OBJECTION
A. No, the diffraction method is the same. The results are different."
62 So far from supporting the proposition for which Mr Martin contended, Professor Rae's evidence, properly understood and considered in whole (rather than by looking at individual questions and answers devoid of context) makes it clear that in his view the fact that the same method of analysis - x-ray diffraction - is used does not mean that the "process" is the same regardless of the identity of the material subjected to that process.
63 It is clear from the description of the second invention given in the PCT application that it is differentiated from a test based on the x-ray diffraction of human hair. Further, although from time to time the PCT application uses the phrase "biological material", it is intended to be limited specifically to x-ray diffraction of skin or nails. The abstract, which I have set out above, makes this clear. Equally, the descriptions of the process and its "preferred embodiments" are limited to the analysis of skin and nail material.
64 Again, although the claims that are said to define the second invention for the purposes of the PCT application relate to the exposure of biological material to x-ray diffraction, the following passages make it clear that what is being discussed is examination of changes in the ultrastructure of biological material comprising skin or nails.
65 It follows from what I have said as to the proper construction of the Australian patent and the PCT application that there is a fundamental difference in the processes that they disclose. The Australian patent relates to the exposure of one class of biological material - hair - to x-ray diffraction. The PCT application relates to the exposure of two different classes of biological material - skin and nails - to x-ray diffraction. They can only be the same process, or the latter can only be something designed to improve the performance, or broaden the applicability of, the former, if the former is construed as extending to all biological material.
66 There is another reason why the second invention cannot be considered to be something that improves the performance, or broadens the applicability, of the first invention. As Professor Rae's evidence to which I have referred made clear, there is more involved with each invention than subjecting the relevant biological material to x-ray diffraction. The results of that process must be compared with what I have called a "database" to see if a correlation can be observed between any disturbance that is noted in the diffraction pattern and a disturbance that is associated with a known genetic or pathological condition.
67 Thus, in relation to the first invention, there must be a database of accepted reliability that shows the characteristic disturbances to the diffraction patterns of human hair caused by the presence of a gene associated with, or the pathological condition of, breast cancer. That database could not be used to analyse the diffraction patterns, and disturbance therein, of human hair or nail. First, the diffraction patterns for hair, skin and nails differ each from the other. Secondly, the disturbances caused by the various genetic or pathological conditions differ each from the other. For the second invention to work, there must be not only a diffraction pattern for the specimen taken from the human subject, but also a reliable database enabling any disturbances in that pattern to be correlated to disturbances associated with the genetic or pathological conditions enumerated in the second application.
68 Of course, as the Australian patent makes clear, disturbances to the diffraction pattern of hair may indicate the presence of conditions other than breast cancer: namely, prostate cancer and Alzheimer's disease. There is thus a substantial overlap of the conditions that may be demonstrated by use of the two inventions. But that does not mean that both are the same invention, or that the second is, in general terms, an improvement of the first either as to performance or as to applicability.
69 The point can be illustrated relatively simply. If, after 11 November 2004, Dr James had carried out further research on the diffraction patterns of human hair, and had observed disturbances that correlated to other pathological conditions (by way of example, various kinds of heart or arterial disease), and established the degree of correlation to a point where it was accepted as providing a reliable indicator of the presence of such diseases, then there could well be a broadened applicability of the process described by the Australian patent. Again, if Dr James had carried out such further research, and had improved the analytic or predictive power of the correlations for breast cancer, prostate cancer or Alzheimer's disease, there might be an improvement to the performance of that process. But neither the second invention nor the process embodied in it is analogous to such an improvement or broadening; and it cannot be, unless, as Mr Martin submitted, the first invention is to be understood as encompassing the x-ray diffraction of all biological material and not just human hair.
70 That then leads to the second way in which Mr Martin put his case: that the second invention is a wholly new process that could be used to enhance or replace the first invention.
71 Essentially for the reasons that I have given, the second invention cannot be regarded as an enhancement of the first invention. That is because the first invention should be understood as restricted to the x-ray diffraction of hair. The whole point of the second invention, as is made clear in the PCT application, is that there are problems in the first invention when the hair is damaged (for example, to quote from the PCT application, damage "resulting from cosmetic hair treatment such as dyes, back combing and even brushing"). That is why Dr James advocated (again, quoting from the PCT application) "an alternative test...which may overcome at least some of the...disadvantages" of the first invention.
72 As the Australian Oxford Dictionary (2nd edition, 2004) makes clear, to "enhance" means to "heighten or intensify (qualities, power, value)" or to "improve (something already of good quality)". "Enhancement" should be understood to have a corresponding meaning: a heightening or intensification or improvement of something already in existence.
73 It is difficult to understand how a wholly new process could be an enhancement of the subject matter of the first invention, unless that subject matter is defined in extremely wide terms. In effect, the subject matter of the first invention would have to be defined as the detection of breast cancer (or prostate cancer or Alzheimer's disease) not just by the x-ray diffraction of hair, or indeed of biological material generally, but by any means whatsoever.
74 Mr Martin relied on the evidence of Professor Rae and Dr Crewther. I have referred to the relevant evidence of Professor Rae above. For the reasons that I have given, it provides no support for this aspect of Mr Martin's submissions.
75 The evidence of Dr Crewther on which Mr Martin relied was paragraph 17 of his affidavit in reply. That paragraph, which was admitted over objection "subject to relevance" on the basis that relevance would be dealt with in final submissions, reads as follows:
17. Further, if any one or more of the following statements made by Professor Rae in his affidavit are accepted as being correct:
(a) " That is, one cannot broaden the applicability of a process by using an independent process" (see paragraph 59 of the Rae affidavit);
(b) "If that is the case, then the process cannot be improved by the substitution of a different biological material, as the process remains the same" (see paragraph 53 of the Rae affidavit);
(c) "If the process is the whole invention, then there is no connection between the 2 inventions…" (see paragraph 54 of the Rae affidavit);
(d) "the process which is the invention is different" (see paragraph 46 of the Rae affidavit);
then it follows, in my opinion, that the new invention must employ a process which is "wholly new".
76 In my view, that paragraph has no evidentiary value. It is not expert evidence: it does not involve any application of Dr Crewther's undoubted expertise to a question in issue. It is, at the most, argumentative or in the nature of a submission. It assumes the acceptance of propositions with which Dr Crewther did not agree (as is made plain by earlier paragraphs in the affidavit) and provides an argumentative response, the basis of which, founded either in logic or in Dr Crewther's expertise, is not disclosed.
77 On reflection, the appropriate course would have been to reject the paragraph when objection was taken to it. However, that not having been done, it does not follow that I am bound to give it any weight; and I do not.
78 I do not accept that the "subject matter" of the first invention, or for that matter of the Australian patent, should be defined so widely. There are a number of reasons. The first is that it finds no support whatsoever in the language of the Australian patent. The second is that a definition of such width would have the effect that Dr James was required, after 11 November 2004, either to abandon any further work on the study of means for diagnosis of the pathological conditions in question (by using x-ray diffraction) or to hand the results of all that work to Fermiscan Australia. Of course, she would be entitled to be paid the consulting fees and additional consulting fees (the latter effectively a two per cent royalty on gross sales resulting from the exploitation of her intellectual property). But it would render meaningless the acknowledgment that her engagement was non-exclusive and that (subject to attempting to give first priority to Fermiscan Australia) she could provide her services where and to whom she chose.
79 As to "replacement": there was no evidentiary material that would enable the conclusion to be drawn that the second invention would or might replace the first. There was no evidence to show why the two could not sit together, with one or the other being used as circumstances might require. In this context, Dr James gave evidence in cross-examination that there were practical (mechanical or procedural) difficulties of undertaking analysis using the second invention compared to the first (T59.20-.25, T60.30-.33). That evidence was not challenged, and was not controverted by other evidence. In my view, Dr James sought to give accurate and truthful evidence and I have no hesitation in accepting what she said, either generally or in those particular answers. Those answers provide good reasons why a test based on the second invention would not always, or in all circumstances, replace a test based on the first invention. On the contrary, that evidence suggests that one or other of the tests might be used depending on a number of site-specific and patient-specific factors.
80 As I have noted, Mr Wood submitted that if an agreement to assign after -acquired property were to be enforceable in equity, it was necessary that the assignor should receive consideration for the promise to assign. In this case, he submitted, it was Fiberscan that had been the owner of the Australian patent and (under the assignment agreement, the assignor of the first invention and the associated rights). The consideration, or "purchase price" of $105,000 was payable by the assignee, Fermiscan Australia, to Fiberscan. Thus, he submitted, Dr James received no consideration for her promise (she, together with Fiberscan, was a promisor, assignor and grantor under cl 2.1) to assign, relevantly, any Improvements owned by her that came into existence after 11 November 2004.
81 The general position is that for a contract not under seal to be enforceable against the promisor, consideration must move from the promisee but not necessarily to the promisor. Mr Wood submitted, basing himself on a footnoted statement made obiter dictum by Davies JA in Jedhar P/L v Grosse [2004] QCA 167 at [2n1], that where what was sought was enforcement of a promise to assign after - acquired property, it was necessary for consideration to pass to the assignor.
82 It is not necessary to consider whether there is any such principle, or whether the observation by Davies JA in Jedhar, and the cases that his Honour cited, support the principle. It is sufficient to say that in this case the consideration comprised not only Fermiscan Australia's promise to pay $105,000 to Fiberscan (on the language of cl 2.1, itself a promise made to both Dr James and Fiberscan) but, more generally, all the promises made by Fermiscan Australia and Fermiscan to Dr James and Fiberscan in the assignment agreement.
83 Nor, having regard to the conclusions to which I have come on this question, is it necessary to consider the submissions as to the availability and form of relief.
84 In my view, Dr James is not contractually bound to assign the second invention or the PCT application to the plaintiffs.
Did Dr James disparage the plaintiffs or their employees?
Relevant terms of the deed of release
85 As the recitals to the deed of release make clear, its intention was to record the agreement of the parties to settle the proceeding commenced by the plaintiffs against Dr James in the Federal Court of Australia. That proceeding apparently related to certain information in the possession of Dr James. In cl 2.1 of the deed, she acknowledged that Fermiscan Australia was entitled to that information. By cl 2.2, Dr James agreed to meet officers of Fermiscan Australia, to discuss the information with them and to enable them to "apply" it. I set out cl 2.2:
2.2 Inspection to Documents and Computer Material
Forthwith after the execution of this Deed James will:
(a) make herself available and will meet with two executives of Fermiscan Australia Dr Peter French ("French") or Leon Phillip Carr ("Carr") or both of them as Fermiscan Australia directs in any particular case and faithfully and fully discuss the Information to facilitate all documentation to be revealed; and
(b) thereafter assist Fermiscan and Fermiscan Australia apply the Information as Fermiscan Australia may reasonably require from time to time.
Such meeting will unless Fermiscan Australia otherwise agrees take place in Sydney or other venue as agreed and Fermiscan Australia will pay James' reasonable travelling, accommodation and per diem costs (food and drinks) in connection therewith.
Once the documentation has been revealed to the mutual satisfaction of Fermiscan, Fermiscan Australia and James, the advance referred to in 6.1 shall be paid forthwith by Fermiscan Australia to James at her direction.
Pending the revealing of the information to the mutual satisfaction of Fermiscan, Fermiscan Australia and James, the advance shall be paid to the trust account of Gilshenan & Luton, Westpac Banking Corporation, Cnr Queen & George Streets, Brisbane, BSB: 034-000 Account No. 000516, within 3 days of the execution of this Deed which sum shall be held in trust.
Should any dispute arise as to whether the obligations of any party under Clause 2.2 have been or failed to have been discharged, the parties shall submit to a determination of an independent referee.
86 By cl 2.3, Dr James undertook to pay the First Amount and the Second Amount to which I have referred above. That clause reads as follows:
2.3 Payment by James
James agrees to pay Fermiscan Australia and Fermiscan jointly the sum of Seven hundred thousand dollars ($700,000) on the following terms:
a) Subject to clauses 2.4 and 6.3 below the sum of five hundred dollars ( "First Amount" ) will be received by Fermiscan Australia by deducting all Fees or Royalties payable to James and applying the same towards satisfaction of the First Amount as and when Fees or Royalties are payable to James as referred to in clause 4 of this Deed until the First Amount has been fully paid and satisfied.
b) The sum of two hundred thousand dollars ("Second Amount") which will only become payable by James to Fermiscan Australia and Fermiscan jointly in the event James commits a breach of the provisions of Clauses 2.2. and/or 5 of this Deed.
c) Fermiscan Australia is hereby irrevocably directed by James without any further consent, direction or authorisation being required to apply all Fees or Royalties payable to James towards satisfaction of the First Amount as and when Fees or Royalties are payable to James as referred to in clause 4 of this Deed until the First Amount has been fully paid and satisfied.
87 By cl 2.4, Fermiscan and Fermiscan Australia agreed (with limitations) not to sue Dr James in respect of those amounts:
2.4 Covenant Not to Sue
Fermiscan and Fermiscan Australian covenant with James they will not take or maintain any action against James in respect of the First Amount of the Second Amount unless James breaches clauses 2.2 and/or 5 of this Deed in which case the First Amount and the Second Amount will become payable forthwith.
88 Clauses 4 and 6 dealt with fees or royalties payable to Dr James, and an advance against them. So far as relevant, they read as follows:
4. Fees or Royalties
Fermiscan covenants with James that her entitlement to fees in the nature of royalties pursuant to clause 7.2 of the Consultancy Agreement is of full force and effect.
6. Advance Against Fees or Royalties
6.1 Advance
Subject to James complying with Clause 2.2(a) Fermiscan Australia will pay James the sum of One hundred thousand dollars ($100,000) ("Advance") as a non-refundable advance on account of Fees or Royalties and which advance is to be recouped by Fermiscan Australia deducting all Fees or Royalties payable to James and applying the same in repayment to Fermiscan Australia of the Advance until the whole of the Advance has been fully repaid.
6.2 Authority
Fermiscan Australia is hereby irrevocably directed by James without any further consent, direction or authorisation being required to apply all Fees or Royalties payable to James towards satisfaction of the Advance as and when Fees or Royalties are payable to James as referred to in clause 4 of this Deed until the Advance has been fully repaid and satisfied.
6.3 Cashflow
The repayment of the Advance is to be deducted from Fees and Royalties payable to James in priority to payment by James of the First Amount.
89 Clause 5 of the deed of release reads as follows:
5. Conduct
James covenants with Fermiscan and Fermiscan Australia and each of them that as and from the date of this Deed she will not disparage or make any statements or take any action which would:
(a) tend to injure or damage the reputation or standing of Fermiscan or Fermiscan Australia or their respective trades or businesses or any diagnostic tests offered or to be offered or made available by or through either of them; or
(b) tend to injure or damage the reputation or standing or call into question the abilities or capabilities of any of the respective Directors, officers or employees of Fermiscan or Fermiscan Australia.
The alleged disparaging material
90 The plaintiffs relied on a number of statements made by Dr James in the article submitted for publication in the International Journal of Cancer and in other documents. So far as the article is concerned, Mr Martin referred to a number of extracts. I do not propose to set them out in full.
91 The passages in the article to which Mr Martin referred noted that there were problems with the use of the first invention to diagnose breast cancer. Those problems related to "the appearance disorder rings which mask the BCDR". "BCDR" means "breast cancer diffraction ring": the characteristic disturbance caused by the breast cancer gene or pathology in the patient, and thus the key to the use of the first invention as a diagnostic tool. The article stated that "disorder is still a major problem with the marketing of this diagnostic test" and that "[t]he problems of disorder in the hair patterns caused by cosmetic treatments cannot be easily overcome".
92 Having made those points, the article stated, on a number of occasions and in quite emphatic terms, that "subject to further successful research outcomes", a diagnostic tool based on x-ray diffraction of material from nails offered considerable advantages, including that: