Crisalis International Pty Limited v C2 Water

I am not satisfied that the Register should be updated under s191A(1) or that I should make the Declaration requested by Crisalis International Pty Limited under s191A(2). Subject to appeal, the patent remains in the name of C2 Water (SPV) Pty Limited. I award costs according to Schedule 8 against Crisalis International Pty Limited.

1. This decision relates to a request, filed on 13 December 2023 by Crisalis International Pty Limited ("Crisalis / the Requestor"), for the Commissioner to either rectify the Register under s191A(1) or to make a declaration under s191A(2), to the effect that Crisalis should be recorded on the Register as the owner of Australian patent number 2014271193 ("the Patent").
2. The named patentee, C2 Water (SPV) Pty Limited ("SPV / the Patentee") contested this request as per s191A(4), and the matter was heard by videoconference on 12 February 2025. The evidence proffered by the parties consists of:
   • A first declaration by Dr Chris Barber ("Barber-1") dated 13 December 2023, and exhibits CB1-8
   • Declarations by Chris Dawson ("Dawson") and Venn O'Neill ("O'Neill") dated 15 April 2024 with respective exhibits CD1-5 and VO-1
   • A second declaration by Dr Barber ("Barber-2") dated 12 June 2024

1. Section 191A of the Patents Act 1990 provides the Commissioner with the ability, and sometimes the obligation, to rectify the Register of Patents. Subsection (1) is a discretionary provision that allows the Commissioner to do so of his own motion if he is satisfied that any of the following is the case:

(1) The Commissioner may rectify the Register if the Commissioner is satisfied, on the balance of probabilities, whether on application or otherwise, of any of the following: > > (a) the omission of an entry from the Register; > > (b) an entry made in the Register without sufficient cause; > > (c) an entry wrongly existing in the Register; > > (d) an error or defect in an entry in the Register.

2. Subsection (2) is not discretionary - it requires the Commissioner to act on a person's application if satisfied that the Register does not accurately reflect entitlement to a patent:

(2) The Commissioner must, on application, make a declaration as to a person's entitlement to a patent, or a share in a patent, if the Commissioner is satisfied, on the balance of probabilities, that the Register does not properly record a person's entitlement to a patent, or a share in a patent: > > (a) because the patent, or a share in the patent, was granted to a person who was not entitled to it; or > > (b) because the patent, or a share in the patent, was not granted to a person who was entitled to it; or > > (c) for any other reason.

3. Subsection (3) then provides that if the Commissioner makes such a declaration he must amend the Register, and subsection (4) provides the parties in the dispute with a right to be heard. As per subsection (6), decisions under s191A are appealable to the Federal Court.
4. Although Crisalis's request mentions both s191A(1) and (2), subsection (2) is more germane to the issue. If I am satisfied on the balance of probabilities that Crisalis is entitled to the Patent (or a share in it) I am obliged to make a declaration and rectify the Register accordingly. If not, I am unable to take any action under either subsection.

1. The Patent, directed to improvements in the desalination and processing of bore water, was granted on 6 August 2020 in the name of Crisalis - a private company of which the sole inventor, Dr Barber, is a director.[1] Dr Barber had had a long standing collaboration with a second Chris - Mr Dawson - with the two of them being directors of another private company, C2 Water Pty Limited, which had incorporated in 2013 with the intent to commercialise the IP held by Crisalis.[2]
2. It would appear that C2 Water had difficulties in acquiring investment capital, and on the advice of Mr O'Neill, SPV was incorporated as a special purpose venture on 4 April 2022.[3] It would appear that the intention of the directors of SPV was that it would hold the Crisalis intellectual property and, as a "clean skin" venture, would be more attractive to investment capital.[4]
3. By late 2022, it seems to have been agreed that Crisalis would transfer the Patent to SPV and would receive a payment of $1.9 million as compensation. An IP transfer agreement (exhibit CB-1) was drawn up by SPV's lawyers and was executed, apparently in haste,[5] on 14 December 2022. This agreement specified, inter alia, a "Completion date" of 31 January 2023 (which could be varied by agreement) upon which the IP (including the Patent and associated know how) would be transferred to SPV and payment would be made. Nevertheless, it would seem that all parties were aware when the agreement was signed that SPV had no assets and the money to pay the transfer fee would have to come from investment or contract income that had not, at the time of signing, yet eventuated.[6]
4. January 2023 came and went, and it is common ground that no transfer payment was made by SPV to Crisalis. Neither was any alternative completion date agreed.[7] Throughout 2023, relationships between Crisalis and SPV appeared to deteriorate, with Dr Barber resigning from the board of SPV on 23 August 2023.[8] Crisalis communicated its intention to terminate the transfer agreement on 28 August 2023.[9] While several rounds of correspondence were taking place between Crisalis and SPV, SPV informed IP Australia of the existence of the transfer agreement on 25 October 2023 and the ownership of the Patent on the Register was duly updated to SPV the next day.
5. On 7 November 2023, Crisalis sent a request to SPV to reverse the transfer of ownership[10] within one week. One month after the expiration of that deadline, Crisalis initiated the present s191A proceeding.

1. Although there appears to be little disagreement between the parties on the events leading up to the present dispute, there is significant divergence between them on the legal status of the Patent, and this in turn derives from fundamental differences as to how the terms of the transfer agreement should be understood.
2. I understand Crisalis's position to be that because no payment has been made, the transfer of intellectual property rights has not yet taken place, and that the agreement has now been terminated. According to Crisalis's interpretation of the agreement, the transfer of intellectual property is contingent upon the payment of the assignment fee, and SPV has never owned the Patent.[11]
3. In contrast, SPV's position is that the assignment of the intellectual property rights was effected as of the Completion Date of 31 January 2023, simultaneously with SPV incurring a debt or obligation to pay Crisalis the transfer fee.[12] SPV submitted that the payment of the transfer fee was not a "condition precedent" to the contract;[13] that termination only releases the parties from obligations in the future and not events that have already occurred;[14] and that although rescission of a contract can allow the parties to be placed in the position they were before entering the contract, there is no suggestion that the conditions for rescission have been enlivened in this case.[15]
4. Indeed, Crisalis has not submitted that the contract should be rescinded. It therefore seems to me that the dispute turns on the question of whether assignment of the Patent was contingent on payment of the transfer fee (in which case Crisalis would be the true owner) or not (in which case SPV is in fact the owner).

1. Resolution of this dispute therefore relies on construction of the agreement itself. In general, the effect of a contract is taken from the plain meaning of its terms. However, in case of ambiguity it can be appropriate to refer to contemporaneous evidence to assist in interpretation.[16]
2. The agreement commenced on 14 December 2022, being the date of execution.
3. The agreement specifies a "Completion date" of 31 January 2023 "or such other date as may be mutually agreed by the Parties". Notably there is no mechanism for specifying how such agreement could be reached and recorded. Although it is common ground that no other date was in fact agreed, it is for example ambiguous as to whether an agreement to vary the completion date after the completion date would have had retroactive effect.
4. Clause 2 of the agreement specifies assignment of intellectual property rights. The entire clause is subject to the chapeau: "Subject to the terms and conditions of this Agreement, as and from the Completion Date". The most relevant subclause is 2(a) "[As and from the completion date] The Assignor hereby assigns, transfers and releases to and the Assignee hereby agrees to purchase and accepts on the terms stated here, all of the Assignor's rights, title and interest to and in the Intellectual Property Rights...".
5. Clause 4 relates to payment.[17] Subclause (a) states that "In consideration for the Assignor's transfer of the IP Rights, the Assignee will, on the Completion Date pay an assignment fee ...". Subclause (b) states that "[t]he Assignor hereby acknowledges receipt of the Assignment fee in full and final settlement of the purchase by the Assignee of the IP Rights". This seems prima facie absurd - because on the date of signing the Assignor could not acknowledge receipt of a payment that was not due for another seven weeks. Crisalis's interpretation of this clause was that payment, when made, would be acknowledged as the full settlement.
6. Crisalis pointed to subclause 2(g) "[As and from the completion date] In the event that the assignments of transfers in relation to the Intellectual Property Rights have not been fully effected by the Completion Date then until such assignment or transfers are fully effect, the Assignor grants the Assignee and unconditional and irrevocable license ..." as providing a transitional license in the event that the assignment fee had not been paid by the Completion Date. I have difficulty in agreeing with this interpretation as there is no reference to the fee in this clause. It rather appears to relate to possible delays in registration of the IP transfers. Alternatively, it could relate to knowhow which is included in the definition of the Intellectual Property rights at Schedule 1(a).
7. Perhaps Crisalis's strongest submission was that the assignment of intellectual property rights in clause 2 was subject to the chapeau "Subject to the terms and conditions of this agreement, as and from the Completion Date" whereas the obligation to pay the assignment fee in clause 4(a) was only subject to "on the completion date".
8. According to this submission, the assignments in clause 2 would only take effect if the other terms and conditions, including payment of the assignment fee, had been satisfied. This scenario seems to be what SPV identified as an alleged "condition precedent". However, I have difficulty in seeing how a payment that is agreed to take place on the Completion Date can be a condition precedent to an assignment of intellectual property on the same date, in the absence of specific wording to that effect.
9. Even if I were to find that this construction was genuinely ambiguous and I needed to refer to extraneous evidence, I would find the evidence of exhibit VO-1 to be quite pertinent. This exhibit contains legal advice received by Dr Barber on 5 December 2023. Under the heading Assignment Provisions, Dr Barber is advised that he may wish to request a redraft to the effect that "The assignment itself should be tied to the payment of the assignment fees". Under the heading Completion Date, Dr Barber is advised that the completion date be "redrafted to be that Completion Takes place when C2 Water (SPV) receives the cleared funds from the investor. We would recommend against assigning even whilst funds are in escrow, as if the rights are assigned and you are not paid, the patent rights do not automatically revert to you. Rather you would be limited to a breach of contract claim." According to my understanding this advice was correct.
10. Those advised changes were not made to the agreement, even though others (in particular "Assignment back to Crisalis in the event of Liquidation") were. It therefore seems clear that Dr Barber and Crisalis were content with the wording of the assignment which simultaneously assigned the Intellectual Property Rights on the Completion Date and created an obligation for SPV to pay the assignment fee.

1. I therefore find myself in agreement with SPV's position that the Patent was assigned to SPV on 31 January 2023, and that simultaneously SPV incurred a debt to Crisalis. Although Crisalis may well have a cause of action under breach of contract, such is beyond the power of the Commissioner. On the face of the evidence available, the current owner of the Patent is reflected correctly in the Register.

1. Costs typically follow the event. The scheduled costs in the Patents Regulations exist to provide some measure of compensation to the successful party for costs incurred during the proceeding. Although the Commissioner has from time to time varied cost awards there does not appear to be a compelling reason to do so here.
2. SPV has certainly acted reasonably insofar as I have found it to be the owner of the patent.
3. Crisalis has also not acted unreasonably insofar as it only commenced proceedings before the Commissioner one month after its final demand to SPV, consistent with the Communication and Dispute resolution clauses of the agreement at clauses 14 and 17.
4. I therefore award costs according to Schedule 8 against Crisalis International Pty Limited.

[3] O'Neill at 4, Dawson at 7, Barber-1 at 11

[5] Cf Barber-1 at 13 and CB-4 paragraph 4

[6] Barber-1 at 13, Dawson at 12, O'Neill at 7

[11] See e.g. the Requestor's written submissions ("RWS") 19 January 2025, at 83

[12] Cf the Patentee's written submissions ("PWS") 5 February 2025, at 19b and 50

[16] See e.g. Codelfa Construction Pty. Ltd. V. State Rail Authority of N.S.W. [1982] HCA 24 at 22-24

[17] Due to an apparent drafting error there is a second clause 4 relating to "Goods and Services Tax" which is not at issue here.