46. Next, Mr Seymour pointed out that the amended Agreement did not contain any kind of endeavours clause and that payment of royalties only started upon commercial sales. The only other requirement for payment was a $100,000 signing fee. So, Mr Seymour submitted, the first purpose of the agreement was to permit Beckman to develop products if it wanted to do so. So much is of course self-evident. Commercialisation was a long way off. Technically no licence was probably needed because experimental use is an exception to the scope of the infringement. But whether that was so or not, I do not think Mr Seymour gets any significant assistance from the position in relation to royalties.
47. Mr Seymour then turned to attack Mr Wilson's submission that there could only be a "business" when commercial sales had started. Clause 3.2 defines "royalty bearing product" as essentially "a product covered by a claim asserted in good faith of any of the Southern patents" which is "manufactured by or for and sold or otherwise used in the performance of the service on behalf of a third party for money by Licensee or by an Affiliate". Mr Seymour submitted that Clause 16.2 would say "business in royalty bearing products" rather than "business in products licensed hereunder" if Mr Wilson were right. I do not agree. There had to be a precise definition of "royalty bearing product" so that one knew exactly which products carried royalties. Clause 16.2 is not concerned with that sort of problem.
48. Next, Mr Seymour sought to draw comfort from Clause 3.9. This contains an elaborate definition of what counts as a sale. He submits that the parties obviously considered very carefully what amounted to a sale and thus, if they meant a "business in selling products" in Clause 16.2, they would have gone out of their way to say so. But again it was necessary for royalty purposes to define "sale" exactly and the fact that the parties did that throws no light on the concept of business transfer for the purposes of Clause 16.2.
49. Mr Seymour also relied upon the definition of Licensee Consortium, which referred to "commercialisation". He submitted that it would be odd for the parties to have both provided for the grant of a licence to a Consortium Member who might not have got as far as commercialisation, and yet to have prevented Beckman from assigning the licence unless and until they had themselves reached commercialisation. I do not really see why: the object of the grant to a Consortium member is limited to a Consortium purpose as I have held and so the member would be aiming at commercialisation for that purpose. The member would like to know in advance that it had a licence for commercialisation. Moreover the origins of the two clauses are quite different. I do not think that the Consortium definition assists in the construction of Clause 16.2. I do not think the draftsmen when they inserted it thought it had anything to do with the pre-existing Clause 16.2.
50. Thus far I have indicated that I do not accept Mr Seymour's submissions about the meaning of Clause 16.2 based upon supposed inferences to be drawn from other clauses concerned with essentially different aspects of the Agreement. Not to put too fine a point on it, I think they are all ingenious lawyers' afterthoughts.
51. A more formidable submission took the form of a question: why would it be objectionable to Isis if Beckman, having itself no interest in commercialising the inventions, were to transfer what it had achieved thus far to a third party? The result of such a transfer (if the third party was successful in bringing the inventions to market) is that the third party would have to pay substantial royalties to Isis. The trouble with that submission is that it applies equally to a clause permitting the Licensee to transfer its licence to any third party (at least of a respectable nature). The licence might as well be freely assignable or indeed sub-licensable. Yet it was expressly neither of these.
52. In the end Mr Seymour's submission is that the reference to "business" in Clause 16.2 is a shorthand cross-reference back to recital 2.2. This would make Clause 16.2 read as follows: "succeeding to Beckman's business of designing, developing, manufacturing and selling bioanalytical and diagnostic instrument systems so far as they relate to products licensed hereunder". But that does not assist Mr Seymour either. The extended definition of "business" proposed does not seem to me to cover merely some results of incomplete research and some laboratory equipment.
53. I think the true meaning of "business" in Clause 16.2 is simply that conveyed by the normal meaning of the word. No one would normally describe a few patents and some incomplete research work, even if the latter were modestly ongoing, as a "business". Still less would they describe the mere transfer of the rights to such, without any associated transfer of any actual activity, as a "business". Moreover where does the submission stop? Suppose Beckman had done even less research than they had – a few test-tubes and the odd notebook - would that amount to a "business" too? Could they have assigned after only a few months of research? If not, why not? The incomplete research is no more a "business" than a half-built factory and probably less.
54. So I think Mr Wilson is essentially right – the business begins broadly when the sales start. I do not think, however, that the line is that sharp. If a factory existed, and samples were on trial that might have been enough to constitute a business in embryonic form. To some extent the question is one of degree. What I am clear about however, is that whatever was passed, or supposed to be passed to Affymetrix did not amount to the transfer of a business.
55. I reach this conclusion on the language of the amended agreement as such. But there is a compelling further consideration. The clause was carried over from the unamended agreement. In the original Agreement it is fairly clear that "business" did not mean some research and no more. Isis had put its trust in Beckman to develop the inventions. Beckman were to use "reasonable endeavours according to its resources to manufacture, promote and sell". Neither side can have contemplated that by the use of Clause 16.2 the resources of some unknown party could be substituted for those of Beckman to get the product to market. It was intelligible for there to be a restraint on Beckman being able to sell just the results of some research when it was in them that Isis had relied to bring the product to market. If that is what they wanted to do they would have to ask Isis first.
56. Mr Seymour evidently felt the force of this point. Rather than attempt to refute it on the basis of the unamended Agreement, he suggested that it should be disregarded as an aid to construction. That flies in face of ICS v West Bromwich. The agreement from which the parties started surely forms part of the factual matrix – the background material available to the parties. Mr Seymour could not find an authority, which supported his proposition. What he found were authorities on whether deletions from printed forms could be used in construing contracts. They are not quite in point, but so far as they go they do not support him. For instance in Punjab National Bank v de Boinville [1992] 1 WLR 1138 at p. 1149 Staughton LJ said:
"So I would hold that, even if the parties to a concluded contract subsequently agree in express terms that some words in it are to be replaced by others, one can have regard to all aspects of the subsequent agreement in construing the contract, including the deletions, even in a case which is not, or not wholly, concerned with a printed form."
Applying that here means no more than that one can have regard to the whole of the amended Agreement to construe it but in so doing one can take into account the unamended Agreement. That is far from saying one disregards the latter.
57. More generally, where parties to a concluded agreement subsequently re-negotiate and amend it but decide to keep a clause unchanged, they must be taken to intend that clause to have the same meaning in their amended agreement as it had in the original. If they intend it to change its meaning the natural thing to do is by an explicit alteration. A change of meaning is not to be inferred simply by inference from other clauses, even if they are new. There may be an exception in an extreme case - where the "old" meaning is inconsistent with the re-negotiated agreement. But that is far from this case. This general rule is no different from that which applies to the construction of an amended statute – it is a basic rule of statutory interpretation that old provisions repeated in an amended Act continue to have the same meaning.
Other points
58. In the result I hold that OGT were not obliged to grant Affymetrix a licence pursuant to the Consortium clause and that Beckman's licence did not pass to Affymetrix as a result of the Asset Purchase Agreement. That is enough to dispose of this case, but I should deal briefly with further points argued in relation to the latter agreement.
The LLC Point
59. By Clause 3(b) of the Asset Purchase Agreement, the parties agreed to set up a joint venture company (the "LLC"). The details of the structure of this LLC were contained in an annex to the Agreement. Mr Wilson analysed the terms of that annex. His analysis went essentially unchallenged. I accept his closing submission that, if implemented, in substance the business stayed exactly where it was and Affymetrix got the licence. The LLC did not guarantee Affymetrix any management control over the business, nor any right to any profits because Beckman could control virtually everything that went on including whether or not it made any profit. In substance, if there was a transfer of a business to Affymetrix, it was being re-transferred to Beckman via the LLC Agreement, just leaving Affymetrix with a licence under the Southern patents.
60. The defendants' answer to this point was that the LLC had not been implemented and that there was no present intention to do so. Therefore, if and to the extent that the LLC arrangement would undo the assignment of a business, it is simply irrelevant. I accept that submission. But, in so accepting, I think the fact that the LLC was not set up is a further indication of the fact that no real business was ever assigned. For if it had been, Beckman, at least would have had a strong interest in the LLC being implemented so that it could enjoy the benefits of the business.
The Relevant Date Point
61. In his reply speech, Mr Wilson sought to raise a new point. It ran as follows:
(1) The Precedence Letter provided that if OGT refused to grant a licence within the time specified in paragraph 5.3 of the Consortium Agreement or an extension thereof agreed, then the parties shall terminate the Consortium Agreement.
(2) The period specified by paragraph 5.3 was six months from a written request.
(3) Such a request was made on 13th August 1998.
(4) There was no extension of time.
(5) So the six-month period expired on 13th February 1999.
(6) It is not alleged that there was a "refusal" in that six-month period.
(7) It follows that the machinery for termination of the Consortium Agreement never came into play and so the Asset Purchase Agreement never came into force.
62. I do not think it is open to Mr Wilson to take this point after the evidence is over. It depends, amongst other things upon an assumption that there was no extension of time agreed by the parties. They certainly conducted themselves as though an extension had been granted. Moreover, the precise effect of the clause, and in particular the operation of time limits, may have involved Californian law which was certainly a matter upon which Beckman and Affymetrix may have wished to give evidence. I also think the point is artificial. If both parties treated the trigger as not having been pulled then it is difficult to see why they should not be taken to have granted each other an informal extension.
Was there a refusal by OGT?
63. Mr Wilson also argued that the trigger was never pulled because it was never proved that OGT had ever refused to grant the requested licence under reasonable terms and conditions. For the reasons I have already given I think this is a hopeless point having regard to the special definition of "reasonable terms and conditions" in the Precedence Letter. Of course in principle OGT were willing to grant a licence to Affymetrix. Indeed they probably still are. Notwithstanding the fact that they have started infringement proceedings there may be a negotiated outcome including a licence; adapting von Clausewitz, litigation is the continuation of negotiation by other means. But that is not what the Precedence Letter was about: it was about what amounted to a practical refusal – an impasse. And there certainly was that, sensibly brought to a head by OGT in issuing these proceedings.
Did the parties have to do anything to terminate the Consortium Agreement?
64. The Precedence Letter says that following the refusal "the parties shall ... terminate the Consortium Agreement". Mr Wilson submitted that the parties actually had to do something to terminate the Consortium Agreement, even though the Precedence Letter is silent as to what should be done. He says the clause left it open for the parties to agree a non-termination and that there would be no automatic termination following a refusal.
65. Ex-Chief Justice Lucas gave evidence on the point. At first he seemed to be of the opinion that a notice of termination was necessary before the termination would be effective, but when pressed he said in response to my question as to what the parties had to do to terminate the Consortium Agreement:
"I am not sure they have to do anything except agree between themselves that as far as they are concerned, their licensing conditions have not been met, have been refused and that they belong to the Asset Purchase Agreement."
His final position was that no formal step had to be taken.
66. I accept that evidence. I think the phraseology of the Precedence Letter viewed from a business sense is that it was the refusal by OGT to grant a licence which was the triggering event. It follows from the Precedence Letter that the Consortium Agreement was replaced by the Asset Purchase Agreement. So, from the refusal onwards (i.e. from the commencement of proceedings), the Asset Purchase Agreement came into effect.
What was the effect of the letter of 5th June 1999?
67. The letter purports to impose conditions upon the coming into effect of the Asset Purchase Agreement. There was a dispute as to whether, given the acceptance of those conditions, there was a concluded contract between the parties. Points were made on the basis that one of the conditions (return to status quo) was impossible of fulfilment and the rule of Californian law requiring that there be a real consideration for a binding contract. Affymetrix said there was no contract, whereas OGT contended otherwise. I am bound to say that I do not think it matters one way or the other. If there was no contract then the Asset Purchase Agreement was implemented by virtue of the refusal and the operation of the Precedence Letter. If there was a contract then, notwithstanding the conditions of the contract, the parties implemented the Asset Purchase Agreement. Whether, if I were wrong on the Consortium point, they can somehow revert to the Consortium model is not necessary to decide; though it would seem difficult to do so without a fresh agreement.
68. I am conscious that in this already over-long judgment there are a number of minor issues, sub-issues and quibbles with which I have not dealt expressly. Nor have I referred to some of the witnesses and most of the evidence, written and oral. I do not find it necessary to do either.
69. I will hear Counsel as to the appropriate Form of Order and as to what procedural steps should now be taken in relation to these proceedings for the future.
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