The application be dismissed.
2. The applicant pay the first and second respondents' costs of the application.
3. The first respondent's cross-claim against the applicant be dismissed.
4. The first respondent pay the applicant's costs of the first respondent's cross-claim.
5. The second respondent's cross-claim against the applicant be dismissed.
6. The second respondent pay the applicant's costs of the second respondent's cross-claim.
7. The second respondent's cross-claim against the third respondent be dismissed.
8. There be no order for the costs of the second respondent's cross-claim against the third respondent.
9. The second respondent's cross-claim against the first respondent stand over for a directions hearing for directions as to an assessment of damages based upon the first respondent's breach of his duty as a director of the second respondent and for misleading or deceptive conduct in contravention of the Fair Trading Act 1987 (WA) arising out of his non-disclosure to the second respondent of correspondence between himself and the Vice-Chancellor of the first respondent in 1999.
10. The first respondent pay the second respondent's costs of its cross-claim against him.
11. The directions hearing be fixed for 23 June 2008 at 9.00am or such other date as may be directed.
12. The first respondent's cross-claim against Dr Yan Chen be dismissed.
13. There be no order for the costs of the first respondent's cross-claim against Dr Yan Chen.
14. Any party against whom an order for costs has been made in the preceding orders is at liberty to file and serve written submissions on or before 8 May 2008 seeking a variation of the costs order.
15. Any party who wishes to respond to a written submission filed and served pursuant to the preceding order is to do so by filing and serving a written submission by 29 May 2008.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
[2]
Introduction
Introduction [1] - [20]
Statutory framework - The UWA Act [21] - [26]
The law making power of UWA - legislative history [27] - [34]
Statutory framework - The Patents Regulationsof UWA [35] - [44]
The Patents Regulations - a futile debate about promulgation [45] - [48]
Statutory framework - Intellectual Property Regulations [49] - [63]
The Intellectual Property Regulations - the promulgation debate [64] - [83]
Limitation on UWA's power to make regulations affecting
intellectual property rights [84] - [94]
Statutory Framework - The Patents Acts 1952 and 1990 [95] - [104]
Employee inventions and the Patents Acts 1952 and 1990
of Australia [105] - [107]
Employee inventions in the Patents Act 1949 and 1977
of the United Kingdom [108] -[111]
Employee inventions at common law - the United Kingdom
Authorities [112] - [130]
Employee inventors in other jurisdictions [131] - [143]
Employee inventors at common law - the Australian cases [144] - [157]
Application of general principles to university researchers [158] - [164]
Evolution and implementation of UWA's Intellectual Property
Policy - 1985/2002 [165] - [238]
UWA's Intellectual Property Committee - 1993/1996 [239] - [245]
Summary of findings about implementation of intellectual
property policy and regulations - 1985/2006 [246] - [247]
Legal consequences of the non-appointment of a Patents Committee [248] - [257]
Gray - professional history to 1980 [258] - [263]
Microspheres against cancer - 1948/1982 [264] - [276]
Gray commences microspheres research - 1980/1984 [277] - [301]
The DOX-Sphere concept [302] - [303]
Findings of fact on Sir-Spheres as at 1985 [304] - [305]
The Thermo-Sphere concept [306] - [307]
Targeted microspheres - research funding applications 1981/1984 [308] - [313]
Commencement of Gray's employment by UWA [314] - [319]
Gray's conditions of appointment [320]
The pleaded case about Gray's conditions of appointment [321] - [328]
Gray's administration of UWA Department of Surgery
February 1985/1987 [329] - [334]
Gray's publications - 1985/1987 [335]
Establishing the microsphere research program - 1985/1988 [336] - [344]
CSIRO/UWA DOX-Spheres collaborative research funding
application - April 1985 [345] - [349]
Ferric ions to bind Doxorubicin - Hodgkin's idea - 1985 [350] - [352]
C Jones' research on DOX-Spheres and SIR-Spheres - 1985/1988 [353] - [365]
The Thermo-Sphere conception -prior art - 1957/1985 [366] -[368]
The physics of hysteresis heating [369] - [378]
Gray initiates the Thermo-Sphere project -1986 [379] - [380]
Funding microsphere research generally - 1985/1988 [381]
Attracting post-graduate students - 1987 and following [382] - [383]
Gray's deals with CABR - May 1986/1987 [384] - [388]
Application to Lederle - December 1986 /May 1987 [389] - [390]
Gray meets Parfitt and prepares CABR proposal - 1987 [391] - [399]
CABR seeks advice about patentability - May 1987 [400] - [402]
Nicholas asks Gray to summarise DOX-Spheres research - 1987 [403] - [407]
Gray approaches Fauldings - June 1987 [408] - [410]
Gray writes to CABR about Thermo-Spheres - September 1987 [411] - [414]
Burton reports progress to UWA on vasocative agents
October 1987 [415]
Further commercial contacts - November 1987/May 1988 [416] - [419]
Clinical trials of SIR-Spheres - 1986/1988 [420] - [428]
Increasing use of SIR-Spheres in patient treatment - 1990s [429] - [434]
Attempts to develop hollow SIR-Spheres - 1989/2001 [435] - [443]
Kelleher and Codde join research group - 1987/1988 [444] - [447]
Gray approaches Street about Thermo-Spheres - 1987 [448] - [450]
CSIRO engaged on Thermo-Spheres - October 1987/September 1988 [451] - [465]
Gray lodges Thermo-Sphere Provisional Specification PJ0371
September 1988 [466] - [473]
Thermo-Spheres left to Parfitt - September 1988 [474]
Uniscan "hands back" DOX-Spheres - September 1988 [475] - [476]
Thermo-Spheres proposal for Uniscan - October 1988 [477] - [482]
Burton and Gray present and publish - 1985/1995 [483] - [486]
Chen - employment history with UWA and RPH
September 1989/October 1994 [487] - [493]
S Jones' employment with UWA and Sirtex - 1989/2006 [494] - [505]
S Jones' works on hyperthermia - 1989/1994 [506] - [539]
S Harrison and rotational hysteresis - 1994 [540] - [547]
Chen on DOX-Spheres - 1989/1994 [548] - [577]
McCulloch on DOX-Spheres work - 1991/993 [578] - [592]
LCI established - 1989/1990 [593] - [613]
CRI established - January 1991 [614] - [615]
Burton encounters resistance and resigns - 1989/1993 [616] - [621]
Chen salary dispute - 1990/1991 [622] - [636]
Irvine complaint - April 1992 [637] - [638]
Michael Report - October 1992 [639] - [647]
Memorandum of Understanding - LCI and RPH Medical
Research Foundation - November 1992 [648] - [650]
LCI applies for affiliation - 1991/1992 [651] - [660]
Faculty defers affiliation - January 1993 [661] - [666]
Jillean Winter/CRI - 1993 [667] -[668]
Chen/Gray DOX-Spheres provisional application PN2492
18 November 1993 [669] - [677]
Gray-SIRT-2 applications 54724/94 - 21 January 1994 [678] - [679]
Revised LCI affiliation application - 1993/1994 [680] - [683]
LCI/UWA affiliation approved - July 1994 [684]
International Application DOX-Spheres PCT/AU94/00708
17 November 1994 [685] - [687]
Gray-Thermo-Spheres-1 Application PN0213 - 23 December 1994 [688]
Gray and Robson - 1994/1997 [689] - [692]
The Rindos Affair - 1993 [693] - [695]
Gray begins commercialisation - 1994 [696] - [701]
Gray meets Barber - 11 May 1994 [702] - [704]
Gray and Shervington meet Barber - 15 August 1994 [705] - [711]
Gray and Shervington meet Stokes and King - 17 August 1994 [712] - [713]
The "Newco" Board meets - October 1994 [714] - [722]
Gray phones Gale - December 1994 [723] - [724]
Chen and CRI Board 1992/1994 [725] - [726]
Chen and DOX-Spheres PCT application - November/December 1994 [727] - [737]
International Application for SIRT-2 filed - 20 January 1995 [738]
Williams at CRI -1993/1996 [739] - [750]
Williams at CACS - 1996/2000 [751] - [753]
Incorporation of Paragon Medical - April/May 1995 [754] - [759]
Gray deals with ANSTO - February/June 1985 [760] - [769]
Paragon Medical approaches Tolhurst - June 1995 [770] - [772]
Paragon Medical board meeting - August/September 1995 [773] - [774]
The Tolhurst Information Memorandum - September 1995 [775] - [779]
Affiliation Agreement negotiations - August 1994/October 1995 [780] - [802]
The Affiliation Agreement - 30 October 1995 [803] - [807]
Paragon Medical board meetings - October 1995/February 2006 [808] - [814]
Gray's directorship - Gale's response - November 1995/
January 1996 [815] - [824]
Paragon Medical approach to Western Australian Innovation
Support Scheme - February 1996 [825] - [829]
Paragon Medical board meeting - 28 February 1996 [830]
Gray/Hall conflict at RPH - the CACS proposal - December/
February 1996 [831] - [838]
Harrison - rotational hysteresis research 1996 [839] - [850]
Dane/Gorn/CRI/Sirtex - February 1996/September 2003 [851] - [856]
The Gray Relocation Agreement - 29 February 1996 [857] - [858]
The CACS Agreement - 1 March 1996 [859] - [867]
The CACS Advisory Board [868] - [869]
Gray relodges Thermo-Spheres-1 Provisional - 10 May 1996 [870] - [872]
Paragon Medical board meetings - 8 and 29 May 1996 [873]
Gorn's fund raising attempt - 1996 [874] - [882]
Paragon Medical meets Panaccio - mid 1996 [883] - [897]
Gray meets Lennon 14 July 1996 [898] - [900]
Gray writes to Barber - 26 July 1996 [901[ - [909]
Intellectual property clearances pursued - September/October 1996 [910] - [911]
Gray and Panaccio - September/October 1996 [912] - [920]
Gray meets Lennon - October 1996 [921] - [925]
Chen and US DOX-Spheres patent assignment - October/
December 1996 [926] - [929]
The Nomura/JAFCO offer - January 1997 [930] - [932]
Gray meets Lennon again - 14 January 1997 [933] - [943]
The Gorn and Barber letters - January 1997 [944] - [972]
Gorn's discussion paper - January 1997 [973] - [975]
Paragon Medical's SIR-Spheres price increase - January 1997 [976] - [978]
Harrison/Jones and Theremo-Spheres patent - January 1997 [979] - [990]
S Jones on hyperthermia prior art - 6 February 1997 [991] - [993]
Barber/Gray re Paragon Medical directorship - February/
March 1997 [994] - [996]
Dr Gray moves to a 0.3 appointment - March 1997 [997] - [998]
Robson demands payment for damaged equipment
February/March 1997 [999] - [1008]
Jones/Cox re MHE figures in Thermo-Spheres-1
-April 1997 [1009]-[1010]
Cherry/Panaccio - Thermo-Spheres patent - 27 March 1997 [1011]-[1013]
The Paragon Medical/Nomura/JAFCO transaction
1 May 1997 [1014]-[1016]
Asset Purchase Deed ASPL to new Paragon Medical
1 May 1997 [1017]-[1024]
Asset Purchase Deed ASPL to new Paragon Medical
29 April 1997 [1025]
Subscription and Shareholders' Agreement - 1 May 1997 [1026]-[1034]
Employment Agreement Gray/Paragon Medical - 1 May 1997 [1035]-[1036]
Services Agreement S Jones/CRI/Paragon Medical [1037]-[1041]
Gray/Paragon Medical - Assignment of intellectual property rights
1 May 1997 [1042]-[1045]
Robson complains to ACC re Gray - May 1997 [1046]-[1054]
Paragon Medical treats ACC inquiry as Gray's problem
June/July 1997 [1055]-[1057]
Gray/CRI assignment to Paragon Medical - 28 October 1997 [1058]
Harrison and CACS confidentiality issues - July 1996/October 1997 [1059]-[1068]
Robson demands Gray resign Paragon directorship - 19 November 1997 [1069]-[1075]
Raffaele Cammarano - 1997 [1076]-[1079]
Students/CACS/intellectual property - ongoing issue
March 1998/July 1999 [1080]-1089]
P Moroz - 1998/2002 [1090]-[1096]
Paragon Medical news release - 12 November 1998 [1097]-[1098]
ACC refers Robson complaint to UWA - May 1999 [1099]
Key/Robson - 10 June 1999 [1100]-[1101]
Schreuder/Gray - 17 June 1999 [1102]
Schreuder/Gray correspondence - 28 September 1999 [1103]-[1104]
Key/Sirtex Website - 30 September 1999 [1105]
Schreuder/Gray - 11 October 1999 [1106]-[1107]
Gray/Schreuder - 17 November 1999 [1108]-[1109]
UWA's knowledge - November 1999 [1110]
Sirtex's knowledge of Gray/UWA 1999 correspondence [1111]-[1115]
Sirtex public float commences [1116]-[1118]
Paragon Medical due diligence - 2000 [1119]-[1171]
What Sirtex Knew - July 2000 [1172]-[1174]
Gray leaves CACS - April 2000 [1175]-[1180]
The Sirtex Prospectus - July 2000 [1181]-[1198]
Barber declines to act on Sirtex Prospectus - July 2000 [1199]-[1204]
Williams raises Sirtex concerns - September/November 2000 [1205]-[1210]
Williams' Discussion Paper - December 2000 [1211]-[1213]
CACS Advisory Board - 25 January 2001 [1214]-1215]
Williams/CRI litigation - 2001/2002 [1216]-[1225]
Boyce - Sirtex director - 2002 [1226]-[1227]
S Jones/Gray and laboratory books - 2002/2005 [1228]-[1246]
UWA investigates Sirtex IP - 2002 [1247]-[1258]
Events preceding UWA's letter of demand - September/October 2004[1259]-[1264]
Boyer - expert evidence on Gray patent applications [1265]-[1276]
Boyer - public availability of patents databases [1277]-[1282]
Chen/UWA coordination - 2003/2004 [1283]-[1303]
UWA's letter of demand to Sirtex - 26 October 2004 [1304]
Timing and purpose of letter of demand [1305]-[1314]
UWA/CRI settlement - 22 February 2007 [1315]-[1319]
Sirtex corporate history - Wong [1320]-[1329]
UWA's causes of action against Sirtex - some defined terms [1330]
UWA claims against Gray for breach of contract [1331]-[1332]
UWA claims against Gray for breach of fiduciary duty [1333]-[1334]
UWA claims against Sirtex for knowing involvement in
breaches of fiduciary duty [1335]
Gray's cross-claim against UWA for unjustifiable threats,
misleading or deceptive conduct and defamation [1336]
Sirtex's cross-claim against UWA for misleading or deceptive
conduct and unjustifiable threats [1337]
Sirtex's cross-claim against Gray for breach of warranties [1338]
Sirtex's cross-claim against CRI for misleading or deceptive
conduct and breach of warranty [1339]
Gray's cross-claim against Chen [1340]
Pleading amendments - reserved rulings [1341]-[1346]
UWA "interests" and "property rights" in relation to inventions [1347]-[1356]
Implications from Dr Gray's contract of employment [1357]-[1367]
Dr Gray's work at RPH [1368]-[1369]
Agreements said to affect Dr Gray's contractual obligations [1370]-[1392]
Dr Gray's defences based on the Affiliation and CACS Agreements [1393]-[1397]
Agreement 5 March 1997 [1398]-[1400]
Modification of the Regulations [1401]
Inventions for treatment of the human body [1402]-[1409]
The development and/or discovery of inventions [1410]-[1418]
Ideas, discoveries and inventions [1419]-[1427]
Identifying inventions for the purposes of entitlement in England [1428]-[1441]
Conclusion on general principles [1442]-[1443]
SIRT-Spheres inventions [1444]-[1447]
SIRT-1 Invention - microspheres bearing Yttrium [1448]-[1453]
The SIRT-1 PCT application claims [1454]
SIRT-1 invention - UWA submissions [1455]-[1465]
SIRT-1 invention - Dr Gray's submissions [1466]-[1467]
SIRT-1 - conclusions [1468]-[1470]
SIRT-2 invention - hollow Yttrium microspheres [1471]-[1485]
SIRT-2 - conclusion [1486]
DOX-Spheres [1487]-[1493]
The DOX-Spheres provisional specification [1494]-[1498]
DOX-Spheres - contentions and conclusions [1499]-[1507]
Thermo-Spheres-1 invention [1508]-[1510]
Thermo-Spheres-1 provisional specification [1511]-[1514]
Thermo-Spheres-1 - contentions and conclusions [1515]-[1537]
Thermo-Spheres-2 invention [1538]-[1544]
Thermo-Spheres-3 inventions [1545]
Thermo-Spheres-3 - contentions and conclusions [1546]-[1550]
UWA contract claims against Gray [1551]-[1562]
Claims for breach of fiduciary obligations by Dr Gray [1563]-[1567]
UWA's claim against Sirtex [1568]-[1570]
Sirtex cross-claim against UWA [1571]-[1584]
Gray's cross-claim against UWA [1585]-[1599]
Sirtex' cross-claim against Gray [1600]-[1613]
The Sirtex/CRI cross-claim [1614]-[1615]
Gray/Chen cross-claim [1616]-[1618]
Conclusion [1619]
[3]
WESTERN AUSTRALIA DISTRICT REGISTRY WAD292 OF 2004
[4]
REASONS FOR JUDGMENT
Introduction
1 In 1985 the University of Western Australia (UWA) appointed Dr Bruce Gray as its Professor of Surgery. He was a fulltime employee of UWA and remained as such until March 1997 when he changed to a fractional 30% appointment focussing on clinical work at the Royal Perth Hospital (RPH). In his time as a fulltime employee, Dr Gray was required by his terms of appointment to teach and to conduct and stimulate research. The terms incorporated the Statutes and regulations of UWA including its Patents Regulations.
2 At the time of his appointment Dr Gray had been engaged for some years in researching the treatment of liver cancer by using microspheres, in the general size range of 10 to 50 microns, injected into the blood vessels of the liver to deliver anti-cancer therapies to the sites of tumours. Microspheres were directed to those sites with the aid of a vasoactive agent which temporarily promoted blood flow into the tumour blood vessels at the expense of blood flow into normal liver tissue. It was this line of research that Dr Gray pursued at UWA along with other researchers, including Dr Mark Burton, who had worked with him previously at Melbourne University.
3 In the years that followed Dr Gray's appointment work was done on three microsphere technologies. One was known as SIR-Spheres, the acronym SIR standing for Selective Internal Radiation. It was designed to transport a short lived radioisotope to irradiate cancerous tissue. A second class, DOX-Spheres, was designed to transport and release, in a controlled way, anti-cancer drugs and particularly doxorubicin. A third technology, Thermo-Spheres, involved the delivery of microspheres of magnetic material into the cancerous tissue and heating them by the external application of an alternating or rotating magnetic field. It relied upon a phenomenon known as "magnetic hysteresis". Provisional applications for various patents and international applications under the Patent Cooperation Treaty were made in respect of inventions said to have been developed in relation to the various technologies. Various applications were made over a period of years.
4 The history of Dr Gray's employment at UWA, the people with whom he worked and the work they carried out, the conflicts he had with other academics and administrators at UWA, his attempts to secure funding from external sources and ultimately to commercialise the technologies are set out in this judgment in an extensive history which covers a period of over 20 years.
5 By 2000 Dr Gray was a director of Sirtex Medical Limited (Sirtex), a publicly listed company which was floated in that year to commercialise and market the technologies. In 1997 the company had acquired from Dr Gray and the Cancer Research Institute (CRI), a body set up to provide support for his research work, intellectual property rights arising out of the inventions said to be associated with the technologies. In the late 1990s Dr Gray's employer, UWA, was aware of his involvement with an external company and the prospect of commercialisation of the technologies. Its officers formed the view, certainly by 1999, that UWA might have some claim on the intellectual property rights being used by the company. A letter from the Vice-Chancellor of UWA, Professor Schreuder, to Dr Gray in 1999 made that clear. It was a letter which Dr Gray did not disclose to Sirtex. UWA was also aware in 2000 of the float of the company, its prospectus and that it acquired intellectual property rights in respect of the targeted microsphere technologies which it proposed to commercialise. The Pro Vice-Chancellor (Research) took a decision that any investigation into whether UWA had an interest in the intellectual property would be difficult because of its "messy lineage". He said at the time that he hoped that if Dr Gray made a lot of money out of the float he might donate a Chair of Surgery to UWA. He concluded that the risks of legal action were not outweighed by the likely benefits. Ultimately, for reasons which appear in the judgment, UWA decided to initiate proceedings to vindicate its asserted rights to the intellectual property associated with the microsphere technologies late in October 2004. In the meantime many people had invested and traded in Sirtex shares and it had expended money on the development of the technology.
6 In October 2004, UWA sent letters of demand to Dr Gray and to Sirtex alleging that the inventions the subject of the intellectual property rights which Sirtex had acquired were developed or made in the course of Dr Gray's employment at UWA and that of other academic researchers working with him. UWA commenced proceedings against Dr Gray, Sirtex and CRI on 21 December 2004. It sought a declaration that Dr Gray had held his shares and options in Sirtex on trust for UWA. It also sought orders that he transfer them and that he account to UWA in respect of any benefits obtained by him by reason of those shares and options. It sought a declaration against Sirtex that all the rights, title and interest in the relevant patent applications, patents and inventions were held on trust by Sirtex for UWA. It sought an order that Sirtex transfer that right, title and interest to UWA. Other ancillary orders were also sought.
7 Before the trial the Court appointed a receiver to CRI whose board of management was purportedly reconstituted to consist of Dr Gray, his sister and his solicitor. The receiver was given power to conduct the litigation on behalf of CRI or to settle with UWA subject to the approval of the settlement by the Court. UWA and CRI settled and the settlement was approved by Graham J. Sirtex and Dr Gray appealed against the approval to the Full Court. That appeal was dismissed.
8 The trial of the action lasted some 50 days with the Court sitting extended hours most days to ensure that the trial was finished within the available time. There were some 4,586 pages of transcript and more than 1,000 documentary exhibits. Much of the case was based on the documentary evidence. So much time had passed since many of the events relevant to these proceedings that it was not unusual for witness testimony to be based on inference derived from contemporary documents rather than actual recollection. The witness inference being mere opinion was not evidence.
9 UWA alleged that Dr Gray had breached his contract of employment with it by failing to comply with disclosure and associated obligations imposed by its Patents Regulations which had been made in 1971 and their successors, the Intellectual Property Regulations (the IP Regulations) which were passed by the Senate of UWA on 22 July 1996. I have found that the latter Regulations were not shown to have been promulgated, as required by the University of Western Australia Act 1911 (WA) (UWA Act) before 30 November 1997. I have proceeded on the basis that they did not come into effect before that date. UWA also alleged that Dr Gray had breached his fiduciary obligations to it. It claimed that Sirtex had been knowingly concerned in those breaches by Dr Gray and had provided knowing assistance to him in those breaches by the issue of shares to him.
10 Dr Gray and Sirtex each cross-claimed against UWA. Dr Gray's cross-claim included a claim for defamation based on the letter of demand to Sirtex and asserted that malice informed the content and timing of the letter. The malice claim attracted a good deal of evidence about conflicts which arose between Dr Gray and various individuals in the University, particularly the current Vice-Chancellor, Professor Allan Robson. I was not satisfied that the letter of demand was actuated by malice so as to defeat a defence of qualified privilege to the defamation claim. I have rejected claims by Dr Gray and Sirtex that UWA's letter of demand and the institution of the proceedings constituted unjustified threats of infringement action within the meaning of s 128 of the Patents Act 1990 (Cth) (1990 Act). Similarly, I have rejected claims brought by them against UWA alleging misleading or deceptive conduct.
11 UWA had a problem in seeking to rely upon its Patents Regulations. I have found that from 1988 it had effectively abandoned the Patents Committee mechanism for which the Regulations provided. After that time the possibility that a committee could be appointed on an ad hoc basis to respond to reports of particular inventions was never considered. Instead UWA moved down an alternative pathway using a company called Uniscan and a centre which it established called "The Centre for Applied Business Research" (CABR). It also appointed a Deputy Vice-Chancellor (Research) and later a Pro Vice-Chancellor (Research) to provide a framework within which inventions could be commercialised. In contractual terms UWA failed to maintain the mechanism necessary for the performance of the notification obligations said to have been imposed upon its staff by the importation into their contracts of the terms of the Patents Regulations. This conclusion adversely affected UWA's contract claims against Dr Gray for alleged non-compliance with the Patents Regulations. However that was the least of its difficulties in this case.
12 UWA's case against Dr Gray and Sirtex was critically dependent upon the proposition that it was an implied term of Dr Gray's contract of employment that intellectual property developed in the course of his employment belonged to UWA. Although there seems to have been an assumption among some at UWA that such an implied term operates generally in the case of academic staff who research and use university facilities, I have concluded that the assumption is not well founded. Absent express agreement to the contrary, rights in relation to inventions made by academic staff in the course of research and whether or not they are using university resources, will ordinarily belong to the academic staff as the inventors under the 1990 Act. The position is different if staff have a contractual duty to try to produce inventions. But a duty to research does not carry with it a duty to invent.
13 Moreover, in my opinion, such provisions of the Regulations made by UWA as purport to vest intellectual property rights in it or interfere with the intellectual property generated by its academic staff, are not valid. UWA did not rely upon the earlier Patents Regulations as a source of its property rights. But the IP Regulations assert ownership by UWA of all intellectual property developed by its staff (apart from most copyright). UWA was authorised, by the UWA Act, to make regulations relating to the control and management of its own property. It was not authorised by the Act to make regulations acquiring property from others or interfering with their rights.
14 It would seem that the only secure way for UWA to acquire property rights from its academic staff in respect of intellectual property developed by them in the course of research at UWA is by express provision in their contracts of employment. Even then, as this case demonstrates, the transaction costs of administering and enforcing such provisions and the uncertainty surrounding their scope and application, raises a real question as to their utility. The length and complexity of this litigation has been exceptional. However any claim by a university to intellectual property rights whose creation has involved a team of research workers, external funding, collaborative arrangements and extended periods of conceptual and practical development is likely to pose similar difficulties. UWA and other universities might well consider the alternative of deriving benefits from inventions produced by their staff by offering highly competent and experienced commercialisation services in exchange for a negotiated interest in the relevant intellectual property. That alternative offers many benefits in terms of incentives, harmony and certainty that are not available through the enforcement of legal rights unlikely to be capable of precise definition.
15 The legal foundation of the UWA case did not exist and for that reason its claims against Dr Gray and Sirtex will be dismissed. In addition, I was not satisfied that the inventions, other than the so-called DOX-Spheres were made by academic staff of UWA in the course of their employment there. That conclusion depended upon a consideration of the times at which the inventive concepts constituting the inventions were created.
16 The cross-claims by Dr Gray and Sirtex against UWA will be dismissed. The cross-claim by Sirtex against Dr Gray succeeds in so far as it alleged that he breached his duty as a director of the company and engaged in misleading or deceptive conduct by failing, in 2000, to disclose to Sirtex correspondence between himself and Professor Schreuder, the Vice-Chancellor of UWA, in 1999. The correspondence would have alerted Sirtex to the risk of a claim against its intellectual property rights by UWA. The damages flowing from that cross-claim will have to be assessed at a separate hearing if they are not able to be agreed between Sirtex and Dr Gray. They are likely to relate to the costs of these proceedings incurred by Sirtex and not recovered from UWA.
17 There were two remaining cross-claims. One was Sirtex's cross-claim against CRI for breach of warranty and misleading or deceptive conduct. It is dismissed. There will be no order as to costs as CRI took no part in the proceedings following its settlement with UWA. The other was Dr Gray's claim for a declaration that one of his research team involved in the work on DOX-Spheres, Dr Chen, had no interest in a provisional application for that invention filed in November 1993. Although I have made findings adverse to Dr Chen's claim of inventorship, in my opinion the case is not one in which I should make a declaration in favour of Dr Gray who has no obvious interest in seeking it.
18 In the reasons for judgment I have attempted to give a reasonably comprehensive history of the events of over 20 years which had led to these proceedings. Some of the facts which have been found were not directly related to the conclusions reached on the various claims and cross-claims. Some of them would be relevant to issues in defences raised under the Limitation Act 1935 (Cth)and by way of laches or undue delay by UWA in bringing the proceedings against Dr Gray and Sirtex. Some may also be relevant to other defences. The positive defences were the subject of extensive argument. However given my conclusions on UWA's case, it is not necessary to deal with them here. It would add more length to an already long judgment and provide hypothetical answers to questions which have not arisen.
19 For the reasons that follow, UWA's claims against Sirtex and Dr Gray fail. All cross-claims in the proceedings are dismissed save for Sirtex's cross-claim against Dr Gray for breach of his duty as a director and misleading or deceptive conduct which will stand over for a hearing (if it be necessary) for assessment of damages.
20 I will make orders but the parties will have the opportunity to file written submissions seeking variation of those orders.
[5]
Statutory framework -The UWA Act
21 UWA was established by s 3 of the UWA Act which provides:
There shall be from henceforth for ever in the State of Western Australia a University to be called "The University of Western Australia" with such faculties as the Statutes of the University may from time to time prescribe.
The Preamble to the UWA Act states, inter alia:
WHEREAS of the States of the Commonwealth Western Australia alone is unprovided with a University:
And whereas it is desirable that provision should be made for further instruction in those practical arts and liberal studies which are needed to advance the prosperity and welfare of the people:
And whereas it is desirable that special encouragement and assistance should be afforded those who may be hindered in the acquisition of sound knowledge and useful learning by lack of opportunity or means:
And whereas for these purposes it is expedient to incorporate and endow a University within the State of Western Australia,
…
22 UWA consists of the Senate, Convocation, staff and graduate and under-graduate students (s 4). It is a body corporate with all the attendant capacities to sue and be sued and to take, purchase, hold and alienate real and personal property (s 6). The definition of UWA, including staff and students, no doubt traces its ancestry back at least as far as s 1 of the statute of 1571 relating to Oxford University which provided that "The Chancellor, Masters and Scholars of Oxford" shall be incorporated and have perpetual succession in fact, deed and names. Similar formulae appear in a number of University Acts throughout Australia, including those in New South Wales, Victoria, South Australia and the Northern Territory. The definition is not used in University Acts in Queensland. Those statutes that use the traditional formula recognise staff and students as members of the university and not merely as employees and clients respectively. It has been suggested that this has implications for the interpretation of university statutes, bylaws and regulations which affect them: Corcoran S, First Principles in the Interpretation of University Statutes (2000) 4 Flinders Journal of Law Reform, 143 at 149. It may also have implications for the nature of the employment relationship between UWA and its academic members although none was argued.
23 Subject to the UWA Act and Statutes made under its authority, the entire control and management of the affairs and concerns of the university is vested in the Senate which "… may from time to time appoint deans, professors, lecturers, examiners, and other officers and servants of the University, …" (s 13). Control and management of real and personal property vested in or acquired by UWA is also conferred upon the Senate (s 14).
24 The Senate has power under sections 16A and 16B to make bylaws regulating the use of UWA lands. The power to make such bylaws is conferred by section 16A(2). It is constrained by the requirement that the bylaws be approved by the Governor. The purposes for which they may be made are "managing, preserving, and protecting the lands of the University … and … regulating the terms and conditions on which such lands may be visited or used by any persons … and the conduct of such persons when on or upon such lands". Specific subjects of bylaws are set out in paragraphs (a) to (k) together with a catchall purpose in paragraph (l):
… for carrying out the purposes of this Act, or any Statute made by the governing authority of the said University.
Section 16B requires that bylaws made under section 16A and any alteration and repeal of such bylaws be submitted for approval by the Governor and publication in the Government Gazette (WA) (the Gazette). They "take effect and have the force of law as from the date of such publication, or from a later date specified in the publication".
25 The Senate may also make regulations. Section 16E provides:
(1) The Senate, in the name and on behalf of the University, may, from time to time, make, alter and repeal regulations for the purpose of carrying out this Act, or any amendment thereof, or any Statute made by the governing body of the University, or for the purpose of securing and enforcing the management, good government and discipline of the University; and every such regulation shall be binding upon all deans, professors, lecturers, examiners, and all other officers and servants of the University and also on all students attending the University.
(2) The provisions of s 36 of the Interpretation Act 1918 do not apply to a regulation made by the Senate under subsection (1), and shall be deemed never so to have applied, and any such regulation shall take effect from the date of its promulgation in the University or from such later date as may be therein specified.
26 The Senate is said in section 5 to be the "governing authority" of UWA. Section 31 empowers the "governing authority" to make, alter, and repeal "Statutes" with respect to a variety of matters set out in that section. They include the following:
(a) the management, good government and discipline of the University;
…
(g) the number, stipend, manner of appointment and dismissal of deans, professors, lecturers, examiners and other officers and servants of the University;
…
(u) the control and investment of the property of the University;
…
(x) Generally all other matters not inconsistent with the provisions of this Act.
By section 31(2) the draft of every proposed Statute is to be submitted to the Convocation for its consideration. Under section 31(3) the Convocation may consider and draft amendments to the proposed statute and return the draft to the Senate. If the Senate agrees, it may forthwith make the Statute. If it does not, there is a process for a conference between the Senate and the Convocation. Where agreement cannot be reached, the Senate can nevertheless make the statute. By section 33 Statutes require approval of the Governor and must be published in the Gazette and "shall thereupon have the force of law". They are subject to annulment by resolution of either House of Parliament.
[6]
The law making power of UWA - legislative history
27 Before turning to the Patents Regulations and the IP Regulations of UWA which are involved in this case it is necessary to consider the delegated legislative powers under which they are made and the history of those powers. As it turns out, consideration of the legislative history by the parties would have avoided some wasted debate.
28 UWA has a rather confusing and overlapping mix of delegated legislative powers. The UWA Act as originally enacted conferred upon the Senate the "control and management of the affairs and concerns of the University" and of real and personal property vested in UWA (sections 13 and 14). There was no express power to make bylaws or regulations. Section 31, in much the same form as it is now, conferred power upon the Senate to make, alter and repeal Statutes. That power was subject to the constraints imposed by section 33 requiring the approval of the Governor, publication in the Gazette and laying before Parliament.
29 When the UWA Act was introduced into the Legislative Assembly in 1911 the then Premier who delivered the Second Reading Speech made reference to the statute making power. He said:
The other clauses of the measure provide for the holding of examinations, and the granting of degrees and diplomas, and they give ample power to the governing authority to make statutes in regard to various matters of internal control and the general management of the University.
Parl Deb WA LA 24/1/1911 at p 3268
30 The relevant dictionary meaning of "statute" is "a law made by a guild or corporation for the conduct of its members, a by-law of a borough; a provision in a municipal charter": Oxford English Dictionary, 2nd Ed (1989). An example of that usage from 1538 given in the dictionary referred to the "Masters of the Collegis in Cambryge and Oxforde with there Statuytts: Latimer in Ellis Orig Lett (Ssr III III.204)".
31 As appears from the dictionary definition the term "Statute", which designates delegated legislation made by UWA under section 31, dates back in usage to domestic rules made by universities in England as chartered corporations under the Royal prerogative such as the Colleges of Oxford and Cambridge. Such statutes did not enjoy legislative status and were subject to judicial review for unreasonableness and inconsistency with the general law. However, where a university was established by an Act of Parliament with power to make statutes as a species of delegated legislation, statutes so made had the force of law. An early example was the Oxford University Act 1854 (UK) which authorised the Hebdomadal Council and ultimately Convocation to make statutes: University of Oxford - Statutes and Regulations: Preface: Constitution and Statute-making Powers of the University www.admin.ox.ac.uk/sttutes; Whittaker S, "Public and Private Law-making: Subordinate Legislation, Contract and the Status of Student Rules" (2001) 21 Oxford Journal of Legal Studies pp 103-128. Against that background it is helpful to turn to the history of the by-law and regulation making powers of UWA which were first conferred upon it some 18 years after its establishment.
32 Sections 2 and 3 of the University of Western Australia Act Amendment Act 1929 (WA) (the 1929 Amendment Act) conferred on the Senate power to make bylaws in the terms and subject to the constraints now reflected in sections 16A and 16B of the UWA Act. Section 6 introduced the regulation making power now found in section 16E(1). The 1929 Amendment Act was to be read with the UWA Act. There was no provision requiring promulgation of regulations in order for them to take effect. Sections 2 to 7 of the 1929 Amendment Act were renumbered as sections 16A to 16F of the UWA Act by the University of Western Australia Act Amendment Act 1970 (WA). The University of Western Australia Act Amendment Act 1975 (WA) amended section 16E of the principal Act by redesignating it as subsection (1) and enacting the present subsection (2). At the time that the Patents Regulations were made by the UWA Senate in 1971 there was no requirement in the UWA Act for their promulgation. This issue is further considered below.
33 A point was made, in closing argument, about distinctions between the powers to make Statutes, bylaws and regulations and the implications of those distinctions for the extent, if any, to which regulations could affect property rights derived from the general law and, in particular, intellectual property rights. That is discussed later in these reasons, but it is useful to note what was said about the regulation making power when it was enacted in 1929.
34 The Second Reading Speech in the Legislative Assembly for the 1929 Amendment Act dealt principally with the bylaw making power which was concerned with UWA lands. In the Second Reading Speech in the Legislative Council however, specific reference was made to the regulation making power which was described thus:
The regulations mentioned in Clause 6 are chiefly details regarding degree courses, scholarships etc. They occupy the greater part of the University calendar for example from page 30 to 103 of the 1929 Calendar. Small alterations are made in these regulations at almost every meeting of the Senate in order to meet the changing conditions of University work. The University Act and the statutes set out the main principles on which degrees are given, and the regulations concern themselves only with minor details. At present however, these regulations have not the force of law, and the Bill proposes to give the Senate power to make such regulations.
Parl Deb WA LC 16/10/29 at 982
The Chancellor of UWA, the Hon AJH Saw, who was also a member of the Legislative Council at the time, followed immediately upon the Second Reading Speech in supporting the Bill and did not qualify what was said about regulations.
[7]
Statutory framework - The Patents Regulations of UWA
35 On 13 December 1971 the Senate of UWA approved Patents Regulations proposed by the Senate Legislative Committee.
36 The Patents Regulations commenced with a Preamble reciting that "Although it is not the policy of University research to seek patentable inventions, there can arise in the course of research, inventions which, in the interests of the public, the University and the inventor, should be patented." The purposes of the Patents Regulations were said to be:
… to define the procedures for determining which inventions resulting from University research should be patented, and to establish the procedures for obtaining patents without cost to the inventor and for dealing with them so as to safeguard the interests of the University and of the inventor in a manner consistent with the University's obligations to the public.
37 The application of the Patents Regulations was set out in reg 2:
These Regulations shall apply -
(i) to all members of the staff of the University whether employed in a full-time or part-time capacity; and
(ii) to all students using the research facilities of the University, each of whom shall enter into an agreement to assign to the University his rights in any invention made or developed wholly or in part through the use of such facilities.
38 The procedure where financial support was offered by a third party was set out in regulation 3:
(1) No offer of financial support from any outside person or organisation which may claim rights in any invention made or developed in the course of work undertaken with such support, may be accepted without the prior consent of the Vice-Chancellor and will be subject to such conditions as he may impose.
(2) Any person authorised under the preceding sub-regulation to undertake work supported by any outside person or organisation, shall assign to the University such rights as may be necessary to enable it to exercise the inventor's rights in any invention made or developed with such outside support.
39 The Patents Regulations set up a Patents Committee in the following terms:
4(1) There shall be a Patents Committee appointed by the Senate to advise the Vice-Chancellor on all action to be taken in relation to inventions made or developed by persons subject to these regulations and in particular on -
(i) whether the University should exercise its rights in such inventions;
(ii) whether action to patent an invention once commenced should at any time be abandoned;
(iii) whether the patent rights should be applied for in other countries and if not whether the right to do so should be assigned to the inventor;
(iv) the action to be taken to negotiate the development of the patent and the terms of the arrangements to be made.
(2) In considering matters referred to it by the Vice-Chancellor the Patents Committee shall consult the inventor.
(3) Subject to approval of the financial implications by the Vice-Chancellor in each case, the Patents Committee may seek expert advice and employ the professional services of a Patents Attorney or other person.
40 The power of the Vice-Chancellor in relation to inventions subject to the Patents Regulations was circumscribed by the requirement to act with the advice or, after the event, the endorsement of the Patents Committee:
5(1) The Vice-Chancellor acting on the advice of the Patents Committee may act on behalf of the University in all matters relating to inventions made or developed by any person subject to these regulations: provided that this authority shall not extend the financial powers otherwise vested in the Vice-Chancellor.
(2) In any case where the Vice-Chancellor deems it necessary to act without the advice of the Patents Committee he shall as soon as possible thereafter seek the endorsement of such action by the Patents Committee.
(3) Should the Patents Committee refuse to endorse the action taken by the Vice-Chancellor under sub-regulation (2) the Vice-Chancellor shall report the matter to the Senate for directions.
41 The key obligation on persons developing a patentable invention was imposed by regulation 6:
(1) Any person subject to these regulations shall immediately inform the Vice-Chancellor of any patentable invention made or developed wholly or in part during the course of that person's duty or whilst using the University's research facilities.
(2) The Vice-Chancellor shall refer any report received under sub-regulation (1) to the Patents Committee and, acting on the advice of the Committee, shall inform the inventor as soon as possible, and not more than sixty days after receiving a written request to do so, whether or not the University will exercise its rights in the invention.
(3) If the University decides to exercise its rights in the invention, the inventor shall assign his rights therein to the University.
(4) If the University decides not to exercise its rights in the invention, the University shall assign its rights therein to the inventor.
42 If UWA decided to exercise rights in an invention its responsibilities and the rights of the inventor were covered by regulations 7 to 9, which provided:
7(1) If the University decides to exercise its rights in an invention the Vice-Chancellor shall cause application to be made for the patent as soon as reasonably possible and the inventor shall not publish the invention until after the application for the patent has been lodged.
(2) The University shall be responsible for the costs of patenting the invention.
8(1) If the University decides to exercise its rights in an invention the Vice-Chancellor shall cause all necessary action to be taken to negotiate the exploitation of the patent.
(2) The University shall be responsible for any necessary expenses incurred in the reasonable promotion and exploitation of the invention.
9. The inventor shall be entitled to 33 1/3 per cent of the net financial return from any invention exploited under Regulation 8 after any expenses incurred by the University in patenting and exploiting it have been met: provided that, if the net annual return to the University from the invention exceeds $50,000 the proportion to be received by the inventor shall be progressively reduced until at a net annual return to the University of $500,000 it shall be 10 per cent; and provided also that, even before the University's expenses have been met, the inventor shall at no time receive less than 10 per cent of the gross returns to the University from his invention.
43 The profits made by UWA from patents, assignments or exploitation of an invention under the Patents Regulations were to be set aside for research (regulation 10). And under regulation 11 it was provided:
Nothing in these regulations shall prevent the University from abandoning action initiated under Regulation 7 or Regulation 8 at any time should the Vice-Chancellor, acting on the advice of the Patents Committee, decide it to be in the interests of the University to do so.
44 Nothing in the Patents Regulations could prevent the Senate from entering into a special agreement with an inventor in the case of a particular invention on terms differing from those set out in the preceding regulations.
[8]
The Patents Regulations - a futile debate about promulgation
45 As noted earlier, section 16E(2) of the UWA Act provides that a regulation made under the Act comes into effect "from the date of its promulgation or from such later date as may be therein specified". This provision was the subject of considerable debate advanced by Dr Gray and Sirtex about whether and when the Patents Regulations had been promulgated and thereby came into effect. UWA joined issue on that debate. Much reference was made to the publication of University Calendars, inter-faculty handbooks and the like. This was unnecessary because section 16E(2) had not been enacted when the Patents Regulations were made by the Senate. It was not enacted until 1975.
46 A question arose after the passage of the Murdoch University Act 1973 whether regulations made by UWA attracted the requirements of s 36 of the Interpretation Act 1918 (WA). Section 36(4) of that Act applied to Acts which provided for regulations to be made by any authority other than the Governor. Regulations so made were subject to paragraphs (b), (c) and (d) of s 36(1) and to ss 36(2) and (3). Such regulations were to be published in the Gazette. They would "take effect" and have the force of law from the date of such publication, or from a later date fixed by the order making such regulations. Section 36(1)(d) required such regulations to be laid before both Houses of Parliament. By s 36(2) they were subject to disallowance by either House. The term "regulation" was defined in s 36(5) to include "rule" or "by-law".
47 There was no evidence that the Patents Regulations had ever met these requirements. It is highly likely that they did not. The problem which existed in respect of those and other UWA regulations was resolved in 1975 by the first limb of section 16E(2) of the UWA Act. That deemed the provisions of s 36 of the Interpretation Act never to have applied to a regulation made by the Senate under section 16E(1). The deemed non-application of s 36 of the Interpretation Act was retrospective in its application. It was, in effect, deemed never to have applied to any regulation made by the Senate prior to the date from which section 16E(2) came into force. The second limb of section 16E(2) is prospective only as appears from the use of the word "shall".
48 The purpose of section 16E(2) appears from the Second Reading Speech introducing the University of Western Australia Act Amendment Bill 1975 in which the Minister said:
With regard to the proposed amendments to the provisions of s 16E of the principal Act, the University authorities requested that provisions similar to s 27 of the Murdoch University Act, 1973, be included following doubts raised as to whether the regulations made by the university senate were regulations for the purposes of the provisions of s 36 of the Interpretation Act relating to disallowance.
The amendment now sought makes it clear that a regulation of the university senate is not, and never has been, such a regulation and emphasises the time at which it is to take effect.
WA ParlDeb LA 24/4/745 p 1087
It may well be that regulations made by UWA prior to the enactment of section 16E(2) did not have the force of law for failure to comply with s 36 of the Interpretation Act. This may have been the case with the Patents Regulations until 1975. But whatever the true position may have been between 1972 and 1975, the Patents Regulations were in effect at all material times after the coming into effect of the 1975 amendment to section 16E of the UWA Act.
[9]
Statutory framework - Intellectual Property Regulations
49 At a meeting of the Senate of UWA held on 22 July 1996 the Senate resolved:
that the Patents Regulations be rescinded and that the Intellectual Property Regulations be introduced with immediate effect.
50 The IP Regulations begin with the statement that:
These regulations, effective from 22 July 1996, supersede the University's Patents Regulations.
51 Regulation 1 is an interpretation provision. It contains a wide definition of "intellectual property", relevant parts of which are as follows:
'intellectual property' means, without limitation, all rights in relation to any:
…
. confidential information which means information of any kind which, because of its confidential character, is capable of protection by contractual or equitable means, and includes information of a valuable commercial or technical character.
. copyright work which means any work or thing in which copyright may subsist including, without limitation, 'artistic work', 'literary work', 'dramatic work', 'musical work', 'sound recording', 'cinematograph film', 'television broadcast', 'sound broadcast', 'published edition of work' or 'photograph', as those terms are defined by the Copyright Act 1968 (Commonwealth) as amended or replaced from time to time.
…
. invention which means an invention (including both products and processes) which may be patentable under the Patents Act 1990 (Commonwealth) as amended or replaced from time to time.
. patent which means a patent within the meaning of the Patents Act 1990 (Commonwealth) as amended or replaced from time to time, and includes a standard patent, provisional patent application, patent application, or a petty patent.
…
and includes rights of a related nature.
52 Other relevant definitions include the following:
'originator' means any person who creates, whether or not in conjunction with another person, any intellectual property.
'patent' refers to intellectual property.
53 Regulation 2 deals with sponsorship of research in the following terms:
Where -
(a) a person sponsors research within the University by providing funding for the research; and
(b) an agreement has been made between that person and the University governing ownership of intellectual property which would otherwise by virtue of these regulations be owned by the University, the provisions of the agreement prevail to the extent of any inconsistency between that agreement and these regulations.
Other agreements may be made between UWA and the originators as provided for in regulation 3:
(1) The University may enter into an agreement with an originator or other person in relation to the creation, ownership, licensing, use or commercialisation of intellectual property.
(2) Where the ownership, licensing or exploitation of any intellectual property is governed by any agreement between the University and a student or member of staff or any other person, the provisions of the agreement prevail to the extent of any inconsistency between that agreement and these regulations.
54 Regulation 4 deals with the ownership of intellectual property. Originators are to own the copyright in all copyright works created by them subject to the other provisions in the IP Regulations (regulation 4(1)). Students are to own intellectual property which they create (regulation 4(2)). Regulation 4(4) provides:
In respect of intellectual property created by an originator in the course of the originator's employment with the University, the University shall own copyright in computer programs, but no other copyright, and own all other intellectual property.
There is an obligation on the originator to execute documents as required by UWA (regulation 4(8)):
An originator shall, if required by the Vice-Chancellor or authorised officer, execute a document or do anything reasonably required by the University in relation to intellectual property created in whole or in part by the originator to demonstrate or prove ownership to third parties or secure intellectual property protection, or assist the University to commercialise the intellectual property.
55 Originators are not to disclose the details of or use of intellectual property if the disclosure or use is determined by the Pro Vice-Chancellor (Research) to be a disclosure or use which would prejudice the protection, enforcement or commercialisation of that intellectual property which is owned wholly or in part by UWA or by another person under an agreement made with UWA or would be contrary to any Government or legislative requirement.
56 Regulation 4(11) provides:
An originator shall not apply for any form of protection for, or commercially exploit or otherwise deal with any intellectual property, or do any act or thing in a manner inconsistent with the University's rights under these regulations or otherwise.
And in regulation 4(13):
Subject to Regulations 2 and 3(2), all applications (whether in Australia or overseas) for registration of any intellectual property to which these regulations apply shall be in the name of the University, unless expressly otherwise determined by the Pro Vice-Chancellor (Research).
57 A general obligation to report intellectual property is created by regulation 6:
(1) Where any intellectual property to be owned by the University, which is likely to be commercially significant is created, any originator, executive dean, head of department, director of a centre or other officer who becomes aware of the creation, commercialisation or unauthorised use or infringement of that intellectual property shall promptly inform the Pro Vice-Chancellor (Research) in writing of all relevant details of the intellectual property, such as-
(a) the date upon which the intellectual property was created;
(b) the identity of any person or persons who contributed to the creation of the intellectual property;
(c) the details of any pre-existing intellectual property which was used in creating the intellectual property;
(d) whether any person other than the originator claims any entitlement or interest in the intellectual property;
(e) the details of any University facilities or resources used to create the intellectual property, (especially including grant monies or other research funding);
(f) the details of any known existing or partial use or commercial exploitation of the intellectual property; and
(g) the details of any provisional patent application that may have been filed with regard to the intellectual property.
(2) A student or member of staff shall not apply for any form of protection for or commercialise or otherwise deal with any intellectual property, or do any act or thing in a manner inconsistent with the University's rights under these regulations or otherwise.
58 Under regulation 7, where action is to be or has been taken to protect intellectual property which is likely to be commercially significant, the originator is required to consult with the Pro Vice-Chancellor (Research) with regard to undertaking in a timely fashion the work necessary to complete the relevant formalities and facilitating the commercialisation of the intellectual property (regulation 7(1)). A decision on action arising out of the consultation is normally to be made within 90 days of the consultation taking place (regulation 7(2)). Regulation 7(3) provides:
The University shall not normally file a complete patent application unless during the currency of the provisional application a third party undertakes to meet the expected costs of completion of the Australian application and/or overseas filings, or the Pro Vice-Chancellor (Research) determines a strategy for further development leading to the commercialisation of the intellectual property, including how the costs of patent protection will be met.
59 UWA may assign the rights in the intellectual property to the originator thus (regulation 7(4)):
(a) In the event that the originator wishes at his/her own expense to apply for, or continue, protection of intellectual property in which the University has no further interest, then the originator shall have the option to do so.
(b) If this option is exercised, the University, where appropriate, shall assign to the originator within ninety (90) days, rights to the intellectual property on fair terms.
60 The IP Regulations established an Intellectual Property Committee as an advisory committee to the Vice-Chancellor on matters relating to intellectual property (regulation 8(1)). The committee was empowered to establish guidelines, procedures and criteria for reporting to the Pro Vice-Chancellor (Research) the creation, commercialisation, unauthorised use or infringement of intellectual property to which the IP Regulations apply.
61 The Pro Vice-Chancellor (Research) is empowered by regulation 9 to do a variety of things for the purposes of the IP Regulations. These include consultation with the originator and the relevant executive deans of faculties, application for protection or registration of intellectual property, commercialisation of intellectual property owned by or licensed to UWA and assignment or licence to the originator of intellectual property owned or licensed to UWA under the IP Regulations.
62 Regulation 10 provides for the apportionment of net revenue from the commercialisation of UWA's intellectual property. Under regulation 10(3) normally the distribution of cumulative net revenue for the entire life of the intellectual property would be according to the following schedule:
Cumulative Net Revenue Originators Retained by the University
<$50,000 85% 15%
Next $100,000 65% 35%
Further amounts 50% 50%
[10]
63 There is a provision for dispute resolution by the appointment of mediators or arbitrators under regulation 11 and a requirement under regulation 12 for UWA to take reasonable steps to ensure that the "policy" is communicated and explained to staff and students.
[11]
The Intellectual Property Regulations - the promulgation debate
64 Dr Gray and Sirtex submitted that the IP Regulations could not have come into effect upon 22 July 1996 as provided in their Preamble. Moreover, they contended there was no satisfactory evidence that they had been promulgated as required by section 16E(2).
65 UWA submitted that the date at which the IP Regulations came into effect did not depend upon their promulgation as it was stated in the IP Regulations themselves that they were "effective from 22 July 1996". In so contending UWA relied upon section 16E(2) of the UWA Act. In the alternative, UWA relied upon publication of the IP Regulations:
(a) by circulation of the draft minutes of the Senate meeting dated 22 July 1996 to University Heads of School (formerly Heads of Departments) and Heads of Sections in the University;
(b) by notice in the University newsletter, Campus News, dated 12 August 1996;
(c) by notice in the University inter-faculty handbooks for the years 1997 to 1999;
(d) in the University Calendars for the years 1997 to 1999.
66 It is important to point out that promulgation for the purpose of section 16E(2) requires publication at a particular date which may then be identified as the date from which the relevant regulation comes into effect. The insufficiency of a particular claimed publication cannot be cured by its repetition over a number of years.
67 There is a constructional difficulty with UWA's submission that the IP Regulations took effect upon the date they were made by the Senate, ie 22 July 1996. A regulation made under section 16E(2) will take effect "from the date of its promulgation in the University or from such later date as may be therein specified". The subsection makes promulgation a necessary condition of a regulation coming into effect even if the date upon which the regulation comes into effect is later than its promulgation. Moreover, the subsection, properly construed, contemplates that if a regulation is to come into effect at a date later than its promulgation, that later date will be specified in the promulgation itself. The word "therein" in section 16E(2) refers to the promulgation, not to the regulation. This is consistent with the model for bylaws which come into effect upon the date of publication in the Gazette or "from a later date specified in such publication" (section 16B). A less likely alternative construction would allow the later date to be specified in the regulation itself. But the regulation and the later date would still have to be promulgated. In any event, the inclusion in the IP Regulations of the provision that they would be effective from 22 July 1996 was not valid as it purported to bring them into operation before they had been promulgated. On any view of what constituted their promulgation it occurred at a date after their approval by the Senate.
68 The Senate cannot bypass the promulgation requirement. Its importance is apparent. It was imposed in 1975 by section 16E(2) in lieu of the more rigorous requirements of s 36 of the Interpretation Act. It is the mechanism by which the existence of regulations is to be brought to the attention of those to be bound by them. Those to be bound are identified in section 16E(1) namely "… all deans, professors, lecturers, examiners, and all other officers and servants of the University and also … all students attending the University".
69 There is no definition of "promulgation" in the UWA Act. The Court was not directed to any statute, regulation, instrument or written administrative policy or practice which existed in 1996 and which specified how regulations made under the UWA Act were to be promulgated. The term "promulgate" is relevantly defined in the 2nd Edition of the Oxford English Dictionary (1989) as:
Expose to public view, publish … To make known by public declaration; to publish; esp to disseminate (some creed or belief); or to proclaim (some law, decree or tidings).
The 2nd Edition of the Macquarie Dictionary (1991) defines it thus:
To make known by open declaration; to publish; to proclaim formally or put into operation (a law or rule of court or decree) 2. To set forth or teach publicly (a creed, doctrine etc).
Against that ordinary meaning of the word it is appropriate to consider the publications said by UWA to have constituted promulgation of the Regulations.
70 Evidence relating to the circulation of draft Senate minutes was given by Ms Lynette Hill who was the Personal Assistant to the University Registrar between April 1992 and December 1999. One of her duties was to compile draft minutes of Senate meetings and to circulate them within about a week of the meeting to people identified on a mailout list. The current list, which Ms Hill exhibited to her affidavit, reflected the classes or groups of persons, defined by office, to whom she had been sending draft Senate minutes since 1992. The draft minutes of the Senate meeting of 22 July 1996 would therefore have been sent to members of Senate, senior officers in the Chancellery, Deans of Faculties, Heads of Schools and various UWA administrative officers.
71 The draft minutes of the Senate meeting held on 22 July 1996, as exhibited to Ms Hill's affidavit, included the resolution on the recommendation of the Academic Council rescinding the Patents Regulations and adopting the IP Regulations. They did not include the text of the regulations nor any guide to where they could be viewed.
72 I accept the evidence given by Ms Hill as to the distribution of the draft minutes and infer that it is likely that they were distributed as she suggested. However, in my opinion, that distribution did not constitute promulgation of the IP Regulations. It was a limited publication of unconfirmed minutes setting out a resolution but not the regulations or how they might be accessed. It did not purport to be a promulgation. In my opinion it does not answer the definitions of promulgation referred to above.
73 The UWA newsletter, Campus News, published in August 1996 contained a notice that the Senate had passed the IP Regulations 1996. An extract of the newsletter was exhibited to the affidavit of the University's Secretary, Ms Massey. It contained the following statement set out in a section headed "from the SENATE":
INTELLECTUAL PROPERTY REGULATIONS
It was resolved that the Patents Regulations be rescinded and that the Intellectual Property Regulations be introduced with immediate effect. The President of the Post Graduate Students Association commended the new arrangements saying that students perceived them to be very favourable.
The extract gave no clue to the content of the Regulations nor any advice about how a copy could be obtained or their text viewed. This publication in my view was not a promulgation of the Regulations.
74 The Interfaculty Handbook 1997, was on the face of it a publication directed to students. This may be inferred by reference, inter alia, to the contents page. It contained a more fulsome statement about the IP Regulations. It began thus:
The University has an Intellectual Property Policy which includes the Intellectual Property Regulations.
In terms clearly directed at student readers it stated that students were bound by the Regulations. It said that they provided for the ownership of intellectual property created by students and staff of UWA. It said nothing about the obligations of UWA staff under the terms of the regulations. It concluded:
Copies of the Policy are available from the Intellectual Property and Contracts Officer, Legal Services Office, and can be accessed on the Internet Home
page of the University's Research Administration Unit under:
http://www.acs.uwa.edu.au/research/policy.html#ippol
The full Regulations will be printed in the University Calender 1997, available for reference in the Library.
75 There was no direct evidence of a date upon which the Interfaculty Handbook was published. I am prepared to infer from the contents page that it would have been published close to the beginning of the academic year. It set out, amongst other things, Principal Dates and Semester Dates. It gave details of the Orientation Program. I am not prepared to accept that publications to students or a statement about the IP Regulations constituted the promulgation of the Regulations. I accept that there was reference in the Interfaculty Handbook to the publication of the Regulations on a UWA website, but this was not relied upon by UWA as promulgation.
76 The first formal publication of the IP Regulations relied upon and of which there was evidence, was in the 1997 University Calendar. There they were reproduced in full. However the date of the publication was attended with uncertainty. The Calendars for the years 1972 to 1975 and 1985 to 1999 included statements that they were current at a particular month, generally March or April, in the year of publication. In some cases the Calendar was updated throughout the year so that it bore a number of dates at which the information in it was said to be current. Information in the 1997 Calendar was said to be current as at April 1997.
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77 The only direct evidence about UWA's practice in relation to the date of publication of its Calendars before they began to be produced in an electronic form, was that of Professor Robson, the current Vice-Chancellor who was first employed by UWA as an academic in the field of agriculture in 1974. He said of the Calendar generally that "Prior to it becoming electronic it was generally produced towards the end of the year". It was put to him that it was in October or November. He said "of that order of time, yes". The following exchange occurred:
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Mr Bennett - Yes, so if you look at a 1972 calendar it would be October or November in 1972?
Professor Robson - I would imagine so.
The only evidence of the dates upon which UWA calendars began to be published electronically was Professor Robson's evidence that it was "sometime in the 90s". He said however, he was not certain when that occurred.
78 Professor Gale, who was the Vice-Chancellor from 1 February 1990 to 31 December 1997, agreed in cross-examination that the "normal process" was for regulations to be published in the UWA Calendar after they had been through the Senate. It was put to her that the 1997 Calendar was published in October or November of that year but she could not remember when it was published.
79 UWA submitted in its responsive submissions in closing that the Court should infer that the 1997 Calendar was published in April of that year. This inference was said to be supported by the statement in the Calendar that the information it contained was current as at that month. No such inference can be drawn. Moreover, it is at odds with the only evidence there was about publication dates which came from Professor Robson. It was submitted that Dr Gray's counsel did not put a date to Professor Robson. But that was not his obligation. It was for UWA, which invoked the Regulations against Dr Gray, to establish the date at which they came into effect.
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80 I cannot find, given the evidence of Professor Robson, that the IP Regulations were published in the University Calendar 1997 at any particular date. I can infer, based on his evidence, that they had been published by 30 November 1997. The evidence does not allow me to infer on the balanceof probabilities that they were promulgated at any particular date before then.
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81 It was acknowledged on behalf of Sirtex that Dr Gray appeared to know about the existence of the IP Regulations as early as 26 July 1996. That knowledge, as was pointed out by Sirtex, did not constitute evidence of promulgation. Dr Gray had recently spoken with Mr James Lennon, the lawyer in charge of intellectual property in the UWA Legal Office and may have learned about the new regulations informally in that way.
82 I conclude, for the purposes of these proceedings, that the IP Regulations did not come into effect until 30 November 1997 and that the Patents Regulations were not rescinded until that time.
83 There would be utility in a procedure for promulgation to the whole of the UWA community, formally adopted by UWA, publicised and uniformly applied to its regulations when made or repealed. The content of any promulgation would give notice of the existence of the regulations and their contents or aconvenient means of accessing their text. The procedure should also provide for promulgation of regulations at a particular date so that there can be no debate about when they come into effect.
Limitation on UWA's power to make regulations affecting intellectual property rights
84 A distinction was drawn by Sirtex in its closing submissions between the power of UWA under s 31 of the UWA Act to make Statutes and its power to make regulations under section 16E. Sirtex pointed to the procedural safeguards associated with Statutes which require their approval by the Governor, publication in the Gazette and that they be placed before Parliament and be subject to annulment. It also pointed to the safeguards attaching to bylaws under s 16A which regulate the use of UWA land. They too must be approved by the Governor and published in the Gazette. The absence of such procedural requirements for regulations made under section 16E was said to indicate that they were intended to be ancillary procedural and facilitative. It was submitted that section 16E does not authorise the making of regulations which abrogate substantive rights accorded to private persons as a matter of general law. The submission was consistent with the representation made to the Legislative Council in the Second Reading Speech for the Amendment Act 1929 that regulations made under the power conferred by that Amendment would be concerned with "minor details".
85 It is apparent from the language of section 16E that regulations are a lesser form of delegated legislation than Statutes. Their first stated purpose is "carrying out the Act … or any Statute made by the governing body of the University". These words indicate that regulations made pursuant to that purpose are ancillary to the Statutes. The second stated purpose of the regulation making power however overlaps with the first subject matter of the Statute making power which is "the management, good government and discipline of the University". The words "securing and enforcing management, good government and discipline of the University" which define the cognate purpose for which regulations might be made, suggest that they are a lesser species of instrument than the Statutes. They do not attract the procedural protections attending the making of those higher instruments under section 31. Nevertheless, the securing and protection of property belonging to UWA under the general law, would lie within the scope of the regulation making power as well as within the power to make Statutes.
86 It is a very different matter to propose that the law-making power of the university authorises regulations which alienate or interfere with property rights not vested in UWA. The words of section 16E are not apposite to such a wide construction. Moreover, there is a well established presumption against construing legislation as interfering with vested proprietary interests. It applies to the scope of the powers conferred by section 16E.
87 The presumption was applied by Kitto and Owen JJ in CJ Burland Pty Ltd v Metropolitan Meat Industry Board (1968) 120 CLR 400. The High Court there held that a bylaw under which the Metropolitan Meat Industry Board could keep parts of animals killed at its abattoir was invalid. The bylaw making power in s 30 of the Meat Industry Act 1915 (NSW) provided for by-laws for "the management and control" of public abattoirs and for regulating and controlling their use. Kitto J referred to (at 406):
… the firmly established rule of law that a statute will not be read as authorizing the expropriation of a subject's goods without payment unless an intention to do so be clearly expressed. As was held in Newcastle Breweries Ltd v The King [1920] 1 KB 854 this rule applies a fortiori to the construction of a statute delegating legislative powers.
Owen J, at 415, cited a passage from the judgment of Bowen LJ in London and North Western Railway Co [1893] 1 Ch 16 at 78 to like effect with respect to the general presumption. Windeyer J agreed with Owen J inter alia (at 410). See also:LH Hoare Pty Ltd's Application [1976] Tas SR 1156 and generally: Pearce and Geddes Statutory Interpretation in Australia (6th ed, 2006 Lexis Nexis Butterworths)at 5.17-5.18.
88 When property said to be affected by a statute is itself a statutory right, then a question of the construction of the two statutes may arise. The presumption has been applied in some such cases: eg Greville v Williams (1906) 4 CLR 694 and Yang v Owners-Strata Plan No 3529 (2001) 54 NSWLR 60. In those two cases, widely separated in time, public service superannuation rights and rights under the Strata Scheme Management Act 1996 (NSW) were respectively treated as property rights which could not be taken away without an express provision: Pearce and Geddes at 5.19.
89 In my opinion an inventor's rights derived from the 1990 Act or its predecessor fall into the category of property rights which attract the presumption. No question can arise of UWA's regulations modifying in any way the operation of the Patents Act. No such suggestion was made. The 1952 and 1990 Acts both provide that the rights given to a patentee by a patent are personal property and "capable of assignment and of devolution by law" (s 152(1), 1952 Act and s 13(2), 1990 Act). A person may alienate or encumber rights created by the Acts, or associated rights, expressly or by operation of law including by application of equitable principles. Assuming, without deciding, that UWA could be empowered by its Act to make a regulation appropriating rights derived from the Patent Act it has not been so empowered in this case. That conclusion flows from the language of section 16E and, if it be necessary, the effect upon its construction of the presumption against interference with property rights.
90 There is, of course, nothing to prevent UWA, which has all the capacities of a body corporate, from engaging a person as a member of its academic staff, subject to an express covenant to assign to UWA all or any subset of defined intellectual property rights which may arise out of the person's work as an employee. Property rights vested by contract in the university or otherwise devolving on the university can be protected, managed and controlled by statute or regulation as can any of its property. However UWA cannot, by regulation, acquire property from its staff members. The position is no different where the staff member's contract embodies a regulation which purports to declare that intellectual property generated by him or her belonged to UWA. If the regulation is not valid for the reasons I have outlined then it could not be said that it was intended by either party that compliance with an invalid regulation could become a contractual obligation. The incorporation of the Statutes and the Regulations of the university into staff contracts is, in my opinion, posited on their validity.
91 Where the regulations "from time to time" are imported into the conditions of appointment and UWA enacts, during a person's term of appointment, a new regulation purporting to appropriate intellectual property rights, a similar issue arises. A regulation beyond power could not change contractual arrangements so as to affect a staff member's proprietary rights.
92 Regulation 6(3) of UWA's Patents Regulations mandated assignment of a staff inventor's rights in his or her invention to UWA. Regulation 4(4) of the IP Regulations asserts the ownership of UWA to all intellectual property created by an "originator" in the course of the originator's employment with UWA. That is other than copyright (save for copyright in computer programs). On the analysis already outlined these Regulations are either redundant or invalid. If UWA (contrary to my conclusion later in these reasons) already owned the property by implied term or as an incident of the employment contract, then the Regulations would add nothing. If UWA does not have the property, then the Regulations could not validly appropriate it.
93 The scope of the Patents Regulations in this regard was something of a non-issue between the parties for in its closing submissions UWA said (at [36]):
Upon their true construction it is submitted that the Patents Regulations did not have the effect of imposing the terms upon which the University will acquire any interest in intellectual property (including patentable inventions) from persons subject to the jurisdiction of the Senate. They did not create the University's interests in patentable inventions nor do they extinguish any such interest. As a matter of proper construction the Patents Regulations were expressly machinery provisions, as the terms of the preamble and the Regulations themselves make clear.
I accept that as a proper characterisation of those Regulations. As Sirtex pointed out they did not state circumstances in which UWA would have an interest in patentable inventions developed by UWA academic staff. That was a question left to the general law. Rather, they provided a procedure by which UWA was to vindicate its rights (or decide to abandon them) in relation to inventions in which the general law gave it an interest. The assignment obligation under regulation 6 was posited upon UWA having rights in relation to an invention. It was not relied upon as the source of UWA's rights.
94 UWA's position was not always clear in respect of the IP Regulations. However at one point it characterised the purpose of both sets of regulations as implementing a procedure to enable the orderly identification of property "to which the University was entitled". The relevant property comprised patentable inventions made by, among others, an employee in the course of his or her duty and in respect of which UWA was entitled to be recorded on the Patents Register as the owner.
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Statutory framework - The Patent Acts 1952 and 1990
95 The statute law applicable during the period in which Dr Gray and others developed the technology the subject of these proceedings was the Patents Act 1952 (Cth) (the 1952 Act) and its successor the 1990 Act. The statutory rights granted under a patent to a patentee pursuant to the 1952 Act derived from that Act as do the statutory rights associated with a patent granted under the 1990 Act. Although the 1952 Act was repealed by s 230 of the 1990 Act, transitional provisions in the latter Act apply it in relation to a standard or petty patent granted under the 1952 Act as if it had been granted under the 1990 Act (s 232(1)). Where, before the commencement of the 1990 Act, a patent application and provisional specification had been lodged under the 1952 Act, but a complete specification had not been lodged under that Act then, subject to Ch 23 of the 1990 Act and the Regulations, the 1990 Act applied as if the application were a provisional application under the 1990 Act. Where the complete specification had been lodged then the 1990 Act would apply on and after the commencement day as if it were a complete application under that Act (s 234(2)).
96 Each Act defined "invention" in exactly the same way:
invention means any manner of new manufacture the subject of letters patent and grant of privilege within section 6 of the Statute of Monopolies, and includes an alleged invention.
97 The 1990 Act in s 18(1) defined a "patentable invention" thus:
(1) Subject to subsection (2), an invention is a patentable invention for the purposes of a standard patent if the invention, so far as claimed in any claim:
(a) is a manner of manufacture within the meaning of s 6 of the Statute of Monopolies; and
(b) when compared with a prior art base as it existed before the priority date of that claim:
(i) is novel; and
(ii) involves an inventive step; and
(c) is useful; and
(d) was not secretly used in the patent area before the priority date of that claim by, or on behalf of, or with the authority of, the patentee or nominated person or the patentee's or nominated person's predecessor in title to the invention.
Subsection (1A) applies a similar definition to a patentable invention for the purposes of an innovation patent.
98 The content of the rights created by a patent granted under the 1952 Act were set out in s 69 of that Act:
Subject to this Act, the effect of a patent is to grant to the patentee the exclusive right, by himself, his agents and licensees, during the term of the patent, to make, use, exercise and vend the invention in such manner as he thinks fit, so that he shall have and enjoy the whole profit and advantage accruing by reason of the invention during the term of the patent.
The nature of the rights under the 1952 Act appeared from s 152(1):
The rights granted to a patentee by a patent are personal property and are capable of assignment and of devolution by operation of law.
The persons who could apply for patents under the 1952 Act were set out in s 34:
(1) Any of the following persons, whether an Australian citizen or not, may make an application for a patent:
(a) the actual inventor;
(b) the assignee of the actual inventor;
(c) the legal representative of a deceased actual inventor;
(d) the legal representative of a deceased assignee of the actual inventor;
(e) a person to whom the invention has been communicated by the actual inventor, his legal representative or assignee (if the actual inventor, his legal representative or assignee is not resident in Australia);
(f) the assignee of such a legal representative as is specified in paragraph (c) or (d);
(fa) a person who would, if a patent were granted upon an application made by a person referred to in any of the preceding paragraphs, be entitled to have the patent assigned to him; or
(g) the agent or attorney of a person referred to in any of the preceding paragraphs.
…
(4) Where, at any time before a patent has been granted, a person would, if the patent were then granted, be entitled, by virtue of an assignment or agreement made by the applicant or one of the applicants for the patent, or by operation of law, to the patent or to the interest of the applicant in the patent or to an undivided share in the patent or in that interest -
(a) the Commissioner may, upon a request being made as prescribed, direct that the application is to proceed in the name of the person or in the names of the person and the applicant or the other joint applicant or applicants, as the case requires; and
(b) upon such a direction being given, this Act applies as if the person were the applicant or one of the joint applicants, as the case requires.
Paragraph (fa) was inserted into the 1952 Act by s 5 of the Patents Act 1960 (Cth) with effect from 27 February 1961: Gazette 1961, p 753. Subsections (2) and (3) are not material for present purposes. Subsection (4) was inserted, with effect from 14 June 1969, by ss (2) and (6) of the Patents Act 1969 (Cth).
99 The 1952 Act required a Register of Patents to be kept at the Patents Office in which particulars of patents in force would be entered along with other prescribed matters (s 20(1)). Persons entitled to a patent by "assignment, transmission or other operation of law" could apply to the Commissioner of Patents to register their titles (s 21). Notice of trusts, expressed, implied or constructive, relating to a patent or licence, were not to be entered on the Register or be receivable by the Commissioner (s 25). Section 26 provided:
A patentee has, subject only to any rights appearing in the Register to be vested in some other person, power to deal with the patent as if he were the absolute owner of the patent and to give good discharges for any consideration for any such dealing.
100 The content and nature of the rights conferred by a patent under the 1990 Act are set out in s 13:
Exclusive rights given by patent
(1) Subject to this Act, a patent gives the patentee the exclusive rights, during the term of the patent, to exploit the invention and to authorise another person to exploit the invention.
(2) The exclusive rights are personal property and are capable of assignment and of devolution by law.
(3) A patent has effect throughout the patent area.
101 The definition of "exploit" in Schedule 1 of the 1990 Act is in the following terms:
"Exploit", in relation to an invention, includes:
(a) where the invention is a product - make, hire, sell or otherwise dispose of the product, offer to make, sell, hire or otherwise dispose of it, use or import it, or keep it for the purpose of doing any of those things; or
(b) where the invention is a method or process - use the method or process or do any act mentioned in paragraph (a) in respect of a product resulting from such use.
102 The classes of persons to whom patents may be granted under the 1990 Act are listed in s 15:
Who may be granted a patent?
(1) Subject to this Act, a patent for an invention may only be granted to a person who:
(a) is the inventor; or
(b) would, on the grant of a patent for the invention, be entitled to have the patent assigned to the person; or
(c) derives title to the invention from the inventor or a person mentioned in paragraph (b); or
(d) is the legal representative of a deceased person mentioned in paragraph (a), (b) or (c).
(2) A patent may be granted to a person whether or not he or she is an Australian citizen.
Section 15(1)(b) uses the language of s 34(1)(fa) of the 1952 Act.
103 Section 32 of the 1990 Act provides for disputes between applicants thus:
If a dispute arises between any 2 or more interested parties in relation to a patent application whether, or in what manner, the application should proceed, the Commissioner may, on a request made in accordance with regulations by any of those parties, make any determinations the Commissioner thinks fit for enabling the application to proceed in the name of one or more of the parties alone, or for regulating the manner in which it is to proceed, or both, as the case requires.
Section 36 of the 1990 Act provides a mechanism by which persons may apply to the Commissioner for an administrative declaration that they are eligible persons, meaning persons to whom a patent for the invention may be granted under s 15.
104 As appears from the preceding provisions of both the 1952 and 1990 Acts, and as submitted by Sirtex, there was at all material times after the making of the Regulations in 1971 a mechanism by which UWA could apply to the Commissioner for a patent to which it claimed entitlement by operation of law.
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Employee inventions and the Patents Acts 1952 and 1990 of Australia
105 There were no provisions in the 1952 Act and there are none in the 1990 Act which expressly deal with the right of an employer to take the fruit of an employee's inventions. As Professor Ricketson wrote of the 1952 Act in 1984:
Under Australian law the question falls to be determined by the application of the general common law and equitable principles governing the employment relationship. …
While ss 34(2), (3), (4), 63 and 64 deal with assignments and joint applications and ownership, all these provisions do is to permit assignments of patents from employee to employer or joint applications or both. The common law and equitable principles still govern who, in the first place, is entitled to apply for a patent for such an invention or is entitled to the patent when granted.
Ricketson S, The Law of Intellectual Property (Law Book Co, 1984) p 1014
106 Section 34(1)(fa) was introduced into the 1952 Act by the 1960 Act in order, inter alia, to allow employers to apply for patents generated by their employees where they had a right to the patents under the general law. The amendment was the result of a recommendation by a committee set up in 1950 by the Commonwealth Attorney-General under the chairmanship of Dean J of the Supreme Court of Victoria. Its establishment followed the 1947 Report of the Swan Committee which led to the enactment of the Patents Act 1949 (UK). The Bill recommended by the Dean Committee became, in effect, the 1952 Act. The Committee was reconvened in January 1957 to consider suggested amendments to the Act. One of those related to s 34. The Committee recommended that "any person who is entitled to the benefit of a patent when granted may make an application for a patent" - Report of the Committee appointed by the Attorney-General of the Commonwealth to consider what further alterations are desirable in the Patent Law of the Commonwealth (the Dean Report) p 2.
107 In his Second Reading Speech for the Bill for the 1960 amendments, the then Attorney-General, Sir Garfield Barwick, said:
Section 34 of the Patents Act sets out the persons who are entitled to make an application for a patent. However, there are certain persons who are entitled to the benefit of a patent once it has been granted but, as the Act stands at present, they are not entitled to make an application. One example of such a class of person is an employer who is unable, at present, to apply in his own name for a patent in respect of an invention made by his employee in the course of his employment. The committee recommended that these persons should themselves be entitled to make an application.
Parl Deb H of R 2/6/1960 at 2214
The language of s 34(1)(fa) is reflected in s 15(1)(b) of the 1990 Act. These provisions did not, however, affect the general law governing ownership of intellectual property rights as between employers and employee inventors.
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Employee inventions in the Patents Act 1949 and 1977 of the United Kingdom
108 In order to better appreciate the relevance of some of the later United Kingdom authorities on the common law relating to employee inventions, it is helpful to mention two particular provisions of British patents laws.
109 Section 56(2) of the Patents Act 1949 (UK) was enacted to provide a procedure for determining disputes between employers and employees about the ownership of patent rights and for the apportionment of interests. In the event that the Court or Comptroller was not satisfied that either employer or employee was entitled, to the exclusion of the other, to the benefit of an invention made by the employee, an application could be made for apportionment between them of the interest or benefit derivable in or from the invention or patent in such manner as the court or comptroller deemed just. The provision was recommended by the Swan Committee: 1947 Cmnd 7207 [27]. Its object, according to the recommendation, was to allow an apportionment of interests where the moral rather than the legal benefits were shared. It was, however, narrowly construed by the House of Lords in Sterling Engineering Co Ltd v Patchett [1955] AC 534. See the comment by the author of the Swan Report in K Swan, Patent Rights in an Employee's Invention (1959) 75 LQR 77. The provision was replaced by ss 39 to 43 of the Patents Act 1977 (UK) - see generally Phillips and Hoolahan, Employees' Inventions in the United Kingdom - Law and Practice (ESC Publishing, Oxford, 1982) Ch 2.
110 Section 39 of the Patents Act 1977 (UK) relevantly provides:
(1) Notwithstanding anything in any rule of law, an invention made by an employee shall, as between him and his employer, be taken to belong to his employer for the purposes of this Act and all other purposes if -
(a) it was made in the course of the normal duties of the employee or in the course of duties falling outside his normal duties, but specifically assigned to him, and the circumstances in either case were such that an invention might reasonably be expected to result from the carrying out of his duties; or
(b) the invention was made in the course of the duties of the employee and, at the time of making the invention, because of the nature of his duties and the particular responsibilities arising from the nature of his duties he had a special obligation to further the interests of the employer's undertaking.
(2) Any other invention made by an employee shall, as between him and his employer, be taken for those purposes to belong to the employee.
Section 39(3) is not material for present purposes. Section 40 provides for the compensation of employees where an employee invention is of outstanding benefit to the employer and "it is just that the employee should be awarded compensation to be paid by the employer". Section 41 provides for the way in which such compensation is to be assessed.
111 Cornish and Llewellyn in their text on Intellectual Property describe s 39 as "in effect" codifying the common law principles which determine whether an employer or an employee is initially entitled to an invention although as they note, Falconer J in Harris' Patent [1985] RPC 19 did not accept that s 39 necessarily embodied the common law: Cornish W and Llewellyn DM, Intellectual Property - Patents, Copyright, Trade Marks and Allied Rights, (6th ed, Sweet and Maxwell, 2007) p 275. It is convenient now to consider the common law in relation to employee's inventions as developed in the United Kingdom.
Employee inventions at common law - the United Kingdom authorities
112 Absent express provisions governing the ownership of intellectual property rights generated by an employee in connection with an employment relationship, a term devolving such ownership upon the employer may, in some circumstances, be implied at common law. Whether it will be implied will depend upon the circumstances, as will the scope of the implication. The cases illustrate a degree of judicial caution about generalisations in the area although, as appears below, there was thought to be a strengthening of the position in favour of the employer in the House of Lords in 1955 notwithstanding the provisions of s 56(2) of the Patents Act 1949 (UK). The perceived effects of that decision were mitigated in the United Kingdom by ss 39 to 43 of the 1977 Act (UK).
113 At the end of the 19th century the fact of employment and payment could be enough to support a prima facie inference, at common law, that copyright generated by an employee in the course of employment belongs to the employer: Lamb v Evans [1893] 1 Ch 218 at 225 (Lindley LJ). Where confidential information was involved a good faith requirement preventing its use by an employee for his own benefit would usually be implied: Robb v Green [1895] 2 QB 215. On the other hand there was no general presumption that an employer had property in an employee's inventions. Farwell J in Marshall and Naylor's Patent (1900) 17 RPC 553, quoted with approval from what turned out to be an influential passage in Frost on Patents (at 555):
In the absence of a special contract the invention of a servant, even though made in the employer's time and with the use of the employer's materials and at the expense of the employer, does not become the property of the employer so as to justify him in opposing the grant of a Patent for the invention to the servant who is the proper Patentee.
114 In Worthington Pumping Engine Co v Moore (1903) 20 RPC 41 Byrne J accepted, as had Farwell J, that the existence of a contract of service did not per se disqualify a servant from taking out a patent for an invention made by him during his term of service. He might do so even though the invention might relate to subject-matter germane to and useful for his employers in their business and even though the servant may have made use of the employer's time and servants and materials in bringing the invention to completion, and may have allowed the employers to use the invention while in their employment (at 48). The passage from Frost, relied upon by Farwell J, was accepted as correct by Warrington J in Edisonia Ltd v Forse (1908) 25 RPC 546 at 549 with the additional qualifying passage from the same text that:
It may very well be that in the circumstances of a particular case, it is inconsistent with the good faith which ought properly to be inferred or implied as an obligation arising from the contract of service that the servant should hold the Patent otherwise than as a trustee for his employer and a declaration of the Court may be obtained to that effect.
In that case a declaration of trust was made. The employee had been engaged to use his skill, knowledge and inventive powers to improve the manufacture of moulding cylinders for phonograph records. He made the inventions in the execution of that duty and took out the patents in issue through the patent agent of the company and at the company's expense.
115 So too, in British Reinforced Concrete Engineering Co Ltd v Lind (1917) 34 RPC 101, the employee, obliged by the terms of his employment to produce the best design he could for linings of headings in a colliery, was a trustee of a patent of an invention produced pursuant to that obligation. Eve J identified the relevant question by reference to the passage in Frost cited in Edisonia Ltd v Forse 25 RPC 546. He held that the mere fact that the employee had been engaged as an assistant engineer or draughtsman would not have entitled his employer to claim for its benefit the advantages of any invention which he might have made albeit the invention had been the result of knowledge and experience gained in the employer's office and might even have been suggested by difficulties which had arisen there. Eve J said:
But in dealing with the question whether or not a particular invention is to be retained by the servant or has been made by him for the benefit of the employer, it is necessary to regard not only the contract of service and the relative positions which the servant and the employer occupy thereunder, but the circumstances in which the particular invention was made.
116 The Court of Session in Scotland in Mellor v William Beardmore & Co Ltd (1927) 44 RPC 175 also rejected the proposition that a contract of employment was enough to support the implication that any invention made by an employee in the course of employment was the property of the employer. Lord Ormidale said (at 191):
As I understand the law of the matter, the mere existence of a contract of service in no way disqualifies a servant from taking out a patent in his own name and entirely for his own benefit - and that notwithstanding that he has used his employers' time and materials to aid him in completing his invention - unless he has become bound by some agreement, either express or implied, to communicate the benefits of his invention to those in whose employment he is.
117 Farwell J adverted again to limits on the employer's rights in Adamson v Kenworthy (1932) 49 RPC 57 when he said of a draughtsman engaged by an engineering firm (at 69):
I can well conceive that such a person might make an invention in respect of something which is outside his work altogether.
In that case, however, the draughtsman, who had been instructed to prepare a design for a crane brake, designed one which did not work and then, on his own time, designed another which did. A declaration was made that he was a trustee for the patent for the successful design. He was under a duty to his employer to design to the best of his ability a brake that worked. The invention which he developed was the solution of a problem which his employers had instructed him to solve.
118 A statement of the circumstances in which ownership of an employee invention by the employer will be implied appeared in Triplex Safety Glass Co v Scorah (1937) 1 Ch 211 at 217. Farwell J held in that case that an implied term existed which gave rise to an equity on the part of the employer. He said:
… any invention or discovery made in the course of the employment of the employee in doing that which he was engaged and instructed to do during the time of his employment and during working hours, and using the materials of his employers, is the property of the employers and not of the employee and that, having made a discovery or invention in the course of such work, the employee becomes a trustee for the employer of that invention or discovery, and he is therefore as a trustee bound to give the benefit of any such discovery or invention to his employer … notwithstanding the express contract is not enforceable.
The trust relationship in that case arose out of the relationship created by the particular terms of the employment contract, a proposition approved by Romer J and the Court of Appeal in British Celanese Ltd v Moncrieff (1948) 1 Ch 564 at 578-579.
119 On the other side of the line was Charles Selz Ltd's Application (1954) 71 RPC 158 in which the manager of a factory making lamp shades discovered a method of applying plastic coatings to frameworks for display articles and signs and also for making lamp shades. Lloyd-Jacob J rejected the employer's claim on the basis that the employee had at no time been engaged by his employer to apply himself to discovering an invention or anything in the nature of an invention.
120 An apparently distinct category was recognised where the status or seniority of the inventor employee was such that he or she could be said to owe a fiduciary obligation to the employer in respect of the benefit of any invention developed in the employer's time and/or using the employer's resources. In Fine Industrial Commodities Ltd v Powling (1954) 71 RPC 253 the managing director of a company who had participated, as managing director, in experiments which led to a patented invention was found to hold his share of the patent as trustee for the company. Danckwerts J referred to the relevant law as "well settled" and cited Worthington Pumping Engine Co 20 RPC 41, British Reinforced Concrete Co 34 RPC 101 and Triplex Safety Glass Co (1937) 1 Ch 211. Acknowledging the law, as stated in Frost, that a contract of service did not per se disqualify an employee from taking out a patent for an invention made during the term of service even though germane and useful to the employer and developed using the employer's time and materials, he said:
But all the circumstances must be considered in each case. It is very material to see what is the nature of the inventor's position in regard to the business, and it may be a term of his employment, apart altogether from any express covenant, that any invention or discovery made in the course of the employment of the employee in doing that which he was engaged and instructed to do during the time of his employment, and during working hours, and using the materials of his employers, should be the property of the employers and not of the employee, and that, having made a discovery or invention in the course of such work, the employee becomes a trustee for the employer of that invention or discovery, so that as a trustee he is bound to give the benefit of any such discovery or invention to his employer.
121 The general issue received consideration by the House of Lords in Sterling Engineering Co Ltd [1955] AC 534 which, on one view, strengthened the position of employers in respect of employee inventions. The case concerned proceedings under s 56(2) of the Patents Act 1949 (UK) involving an inventor and the company which employed him at the time he made the relevant invention. There was discussion of the nature of the "implied term" in a contract of service that inventions made by an employee belonged to the employer. Viscount Simonds, with whom the other Law Lords agreed, described such a term as implied in the sense that it was implied in the contract of service of any worker that what is produced "by the strength of his arm or his skill or the exercise of his inventive faculty belongs to the employer" (at 544). Viscount Simonds said of property produced by an employee (at 544):
If the employment is of a designer that which he designs is thus the property of the employer which he alone can dispose of. If it is patentable it is for the employer to say whether it shall be patented, and he can require the employee to do what is necessary to that end.
This being the law, it could only be excluded by an express agreement that it be varied and some other legal relationship created. Lord Reid saw it as a term "inherent in the very nature of the contract which the law will imply in every case unless the parties agree to vary or exclude it" (at 547). He said:
No doubt the respondent was the inventor and in the ordinary case the benefit of an invention belongs to the inventor. But at the time when he made these inventions he was employed by the Appellants as their Chief Designer and it is, in my judgment, inherent in the legal relationship of master and servant that any product of the work which the servant is paid to do belongs to the master: I can find neither principle nor authority for holding that this rule ceases to apply if a product of that work happens to be a patentable invention. Of course, as the relationship of master and servant is constituted by contract, the parties can, if they choose, alter or vary the normal incidents of the relationship, but they can only do that by express agreement or by an agreement which can be implied from the facts of the case.
122 Cornish and Llewellyn commented upon the House of Lords judgment in the context of the case law at that time:
Before that, emphasis tended to be placed on the need to show either a positive contract in the employer's favour or an implied duty of trust. Indeed it was said that the invention might be the employee's even though made in the employer's time and with his materials. The tendency to increase the presumption in favour of his employer probably grew as cases arose in which employees were trying to stop their employer from using the invention in his own business.
Cornish W and Llewellyn D, op cit at 7-03.
123 In British Syphon Co Ltd v Homewood (No 2) [1956] 73 RPC 225, the defendant was engaged by a manufacturer of soda water syphons as its chief technician. He was found to have been employed "… to give the Plaintiffs technical advice in relation to the design or development of anything connected with any part of the Plaintiffs' business." He made an invention on his own initiative which related to the business of the company. He had been employed by the company on other work and on terms which permitted him to retain for himself the benefit of anything which he subsequently invented. Shortly after applying for a patent for his invention he left the company's employment and entered that of a trade rival. Roxburgh J held that it was not consistent with the relationship of good faith between a master and a technical advisor that the advisor make some invention in relation to a matter concerning a part of the plaintiff's business and either keep it from his employer if and when asked about the problem, or sell it to a rival. Roxburgh J put it thus (at 231):
It seems to me that he has a duty not to put himself in a position in which he may have personal reasons for not giving his employer the best advice which it is his duty to give if and when asked to give it. Of course, what I am saying only relates to matters concerning the business of his employer. That, of course, is quite clear; but, in matters of that type it seems to me that he has a duty to be free from any personal reason for not giving his employer the best possible advice.
An order was made that the employee assign to the plaintiffs the patent when granted.
124 In a note on the case in the Law Quarterly Review, RE Megarry observed that the earlier authorities contained not even an oblique discussion of the question whether the company was entitled to the benefit of the invention which had been made voluntarily and without any request even for advice on the problem. Roxburgh J's conclusion rested on the basis of good faith between master and servant. The invention was substantially complete when the technician was still obliged to give technical advice to the company. Megarry said:
It may be added that a more difficult case would be one where, at the time when the employee ceased to be liable to give his employers technical advice, he had not substantially completed the invention process, but had a pretty shrewd idea how it might be done. Let the spark of genius be struck before the vital date and the tedious process of converting it into a workable invention be carried out subsequently: what claim would the original employers have then?
(1956) 72 LQR 482-483
125 The decision of the House of Lords in Sterling Engineering Co Ltd [1955] AC 534 did not make bad law of cases such as Triplex Safety Glass Co (1937) 1 Ch 211. The latter decision was applied by Whitford J in Electrolux Ltd v Hudson [1977] FSR 312. The relevant employee was a senior storekeeper for Electrolux Ltd. He and his wife devised an adaptor for use in vacuum cleaners whereby any open mouthed bag could be made to fit into a vacuum cleaner to collect the dust sucked up by it. Electrolux claimed that the invention was made while he was in their employment and that they were entitled to its benefit under their "Standard Conditions of Employment for Staff". The relevant clause was held unenforceable as an unreasonable restraint of trade. It covered the discovery of any process, invention or improvement relating not only to articles manufactured by the employer but also by any of its associated companies in the United Kingdom or elsewhere. Despite the absence of an enforceable express condition relating to inventions by employees, the Court held that there could be implied into a contract of employment a covenant that inventions made in the course of employment should be held upon trust for the employer. But such a principle had no application where the employee was not employed to invent and had made the invention outside working hours and without using the materials of the employer. In so holding Whitford J accepted the principle in Robb v Green (1895) 2 QB 1 that there would be engrafted on any contract between master and servant a condition that the servant undertook to serve the master with good faith and fidelity (at 329). There was no breach of that obligation to Electrolux. Whitford J held that when an employee is not required to produce inventions in a particular field, he or she may well be able to enjoy the fruits of inventive activity.
126 In Harris' Patent (1985) 102 RPC 19, Mr Harris had managerial responsibility for a department of his employing company which sold a class of valve manufactured by a Swiss company. Neither he nor his employer had a research function. They were to sell and provide after sales service for the product. Mr Harris designed an improved version of the valve in his own time and, after leaving his employment, applied for a patent for it. The company claimed, under s 39(1) of the Patents Act 1977 (UK), that the invention belonged to it. Falconer J upheld the Hearing Officer's decision in favour of Mr Harris. He referred to Adamson v Kenworthy for the proposition that "… the duty of fidelity is to carry out faithfully the work the employee is employed to do to the best of his ability" (29). The existence of that duty did not "assist in the formulation of the actual duties which the employee is employed to do" (30). The business of Mr Harris' employer was to sell valves made by a Swiss manufacturer, all made strictly according to the manufacturer's drawings. As manager of that part of the business, Mr Harris had no special obligation, beyond that of sales and after sales service, to further the interests of his employer. The invention therefore did not fall within s 39(1)(b) of the Patents Act 1977.
127 As has been pointed out in academic commentary Mr Harris' job description required him to use his specialist knowledge to deal with problems experienced by customers of his employer. However, the Patents Court did not base its decision on his job description but on the actual duties he performed. He had no research laboratory or other facilities. He did not undertake any creative activity and major design problems were referred to the Swiss manufacturer of the valves: Chandler PA "Employees' Inventions: Inventorship and Ownership" [1997] 5 EIPR, 262 at 263.
128 Harris' Patent 102 RPC 19 was distinguished in Staeng Ltd's Patents (1996) RPC 183 where the relevant employee was held by the Comptroller-General to be a senior executive with a special obligation to advance the interests of his employer's undertaking. The existence of a "special obligation" is a statutory condition for employer ownership prescribed in s 39(1)(b) of the Patents Act 1977. It may, to some extent, reflect the common law where the status or seniority of the inventor/employee is such that he or she could be said to owe a fiduciary obligation to the employer. Such an obligation may arise "… where the employee represents the alter ego of his employer or occupies a position very high in the management structure": Chandler PA op cit at 265. In Staeng Ltd's Patents [1996] RPC 183 a point of distinction was that while Mr Harris passed on problems, the employee of Staeng Ltd was expected to solve them by identifying the need for new products or modification of existing ones: Chandler PA op cit at 266.
129 In a case a little closer to the present, a junior registrar employed at the Department of Ophthalmology in a hospital in Glasgow, and paid by the Greater Glasgow Health Board made an invention. It related to an optical spacing device for use with an indirect ophthalmoscope. The inventor was found by Jacob J, in proceedings under s 39 of the Patents Act 1990 (UK), to have been doing some teaching and taking an interest in research to the extent it was consistent with his primary and essential function of treating patients. He made the invention in his own time. He was held not to have been acting in the normal course of his duties as a Registrar: Greater Glasgow Health Board's Application (1996) RPC 207 at 222. Jacob J rejected the proposition that because it was a doctor's duty to think about the diagnosis and treatment of patients, it was also his or her duty to devise a better method of diagnosis if he or she were able to find one. Jacob J said (at 223):
Doctors frequently develop new and better treatments. Some of those will involve patentable inventions. Most doctors are employed. If, just because they are employed and because the invention could be used for the purpose of their employment the invention belongs to the employer then many doctors would be placed in a very difficult position … "Can they publish what they had discovered?", "Do they have to get their employer's permission to publish?" At present they do not. I do not see why they should in the future.
Jacob J also referred to the decision of the Court of Appeal in Stephenson Jordan & Harrison Ltd v MacDonald & Evans (1952) 69 RPC 10. When that case was decided the issue of ownership of copyright in a work as between employer and employee was based upon whether the work was made in the course of employment. A person engaged to give lectures who decided to reduce them to writing would, absent clear terms, have been entitled to the copyright. Jacob J thought the same applied to an inventor. While a "useful accessory to his contractual work" it was not "really part of it". (224)
130 The common law with respect to employee inventors arising from the British authorities involve the following propositions:
1. A contract of employment may validly provide that the employer or the employee or the two parties jointly, or in shares in some specific proportion, own the right to any invention created by the employee in the course of his or her employment. It may also require the assignment of rights associated with such an invention.
2. A provision conferring an employee inventor's rights on the employer, if too widely expressed, may be unenforceable as an unreasonable restraint of trade.
3. Absent express provision, a term may be implied in a contract of employment whereby the benefit of an invention developed by an employee belongs to the employer such that the employee is a trustee of the invention for the employer. There may be an associated implied contractual obligation or an incidental equitable obligation to assign the benefit of any invention to the employer.
4. The character of a contract as a contract of employment does not of itself require the implication of a term that would prevent the employee from taking the benefit of an invention made by the employee during the term of service even if made in part in the employer's time and using some of the employer's human and material resources.
5. Where an employee has been employed for the purpose of solving a technical problem or improving the employer's technology or to make inventions, then there will be an implied term in the contract that the inventions made by the employee in the discharge of such contractual duties belong to the employer.
6. The preceding implication may be supported by an implied term that the employee will act in good faith in the interests of the employer in discharging his or her duties under the contract of employment.
7. Where the employee has a position with the employer of such seniority that it carries with it an associated duty to advance the interests of the employer generally, then there may be an implied duty of good faith and an implied term that an invention made by the employee relevant to the employer's business will belong to the employer even if made outside working hours.
8. Where an employer is entitled to the benefit of an employee's invention by express provision or by implication, the employee will hold the invention in trust for the employer.
None of these authorities had to deal with the particular case of academics employed by a university to undertake research and other duties with no duty to invent. For reasons discussed below their application to such a case is to be approached with caution.
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Employee inventors in other jurisdictions
131 It is helpful to refer briefly to the position of employee inventors in the United States, Canada and New Zealand so far as it appears from leading cases in those jurisdictions.
132 In the United States it has long been the rule that, when an employee is employed to invent, an invention produced pursuant to that contractual obligation is the property of the employer. Where an employee is not specifically employed to invent but makes an invention on the employer's time and using the employer's facilities then the employee may retain the invention: Hapgood v Hewitt 119 US 226; Solomons v United States (1890) 137 US 342; Dalzell v Duaber Manufacturing Co 149 US 315. In such a case the employer may have an implied non-exclusive right to use the invention. This is known as a "shop right": United States v Dubilier Condenser Corporation (1933) 289 US 178.
133 In Dubilier Condenser Corporation (1933) 289 US 178 the inventors were employed by the US Bureau of Standards. They were given particular projects on which they were to work. With their employer's permission they became interested in another project to which they had not been assigned. This involved remote control devices for use in bombs and torpedoes. They invented a device relevant to that project, obtained a patent on it and assigned it to Dubilier Condenser Corporation. The Supreme Court held that even though they had used workplace facilities to develop the idea, their employers had given them permission to do so which was not conditional upon their undertaking to assign the patent that resulted. That observation reflected what the Court called "[t]he reluctance of courts to imply or infer an agreement by the employee to assign his patent". That reluctance was said to be based upon the particular nature of the act of invention and the distinction between that act and that of the discovery of the laws of nature. The Court said (at 187):
One employed to make an invention, who succeeds, during his term of service, in accomplishing that task, is bound to assign to his employer any patent obtained. The reason is that he has only produced that which he was employed to invent. His invention is the precise subject of the contract of employment … On the other hand if the employment be general, albeit it cover a field of labour and effort in the performance of which the employee conceives the inventions for which he obtained the patent, a contract is not so broadly construed as to require an assignment of the patent.
134 The so-called "shop right" of the employer recognised in the United States was explained thus (at 188-189):
Since the servant uses his master's time, facilities and materials to attain a concrete result, the latter is in equity entitled to use that which embodies his own property and to duplicate it as often as he may find occasion to employ similar appliances in his business. But the employer in such a case has no equity to demand a conveyance of the invention, which is the original conception of the employee alone, in which the employer had no part. This remains the property of him who conceived it, together with the right conferred by the patent to exclude all others than the employer from the accruing benefits. These principles are settled as respects private employment.
135 The position was no different in government service. The general proposition was stated by Brewer J in Solomon v United States (1890) 137 US 342 at 364:
An employee, performing all the duties assigned to him in his department of service, may exercise his inventive faculties in any direction he chooses, with the assurance that whatever invention he may thus conceive and perfect is his individual property. There is no difference between the government and any other employer in this respect.
And further (at 364):
If one is employed to devise or perfect an instrument, or a means for accomplishing a prescribed result, he cannot, after successfully accomplishing the work for which he was employed, plead title thereto as against his employer. That which he has been employed and paid to accomplish becomes, when accomplished, the property of his employer. Whatever rights as an individual he may have had in and to his inventive powers and that which they are able to accomplish, he has sold in advance to his employer.
136 In a case in which federal funding was made available through the University of Florida for research, an implied term was found to exist in the employment contract of an academic so funded requiring him to assign the patent of an invention developed in the funded research to the university. Factors relevant to that conclusion included the purpose of the federal government fund, the provision and use of university facilities, the university's willingness to pay all expenses related to the patent application out of the federal fund, the nature of the instructions given to the academic and the circumstances in which the initial application was made: State of Florida v Neal (1943) 152 Fla 582. This may be contrasted with Florida State Board of Education v Bourne (1942) 150 Fla 323 where the employee was held to retain full rights in his invention. The employee, who was a plant pathologist, was assigned to a project focussed on cane breeding experiments. It was not directed to any specific varieties of cane. He was employed to develop cane varieties by research and experimentation that might or might not lead to invention. The three varieties of sugar cane were in fact produced using the land and facilities of a private company separately employing the employee for that purpose. The Board of Education was aware of that employment and of the payment being received. The court held that the evidence was insufficient to establish that the employee had been specifically employed to invent.
137 The decision of the Supreme Court of North Carolina in Speck v North Carolina Dairy Foundation, Inc (1984) 319 SE 2d 139 represented something of a departure from established jurisprudence. A single judge of the Supreme Court of that State held that a secret process, developed through the research of a university professor and his assistant in relation to acidophilus milk, belonged to the university absent a written contract by the university to assign. The Court found that the researchers were permitted and encouraged by their employer to conduct the precise research which led to the discovery and perfection of the secret process. The decision in Speck (1984) 319 SE 2d 139 has been criticised as contrary to the principles enunciated in Dubilier (1933) 289 US 178. With one exception it has not been followed by US Courts in later cases. The exception was Madey v Duke University (1999) US Dist Lexis 21379. The decision suffered appellate reversal in certain respects and appears to have been principally concerned with the effect of federal grants for research and an experimental use defence to an infringement allegation: Madey v Duke University (2002) 307 F 3d 1351.
138 The US cases to 1992 were discussed in a helpful article in the Wisconsin Law Review in 1992: Chew PK, "Faculty-generated inventions: Who owns the Golden Egg?" (1992) Wis L Rev 259. The author observed that at that time many cases had applied the Dubillier principle but few had specifically addressed ownership disputes between faculty inventors and university employers. One first instance decision cited was Kaplan v Johnson (1976A) 409 F Supp 190 which held that a doctor working at a Veterans Administration Hospital owned the rights to an invention he conceived for a camera for whole body imaging. The invention was made in part during working hours, using hospital facilities and the assistance of other employees. The court rejected the proposition that the doctor was hired to invent because research was part of his job. A distinction was drawn between "employment calling for general research work and employment with a specific job of inventing". There were other issues in the case relating to the governmental character of the employer and the effect of an Executive Order for rights to the invention which led to reversal on other grounds: Kaplan v Corcoran (1976) 545 F 2d 1073. The case does not carry great persuasive weight save for its application of the Dubillier principle to a situation, in some respects, analogous to the present.
139 Professor Chew in the article made the point that many of the decided cases focussed on researchers, scientists and engineers in a variety of institutional settings. In such cases the question for decision had always been whether the employees were "hired to invent" (266).
140 In Canada an invention by an employee is the property of the employee except where the employee is engaged to invent and creates an invention in the course of his or her duties. That is to say, where the invention is the product of the very work the employee is paid to do, it belongs to the employer: Spiroll Corp Ltd v Putti (1975) 64 DLR (3d) 280, aff'd (1976) 77 DLR (3d) 761; Seanix Technology Inc v Ircha 53 BCLR (3d) 257. The position that the employee, not employed to invent, retains the rights to an invention developed during employment applies even though the employer's time and materials have been used to develop the invention: Comstock Canada v Electec Ltd (1991) 45 FTR 241. In that case the Federal Court of Canada set out eight indications relevant to the question whether an employee is employed to invent:
(a) whether the employee was hired for the express purpose of inventing;
(b) whether the employee at the time of hiring had previously made inventions;
(c) whether an employer had incentive plans encouraging product development;
(d) whether the conduct of the employee once the invention had been created suggested that ownership was held by the employer;
(e) whether the invention was the product of the problem the employee was instructed to solve, ie whether it was a duty to make inventions;
(f) whether the employee's invention arose following his consultation through normal channels (ie was help sought?);
(g) whether the employee was dealing with highly confidential information or confidential work;
(h) whether it was a term of the servant's employment that he could not use the ideas which he developed to his own advantage.
141 The court also held that the fact that an employee owes a fiduciary duty to act in the best interests their employer does not of itself prevent the employee from asserting rights in relation to an invention to which he or she is entitled: Comstock Canada (1991) 45 FTR 241 at [79]. Nevertheless there are situations in which a fiduciary employee's conduct in relation to the development and exploitation of the invention will be held to have breached a fiduciary duty. In CI Covington Fund Inc v White (2000) 10 BLR (3d) 173, the principal shareholder and director of a company used the company to solicit funding to develop water treatment technology and having used that funding to develop that technology lodged patent applications in his own name. In the Ontario Superior Court of Justice, Swinton J held that since the employee's principal employment obligation was research and development with respect to water treatment technology the employer company should properly be regarded as owner of the patents and the patent applications. The employee's failure to lodge the applications in the company's name constituted a breach of fiduciary duty as director.
142 It does not appear that the American concept of the "shop right" has been developed in Canada. There is a helpful discussion of the US and Canadian cases in the context of university employees in La Roche, Collard and Chernys, "Appropriating Invention: The Enforceability of University Intellectual Property Policies" (2007) 20 IPJ 135. Generally speaking the cases cited supported the proposition that, absent an assignment or like provision in a contract, an employee who has not been employed to invent retains the property right in relation to any invention developed in the course of his employment.
143 In New Zealand, the question of entitlement to employee inventions was considered by the Court of Appeal in Empress Abalone Ltd v Langdon (2000) 2 ERNZ 53. There was no dispute in that case between the parties as to the law concerning the ownership of employee inventions. Keith J cited a passage from the 5th edition of Blanco White's text on Patents as representing an agreed statement of principle:
Where an employee in the course of his employment made an invention which it was part of his duty to make, the law imported into the contract of employment a term that the invention is the property of the employer.
Blanco White TA Patents for Inventions and Protection of Industrial Designs (5th ed, 1983, London: Stephens & Sons) at [7-004].
Keith J observed that the main difficulty in such cases usually lay in determining whether the invention concerned was made in the course of employment or, in other words, whether it was something that it was the employee's job to invent. Keith J held that where an employee is employed to invent in one area of the employer's business and creates an invention outside that area the invention will belong to the employee even if it is valuable to another part of the employer's business: Empress Abalone Ltd (2000) 2 ERNZ 53 at [8].
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Employee inventors at common law - the Australian cases
144 The two principal reported Australian cases on employee inventors are the decision of Branson J in Spencer Industries Pty Ltd v Collins (2003) 58 IPR 425 and, in a university setting, the decision of Nettle J in Victoria University of Technology v Wilson (2004) 60 IPR 392. Two other reported decisions are mentioned briefly for completeness. Kwan v Queensland Corrective Services Commission (1994) 31 IPR 25 was a decision of a delegate of the Commissioner of Patents which turned on the conclusion by the delegate that the relevant inventors were not employees of the Commission at the relevant time. Even if they had been employees they would have been entitled to the grant of the patent as the making of the invention was not done in the course of their ordinary duties. The other decision which touched incidentally upon the issue, was that of the Western Australian Court of Appeal in Eastland Technology Australia Pty Ltd v Whisson (2005) 223 ALR 123; [2005] WASCA 144. That case is of marginal relevance because it was concerned with the position of a company director who invented something that would have advanced the commercial interests of his company. McLure JA who wrote the judgment of the Court referred to Fine Industrial Commodities Ltd v Powling (1954) 71 RPC 253. She cited it as authority for the proposition that "the mere fact that a person is a director or employee of a company does not disqualify a person from taking out a patent for an invention made by him during his period of service even though the invention may relate to or be useful in the company's business". Beyond that observation, the case has little direct relevance to the present proceedings.
145 The first of the decisions dealing more substantively with the issue of employee inventors was Spencer Industries Pty Ltd 58 IPR 425, a judgment on appeal from a delegate of the Commissioner of Patents reported in Spencer Industries Pty Ltd v Collins (2002) 54 IPR 434. The delegate had refused to extend the term of a petty patent on the basis that an employee of the patentee made the invention outside the course of his normal duties as an employee. The petty patent system was abolished from 24 May 2001 upon the coming into operation of the Patents Amendment (Innovation Patents) Act 2000 (Cth) but transitional provisions in that Act applied in relation to the petty patent before the Court.
146 The business of the employer, Spencer Industries, was the manufacture of equipment used in the tyre retreading business, particularly rasp blades, hubs and spaces and pins for hubs. Mr Collins was employed as sales manager of the company with "… total responsibility for sales and contracts and the authority to negotiate new agencies both in Australia and overseas". He was a qualified first class machinist and also had considerable experience as a sales representative. He was responsible for selling the products manufactured by his employer. However he did not have complete autonomy. He was not involved in decisions concerning the management of the employer's business. He was not employed to improve the products of the employer or to invent new ones. He did, however, make suggestions which were acted upon about the expansion of his employer's product range and accepted that this was part of the performance of his duty to increase sales.
147 An overseas customer of the employer raised with Mr Collins the issue of the employer designing its own tyre rasp hub. A principal of the company instructed or authorised Mr Collins and a machinist to work together towards the design of a new hub. Subsequently he worked on the design of a tyre rasp spacer with another employee. He then designed a more efficient and effective tooth for a rasp blade, but when he sought to interest his employer in the invention he was effectively rebuffed. Later however, at his employer's request and in his own time, he prepared enlarged drawings of the invention using his own equipment.
148 Branson J held that Mr Collins did not make the invention within the course and scope of his employment as sales manager of Spencer Industries. The position he held was principally a sales position. He occasionally undertook tasks outside his area of principal responsibility. He could be given reasonable direction to perform duties outside of the area of sales that were within his technical skills and that were not incompatible with his principal responsibility for sales. Her Honour rejected the submission that because he had a duty as sales manager to advance the sales of his employer any invention made by him which was capable of advancing those sales was made within the course and scope of his employment. It was no part of his ongoing duties to invent products for the employer. Her Honour therefore upheld the decision of the delegate that the invention was made by Mr Collins outside the course of his duties and that Spencer Industries would not have been entitled to have the patent of the invention assigned to it.
149 In that case the parties were in agreement that the relevant law was that articulated by Lord Reid in the passage cited earlier from Sterling Engineering Co Ltd [1955] AC 534. A helpful commentary on the decision appears in Raper E, "Employee Ownership of Inventions - A Re-examination" (2004) 17 AJLL 81.
150 The second case on employee inventions is also the only reported Australian decision about the rights of universities and academic staff in relation to inventions created by staff is Victoria University of Technology 60 IPR 392, a decision of Nettle J. The defendants, Wilson and Feaver, were respectively a professor and senior lecturer at the Victoria University of Technology. In March 2000 Professor Wilson, Dr Feaver and one Astill lodged an Australian provisional patent application in respect of an invention which they had developed involving an electronic international trade exchange. It was intended to enable international traders and brokers to undertake trading transactions electronically through a controlled electronic trading environment. It was otherwise described as a product and commodity internet and extra-net based electronic trading exchange. The facts of the case were, like the facts of this case, complex and convoluted. Although there was a university intellectual property policy in existence, there was no evidence it had ever been approved by the university council or published in its human resources manual, staff manual or equivalent publication.
151 Nettle J stated the general law thus (at [104]):
The law is well settled upon the position of an officer or employee who makes an invention affecting the business of his or her employer. It is an implied term of employment that any invention or discovery made in the course of the employment of the employee in doing that which he is engaged and instructed to do during the time of his employment, and during working hours, and using the materials of his employers, is the property of the employer and not of the employee. Having made a discovery or invention in course of such work, the employee becomes a trustee for the employer of that invention or discovery, and he is therefore as a trustee bound to give the benefit of any such discovery or invention to his employer. But the mere existence of the employer/employee relationship will not give the employer ownership of inventions made by the employee during the term of the relationship. And that is so even if the invention is germane to and useful for the employer's business, and even though the employee may have made use of the employer's time and resources in bringing the invention to completion. Certainly, all the circumstances must be considered in each case, but unless the contract of employment expressly so provides, or an invention is the product of work which the employee was paid to perform, it is unlikely that any invention made by the employee will be held to belong to the employer.
His Honour referred to Worthington Pumping Engine Co [1902] 20 RPC 41, British Reinforced Concrete Engineering Co 34 RPC 101, Triplex Safety Glass Co Ltd [1937] Ch 211, Sterling Engineering Co Ltd (1955) AC 534 and Spencer Industries Pty Ltd (2003) 58 IPR 425.
152 In discussing the existence of fiduciary duties owed by employees to employers, Nettle J observed that, in the law of contract, the extent of an employee's duty of fidelity and loyalty to the employer is dependent upon the facts of the case. So the law will not impose on a manual worker restrictions, the real effect of which would be to interfere with the worker's freedom to use spare time as he or she chooses. A chief executive officer of a listed public company is in a different position. His Honour said (at [145]):
The same is true of fiduciary duties although it is necessary to distinguish between an employee's contractual duty of good faith and loyalty and such if any fiduciary duty as he or she may owe to their employer. Some employees, particularly senior employees, do owe fiduciary duties to their employers. But others do not. The scope of an employee's fiduciary duties to the employer depends as much as anything upon the nature and terms of the employment. "The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with and conforms to them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction".
He referred to Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 at 97; Nottingham University v Fishel [2000] ICR 1462 at 1491-1492 per Elias J.
153 Nettle J found that the research which the academic defendants undertook in developing the patented system was not research which they had been retained to perform (at [115]). It had never been conceived before the advent of their proposal that they were retained to conduct the sort of research that could result in a patentable invention. They were expected to undertake the kind of intellectual analysis which typifies social science academic inquiry even in applied disciplines. Nevertheless, his Honour found that they undertook the project as work on behalf of the university and continued with it on that basis until they resolved to take the intellectual property for themselves. It could therefore be concluded that they were retained to perform the work which they undertook on the invention. The general principle leading to that conclusion was set out at [120]:
Self-evidently the work which an employee is retained to perform can and often does change over the period of employment, and sometimes so as to be distinctly different in nature to what was envisaged at the outset; for example where an employee is promoted or reassigned. Other times, an employee may be retained at the outset of the employment relationship on a general basis providing no more specific guidance as to the work which he is to perform than that he is to do the work assigned him by his foreman or supervisor. In such a case the nature of the work which the employee is retained to perform is capable of changing daily if not more frequently. Consequently, the law in this country is that the nature of the work which an employee is retained to perform at any point of time must be assessed by reference to the work performed at that point of time.
His Honour referred to British Reinforced Concrete Engineering Co Ltd 34 RPC 101; Edisonia Ltd v Forse (1908) 25 RPC 546 and French v Mason [1999] FSR 597 at 602.
154 In relation to the allegation that the academics had breached their fiduciary duties to the university, his Honour referred to the degree to which, over the last 30 years or so, public service in general and academia in particular, has changed. He observed that conditions of service which once informed academic service structures have been replaced with business practices. Permanent and tenured employees have, in many cases, been replaced with contractors. It no longer goes without saying that public servants in general or academics in particular are bound to refrain from extraneous paid activities. His Honour did not accept that it was enough to make an academic liable to account for information or opportunity acquired while working, that the academic may spend most of his or her time working. Indeed, in the case of the Victoria University, its outside work policy provided they were free to work outside university hours without consent provided their work did not interfere with their duties to the university. On the other hand, even if an employee were free to work for somebody else, he or she must avoid work which could conflict with the interests of the employer that the employee is paid to serve. So in the absence of full and frank disclosure and consent, a professional employee remains bound to account to the employer for gains derived as a result of the employee's fiduciary position and for opportunities of which the employee may learn in the course of employment.
155 His Honour found that there was a breach of fiduciary duty in the case before him because:
1. The opportunity to design the system was presented to the academics in their capacities as such.
2. The opportunity was available to the university in the sense that the proponent would have been pleased to have had the system designed in the name of the university.
3. The academics began work upon the system design in their capacities as employees for the university and for the benefit of the university.
4. Their decision to take the intellectual property rights for themselves had the effect that they were taking away from the university and transferring to themselves the opportunity of continuing with the design of the system, to exploit the opportunity for their own benefit to the exclusion of the university.
5. It was irrelevant whether the change was made in knowing disregard of the university's interest or an honest ignorance of their obligations. So too, to a large extent, was the question whether the university would have chosen for them to continue with the work on its behalf if apprised of all the facts. It was plain in that case that the university did have the capacity to do the work of designing the system.
156 His Honour dealt specifically with an argument that the university was not in the business of providing venture capital for the sort of enterprise in which they were involved in developing the software the subject of the patent. He identified, as one answer to that contention, the proposition that it is not ordinarily a defence to a breach of fiduciary duty that the fiduciary's principal may have been unwilling, unlikely or unable to take the opportunity taken by the employee and exploit it. That was not altogether an adequate answer as a fiduciary's position only inhibits him or her in respect of business opportunities that the principal is actively pursuing or in which the principal might reasonably expect to be interested. His Honour cited Glover J, Commercial Equity: Fiduciary Relations (Butterworths, Sydney, 1995):
characterisation of an opportunity as a fiduciary opportunity overlaps with the characterisation of whether the scope of fiduciary duties extends to the opportunity in question.
His Honour had to decide, therefore, how likely it was that the university might have been interested in becoming involved in the development of the relevant software if it had been apprised of the opportunity. The evidence did not go far enough to positively satisfy him that it would have wished to be involved. Nevertheless there was a real and sensible possibility that it would have so wished if given the chance to do so. There was therefore a real and sensible possibility of conflict of interest and duty on the part of the academics in arranging for their software to be developed by an external entity rather than by the university. They therefore acted in breach of fiduciary duty by excluding the university from the opportunity to be involved (at [213]).
157 The decision was not directly concerned with the question whether a member of the academic staff of a university, employed to do research which could give rise to inventions, can be said to have a duty to invent. Nor did it have to deal with the question whether, irrespective of any duty to invent, an academic researcher whose work was in an area likely to give rise to an invention held the rights in relation to any inventions or whether they effectively belonged to the university. The academic staff in the University of Victoriacase had not been engaged to do the kind of research that could result in patentable inventions. The case was decided on grounds relating to the conduct of the academics and choices they made in breach of a fiduciary duty to the university. It left open the question whether academic staff of the university engaged to carry out research which could result in patentable inventions as a general proposition hold the rights to such inventions or whether the university would be entitled to those rights.
Application of general principles to university researchers
158 After conducting a review of the position in the United Kingdom, Australia and the United States, Monotti and Ricketson observed in Universities and Intellectual Property(Oxford University Press, 2003) that it is not always clear, in any of these countries, that an academic who is employed to teach, conduct research and perform administrative duties is "employed to invent" (at 5.64). They said (at 6.59):
Employer ownership of inventions that academic employees create rests on the interpretation of the contract of employment, any express term concerning ownership of inventions, any separate agreements, statutes or policies dealing with IP matters, and the scope of the duties of employment. It seems reasonable to state that, while there is a clear principle that a UK university employer will own inventions that its academics create in the course of their employment, its practical application can be very difficult. Uncertainties remain in determining when the academic is employed to invent. The position is the same in Australia. Hence, it will be unwise for a university to rely upon general principles if its intention is to claim title to inventions that are made by its academic employees during their working hours and using university facilities and funding. A contractual term that limits university claims to inventions made in the performance of duties of employment will be inadequate protection if the duty to invent is not a duty of employment. Hence, it would be necessary to include an express term under which the researcher agrees to assign any inventions that he makes not only in the performance of employment duties, but also in the course of using university funding and other resources.
They suggested that Greater Glasgow Health Board's Application [1996] RPC 207provides some authority for distinguishing, in appropriate circumstances, the duty to invent from the duty to conduct research. However they acknowledged that, in that case, the comments to that effect were obiter because the invention was made out of working hours and not within the scope of the doctor's employment (at [6.65]).
159 Monotti and Ricketson confessed to a "lingering discomfort with equating an academic's general duty to research with a duty to invent, even though the research is that from which an invention might reasonably be expected to result". In asking why this discomfort should exist they referred to the general obligation of secrecy imposed on the employee who has a duty to invent. Although contracts of employment may include express conditions to that effect, with safeguards on the duration of secrecy, an automatic implied obligation sits uncomfortably with the notion of "academic freedom", shared ownership and free exchange of research results (at [6.66]). There is much force in their observation at [6.67] that:
… in the absence of an express or implied duty to invent and to hold any information secret, the principles that operate in industrial settings seem to have no application to the creation of inventions in the performance of normal academic duties of teaching, research and administration.
The authors acknowledged that their view was "essentially speculative" and based upon the essential differences between universities and other organisations. In my opinion, however, those differences in relation to persons engaged to undertake research at universities are of critical importance.
160 A person engaged to carry out research only is in a different category even when the possibility or probability exists that the research will lead to the development of an invention. Such a person has a duty to research, but no duty to invent. Where, as is often the case, the pathways that may be taken in research are a matter of choice, the question whether or not to invent will be a matter of choice. Given the nature of universities and the public purposes served by such as UWA, there is no basis for implying into the contracts of employment of its academic staff a duty not to disclose the results of research even if such disclosure could destroy the patentability of an invention. Absent such a duty and given a choice to invent or not invent, it is difficult to see upon what basis there can be a presumption that a term will be implied as a matter of law that the university has an entitlement to take the inventor's property rights in relation to the invention. In the present case UWA does not assert any limited right to the inventions but all the rights. No question of an implied "shop right" has been raised.
161 The existence of such an implied term is even more problematical in circumstances such as the present where the researcher was expected to secure funding to a substantial degree from sources external to UWA. This was even though UWA, under standard arrangements, administered funding, from sources such as the NH & MRC and CSIRO, when it was received. A striking feature of this case was the significant amount of time and effort devoted by Dr Gray andthose researching with him in applying for research grant grants to a myriad of funding and grant bodies and agencies.
162 In relation to UWA, the principal officers of the university responsible for administering its intellectual property policies took somewhat differing views of its role in relation to inventions produced by academic staff. Professor Parfitt, who was Deputy Vice-Chancellor (Research) from 1 April 1987 to 31 December 1991 commented in a draft document which he produced in October 1988 that the whole of the professional time of an academic staff member was to be devoted to the performance of the duties of office of that staff member. Any intellectual property developed by staff members in the performance of the duties of their office belonged to UWA. This could not have been a statement about the operation of the Patents Regulations because they made no such provision. Professor Parfitt saw UWA, in practical terms, as having an option to seek intellectual property protection for inventions at its own cost or, if it decided not to do so, to assign the relevant rights to the staff member within a reasonable time. Professor Barber who was Pro Vice-Chancellor (Research) from February 1994 to late 2002 regarded commercialisation of intellectual property as a by-product of UWA's activities. He characterised UWA's approach as reactive rather than proactive.
163 Absent express contractual provisions, if a person were employed by a university specifically to produce an invention, then there would be at least a presumption of a term implied by law that the rights in relation to the invention will belong to the university. For example, if a post-graduate student is engaged by the university to design a particular device or an improvement to an existing device, any right to apply for a patent in relation to such device or improvement will belong to the university. That would accord with the established authorities relating to employees who have a duty to invent. However, nobody from UWA suggested that the academic staff in this case, who were engaged to carry out research, had a duty to produce inventions. Indeed that proposition was disclaimed by counsel for UWA in oral closing submissions.
164 While each case involving a university and its academic staff must be assessed by reference to its particular circumstances and the terms and conditions of employment of its staff, I do not consider as a general proposition that there is a presumption at law that the university will be entitled to the rights to inventions developed by such staff in the course of their research. This issue will be revisited later in these reasons by reference to the particular circumstances of Dr Gray's appointment.
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Evolution and implementation of UWA's Intellectual Property Policy - 1985/2002
165 Regulation 4 of the Patents Regulations of UWA provided for the creation of a Patents Committee appointed by the Senate "to advise the Vice-Chancellor on all action to be taken in relation to inventions made or developed by persons subject to these regulations …". The power of the Vice-Chancellor in relation to inventions said to be subject to the Patents Regulations, was circumscribed by the requirement to act with the advice or the subsequent endorsement of the Patents Committee.
166 The only direct documentary evidence of the existence and composition of the Patents Committee covered the years from 1985 to 1988 inclusive. It was listed in the University Calendars for those years. In 1985 its chairman was Professor Boyle. The other members were Mr Ford of the Faculty of Law, Associate Professor Wager of the Faculty of Engineering, and Associate Professor Bottomley who filled the role of a member appointed from the School of Chemistry or Department of Physics. The membership was the same for 1986, but in 1987 Professor Robert Parfitt, the appointee to the newly created position of Deputy Vice-Chancellor (Research), became its chairman. He was also the chairman in 1988.
167 The only minutes of the Patents Committee before the Court recorded a meeting held on 25 October 1985. Professor Clyde acted as chairman at that meeting. Mr Ford and Associate Professor Bottomley were present. Minutes of a meeting held on 18 August 1983 were confirmed. There is no other evidence that the Patents Committee met at any time relevant to these proceedings. Professor Robson, the current Vice-Chancellor, accepted in cross-examination that if there were minutes of the Patents Committee in existence they would have been produced. Mr Fritz Steenhauer, who was the secretary to the Committee could have been called as a witness but was not. I infer from the absence of documentary evidence of any meetings after 1985 and the history of institutional arrangements for dealing with intellectual property, discussed below, that the Patents Committee did not meet after 25 October 1985. It had become a dead letter. Although formally constituted until 1988 it ceased to exist thereafter.
168 In its responsive closing submissions, UWA argued that the Senate was empowered to convene the Patents Committee at any time. Until such time as disclosure of an invention was made that committee had no duties to perform under the Patents Regulations. Accordingly, so it was submitted, the maintenance of a standing Patents Committee could not be a condition precedent to the enforcement of the Patents Regulations. I will deal with that submission later in these reasons.
169 On or about 30 November 1976 a company called Uniscan Ltd (Uniscan) was incorporated by UWA as a company limited by guarantee. According to a Position Paper written years later by Mr David Hilditch, who in the 1980s was to work as a consultant for that company, it came into existence as the result of a recommendation by the Patents Committee. The particular project for which it was formed was the Beta-Graph, an invention developed by Professor John Ross at the Department of Psychology. This was reflected in the first object set out in the memorandum of association of the company:
The development and exploitation of graphic display systems.
Although the invention was found later to have only limited commercial application, Uniscan continued as a UWA owned company. One of its objects was to cooperate in research activities in "any university or college of advanced education in Australia or elsewhere" and with other bodies including the Commonwealth Scientific and Industrial Research Organisation (CSIRO) and:
to define procedures for determining which inventions resulting from such research shall be patented in accordance with the Patents Regulations for the time being of the University of Western Australia.
Another company, Univention Ltd (Univention), was also incorporated at about the same time for similar commercial purposes, although there was little evidence of any activity on its part at any time.
170 On 28 September 1982 the Senate of UWA agreed in principle to a recommendation from its General Purposes Committee that it establish a Centre for Applied Business Research (CABR). According to an internal UWA memorandum dated 1 June 1983, CABR was established as a limited liability company wholly owned and controlled by UWA. The statement that CABR had corporate status was mistaken. Professor Robson said in cross-examination that he did not think that CABR was a company. Mr Hilditch's Position Paper treated it as a trading name used by Uniscan. According to the memorandum of 1 June 1983, it was controlled by a board of management, not a board of directors. I find that CABR was a "centre", established by UWA but lacking a distinct corporate identity. It was an administrative unit of the university. Although it had its own board of management, it was effectively operated in conjunction with Uniscan.
171 According to the memorandum of 1 June 1983, CABR's objective was "to facilitate the expansion of applied research within the School of Commerce and the expansion of non-award professional and management development activities … and to coordinate and administer research projects, seminars or short non-award programs resulting from these research activities". It commenced its operations on 1 April 1983. Mr Hilditch described it as having been established to provide consulting services to the Western Australian business community utilising academic resources available to it through its association with UWA.
172 An internal UWA document dated 29 June 1984 and entitled "Centre for Applied Business Research Project Proposal" suggested the establishment of what was variously referred to as an "Industrial Liaison Unit", a "Intellectual Property Service Unit" and a "Technology Transfer Intellectual Property Liaison Unit". I infer from its text that it was a document from within CABR. One of the points made in it, in a summary designed as an "aide memoire" was that:
CABR is at a disadvantage when dealing with on-campus staff since the present practice of UWA in handling patents in unclear. [sic]
The document seems to have led or contributed to the creation of a Technology Transfer Intellectual Property Liaison Unit.
173 Following the June 1984 paper, UWA approved the establishment of a Technology Transfer/Intellectual Property Liaison Unit (the IP Unit) within CABR on a "retainer" of $30,000 per year for a three year trial period. In his position paper Mr Hilditch described the terms of reference of the unit as very broad and extending well beyond the charter of the Patents Committee. He saw the IP Unit as set up "to exclusively manage and commercialise intellectual property arising from research originating from within the University". Its role was to analyse the commercial potential of an intellectual property project, obtain advice on the best method of protecting the property, liaise with prospective commercial and industry partners and make recommendations to the Uniscan board. I accept that as an accurate description of its purpose and function.
174 David Hilditch was engaged by Uniscan between early 1984 and May 1985 to provide part time consultancy services. He had a science degree from Nottingham Trent University and a Master of Business Administration from UWA. He was engaged through David Hilditch & Associates Pty Ltd as trustee for the Hilditch Family Trust. In May 1987 Uniscan offered him a position as a senior consultant on a project-by-project basis. At that time Uniscan's office was located at Love House in Nedlands. From May 1987 to November 1987 he was primarily engaged in Uniscan and CABR consulting projects preparing business plans and market reports for external industry clients. He reported on his work to the Director of CABR, Dr Ian Nicholas who, as appears below, was appointed to that position in December 1984.
175 In his cross-examination Mr Hilditch said the role of managing the University's intellectual property had been conferred on Uniscan and CABR in 1984 although there was still "notionally a Patents Committee". But from 1984 onwards the Patents Committee was dormant, albeit it could be convened at any time to discuss whether or not there was going to be any financial commitment made or any discussion about the lodging of patents.
176 An internal UWA draft document dated 6 June 1985 was put in evidence. It was entitled "Intellectual Property - Administrative and Financial Issues". It proposed that UWA's rights to all intellectual property should be assigned continuously to Univention as a holding company. That company would in turn empower CABR to manage intellectual property on its behalf. It was proposed that Univention "be reconstituted and merged with the current Patents Committee but widened to incorporate one or more members of Uniscan and/or CABR and where the CABR representative takes on a commercial advisory/secretarial role". The document also proposed merging the board of directors of Uniscan with the board of management of CABR. It was indicative of the degree of uncertainty and confusion about policies and practices with respect to intellectual property at UWA at the time. This was reflected the following year in a paper submitted to the Senate by the Vice-Chancellor, Professor Robert Smith, which led to the creation of the position of Deputy Vice-Chancellor (Research).
177 On 20 December 1985, Professor Boyle, signing over the title "Chairman, Patents Committee" wrote to the Secretary of the Australian Vice-Chancellors' Committee (AVCC) explaining UWA's general policy with respect to patents. The letter was written in response to an inquiry from the AVCC. Professor Boyle said that UWA's general policy was determined by the Patents Regulations and enclosed a copy. He noted that in the past the Regulations had been "… broadly interpreted with inventors usually being given the rights to their inventions". He attributed this to lack of return from inventions and dissatisfaction shown by many inventors. The word "given" puts the level of UWA activity in relation to inventions too high. There was no evidence of purported assignments of intellectual property rights to inventors having occurred at this time.
178 Professor Boyle wrote that, with the introduction of CABR, intellectual property policy was under review and it was anticipated that CABR would take a more active role in evaluating and developing intellectual property and seeking partners to develop or market it. Against that background he found it difficult to be specific in answering the questions posed by the AVCC and the answers he gave were to be regarded as a "guide to policy only". He wrote, inter alia:
The Patents Regulations make no distinction between inventions made during the course of duty or privately and would therefore appear to apply to any invention made by a staff member or student. It is understood that the Common Law position is not as clear cut and it may well be that in the case of a legal challenge the Patents Regulations may be overridden.
Negotiations and other administrative work has traditionally been handled by the Bursar's Office, now Accounting Services, but as mentioned above these functions are now largely handled by the Centre for Applied and Business Research, the operating arm of the wholly owned company of the University known as Uniscan Ltd.
Professor Boyle acknowledged that UWA had had very little success in "commercialising" patents and other forms of intellectual property in the past. It had patented some significant discoveries, but for a number of reasons had not benefited greatly from those inventions. He was not called as a witness, but Professor Robson in his cross-examination said he accepted the letter at face value. He had not been personally involved at the time. He was then Professor of Agriculture at UWA.
179 UWA's intellectual property policies and practices were in a state of disarray in 1986. A Position Paper dated 16 May 1986 prepared by the then Vice-Chancellor, Professor Robert Smith, and entitled "Research at the University of Western Australia"described the situation thus:
There is a formidable challenge in understanding and working with the mere bewildering array of policies, legislation and practices relating to patents, licensing, copyright and intellectual property so that the University's interests and those of individual researchers are not compromised in these cases. The role of the Patents Committee and its ability to operate within the time-frame of a commercial environment needs to be re-assessed in these circumstances. The Patents Regulations need revision to bring them into line with current practices (the Regulations are in conflict with the grant conditions of some funding bodies). There is very little coordination or consultation between the Patents Committee and other bodies within the University.
Professor Robert Smith recommended to the Senate the creation of the position of Deputy Vice-Chancellor (Research). The Senate resolved accordingly on 26 May 1986. In the event, the new position was not filled until 10 months later.
180 On 1 April 1987 Professor Robert Parfitt took up his appointment to the newly created office of Deputy Vice-Chancellor (Research) at UWA. He reported directly to the Vice-Chancellor. Upon his commencement the Vice-Chancellor was Professor Robert Smith. He was succeeded by Professor Fay Gale in about January 1990. Professor Roy Lourens acted as Vice-Chancellor between Professor Smith's retirement and the commencement of Professor Gale's term. In his capacity as Deputy Vice-Chancellor (Research), Professor Parfitt was a member of the Patents Committee, a director of the board of Uniscan and a director of two other companies associated with a commercialisation project known as the QPSX Project. Professor Parfitt said in cross-examination that Professor Smith's characterisation of UWA's legislation policies and practices in relation to intellectual property and the role of the Patents Committee accorded with his own understanding when he took up his appointment as Deputy Vice-Chancellor (Research).
181 After taking up his position Professor Parfitt made it his business, over a period of some months, to go to all UWA departments meeting researchers so that he could get a broad understanding of the research being undertaken in UWA generally. During this time, as appears below, he met Dr Bruce Gray.
182 A report, dated 1 October 1987, on the activities of Uniscan and CABR was delivered to the Finance Committee of UWA by the executive chairman of Uniscan, Mr Hyland. It was exhibited to Professor Parfitt's affidavit who used it to refresh his memory with respect to appointments. Although he was not the author of the report, he did provide some comments and suggestions to Mr Hyland in its preparation. It reflected his understanding, at the time, of the approach to be adopted when dealing with UWA's intellectual property rights for the purpose of commercial dealings involving third parties.
183 Mr Hyland reported that CABR had achieved a small profit of nearly $10,000 in 1986/1987 on an increased turnover of $764,000. There had been an increase in its work on UWA's intellectual property including the QPSX project, an outstanding invention in the field of telecommunications. He said:
At the present time we are handling 12 inventions, having rejected another 12 during the past year. Two projects from the Department of Surgery offer great hope in the treatment of cancer tumours. CABR's staff establishment has been trimmed down to only 10 persons - excluding myself.
He said there was general apathy within UWA towards CABR, largely caused by "the company" [sic] itself in the years 1983 to 1985.
184 It appeared from Mr Hyland's report that in the previous year he had recommended the re-establishment of CABR with the more marketable name of "Uniscan" and with greater involvement in UWA's intellectual property. He said:
I am pleased to tell you that Uniscan Ltd is now the operating company of the University's Centre for Applied and Business Research.
The board of Uniscan met monthly to monitor its progress and to formulate policies. Mr Hyland anticipated that eventually the term "CABR" would disappear. He identified six major objectives to be achieved by Uniscan and CABR in the current year. One of those was:
To cooperate with Professor Parfitt in his revision of the University's internal regulation on patents.
185 Professor Parfitt said that at the time of his appointment to UWA, intellectual property management and other services with respect to protection and commercialisation of UWA's intellectual property were supplied on a retainer basis by Uniscan. Such arrangements were not unique. He said that while Uniscan and CABR undertook that work he did not consider it necessary to convene meetings of the Patents Committee. Professor Lourens had informed him at the time of his appointment that the Patents Committee had not met for some time.
186 Professor Parfitt also said that to the extent that the Patents Regulations required advice to be given to the Vice-Chancellor about the exercise of UWA's rights in an invention, he believed the advice would have been provided by himself as Deputy Vice-Chancellor (Research). He did not recall giving any advice of that kind during his term. His understanding of the operation of the Patents Regulations when he joined the University was that they had "more or less lapsed". He put it thus:
There was an informal mechanism operating but not formal mechanism operating. [sic] That's as I understood it and I was asked by Professor Smith to try to resolve the issue.
187 In May 1983, Dr Ian Nicholas was offered an Honorary Visiting appointment to the Department of Management at UWA from 30 July to 30 August 1983. In the course of that appointment he became aware of CABR. Its work and proposed areas of work were of interest to him. When he returned to England in late 1984 he was invited to apply for the position of Director of CABR. He flew back to Western Australia in December 1984. He was interviewed and, on 11 December 1984, he was offered the position which he formally accepted on 14 December 1984. He attended his first meeting of the board of management of CABR on 12 December 1984.
188 As Dr Nicholas described it, when he became the Director of CABR, its main function was the provision of consulting services to third parties for a fee. He considered that if CABR were to succeed in developing an intellectual property enterprise, it was appropriate that UWA should as far as possible retain ownership of patents and intellectual property with UWA, but that there should be a corresponding arrangement to share costs and benefits of the exploitation of such property with the people who developed it. He recognised that his vision was not consistent with the Patents Regulations. He considered that UWA needed to amend its policy if CABR was to flourish. He considered the Patents Regulations to be too restrictive. When he commenced the position of Director, it was part of his job, as he saw it, "… essentially to create a role for CABR in relation to intellectual property projects". In June 1985 he prepared a position paper for the board of CABR setting out his vision of how it could develop. He understood at the time that the Patents Committee had fallen into disuse.
189 During the period that Dr Nicholas was the director of CABR, it held monthly meetings. Minutes were prepared and circulated. Whenever he was introduced to an intellectual property project that might be of interest to CABR he placed it as a "work in progress" item on the minutes. It remained as such until a formal decision was taken by CABR to abandon the particular project or it was otherwise exploited.
190 In March 1986 Dr Nicholas prepared another position paper about CABR's role at UWA in the area of intellectual property and technology transfers. He sent a copy to Professor Lourens. The basic proposition outlined at paragraph 2.1 of the paper was that UWA should retain, as far as possible, total ownership of patents and other intellectual property developed within it and that existing regulations to that effect should be observed and, should it prove necessary, be enforced. Those who had developed innovations and those, whether within UWA or third parties who assisted in their development should be obliged to come to some mutually acceptable and equitable arrangement about the costs and benefits accruing. It followed that UWA had the responsibility " … to be actively involved in the protection, management and commercial development of the intellectual property it possesses …". This philosophy, he said, was embodied within the current Patents Regulations. While Uniscan/CABR's role in the general area of intellectual property had been "inferred by relevant correspondence on a number of occasions" it had never been unequivocally stated. That situation should be rectified. He also proposed flexibility in negotiation so that UWA could relinquish part of intellectual property ownership in consideration of a cash payment, higher royalties or an equity in a promoter's company.
191 Dr Nicholas observed in his paper that a number of the considerations which he had discussed were inconsistent with the Patents Regulations and that contracts containing clauses of the kind he proposed needed to be specifically approved by the Senate before they could be ratified. He recommended that the Patents Regulations be reviewed with the object of redrafting those clauses that might be seen to conflict with best practice and standard commercial usage. He proposed that UWA's rights to intellectual property as provided for by the Patents Regulations, should be assigned to Univention Ltd which would constitute a "holding" company for such property and would undertake much of the activity "… currently the responsibility of the Patents Committee".
192 Dr Nicholas was not the only person who thought that a revision of the Patents Regulations was desirable. Professor Parfitt also reviewed them during his term. That revision was driven by a need to broaden the basis upon which staff and students could participate in the proceeds of commercialisation for other categories of intellectual property. It was Professor Parfitt's understanding at all times that other categories of intellectual property owned by UWA could be commercialised with or without the assistance of Uniscan.
193 Professor Parfitt did not recall any occasion during his term as Deputy Vice-Chancellor (Research) when UWA or Uniscan was authorised by the Vice-Chancellor to assign or abandon any interest in any intellectual property owned or created in the course of employment by a member of staff. However, on 1 September 1988 he sent a letter to Dr Roy of the Department of Computer Science referring to the drawing back of Uniscan "within the University structure". He expressed a hope that within a few months "… we should be able to recommence activities, offering advice and support in the areas of intellectual property and contract research". He referred to the possible exploitation by Uniscan of a computer program developed by Dr Roy with the aid of an external grant. He informed Dr Roy that the contract prepared by Uniscan was not acceptable from UWA's perspective and said:
My opinion is that you would be far better exploiting the property in your own right. On behalf of the University, therefore, I transfer all its rights in that property to you.
In cross-examination Professor Parfitt drew a distinction between UWA's position with respect to copyright and patents. It treated computer software as copyright. Professor Parfitt said he could not give back patents. He described his letter as a "letter of comfort" and asserted that "all copyright belonged to the academic at this particular time".
194 Professor Parfitt wrote a memorandum dated 23 November 1988 entitled "THE FUTURE OF UNISCAN". In it he observed that Uniscan had been contracted into the University under the supervision of the Deputy Vice-Chancellor (Research). He observed that the recent winding back of the company and the appointment of a new board of directors by the UWA Senate afforded it the opportunity for a new start. The time was opportune in Western Australia to rethink how intellectual property was handled in publicly funded institutions and to decide which elements of commercial enterprise were appropriate for universities. He canvassed the alternative of a state-wide intellectual property handling organisation. Uniscan would still be maintained by UWA as a company with a remit to handle commercial activities including the negotiation of appropriate contracts on behalf of UWA staff, departments and UWA. It would also act as a conduit for contract research and consultancy activities into UWA and be the employment vehicle for staff for some of UWA's centres. His memorandum was written in the context of what was then thought to be the imminent merger of UWA and Murdoch University. In that context he proposed that the amalgamated university have only one contract and consulting company.
195 In the course of his employment as Deputy Vice-Chancellor (Research), Professor Parfitt drafted a number of memoranda, policy and other documents setting out UWA's approach to the development, ownership and commercialisation of intellectual property created by its employees and students. One of those documents, dated 2 July 1987, was a memorandum to Deans of Faculties and Heads of Department. He told them that if they needed advice on matters relating to intellectual property they should contact himself or Dr Nicholas.
196 Uniscan sustained substantial losses in its initial years. A financial report prepared by Dr Nicholas dated 1 September 1987 set out expenditure in relation to various projects being handled by Uniscan/CABR. These were dominated by the QPSX projects. Two of the projects that were relevant to Dr Gray's research were designated CDS 9014 and TUM 9015. The first related to controlled delivery systems and the use of microspheres to deliver drugs to cancer tumours. Some $420 was expended on it. A comment relevant to it in the table prepared by Dr Nicholas was:
Research proceeding. Provisional patent application to be lodged. Initial discussions with interested company taking place.
The second was designated "Hyperthermia" and related to the use of ferromagnetic microspheres and hysteresis to treat cancer tumours. It attracted the same comment as the controlled delivery system project.
197 In his affidavit evidence, Dr Nicholas said that in 1986 and 1987 he attempted to promote the intellectual property and technology transfer activities of CABR. CABR however did not flourish. On 18 November 1987 the Uniscan board resolved to extend his contract of employment on a temporary basis pending re-advertisement of the position. He found that unacceptable and on 3 December 1987 wrote to Mr Hyland, the executive chairman of Uniscan advising that he would not seek to extend his contract beyond 31 January 1988. The position was advertised and the successful applicant was Mr Peter Macintosh, although his time as director lasted only from April 1988 to 31 July 1988. One of the unsuccessful applicants was David Hilditch.
198 A meeting of the Uniscan board on 22 June 1988 considered a letter from the Vice-Chancellor to the Executive Chairman, Mr Hyland, stating that it was no longer possible to operate Uniscan as a company at arms length from UWA. The Chairman had been asked by the Vice-Chancellor to advise the board that it would need to "wind down the company prior to reducing its functions and placing it within the traditional function of the University". Professor Parfitt was present at the meeting.
199 Mr Hyland wrote to the Vice-Chancellor on 24 June 1988 advising that the board had decided that Uniscan would cease to handle all business consultancy work save for outstanding projects which it was legally obliged to complete. He also stated:
No members of staff will be transferred from UNISCAN to the University but the one person will continue to handle Intellectual Property on campus with the assistance of University staff as arranged by Mr Griffith.
Uniscan would continue in existence with a smaller board. Mr Macintosh wrote to Professor Parfitt on the same day and said:
I understand from our telephone conversation today, that you and the Vice-Principal have briefed the Vice-Chancellor regarding the yet to be determined position of Uniscan (handling Intellectual Property and Contract Research for the University).
200 On 27 June 1988 the Vice-Chancellor recommended to the Senate, which resolved accordingly, that the appointments of the existing directors of Uniscan be terminated. Five replacement directors were to be appointed. Professor Parfitt, the Acting Vice-Principal and Ms BE Robbins, all of whom were existing members of the board were reappointed. In addition there were to be two external members appointed by the board. From 1 July 1988 Professor Parfitt managed the former Uniscan/CABR projects. In this he was assisted by Mr Hilditch who already had a consultancy relationship with Uniscan.
201 A meeting of the new board of directors of Uniscan was held in Professor Parfitt's office on 11 July 1988. He suggested immediate action to produce a list of projects which the company wished to continue and those which it wished to eliminate as no longer viable. On 1 August 1988 the outgoing executive director, Peter Macintosh, wrote to Professor Parfitt advising that a number of prospects and genuine opportunities in intellectual property had been raised and were within days of transfer. Detailed files had been prepared on each project. They had been updated in the previous week with a current contact list, immediate history and actions for conclusion.
202 From mid-June 1988 to mid-July 1988 Mr Hilditch was overseas on a Uniscan assignment. When he returned he learned that the Love House office was to close down and that Uniscan was to discharge its staff and consultants including himself. On 12 August 1988 Professor Parfitt who wrote to him confirming that he would be retained by Uniscan as a consultant at $35 per hour to "carry out a holding function with respect to Intellectual Property activities" and "advise the board on matters concerning Contract Research Projects that are currently in progress or that may be contemplated in the near future". Mr Hilditch already had a consultancy arrangement for some existing projects which were continuing.
203 On 10 October 1988 Professor Parfitt produced a revised version of a document entitled a "Draft Policy and Guidelines on Intellectual Property". In it he stated that the University had appointed Uniscan as its agent for the management of most classes of intellectual property. It was responsible for all business and related legal negotiations concerning the assignment or licensing of rights and development through other mechanisms or forms of agreement. He said:
A member of staff shall not enter into negotiations for the development or management of intellectual property, other than through Uniscan Ltd, without the prior approval of the Vice-Chancellor or Deputy Vice-Chancellor (Research).
Dealing with the question of ownership of intellectual property his document stated:
The whole of the professional time of an academic staff member is required to be devoted to the performance of the duties of office of that staff member. Thus, any intellectual property developed by staff members in the performance of the duties of their office belongs to the University.
The document provided that a decision whether or not to file a specification in support of an Australian Provisional Patent application or to seek trade mark or design protection could be made on behalf of UWA. The cost would be borne by UWA. A decision to file a complete specification would be made by the Vice-Chancellor or Deputy Vice-Chancellor (Research) after considering advice from the inventors and Uniscan and any other appropriate sources. Some, but not all, of the references to Uniscan in the document had been struck out so that the relevant action was taken by UWA. This seems to have been an incomplete attempt to make the policy and guidelines consistent with the winding down of Uniscan's activities. The document stated (at [3.4]):
Inventors on the University staff shall be free at their own expense to apply for, or continue, protection of intellectual property for which the University has decided to incur no further expense. If this option is exercised the University will assign to the inventor(s) within a reasonable time rights to the intellectual property on fair terms taking into account all costs to the University and its agents to the date of assignment.
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204 The draft statement suggested at paragraph 3.6 that UWA could claim copyright in written or audiovisual material or computer software generated by a staff member in the course of performance of their duties of office. It set out arrangements that would normally apply to the distribution of earnings from intellectual property. Under those arrangements inventors or originators would receive 60% of the net annual earnings up to $50,000, 40% of the next $100,000 and 20% thereafter. The corresponding percentages to UWA would be 20%, 40% and 60% with 10% in each case to the department or centre and 10% in each case to Uniscan. A notation on the document indicated that it had been revised as at 10 October 1988.
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205 Towards the end of 1989 Professor Parfitt appointed Technology and Innovation Management Pty Ltd (TIM) on a subscription basis to provide intellectual property services to UWA in place of those previously provided by Uniscan/CABR. This was done in conjunction with Murdoch University, Curtin University and the Western Australian College of Advanced Education (now Edith Cowan University). All agreed to subscribe to TIM. The subscription covered:
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Seeking intellectual property from within institutions.
2. Handling intellectual property queries.
3. Offering advice to academic staff on market potential and protection of intellectual property.
4. TIM would also, for additional cost, arrange to provide patent protection and seek additional parties for the exploitation of inventions.
206 In 1989 Mr Peter Johnson was appointed Assistant Registrar, Research Liaison.
207 In or about February 1990 Mr Hilditch's family company was engaged by the University directly to provide his consultancy services on a part time basis (two days per week). He ceased providing services to Uniscan but otherwise his role did not change significantly. He was required to liaise with TIM on projects assigned to it. He continued to report to Professor Parfitt and, from time to time, to Messrs Steenhauer and Martin Griffith and Professor John Ross. After Professor Parfitt left UWA, Professor Ross was Acting Deputy Vice-Chancellor (Research). Mr Hilditch's consultancy contract with UWA was renewed on three occasions so that he continued in that role until the end of 1993.
208 Mr Hilditch said that, as a consultant to Uniscan and later UWA, his authority was very limited. He did not have authority to sign agreements on behalf of UWA nor to abandon or assign its interests in any intellectual property. In some cases Uniscan/CABR would refer an intellectual property project back to the inventor because there was no commercial interest in it or there was difficulty in developing a business case for capital raising purposes. Alternatively, the project might be immature and need more development before being referred for commercialisation. The referral of a project back to the inventor meant that Uniscan/CABR would no longer investigate its commercial application. The relevant head of department would be notified so that he or she could monitor the project on behalf of UWA. By way of example, an inventor in the Department of Electrical Engineering independently found an external partner to commercialise an invention and an agreement was subsequently reached between the researcher, UWA and the external partner.
209 The process of referral back to an inventor was done by recommendation from Mr Hilditch to Professor Parfitt or Mr Steenhauer. During the whole of the time that Mr Hilditch was engaged by Uniscan and UWA he did not encounter any situation in which UWA assigned any intellectual property rights to a UWA employee personally.
210 Professor Parfitt said that while Mr Hilditch had assisted him with ongoing and prospective projects, he had no authority to make decisions about the ownership or abandonment of the UWA's property. Professor Parfitt retired from UWA on 31 December 1991. Professor John Ross was appointed as Acting Deputy Vice-Chancellor (Research) at some time following Professor Parfitt's retirement and pending a substantive appointment to the position. He began a process of reviewing intellectual property policy.
211 Professor Fay Gale, who was Vice-Chancellor of UWA from 1990 to 1997 did not remember questioning the role of the Patents Committee. She accepted in cross-examination that if something came to the attention of Professor Parfitt relevant to intellectual property issues, it would be his decision whether to notify her or to convene a meeting of the Patents Committee.
212 Professor Gale did not have much systematic interaction with her Deputy Vice-Chancellors, including Professor Parfitt, for at least the first two years of her term as Vice-Chancellor. She found it difficult to get them together as a team. She did not remember whether Professor Parfitt briefed her on how he was administering research within UWA. She did not think that the Patents Regulations were ever brought to her attention. She did not remember inquiring about the role of the Patents Committee.
213 On 23 April 1993 the Senate resolved to advertise the new position of Pro Vice-Chancellor (Research). The duties attaching to that position covered the development and implementation of a comprehensive research policy for UWA, advice to the Vice- Chancellor on all matters relating to research and the chairing of the Research Committee with oversight of the work of its sub-committees. They included monitoring and ensuring adherence to policies on intellectual property, integrity in the conduct of research, fraud and plagiarism.
214 Professor Michael Barber was appointed to the position which he described in his affidavit evidence as Pro Vice-Chancellor (Research and Innovation). Immediately prior to his appointment he was Professor of Mathematics and Dean of the Faculty of Science at the Australian National University. As Pro Vice-Chancellor (Research and Innovation) he was the Chair of the UWA Research Committee. He was also a member of the Academic Board and of the Executive Committee of that Board which was known as the Academic Council. He did not recall the existence of a Patents Committee at the time of his appointment and was not appointed to any such committee.
215 Professor Barber said that the implementation and administration of UWA's research policies was the responsibility of Research Administration and at the time of his appointment, was headed up by Peter Johnson the Assistant Registrar, Research Liaison. He provided direction to Mr Johnson about the interpretation of policies and took advice from him about implementation and administration. Mr Johnson formally reported on implementation and administration to the UWA Registrar, Malcolm Orr.
216 Between the time that the Senate decided to advertise the new position of Pro Vice-Chancellor (Research) and the commencement of Professor Barber's appointment, Uniscan was deregistered. The public notice dated 21 July 1993 over the name of Martin Griffith was placed in the West Australian Newspaper pursuant to s 573(5) of the Corporations Law.
217 Professor Barber commenced at UWA in February 1994. One of the matters that he attended to very soon after his appointment was a review of the Regulations and the development of new intellectual property regulations. He did this in conjunction with Peter Johnson and Professor John Ross who was the Acting Deputy Vice-Chancellor (Research) prior to his appointment. Professor Ross had prepared a discussion paper for a proposed new intellectual property policy which was circulated around UWA in early 1994. According to Professor Gale, the review of intellectual property policy was "a specialty" of Professor Barber's "as at the time of his appointment". He had spoken very strongly about it.
218 Professor Barber convened a group to discuss intellectual property issues and to develop a new policy based on Professor Ross' discussion paper. Draft documents relating to a new policy were considered by the Research Committee on 1 June 1995 and 14 September 1995. They were prepared by Professor Ross and Mr Johnson with input from Mr James Lennon who was then UWA Intellectual Property and Contracts Officer. An outline of Mr Lennon's employment history and role with UWA appears later in this section.
219 The draft documents comprised:
(a) Intellectual Property Regulations;
(b) The Constitution of an Intellectual Property Committee; and
(c) A Guide to the Intellectual Property Policy.
They were considered by the Academic Council at its meeting on 4 October 1995. The Council resolved to endorse the proposed policy and the Constitution of the Intellectual Property Committee and to recommend to the Senate that the Patents Regulations be rescinded and the IP Regulations be introduced with immediate effect. At a meeting of the Senate on 23 October 1995 the item was withdrawn from the agenda to allow further discussion with the academic staff union.
220 The IP Regulations were considered again by the Academic Board on 19 June 1996. The Academic Board then resolved to endorse the proposed Intellectual Property Policy and the Constitution of the Intellectual Property Committee and to recommend that the Patents Regulations be rescinded and the proposed IP Regulations be introduced with immediate effect, subject to final drafting by the Senate Legislative Committee. Professor Barber attended the meeting of the Senate on 22 July 1996 at which it was resolved that the Patents Regulations be rescinded and the IP Regulations be introduced with immediate effect.
221 The Intellectual Property Policy approved by the Academic Council was entitled "A Guide to the Intellectual Property Policy'. In its Introduction it stated that UWA's policy on intellectual property centred around the IP Regulations, General Regulation 32A and the Constitution of the Intellectual Property Committee.
222 The Introduction was followed by a Background Statement about UWA's primary mission which was said to be "to advance, transmit and sustain knowledge and understanding through the conduct of teaching, research and scholarship at the highest international standards, for the benefit of the international and national communities and the State of Western Australia". Thatstatement was qualified thus:
As funding for the activities relating to its primary mission tightens, and as competition for students and research funding grows, the University cannot afford to ignore the commercial benefits to be gained from the by-products of those activities. The benefits should provide equitable returns to the originators of intellectual property, both as an incentive and reward, as well as to the University.
223 The IP Regulations were said to replace the former Patents Regulations which did not encompass copyright and other forms of intellectual property.
224 In section 3 of the Policy, its Key Elements were set out. Paragraph 3.2 was entitled "Ownership of Intellectual Property". It contained a reference to regulation 4. Under the heading "Staff" in [3.2.2] it stated:
Apart from computer programs, staff own copyright in all copyright works created by them (sub-regulations4(1) and 4(4)).
The University owns all other intellectual property created by staff in the course of their employment with the University (sub-regulation 4(4)).
225 Paragraph 3.4 under the heading "Duty to Report" referring to sub-regulation 6(1), stated:
There is an obligation on originators of intellectual property and certain other staff to inform the Pro Vice-Chancellor (Research) in writing of the creation of any patentable invention or commercially significant computer program to be owned by the University (sub-regulation 6(1)).
This was a misstatement of sub-regulation 6(1) which imposes the duty to report the creation of "… any intellectual property to be owned by the University, which is likely to be commercially significant …".
226 The Policy set out the obligation upon originators to consult with the Pro Vice-Chancellor (Research) about what would be necessary to be done to protect intellectual property likely to be commercially significant and how best to facilitate the commercialisation process. This did not preclude established researchers from filing a provisional patent prior to consulting the Pro Vice-Chancellor (Research) as long as the outcome was not inconsistent with UWA's rights. It was acknowledged that the Pro Vice-Chancellor (Research) had the option of deciding that UWA had no further interest in the intellectual property. UWA would assign rights to the originators within 90 days if that option were exercised.
227 Under the heading "Management of Intellectual Property" the policy stated that the Pro Vice-Chancellor (Research) was empowered under the IP Regulations to act on behalf of UWA on a wide range of intellectual property matters. On a day-to-day basis he obtained advice from the Intellectual Property and Contracts Officer. Reference was also made to the Intellectual Property Committee as an advisory committee to the Vice-Chancellor which met three times each year and otherwise as needed.
228 Under the heading "Sources of Advice" reference was made to Technology and Innovation Management Limited (TIM) as an organisation which existed to commercialise intellectual property developed in the four public universities in Western Australia.
229 The Constitution of the Intellectual Property Committee referred to its function under the IP Regulations. It comprised the Pro Vice-Chancellor (Research) as Chair, the Chair of the Academic Board, members of academic and general staff, the President of the Post Graduate Students' Association, the Vice-Principal and up to two coopted members. It was normally to meet three times each year and to report to the Vice-Chancellor "only in general terms for reasons of confidentiality" (clause 4). As part of its function it was "to review all relevant matters determined by the Pro Vice-Chancellor (Research) to ensure that proper policy advice on intellectual property is developed" (clause 5). It had a dispute resolution role under the Regulations requiring it to appoint a mediator where a dispute arose as to the operation of the policy. It could appoint an arbitrator if the dispute could not be resolved (clause 6). It could also exercise the power of the Pro Vice-Chancellor (Research) set out in regulation 9 of the IP Regulations in respect of any reference to it by the Vice-Chancellor.
230 Professor Barber saw himself as having primary responsibility for the administration and operation of the IP Regulations. He described what he called "the philosophy" underpinning UWA's approach to intellectual property and commercialisation from 1994 to at least 1999 under both the Patents Regulations and the IP Regulations as "not commercially focussed". It was directed to such matters as gaining research funding, the support of PhD students and "… above all, kudos and reputation from academic publication in the peer reviewed literature". Commercialisation of intellectual property was a "by-product" and there were only a few examples of it during that period. I take Professor Barber's account of "the philosophy" to reflect his own approach to the administration of intellectual property policy within UWA from the time of his appointment up until 1999. On that basis it may properly be attributed to UWA. He went on to say in his affidavit evidence:
I recognised that some research outputs could have commercial applications and that, at times, that possibility needed to be protected by patents and other forms of intellectual property protection.
He said that UWA did not actively monitor disclosure under the Patents Regulations or the IP Regulations because of the large number of its staff who were undertaking research in various fields. He did not see his role as that of a "police officer" enforcing intellectual property rights.
231 Professor Barber regarded the principal researcher as the key person in terms of UWA's involvement with any commercialisation of intellectual property. He assumed that the originator of the intellectual property was both the expert on the research itself and its potential areas of application or commercialisation. So if a researcher were to inform him under the IP Regulations that he or she thought some intellectual property was commercially valuable and wished to pursue discussions with a third party about patenting or some other form of commercialisation, UWA would generally work with the researcher to follow this through. By way of example he pointed to the commercialisation of the production of nanopowders through the establishment of Advanced Powder Technology Pty Ltd between 1999 and 2000. On the other hand, if a researcher said that intellectual property was of little value this was accepted at face value. This, in a number of cases, reflected a decision by the researcher and/or UWA that publication was the primary goal in terms of utilising the intellectual property. Professor Barber characterised UWA's approach to intellectual property as reactive rather than proactive. Implementation of the IP Regulations and the Intellectual Property Policy up to the time of the establishment of the Office of Industry and Innovation, which occurred in 2001 and is referred to below, was based upon a level of trust in the persons likely to be involved particularly at the professorial level.
232 There was a tension between Professor Barber's approach as explained in evidence and the provisions of the IP Regulations. His approach tried to accommodate the practical reality that the existence of the reporting obligation depended upon at least two important evaluative judgments. The first was a judgment that intellectual property had been created. In the case of a patentable invention this is no trivial requirement as the Law Reports, text books on the subject and these proceedings testify. The second was a judgment that the intellectual property created "was likely to be commercially significant". The obligation created by the regulations was imposed upon one or more persons who answered the definition of "originator". The effect of Professor Barber's approach, as he described it, was that if a researcher wanted to commercialise an invention or other intellectual property he or she would approach UWA about it before dealing directly with any outside party. No doubt in most cases such an approach from a researcher would imply that the researcher had made the judgment that intellectual property had been created and that it was commercially significant. Of course the researcher might be wrong. Although requiring evaluative judgments, the criteria in the IP Regulations are expressed objectively and not subjectively.
233 Professor Robson, who was Acting Vice-Chancellor on a number of occasions during Professor Barber's time as Pro Vice-Chancellor (Research), described his understanding of Professor Barber's role. It was that, under the IP Regulations, Professor Barber had the power to deal with inventions on behalf of UWA, including any assignment or waiver of UWA's rights in relation to them.
234 Four other individuals who played a role in UWA's implementation of its intellectual property policies were Linda Key, James Lennon, Andrew Sierakowski and Kim Heitman. An outline of their roles and employment history with UWA follows.
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235 Linda Key was UWA's Senior Legal Officer from 1995 and subsequently its Director of Legal Services until her death in 2002. James Lennon was employed as a solicitor by the University from 19 April 1993 until about February 1998. From 19 April 1993 he worked in the Registrar's office as a Contracts Officer and from 19 April 1994 that position was extended for a two year fixed term contract, which was again extended. From the time of his appointment in 1993 he took over Mr Hilditch's role in relation to intellectual property projects. Mr Hilditch's consultancy finished at the end of 1993 following an overlap and handover period with Mr Lennon. When the UWA Legal Office was established in about 1995 Mr Lennon was assigned to that office and worked under the supervision and direction of Linda Key. In February 1998 he left to take up a position in Sydney.
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236 Mr Lennon's duties including the preparation of confidentiality agreements, research contracts and intellectual property agreements in which UWA was involved, including drafts of agreements between UWA and external parties. He was otherwise required to assist Professor Barber. This involved being a contact point for UWA staff and Professor Barber in relation to intellectual property issues, although staff could deal with Professor Barber directly and often did so. He was responsible for preparing the agenda and papers for meetings of the Intellectual Property Sub-committee and participating in those meetings from time to time. He also assisted in the preparation of documents associated with the review and amendment of UWA's Patents Regulations prior to the enactment of the IP Regulations by the Senate in July 1996.
237 In January 2001 the University established an Office of Industry and Innovation (OII). Dr Andrew Sierakowski was appointed as its director. As he described it in his affidavit, the key functions of the OII included:
(a) Commercialising the University's intellectual property;
(b) Liaising with industry;
(c) Facilitating research contracts with external entities;
(d) Training researchers in relation to:
(i) intellectual property processes;
(ii) the University's Regulations in relation to intellectual property; and
(iii) the commercialisation of intellectual property originating from the University.
The OII liaised with UWA's Legal Services Office in relation to legal aspects of their functions. The two offices were physically located within 20 metres of each other. When he commenced as OII's director, Dr Sierakowski reported directly to Professor Barber.
238 In November 2001, Mr Kim Heitman was appointed to the Legal Services Office of UWA on a three day per week appointment as an intellectual property lawyer. His predecessor, a solicitor named Julia Frodsham, was commencing maternity leave. Mr Heitman's responsibility as UWA's intellectual property lawyer, included managing intellectual property contracts, dealing with copyright issues, software licensing and student intellectual property rights. He reported to the Director of Legal Services who at that time was Linda Key. Ms Key was unwell and her health continued to deteriorate. In early 2002, Mr Heitman was appointed Deputy Director of Legal Services on a four day a week basis. Ms Key died in about May 2002 and thereafter Mr Heitman was appointed Acting Director of Legal Services. Following a selection process, he was appointed University Lawyer and Director of Legal Services in about November 2002. He continued to occupy the office of Director of Legal Services at the time of the trial of this action. Professor Barber left UWA late in 2002 and took up an appointment as Executive Director Science Planning with the CSIRO.
UWA's Intellectual Property Committee - 1993-1996
239 There was an Intellectual Property sub-committee of the Research Committee of UWA established during the time that the Patents Regulations were in force. The records, put in evidence, relating to meetings of the sub-committee were limited to a notice of a meeting to be held on 22 June 1993 and minutes of a meeting held on 14 February 1994. The June 1993 notice showed Professor Ross as the convenor. The members included Mr Martin Griffith, David Hilditch, Peter Johnson, Professor Robson, Mr Steenhauer who, during the time of the existence of the Patents Committee had been its secretary, and Mr James Lennon. The agenda made no reference to any matters concerning Dr Gray. One of the items listed, however, was a Strategy for the development of UWA's intellectual property policy. Mr Lennon signed the notice as secretary to the Intellectual Property sub-committee.
240 The minutes of the sub-committee meeting held on 14 February 1994 showed that the meeting was chaired by Professor Robson. Also present were Messrs Griffith, Johnson Steenhauer and Lennon. The meeting resolved that Professor Barber would be invited to become chair of the sub-committee. Interestingly, the meeting also discussed the place of the sub-committee within UWA's structure. It was proposed that the sub-committee become an advisory committee to the Vice-Chancellor which would necessitate redrafting the regulations. The matter was flagged for discussion when Professor Barber took up his appointment. There was comment critical of TIM which somebody at the meeting suggested was "barely worth the financial contribution being made to support it". Professor Barber was to be asked to be UWA's appointment to TIM's board. A series of "clinics" with TIM were to begin at UWA designed to "increase awareness and use by staff of both TIM and the Research Contracts Officer".
241 The Intellectual Property Committee constituted under the IP Regulations had its first meeting on 9 December 1996. A copy of the minutes of that meeting were in evidence. It was chaired by Professor Barber. Its members included Mr Steenhauer and Mr Lennon. It was resolved that proceedings of the committee would be confidential unless specifically noted otherwise in order to protect patentability of inventions and to honour obligations of commercial confidentiality. At the time, as I have found, the IP Regulations were not in effect as they had not been promulgated. The existence of the Committee was not at that time supported by the Regulations. Nothing however turns on that fact for present purposes.
242 There was discussion, led by Professor Barber, of two issues in connection with the Intellectual Property Policy. The first was the application of the Policy to Co-operative Research Centres (CRCs). The second related to centres at UWA. The minutes noted that in ordinary circumstances the Intellectual Property Policy did not apply to CRCs because they were governed by external agreements. It was thought desirable to find out whether the spirit of the Intellectual Property Policy was being followed in UWA's own staff and student activities within the centres. Professor Barber thought it appropriate that UWA write to the Directors of the CRCs to enquire about their intellectual property policies.
243 In relation to UWA centres, the minutes recorded what was presumably a statement by Professor Barber that the Intellectual Property Policy was based on a particular model of UWA not being viewed as an entity whose primary aim was commerce. The essential model was that commercial intellectual property was a by-product of UWA activity and that it was directed to incentives and protection. There were a number of centres which had a commercial focus and in which research was to be done with a commercial emphasis supporting the research. An example was the Centre for Water Research. In that Centre income was ploughed back into research. This meant that where the policy stated that a share of the revenue went back to staff, the commercial emphasis of such centres was compromised.
244 The committee then discussed a number of standard documents being:
(a) revenue sharing agreements;
(b) confidentiality agreements; and
(c) project research undertakings.
The committee also discussed an educational program. It was told of efforts taken at that time to inform members of the university community of the intellectual property policy. There had been a "well attended lecture" through the Centre for Staff Development and presentations made to particular groups of researchers.
245 There was a meeting of the Intellectual Property Committee attended by Professor Barber, Mr Steenhauer and a UWA solicitor, Ms Frodsham on 15 December 1999. A copy of the agenda was in evidence including an item which referred to "New disputed IP - Heartlink monitor, Paragon Liver Cancer SIR Technology". There was no evidence of the outcome of that meeting. Professor Barber made no reference to it in his evidence and neither Mr Steenhauer nor Ms Frodsham were called as witnesses. The reference to SIR technology as "new disputed IP" is relevant to UWA's state of knowledge at that time of facts which might have given rise to a claim against Sirtex.
Summary of findings about implementation of intellectual property policy and regulations - 1985-2006
246 A number of salient findings emerge from the preceding history, which it is convenient to extract and list here:
The Patents Regulations came into effect no later than 1975.
2. The Patents Committee established by the Patents Regulations did not meet after 1985.
3. No one was appointed to the Patents Committee after 1988. UWA effectively treated it as a dead letter after 1985. None of the practical arrangements in place for the exploitation of intellectual property policy between 1985 and 1997 provided for any function to be undertaken by the Patents Committee.
4. The Vice-Chancellor between 1985 and 1997 did not:
(i) seek or receive the advice of the Patents Committee on any matter relating to any invention;
(ii) refer any matter to the Patents Committee; or
(iii) seek the endorsement of the Patents Committee for any action. (See regulations 4, 5 and 5 of the Patents Regulations).
5. The Patents Regulations ceased to be in effect no earlier than 30 November 1997.
6. UWA took no steps between 1985 and 1997 to establish administrative processes or guidelines for notification of inventions to the Vice-Chancellor under regulation 6(1) of the Patents Regulations, referral of matters to the Patents Committee or advice from the Patents Committee to the Vice-Chancellor.
7. In 1976 UWA established Uniscan to "define procedures for determining which inventions resulting from research should be patented in accordance with the Patents Regulations".
8. Uniscan did not define or publish to academic staff of UWA any procedures to give effect to its stated objectives.
9. In 1983 UWA established CABR to provide, inter alia, external consultancy services.
10. In 1984 an IP Unit was created within CABR to manage and commercialise intellectual property arising from research within UWA and to provide advice to Uniscan.
11. No arrangements were put in place to link the functions of the Patents Committee to those of the IP Unit of CABR or Uniscan.
12. Dr Ian Nicholas was appointed as Director of CABR from December 1984 to December 1987. He regarded the Patents Regulations as too restrictive.
13. In 1985 UWA had no procedures in place for the administration or enforcement of the Patents Regulations.
14. In 1986 UWA's intellectual property policies and practices were, and were described by its Vice-Chancellor as being, "in a state of disarray".
15. The position of Deputy Vice-Chancellor (Research) was created in 1986 and Professor Robert Parfitt appointed in April 1987.
16. Professor Parfitt, a member of the Patents Committee, never convened it or attended a meeting of it. He regarded the Patents Regulations as "more or less lapsed".
17. Professor Parfitt informed Deans of Faculties and Heads of Departments in July 1987 that if they needed advice on intellectual property matters they should contact himself or Dr Nicholas.
18. Uniscan's independent function was removed when the board was replaced in June 1988. Its function at that time was limited to assessing existing intellectual property projects which had already been referred to it.
19. In October 1988 in a draft policy paper Professor Parfitt asserted ownership by UWA of intellectual property developed by its academic staff in the performance of their duties as staff.
20. In the draft document Professor Parfitt asserted that staff had to deal through UWA in the commercialisation of intellectual property unless they had the prior agreement of the Vice-Chancellor or himself.
21. In 1989 TIM was appointed to provide intellectual property services to UWA in lieu of those provided by Uniscan/CABR.
22. From the 1980s through to the 1990s Mr David Hilditch provided consultancy services to UWA initially through Uniscan and then in liaison with TIM on the commercialisation of intellectual property projects.
23. Some projects were referred back to inventors from time to time as not commercially viable or requiring more development. Referrals were made by Professor Parfitt on Mr Hilditch's recommendation.
24. Professor Parfitt retired on 31 December 1991.
25. An intellectual property sub-committee of the Research Committee was established and met once in 1993 and again in 1994. The committee may have met on other occasions.
26. In February 1994 Professor Michael Barber was appointed to the new position of Pro Vice-Chancellor (Research). His duties included maintaining and ensuring adherence to intellectual property policies.
27. Professor Barber was never appointed to a Patents Committee and knew nothing of the existence of such a committee.
28. UWA adopted an Intellectual Property Policy together with IP Regulations and established an Intellectual Property Committee in 1996.
29. The Intellectual Property Committee first met in December 1996.
30. The IP Regulations came into effect no earlier than 30 November 1997.
31. Neither Professor Barber nor UWA put in place any procedures for the enforcement of notification obligations under the Patents Regulations or the IP Regulations.
32. Professor Barber had power under the IP Regulations to deal with inventions on behalf of UWA including any assignment or waiver of UWA's rights in relation to them.
33. UWA legal officers were involved in issues relating to commercialisation of intellectual property projects.
34. In January 2001 UWA established an Office of Industry and Innovation. One of its functions was to train researchers in relation to intellectual property processes and its regulations in relation to intellectual property. Dr Andrew Sierakowski was appointed as its director. He reported to Professor Barber.
35. In November 2001 Mr Kim Heitman was appointed as an intellectual property lawyer in the Legal Services Office of UWA. In November 2002 he became Director of Legal Services.
36. Professor Barber resigned from UWA late in 2002.
Legal consequences of the non-appointment of a Patents Committee
247 It is convenient at this point to consider submissions by the respondents in relation to the Patents Regulations. Sirtex argued in substance that, absent a Patents Committee, the procedure prescribed in the Patents Regulations was not binding upon the staff of UWA. Academic staff were unable to follow the procedure set out in the Patents Regulations in relation to any invention conceived before those regulations were rescinded. That submission did not require a finding that UWA lost, as a consequence, whatever rights it might have at common law to intellectual property developed by its employees during that period. Rather its failure to maintain the mandated procedure went to the question whether Dr Gray had breached his contractual obligations by the way in which he dealt with the technology in issue in these proceedings.
248 Sirtex submitted that regulations 4 to 6 of the Patents Regulations were premised on the existence of the Patents Committee. When acting in relation to inventions made or developed by persons subject to the Patents Regulations, the Vice-Chancellor was obliged to act on the advice of the Committee. Upon receiving notice of a patentable invention the Vice-Chancellor was obliged to refer it to the Patents Committee and to act on its advice in deciding whether UWA would exercise any rights it had in relation to the invention. Regulations 7 to 11 were also said to be premised on UWA having decided to exercise its rights in relation to a patentable invention and so premised on the Vice-Chancellor having obtained advice from the Patents Committee. To the extent that no, or no adequate, Patents Committee was maintained the prescribed procedure was not binding.
249 UWA argued that the Senate was empowered to convene a Patents Committee at any time. Until such time as a disclosure of an invention was made, the Patents Committee had no duties to perform under the Regulations. Accordingly, the maintenance of a standing committee could not be a condition precedent to their enforcement. In any event, it was always open to Dr Gray under regulation 6(2) to require UWA to inform him as to whether or not it would exercise its rights in any invention made by him.
250 UWA pointed to Professor Barber's evidence that although he was not a member of the Patents Committee, intellectual property was regulated during his time by the Intellectual Property Sub-committee of the Research Committee. It also pointed to Mr Hilditch's evidence that although the Patents Committee was dormant it could be convened at any time. Mr Hilditch had attended meetings of the Intellectual Property Sub-committee which he regarded as "essentially the old Patents Committee". This evidence, it was said, did not support an inference of any lack of readiness or ability to convene a Patents Committee should the need arise.
251 Professor Barber's view of the role of the Intellectual Property Sub-committee and Mr Hilditch's opinion of the capacity of UWA to convene the Patents Committee do not answer the Sirtex submissions. The issue raised by those submissions must be analysed with more precision than they were able to offer in essentially argumentative opinions.
252 A case can be imagined in which the members of the Patents Committee, appointed by the Senate, all ceased to be members at the expiry of their terms and before their reappointment or the appointment of new members. In the event that one of the conditions for the exercise by the Patents Committee of its functions under the Regulations was met during a period when the terms of its members had lapsed, then fresh appointments could be made. If the condition was the reporting of an invention to the Vice-Chancellor, it would be necessary to make the fresh appointments in time to enable the Vice-Chancellor to refer the report to the committee, receive advice from it and inform the inventor of UWA's position within the 60 days prescribed by regulation 6. Alternatively, the Vice-Chancellor could proceed under regulation 5(2), acting without the advice of the Patents Committee and upon its reappointment could seek endorsement of the action taken. Absent such endorsement the matter would have to be reported to the Senate for directions.
253 To hold that the Regulations ceased to operate during any period that the Patents Committee was not constituted, however brief that period might be, would be to attach to their operation an absurd implied condition. It would be a condition that would not be necessary for the proper functioning of the Regulations and, indeed, would have impeded it. Nothing in the text or in ordinary principles of construction would warrant such an implication.
254 The position is not the same where UWA can be taken to have effectively abandoned the Patents Committee structure.
255 Regulation 4(1) mandates the appointment of a Patents Committee by the Senate. Absent appointment by the Senate, the Committee did not exist as some sort of continuing corporate entity. The Senate was not advised by officers of UWA after 1988 to make any appointments. On the basis of the facts already found, UWA may be taken, by attribution, to have decided that the Patents Committee had no useful continuing function. It was not merely "dormant". It did not exist and there was no prospect of its revival although theoretically this would have been open to the Senate for the appointment of members to it.
256 In my opinion UWA should be taken to have decided, after 1988, not to appoint a Patents Committee at all. The possibility that a committee could be appointed on an ad hoc basis to respond to reports of particular inventions was never considered. Indeed, UWA moved down an alternative pathway using Uniscan and CABR, the Deputy Vice-Chancellor (Research) and later the Pro Vice-Chancellor (Research) to provide a framework within which inventions could be commercialised. UWA depended upon approaches by staff interested in commercialisation. The activities of these entities were not posited on a legal obligation on staff members to bring matters to them.
257 The question remains whether the obligation imposed by regulation 6(1) upon staff members to inform the Vice-Chancellor of any patentable invention was dependent upon the existence of the Patents Committee. If the Patents Committee were merely an advisor to the Vice-Chancellor, then its existence or non-existence would not be seen as critical to the existence of the obligation under regulation 6(1). Its function, however, was more than that. Referral of a report to the Patents Committee was an essential element in the process leading to the Vice-Chancellor's response to the reporting inventor. The Vice-Chancellor had an obligation "acting upon the advice of the Committee" to inform the inventor "as soon as possible" and in any event not more than 60 days after receiving a written request on whether UWA would exercise "its rights" in the invention. The permanent absence of the Patents Committee and the adoption by UWA of other mechanisms for assessing inventions for commercial development meant that the procedure, of which the inventor's obligation to notify the Vice-Chancellor of patentable inventions was part, could not operate. UWA can be regarded as having had a reciprocal obligation to establish the mechanism under the regulations for providing a prompt response to an inventor's notification. That reciprocal obligation having been abandoned, a necessary condition of the existence of the inventor's obligation was removed. UWA failed to maintain the mechanism necessary for the performance of the obligations said to have been imposed upon its staff by importation into their contracts of the terms of the Regulations. This conclusion affects UWA's claims against Dr Gray for breach of contract up to 30 November 1997.
Gray - professional history to 1980
258 Dr Bruce Gray graduated with a degree in medicine from UWA in 1965. After graduation he spent two years in teaching hospitals in Perth, initially as a junior resident medical officer and then as a senior resident medical officer. In 1968 he worked at the Department of Health in the north-west of the State for a year. He then decided that he wanted to become a specialist surgeon. In 1969 he sat for and passed the first-part examination of the Royal College of Surgeons in Ireland. He applied for and was awarded a training post in surgery in Auckland. He became interested in the treatment of liver cancer.
259 In 1971 Dr Gray passed the examination for the Final Fellowship of the Australasian College of Surgeons. He was offered a Fellowship in Transplantation and Oncology at the Lahey Clinic in Boston. Because there was a delay between the offer and the commencement of the Fellowship, he spent 1972 back in the north-west of Western Australia as a regional surgeon before taking up the Fellowship. He enjoyed success at the Lahey Clinic. He was offered a position as an Associate and had two major research projects there, one in pancreas transplantation for diabetes and the other in oncology. As a result of his diabetes research, he was awarded a Master of Science in Surgery from Tufts University.
260 A letter of reference from Dr Elton Watkins of the Lahey Clinic to a professorial selection committee at UWA on 25 January 1984 testified to the significance of Dr Gray's research contributions during his time at the Clinic. Dr Watkins described Dr Gray as "outstanding in his capacity for independent research in fields relating to the advance of surgical science" and said he would have been delighted to have him continue as a member of the permanent senior staff at the Clinic.
261 Dr Gray spent three years in the United States after which he returned to Australia and took up an academic position in the University of Melbourne, located at St Vincent's Hospital. He had responsibility for the surgical care of some patients within the hospital but also continued research he had started in Boston relating to cancer immunology. Ultimately the immunotherapy which he investigated turned out to have no useful effect. The results of his research were not published until 1988.
262 While writing a clinical trial program for the immunotherapy research, Dr Gray commenced a number of other oncology-related research programs. He established a group known as the "Australian and New Zealand Bowel Cancer Trials Group" with surgeons, medical oncologists and radiotherapists from Australia and New Zealand. The Group initiated two major trials. One of those involved chemotherapy by injection directly into the blood supply of the liver as a preventative measure against secondary liver cancer in patients who had undergone removal of a primary cancer in the bowel. The trial had been suggested by a Professor Taylor in Bristol. It was directly related to Dr Gray's interest and expertise in liver cancer.
263 In 1980 Dr Gray was elected as a Fellow of the American College of Surgeons and in 1982 was awarded a PhD from the University of Melbourne for his work on cancer immunology. In 1982 he was awarded the John Mitchell Crouch Fellowship by the Royal Australasian College of Surgeons for the "most outstanding contribution to surgery". He used money from that Fellowship to employ another research assistant at the University of Melbourne to help with his cancer research.
[27]
Microspheres against cancer - 1948/1982
264 Dr Gray became involved in what he called a "targeted microsphere technology research program" between 1980 and 1984. He studied the natural history of cancer so he could better understand its basic physiology. He wanted to develop an understanding of how bowel cancer metastasises to the liver. Understanding the process might open opportunities for prevention. He undertook an exhaustive review of the literature and published his findings in 1980: Gray, "Colorectal cancer: The Natural history of disseminated disease" (1980) Australia & New Zealand Journal of Surgery 50; 643-646. He also published a review of methods used to treat disseminated bowel cancer.
265 The idea of using microspheres to treat cancers dated back to the late 1960's. Dr Gray linked it to the delivery of high doses of anti-cancer drugs directly into the liver to treat liver cancer. He referred to an article co-authored by Dr Watkins entitled "Surgical Basis for arterial infusion chemotherapy of disseminated carcinoma of the liver" (1970) Surgery, Gynaecology and Obstetrics 30:581-605. Dr Watkins had developed a technique for infusing cancer chemotherapy drugs into the hepatic artery in order to deliver the drugs to cancers within the liver. The technique had met with some success but had not progressed to a clinical application. The paper documented the management, in 1961, of 195 patients with carcinoma of the liver. It demonstrated the feasibility of delivering, over protracted periods, high concentrations of a cancerostatic drug directly into the liver which has the unique ability to detoxify excess quantities of the drug. The blood supply of the liver could be used to deliver the drugs. Dr Gray thought that the technique could be modified by manipulating the way in which blood flows between the liver and cancers within the liver and by packaging anti-cancer agents into microspheres rather than simply infusing them into the blood stream. This was to be the basis for his subsequent targeted microsphere work.
266 In treatments which he trialled, infusing anti-cancer drugs directly into the blood stream of the livers of patients with liver cancer, Dr Gray observed how blood flow could be manipulated between liver and cancer tissue compartments. He injected a dye into the blood stream and watched its differential flow between normal and cancerous tissue. He thought that this could be the Achilles heel of liver cancer as it would allow the use of a range of agents to target the cancers selectively while sparing normal liver tissue. The agents included radioactive isotopes. He thought that the most positive results would arise from the use of microspheres to deliver local radioactive materials.
267 Dr Gray referred to 11 papers published between 1948 and 1982, of which he was aware at that time. They dealt, inter alia, with the treatment of patients with advanced liver cancer using anti-cancer agents and microspheres injected into the hepatic arterial circulation. They covered ideal microsphere characteristics and the targeting of microspheres by utilising preferential arterial supply to tumours as well as the use of resin microspheres to carry radionuclides and in particular Yttrium90. It is helpful to refer to those papers to get a sense of the ideas underlying the development of targeted microsphere technology which were already in the public domain.
268 The first of the papers was Prinzmetal, Ornitz, Simkin and Bergman, "Arterio-Venous Anastomoses in Liver, Spleen and Lungs" (1948) American Journal of Physiology 152:48-52. Glass spheres with diameters ranging from 10 to 440 microns, 20 to 40 times the average diameter of the lumina of capillaries, were injected into veins and arteries servicing the liver, spleen and lungs of experimental animals. The spheres were recovered from other organs after the animals had been killed. Their recovery from those organs demonstrated the existence of arterio-venous shunts through which they must have travelled to bypass the capillaries. The existence of such shunts, which was discussed in evidence at the hearing, later became a concern in the use of microspheres for the treatment of cancer patients. In the case of radioactive microspheres "breakout" through shunts could result in their lodgment in the lungs.
269 The second paper referred to by Dr Gray described an experiment involving delivery, by intravenous injection, of a short-lived artificial radioactive isotope to the lungs of cancer patients using a precipitate of radioactive colloidal gold: Muller and Rossier "A New Method for the Treatment of Cancer of the Lungs by means of Artificial Radioactivity" (1951) Acta Radiologica 35:449-468.
270 The third paper by Kim and Others, was published in 1962. It described an investigation using ceramic microspheres containing either Scandium16 or Yttrium90 to determine:
Distribution of the spheres within normal and tumour-containing organs.
2. The volume flow through arteriovenous shunts of spheres of 60 microns or greater in size "spill over".
Altered function of specific organs after large doses of internal irradiation.
Effect on growth of experimental tumours in mice and rabbits.
Effect on tumours, both primary and metastatic in 17 patients.
The authors observed that ceramic microspheres had unique advantages unavailable in the past. They were of uniform size and too large to pass through any capillary bed. They were capable of carrying a wide variety of cationic isotopes and had great stability in the sphere itself and in the isotope within the sphere: Kim, LaFave and Maclean, "The use of radiating microspheres in the treatment of experimental and human malignancy" (1952) Surgery 220-231.
271 The fourth paper was a further publication on the same topic by the same researchers and others in 1965. It summarised their clinical experience in the treatment of tumours with radioactive microspheres. Localised beta irradiation using radioactive microspheres caused regression in 30% of people treated. Several patients were clinically and subjectively improved and one may have been cured. The procedure was simple and relatively safe. However a tumour had to have proven excellent vascularity before intravascular microsphere infusion: Blanchard, LaFave, Kim, Frye, Ritchie and Perry, "Treatment of Patients with Advanced Cancer Utilizing Y90 Microspheres" (1965) Cancer, 18:375-380.
272 In the fifth paper cited by Dr Gray, Blanchard and others reported further on their work: Blanchard, Grotenhuis, LaFave and Perry "Blood Supply to Hepatic V2 Carcinoma Implants as Measured by Radioactive Microspheres" (1965) Proceedings of Society of Experimental Biology and Medical Science, 118:465-468. They concluded that radioactive microspheres reached a concentration in hepatic metastases averaging four times the concentration in surrounding liver parenchyma when infused via the hepatic artery. The spillover of radioactive microspheres 15 microns in diameter from liver to lungs and kidneys was negligible. Arteriovenous shunts in the liver and V2 carcinoma were either few in number or less than 15 microns in diameter.
273 The sixth paper, which was cited but not exhibited to Dr Gray's affidavit, was by Piovelei and Badellino entitled "The behaviour of rigid microscopic resin in the terminal circulation of tumors", (1967) Bibl Anat 9: 446:449.
274 In the work reported in the seventh paper, Yttrium90, tagged to microspheres, was used to study the distribution of vascular systems to normal and tumour tissue. The paper was cited as Ackerman, Lien, Kondi and Silverman, "The blood supply of experimental liver metastases. I. The distribution of hepatic artery and portal vein blood to "small" and "large" tumors", (1969) Surgery 66:1062-1072. An eighth paper reported another such study using ceramic microspheres labelled with radioactive Chromium51: Rogers, Edlich and Bradley, "II. Distribution of Blood Flow in Experimental Tumors", (1969) Angiography, 20:374-387.
275 The ninth paper, by Edgar Grady, was entitled "Internal Radiation Therapy of Hepatic Cancer" (1979) Diseases of the Colon and Rectum, 22:321-375. It reported that established cancer in the liver could, in selected patients with good arterial circulation in the tumours, be effectively treated by intrahepatic artery radioactive Yttrium90 resin microspheres. The tenth paper was by Matramadai and Spigos, "Intra-arterial Yttrium-90 in the treatment of hepatic malignancy", (1982) Radiology 142:783-6. The eleventh paper was Ariel and Padul, "Treatment of Asymptomatic Metastatic Cancer to the Liver from Primary Colon and Rectal Cancer by the Intraarterial Administration of Chemotherapy and Radioactive Isotopes" (1982) Journal of Surgical Oncology, 20:151-156. The latter study found that intrahepatic artery installation of cancer chemotherapeutic drugs plus internal irradiation in the form of Yttrium90 microspheres in 40 patients with asymptomatic hepatic metastases tripled their life span to an average of 28 months.
276 It is not necessary to resort to Dr Gray's opinion on the point which was objected to, to conclude from the preceding papers that the concept of using microspheres as a means of delivering anti-cancer agents to liver cancers had been well ventilated in scientific literature before he commenced his development of it. However, at the time that Dr Gray reviewed the papers, and so far as appears from them and from his evidence, no microsphere technique had been developed to the point where it was acceptable as a viable treatment alternative for cancer patients. A major obstacle lay in developing a suitable microsphere material to carry radioactive isotopes. Dr Gray believed that he understood why the use of microspheres had failed and how he could make it work.
Gray commences microspheres research - 1980/1984
277 In 1980 Dr Gray started a research program to design a variety of microspheres and to deliver them selectively into tumours within the liver. He intended to develop a range of microspheres able to carry different anti-cancer agents. They would be designed so that they could flow freely in the blood stream and be of such a size that they would get caught in the tiny blood vessels of the cancer. This could be accomplished by injecting millions of the right size, shape and density into the liver blood supply. Selective targeting of the cancers would occur by manipulating the arterial blood flow so that, for a few minutes, it preferentially flowed to the cancer and away from the normal healthy liver. Those few minutes would be sufficient to enable injection of the microspheres. Once they were lodged in the cancer the targeting process would have been accomplished and the anti-cancer payload within the microspheres could take effect. Dr Gray called the application of the idea "targeted microsphere technology". Anti-cancer agents which could be carried by the microspheres included radiotherapy, chemotherapy, hyperthermia and targeted anti-bodies.
278 Dr Gray commenced experiments into targeted microsphere technology at St Vincent's Hospital in Melbourne in 1980. The hospital's research centre provided the necessary facilities and some limited research staff to assist in the experiment. However he needed assistance to develop the project further. He applied for a competitive research grant. He secured funding to employ Dr Kelvin Stribley to investigate tumour blood flow and test ways of using microspheres to carry anti-cancer agents. That study he described as "… generic to all the future iterations of microspheres that would be, or could be, developed either by scientists associated with me or with other groups".
279 Dr Gray and Dr Stribley performed a series of experiments generic for all applications of targeted microsphere technology, in which they tried to develop spheres to deliver selective internal radiation therapy as the first "product" to be used. These Dr Gray later called "SIR-Spheres". That term is used throughout these reasons to refer to microspheres used to deliver localised radiotherapy. Two different types of microspheres were employed in initial experiments. The first was used to study microsphere distribution in the bloodstream of animals and the manipulation of arterial blood flow to assist in their targeting. Dr Gray called them "tracer" microspheres. They could be purchased commercially from a company specialising in that technology. They were made from an ion-exchange co-polymer and could be labelled with a tracer such as radioactive tin or cobalt. The second type was to be used to treat humans.
280 Drs Gray and Stribley published two articles describing the results of their experiments to evaluate the distribution of varying numbers of the microspheres in three animal models. They were: Stribley, Gray, Chmiel, Heggie and Bennett "Internal Radiotherapy for Hepatic Metastases I; The Homogeneity of Hepatic Arterial Blood Flow" (1983) Journal of Surgical Research 34; 17-24 and Stribley, Gray, Chmiel, Heggie, and Bennett "Internal Radiotherapy for Hepatic Metastases II; The Blood Supply to Hepatic Metastases" (1983) Journal of Surgical Research 34;25-32. The purpose of the study reported in the first paper was to establish the homogeneity of isotope distribution in liver substance when 15 micron microspheres using Cobalt57 as a tracer isotope were arterially injected. This was done in three mammalian species. The results showed a mean percentage coefficient of variation of 28% + 5%. The study also demonstrated that 15 micron particles while not penetrating to the venous circulation, achieved a more homogeneous spread throughout the liver than larger particles. To maximise homogeneity in distribution, 4,000 beads per gram of liver tissue were required. The results indicated criteria for maximum homogeneity of therapeutic agents within liver substance when administered by this method and allowed confidence limits to be attached to direct in vivo measurement of hepatic irradiation. Curiously, Dr Gray's affidavit evidence describing this study gave the impression that Yttrium90 was used and made no reference to the use of Cobalt57. This rather suggests that in preparing his evidence he scanned the abstract rather than looking to the body of the paper. The second paper reported that 30 rats had adenocarcinomas implanted directly into their livers. Between 10 and 20 days after implantation, 15 micron diameter Cobalt57 microspheres were infused. The animals were sacrificed and the distribution of the microspheres studied. A second experiment reported in the same paper involved the injection, via the hepatic artery, of three humans with "macroaggregated ferrous hydroxide technetium-99m". The technetium isotope is a gamma ray emitter used for blood perfusion studies. The experiments demonstrated increased arterial blood supply to the hepatic metastases. The results from the three human studies indicated that extrapolation from the animal model to the human situation was valid. Dr Gray presented these results to the annual scientific meeting of the Surgical Research Society of Australia: Gray, Stribley, Heggie, Chmiel and Bennett "Distribution of radioactive microspheres in liver parenchyma and tumour tissue" (1983) Aust NZ J Surg, 53;366.
281 In 1981 Dr Gray considered he was ready to develop a microsphere to carry radiation to treat patients. He chose a radioisotope, Yttrium90, as his preferred radiation source because it had what he regarded as ideal nuclear radiation characteristics. He then had to select a matrix to form the carrier microsphere. His first approach was to develop microsphere made of Yttrium Oxide and to activate the stable Yttrium isotope to Yttrium90 by bombardment in a neutron flux at the Lucas Heights Reactor in New South Wales. This was potentially a much simpler process than trying to incorporate radioactive Yttrium90 into an inert microsphere made of some other material.
282 Ways of making small Yttrium Oxide particles were explored. One way was to use plasma spraying. The Department of Materials Engineering at Monash University in Victoria had particular expertise in this technique. Dr Reginald McPherson undertook a series of experiments in 1982 to manufacture pure Yttrium Oxide microspheres using plasma spraying technology. Some of the microspheres produced as a by-product of the process were hollow: McPherson J, "Formation of metastable monoclinic rare earth sesquioxides from the melt" (1983) Material Science 1341-1345. A photograph of plasma spheroidised Yttrium Oxide (Y2 O3) was Figure 3 in the paper. It depicted the hollow Yttrium microspheres that Dr McPherson made in 1982. Dr McPherson has died since Dr Gray prepared his affidavit.
283 The solid Yttrium microspheres were found by Dr Gray to be too heavy and to distribute poorly in the blood stream. They were not suitable for clinical use. He asked Dr McPherson to try to manufacture the hollow variety. A few further experiments were undertaken to that end but did not lead to either understanding or control of their formation. That would have been a major research project in itself and Dr Gray did not have access to the necessary funding. This all occurred in 1981-1982 at the end of which time he put the project on hold until large scale funding became available. As appears later in these reasons, subsequent attempts by his research group and by Sirtex to develop hollow microspheres extended over more than a decade and were ultimately unsuccessful. Even when hollow microspheres of Yttrium Oxide were produced, they were found to fracture in the neutron flux necessary to convert them to radioactive Y90.
284 Dr Gray then considered the use of polymer microspheres. He selected a co-polymer (polystyrene divinyl benzene) matrix commonly used as a cation-exchange resin and available in microsphere form off the shelf from a commercial company - Biorad. Biorad is an American company which supplies ion exchange resins. Yttrium90 was easily incorporated into the new microspheres and they behaved well when injected into the blood stream of animals.
285 Dr Stribley returned to medical practice and was replaced by Dr Michael Chamberlain who took over his research into the targeted microsphere technology project. Dr Gray and Dr Chamberlain undertook further experiments and in 1983 published an article: Chamberlain, Gray, Heggie, Chmiel, Bennett "Hepatic Metastases - a physiological approach to treatment" (1983) British Journal of Surgery 70; 596-598. The last paragraph of the introductory portion of the article stated:
This report describes our initial experience with 90Yttrium-containing microspheres, particularly with regard to the homogeneity of distribution of microspheres within the liver substance and the extent of preferential entrapment of the spheres in intrahepatic tumour tissue. The intrahepatic distribution has been studied in the dog, rabbit and rat models.
The article described how Yttrium Oxide was neutron bombarded to produce activated Yttrium90. The activated Yttrium90 was incorporated into styrene-divinyl benzene copolymer ion exchange microspheres of 17.5 + 2 micron diameter. The microspheres contained 10% Yttrium (w/v). They were exhaustively washed in an acid solution to free non-absorbed or lightly absorbed Yttrium90. The spheres were injected into the hepatic artery of anaesthetised mongrel dogs, the thoracic artery of white rabbits and the thoracic aorta of rats. The animals were sacrificed and the distribution of the spheres studied. The article described the application of the animal studies to humans. It was suggested that, as was the case with the animals, there would be considerable variation in the therapeutic ratio of tumour to normal liver blood supply of human patients. Therapeutic application would depend upon calculation of individualised therapeutic ratios for each patient.
286 The 1983 paper described how to make what Dr Gray called SIR-Spheres, including their size, composition and specific density, their Yttrium90 content and the radiation activity of the isotope. It described the removal of Yttrium90 from the spheres by acid washing, their suspension in saline solution for administration, their distribution after administration to animals and their selective targeting of tumours within the liver.
287 There was a problem with the new SIR-Spheres that rendered them potentially unsafe. That was the risk that Yttrium90 would leach off because of poor chemical bonding to the microsphere matrix. This could occur through a process of exchange with counter-ions in the blood. If large amounts of Yttrium90 were leached off it could circulate in the blood, concentrate in the bone, and irradiate bone marrow with catastrophic consequences. On Dr Gray's understanding of the literature similar events had been experienced by Dr Grady and others with fatal outcomes. As appears below, the problem was largely resolved by Dr Gray's research team on advice from a CSIRO researcher, Dr Jonathan Hodgkin and work done by Cameron Jones, a member of Dr Gray's team, in 1988.
288 When Dr Chamberlain returned to medical practice he was replaced by Dr Gregory Self. In 1983 Dr Mark Burton was also recruited to Dr Gray's research team and took over day to day responsibilities of all the research projects. Dr Burton, who is now Dean of Science at Charles Sturt University, graduated with an Honours degree in science majoring in physiology from the University of New England in 1980. Although he commenced his PhD in 1981 he had to take up concurrent employment for financial reasons and completed it in 1989. He was appointed as a Research Fellow with Melbourne University at St Vincent's Hospital when he joined Dr Gray's team in 1983. He was offered a position initially as a vascular physiologist, a research area which fitted well with his prior experience and interest in the relationship between structure and function at organ and tissue levels.
289 Dr Burton was directed by Dr Gray to international research literature relevant to liver cancer and the process of its spread. He also made himself familiar with papers already published by Dr Gray in conjunction with Dr Stribley and Dr Michael Chamberlain and others. Through this reading he became aware of the possibility of injecting suitably sized microspheres carrying radioactive isotopes into the vascular bed of tumours in the liver.
290 It soon became apparent to Dr Burton that the vascular architecture associated with hepatic metastases was reasonably well known and provided clues for a different approach to treatment. He gave a helpful explanation of relevant features of that architecture in his affidavit. The liver receives blood from the portal vein and oxygenated blood from the hepatic artery. The majority of the blood permeating the tissue mass of the liver is derived from the portal vein. The overall contribution of the hepatic artery is relatively small. So normal liver tissue is fed more by venous than arterial blood. Prior research had already established that as tumour tissue develops it creates its own blood vessels which are supplied principally from well oxygenated arterial blood. It was a considered view, referred to in the literature, that introduction of an anti-cancer agent into the hepatic artery would deliver a higher concentration of that agent into the tumour than into normal tissue. This had led to investigations by international research groups, which commenced in 1975, into internal hepatic radiotherapy. Dr Burton referred to the move by Dr Gray's group from using Yttrium microspheres to polystyrene particles because of the low density of the plastic compared to whole blood. Using that approach, small quantities of Yttrium Oxide could be activated to its radioactive isotope, ionically dissociated and then adsorbed onto polystyrene microspheres by ion exchange before they were injected into the hepatic artery.
291 Dr Burton's first project at St Vincent's Hospital was to examine vasoactive agents which could influence blood supply within the liver and within a liver tumour. In particular he was to identify drugs that would constrict vascular flow in normal liver tissue. He determined that very immature vessels of newly established tumour vasculature did not contain the normal functional units of a standard blood vessel. So the tumour vasculature could not respond to standard vasoconstrictive agents. Normal vasculature retained that function. Using animal studies he showed that the normal distribution of blood flow to a tumour in the liver varied from species to species but was generally around three times normal tissue blood flow. Using the vasoconstrictor angiotensin-2 he demonstrated that an injection of the drug before the entry of microspheres could increase the normal ratio from 3 to 1 to more than 10 (or hundreds) to 1. This would have obvious positive effects on the distribution of radiation during a treatment session. The majority of his experimental work in the vasoconstriction project was based on the measurement of blood flow in particular vascular beds. That was done using radioactive microspheres. These "blood flow microspheres" had physical characteristics very similar to those to be used for clinical work and so acted as a clear model. The spheres he used were made of the same polystyrene matrix as the polymer resin which was subsequently to be used in Perth for internal radiation therapy in humans. They were available for purchase from a radioactive product distributor. They could float in the blood stream in the same way as a red blood cell.
292 Dr Burton's first major publication in relation to this work appeared in 1985: Burton, Gray, Self, Heggie and Townsend, "Manipulation of Experimental Rat and Rabbit Liver Tumor Blood Flow with Angiotensin II" (1985) Cancer Res, 45: 5390-5393. The experimental work described in the article measured the ratio of arterially introduced microspheres lodging in tumour tissue to those in surrounding normal hepatic tissue, referred to as parenchyma, both before and after the intra-infusion of angiotensin-2 inducing incremental systemic responses. A significant elevation in the ratio was observed for both rats and rabbits following the drug infusion. Ratio elevation occurred in 37 of 40 tumours examined despite the lack of a clear dose-response relationship. Angiotensin-2 was found to increase significantly the number of microspheres gaining arterial access to the central portions of the tumours. The results indicated "… a substantially enhanced radiation dose reaching tumour tissue after angiotensin-2 infusion, while relatively sparing the surrounding normal tissue".
293 Dr Burton and his colleagues noticed during preliminary experimentation that a small proportion of the radioactive isotope dissociated from or leached off the microspheres in salt solutions. This leaching was a matter of concern. It was undesirable that radioactive Yttrium90 be released from injected microspheres to the general circulation from which it could spread to the lungs and bone marrow. That problem had to be solved if the microsphere technology were to be suitable for use in human clinical trials.
294 Dr Burton, Dr Self and Dr Townsend looked at a variety of ways of more firmly combining Yttrium90 to the microspheres. They had mixed success. In order to understand the solution which was eventually adopted, it is helpful to set out the steps involved in the creation of the irradiated microspheres to that point. As described by Dr Burton they were as follows:
[28]
Targeted microspheres - research funding applications - 1981/1984
308 During his time at the University of Melbourne, Dr Gray made numerous grant applications for funding for his research. He retained copies because it was usual practice to cut and paste from one to another to bring in their common background. He set out in his affidavit a list of some 17 applications for which he had found records for the period 1981-1984 relating to the targeted microsphere technology project. The list set out the title of each application, the amount sought, the year in which the application was made and the body to which it was made. The applications were exhibited to his affidavit. As he put it they "… describe in some detail what had already been achieved in the area of the targeted microsphere technology research relating to the application itself". The University in its closing submissions handed up a "Schedule A" offering an analysis of the applications showing those which, on the evidence, had resulted in a grant and those for which there was no evidence of a grant being made.
309 The earliest application was made in 1981. It was directed to the Anti-Cancer Council of Victoria (ACCV) and sought funding for a project described in its short title as "Intrahepatic administration of radioactive Yttrium90 microspheres for the treatment of hepatic metastases". In the application Dr Gray stated that techniques used to that date were intrinsically inadequate as there had been no attempt to maximise the dose of radiation delivered to metastatic tumour tissue. Limited attempts at therapeutic application in humans had been based on grossly inadequate estimations of the likely dose to be delivered to normal liver parenchyma. The aim of the project was described as follows:
(1) To develop and refine the concept and technique of treating metastatic hepatic cancer by selective embolisation of radioactive microspheres containing Yttrium-90 via the hepatic artery.
(2) To develop and refine a technique for accurate quantitative measurement of the radiation dose to be delivered to the liver parenchyma on an individual patient basis.
(3) To further develop suitable microspheres containing Yttrium with the desired physical properties for embolisation into the hepatic artery of cancer bearing subjects.
(4) To apply this new technique on an individual basis to patients for the treatment of metastatic hepatic cancer.
In setting out the progress to date the application claimed that a new technique of evaluating tissue blood supply using 15 micron resin Cobalt57 microspheres, 50 micron technetium99 labelled MAFH and 20 micron technetium99 labelled albumin microspheres had been developed to explore the basic physiological premise of a selective blood supply to hepatic metastases. The second application was made to the RACS in 1981 for substantially the same purposes and yielded a grant of $4,500.
310 A third application was made to the Felton Bequest Committee in 1982 for an investigation into the value of vasoactive agents to enhance the internal radiation of metastatic liver cancer. The aims of that project were as follows:
1. To investigate the ability of vasoactive agents to differentially act on the vascular bed of normal hepatic parenchyma, whilst having either the reverse of no effect on the vascular bed of the hepatic metastases.
2. To quantify the extent of the "therapeutically enhanced" blood flow to metastatic tumour nodules within the liver of two experimental animal models, using the technique of embolization of radioactive microspheres into the vascular tree.
3. Using the two available animal models, to assess the potential therapeutic value of using intra-hepatically delivered vasoactive agents prior to the delivery of radioactive microspheres, for treatment of metastatic liver cancer.
4. To apply these techniques to the treatment of patients with metastatic liver cancer.
There is no record that the grant application was successful. The date of the application was 20 December 1982. Similar applications at about the same time were made to the Buckland Foundation, the Rowden White Fund, the Utah Foundation, The Ian Potter Foundation, The H & L Hecht Foundation, The Brockhoff Foundation and The Helen Schutt Trust. The application to the Buckland Foundation had the same title as that to the Felton Bequest. The applications to the other Funds, Foundations and Trust in 1982 all related to the use of vasoactive agents to enhance the anti-cancer effect of radioactive microspheres. The application to the H & L Hecht Foundation yielded a grant of $4,000.
311 An application to the ACCV in 1982 entitled "Intrahepatic administration of radioactive Yttrium-90 microspheres for the treatment of hepatic metastases" yielded a grant. Its quantum is the subject of some conflicting evidence ranging from $23,000 to $33,300. The quantum is not material for present purposes.
312 In 1983 an application was made to the ACCV entitled "Enhanced radiation of liver cancer by vasoactive agents" and in 1984 another application to the same body entitled "Drug Enhanced Arterial Perfusion of Experimental Liver Tumours". In 1984, three applications were made to the National Health and Medical Research Council entitled:
Internal radiotherapy for hepatic metastases by Yttrium90 microspheres;
2. Drug enhanced arterial perfusion of experimental liver tumours; and
Enhanced Internal Radiation of Metastatic Liver Cancer by Vasoactive Agents.
There is no record that any of those applications were successful.
313 In late 1984 an opportunity arose for Dr Gray to take up the UWA's Chair in Surgery at Royal Perth Hospital (RPH). In light of that opportunity he considered it would have been inappropriate to start a major clinical project at St Vincent's only to have it aborted by relocating several months later. He delayed treating patients with the SIR-Spheres until after he had relocated to Perth. It is convenient now to refer to his appointment to the Chair of Surgery and its terms and conditions.
[29]
Commencement of Gray's employment by UWA
314 On 8 August 1984 Professor Robert Street, the Vice-Chancellor of UWA, wrote to Dr Gray on behalf of the Senate and offered him an appointment to the Chair of Surgery as from 1 January 1985. The letter informed Dr Gray that if he accepted the offer he would be granted clinical status and admission to practice by the Board of Management of the RPH. The offer came with a set of "Conditions of Appointment". If Dr Gray were to decide to accept the offer, he was to sign and return a copy of the Conditions of Appointment.
315 Dr Gray replied on 15 August 1984 setting out what he regarded as minimum basic infrastructure requirements for the University Department at RPH to be viable. He wanted four full-time clinical surgical positions, recognition by the hospital that full-time surgical staff must have sufficient access to public hospital patients to provide an adequate clinical caseload and ongoing salaried research staff to help support a commitment to research from all members of the department. He would need adequate secretarial support and an establishment grant of approximately $120,000 for the purchase of laboratory equipment to re-establish his ongoing research projects in Perth.
316 The Deputy Vice-Chancellor (Staffing), Professor Boyle, replied to Dr Gray on 2 October 1984. Some, but not all, of his requirements could be met. These included provision of an associate professor and one full-time position. An assurance had been given by the hospital that his unit would have increased access to public hospital patients. A de facto arrangement could be made for the provision of research support. There was an existing support group consisting of a director and deputy, with three research officers, six staff assisting in the animal house and two in the theatres. The comment about secretarial support had been passed on. The hospital had agreed to provide up to $50,000. UWA had been able to secure reasonably definite commitments to the extent of $30,000 and Professor Boyle was hopeful that an extra $20,000 could be made available.
317 Dr Gray responded to Professor Boyle on 9 October 1984. His inquiries had indicated that it would not be possible to locate a new research staff member within the RPH staffing structure. It was imperative that Mark Burton be relocated to Perth. He described Dr Burton as "… the key scientist in our main research program at St Vincents". He proposed that a position be found for him with UWA, similar to that which he had at Melbourne. Dr Gray would not accept the Chair in Surgery unless Dr Burton could be accommodated.
318 A meeting of the Raine Research Committee of UWA held on 16 October 1984 resolved to provide support to an upper limit of $30,000 per year for a limited term tenured appointment for Dr Burton. This was on the condition that the Vice-Chancellor were unable to find any other source of support. The Committee required that support be limited for a period of no more than five years, Dr Burton be known as a Raine Research Fellow, and that a report on his work be submitted to the Committee annually. A letter of offer went to him on 5 November 1984. He was offered an appointment as Raine Research Fellow initially placed in the Department of Surgery at a commencing salary of $23,905 per annum for a term of five years. He accepted the offer on 16 November 1984.
319 On 26 October 1984 Dr Gray signed an acceptance of UWA's offer. The acceptance clause was appended to a set of the "Conditions Governing Permanent Appointments to Chairs". It was in the following terms:
I accept appointment as a Professor in Surgery in terms of the conditions outlined (above) hereon and at a salary of $52,026 per annum, plus a clinical loading of $9,302 per annum as from the 1st January 1985.
[30]
Gray's conditions of appointment
320 The Conditions Governing Permanent Appointments to Chairs were in common form. The relevant parts of the conditions were as follows:
DUTIES
A Professor will be a full-time officer of the University and will be required to devote his whole time to his University duties except in so far as he undertakes private and consultative work (as to which see clause 11). He will be responsible where applicable to the Head of the Department and will be required -
(i) to teach, to conduct examinations and to direct and supervise the work in his field in accordance with the Statutes and regulations of the University and the directions of the Senate;
(ii) to undertake research and to organise and generally stimulate research among the staff and students; and
(iii) to perform such other appropriate work as the Senate from time to time determines.
…
3. TENURE
(i) A professor will be subject to the University Act, the Statutes and regulations of the University and to any general directions issued from time to time by the Senate to the staff.
4. SUPERANNUATION
As a condition of employment a professor will be required to join the Superannuation Scheme for Australian Universities. The Scheme provides for a pension to be paid on retirement after age 55 and cover in the case of invalidity or death. Contributions are at the rate of 7 per cent of salary whilst the University contributes 14 per cent.
…
11. PRIVATE AND CONSULTATIVE WORK
(1) The right of private consultative practice under the conditions set out below will be available to professors.
(2) Consulting and outside work must not interfere with the carrying out of all necessary University duties and shall normally be relevant to a professor's teaching and research.
(3) The right to engage in private consultative practice shall be confined to two types of cases-
(i) where it is desirable that the professor's experience and special knowledge should be made available to the community through the profession of which he is a member;
(ii) where, on account of any unusual circumstances affecting the case, the professor's knowledge as a University teacher would be enlarged if he were permitted to be associated with the case.
(4) Requests to undertake other private consultative work not covered by (3)(i) and (3)(ii) above shall be referred to the Senate.
…
(6) Only in exceptional circumstances and by special permission of the Senate will a professor be permitted to retain more than an amount equal to 25 per cent of his salary (including any loadings and differentials payable) from the net amount received in earnings (including fees) from private and consultative work - that is, from the amount remaining after the deduction of allowable expenses (such allowable expenses to be determined by the Vice-Chancellor). Fees in excess of this amount shall be paid to the University and credited to a departmental fund to be used for such purposes as may be recommended by the head of department and approved by the Vice-Chancellor.
[31]
The pleaded case about Gray's conditions of appointment
321 In its Second Further Substituted Statement of Claim (the Statement of Claim) UWA alleged, and Dr Gray admitted, that they had entered into a contract of employment on 26 October 1984, with effect from 1 January 1985. UWA alleged that Dr Gray's contract included:
(a) the obligation to undertake research and to organise and generally stimulate research among the staff and students of UWA; and
(b) the UWA Act, the Statutes and Regulations from time to time were imported into and formed part of the terms of employment.
Dr Gray did not admit the first condition as pleaded. As to the second, he pleaded that, under clause 3(i), a professor would be subject to the Act, Statutes and Regulations of UWA.
322 Dr Gray pleaded his right under clause 11 to conduct a private consultative practice. He alleged that the necessary conditions under clause 11(3) to permit him to engage in private consultative practice were satisfied, namely:
1. It was desirable that his experience and special knowledge be made available to the community through the profession of which he is a member.
2. His knowledge as a University teacher would be enlarged.
He pleaded clause 11(6) which permitted him to retain, without special permission from the Senate, an amount up to 25% of his salary, including any loadings and differentials payable, from the net amount received in earnings from private and consultative work. In addition, he relied upon the applicable academic industrial awards and, as and from 1993, the Minimum Conditions of Employment Act 1993 (WA).
323 UWA alleged that by reason of his employment by it between 11 February 1985 and 21 November 1999, as pleaded in paragraph 2 of the Statement of Claim, Dr Gray owed certain fiduciary duties to the University. They were said to be:
(a) a duty to deal with the property rights and interests of the University so as to protect and preserve that property and those rights and interests for the University;
(b) a duty not to make any secret profit or receive any secret payment or obtain any secret benefit from any third party with whom he was dealing;
(c) a duty to account for any such secret profit or secret payment or benefit; and
(d) the duties of a trustee of such of the University's assets and property as were in his possession or control and/or under his direction from time to time.
Each of these duties was said to have survived the termination of his employment relationship with the University. Dr Gray did not admit that he owed the fiduciary duties alleged during the course of his employment by UWA. He positively denied that he owed those duties after March 1997 and denied that they survived the termination of his employment.
324 Dr Gray further asserted in his defence that any fiduciary duties he owed to UWA were cognate to the circumstances in which their relationship of employment was formed, and that he did not breach those duties by:
1. pursuing research consistent with, or related to, those areas of research in which he had been engaged prior to his employment with the University; and
2. seeking to commercialise, for his own benefit or for the benefit of others, intellectual property the product of that research.
325 There was some controversy in closing argument about whether it was properly part of the UWA case that compliance with the Regulations was a contractual obligation imposed upon Dr Gray. In my opinion it was. There would otherwise have been little point in the clearly implied reference in the statement of claim to clause 3(i) of the Conditions.
326 It was asserted on behalf of Dr Gray that there was no case pleaded against him that he had any contractual or other obligation to supervise compliance with the Regulations by any other employee of UWA. This point was made because, in its written opening statement, the University said that Dr Gray had an obligation to report discoveries made by other persons bound by the Regulations who were operating under his supervision, whether or not he personally made those discoveries. But an obligation to report is not an obligation to supervise. As appears from its responsive submissions, UWA did not assert a general duty of supervision, but rather a duty to report the making of inventions by others. It was said to arise out of the Patent and IP Regulations.
327 UWA did not plead in its statement of claim any implied term in Dr Gray's contract of employment that the benefit of any invention developed by him in the course of his employment belonged to UWA. The pleading seems rather to have proceeded upon the assumption of some unspecified mechanism whereby such inventions developed by him belonged to UWA. That mechanism was plainly not the Patents Regulations. They left open the question of UWA's rights in respect of inventions. The IP Regulations took a different approach.
328 UWA attempted, on day 44 of the trial, by an amendment to its reply to Dr Gray's defence, to plead an implied term in his contract of employment with it. The implied term was that he owed to UWA a duty of good faith and fidelity. That term had not been previously pleaded. It was raised in answer to defence pleaded by Dr Gray under the Limitation Act 1935 (WA). The amendment was disallowed on 19 June 2007:University of Western Australia v Gray (No 17) [2007] FCA 924 at [42], ruling A7.
Gray's administration of UWA Department of Surgery - February 1985/1987
329 Dr Gray took up his position at UWA in February 1985. He was provided with an office and a secretary. Seventy per cent of his salary was paid by the University and 30% by RPH. His secretary was paid for by the hospital to provide support for him and the other three academics in the department. The conditions of his appointment made it "permanent subject to review" for an initial period of three years. That initial period ended on 11 February 1988. On 12 October 1987 the Vice-Chancellor, Professor Smith, wrote to Dr Gray advising him that, in accordance with standard procedures, he was required to put a recommendation to the Senate in respect of the conversion of Dr Gray's appointment to "permanent not subject to review". He requested that Dr Gray submit a report on his teaching, research and other activities since taking up his appointment in February 1985. It is convenient to refer to that report which provides an overview of the kind of activities undertaken by Dr Gray in his first three years at the University.
330 In his report to the Vice-Chancellor Dr Gray referred to his initial negative perceptions of the University Department of Surgery and the work he had undertaken in the first three years with academic members of the Department to develop it. He had received cooperative support from most but unfortunately not all of them. He set out a number of principles which he had sought to apply and which amounted to what he called "the philosophy that I have attempted to develop". According to these "principles" all members of the University Department of Surgery should undertake research to justify their continuation within it. Teaching students and the provision of ongoing education for the practising medical profession were emphasised. Clinical excellence was an essential requirement for all members. He reported, inter alia, that in 1986 he had initiated a clinical service for complicated liver surgery and was receiving personal referrals from practitioners and surgeons throughout the State. He described the service as "… one of the major liver surgery centres in Australia."
331 The report to the Vice-Chancellor did not make specific reference to Dr Gray's ongoing involvement in targeted microsphere technology research beyond what might be discerned by reference to the titles of a number of his published and submitted research papers which were set out in appendices. This was not surprising as it was primarily directed to an account of what he considered he had achieved in relation to the development and improvement of the University Department of Surgery during his first three years as Professor of Surgery. There was a considerable emphasis on that topic in his affidavit evidence. It was accompanied by commentary and was plainly designed to indicate the major contribution to change which Dr Gray considered that he had made. Some of that commentary included observations that:
1. At the time of his appointment surgeons in the University Department of Surgery had little influence on academic affairs in Australia, were not noted for any significant research outcomes and had a low profile in the affairs of the Royal Australasian College of Surgeons.
2. There was a generally dismissive attitude towards academic surgery in Western Australia and he had a mandate for change.
3. With the exception of orthopaedics and ophthalmology there was an extremely poor history of success in obtaining national peer reviewed competitive research grants.
4. The quality of teaching by some visiting consulting surgeons was often poor.
5. There was no coordinated theme for clinical activities within the Department of Surgery and over the four teaching hospitals.
6. Undergraduate teaching had been dysfunctional and largely ad hoc and required a complete revision of the teaching syllabus.
7. Poorly coordinated post-graduate training was responsible for a long history of a high failure rate by surgical trainees in Western Australia undertaking surgical examinations for the Royal Australasian College of Surgeons.
8. The financial affairs of the University Department of Surgery in 1985 were in disarray.
9. The Department of Surgery had an almost invisible presence in obtaining competitive national scholarships for undergraduate or post-graduate students prior to 1985.
The changes necessary to remedy these perceived deficiencies came at what Dr Gray regarded as a high personal cost. He perceived antipathy towards him by some academic surgical staff who had been replaced. However on 14 October 1988 he was informed by the Deputy Vice-Chancellor (Academic) Professor Clyde, that the Senate had converted his appointment to a permanent one, not subject to review, effective from 26 September 1988.
332 Dr Gray said that during the period 1985 to 1990 he enjoyed a high level of support from the central University administration including Professor Robert Street, who was the Vice-Chancellor when he was appointed, Professor Robert Smith who succeeded Professor Street in 1986 and the Deputy Vice-Chancellors, Professors Alan Boyle and Roy Lourens during that period. He regarded all of them as "supportive of my attempts to elevate the academic standing of the University Department of Surgery".
333 Between 1985 and 1990 Dr Gray took an active role at a national level in oncology related organisations. He was a member of the Executive of the Clinical Oncology Society of Australia and the Surgical Research Society of Australia. He was a member of the Australian National Cancer Advisory Committee and the Australian Cancer Network. He was chairman of the Gastrointestinal Group of the Clinical Oncology Society of Australia. He founded and chaired the Australia and New Zealand Bowel Cancer Trials group as a national cooperative group for the coordination of the conduct of cancer trials in Australia. In 1991 he convened, with funding support from a Melbourne-based company, a meeting which led to the formation of the Australian Gastrointestinal Trials Group, which he described in his evidence as "… now the pre-eminent national organisation for coordinating larger scale clinical trials in cancer". He chaired that group from 1991 until 1996.
334 The setting out of this global history at much greater length in Dr Gray's affidavit indicates that he saw himself, no doubt with considerable justification, as an agent of great change and improvement within the University Department of Surgery. The emotional significance of that perception, in my opinion, is not to be under-estimated and is reflected by the space which his account of his years in the Department occupied in his affidavit even though it was not, on any view, a necessary part of his case. Importantly, what came to dominate his relationship with UWA in later years was his research program on the use of the microspheres to treat liver cancer and attempts to commercialise the intellectual property deriving from it. It is appropriate now to focus upon that program and dealings between Dr Gray and UWA and other participants in the research group.
[32]
Gray's publications - 1985/1987
335 The titles of the scientific articles and abstracts which Dr Gray listed in his report to the Vice-Chancellor as papers which he had co-authored between 1985 and 1987 gave a clear indication, to anyone who was interested, of the areas of research, relevant to these proceedings, in which his group was working over that period One was the Meade paper already referred to which concerned the distribution of different sized microspheres in hepatic tumours. Others, relevant to the targeted microsphere technology, included:
9. Burton, Gray "Redistribution of blood flow in experimental hepatic tumours with Nor-Adrenaline and Propanalol" (1987) Brit J Cancer, 56; 585-588.
12. Burton, Gray "Intra-operative dosimetry of Yttrium-90 in liver tissue" (1988) Nuclear Med (In press).
14. Burton, Gray, Colletti "Effect of Angiotensin-2 on blood flow in the transplanted sheep squamous cell carcinoma" Europ J Cancer Clin Oncol (In press).
17. Jones, Burton, Gray "Albumin microspheres as vehicles for the sustained and controlled release of Adriamycin" (1987) J Pharm Pharmacol (Submitted).
18. Jones, Burton and Gray "Enhanced in-vivo activity of Adriamycin incorporated into slow release microspheres" J Cont Release (Submitted).
19. Jones, Burton, Gray "In-Vitro release of cytotoxic agents from ion exchange resins" J Cont Release (Submitted).
Abstracts in refereed journals reported were:
1. Burton, Gray "Improved distribution of radioactive microspheres in the liver with Nor-Adrenaline and Propanalol" (1986) Proc Aust Physiol Pharmacol Soc, 17:61.
2. Jones, Burton, Gray "Albumin microspheres as vehicles for sustained and controlled release of cytotoxic compounds" (1987) Proc Aust Physiol Pharmacol Soc, 17: 60.
3. Jones, Burton, Gray "Sustained and controlled release of cytotoxic agents from microspheres" (Abstract) Presented at Australian Society for Medical Research, Sydney, December, 1986.
[33]
Establishing the microsphere research program - 1985/1988
336 In 1986, Dr Gray's research group had set up a temporary laboratory at RPH and was ready to begin conducting experiments. A lot of the setting up was done by Dr Burton. He was the only member of the Melbourne research group to transfer to Perth with Dr Gray. When he arrived at the hospital it became clear to him that significant resources and infrastructure were needed before they could start on the research program which had already been developed and planned. For him, 1985 was also a year of consolidation of the research results emanating from the Melbourne work in which he had been involved, publication of those results, applications for grants income to support the extension of the work and progress to new research subsequently derived. The period from 1985 to 1988 was marked, for Dr Burton, by the completion of his PhD, the building of the research team with a reasonable number of research assistants and researchers, its establishment within the UWA Department of Surgery and the development of a profile in the Perth research community.
337 One of those appointed to the group early in the piece was Cameron Jones, a 1984 UWA graduate with an Honours Degree in Science, majoring in organic chemistry. He is now a Professor at the School of Chemistry at Cardiff University in Wales. He also has an Australian Research Council Professorship which he took up at Monash University at the beginning of November 2006 to be held concurrently with his other professorship until October 2007. (Although he did not obtain his doctorate until some time later, he is referred to by the title "Dr" in these reasons).
338 On 1 July 1985 Dr Jones commenced a 12 month appointment as a research grant funded graduate research assistant. He continued with successive appointments as a research assistant until 31 December 1987 when he left to travel around the United States. In late 1988 he came back on a casual basis as a research assistant with the group. Another research assistant working with him was Angela Colletti. She assisted with animal experiments and in vitro and in vivo studies.
339 Cameron Jones was appointed as a member of the UWA staff, albeit funded out of a research grant. His initial appointment expired on 30 June 1986. It was extended upon Dr Gray's application dated 11 June 1986. The nature of his appointments was indicated by the offer of an extension of his term made by the UWA Staffing Officer on 27 June 1986 following Dr Gray's application for its extension. The University Staffing Officer, "on behalf of the Vice-Chancellor", offered him an appointment as a research assistant "on the research grant funded staff of this University". The appointment was offered subject to the provisions of the UWA Act, the Statutes and Regulations of UWA. It was funded from a grant made for research purposes. UWA was unable to contribute its own funds. If a salary variation were to occur and the grant funds were insufficient to support the appointment to its original termination date, then the termination date would be brought forward accordingly.
340 I am satisfied, having regard to the circumstances of Dr Burton's appointment and those of the researchers in Dr Gray's group when it was established in 1985 at RPH, that they were all employed as staff members of UWA.
341 A considerable part of Dr Burton's time was used in developing and training existing and new staff within the hospital laboratories and animal research facilities so that they were conversant with the kind of research he had been carrying out in Melbourne. The protocols for the handling and management of the very high levels of radiation to be used in the clinical work had to be established within the medical radiation facilities of the hospitals. On 12 March 1985 he wrote to Dr Richard Fox of the Department of Medical Physics at RPH describing the technique which he used to make microspheres and seeking necessary approval for the use of Yttrium90. He received a memorandum of 21 March 1985 from Dr Fox setting out details to be covered by the relevant protocol.
342 Dr Burton brought with him to UWA the equipment he used in the University of Melbourne and, in particular, a hand held probe used to measure and calibrate radiation in liver tissue. Initially he performed a number of experiments using new animal models such as sheep to calibrate the intra-operative radiation probe to be used in human studies. He also undertook a significant amount of work in developing safe handling techniques for the radioactive materials to be used, quality control procedures for the labelling of the microspheres and the production of radiation protection measures for staff.
343 As part of the establishment grant which he had requested upon appointment, Dr Gray sought $50,000 for the purchase of radiation detectors, they being a Packard Liquid Scintillation Counter and a Packard Gamma Counter and associated equipment and accessories. The request was referred to the Equipment Advisory Committee of UWA which was prepared to approve $25,000 and indicated that other moneys were available from the Medical School Endowment Fund. The Head of Department of Surgery, Professor Catchpole was so advised by a memorandum dated 19 March 1985. On 25 March 1985 Dr Gray wrote to the secretary of the Research Committee to justify the request.
344 Dr Gray explained in his letter to the Research Committee that the main thrust of his group's investigations was a continuation of earlier research investigating the blood supply and treatment of hepatic metastases. It required the use of a number of multiple labelled radioactive microspheres. The multiple labelling techniques were used to assess alterations in blood flow induced by the use of vasoactive agents. A sophisticated gamma counting device was needed as the technique required the removal of organs from experimental animals and the counting of microspheres in tissue samples. The Liquid Scintillation Counter was required in connection with investigation into the treatment of disseminated malignancy by the intra-arterial embolisation of radioactive microspheres. The work involved the counting of tissue samples containing the microspheres into which Yttrium90 had been incorporated. He wrote that two full time members of the department were working on the project. The need for large scale counting of Gamma and Beta emitting isotopes was imminent. A copy of the letter was sent to Professor Catchpole. Funding for the radiation detectors was eventually provided.
[34]
CSIRO/UWA DOX-Spheres collaborative research funding application - April 1985
345 On 9 April 1985, Dr Burton applied to UWA for a grant from a CSIRO/University of Western Australia Collaborative Research Fund. The short descriptive title of the work proposed was:
The Utilization of Microspheres as Vehicles for the Accurate and Sustained Delivery of Anti-cancer Drugs.
The application was written by Dr Burton in late 1984. The participants in the work were identified as Drs Gray, Burton, Hodgkin and Mau, the latter two being employed by CSIRO. Dr Jonathan Hodgkin, it will be recalled, was the CSIRO research scientist based in Melbourne who had been consulted by Dr Burton in 1982 or 1983 about the use of phosphate salts to chemically fix Yttrium90 to SIR-Spheres.
346 The "Project Detail" section of the application set out at some length in the application referred to prior research in the use of microspheres as vehicles for anti-tumour agents which had been undertaken by the group. Its opening paragraph was in the following terms:
We propose to develop a method for the incorporation of anti-tumour drugs into ion exchange resin microspheres for injection into the arterial supply of cancerous organs or tissue areas. After these drugcarrying particles have become preferentially embolised within the tumour tissue, they will allow a continuous slow release of chemotherapeutic drugs directly within the surrounds of the tumour with relative sparing of normal tissues from the toxic effects of drug exposure. The proposal requires the development of a process for producing maximal uptake of drugs into the microspheres and the measurement of drug capacities of microspheres of varying size and type. In addition, a means of regulating the sustained release of drugs into the tumour must be developed. Over the past two years we have developed a proven technique for the preferential delivery of microspheres into tumour tissues in larger numbers for therapeutic means.
The application indicated that the development of the microsphere labelling methodology and techniques for the controlled release of drugs was to be carried out under the management of Dr Hodgkin. He would require a part time technical assistant for the duration of the project. Testing and quality control would require the services of a graduate research assistant under the direction of Dr Burton. It would include assessment of microsphere drug carrying capacity, release rates and the therapeutic value of the microspheres as vehicles for chemotherapy pharmaceuticals.
347 The application was successful. Dr Hodgkin wrote to Dr Burton on or about 15 April 1985. He could start work almost immediately. He asked for any samples of ion exchange microspheres to be sent over otherwise he would start with a sample of Aminex A-6 which had already been sent or with material of his own group's making.
348 On 18 June 1985 Dr DH Solomon the Chief of the Division of Applied Organic Chemistry of CSIRO, wrote to Dr Gray advising that CSIRO had received notification of the award of the joint grant and had arranged for the appointment of a technical assistant in its division, Ms JR Colman, to carry out the work. She was to be appointed from 15 July. In his letter Dr Solomon said:
In the event that patentable inventions are made by the investigators working on this project, the Division would be happy (if you agree) to carry out the necessary work to obtain patent coverage; as we do this as a matter of course in a number of other areas. The assignment of benefits between the two Institutions would depend on their degree of involvement and would be negotiable separately.
He added that in order to protect loss of patentability or commercially valuable information by premature disclosure, both parties should approve any publication or disclosure to outsiders beforehand.
349 I find, and it is not contentious, that Dr Hodgkin and Ms Colman were and remained employees of CSIRO in the work that they carried out under the collaborative funding arrangement.
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Ferric ions to bind doxorubicin - Hodgkin's idea - 1985
350 In his affidavit evidence about work done under the collaborative grant, Dr Hodgkin explained that a part of it was to develop a means of regulating the sustained release of anti-cancer drugs from microbeads. There was a tendency for drugs initially to come off microbeads quickly. This was well known in the scientific literature and referred to as the "burst release" effect. His investigations involved looking for a chemical means to prevent this and control the rate of release of the anti-cancer drugs from the beads.
351 As will appear later in the evidence, another actor in these proceedings, Dr Yan Chen who joined the Gray group in September 1989, claimed that in 1991 she developed the idea of using a ferric ion to complex with doxorubicin and prevent burst release. Dr Hodgkin said that he had come up with the concept and provided it to Dr Chen. He had found in the literature that doxorubicin complexes with ferric ions to produce a fairly insoluble compound. In the application lodged on 1 April 1985 for the collaborative research grant he had provided a number of references to his previous publications and patents which he had taken out on the same or similar chemical processes. He referred in particular to a patent application he had lodged in 1980 entitled "Ferric Ion Selective Resins" (Australian Patent Application 64585/80). He also referred to an exchange of correspondence he had had in September and October 1985 with Cameron Jones.
352 Dr Jones wrote to Dr Hodgkin on 20 September 1985 advising that he was considering coating his spheres with some biodegradable or non-biodegradable polymer to control drug diffusion from sphere matrix. He sought advice about how to proceed. On 8 October 1985 Dr Hodgkin replied that he and his associates had carried out some tests using both Adriamycin and Methotrexate in .9% NaCl. They also were looking at ways of coating the spheres to slow down the release. One method used the more insoluble salts of the drugs, by soaking the spheres in sulphate or phosphate or perchlorate solutions after the drug was put into them. Dr Hodgkin accepted that his letter did not mention metals. There is a slight difference in the chemical terms as the use of iron involves formation of a chelate rather than an ion exchange. However it operates on exactly the same chemical principle and any organic chemist would understand that. In 1982/1983 he had written a chapter for the Encyclopaedia of Polymer Science entitled "Metal Chelating Polymers". Dr Hodgkin also referred to a collaborative research fund application for 1986/1987 which he signed on 17 March 1986 on behalf of himself, Mr Mau, Dr Burton and Dr Gray. Under the heading "Project Details" he stated:
The CSIRO is providing input in relation to the extensive area of research into the chemistry and synthesis of metal selective ion exchange resins (for potential microsphere carriers) and also reactions on functional polymers.
In his evidence, which I accept, he said that the term "metal selective ion" was a reference to iron or copper. In 1986 when his wife was working at the Alfred Hospital he was able to access a lot of out of date anti-cancer drugs from her oncologist co-workers to experiment with chelating resins. The experiments included using drugs such as doxorubicin in combination with metal ions.
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C Jones' research on DOX-Spheres and SIR-Spheres - 1985/1988
353 Cameron Jones' appointment to the Department of Surgery in July 1985 was, as he agreed in cross-examination, the start of his research career. He described his work as a research assistant in the Department of Surgery. The group was quite small. It consisted of Dr Gray, Dr Burton, Angela Colletti and himself. He worked on both DOX-Spheres and SIR-Spheres. He was supervised by Dr Burton whom he described as his "line manager". He and Dr Burton would meet about once a week with Dr Gray to discuss their research. Dr Gray was an active participant in the meetings. They would talk about their findings, apparatus designs, difficulties they were having, proposed studies and related topics. One of the things he discussed with Dr Burton was the use of angiotensin-2 to manipulate blood flow. One matter Dr Gray regularly emphasised was the need to ensure that the SIR-Spheres' work complied with regulations relating to radiation safety. Occasionally he would visit the laboratory but his visits tended to be fleeting. Dr Jones did not recall ever seeing him doing experiments in the laboratory.
354 In cross-examination Dr Jones agreed that Dr Gray's research group worked in a collegiate manner. Each member had his or her own expertise although because it was a small group they had to diversify. They all got on "fairly well". He thought there was a lot of pressure on Dr Burton. It was put to him in cross-examination that although Dr Gray did not carry out the laboratory work he contributed to the analysis of the results. He said Dr Gray was not involved in the statistical analysis. However he had an input into the analysis of results at the group meetings.
355 Cameron Jones' work with the DOX-Spheres involved biodegradable and non-biodegradable versions. The former were made of a protein which in his time was bovine serum albumin (BSA). It could be purchased commercially as a dried powder. The DOX-Spheres were produced by dissolving albumin in an aqueous medium and adding doxorubicin to that solution. The albumin-doxorubicin solution would then be mixed with oil to form an emulsion. Droplets of albumin-doxorubicin would disperse throughout the oil. They would then be stabilised by heat or chemical means causing the albumin to be denatured as chemical bonds formed between individual albumin molecules. These alterations in structure and the formation of the bonds created solid 3 dimensional albumin matrices. The biodegradable DOX-Spheres were composed of albumin in the size and shape of the aqueous droplets in the emulsion. The doxorubicin was dispersed throughout the albumin matrix. Non-biodegradable DOX-Spheres were made from cation exchange resin. This would be purchased from a commercial supplier in the form of tiny spheres of approximately the same size. They would be mixed with a solution of doxorubicin which would become bound to them.
356 Dr Jones remembered in cross-examination that his study on DOX-Spheres had reached the conclusion that resin spheres did not display the "burst release" phenomenon and were superior in that respect to albumin DOX -Spheres. This conclusion was reflected in a paper entitled Jones, Burton, Gray, "Enhanced in vivo activity of Adriamycin incorporated into controlled released microspheres" (1989) British Journal of Cancer 59:743-745.
357 Cameron Jones' name appeared as the first named author in four of the papers mentioned by Professor Gray in his 1987 report to the Vice-Chancellor, mentioned earlier. One article, although submitted in 1987, was not published until 1989. It was:
. Jones, Burton and Gray, "Albumin microspheres as vehicles for the sustained and controlled release of Doxorubicin" (1989) Journal of Pharmacy and Pharmacology, 41:813
The other, later article was:
. Burton, Jones Trotter, Gray and Codde, "Efficacy of ion-exchange resins for anti-tumour drug delivery" (1990) Reg Cancer Treat 3, at 36-39.
358 Dr Jones was also involved with SIR-Spheres. He assisted in the design of an apparatus for their safe manufacture so that they complied with regulations governing the use of radioactive materials. He saw a document very similar, if not identical to, that which Dr Self had prepared in January 1984 as a guide to the preparation of Yttrium90 microspheres. While he was not sure whether the equipment he used in their preparation was the same, the chemistry was the same. That was the chemistry developed in Melbourne. The use of phosphate salts to ensure binding of Yttrium90 to the microspheres had already been adopted by the group in Melbourne. He also assisted Dr Burton in animal trials using the SIR-Spheres. Experiments were done on sheep which were injected with spheres comprising a cation exchange resin and Yttrium90 . Samples of liver taken from the treated sheep were analysed.
359 Dr Jones recalled concern about the leaching of Yttrium90 from the resin SIR-Spheres. He set out the steps that he took in manufacturing them. They included the following:
. dissolving Yttrium90 oxide (radioactive) with sulphuric acid to form Yttrium Sulphate
. adding cation exchange resin microspheres to the solution containing Yttrium90
. washing the microspheres with distilled water to remove excess sulphuric acid
. treating the microspheres with a phosphate solution
. washing the spheres several times after treatment with a phosphate solution to remove unbounded Yttrium90.
One problem he encountered was aggregation of the microspheres after their sterilisation by autoclaving. The problem was mitigated by storing the spheres frozen. A similar solution was adopted to prevent clumping of DOX-Spheres carrying adriamycin.
360 In January 1987 an application was made in Cameron Jones' name to the RPH Research Foundation for a grant of $3,915 to investigate the incorporation of Floxuridine, Mitomycin C and Novantrone into biodegradable and non-biodegradable microspheres. In that application he defined the aim of the project as the development of a technique "for the concentration and preferential delivery of chemotherapeutic drugs into tumour tissue". The means for pursuing that aim which he identified in the application were :
1. Incorporation of chemotherapeutic drugs into slow release microspheres suitable for embolization into the arterial circulation of tumour bearing organs.
2. Optimisation of the capacity and drug release profiles of 3 cytotoxic compounds (Novantrone, Floxuridine and Mitomycin-C) in both biodegradable and non-degradable microspheres.
3. Vasoactive manipulation of the blood supply to tumours to enhance preferential delivery of drug containing microspheres into the tumour tissue.
4. Analysis of the therapeutic benefit of this form of controlled release drug delivery in comparison with present chemotherapy techniques.
361 Towards the end of 1986, animal trials of the SIR-Spheres had progressed to the point where Dr Gray was ready for clinical trials. Dr Jones was not directly involved in the administration of the SIR-Spheres to human patients in those trials, the first of which occurred in November 1986. However he prepared the spheres that were used and watched them administered to at least one patient. During that operation he measured the level of radiation emitted from the patient's liver using a portable beta-counter. A more detailed account of the clinical trials of SIR-Spheres at RPH appears later in these reasons.
362 Upon his return from the USA, Cameron Jones accepted a casual appointment with UWA from about 22 November 1988 until about mid-December 1988 to look at why leaching and aggregation were still occurring with Yttrium90 microspheres. His appointment was on flexible hours and he did most of his work in the afternoons. He researched chemical literature and, in particular, literature concerning the solubility of Yttrium phosphate. He found that the leaching of Yttrium90 from the radiation spheres was pH related. Yttrium phosphate was more soluble at a lower pH. Storage of the radiation spheres at a low pH would allow leaching to occur. The problem therefore was really only an artefact of storage of the SIR-Spheres in the laboratory.
363 Dr Jones knew that blood is maintained at a relatively constant pH of about 7. He also knew from his research at the UWA library that Yttrium phosphate is insoluble at physiological pH so that in the blood it would remain insoluble and attach to the radiation spheres. He told Dr Burton that he didn't think there was a problem. The Yttrium90 phosphate would remain insoluble at physiological pH and the leaching from the SIR-Spheres in storage could be reduced by using a buffer at about the level of physiological pH. In fact in cross-examination he said it was his conclusion that at physiological pH there would be "next to no leaching".
364 Cameron Jones referred in his affidavit to a provisional specification for a patent lodged in the Australian Patent Office on 18 November 1993 by Dr Yan Chen and Dr Gray and entitled "Controlled Release Matrix for Drugs and Chemicals". The number allocated to the provisional specification was PM2493. Dr Jones had not seen the document before he prepared his affidavit although three or four years before he had obtained a copy of the United States patent that appeared to him to describe the same invention.
365 Dr Jones called the provisional specification a "provisional patent" which, as he put it, referred to the use of biodegradable and non-biodegradable matrices to transport and control the delivery of therapeutic and chemical agents. He identified two distinct differences between the experiments described in the provisional specification and his own experiments at UWA on biodegradable and non-biodegradable DOX-Spheres. The differences were:
(a) The biodegradable DOX-Spheres that he produced and used in his experiments in 1985 to 1987 were made entirely of albumin. Those described in the provisional specifications were formulated to be more ionic and specific reference was made to drugs spheres made of a mixture of albumin and dextran sulphate. Dr Jones had no recollection of ever making drugs spheres composed of a mixture of albumin and dextran sulphate.
(b) He did not treat either the biodegradable DOX-Spheres or the non-biodegradable DOX-Spheres with metal ions as a means of controlling the rate of drug release from them.
He pointed out that the provisional specification described the way that the microspheres are produced. That technique he said was very similar to the technique that he used to make biodegradable microspheres between 1985 and 1987. He referred in particular to the way that the authors of the provisional specification controlled the size of their microspheres by passing them through sieves. This was the same as the method that he used while he was working at UWA.
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The Thermo-Sphere conception - prior art 1957/1985
366 Dr Burton had a particular interest in the use of hyperthermia to treat cancer. He did some work on the use of microwaves to attempt to heat tissue. He also thought, wrongly as he acknowledged, that it might be possible to load microspheres with metal ions which could be heated with microwaves.
367 Hyperthermia, as Dr Gray pointed out in his evidence in chief, covers a wide range of technologies for the treatment of cancer. In the 1980s they included, but were not limited to, the microwave and radio frequency wave induction of hyperthermia, in which Dr Burton was interested. One technique involved the direct infusion of heated fluids containing chemotherapy drugs into the abdominal cavity of patients with advanced abdominal cancer. Another involved connecting the patient to a cardiac bypass machine, heating the patient's blood and adding anti-cancer drugs to it. The heated blood was perfused through the patient's limbs. This was used for patients with recurrent melanoma of the limbs. Dr Gray was not involved in the development of these technologies but said he did introduce them into Western Australia.
368 There was already in existence in 1985 a significant amount of literature in relation to the uses of hyperthermia in the treatment of cancer. Some of that literature was set out in a schedule of publications ranging from 1957 to 1996 on the basis that it was prior art for the purposes of the Thermo-Spheres patent application made in 1997 which is the subject of these proceedings. At the time, in 1985 and 1986, that Drs Gray and Burton were pursuing their interests in hyperthermia the published literature included:
1. Gilchrist and Others, "Selective Inductive Heating of Lymph Nodes", (1957) 147 Annals of Surgery 596-606. Fine magnetic particles were injected into lymph nodes and subjected to induction heating by the use of radio frequencies. Heating occurred through three mechanisms - dielectric loss, eddy currents and hysteresis. Hysteresis loss, described as "a form of magnetic friction" was said to offer "the best approach to the problem as the heat per unit volume is independent of particle size."
2. Mosso and Others, "Ferromagnetic Silicone Vascular Occlusion" (1973) 178 Annals of Surgery, 663. This paper reported selective vascular occlusion of tumour blood vessels by direct injection of a ferrosilicon preparation under magnetic control. It did not involve heating of the magnetic particles but their movement under the direction of an externally applied magnetic field.
3. Rand RW and Others, "Selective Radiofrequency Heating of Ferrosilicon Occluded Tissue: A Preliminary Report" (1976) 41 Bulletin of Los Angeles Neurological Society, 154. The paper referred to previous work on hyperthermic therapy including heated perfused blood and heated anaesthetic gases. Liquid silicone impregnated with finely powdered iron particles was used to occlude vascular beds of tumours. The work evaluated the ability to heat the material, both alone and within various organs, by the use of selective radio frequency heating.
4. "Cancer treatment method", US Patent 4,106,488 RT Gordon inventor. The patent was for a treatment of cancer by the application of external electromagnetic energy to generate heat in intracellular particles to induce selective thermal death of cancer cells in living tissue. It proposed the use of particles of 1 micron or less in diameter with magnetic properties so that they would be inductively heated when subjected to a high frequency alternating electromagnetic field. The particles could also be used as a method of delivering a chemotherapeutic agent primarily to the interior of the cancer cells, the agent being encapsulated in the particles and released by application of the electromagnetic field or by solubilising the particulars within the cells.
5. Gordon RT and Others, "Intracellular Hyperthermia: A biophysical approach to cancer treatment via intracellular temperature and biophysical alterations" (1979) Med Hypotheses 5, 83-102. The concept described in the paper involved locally induced heat energy after tumour phagocytosis of submicron particles whose composition permits magnetic excitation. The process used the cancer cell membrane to contain the energy generated within the cancer cell.
6. "Cancer treatment", US Patent 4,303,636, 1 December 1981. RT Gordon inventor. The patent abstract described a treatment of cancer by the application of external electromagnetic energy capable of the generation of heat in intracellular particles to induce selective thermal death of cancer cells in living tissue.
7. Borrelli NF and Others, "Radio frequency induced hyperthermia for tumour therapy", US Patent 4,323, 056. The invention involved the use of localised Magnetically- coupled, RF-induced hyperthermia mediated by a non-toxic and preferably inert material compatible with animal tissue and incorporating iron-containing crystals of size, composition and magnetic properties sufficient to impart at least 200 oersteds to the material in an RF magnetic field with a frequency not in excess of 10 kilohertz. The magnetic properties of the crystals were "such as to maximise the hysteresis loss".
8. Luderer AA and Others, "Glass-Ceramic Mediated Magnetic-Field-Induced Localized Hyperthermia: Response of a Murine Mammary Carcinoma" (1983) Rad Res 94, 190-198. The article reported the use of a biocompatible ferromagnetic glass-ceramic capable of inducing localised hyperthermia by hysteresis heating upon exposure to an alternating magnetic field. The ceramic was used on a subcutaneously transplanted weakly antigenic breast carcinoma. The data demonstrated such heating may be a useful therapeutic approach to the treatment of cancer.
9. Borrelli AA and Others, "Hysteresis heating for the treatment of tumours" (1984) Phys Med. Biol. 29(5), 487-494. The paper reported a method whereby effective hysteresis heating in living tissue was achieved utilising a biocompatible magnetic glass-ceramic material. The method involved the use of an external magnetic field developing heat through magnetic hysteresis.
10. "Inductive heating method for use in causing necrosis of neoplasm", US Patent 4,983,159, 8 January 1991. RW Rand and Others inventor. The abstract of the patent described a process involving the injection of particles having hysteresis heating characteristics into tissue either within or in close proximity to the neoplasm and then subjecting those particles to an alternating magnetic field sufficient to cause hysteresis heating.
11. Matsuki H and Another, "High quality soft heating method utilizing temperature dependence of permeability and core loss of low Curie temperature ferrite" (1985) IEEE MAG 21(5), 1927-1929. A high quality soft heating method utilising low temperature ferrite was developed. The heater generated sufficient heat at room temperature and stopped abruptly at the Curie temperature. The heat characteristics of the heater and the suitable exciting conditions were clarified. The term "soft heating" was a reference to induction heating utilising temperature-sensitive magnetic materials whose hysteresis loss and permeability largely depend on temperature.
Before considering further the history of the thermosphere project, it is convenient to refer briefly to the physics of hysteresis heating which underpinned the thermosphere technology.
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The physics of hysteresis heating
369 The following overview of the physics of hysteresis heating is based largely upon a primer made available at the hearing and evidence given by Professor Street. It is a superficial but uncontentious account sufficient for the requirements of these proceedings.
370 Magnetic fields are associated with electric currents. So an electric current moving through a conductor will produce a magnetic field around the conductor. At the atomic level tiny magnetic fields are associated with orbital electrons. The response of particular materials to externally applied magnetic fields classifies them as one or other of diamagnetic, paramagnetic or ferromagnetic materials. The classifications reflect ascending levels of response.
371 Diamagnetism derives from current loops associated with orbital electrons at the atomic level. Application of an external field aligns the loops to oppose the applied field. If this is the only magnetic response of a material it is designated as a diamagnetic material. All materials are inherently diamagnetic. The phenomenon is even seen in those commonly regarded as non-magnetic. It is a very weak form of magnetism.
372 Some materials display magnetisation proportional to the externally applied magnetic field. This phenomenon is designated "paramagnetism". The spin of electrons at the atomic level defines the direction of the magnetic field associated with the atom. The fields in neighbouring atoms may or may not point in the same direction. Where the material is non-magnetic these randomly oriented fields cancel each other out. However where the cancelling out is incomplete the net magnetic field will be in a particular direction. A material which exhibits a magnetic field of this kind is referred to as paramagnetic. Paramagnetism is stronger than diamagnetism but is a lot weaker than ferromagnetism.
373 Ferromagnetic materials are characterised by the alignment of unpaired electron spins in regions known as domains. Within each domain the magnetic field is strong and focussed in a particular direction. There will be many domains for a microscopic sized piece of material. Absent an externally applied magnetic field the magnetic fields within the domains being randomly oriented will cancel out. However when a modest magnetic field is applied to a piece of unmagnetised ferromagnetic material, it can induce individual domains to align with its direction. This means there is less cancelling out by localised opposing magnetic fields and consequential multiplication of the internal magnetic field.
374 When a piece of ferromagnetic material is removed from an external magnetic field it remains to some degree magnetised. The term "hysteresis" refers to the tendency of the ferromagnetic material not to return to its original pre-magnetisation state. The word is derived from the ancient Greek word, phonetically rendered as "hustreresis" meaning "short coming" or the related word, "hysterein", meaning to be late or to fall short. The term is defined in the Oxford English Dictionary, 2nd ed as:
A phenomenon observed in some physical systems, by which changes in a property (eg magnetisation, or length) lag behind changes in an agent on which they depend (eg magnetising force or stress) so that the value of the former at any moment depends on the manner of the previous variation of the latter (eg whether it was increasing or decreasing in value); any dependence of the value of a property on the past history of the system to which it pertains.
Associated with that definition is the concept of the hysteresis curve or hysteresis loop. That is defined as a graph showing how the value of some property of a hysteretic system varies as the agent causing it is varied from one value to another and back again, having the form of a closed curve whose area is a measure of the loss of energy in the cycle. Thus hysteresis loss is the energy dissipated as heat in a system as a result of hysteresis.
375 A typical hysteresis curve showing the degree of magnetisation of ferromagnetic material varying according to the strength of the external magnetic field appears below in Annexure 1 to these reasons.
376 Where the external magnetic field not only changes its strength but changes its direction the reversed external field will begin to reverse the direction of the magnetic field within the domains of the ferromagnetic material. When the external magnetic field alternates between one direction and another 180ş in the opposite direction, the directions of the domains alternate. The associated hysteresis phenomenon is referred to as alternating hysteresis.
377 Hysteresis may also occur where instead of simply reversing the polarity of the magnetic field the field is rotated. Where a magnetic field is rotated around a piece of ferromagnetic material, the direction of the field inside the piece of material also rotates. The external energy applied to the material via the rotating magnetic field is manifested in part as heat generated in the material. With alternating hysteresis there are times when the field is stable and not in a state of flux. The more flux that can be caused, the greater the heat generation. On this basis rotational hysteresis is a much more efficient way of converting changes in externally applied magnetic fields to heat.
378 There is a temperature called the Curie temperature which is referred to in some of the evidence. That is a temperature at which a ferromagnetic material either becomes paramagnetic or loses magnetism altogether. Another term, related to hysteresis, which was mentioned in some evidence is "remanence". It refers to the fraction of the saturation magnetisation that remains in a ferromagnetic material when an externally applied magnetic field is removed.
Gray initiates the Thermo- Sphere project - 1986
379 Dr Gray wrote to Dr Burton on 3 December 1986 attaching notes entitled "Adjuvant Hyperthermia in the Treatment of Cancer". He asked Dr Burton to have a look at the attachment which contained a general discussion of the potential application of hyperthermia to the treatment of cancer. He identified what he called "the greatest potential clinical application for hyperthermia" being its use as a "potentiating and adjuvant treatment for conventional radiotherapy". He referred to studies which confirmed that hyperthermia and radiotherapy were synergistic. He said:
The potentiation of radiotherapeutic killing of hypoxic cells can be enhanced by hyperthermia by a factor of approximately 2. This reduction is the Oxygen Enhancement Ratio (OER) and for radiotherapy is particularly relevant for hypovascular areas of tumour.
Dr Gray referred specifically in the notes to the use of microspheres to enhance tissue heating.
380 Dr Gray's interest was in the use of fluctuating magnetic fields to induce heating in microspheres bearing magnetic materials. He called this "targeted hysteresis hyperthermia". He coined the term "Thermospheres" for microspheres containing magnetic material. The development of this technology, however, was going to be expensive and beyond normal funding mechanisms then available to him. Soon after arriving in Perth he approached UWA seeking research funds to develop targeted hysteresis hyperthermia to the point where it could be tested in patients with cancer. He did not need funding for the SIR-Spheres project as he regarded this as having already matured. He needed only limited funding for the drug microspheres project. The large research funding he required was for the development of the thermospheres and what he called "antibody microspheres"
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Funding microsphere research generally - 1985/1988
381 Dr Burton gave evidence of funding allocated to Dr Gray's group from a number of sources. He exhibited to his affidavit a list of research grants for the period July 1985 to 1988. Two were UWA grants, six were from RPH, two from the RPH Research Foundation, one from the CSIRO/UWA Collaborative Research Fund, three from the National Health and Medical Research Council, one from the Cancer Foundation of Western Australia and one from the Medical Research Fund of Western Australia. All related to topics forming part of the targeted microsphere project being undertaken by the group. An analysis of the successful research grant applications for the period 1985 to 1986, taken from Dr Gray's closing submissions and incorporating amendments and comments from UWA, appeared in a Schedule B lodged by UWA in its closing submissions. There were some disputed entries but the points of difference are not of great materiality in the outcome of these proceedings. An extract of some of the elements of Schedule B is Annexure 2 to these reasons.
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Attracting post-graduate students - 1987 and following
382 In January 1987 Dr Gray established a departmental scholarship scheme under which post-graduate students could be funded from the Research and Teaching Fund. He said there was a formal mechanism for review and up to three post-graduate scholarships would be provided for in any year. He described the initiative as highly successful and instrumental in promoting the research activities within the Department. He had some limited success in obtaining scholarships from within UWA itself. The Faculty of Medicine offered scholarships on a competitive basis to various academic departments. Two of these internal scholarships were awarded during 1987-1988.
383 The number of higher degree students within the Department of Surgery increased significantly in the first five years after his appointment as Head of Department. Three students annually had been enrolled for higher degrees between 1982 and 1985 but by 1988 the number had increased to seven.
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Gray's dealings with CABR - May 1986/1987
384 Dr Gray's memory was vague about his first dealings with CABR. However it appears reasonably clear that he telephoned the director of CABR, Dr Ian Nicholas, in May 1986 and arranged to meet him at the CABR offices. There were at Love House. Dr Nicholas remembered the meeting because Dr Gray parked his old Rolls Royce next to Dr Nicholas' green Morgan. He told Dr Nicholas about his three projects relating to cancer research. Dr Nicholas thought they were very exciting.
385 Although Dr Nicholas did not recollect the detail of the meeting, he remembered that it lasted for about one and a half hours. Dr Gray told him he had been working on cancer research using microspheres for some time, that the CSIRO had been involved, that a Japanese company manufactured the spheres and that he had a team of people located at RPH. He outlined the three projects which he thought might be of interest to CABR. As Dr Nicholas recalled them they were:
1. A project relating to iron filings and plastic spheres which would be used for cancer treatment. The iron filings would be introduced via the spheres into the patient and a magnetic field applied to generate hysteresis heating to treat the cancer. Dr Gray told Dr Nicholas that the technique enabled the targeting of the cancerous cells and that it could be difficult to control.
2. A project involving the use of permeable spheres which contained drugs as another treatment for patients.
3. A project involving the use of spheres containing radioactive Yttrium which could be introduced into a patient and provide radiation treatment.
386 Dr Nicholas told Dr Gray that UWA would want ownership of the intellectual property but would look to agree on appropriate terms to exploit it commercially. This, he said, was a standard discussion he had with those whom he thought might be able to bring intellectual property to CABR. In cross-examination, he agreed that it was his understanding at the time, that UWA would own the intellectual property in any event if the relevant discovery were at UWA. Although he thought the project sounded exciting, his impression was that there was still a considerable amount of work to be done to perfect it. He thought it was a matter worth following up in a year's time to see if there would be scope for CABR involvement.
387 Professor Parfitt accepted in cross-examination that it was appropriate for Dr Gray to approach CABR as he did. That was the procedure to be followed by UWA staff who thought that they had invented something. UWA did not insist that academic inventors make disclosure of their inventions directly to the Vice-Chancellor under the Patents Regulations. Given that there was no process in place to facilitate or deal with such disclosures, this is not surprising.
388 Dr Nicholas opened a file for the projects which Dr Gray had discussed with him. It was designated IP 4. That meant that it was the fourth major intellectual property project which had been introduced to CABR. He dictated a file note of the meeting but it was not in evidence.
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Application to Lederle - December 1986/May 1987
389 Dr Gray was referred by Dr Nicholas to Lederle Laboratories. He made approaches to them for funding in December 1986. He kept handwritten notes of an initial contact with Mr Tony Bates and Dr Bill Kettleby of Lederle. He wrote to Dr Kettleby on 29 December 1986. The letter followed a submission which his group had made to MERA for funding. He attached a copy of the submission, a report on the use of albumin microspheres for the controlled release of Adriamycin and graphs relating to the experimental work which his group had already done in that connection.
390 In his letter to Dr Kettleby, Dr Gray proposed that Lederle provide support:
. By provision of a research assistant's salary for about two years at the rate of about $25,000 per annum.
. Maintenance expenses of the order of about $10,000 per year and a supply of the drugs that they wished to test.
He suggested that they enter into an arrangement whereby specific cytotoxic drugs could be targeted for their evaluation. He was only interested in using drugs with relatively high activity where a clinical use could be found if they were shown to be of benefit in in vivo experiments. He proposed that the ownership of information generated from the "conjoint research project" be negotiated. Ultimately, however, in a telephone conversation held on 13 April 1987, Dr Kettleby told Dr Gray that Lederle was not interested in proceeding.
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Gray meets Parfitt and prepares CABR proposals - 1987
391 As mentioned earlier, upon taking up his position as Deputy Vice-Chancellor (Research) in April 1987, Professor Parfitt sought out researchers in the various UWA departments so that he could obtain an understanding of the nature of the research happening in UWA generally. He met Dr Gray shortly after he arrived. The meeting did not arise out of his general visitations. Dr Gray approached him and told him about his research projects. Professor Parfitt had some previous awareness of them because he had written an article for the Canberra Times on drug delivery systems for the treatment of cancer. He suggested to Dr Gray that there was some prior art and that the research needed development. The technology would have to be improved to get a patent. The date of their meeting did not appear from Professor Parfitt's oral evidence in cross-examination. Indeed, his first diary record of a meeting with Dr Gray was dated 2 May 1988 and he no longer had a direct recollection of that meeting.
392 At some time in 1987 Dr Gray prepared a document for CABR entitled "A proposal to determine interest in production and marketing of Yttrium90 loaded microspheres for use as an agent for delivering therapeutic radiation for the treatment of cancer". In the document he described the project as having been developed over the previous six years and refined to a stage where clinical trials had started in patients with metastatic liver cancer. He referred to phase 2 clinical trials which began in November 1986 and were continuing at RPH. While acknowledging that it was too early to determine the efficacy of the treatment in prolonging life, the initial tumour response rates in patients treated to that date were so encouraging that the prospects for commercialisation should be explored. The procedure was potentially applicable to other organs but his discussion focussed upon the treatment of secondary liver metastases as the area in which most of the basic and clinical investigations had concentrated.
393 Under the heading "Product Description and Quality Control" Dr Gray described the SIR-Spheres as manufactured from commercially available cationic exchange resin microspheres. He indicated that although various dimensions were available those used to that date were either 17 + 2 microns in diameter or 30 + 2.5 microns. The final SIR-Spheres contained on average 5.6% dry weight of Yttrium90. The specificactivity of the isotope purchased from ANSTO was usually within the range of 3,000 to 3,150 Mbq per 100mg of Yttrium Oxide. The hydrated SIR-Spheres had a specific gravity of about 1.6. This was adequate for embolisation into the arterial circulation of cancer-bearing organs. Microspheres with higher specific gravities would not mix adequately in blood when embolised into the arterial circulation resulting in uneven distribution within target organs.
394 Dr Gray referred to the risk of leaching and the procedure for leach testing before use of the spheres in patients. He described the SIR-Sphere manufacture process, toxicity studies, precautions to be taken and preliminary investigations in patients considered for SIR. He gave details of the technique for the delivery of SIR-Spheres in the treatment of metastatic liver cancer. He explained the procedure for intra-operative measurement of liver and tumour radiation doses. Selective targeting using a vasoconstrictor was also described. He set out the calculation of tissue radiation doses and previous experience with Yttrium90 microsphere internal radiotherapy.
395 Points of difference between the technique described in the proposal and previous attempts at similar procedures were listed. In summary they were:
1. The use of a new type of Yttrium90 microsphere with desired physical qualities for embolisation into the vascular tree of body organs.
2. Firm binding of the Yttrium90 to the sphere matrix to avoid leaching.
3. Absence of toxicity.
4. No significant effect on overall liver blood flow from therapeutic doses to the hepatic arterial circulation.
5. A sufficient payload capacity in the microspheres to allow radiation doses well in excess of the therapeutic range without disturbance to liver blood flow.
6. A manufacturing process refined to avoid significant risk to laboratory staff.
7. Ease of sterilisation of the microspheres.
He also referred to the recent development by an Atlanta group of researchers of an Yttrium90 microsphere for which patent protection had been obtained. The SIR-Spheres were significantly different in basic composition and "… hence would be patentable as a different product". The alternative product known as "Therasphere" developed by Nuclear Medicine Inc consisted of Yttrium90 incorporated into a solid glass matrix. He then referred to the clinical experience in treating liver metastases with SIR-Spheres. He showed the results for seven patients.
396 In the Summary to his paper, Dr Gray stated:
SIR is a new treatment modality that holds great promise for effective treatment of both primary and metastatic liver cancer. The technique for delivering SIR has now been established and initial clinical trials indicate a high objective response rate. Many questions regarded radiation tolerance, augmentation of effect with chemotherapeutic drugs, hyperthermia and radio-potentiating agents remain to be answered. However if the early experience is maintained SIR should find widespread clinical applications within the near future.
It is appropriate to now consider commercialisation of the SIR-Spheres with a view to their marketing for future use as a commercial radiopharmaceutical project.
He described the SIR-Spheres project as by far the most advanced project at the time that he wrote the proposal.
397 Dr Gray also prepared a proposal for CABR with respect to the development of DOX-Spheres. It was entitled "A proposal to determine interest in a co-operative venture for the development of controlled-release delivery systems for Cytotoxic drugs". Its aim was described in its text as continuing the further development of techniques for the concentration and preferential delivery of chemotherapeutic drugs into tumour tissue. Although several controlled release mechanisms had been developed for the selective delivery of Adriamycin into tumours there were many other opportunities to expand the initial work with the prospect of commercial exploitation within a few years. The proposal was for continued development of the project by investigation of the following areas:
1. Incorporation of Cytotoxic drugs into slow release microspheres suitable for embolisation into the arterial circulation of tumour bearing organs.
2. Optimisation of the capacity and drug release profiles of selected Cytotoxic drugs in both biodegradable and non-degradable microspheres.
3. Analysis of the therapeutic benefits of this form of controlled-release drug delivery in comparison with present chemotherapy techniques.
4. Physiological manipulation of the blood supply to tumours to enhance preferential delivery of drug containing microspheres into the tumour tissue.
5. Clinical trials in patients.
6. Marketing of controlled-release drugs that would meet appropriate standards for clinical use.
In his proposal, Dr Gray stated that in the case of Adriamycin, steps 1 to 3 had already been completed. The group was currently conducting animal experiments to define the pharmacokinetic movement of controlled-release Adriamycin in animal tissues prior to clinical trials in patients. More limited studies had been undertaken with several other drugs. He described the present status of chemotherapy and the use of microspheres to transport Cytotoxic agents to tumours. He described the influence of vasoactive drugs in microsphere distribution and the therapeutic exposure advantage of regional chemotherapy. He discussed the incorporation of chemotherapeutic drugs into microspheres stating:
Our preliminary studies during 1985-6 have confirmed that albumin and polymer microspheres provide a practical and controllable carrier role for Adriamycin. Evidence from both the literature and our studies also point to the potential of these drug carriers for the sustained and controlled delivery of other Cytotoxic drugs.
He stated that the group had developed an economic and high yielding manufacturing process for the production of large batches of drug carrying albumin and ion exchange microspheres. The microspheres could be narrowly sized to any required size with the aid of microsieves. Drug levels of up to 25% by sphere weight could be achieved without affecting the structural integrity of the spheres.
398 Dr Gray attached to his DOX-Spheres proposal appendices giving broad details of some of the studies that had been conducted. They were titled thus:
1. Albumin microspheres as vehicles for the sustained and controlled release of Adriamycin.
2. In vitro release of cytotoxic agents from ion exchange microspheres.
3. Enhanced in vivo activity of Adriamycin incorporated into controlled release microspheres.
399 The proposal finally referred to "Current Investigations" under the following headings:
(a) Polymeric coating of microspheres.
This work had centred on the use of furfuryl alcohol to coat ion exchange microspheres in order to control drug release characteristics.
(b) Microsphere manufacture materials.
(c) Therapeutic studies.
Dr Gray expected that the majority of the experimental program could be completed within three years. It would be structured so that only the most favourable potential drug microspheres would reach the therapeutic testing stage. The experimental work was to be carried out in the laboratories of the University Department of Surgery at RPH and the Queen Elizabeth II Medical Centre. He attached a list of some 24 references to the proposal.
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CABR seeks advice about patentability - May 1987
400 Although Dr Gray said that he prepared the SIR-Sphere proposal early in 1987 it is not dated and it is not clear precisely when in 1987 he prepared it. He prepared the DOX-Spheres proposal in or prior to May 1987. In May he met with Dr Nicholas again. Dr Nicholas understood from their conversation at that time that he was not making great progress in relation to the so-called Thermo-spheres and was concentrating on the potentially more exploitable project involving the delivery of the SIR-Spheres with Yttrium90. Dr Nicholas and Dr Gray agreed that CABR would enquire about the patentability of the technologies that he was developing. Dr Nicholas wrote a letter dated 22 May 1987 to Davies & Collison Patent Attorneys seeking their advice about whether Dr Gray's projects might be amenable to patent protection.
401 On 9 July 1987 Dr Nicholas sent a facsimile to Davies & Collison about Thermo-Spheres which does not appear to be in evidence, but which elicited a letter dated 13 July 1987 from Dr Stearne of that firm. Dr Nicholas had instructed Davies & Collison to prepare a provisional patent specification relating to the selective heating of tumour cells. The specification was to be directed to the incorporation of ferromagnetic particles into microspheres. In his reply Dr Stearne sought information about a number of aspects of the proposed invention. These included the mechanism of hysteresis heating, the type, sizes and configurations of the ferromagnetic particles, ranges of field strength and frequency for operating the magnetic coil and preferred sizes for the magnetic coil.
402 Dr Stearne gave his advice about DOX-Spheres on 15 July 1987. His letter opened with the following:
You have requested us to advise on the patentability of various aspects of controlled-released delivery systems for cytotoxic drugs set forth in the Research Proposal entitled "Co-Operative Venture for Development of Controlled-Released Delivery Systems For Cytotoxic Drugs", which accompanied your letter of May 22, 1987.
He identified three particular aspects of Professor Gray's work on DOX-Spheres. Those aspects and his opinion were as follows:
1. The first aspect was the delivery method of drugs utilising microspheres in conjunction with vasoactive drugs techniques to overcome the avascularity of tumour regions. On the basis of what had been published by Dr Gray's group and other groups he advised that any patentable aspects of Dr Gray's work would be confined to the delivery method utilising microspheres having particular characteristics or new developments in vasoactive targeting not previously published. Their novelty, and therefore patentability over known methods would reside in the use of novel microspheres.
2. Processes for the production of albumin microspheres utilising a phase emulsion polymerisation technique and ion-exchange microspheres using sulphonic acid cation exchange resin particles and cationic forms of cytotoxic drugs or other permutations of resins and drugs would seem capable of patent protection as long as they were new in the sense that the processes had not been published and were not obvious in the light of previously published work. Dr Stearne required full details of processes used in producing the albumin microspheres and ion-exchange microspheres if the patent attorneys were to proceed in obtaining patent protection for that aspect of the work.
3. As to the use and techniques of polymer coatings on microspheres to further control drug release characteristics, it seemed to Dr Stearne that that aspect had not been fully developed and further work would need to be done before they could reach the stage of having sufficient information to file any patent applications. He observed, however, that it would seem at least arguable that using a biodegradable polymer coating to enhance sustained drug delivery might be obvious to the skilled person and so not amenable to patent protection. Further information about that aspect of the invention was required before a more complete opinion on patentability could be given.
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Nicholas asks Gray to summarise DOX-Spheres research - 1987
403 Dr Nicholas thought that neither the DOX-Spheres nor the Thermo-Spheres, or iron filings project as he called it, would be patentable. That was not enough to cause him to dismiss them as of no interest to CABR as a potential business opportunity. He asked Dr Gray to write summaries of the DOX-Spheres research with a view to attracting a commercial partner. In answer to that request Dr Gray prepared two documents entitled:
. "Summary of the Use of Albumin and Ion-Exchange Microspheres as Carrier Systems for the Transport of Cytotoxic Drugs"
. "Summary of the Specific Carrier Systems that have been used for the transport of Adriamycin"
404 In the first summary paper Dr Gray acknowledged that the method used by his group to produce the microspheres was a batch ion exchange method similar to that used in the production of orally administered drug resinates. He considered there was little novelty inherent in that technique. It was possible to introduce novelty by developing degradable or non-degradable coatings for drug-laden microspheres which would control drug release rates by moderating the diffusion of the drug out and counterions into the microsphere. Another way to "increase" novelty would be to develop biodegradable ion-exchange microspheres from various materials with a range of release profiles. He claimed there was novelty in the means of microsphere administration. He referred to the introduction of drug-laden microspheres into the arterial blood supply of a tumour bearing organ with a view to embolising them within the tumour micro vasculature. This method of delivery was especially suited to the treatment of hepatic metastases. He also pointed out that the use of vasoactive drugs for preferential shunting of arterially introduced drug-laden microspheres to tumour tissue was unreported. However given that they had been using the technique for the selective targeting of radioactive microspheres to tumour tissue and had published the technique, it could not be regarded as novel.
405 Dr Gray's summary went on to discuss the use of albumin microspheres. He accepted that little novelty existed in the method then being used for the manufacture of those microspheres containing cytotoxic drugs. However, the drugs Novantrone and Floxuridine had been incorporated into the microspheres. This had not previously been reported. Again, novelty could be added as with cation exchange microspheres by use of a coating to retard drug release. Vasoactive drugs could also be incorporated within the microsphere or its suspending medium to enhance tumour targeting.
406 In the second summary, Dr Gray noted that much of the literature concerning albumin microspheres centred on their use to carry Adriamycin. Invariably a phase emulsion polymerisation technique had been used to manufacture them with final microsphere size controlled by energy input into the emulsification. I interpolate that this was the method of manufacture described by Cameron Jones.
407 Dr Gray proposed that a novel variation of Adriamycin loaded albumin microspheres was the biodegradable cation exchange microsphere manufactured by incorporating a weakly acidic cation exchange polymer (Polyglutamic acid) into the albumin matrix. Adriamycin had been loaded onto the microspheres post-manufacture by a simple cation exchange process. Drug loads of up to 50% had been obtained. He observed that the incorporation of Adriamycin into polymeric microspheres had not been widely investigated. Polysacharide (Dextran) ion exchange microspheres had been produced by carboxylating or sulphonating commercially available sephadex microspheres. He referred in this connection to a 1984 paper by Goldberg and Others in a book entitled "Microspheres and Drug Therapy". Another approach was to use an irreversible covalent attachment of Adriamycin to polymeric microparticles which would attach themselves to the surface of cancerous cells. He also discussed emulsion systems for the carriage of Adriamycin.
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Gray approaches Fauldings - June 1987
408 The two summaries were used by Uniscan in correspondence that followed with potential commercial partners. Dr Gray himself made approaches to potential commercial partners. The approach to Lederle in December 1986 has already been mentioned.
409 On 8 June 1987, on University Department of Surgery letterhead, he wrote to Dr Ian Pitman, the Research Director at Fauldings attaching his proposal in relation to the incorporation of cytotoxic drugs into microspheres. He enquired about the possibility of joint collaboration in developing the microspheres to a point where they could be applied in clinical settings. He and Dr Nicholas met with Dr Pitman sometime in June 1987. Their meeting was referred to in a letter dated 4 August 1987 from Dr Pitman. In his letter Dr Pitman said that Fauldings would be most interested in receiving an update on the patentability of the delivery system. His major concern at that time centred around the need to administer a non-biodegradable polymer systemically. He foresaw major regulatory problems, even though the danger to the long term health of a patient might not be great. He expressed interest in the alternative of lipid microspheres as drug delivery systems. He mentioned Dr Goldberg whose work "had great parallels" with that being undertaken by Dr Gray. She was located at the Royal Infirmary in Glasglow.
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410 Dr Gray responded to Dr Pitman on 12 August 1987. He spoke of a patent application making some progress but described it as a "rather time consuming exercise". In a further letter dated 2 November 1987 he attached the two summaries which he had prepared at the suggestion of Dr Nicholas. On 27 November 1987, Dr Pitman replied advising that there would be no funds available to support his research. He left open the possibility of collaborative work in the future on a delivery problem.
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Gray writes to CABR about Thermo-Spheres - September 1987
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411 On 14 September 1987, Dr Gray wrote to Dr Nicholas with responses to the questions raised by Davies & Collison in their letter of 13 July 1987. He attached an overview of the Thermo-Spheres project in specific areas that he thought needed development and particular answers to the questions raised by Davies & Collison. He described specific areas to be developed which included the assessment of various ferromagnetic materials with the necessary properties. These included:
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. suitable and optimal hysteresis heating characteristics;
. materials that become demagnetised at temperatures between 40-100o C in order to regulate the amount of hysteresis heating that could be achieved;
. Curie point temperatures between 40 to 60o C - again to regulate the amount of hysteresis heating;
. suitable and optimal size and shape.
In addition it would be necessary to develop suitable microspheres to carry the particles, identify techniques for incorporation of ferromagnetic particles into the microspheres in a suitable and optimal configuration for hysteresis heating and to develop techniques for their delivery into cancerous tissues. He referred also to the need to develop techniques for selective delivery by the use of radioactive agents and the development of an electrical/mechanical device capable of inducing suitable and optimal magnetic fields to cause hysteresis heating of the particles once lodged within cancerous tissues.
412 A copy of Dr Gray's replies was forwarded to Davies & Collison. They made reference, inter alia, to the magnetic field requirements thus:
Item 7
The requirements for magnetic field strength and frequency depend on the material to be loaded into the microspheres. Materials with large hysteresis loop areas will require high fields at low frequencies, whereas the utilization of materials with small loop areas will require small fields and high frequencies of operation.
Then expected amplitudes for both rotating and alternating fields range up to 200KAm-1 and may be produced by air cored coils or laminated silicon iron cored electromagnets. The frequency range is from a few tens to a few hundreds Hz.
Rotating fields of the required characteristics could be produced using high energy permanent magnets. eg NdFeB.
The space in which the magnetic fields is required will depend on the location of the cancer to be treated. A working volume of about 0.3m diameter and 0.3m would be required.
Significant elements of this response are the reference to rotating magnetic fields and the use of "air cored coils" to produce the fields.
413 Dr Nicholas received a letter, dated 30 October 1987, from Davies & Collison and a draft provisional patent specification for the Thermo-Spheres. The specification was prepared on the basis of the detail supplied by Dr Gray. Dr Stearne noted in his covering letter that the draft lacked supporting experimental data and might be considered somewhat speculative. It would not provide an adequate basis for obtaining Convention priority in the USA. He strongly recommended that one or more further provisional specifications be filed within the following 12 months in order to provide experimental support for the invention. The applications could be "cognated" to form a single complete specification. Dr Gray said in cross-examination that the need for more experimental work to establish the efficacy of the idea reflected in the draft provisional specification was self-evident. However future directions in the work were not driven by Dr Stearne's suggestions.
414 Asked whether some of the further work that he did on the Thermo-Spheres was done at UWA, Dr Gray said that a lot of people worked on it and that the further work done at the University was done "via students". He himself, as a Professor of Surgery at the University, did none of it.
Burton reports progress to UWA on vasoactive agents - October 1987
415 Dr Burton prepared a document entitled "1986/87 Research Report". In it he described research undertaken "to investigate the potential of vasoactive agents to cause a redirection of blood flow within tissue containing metastatic cancer". He reported that:
1. Three animal models of metastatic cancer had been developed and established encompassing the requirements of the study where species differences could be minimised and technical problems involved in the size of the animals addressed.
2. A variety of vasoactive agents had been and were continuing to be assessed with angiotensin-2 the most promising.
3. The sensitivity of the tumours in each of the models had been assessed for a number of the available chemotherapeutic drugs. Adriamycin was being planned as a potentially beneficial drug for experiments combined with the vasoactive agents.
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Further commercial contacts - November 1987/May 1988
416 On 3 November 1987 Dr Nicholas wrote to Mr B Stapleton, the Director of the Technology and Investment Division of the Technology and Industry Development Authority in Western Australia. He attached a copy of the proposed provisional patent specification relating to "hysteresis heating of tumours". He stated in his letter:
The Provisional Application is the outcome of a research programme undertaken by Professor Bruce Gray, and his colleagues, in the Department of Surgery, University of Western Australia, at Royal Perth Hospital, over the past six years.
He said that more detailed research proposals and reports were available upon request. He and Dr Gray would be very pleased to discuss the possibility of a research grant and looked forward to hearing form Mr Stapleton shortly. He sent a copy of the letter to Dr Gray.
417 As appears from the history of events at CABR, previously outlined in these reasons, Dr Nicholas gave notice to Mr Hyland on 3 December 1987 of his intention not to seek to extend his contract beyond 31 January 1988.
418 Early in 1988 Professor Parfitt received a telephone inquiry from the general manager of a Queensland-based company called Technology Transfer Australia Commercial Research and Development Ltd (TTACRD). This inquiry followed some newspaper coverage of Dr Gray's research work in relation to cancer treatment. Professor Parfitt referred him to Dr Gray who wrote to him on 31 March 1988 inviting contact. A telephone conversation followed and Dr Gray wrote to the general manager, Mr Paulson, setting out the nature of the projects in which his group was involved under the headings "Targeted Radiation Therapy", "Targeted Chemotherapy", and "Selective Hyperthermia". He wrote:
As you may be aware, the University of Western Australia has recently started up a commercial based company (Uniscan). We are in the process of channelling several of the projects through Uniscan as they do have real commercial potential.
A handwritten annotation on the letter indicates that Dr Gray subsequently spoke with a representative of TTACRD in Perth. It said:
Very unsatisfactory arrangement for any future development.
He recalled no further contact with TTACRD.
419 Dr Gray was also approached by Mr Heery, Medical Director for Wellcome Australia who had read in the University's newsletter in May 1988 about the targeted microsphere technology. He suggested some further discussions as Wellcome might be interested in the technology. Dr Gray briefly discussed the targeted microsphere technology with Mr Heery and asked for further information from Wellcome but had no record of any further correspondence.
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Clinical trials of SIR-Spheres - 1986/1988
420 In November 1986 Dr Gray began treating patients with liver cancer using SIR-Spheres. This was done with the approval of the Human Ethics Committee and under the supervision of the Department of Medical Physics at RPH. The technique used involved surgical exposure of the patient's liver and insertion of a catheter into the hepatic artery. Angiotensin-2 was injected to divert blood flow to the tumour. A small initial dose of SIR-Spheres followed. The resulting radiation dose to the liver was measured using a radiation detector. The additional quantities of SIR-Spheres necessary were then calculated and inserted through the catheter until the radiation dose in the liver reached a pre-determined level. The procedure took some hours and patients took weeks to recover. Moreover medical staff involved in the procedure were exposed to radiation over a period of time. This was monitored by the use of personal radiation detectors and reduced by staff wearing shielding.
421 In the SIR-Spheres proposal which Dr Gray wrote for CABR in 1987 and which is referred to later in these reasons, he gave details of the clinical trials. The first patient was treated in November 1986. The radiation dose was kept at low levels in that case to evaluate its potential side effects. The treatment was then offered to patients as an experimental procedure from February 1987. At the time he wrote the proposal for CABR, two patients per month were being treated. Dr Gray said that all patients were extensively evaluated pre-operatively with nuclear and CT scans of the liver, an angiography and a battery of liver function tests. All were evaluated for "breakthrough" of microspheres. This was done by injecting Tc99 labelled tracer microspheres into the hepatic arterial circulation via the catheter used for hepatic angiography and placing the patient under a gamma camera and calculating the percentage of microspheres entering the general circulation and reaching the lung. At the time he wrote the proposal no patient had been denied treatment because of excessive microsphere breakthrough. In a table set out in the proposal he gave details for the first seven patients treated with regard to isotopes given and liver and tumour radiation dose as determined by intra-operative probe measurements.
422 As more patients entered into the program, the technique was refined and the radiation dose to patients was increased. Dr Gray said in his evidence, and I accept, that positive results were shown by way of tumour regression. He treated some 16 patients in this way.
423 In order to mitigate adverse effects on patients and reduce irradiation to staff, Dr Gray modified the technique. The change involved implanting a port under the skin of the abdomen connected to a catheter surgically inserted into the hepatic artery. The SIR-Spheres were then able to be injected into the patient under a local anaesthetic through the port. The process was better tolerated than the lengthy surgical procedure. It also reduced staff exposure to radiation.
424 The port devices were available commercially as they were used in chemotherapy for the administration of anticancer drugs directly into the liver. Dr Gray had experience in their implantation. He began combining the SIR-Spheres and chemotherapy using the port for both. The two treatments had a synergistic effect. Dr Guy van Hazel, a medical oncologist practising at the QE II and Mount Hospitals supervised the administration of the chemotherapy. Drs Gray and van Hazel were to collaborate in the publication of a number of papers.
425 During the initial stages of the clinical trials the SIR-Spheres were manufactured by Dr Burton. However that process did involve some radiation exposure. The demand for SIR-Spheres was increasing with the number of patients Dr Gray treated. Following an incident in which Dr Burton received an excessive radiation dose to his hands, arrangements were made for the SIR-Spheres to be manufactured by the Australian Nuclear Science and Technology Organisation (ANSTO). SIR-Spheres manufactured by ANSTO were shipped directly to RPH.
426 Patient outcomes continued to improve. The number of patients coming to RPH from around Australia and overseas increased. By 1988 Dr Gray had accumulated sufficient meaningful results to begin publishing data in international scientific literature. Four papers were published in 1989 in conjunction with staff from RPH who were involved in the SIR-Spheres project. They were:
1. Burton, Gray, C Jones and Colletti, "Intraoperative Dosimetry of 90 Y in Liver Tissue" (1989) Nuclear Medicine Biology, 16:495-498. The paper described the use of a radiation detection probe to measure radiation dose to sheep in an animal study. The result of the clinical trial on a human patient at RPH was also reported.
2. Burton, Kelleher, Klemp, "Selective Internal Radiation (SIR) Therapy for Treatment of Liver Metastasis; Measurement of Response Rate" (1989) Surgical Oncology, 42:192-196. Ten patients with liver metastasis from primary tumours were treated with SIR therapy. The SIR-Spheres used were described in the paper as "… closely sized resin-based microspheres of either 18 or 30 micron diameter and containing Yttrium90 at an activity of approximately 5Bq-microsphere". Bq refers to the Becquerel, a unit of measurement of radioactivity. They had a specific gravity of 1.6, did not leach, and distributed evenly throughout the liver when infused into the hepatic artery. Approximately 5 x 104 to15 x 104 SIR-Spheres per gram of total liver tissue were infused for each patient depending on the final radiation dose required. Dr Gray characterised this paper in his evidence as a description of the technique and results for measuring regression of tumours in patients treated with SIR-Spheres. Tumour response was quantified by measurement of carcinoembryonic antigen (CEA) in each patient and responses were observed.
3. Burton, Gray, Klemp, Kelleher, Hardy, "Selective Internal Radiation Therapy; Distribution of Radiation in the Liver" (1989) European Journal of Cancer and Clinical Oncology, 25:1487-1491. This article reported on evidence of radiation distribution patterns within the liver following injection of SIR-Spheres. The SIR-Spheres used were described in the paper as being of either 17.5 + 2.5 or 32.5 + 2.5 microns in diameter.
4. Klemp, Perry, Fox, Gray, Burton, "Aspects of Radiation Protection During the Treatment of Liver Cancer Using Yttrium90 Labelled Microspheres" (1989)Radiation Protection Australia, 7:70-73. The title of the article speaks for itself.
427 Dr Gray was cross-examined on patient records in relation to the trial. In the case of one patient who died there was evidence, post-mortem, of shunting and a breakthrough of microspheres into the general circulation ending up in the lungs. He said that some spheres would always get through. The point was to keep the breakthrough or shunting below a certain limit. In cancers originating from the gut and particularly from the large bowel, he estimated that 85% to 90% of patients would have less than 3% breakthrough.
428 In cross-examination Dr Gray said that by 1988 he regarded the optimum size of microsphere as 32 micron diameter. It was safer than the 17 micron alternative. He agreed that he moved from 15 or 17 micron microspheres to 32 micron microspheres at some time between 1987 and 1988. The smaller size did not offer any advantage of deeper penetration into the tumour mass. In this connection it was pointed out to Dr Gray that the SIRT-1 PCT application filed on 25 October 2001 designated, in claim 14, a microsphere diameter in the range of 30 to 35 microns. (T2613) He said that the work that led to the stipulation of that size range had been done by Veronica Meade in 1984. Although her studies had found 35 micron microspheres were desirable in rats and rabbits, her conclusions about size were applicable to human beings. Asked why he began using 17 micro microspheres to treat patients in 1986 and 1987, he said there was not a lot of difference between 17, 18, 20, 25 and 30. Only around 50 microns was preferential distribution lost. Meade had shown that. The size of the capillaries in the animals she studied was the same as the size of the capillaries in humans. I accept his evidence in that respect. I accept that the micron size stipulated in the SIRT-1 PCT application derived ultimately from the Meade paper.
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Increasing use of SIR-Spheres in patient treatment - 1990s
429 Dr Gray said that other surgeons began to use his SIRT technique to treat their own patients with liver cancer. One was Professor Arthur Li, Head of Surgery at the Chinese University of Hong Kong. Two of his staff came to Perth for training and started using SIR-Spheres to treat patients at Prince of Wales Hospital in Hong Kong. Dr Richard Stubbs in Wellington, New Zealand visited RPH, sent a scientist to Perth to learn about SIRT and introduced the use of SIR-Spheres to his hospital. By the early 1990s there was an increasing interest internationally in what Dr Gray and his colleagues were publishing and many research groups started experimenting with SIR-Spheres. He said that there are literally dozens of possible ways to make SIR-Spheres. Two research groups in Perth developed their own versions of the spheres.
430 Dr Gray and his colleagues continued to undertake treatment of patients with SIR-Spheres through the 1990s and to publish results as they became available. In 1991 they started their first randomised clinical trial using SIR-Spheres in patients with secondary liver cancer that had spread from a primary cancer in the bowel. The principal investigators were himself and Dr van Hazel with patients being treated at RPH and the QE II Medical Centre and followed up by Dr van Hazel. The evidence sometimes refers to the Sir Charles Gairdner Hospital which is on the QEII Medical Centre site. For ease of reference it will be referred to hereafter as QEII. Approvals for the trial were obtained from the Human Ethics Committees of both hospitals and from UWA. The trial was approved by the Therapeutic Goods Administration Section of the Department of Community Services and Health under the Clinical Trial Notification Scheme. It was designed to compare the outcomes of treating patients with secondary liver cancer with anticancer drugs infused directly into the blood supply of the liver and the same drugs so infused together with a single administration of SIR-Spheres. He and Dr van Hazel were awarded a three year grant by the NH & MRC to conduct the trial. The funds were administered by UWA. The trial was also financially supported by the RPH Medical Research Foundation (the Foundation). The NH & MRC grant allowed the recruitment of staff to assist in the conduct of the trial but the cost of treating patients with SIR-Spheres was met from RPH and the cost of further treatment, tests and care of patients was borne by the public health system through Medicare, the private health insurance industry, RPH and QE II. Annual reports of the clinical trials were submitted to the Ethics Committees of the participating hospitals.
431 Dr Gray and his group continued to conduct SIR-Spheres experiments in the 1990s. A number of papers were published relating to the use of SIR-Spheres in humans. These papers included:
1. Gray, Matz, Burton, Kelleher and Klemp, "Tolerance of the liver to Yttrium-90irradiation" (1990) International Journal of Radiology, Oncology, Biology and Physics, 18:619-623.
2. Burton, Gray, Kelleher, Klemp and Hardy, "Selective internal radiation therapy; Validation of intra-operative dosimetry" (1990) Radiology, 175:253-255.
3. Fox, Klemp, Egan, Mina, Burton and Gray, "Dose distribution following selective internal radiation therapy" (1991) International Journal of Radiation, Oncology, Biology, Physics, 21:463-467.
4. Gray, Anderson, Burton, Codde, Morgan and Klemp. "Regression of liver metastases following treatment with Yttrium 90microspheres" (1992) Aust NZ J Surg 62:105-110.
432 Dr Burton resigned from UWA in 1993 in circumstances referred to later in these reasons. I accept Dr Gray's evidence that his departure hampered the laboratory and animal based studies at RPH as Dr Burton chaired the Medical Advisory Committee of the project funders, Lions Cancer Institute (LCI) and Cancer Research Institute(CRI) (discussed later in these reasons) and supervised research activities. As a result, the flow of publications into the public domain declined. Dr Gray continued to collaborate on some studies with Dr Burton after he went to Charles Sturt University. However, because of the break-up of the research team in Perth at the time, laboratory based and animal based experiments on SIRT were stopped although Dr Gray continued to treat his patients in conjunction with Dr van Hazel and to collect clinical data for publication.
433 Dr Gray and Dr Burton published a further article in 1995 showing that in animals it was possible to prevent the development of liver cancer by treating them with SIR-Spheres before the cancers had actually appeared: Burton, Gray "Adjuvant internal radiation therapy in a model of colorectal cancer-derived hepatic metastases"(1995)British Journal of Cancer, 71:322-325. They collaborated on further publications on SIR-Spheres including their book chapter entitled Gray, Burton "Hepatic Metastases. Diagnosis and Management, Ch 11, Radiotherapy" in Morris, McArdle and Onik (ed), Management of Liver Metastatses (Butterworth Heinemann, 1996) p 108-113. They also collaborated in the publication in the British Journal of Cancer of a study undertaken by one of Dr Burton's research students at Charles Sturt University, entitled: Halley, Walker, Gray and Burton, "Microsphere Distribution within a Metastatic Liver Tumour Following Selective Internal Radiation Therapy".
434 Dr Gray and Dr van Hazel continued to report on the clinical results of patients they were treating. Among the papers which they published were the following:
1. Gray, van Hazel, "Regression of Non-Resectable Liver Metastases following Treatment with SIR-Spheres." (1998) Hepato-Gastroenterology Suppl 2 Vol 45 at 133.
2. Yorke, Jackson, Fox, Wessels, Gray, "Can Current Models Explain the Lack of Liver Complications in Y-90 Microsphere Therapy?"(1999) Clinical Cancer Res (Suppl) 5:3024-3030.
3. Gray, van Hazel, Buck, Paton, Burton, Anderson, "Treatment of Colorectal Liver Metastases with SIR-Spheres plus Chemotherapy" (2000) GI Cancer 3(4):249-257.
4. Gray, van Hazel, Anderson, Hope, Moroz, Paton, "Randomised Trial of SIR-Spheres plus Chemotherapy versus Chemotherapy Alone for Treating Patients with Liver Metastases from Primary Large Bowel Cancer" (2001) Annals Oncology 12:1711-1720.
5. Gray, van Hazel, Blackwell, Anderson, Price, Daunt, Moroz, Bower, Cardaci, "Randomised Trial of SIR-Spheres + FU/LV versus FU/LV alone in Advanced Colorectal Hepatic Metastases" (2002) ASCO: abst 599.
6. van Hazel, Blackwell, Anderson, Price, Moroz Bower, Cardaci, Gray, "Randomised Phase 2 Trial of SIR-Spheres plus fluorouracil/leucovorin chemotherapy versus fluorouracil/leucovorin chemotherapy alone in advanced colorectal cancer" (2004) J Surg Oncol, 88: 78-85.
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Attempts to develop hollow SIR-Spheres - 1989/2001
435 Following Dr Gray's initial attempts through Dr McPherson at Monash University to find a way of selecting for hollow Yttrium microspheres using plasma spraying technology nothing further was done on that front until 1989. Over a period of 11 years from 1989 until 2000 there were a number of attempts to make what Dr Gray called SIRT-2 hollow microspheres. He referred to the copolymer product as SIRT-1. He perceived it as a disadvantage of the use of the copolymer product that it involved handling large amounts of radiation. That problem could be obviated if hollow Yttrium microspheres could be produced. In the event, the effort to produce a hollow Yttrium microsphere was unsuccessful. Dr Gray estimated that the project ended up costing Sirtex something of the order of half a million dollars. The SIRT-2 product was never used by Sirtex.
436 Early in 1989 at Dr Gray's instruction, Dr Burton contacted Dr Christopher Berndt at the Department of Materials Engineering at Monash University to see if he could suggest why some of the microspheres that Dr McPherson had made in 1982 were hollow. Dr Burton sent Dr Berndt some Yttrium Oxide powder in March 1989. Dr Berndt applied a plasma spraying system to the powder. On 18 May 1989 he sent Dr Burton some Scanning Electron Microscope photographs of the powder which had been plasma processed. The photographs indicated that the powder could be spheroidized and that the spheroids so derived showed some porosity. Dr Berndt indicated he was continuing the study and designing some apparatus to improve processing techniques, including an efficient particle collection system and a technique for separating required particle sizes. The photographs showed that the as-received Yttrium Oxide had very irregular shapes, whereas following plasma processing spherical particles were produced.
437 In November 1989 Dr Gray agreed that Dr Berndt could employ a student nearing the completion of a PhD thesis to work on the plasma spheroidization and classification of the powders. The stipend of $1,500 per month was evidently authorised by Professor Parfitt as appears from a letter sent by Dr Gray to the Business Manager's Office at UWA on 6 December 1989. The student was to be employed on the Monash University payroll. The work was to commence in mid January and continue for two to three months. Dr Berndt sent a technical report to Dr Burton on 18 April 1990 and expressed the opinion that they should proceed. The work that had been performed to that point had been successful.
438 Dr Burton sent more powder to Dr Berndt in May 1990 and said he was seeking particles within size range 20 microns (absolute minimum) to 60 microns with a preference for approximately 35 + 5 microns. Other exchanges and work ensued. Electron micrographs which were sent in May 1990 looked "very promising" according to Dr Burton in a letter dated 31 July. Thereafter the program bogged down. In a handwritten note dated 12 October 1990 Dr Burton said he rang Dr Berndt who had done nothing. He had been waiting for powder which was lost in transit. In the event, Dr Berndt treated more powder and sent about 9 grams to Dr Burton under cover of a letter dated 15 November 1990. The powder had been sieved to a size range of 20 to 45 microns. Dr Berndt and his PhD student, Phillip Cheang, provided Dr Burton with a report entitled "Spheroidisation of Ceramic Powders by Flame and Plasma Spraying". The report was 23 pages long and referred to preliminary trials on a variety of materials other than Yttrium which were said to show that particle spheroidization could be achieved in a number of ways. They recommended that 500 grams of Yttrium powder be purchased, consolidated by pressing and grinding and that spheroidization be carried out via plasma processing. The report did not contain any reference to experiments involving plasma spraying of Yttrium. Dr Gray regarded it as of no value. At that point the spheroidization project lapsed.
439 Late in 1991, there was an attempt to revive the hollow Yttrium microspheres project. Dr Burton or Dr Gray suggested that CRI fund a student scholarship at Monash University to identify the spheroidisation mechanisms using plasma spraying. Dr Gray opened negotiations on behalf of CRI with Professor Mary Gani in the Department of Materials Engineering at Monash University. Dr Berndt had left that university. There were a number of conversations and written exchanges between Dr Gray and Professor Gani. In March 1992, CRI guaranteed funds for the first year of work of a post-graduate student who was identified as Ms Gordana Pravdic. She was engaged on an annual remuneration of $24,128.
440 Ms Pravdic commenced her work in July 1992. Payment was to be made to Monash University at six monthly intervals. The first such payment was sent by Dr Gray on 17 September 1992. The covering letter was sent over his name. It used UWA letterhead, and the cheque was from CRI. The receipt was issued to RPH. A second instalment was forwarded on 15 February 1993. On that occasion Monash University issued the receipt to Friends of the Cancer Institute - (Royal Perth Hospital). Ms Pravdic continued to be funded into 1994. She encountered difficulties with her work. Spheroidized Yttrium powder received in October 1993 was found to be too heavy with a specific gravity of over 4. In October 1993 Dr Gray wrote to Dr Gani saying that time was running out. They needed to run some clinical trials. In the meantime, Ms Pravdic explored better separation techniques to try to separate out 20-38 micron and 38-45 micron particles. On 11 May 1994, Dr Gray wrote to Dr Gani suggesting that he might try using a Perth-based density centrifugation to separate spheres by size. He suggested that Ms Pravdic be employed by CRI to assist with the work after she had submitted her thesis for her Masters degree at Monash University. Ms Pravdic submitted her thesis in December 1994. It was entitled "Modification of Ceramic Powders by Plasma Techniques". In the meantime she continued to work on the problem of the Yttrium microspheres.
441 For three years from 1991 to the end of 1994 CRI funded a scholarship for Ms Pravdic at Monash University and then employed her and met other costs associated with the development of the hollow Yttrium microspheres. By the end of 1994 there were still problems associated with hollow microspheres. It was Dr Gray's opinion that the project had met with very limited success. The yield of hollow Yttrium microspheres was extremely small and they were often contaminated. Moreover, experiments at ANSTO showed that the microspheres fractured when placed in a neutron flux which was necessary in order to produce the radioactive isotope Y90. The fracturing made them unsuitable for use. Its cause was not determined despite many experiments at ANSTO. Dr Gray and his associates then decided to shelve the project on the basis that it might be resurrected at some stage in the future if sufficient scientists became available.
442 Late in 1996 with the formation of the company, Paragon Medical Ltd (Paragon Medical) which is discussed later in these reasons, Dr Gray was in negotiation with a Japanese company, Nomura/JAFCO, about a possible venture capital investment in targeted microsphere technology. Dr Michael Panaccio was the Investment Manager for Nomura/JAFCO. He had a PhD in medical science and had worked for many years in medical research. In the course of a due diligence exercise which he undertook on behalf of Nomura/JAFCO, he visited Dr Gani with Dr Gray. At a meeting in November 1996 Dr Gani and Dr Gray decided to resurrect the project. There was some toing and froing about whether Monash University would maintain any claim to intellectual property associated with the use of hollow Yttrium microspheres for the treatment of cancer. On 26 November 1996, Professor Peter Darvall, Deputy Vice-Chancellor at Monash University wrote to Dr Gray in his then capacity as Managing Director of Paragon Medical, and said:
I refer to your letter of 7 November 1996, addressed to Associate Professor MSJ Gani, concerning the project involving plasma processing of ceramic microspheres. I wish to confirm that Monash University recognises that the intellectual property associated with the application of these microspheres was brought by you to the project. The University will not in future have any claim on the technology for using yttria microspheres in cancer treatment.
443 The hollow microspheres project continued at Paragon using Ms Pravdic through 1997 to 1998. The whole exercise proved frustrating. In his affidavit, Dr Gray said that by the end of 1998 neither he nor Dr Gani nor Ms Pravdic understood the factors that controlled the production of Yttrium microspheres. In late 1997 Dr Cammarano joined the research team on a different project and was seconded to the hollow Yttrium microsphere project in 1998. He apparently worked on it for several years. At the end of that time Sirtex was still unable to manufacture hollow Yttrium microspheres and in 2001-02 decided to permanently abandon the project. At the time that Sirtex abandoned the hollow Yttrium microspheres, Dr Andrew Ruys had joined the company. He developed two further iterations of ceramic SIR-Spheres containing radioactive Yttrium which, according to Dr Gray, were far superior to the hollow Yttrium microspheres. The subsequent iterations were patented by Sirtex in patents entitled "Radionuclide Coating Particulate Material" and "Low Density Radionuclide containing Particles".
Kelleher and Codde join research group - 1987/1988
444 The research group was expanded by the recruitment of Dr Deborah Kelleher from the United Kingdom in early 1987. She was initially funded by a UWA fellowship and, from January 1989, and NH & MRC grant. She worked with Dr Burton on a range of matters including the use of microwave hyperthermia, the use of vasoactive drugs to enhance microsphere targeting and the drug microsphere project. Dr Burton described her as having good animal physiology skills and contributing significantly to the animal research program aligned with both the radioactive microspheres and some of the hyperthermia work that was underway. At the end of her time she returned to Europe.
445 Dr James Codde was recruited in 1988. He was a science graduate from UWA with a PhD undertaken through the Department of Medicine at RPH where he worked for 12 years. He worked with the group from 1988 until mid 1992 when he left the Department of Surgery intending to pursue a post-doctoral position in the USA. However, for family reasons his plans changed and he remained in Perth and took up a position with the Western Australian Department of Health.
446 Dr Codde initially engaged with the DOX-Spheres project but diversified into studying the use of liposomes as an alternative drug delivery carrier. He was involved in immunotherapy research. He also supervised the research of Angela Lumsden, a higher degree student from UWA. He described his research projects as falling under the same "umbrella" of attempting to target cancer with specific treatments that reduced the side effects of conventional cancer treatment. Like Cameron Jones, he regarded the atmosphere of the group as collegiate and collaborative. The researchers would talk about their different projects at the tearoom or in more formal discussions. When he was at the department he wrote a variety of software programs designed to assist other researchers measure various parameters they wanted to monitor. During his time with the group he never heard any talk from Drs Gray or Burton or anyone else about any commercial aspects of the research they were doing. The focus of the group was, from his perspective, based entirely on getting better outcomes to treat cancer patients. I accept that characterisation of the focus of the group at the time.
447 Dr Codde described controlled drug release in vivo as a common theme that many of the researchers were trying to address, whether with DOX-Spheres, liposome or other drug delivery systems. A lot of experimental work was carried out in the laboratory measuring the release characteristics of different polymer microspheres. Initially it was conducted by Dr Cameron Jones but was carried on by subsequent researchers, including Dr Yan Chen and Ross McCulloch. If somebody had solved the burst release problem in relation to albumin while he was working in the RPH laboratories he would have heard about it. He did not recall any major break through in the controlled release of doxorubicin in relation to albumin microspheres while he worked in the department.
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Gray approaches Street about Thermo-Spheres - 1987
448 Professor Robert Street was a physicist and UWA administrator and Vice-Chancellor of UWA from 1978 to February 1986, when he retired. He was appointed an Emeritus Professor upon his retirement. That is an honorary title but as an Emeritus Professor he was entitled to access UWA resources such as libraries, the computer system and laboratories and was entitled to apply for grant funding as a member of UWA. Since 1989 he has been an Honorary Research Fellow in the Physics Department and since 1992 a "Senior" Honorary Research Fellow.
449 One of Professor Street's research interests as a physicist included magnetism. He published widely on the topic and supervised Honours and PhD students studying magnetism. In 1988 or 1989 he established, with the assistance of Australian Research Council Funding, a Magnetics Research Group, as an informal subgroup within the School of Physics. The objective of the group was to investigate magnetic materials. It worked in a laboratory established in the basement of the Physics Department and was sometimes referred to as the "HiPerm Lab", which is a reference to High Energy Permanent Magnets.
450 Dr Gray approached Professor Street to find an appropriate body to provide a report to satisfy potential commercial partners about the feasibility of the Thermo-Sphere project. It seems that the approach was made in late 1987. Professor Street suggested that he contact the Department of Applied Physics at CSIRO in New South Wales. Dr Gray followed up by contacting Mr John Collins and Dr John Dunlop from CSIRO in Sydney.
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CSIRO engaged on Thermo-Spheres - October 1987/September 1988
451 Following Dr Gray's initial contact with CSIRO, Dr Catherine Foley sent him a fax on 6 October 1987 entitled "Research Proposal Hyperthermic Treatment of Cancer by Hysteresis Heating". It was, in effect, a research outline for the development of targeted hysteresis hyperthermia outlining the work that would be entailed in a feasibility study. It would require information and assessment of:
1. Heat capacity of brain and liver tissue when under the effect of different drugs used in distribution of the microspheres and with microspheres in place.
2. Consideration of the effect of rotating magnetic fields on the microspheres and whether the spheres themselves would rotate or be prevented by friction.
3. Consideration of the shape of the microspheres.
4. Determination of the quantity of microspheres to provide necessary heating power.
5. Materials, preparation and properties.
6. Field generation including nine questions such as an electro magnetic versus a permanent magnetic field and rotating versus switching fields.
452 On 25 February 1988 Mr Collins sent Dr Gray a draft research agreement for a three month collaboration in a feasibility assessment. CSIRO would provide a feasibility report to UWA by 15 May 1988. At the end of the feasibility stage either party could terminate the agreement. Clause 10.01 of the draft provided that intellectual property resulting from the collaborative activity would be the joint property of UWA and CSIRO.
453 The proposal from CSIRO was too expensive as far as Dr Gray was concerned. Mr Collins then had a telephone conversation with Professor Street and followed up with a letter to Dr Gray on 29 February 1988. He proposed an arrangement whereby CSIRO would charge UWA only the actual salary component of its most junior research scientist with no overheads and no profit margin. CSIRO would have to have an equitable stake in any intellectual or commercial gains that might result from materials researched in the project. The essence of his proposal seems to have been that if CSIRO were not able to recover more than the costs of the relevant research officer's salary, then it would get all, or the lion's share, of the intellectual property in relation to the specification of the composition, geometry and preparation of the magnetic particles and the magnetic parameters for hysteretic heating.
454 Dr Gray had some further discussion with Mr Collins after that correspondence and on 2 March 1988 Mr Collins wrote to him again. He summarised what he called the "essence" of Dr Gray's problem. He attributed Dr Gray's concerns to advice from Uniscan that the proposed arrangement was unacceptable. Mr Collins understood Dr Gray's position to be that UWA would get the work done elsewhere on terms more favourable to UWA or possibly have CSIRO do the work on a three times salary contract basis (presumably with little or no intellectual property benefits). He considered that Uniscan did not appreciate the difficulties inherent in the magnetic research.
455 Evidence from Mr Hilditch contradicted the suggestion attributed by Mr Collins to Dr Gray that Uniscan had advised on the proposed CSIRO arrangement. After Dr Nicholas left Uniscan in November 1987 he had familiarised himself with Uniscan's IP projects and arranged an appointment with each inventor so that he could learn more about them. He contacted Dr Gray to arrange a meeting with him to discuss the two projects designated on the Uniscan files as CDS9014 and TUM9015. However, Dr Gray said to him words to the effect of:
Don't call me. I'll call you when I need to. I don't need Uniscan at this moment.
Mr Hilditch had no detailed knowledge of the technologies Dr Gray wished to commercialise and was unable to form a view as to whether they had any commercial potential or how Uniscan could assist him. He discussed the matter with Professor Parfitt who advised him to refer all matters relating to Dr Gray's IP projects to him. Although he met Dr Gray only once, he estimated that he spoke to him by telephone about three times in the period of his engagement as a consultant to Uniscan and subsequently UWA. Mr Hilditch said he was not involved in any assessment of a proposal from CSIRO and was in no position to determine the extent (if any) of Uniscan's involvement with CSIRO or the feasibility study, financial or otherwise. There was, however, correspondence to Mr Hilditch which does suggest some degree of involvement on his part in 1988.
456 On 13 April 1988, Dr Gray received a proposal from the CSIRO signed by Mr Collins entitled "Research Proposal for Hyperthermic Treatment of Cancer by Hysteresis Heating". CSIRO offered to undertake a feasibility study to end on 30 June 1988 at which time a Joint Management Committee set up between it and UWA would assess the information obtained and the prospects for success in Part 2 of the proposal. In the event, it was finally agreed that CSIRO would undertake a three month feasibility study only and that Uniscan would then seek its own commercial funding that might or might not involve CSIRO in the future. Before final agreement was reached, Dr Catherine Foley at CSIRO actually undertook the feasibility work. In a memorandum dated 6 May 1988 to Dr Gray and copied to Mr Hilditch, Mr Collins reported on encouraging results obtained by Dr Foley and another researcher.
457 On 9 May 1988 Mr Collins sent a fax to Mr Hilditch stating that CSIRO wanted Heads of Agreement finalised as soon as possible. Certain clauses proposed by UWA were unacceptable to CSIRO. Information obtained from CSIRO's measurement would only become the sole property of Uniscan if payment to the CSIRO were agreed at the rate of three times salary. CSIRO would not grant sole rights to the information for a payment of salary only.
458 On 16 May 1988 Peter Macintosh who was by then the Executive Director of Uniscan, replacing Dr Nicholas, wrote to Professor Parfitt concerning discussions he had had with Mr Collins and Dr Gray about the Thermo-Sphere project. They were now coming closer to finalising the necessary agreement. It was going to involve an equal three way allocation of intellectual property rights deriving from the feasibility study between Uniscan, CSIRO and the inventor. As to the identity of the inventor, Mr MacIntosh wrote:
It has been difficult to identify an inventor though clearly Bruce Gray has been principal in bringing the idea to fruition, hence I have left the assignment of that one third to the University Department of Surgery and the inventors within that Department to Professor Bruce Gray's discretion.
Dr Gray had suggested a 50% allocation to the inventors.
459 Dr Gray received a draft agreement, evidently sent by fax from the Department of Electrical Engineering on 12 May 1988 relating to the disposition of intellectual property arising out of the UWA, CSIRO collaboration. That agreement would have been between UWA, Uniscan and himself. Under its terms the parties would assign to Uniscan all their rights to the Property defined as:
… all intellectual property (including but not limited to copyright, patents, registered designs, know-how and trade-marks) developed by the UWA and CSIRO in relation to the hyperthermic treatment of cancer by induced heating.
There was a handwritten note on the draft "not final document". Dr Gray said it was his handwriting.
460 Mr MacIntosh also raised with Professor Parfitt the question of ownership of any patent associated with the Thermo-Spheres project pointing out that Dr Gray had already prepared "letters of patent ready for submission in the form of a provisional patent". He said he had made it clear to Dr Gray that "all rights must be assigned to Uniscan for the purpose of commercial exploitation". Professor Parfitt endorsed a note on the memorandum "ownership mustbe the University".
461 There were in the meantime faxed exchanges between Dr Foley and Dr Gray about the substance of the project. She sought information from him about the microsphere technology and aspects of the physiology of liver cancer and blood flow in patients so she could calculate heat exchange that would be generated from targeted hysteresis hyperthermia microspheres. She also wrote Dr Gray a letter on 27 May 1988 asking for information on liver blood flow and other aspects of the physiology that would be needed for her calculations. Dr Gray responded that he was subsequently unable to locate a copy of his response for these proceedings.
462 The feasibility study was completed and a copy sent to Dr Gray on 30 July 1988. The study recited that it was prepared under a collaborative research agreement with UWA's Department of Surgery, "through its agent Uniscan". It concluded that hyperthermic treatment of liver cancer was possible by hysteresis heating of embolised magnetic microspheres. It referred to the power and power outputs necessary for therapeutic heating and the strength of the relevant magnetic field. Recommendations for further work were included. Dr Gray, in his evidence, was dismissive of the study. He said it was a review of the relevant literature and theoretical calculations rather than an actual experimental result. There was little of substance in the report other than verification that the concept he had espoused was potentially workable. He said it was of no value in assisting the direction of experiments undertaken many years later. I do not attach great weight to that opinion. The fact is that later that year in September, he appended the study to his provisional specification for a patent as confirmatory of the "scientific credibility of the invention". He also used it in a letter written to the Office of the Registrar of UWA on 16 July 1990 in support of Fellowship Funding for Dr Stephen Jones, a researcher working on the hyperthermia project.
463 The Heads of Agreement were concluded after the event between Uniscan and CSIRO and reflected in a document dated 10 August 1988. They provided for the conduct of the feasibility study. They also provided that if the feasibility study gave rise to any invention or discovery by CSIRO, then the intellectual property was to remain the joint property of Uniscan and CSIRO. Mr Hilditch did not recall the original of the CSIRO agreement, nor the identity of the person who drafted it. He did not recall when he first saw it. He received a copy of the feasibility study under cover of a letter addressed to him dated 16 August 1988 and forwarded it to Dr Gray.
464 Dr Gray sent a fax to John Dunlop at CSIRO on 1 September 1988 about a meeting to discuss ongoing collaboration on the Thermo-Spheres project. He observed that ownership of intellectual property would depend on many factors including financial and research contributions. They agreed to meet on 14 September 1988. Mr Dunlop wrote back on 12 September about the financial pressures on CSIRO to recover, as a minimum, 2.8 x salary plus a percentage of intellectual property for collaborative research. On the same day Dr Gray sent him an overview of the work done by his group up to the beginning of 1988.
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465 A number of further exchanges occurred between Dr Gray and CSIRO in October 1988. In a fax dated 27 October 1988 Dr Gray told Dr Barry Inglis at CSIRO that "the bottom line of the CSIRO is so unattractive to us that we would not want to be bound into any contract with which we were not reasonably happy". He said he would continue to try and find private funds for the project. Dr Inglis faxed back on 28 October 1988 that, in light of Dr Gray's comments, CSIRO would not proceed with an NH & MRC application which they had discussed.
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Gray lodges Thermo-Sphere Provisional Specification PJO371 - 12 September 1988
466 On 12 September 1988 Dr Gray lodged with the Australian Patent Office, in his own name as applicant, a provisional specification for an invention entitled "Targeted Hysteresis Hyperthermia as a Method for Treating Cancer". He attached two appendices which were lodged with the specification. The first was entitled "Patent Application for Tumour Hyperthermia by Hysteresis Heating". It comprised 12 pages. The second was the CSIRO feasibility study of 30 July 1988. The number given to the specification by the Australian Patent Office was PJ0371.
467 Dr Gray said he lodged the provisional specification "acting on instructions from Uniscan". Mr Hilditch denied making any such request of Dr Gray. His understanding was that a patent application in respect of an invention developed by a UWA employee in the course of his or her duties as such would be filed in the name of UWA. He was not even aware that the provisional specification had been lodged.
468 I find that Dr Gray did not act on instructions or on a request from Uniscan in filing the provisional specification. In so finding, I have regard to the form of the provisional specification, the fact it was signed by Dr Gray in his own name, the fact that it was not lodged through the Uniscan patent attorneys and Mr Hilditch's evidence, that Dr Gray filed the patent specification without notice to UWA. Nevertheless, in his earlier discussions with Dr Nicholas, both had contemplated the possibility that a provisional specification would be lodged.
469 The provisional specification identified a new method "for delivering hyperthermia as a treatment for patients with cancer". The method was described thus:
The method consists of incorporating magnetic materials into micro particles and injecting these particles into the environment of the tumour. Heat is generated from the particles by release of hysteresis heat when the micro-particles are placed in an alternating magnetic field.
The specification went on to describe techniques for the delivery of microparticles into tumour tissue.
470 Dr Gray said in cross-examination that the provisional specification would have covered the use of a rotating magnetic field. The CSIRO Feasibility Study appended to the specification listed four possible methods of generating the necessary magnetic fields. They were:
. Rotating permanent magnets
. Iron cored electrode magnet connected directly to the main supply
. Iron cored electrode magnetic as part of a tuned circuit; and
. Air-cored coils as part of a tuned circuit
471 As appears below Dr Gray lodged the same provisional specification in May 1996. He was cross-examined on both. He maintained that the provisional specification covered a broad range of fluctuating magnetic fields which could be "rotating or simply oscillating". When it was put to him again that the subject matter of the 1988 and 1996 provisional specification did not include a rotating field he replied "yes absolutely" which in context was an assertion that it did cover rotating fields. Professor Street, in cross-examination by counsel for Dr Gray, said he thought all four field source options identified by the CSIRO referred to alternating fields. He explained that a plot against time of the magnetic field strength of an alternating field would yield a graph in the shape of a sine wave. In the case of a rotating magnetic field, the field is of constant strength but has a direction which varies in time. A plot of the angle of its direction over time would also yield a sine wave.
472 The provisional specification referred to alternating magnetic fields only. It also relied upon two appendices. Appendix 1 was Dr Gray's paper entitled "Patent Application forTumour Hyperthermia by Hysteresis Heating". It was characterised in the specification as a description of "the concept of the invention in greater detail". It referred to particles subjected to "an alternating field of limited magnitude" and "alternating field hysteresis" (at 6/2078). Appendix 2 which was the CSIRO Feasibility Study was characterised in the provisional specification as a paper which "describes preliminary investigations that confirm the scientific credibility of the invention". It did not form part of the description of the invention in the specification. In my opinion the Thermo-spheres provisional specification lodged in 1988 and again on 10 May 1996 described an invention in which alternating magnetic fields were used to induce hysteresis heating in microspheres. It did not extend to rotating magnetic fields.
473 It is perhaps worth noting that funding applications prepared in 1990 and 1991 by Dr Stephen Jones, who was working on the hyperthermia project as part of Dr Gray's group, referred to "alternating" and not to rotating magnetic fields. On the other hand Dr Jones did say in his affidavit evidence, and I accept, that the reference to "rotating permanent magnets" in the CSIRO paper planted in his mind the seed of the idea of using rotating magnetic fields.
Thermo-Spheres left to Parfitt - September 1988
474 In August and September 1988 Mr Hilditch was making fortnightly reports to Professor Parfitt about his progress on Uniscan consulting projects and intellectual property. For the fortnight ended 19 August 1988 he reported on the "Tumour Heating" project thus:
Contracts between UNISCAN and CSIRO, Applied Physics Division in Sydney, have been executed and the Feasibility Study report released by CSIRO. Professor Bruce Gray now has copies of this report. Further studies are anticipated. Professor Gray will discuss his requirements with Prof Parfitt.
The same text was used in his report for the fortnight ended 2 September 1988. For the fortnight ended 16 September 1988, he wrote:
A Feasibility Study has been completed by CSIRO. The project is being reviewed by Professor Gray and Bob Parfitt. I will take no further action unless instructions are received from Bob Parfitt.
Mr Hilditch did not receive any further instructions from Professor Parfitt in relation to the tumour heating project and had no further involvement with Dr Gray in relation to it after September 1988.
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Uniscan "hands back" DOX-Spheres - September 1988
475 On 14 September 1988 Mr Hilditch sent a memorandum on Uniscan letterhead to Mr Steenhauer of Accounting Services who had also been secretary of the Patents Committee. A copy was sent to Mr Baker of Accounting Services and Mr Martin Griffith, the UWA Business Manager. In the letter Mr Hilditch referred to the scaling down of Uniscan's activities and his review of all projects on its books as at 31 July 1988 "to determine whether or not UNISCAN will continue to support them". He wrote:
I have recently completed the review and advise that the following projects will not be proceeded with and request that Department Heads be formally notified.
The DOX-Spheres project was shown in the list attached to his letter in the following terms:
JOB NO PROJECT BRIEF DESCRIPTION REASON FOR HANDING BACK TO DEPARTMENT
CDS 9014 DEPT. OF SURGERY CONTROLLED DELIVERY SYSTEMS PROFESSOR GRAY Delivery system for transferring drugs to cancer tumours Project has not been developed to a sufficiently commercial stage.
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476 Mr Hilditch explained in his affidavit the process of referring a project back to the relevant department. His evidence about that has been canvassed earlier in these reasons in the history of University arrangements for the commercialisation of intellectual property generally from 1985.
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Thermo-Spheres proposal for Uniscan - October 1988
477 Dr Gray wrote a further document at the request of Uniscan. It was dated 3 October 1988 and entitled "A Proposal to Develop Interest in Development and Commercialisation of a New Technique for Selective Induction of Hyperthermia as a Method for Treating Cancer". He said he had also been asked to provide a business plan to accompany the proposal. Mr Hilditch had no recollection of seeing this document.
478 The proposal described the generation of heat in tumours including by hysteresis from microparticles introduced into the arterial circulation of tumour bearing organs and selectively targeted towards tumour tissue by the use of vaso-active drugs. Heat would be generated in the tumour by placing the patient in a high intensity oscillating magnetic field resulting in hysteresis heating of the microparticles.
479 The proposal stated that further development was required before a prototype suitable for clinical application was manufactured. The experiments would refine the materials required for microsphere production and for generation of the magnetic field as well as demonstrating the in vivo heating effect in animal models of cancer. Dr Gray anticipated in his paper that the experiment could be accomplished over one year using the equivalent of two research scientists per year.
480 Dr Gray sent a copy of the proposal and of the business plan to Professor Street on 7 October 1988. He sent it to Professor Street because he was an influential academic, had recently been Vice-Chancellor at the University and had indicated that he might be able to help Dr Gray find a commercial partner. He also had an association with a group called "Integrated Health Care" that might be interested.
481 Dr Gray was introduced by Uniscan to "many potential commercial parties". These included Hambro Grantham Ltd; ICI Australia Ltd and Stinoc. Professor Street introduced him to Integrated Health Care Ltd. He had also earlier introduced Dr Gray to Professor Rossiter, Head of the Department of Materials Engineering at Monash University. None of these contacts was successful. In communicating with them, Dr Gray used UWA letterhead. I have no reason to believe that at the time he made these contacts he did so other than on behalf of the University.
482 Professor Robson, in cross-examination, accepted that in 1987 and 1988 Dr Gray reported to the University all of the work his research group was undertaking and that his reports to Uniscan and to Professor Parfitt as a director of the company, met his obligations under reg 6 of the Patents Regulations. It was put to Professor Robson that the obligation was then on the Vice-Chancellor to refer any report to the Patents Committee and to act upon its advice. He said:
I doubt they were referred to the Patents Committee because there was a parallel process occurring here where Uniscan was being used to commercialise the intellectual property of the University.
It was put to him that UWA had abandoned the Patents Committee as a mechanism for dealing with its intellectual property rights. Professor Robson disagreed saying that the University had maintained a Patents Committee. He did not know what had happened about Professor Parfitt reporting to the then Vice-Chancellor, Professor Smith. He speculated that Professor Parfitt was dealing with intellectual property through Uniscan. It is no disrespect to Professor Robson to say he was asked an argumentative question and understandably gave an argumentative answer. However it was not evidence of the facts about the maintenance and operation of the Patents Committee. In that regard findings have already been made earlier in these reasons.
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Burton and Gray present and publish - 1985/1995
483 Dr Burton, referring to his own time with the Gray group in Melbourne and in Perth, said that all of the research they had carried out and the associated methodologies they applied were in the public arena. There was in the Melbourne group a strong commitment to the publication and dissemination of research results for the sake of developing new treatments and new approaches to cancer management. All of the research and the results of the work undertaken in Melbourne were presented in general and public forums within the Department, the university, at research meetings and conferences without any concern about the disclosure of the new methodologies. I accept his evidence in that respect. According to Dr Burton that approach continued after the move to Perth. Again, I accept his description of the general approach to disclosure during his time with Dr Gray's team in Perth. He and Dr Gray had given conference presentations to the Australian and New Zealand Surgical Research Society on the SIR-Spheres work before and during 1985. In 1986/87 Dr Burton presented work to the Australian Physiological and Pharmacological Society on the use of microspheres in liver cancer. Dr Cameron Jones presented on the manufacture of drug microspheres and releases of the drug from the particles.
484 Dr Burton and Dr Gray also made representations in 1988 to the Cancer Research Foundation of Western Australia in the hope of attracting its funding support. They presented papers to the Cancer Research Association of Western Australia. These related, inter alia, to dosimetry used for selective internal radiation therapy and the methodology and therapeutic responses associated with Adriamycin exchange resins. Presentations they made in 1989 covered the extension work which they had been performing using the same microsphere techniques but using heat to increase the release and therapeutic effects of the agents concerned. In that year the Cancer Foundation of Western Australia provided the group with project funding. They also received support from the RPH Research Foundation.
485 Dr Burton's affidavit exhibited a list of his publications which included refereed journal articles, abstracts and conference papers. Some of hispapers, which wereco-authored with Dr Gray and others, were listed in Dr Gray's report to the Vice-Chancellor of his activities for 1985 to 1987. Some in that report were listed as submitted for publication, but not published at that time. Between 1985 and 1995 there were some 34 papers which he published in major refereed journals in areas relevant to the targeted microsphere technology. In addition there was a significant number of papers in minor publications in the form of abstracts and conference papers. Jointly with Dr Gray and Dr Yan Chen, Dr Burton contributed a chapter entitled "Methodology and Pharmaceutical Aspects of Microparticles" in 1994 to the CRC Handbook: "Clinical Application of microspheres" edited by Willmott and Daly.
486 Dr Burton was of the view that the only robust technology they had developed for the DOX-Spheres, that could clinically be used, was the original concept developed in Melbourne of simply adding doxorubicin to the microspheres and clearing away loose drug to avoid leaching. That was the process that was used for the DOX-Spheres tested in clinical work. In his opinion it held no potential at all for producing a patentable product because the process had been previously disclosed.
Chen - employment with UWA and RPH - September 1989/October 1994
487 Dr Yan Chen has a Bachelor of Pharmacy degree with Honours from the China Pharmaceutical University in Nanjing, China. She obtained that degree in July 1983. She also has a PhD in Pharmaceutical Science conferred upon her in November 1989 from the University of Strathclyde in Scotland. Her thesis title was "In vitro Characterisation and in vivo Evaluation of Microspheres as Carriers for the Anticancer Drug Adriamycin". At the time she gave evidence, she was a senior lecturer at the School of Pharmacy at Curtin University.
488 Dr Burton said Dr Chen had been recommended by a collaborative group who were also working on drug microspheres. Her work was of interest to him and other members of Dr Gray's group and he thought she might be able to contribute to their research ideas and research plans. He said he made two grant applications and received funding to cover her salary for the first year or two. The idea was that she would be able to attract funding in her own right after that time to support her own position.
489 On 14 February 1989 Dr Chen accepted an offer of appointment for two years as a research associate with the University, initially placed in the Department of Surgery. Upon evidence of her successful completion of her PhD she would be appointed as a Research Fellow on the staff of the University. She signed standard Conditions of Appointment which imported the University Act, Statutes and Regulations in the same way as the Conditions of Appointment for Dr Gray.
490 Dr Chen's employment history with UWA and with RPH can be summarised briefly. She commenced her appointment on 1 September 1989. Between June and August 1991 she took unpaid maternity leave from which she returned to work in September 1991. In February 1992 she was offered further employment by UWA from 1 January 1991 to 31 December 1992. The offer, which was signed by Professor Lourens, was for the position of Research Officer (NH & MRC) at the Department of Surgery at RPH. It was retrospective. It included a reference to Dr Chen having made arrangements to pay arrears to the Superannuation Scheme for Australian Universities (SSAU), backdated to 1 January 1991. She accepted the offer on 19 February 1992. UWA paid her until 12 January 1993 when her appointment was treated as expired. Subsequently Dr Chen was offered a limited tenure contract as a Research Assistant by RPH. The duration of the appointment was 13 January 1993 to 31 December 1993. From 13 January 1993 she clearly became an employee of RPH. In February 1993 she received an amended fixed term contract of service for RPH amending her job title to "Research Officer". She accepted the terms of the amended contract.
491 On or about 10 January 1994 Dr Chen was appointed by RPH to the position of Senior Research Officer - Level 1 for a term from 1 January 1994 to 31 December 1994. She accepted the offer. In or about October 1994 she advised RPH of her intention to resign as a Senior Research Officer.
492 In hindsight Dr Burton did not regard Dr Chen's appointment as particularly positive from the perspective of funding grants. He formed the opinion that she did not seem to be able to easily develop new ideas. He used her primarily to service research that had already been devised in relation to the DOX-Spheres. The only independent research she performed, according to his recollection, was premised on earlier work using ion-exchange resins and chemical modification of the drug to combine it with the polymer matrix of the spheres.
493 Dr Chen disputed Dr Burton's assessment of her capabilities. She said that between 1989 and 1994 she was listed as the Chief Investigator on grant applications that yielded over $200,000 in funding, some of which was to support her salary. She also denied that the only independent research that she did was predicated on earlier work on resin microspheres and chemical modification of drugs. She claimed that the research that she was doing was novel.
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S Jones employment with UWA and Sirtex - 1989/2006
494 At the time of the trial of these proceedings, Dr Stephen Jones was the Manager, Research and Development of Sirtex Technology Pty Ltd, which is a wholly owned subsidiary of Sirtex. He holds a Bachelor of Science with Honours from UWA which he completed in 1983. He also undertook his PhD in physics at UWA. It was conferred in 1989. The title of his thesis was "Frequency Stabilisation with a Sapphire Loaded Super Conducting Cavity".
495 Between 1983 and 1986 Dr Jones was a part-time laboratory demonstrator in the Department of Physics at UWA and from 1984 to 1986 a part-time tutor. On 11 January 1989 he was offered, by Professor Parfitt, the position of Research Associate in the Physics Department for a 12 month term commencing 1 January 1989. He accepted that offer on 25 January 1989. On 14 July 1989 he applied, in response to an advertisement, for the position of Raine Research Fellow with the Department of Surgery. His father had been a medical physicist and he had an interest in conducting research in that area.
496 Dr Jones was interviewed for the position by Dr Gray and Dr Burton. Dr Richard Fox, who was the head of Medical Physics at RPH, may also have been on the panel. On 22 September 1989 Professor Parfitt wrote offering him a "temporary appointment as a Raine Research Fellow on the staff of this University, initially placed in the Department of Surgery …". The appointment was for a term of two years. Conditions of Appointment attached to the offer incorporated by reference, the University Act, Statutes and Regulations of the University. Dr Jones accepted the appointment and took up the position in January 1990. He worked in the Department of Surgery located at RPH in Wellington Street, Perth. During his time at RPH, he maintained his contact with the UWA Department of Physics. He co-supervised several students in Honours projects and students undertaking doctorates, some of which related to hyperthermia. He had ongoing contact with Professor Street who was also supervising most of those students. All of them except one, Paul Moroz, were studying in the Physics Department, not in the Department of Surgery. From time to time he delivered presentations about his research to members of the Physics Department, particularly through the Research Centre for Advanced Minerals and Materials Processing. Professor Street held the position of a half-time Senior Research Fellow at the Centre from March 1992 to about the end of 1999.
497 Upon accepting the Fellowship, Dr Jones was given documents to read before starting work. He became familiar with some of the relevant literature including articles by Borelli, Luderer and Panzorino which are among articles on selective hyperthermia previously referred to in these reasons. That literature discussed processes along the lines he was seeking to develop involving the injection of ferromagnetic microparticles which could be heated by an externally applied alternating magnetic field.
498 Dr Jones described his first task as setting up a laboratory with suitable equipment and developing an understanding of the physics behind the magnetic hysteresis heating effect he sought. He described "hysteresis" as the physical mechanism that generates heat, essentially as a result of magnetisation changes in a sample induced by exposing the sample to a variable magnetic field.
499 Dr Burton took an interest in Dr Jones' work. He provided guidance from time to time. He helped him to understand the project in its proper context in terms of treatments and cancers. Dr Chen was working at the same laboratory as Dr Stephen Jones at RPH on other aspects of research and she helped out with some aspects of his work. He was broadly aware that she was working on DOX-Spheres and looking at ways to modify their release characteristics.
500 From 8 January 1991 to 7 January 1992, Dr Jones' appointment as a Raine Research Fellow was superseded by his appointment as a Research Fellow of the University. Funding for that appointment in 1991 came from the University rather than from the Raine bequest. In any event, he continued as a member of the academic staff of the University. From 6 January 1992 to 31 December 1992 his status changed again to Research Officer (NH & MRC) reflecting another change in the source of his funding. He continued in the Department of Surgery at RPH as a member of the academic staff at the University. His appointment was renewed successively through to 19 August 1994. The last reappointment came in the form of a letter dated 18 July 1996 from Professor Robson, the Deputy Vice-Chancellor, confirming his appointment as "Research Officer (NH & MRC) from 1 July 1994 to 19 August 1994". He accepted the offer.
501 In August 1994, shortly prior to the expiry of his NH & MRC grant, Dr Jones applied for the position of Elizabeth Stalker McEwan Fellow in hyperthermia research at RPH. He did not succeed in that application which was made to Mr Doug King, Manager of the Medical Research Foundation at RPH. During the seventeen month period from 19 August 1994 to 29 January 1996 he continued his research at RPH in particular in hyperthermia. He had no appointment with UWA during that time. I accept his evidence that from 20 August 1994 to 28 January 1996 he was employed by CRI and funded by money provided by LCI and CRI. I accept also that he became a staff representative on the Board of Management of CRI in November 1994. The minutes of 15 November 1994 show him in attendance. That meeting also accepted a proposal from Dr Gray that funding support for Dr Jones be provided for 1995.
502 LCI and CRI were affiliated with UWA in 1995. In 1996 they became part of the Centre of Applied Cancer Studies (CACS) at RPH. Reference to the creation of these bodies and their relationship to RPH and UWA is made later in these reasons. Dr Jones worked out of the same laboratory although it had been moved into the Medical Research Foundation building at RPH. When the move occurred, Dr Gray acquired an office on the same floor as the laboratory.
503 On 4 March 1996 Professor Robson, then a Deputy Vice-Chancellor at UWA, wrote to Dr Jones offering him appointment as "Research Fellow (Level B) initially placed in the Lions Cancer Research Institute, University Department of Surgery, (Royal Perth Hospital) within the Faculty of Medicine and Dentistry" for the period 29 January 1996 to 28 February 1997. Dr Jones accepted that offer on 25 March 1996. The conditions of appointment contained the standard provision, incorporating by reference, the University Act, the Statutes and Regulations of the University.
504 On 22 January 1997 Dr Jones sent a letter at Dr Gray's request submitting his resignation from CACS, effective from 31 January 1997. Dr Gray accepted his resignation on the same day. The Department of Human Resources at the University subsequently sent him a letter dated 29 January 1997 stating that the Vice-Chancellor had accepted his resignation from the staff of the University effective 31 January 1997.
505 In February 1997 Dr Jones was appointed as Chief Research Scientist by CRI. The terms of his employment were set out in an agreement entitled "Employment Agreement Stephen Jones The Cancer Research Inc". He served as Chief Research Scientist at CRI until 18 November 1998. On 19 November 1998 he commenced employment at Paragon Medical (now Sirtex). His employment agreement was due to expire on 1 July 1999. On 29 June 1999 he was offered an extension which he accepted. From 2000 to July 2006 Dr Jones was employed as the Senior Research Scientist and Hyperthermia Project Manager at Sirtex. In July 2006 he became Manager Research and Development in Sirtex Technology Pty Ltd.
S Jones works on hyperthermia -1989/1994
506 As noted above Dr Jones' initial work with Dr Gray's group required him to set up a laboratory with suitable equipment and to develop an understanding of the relevant physics through reviewing the literature. He recalled reading, in 1990, a version of the provisional specification for Thermo-Spheres lodged by Dr Gray in September 1988.
507 The nature of some of Dr Jones' work on hyperthermia in these early stages of his UWA employment in Dr Gray's group can be tracked through funding applications that he made. In one of his first applications to the Foundation on 16 February 1990, he sought and obtained funding for a project entitled "Development of Ferromagnetic Microspheres for Treatment of Cancer by Induced Hyperthermia Resulting from Hysteresis Heating". He proposed to develop "microspheres loaded with ferromagnetic material that will, when subjected to a suitable alternating magnetic field, be heated as a result of hysteresis losses". He and Drs Gray and Burton were named as "Principal Investigators". The funding they requested was for the purchase of a Magnetic Field Generation System and a Gauss-Tesla Meter and Probe and Ferromagnetic Powders and Electronic Components. A grant of $5,700 was approved.
508 In setting out the research and methods to be used, Dr Jones referred to the difficulties associated with the use of ferrite (Fe2O3) based materials. The inefficiencies associated with the magnetic heating of such materials required higher frequency in the applied alternating magnetic field in order to achieve the necessary heating. However there was a field frequency threshold at which eddy currents could be induced in normal human tissue which would cause unwanted heating and decrease the effective selectivity between normal and tumour tissue.
509 The application referred to the availability of "several new magnetic materials" from commercial sources. The proposal was to design and construct a benchtop alternating magnetic system that would enable a range of magnetic powders to be tested. It would be necessary to measure the heat generated from hysteresis effects as a function of field strength and frequency for particles of different composition, shape and size. The prototype magnet system was to be a laminated steel cored electromagnet with water cooled energising coils.
510 Dr Jones said that the group had already developed the technology for the production of microspheres of any desired size and was able to incorporate either soluble or particulate materials into the microspheres during the manufacture process. He wrote:
Once the choice of ferromagnetic material has been made they will be incorporated into 30 micron microspheres for embolisation into tumour bearing tissue.
511 On 19 June 1990 Dr Jones applied to the Clive and Vera Ramaciotti Foundations for a research grant of $38,087 to purchase a "Malvern Series 3601 Laser Diffraction Particle Size Analyser". In the application, which was ultimately unsuccessful, he explained that:
One of the most critical parameters that needs to be carefully measured and controlled in this research is particle size. The size of the unincorporated ferromagnetic particles is an important factor determining their magnetic properties while the size distribution of the biocompatible microspheres determines how they will embolize in the vasculature of the tumour, hence, their effectiveness.
The particle size analyser would measure particle size distributions from 0.5-560 micron and measure total particle surface area and time dependent size changes, thus enabling checks on the stability of the microspheres. It was proposed that in addition to its use in the hyperthermia research the instrument would find application in the chemotherapy research with microspheres and the immunotherapy research being undertaken by others in the department.
512 Dr Jones applied to UWA for various Medical Research Fellowships about this time. He attached to his application a document which he drafted describing the hyperthermia project. After explaining the general concept he said that the initial stages of his research would involve a considerable amount of physical testing and analysis to develop and evaluate suitable ferromagnetic particles for incorporation into microspheres to be used to induce selective heating. That would involve measuring the magnetic characteristics of the various ferromagnetic materials and quantifying the effects of changes to particle size, shape and proximity to other particles. The information gained would be used to select the best ferromagnetic material and to maximise the heat generation capabilities of the particles. He claimed that significant progress had already been made in the area. He went on to say:
Once the choice of ferromagnetic material has been made it can then be incorporated into biocompatible microspheres designed to provide the best distribution for effective heating of tumour tissue. Accurate measurements of the heat generation characteristics of microspheres ranging in size from 20 to 50 microns in a controlled benchtop situation will enable proper interpretation of in vivo heating data. The system will be tested in an animal model to fully characterize its heating capabilities.
513 Dr Gray wrote to the Office of the UWA Registrar on 16 July 1990 supporting Dr Jones' applications. He referred in the letter to the CSIRO Feasibility Study which Dr Jones had read. In his letter Dr Gray made clear the early stages of the development of hyperthermia therapy when he said:
The research proposal outlined in Stephen Jones's research programme is of the highest order. A three-month scientific evaluation of the feasibility of the project was undertaken with the CSIRO before the project started. This feasibility study strongly supported the physical rationale for the project. The project is quite unique, and we are not aware of any similar project being undertaken anywhere. The project has the potential to develop truly selective tumour heating as a therapeutic modality. Stephen Jones is about to undertake in vivo studies in animals using the composite materials and magnetic induction equipment that he has developed. There are several other areas of selective tumour heating that Dr Jones wishes to investigate in the future. These also have potential in an area of research that is expanding worldwide.
514 On 31 January 1991 Dr Jones, in conjunction with Dr Gray, made a further application for a research grant to the Foundation. They sought an amount of $8,994 for a programmable current source, a signal generator and the use of external facilities as well as electronic components and magnetic materials.
515 In the application Dr Jones said that a benchtop system had been built and used to make measurements of the hysteresis heating potential of several ferromagnetic materials when exposed to a moderate strength 50Hz magnetic field. Results achieved to that date were superior to other magnetic heating techniques being investigated elsewhere. The research forming the basis of the application aimed to characterise the physical properties of the best ferromagnetic materials over the useable range of magnetic field configurations. That information would be used to optimise particle characteristics which had to be matched with the applied magnetic field frequency and strength to maximise the hysteresis heating effect. The next logical step would be to begin testing in vivo which was beyond the scope of the application then being made.
516 In describing progress to the date of the application, Dr Jones said that since the beginning of 1990 a benchtop alternating electromagnet system had been designed. It consisted of a laminated iron cored electromagnet powered through a variable transformer connected to mains electricity. It could be configured so that a magnetic field alternating at 50Hz, which was the mains frequency, was produced across a small air gap in which the powder samples were located. The smaller gap size was best suited to the material studies. A larger gap size, which was available, allowed for the possibility of in vivo studies at a later date.
517 The four best ferromagnetic powders tested to that point were hexaferrite (barium ferrite), alnico, Magnequench A and Magnequench B. Magnequench A and Magnequench B were two types of neodymium-iron-boron based materials. Progress had also been made in the development of a technique to incorporate the hexaferrite particles into biocompatible microspheres. Dr Jones described the microsphere matrix as crosslinked albumin. He said that microspheres in the size range 20-60 micron could be manufactured with approximately 60% by mass being magnetic material. However he said:
This work is still in its very early stages and no detailed data is yet available.
A grant of $8,994 was approved on 8 May 1991.
518 In July 1991 Dr Jones submitted a manuscript which was published in 1992 under the title: Jones, Gray, Burton, Codde and Street, "Evaluation of ferromagnetic materials for low- frequency hysteresis heating of tumours", (1992) 37 Physics in Medicine and Biology 293-299. The paper described the experiments in which heating properties of several ferromagnetic powders were tested at varying field amplitudes oscillating at 50Hz. This is the same as the mains frequency. A diagram showed the instrumentation used in the experiments. A table similar to that referred to earlier showed the results for the four powders, alnico, barium ferrite, Magnequench A and Magnequench B. His conclusion was that a therapeutically significant amount of heat could be generated by magnetic hysteresis in small ferromagnetic particles using high field strengths and low frequencies. Because the heating power was proportional to frequency the use of a low frequency magnetic field resulted in reduced heat output. In general, however, the hysteresis area increased non-linearly with the amplitude of the applied field. If the correct choice of ferromagnetic material were made such an increase could be sufficient to compensate for the frequency related reduction in heating power. The paper then stated:
A large amount of work is still required to quantify the biological constraints placed on the various operational parameters to define the direction that further optimizations and refinements should take. Operation at mains frequencies allows the possibility of using carefully designed electromagnets with pole pieces to restrict the influence of stray flux and to increase the efficiency of the system. Investigations to find the optimum combination of ferromagnetic material and magnetic field properties to maximise the rate of heat production by magnetic hysteresis are continuing.
519 In February 1992 Dr Jones applied to the Foundation for funding to purchase an electromagnet and power supply and associated equipment. The project with which that application was associated concerned microwave hyperthermia utilising ferromagnetic resonance. Its aim was to develop a method to enhance the selectivity of heat deposition of microwave radiation by utilising ferromagnetic resonance in ferrite particles. The application, which was for the sum of $5,247 was successful. The funding was processed through RPH not through UWA.
520 On 21 February 1992 Dr Jones made an unsuccessful application to the DEET Australia Research Council for funding for a project entitled "Magnetoregulated Release of Active Agents from Polymer Matrices". The application was made jointly with Drs Chen and Burton. All were designated as "Chief Investigator". This application was connected with the DOX-Spheres project. The aim of the project was to characterise and control the effects of magnetically induced changes to polymer carriers impregnated with magnetic particles on the release profiles of active agents. It was sought to establish how these effects were influenced by the properties of active agents in polymers and the forms of entrapment of the active agent in polymer systems.
521 On 25 February 1992 a funding application was made to the NH & MRC signed by Drs Jones and Gray and Professor Street. Dr Jones put the application together. He drafted information about magnetism and hyperthermia used in the application in consultation with Professor Street. Other information in the application was obtained from Dr Gray. On 30 November 1992 the NR & MRC wrote advising that the application had not been successful. The title of the project was "Induced hyperthermia of tumours by ferromagnetic hysteresis heating". In answer to a question on the application form, "Does this project include techniques and processed which could be developed commercially?", he answered in the affirmative.
522 In a section of the application entitled "Background and Research Plan" an outline of currently available techniques for heat delivery was given. Reference was made to whole body hyperthermia, microwave heating, ultrasound heating and the use of metal rods or seeds surgically implanted into the tumour and heated using eddy currents generated through a magnetic field. The concept of tumour targeted hysteresis hyperthermia was said to depend upon selective targeting of tumours with microspheres and the generation of localised hysteretic heat from those microspheres.
523 Under the heading "Progress to Date" the application stated that the research group had commissioned CSIRO to undertake a feasibility study to assess whether it would be possible to generate sufficient quantities of heat from ferromagnetic particles within living tissues and to provide recommendations on how that might be achieved. The study had concluded that the hypothesis was sound and that currently available engineering technology would be sufficient to allow the project to develop to a stage of clinical application. The application then stated that Dr Jones had been employed in 1990 "to develop the project in depth". He had developed "a working relationship with the University Dept of Physics". Progress achieved in the previous two years was then summarised. It included the commissioning of two electromagnetically shielded laboratories and the assembly of basic equipment for preliminary testing and the commencement of evaluation of physical parameters controlling the production of heat by hysteresis in ferromagnetic particles. A cooperative arrangement with UWA Department of Physics enabled access to highly expensive equipment items in that department.
524 Different types of electromagnet systems had been developed and used to evaluate the heating potential of a range of ferromagnetic particles. Three types were described. In the first the coils were energised through a variable transformer connected to the mains, producing a magnetic field alternating at 50Hz in the air gap. The second type was designed for operation at frequencies up to 1kHz. The coils were energised from an audio frequency amplifier. The third and improved electromagnetic type had recently been designed and built to enable operation at 20kHz. This replaced the iron core with a solenoid to produce the magnetic field with the test region being the space inside the solenoid.
525 Small scale experiments had been performed to confirm that the technique of magnetic hysteresis heating could be used to achieve therapeutic temperatures in vivo and to establish a temperature differential between tumour tissue containing ferromagnetic particles and surrounding normal tissue. Figures demonstrating representative temperature rises within tissue in an anaesthetised mouse were shown.
526 The research plan outlined in the application involved the generation of oscillating magnetic fields, the selection and optimisation of ferromagnetic particles, the optimisation of microsphere design and in vivo experiments. Future developments which were foreshadowed included combination therapy using hyperthermia to potentiate the cytotoxic effects of both chemotherapy and radiotherapy. Reference was made to clinical trials then being undertaken using SIR-Spheres and DOX-Spheres for treating patients with cancer. Both those treatment methods could be enhanced by the addition of targeted hyperthermia. The possibility of automatic temperature regulation to avoid overheating of tissues was also flagged in the application. One way of achieving that result would be to use particles with a Curie Temperature in the desired range above which they would lose their hysteretic characteristic. The second was to select particles of the correct size so that the Blocking Temperature above which they would become super paramagnetic lay within the desired range. The second option seemed to offer the sharpest transition.
527 Another application which was successful was made by Dr Jones and Dr Chen on 19 May 1992 for funding by the Cancer Foundation of Western Australia (CFWA) for a research project entitled "Magnetoregulated Release of Doxorubicin from Albumin-Heparin Microspheres". On 15 December 1992 the CFWA approved a grant of $37,000 for research in the project. The funding was processed through RPH, not through UWA. This of course related not to the hyperthermia project but to the DOX-Spheres project. Another application in the area of magneto regulated release of doxorubicin was made by Dr Jones and Dr Chen on 22 June 1992 to the Clive and Vera Ramaciotti Foundations. It was unsuccessful.
528 On 11 August 1992 Dr Jones signed an unsuccessful application for funding by the UWA Faculty of Medicine for research into a project entitled "In vivo Investigation of Hyperthermia by Ferromagnetic Hysteresis Heating". A successful application dated 15 September 1992 was made by the UWA Department of Surgery and LCI for a grant of $50,000 from the Channel 7 Telethon Trust for a project entitled "Development of a Hyperthermia Research Program" Dr Jones said he was broadly aware of the application at the time, but did not recall if he was involved in putting it together.
529 On 12 February 1993 Dr Jones and Dr Gray signed an ultimately successful funding application to the Foundation for a research project entitled "In vivo investigation of induced hyperthermia by ferromagnetic hysteresis technique". Funding of $10,010 was approved for the project. It was processed by RPH and not by UWA. In the application Dr Jones stated that early research had focussed on evaluation of a range of magnetic materials to test for their suitability and also investigations of various designs of electromagnet. He referred to the publication of results of that work. He referred also to a recent pilot study to determine the heating power necessary to raise tumour temperatures into the therapeutic range. This had been performed using five mixed sex WAG rats. Paramagnetic Alnico had been surgically implanted into tumours grown in each of the hind limbs of the rats. In each case one hind limb tumour acted as a control while the other was exposed to an alternating magnetic field. Fluoroptic probes were used to measure temperatures within the tumour and animal core temperatures. He demonstrated a typical curve showing tumour temperature as a function of time.
530 Since the pilot study a new microsphere had been formulated using Biopol, a non-biodegradable bio-compatible polymer material impregnated with CrO2, a medium strength ferromagnetic material. The density and size of the microspheres was easily controlled during the manufacture process. CrO2 had been shown to be a superior heating material by a factor of 2 to 3. A prototype design electromagnet was also being tested.
531 The proposed research plan involved testing the system in vivo. Experiments would evaluate optimum microsphere parameters and would include a short therapeutic study. The funds requested were to cover the purchase of a 10kHz electromagnet and associated equipment and experimental animals.
532 A further unsuccessful application to the NH & MRC was made on 5 March 1993, signed by Dr Jones, Dr Gray and Professor Street. In the research plan section of the application under the heading "Selection and Optimisation of Ferromagnetic Materials" the following statement appeared:
Recent experiments have isolated a particular class of ferromagnetic materials that have the desired characteristics of low to medium coercivity (10-100kA/m) and relatively high saturation magnetisation. This class includes materials such as acicular iron oxides, chromium dioxide and cobalt modified iron oxides. Some preliminary data from experiments with chromium oxide shows that under conditions of low strength, high frequency magnetic fields (Type III magnets), this class of materials can yield the required improvement in heating efficiency.
In his affidavit Dr Jones said the cobalt modified iron oxides comprised the key class of materials later identified in what is referred to in these proceedings as the Thermo-Spheres I PCT application, number PCT/AU97/00287. That specification referred to a particular member of that class, designated "S11". That was a manufacturer's designation given to it by Bayer. The grant application did not specifically refer to it.
533 Another unsuccessful application was made to the NH & MRC by Dr Jones on 23 April 1993 in connection with the hyperthermia project. He was also involved in further applications for funding in connection with the DOX-Spheres project on 20 May 1993 (to CFWA) and the UWA Faculty of Medicine on 10 September 1993.
534 In September 1993 Dr Jones prepared a progress report for the Foundation and the Ethics Centre on the Microwave Hyperthermia Project for which funding of $5,284 had been provided. Progress had been delayed by delays in the delivery of the electromagnet power supply.
535 Despite his involvement in the magnetoregulated release of drugs from DOX-Spheres, Dr Jones played no part in the preparation of the DOX-Spheres provisional patent application nor in the subsequent complete and PCT applications. Nor did he have any involvement in the SIRT-2 provisional patent application AU54724/94.
536 On 11 February 1994 Dr Jones and Dr Gray applied to the Foundation for $9,650 for a project entitled "Use of a Rabbit Tumour Model to Investigate Dose/Temperature Effects in Magnetic Microsphere Induced Hyperthermia". The application was successful. The project involved the use of rabbits randomly assigned in three treatment groups to measure temperature distributions corresponding to three different dosages of 32 micron microspheres. The animals would have their kidneys exposed to enable specified doses to be administered by injection through a catheter to each renal artery. Normal blood flow would be re-established. Fluoroptic probes would be used to measure the temperature after exposure to an alternating magnetic field. A second experiment would test the effects of hyperthermia on the growth of induced tumours placed in the rabbit's kidneys. The application referred to the most favourable ferromagnetic material for its purpose as gamma-Fe203. Dr Jones said, however, that this did not specifically refer to the Bayer manufactured material called "S11" which he obtained and used with some success in his later experiments.
537 Dr Jones gave evidence of what he called the "discovery" of "S11". He had mentioned the material, which was obtained from Bayer, in his progress report of 8 September 1994 to the Foundation. He said in his evidence-in-chief that he made that report 19 days after the expiry of his appointment with UWA on 20 August 1994. He could not recall when he came across S11 but it may have been before 20 August 1994.
538 It emerged from cross-examination that in fact Dr Jones had come across S11 in 1993. In November 1993 he wrote to a Dr Eldridge at CSIRO reminding him that he had given Dr Chen a few grams of S11 a year earlier to assist with her research into magnetic regulation of drug release from polymer matrices. He had been in touch with Bayer which had reclassified the material and did not know which of its products was equivalent to S11 or indeed if there were any equivalent. He asked Dr Eldridge if the CSIRO had any stocks of old material that it could send.Some more S11 material was obtained this way. However it was his evidence-in-chief, which I accept, that he was not able to obtain any further supplies thereafter. Subsequently with Dr Raffaele Cammarano and others he developed a substitute for S11 which became the subject of the Thermo-Sphere-3 patent applications.
539 In 1994 and subsequent years Dr Jones explored the possibility of using rotating magnetic fields to generate hysteresis heating more efficiently than could be done using alternating fields. Closely involved in some of this work was Simon Harrison who joined the Gray group as an Honours student in 1994 to work on the measurement of rotational hysteresis effects. He returned in late 1995 and took up the work again as part of his PhD thesis program. Simon Harrison's involvement in 1994 is outlined in the next section of these reasons.
S Harrison and rotational hysteresis - 1994
540 In 1994 Simon Harrison was an undergraduate student enrolled in the Honours program offered by the UWA Department of Physics. His thesis work involved supervised research in the measurement of rotational hysteresis in ferromagnetic materials. He was jointly supervised by Dr Stephen Jones and Professor Street. His project lasted from February to November 1994.
541 When he first discussed the project with Dr Jones, Dr Harrison (as he now is) was told that Dr Jones and Dr Gray were interested in rotational hysteresis because it appeared from the literature that even though it took twice as much power to generate a rotational field as was needed to generate an alternating field, rotational hysteresis could generate more than twice the amount of heat in exposed materials.
542 Dr Harrison prepared a research proposal which set out the way in which his project would correlate with the research undertaken by Drs Gray and Jones. His precise aim was to develop a device to generate and measure rotational hysteresis in hard permanent magnetic materials. He called it a "Rotating Sample Magnetometer or RSM".
543 Seventy per cent of Dr Harrison's supervision during his work on the device was provided by Dr Jones and about 30% by Professor Street. They would meet regularly in the Hi PERM (High Energy Permanent Magnets) laboratory in the basement of the Physics Department. He also met Dr Jones on about three occasions at the Medical Research Foundation Building.
544 He completed the construction of the RSM in August 1994. It comprised an electromagnet and four sensing coils. These also measured the amount of hysteresis generated by the field. The RSM operated by placement of a small block of ferromagnetic material in the field generated by the electromagnet. The sample could be physically rotated with the sensing coils in the applied magnetic field.
545 All of Dr Harrison's work with the RSM was done in the Hi PERM laboratory. He spent an average of about 20 hours per week working with the RSM and measuring rotational hysteresis in many sample materials. At some time in 1994 he investigated whether "S11" could be used in hysteresis heating. He applied the RSM to measure hysteresis in the material but could not take accurate measurements.
546 Dr Harrison wrote up his Honour's thesis in October or November 1994. Histhesis was entitled "An investigation of low frequency hysteresis heating - with specific application to induced hyperthermia treatment of cancer tumours". He concluded, inter alia, that rotational hysteresis could be generated by physically rotating a sample with the external rotating magnetic field. He also concluded that hard magnetic materials were not preferable to soft magnetic materials for use in cancer treatment despite the fact that hard materials could generate more heat.
547 After submitting his Honours thesis Dr Harrison travelled overseas. The RSM remained in the HiPERM laboratory in the Physics Department. He handed it over to Paul Gouteff, another Honours student. He was to return in 1995 and commence work for his PhD thesis in the same area of rotational hysteresis.
Chen on DOX-Spheres - 1989/1994
548 While employed by the University and RPH Dr Chen was under the nominal supervision of Dr Gray and had a desk and working area in his laboratory. She also performed experiments in the Pharmacy Department at RPH and in the RPH animal house. In about 1992 Dr Gray's laboratory moved to Level 2 of the Medical Research Foundation Building and he relocated his office to that building also. She had an internal office across the corridor from a room which housed computers on the same floor. She also had a cytotoxic suite being a laboratory specifically designed for research using cytotoxic drugs.
549 Dr Chen carried out research using both biodegradable and non-biodegradable microspheres. Most of the non-biodegradable microspheres she used were made of a cation exchange resin being a material with an overall negative charge. They were preformed to a uniform diameter. She said that in most of her studies the non-biodegradable microspheres she used had a diameter of about 32 microns. She made biodegradable microspheres when working in Dr Gray's laboratory. She used the same technique that she had applied during her PhD studies. It involved the emulsifying of an aqueous solution of base materials in oil, creating chemical bonds between strands of base material and thereby creating a three dimensional matrix about the same size and shape as the droplets in the emulsion. She mainly used an absorption method to load microspheres while working in Dr Gray's laboratory. The drugs she loaded included doxorubicin, floxuridine and cisplatin. She used several methods to measure drug loading and release from microspheres including spectrophotometry using light in the ultra-violet and visible light wave lengths. She also used high performance liquid chromatography (HPLC).
550 Dr Chen said that while working at UWA and at RPH it was her practice to record details of experiments she was doing in a laboratory book. When one book was filled she would begin using a new one. They were hard covered books with each page lined, but not numbered. Although it is possible that she used other types of books as her laboratory books, she did not remember doing so. The entries she made in her books in relation to her experiments were generally made at the same time as she performed the experiments. They set out the methods used, the results she obtained and, on occasion, her observations or comments. She obtained laboratory books from a stationery supply in the UWA, Department of Surgery. Each book issued to her had an identifier number which would be recorded in a register maintained by Dr Stephen Jones.
551 Dr Chen used other books in which she wrote down details of experiments and other matters. These included log books recording usage of equipment and a diary which she started in about 1990 and continued until 1994. She said that whenever she left an employer it was her practice to leave the original laboratory books that recorded the experiments undertaken during her employment. From time to time, however, she kept records of experiments that had not been published as she needed them to prepare publications. When she left her job at RPH most of the records of the experiments she had conducted while employed there and by UWA were packaged in a box and left in Dr Gray's laboratory. She no longer has access to those documents.
552 When she commenced her employment at UWA in 1989 Dr Chen initially worked very closely with Dr Burton. She was experienced in the production of biodegradable microspheres from albumin but not the production of microspheres made from cation exchange resin. One of Dr Burton's research assistants showed her how to make resin microspheres.
553 Dr Chen started studying the mechanism by which high doxorubicin loading could be achieved with resin microspheres. She wanted to know how it was bound to them. She did this work in 1989 and/or 1990. It was important for her to know whether the products released from doxorubicin loaded resin microspheres were doxorubicin or some degradation product. She used HPLC to measure the amount of doxorubicin and degradation products following release. Her investigations showed certain forms of resin microspheres were unsuitable for use as drug carriers because of the extent to which the doxorubicin broke down after it was loaded on to them. This research was published under the following titles:
1. Chen, Martins, Burton and Gray, "Characterization of Polymer Carriers for the Anticancer Drug Doxorubicin" in IUPAC International Symposium, Polymer Materials, Preparation, Characterization and Properties: Polymer 91, (1991) Melbourne, Australia 10-14 February 1991, 1:273-274.
2. Chen, Burton, Codde, Napoli, Martins and Gray, "Evaluation of ion-exchange microspheres as carriers for the anticancer drug Doxorubicin: In-vitro studies" (1992) Journal of Pharmacy and Pharmacology, 44:211-215.
554 Dr Chen said that she noticed that resin microspheres initially released doxorubicin at a high rate, a phenomenon which looked similar to the burst release phenomenon. The focus of her research then changed to finding ways to reduce burst release. She could not say when that happened, but she was thinking of ways to reduce the burst release in late January 1991. On 31 January 1991, with Steven Blackbourn a pharmacist at RPH, she submitted a grant application entitled "Formulation of Sustained Release Carriers for Cisplatin" to the RPH Research Foundation. One of the methods under consideration for the reduction of burst release was to coat microspheres with something that would break down in time. She referred to this in the application under the heading "Formulation of Delivery Systems".
555 Dr Chen's affidavit evidence discussed at some length her account of her interaction with Dr Hodgkin. She met Dr Hodgkin at the Polymer 91 Conference at which she presented a paper, already mentioned. She had been corresponding with him since late 1989. On 12 April 1991 she sent him a fax proposing that the two of them jointly apply for funding from the CSIRO/UWA Collaborative Research Fund to undertake experiments to control the release of drugs from microspheres and so reduce burst release. Soon after that they had a telephone conversation. She made some handwritten notes of it on a draft copy of the fax which she had sent. One of the handwritten notes reads: "Metal Chelat …, ion exchange resin + DOX". She said that she did not recall that Dr Hodgkin or anyone else suggested those words. He said words to the effect that he or his colleagues had worked with ion exchange resins for metal ion chelate/binding. She said that metal ion chelation refers to the ability of substances to reversibly bind metal ions and in the process form a metal complex. She said that at the time of their discussion she recalled two papers that she had read in Scotland and brought with her to Perth. They were:
1. Beraldo, Garnier-Suillerot, Tosi and Lavelle, "Iron (III) - Adriamycin and Iron (III)" - Daunorubicin Complexes: Physiochemical Characteristics, Interaction with DNA, and Anti-Tumour Activity" (1985) Biochemistry 24:284-289.
The paper reported potentiometric and spectroscopic measurements showing that Adramyicin and Daunorubicin formed two well defined species with Fe (III) which could be formulated as Fe(HAd)3 and Fe(HDr)3 . Both complexes were described as six membered chelates. Their "stability constant" was one of the highest shown by Fe(III) complexes. Due to that high stability constant, Fe(III) was not dissociated from the complexes by plasma components. The complexes displayed anti-tumour activity against P388 leukaemia which compared with that of the free drug.
2. Gelvan and Samuni, "Reappraisal of the Association between Adriamyicin and Iron" (1989) Cancer Research 48:5645-5649.
The paper reported on spectroscopic investigation of the nature of the association between Adriamyicin and iron. They did not necessarily form a colloidal aggregate but rather a true chelate. The effect of their binding constant was strongly pH dependent. The observed properties were reflected in a progressive dissociation of Fe(III) plus ADR3 upon dilution and at decreasing pH.
556 Dr Chen said in her evidence that she understood these papers to mean that iron (Fe3+)ions could bind doxorubicin by forming a complex, which at high concentration might form colloidal aggregates which were insoluble but could become soluble by dilution. Dr Hodgkin's comments about using ion-exchange resins to chelate metal irons made her think that perhaps there might be an interaction between resin microspheres, doxorubicin and soluble iron (Fe3+) ions. In addition the DOX-iron complex formed as the colloidal aggregate meant that the complex would not be soluble. This insoluble form of the complex would act as a coating. She formed the theory that if this occurred it might suppress the burst release of doxorubicin and slow down the DOX release that she had seen with the microspheres. She said in her affidavit evidence that she did not know exactly when she initially thought it was worth trying to add iron (Fe3+) ions to resin microspheres which were loaded with doxorubicin. She said it was after her telephone discussion with Dr Hodgkin on 12 April 1991 because she re-read the two papers before she undertook her experiments to test her hypothesis.
557 Dr Chen said she undertook an experiment to determine the effect of Fe3+ ions on the binding of doxorubicin to resin microspheres and found that the addition of Fe2+ ions, which were quickly oxidised into Fe3+ upon neutralisation, to doxorubicin and resin microspheres resulted in a striking colour change. When the doxorubicin and the resin microspheres are mixed the solution is a red colour. When she added the iron ions the solution changed to a brown/black colour. In subsequent experiments she found that the burst release of doxorubicin from these microspheres was reduced and the release was more sustained.
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558 Dr Chen sent a further fax to Dr Hodgkin on 23 April 1991 attaching a draft of her proposed CSIRO/UWA Collaborative Research Fund application. In the fax she asked whether he had tried doxorubicin on Nafion resins. She said she would appreciate it if he could give her some more information regarding the characterisation of complexes and microspheres. She asked:
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Can you suggest any other techniques which you have the facilities to do and can be used to measure the quantity or ratio of DOX and DOX-iron complexes?
559 The collaborative application was entitled "Examination of the Role of Doxorubicin-Iron Complexes in Sustained Release of Doxorubicin Microspheres and their Biological Activity". The draft referred to previous studies on DOX-iron complexes and that it was well established from in vitro studies that DOX binds Fe3+ with considerable affinity. Referring to the two previous papers, Dr Chen said:
These reports led us to utilise the features of DOX-iron complexes in the design of sustained release DOX microspheres. DOX-iron complexes can be formulated in an insoluble form which can be used to delay or sustain the release of DOX or soluble DOX-iron from microspheres. Furthermore, by varying the concentration of Fe3+ in the system we will be able to control the degree of formation of soluble and insoluble forms of DOX-iron complexes and iron-hydroxyl polymers in microspheres. This will allow us to study the role of the DOX-iron complexes in sustained release of DOX microspheres. Since DOX-iron complexes are biologically active it is expected that their incorporation into microspheres may produce enhanced biological response.
560 The research application was recast although it was to substantially the same effect and submitted in early May 1991. The principal investigators from CSIRO were Dr Hodgkin and Dr Mau. The principal investigator from UWA was shown as Dr Chen with Dr Burton designated as "Associate Investigator". It appears that the application was successful and that an amount of $31,917 was granted for the project.
561 Dr Chen said she had actually conducted a relevant experiment involving Fe3+ and DOX complexes in April 1991. She did not have a direct recollection of it herself but "estimated" that she had conducted the experiment after speaking to Dr Hodgkin on or about 12 April 1991 and reviewing the two papers mentioned earlier. She thought that she had conducted it before 23 April 1991 when she sent her fax to Dr Hodgkin about the proposed grant application.
562 Dr Chen referred to entries in a diary on a page dated December 1990 which she claimed referred to studies conducted in April and October 1991. The relevant entries, as reported in her affidavit, were as follows:
By analysing results obtained from DOX-Fe Ms Study (18.4.91 and DOX-Fe-Chitosan Ms study (10.10.91)
It seems. DOX-Fe can delay release of DOX from Ms
And DOX-Fe-Chitosan can further delay the release of DOX from DOX-Fe Ms.
563 Dr Chen said that sometime after she undertook the experiment, which she claimed had occurred on 18 April 1991, she tested the use of Fe3+ ions on biodegradable microspheres containing doxorubicin. She did not recall the date of that experiment or the composition of the biodegradable microspheres. She said that the reference on her diary page to DOX-FE-Chitosan Ms Study (10.10.91) suggested that she had added iron (Fe3+) ions to biodegradable microspheres made from Chitosan which is a polysaccharide. The actual date entry in the diary was (18.4.9). She said in cross-examination that she had made the entry some time after October 1991. This followed from the entry date "10.10.91". Asked why she had written the diary entry after October 1991 she said that the loading and treatment of the relevant microspheres was done in April 1991. They were then preserved by freezing and the release study using High Performance Liquid Chromatography (HPLC) was done in October 1991. The reference to HPLC was not consistent with the content of a CSIRO/UWA collaborative research fund application signed by Dr Chen on 28 April 1991. That application was for funding for "Development of complexed Doxorubicin - Metal Ion Microspheres". The stated aim of the research covered by the application was the development of "complexed DOX-Metal Ion Microspheres for the sustained release of DOX/DOX-metal ion". There was no reference in the application to the use of HPLC. Evidence of the formation and stability of DOX-Iron complexes was to be determined by the use of potentiometric titration and UV diode array spectrophotomery. Dr Chen pointed to a reference in the application to a process used to measure the percentage of DOX-iron complexes within the microspheres. She said that HPLC could be used for that purpose. I am not satisfied that Dr Chen's testimony about the entry in her diary was reliable or that the entry was completely accurate. In particular, I am not satisfied that I can rely upon her evidence or that of the entry as evidence that she carried out the study or the analysis recorded at the dates shown in her diary.
564 In February 1992 Dr Chen applied to Foundation for a research grant. It was entitled "Development of Biodegradable Magnetoresponsive Microspheres". It yielded a grant of $3,680. The principal investigators were shown as Dr Gray, Dr Chen and Steve Blackbourn. The aim of the proposed project was described in the application as the development of biodegradable magnetoresponsive microspheres for DOX delivery. This was to be achieved by:
(1) Formulation of sustained release microspheres via incorporation of DOX-metal ion complexes into protein microspheres;
(2) Characterisation of DOX-metal ion complexes and their microspheres with respect to the physicochemical properties and release characteristics;
(3) Inclusion of magnetic particles into the sustained release biodegradable microspheres; and
(4) Evaluation of the magnetoresponse of the microspheres on DOX release regulation.
The reference to magnetoresponsive microspheres was explained in the application. The release rate of drugs such as insulin from polymer systems can be significantly increased by magnetic stimulation. The process is mediated by small magnetic particles dispersed throughout the polymer matrix of the carrier. They have no effect on the release rate under normal conditions. However, upon exposure of the matrix to an externally applied oscillating magnetic field designed to stimulate movement of the particles, the release rate of drug from the matrix can be significantly enhanced. The underlying theory was that the movement of magnetic particles in response to an applied magnetic field results in physical stress of the polymer and induces local heating. This facilitates the release of entrapped drugs. To that point its use had been limited to macromolecules such as albumin and insulin.
565 The application described "Current Progress with Microspheres". It referred to the development of techniques and expertise for incorporating a variety of chemotherapeutic agents into albumin and ion exchange microspheres (15-40 microns in diameter). Reference was also made to the use of vasoconstrictor agents such as angiotensin-2 with the blood borne microspheres.
566 The application described Dr Chen's work and designated her as "Chief Investigator". It stated:
Since Dr Yan Chen joined the present research group, she has conducted research into optimisation of the DOX incorporated ion-exchange microspheres. Her work has identified and elucidated the factors determining the quality of DOX incorporated within microspheres. Furthermore, utilising the concept of complexation of DOX with metal ions as addressed above, she developed DOX-loaded ion-exchange microspheres with versatile release characteristics by varying the concentration and type of metal ions. This significantly improved the degree of control of DOX release from ion-exchange microspheres. In addition, the high drug loading (60-80%) is still maintained. This breaks the conventional perception that higher drug loading leads to faster drug release.
It was still necessary to develop biodegradable DOX microspheres with higher drug loading and controlled release characteristics:
It is believed that we will be able to incorporate the same concept ie complexation of DOX with metal ions into the design of biodegradable sustained release DOX microspheres. Furthermore, it is expected that through inclusion of magnetic particles the magnetoresponsive microspheres will eventually provide enhanced DOX release at the target site which will have significant biological benefits.
567 The steps in the proposed research comprised:
Formulation of biodegradable microspheres containing DOX-metal ion complexes.
The characterisation of DOX-metal ion microspheres.
Inclusion of magnetic particles into microspheres.
Evaluation of the magnetoresponse of the microspheres on DOX release regulation.
A figure incorporated in the application showed what was described as a "Release profile of DOX-loaded ion exchange microspheres with and without metal ion complexation".
568 On 14 February 1992, Dr Hodgkin wrote to Dr Chen following some discussions that they had had in the previous week. He referred to a follow-up discussion he had with a Mr Eldridge of CSIRO, who was knowledgeable about magnetic beads. Dr Hodgkin said that in the course of discussion about biodegradable ion-exchange microspheres made from linear styrene sulphuric acid polymer, Mr Eldridge suggested that sulphonated dextran could be crosslinked with metal ions to give biodegradable microbeads which might be more useful to Dr Chen. Dr Hodgkin also enclosed the first pages of two Japanese papers concerned with drug release involving 5-Fluorouracil (5-FU) and the possibility of making a 5-FU derivative which would bind to ion-exchange microspheres better than 5-FU itself.
569 Dr Chen responded to Dr Hodgkin on 11 March 1992 and said she was also looking into the possibility of using sulphonated dextran beads as biodegradable carriers. On 5 May 1992 she sent him a fax thanking him for his fax of 30 April and an email regarding the washing and storage of resins. She had tried sulphonated dextran as a biodegradable matrix for DOX. It could load DOX but the size of the beads was far too large at more than 200 microns. She asked if he knew any way to make the beads smaller. She had tried grinding them but they were no longer spherical.
570 Dr Chen referred to her laboratory notebook and experiments recorded on 8 and 9 June 1992 when she made microspheres out of albumin and dextran sulphate (Alb/Dex microspheres). She used the abbreviation BSA/DEX-SO4Ms to refer to Alb/Dex microspheres. The Alb/Dex microspheres were prepared without doxorubicin which was loaded on by an absorption method. The microspheres were then treated with Fe3+ ions.
571 There was contention in closing submissions about Dr Chen's claim to have developed the cross-linked albumin/dextran sulphate microspheres to carry the anti-cancer drugs. I accept that she did develop the combination of the two in one microsphere. Dr Gray, in closing submissions, argued that if she did it was not an inventive step because the use of albumin and dextran as carriers was already well known in literature to which she referred in her PhD thesis in 1989. He noted in particular her citation of work by Goldberg et al, published in 1984 in which reference was made to the use of albumin microspheres and dextran microspheres to carry Adriamycin (doxorubicin). On the other hand, as UWA submitted in reply, the Goldberg paper did not refer to a combined microsphere. In her cross-examination Dr Chen accepted that the combination was not a new invention.
572 Dr Chen wrote to Dr Hodgkin on 25 June 1992 referring to experiments that she had conducted creating Fe3+ ion treated doxorubicin loaded Alb/Dex microspheres and animal experiments using Fe3+ treated doxorubicin loaded resin microspheres. In her letter to Dr Hodgkin, she said that she had nominated him as a referee for a research project entitled "Magnetoregulated Release of the Doxorubicin from Albumin-heparin Microspheres". This was an application to the Clive and Vera Ramaciotti Foundation. She reported in the letter that she had managed to get smaller microspheres made of dextran sulphate and albumin in the size range 10 microns to 45 microns. She said they gave a very high yield (99%) of DOX and that their loading doubled the loading of Aminex ion-exchange microspheres. However the release characteristics of the Alb/Dex microspheres compared to Aminex resins was fast. After treating them with Fe3+ the initial burst release of DOX had been significantly reduced. However it was still faster than aminex. She referred to tests on an animal model using the albium/dextran-sulphate microspheres. In her letter she said:
I have talked with prof [sic] Gray about our plan to submit an abstract on DOX-metal ion complex for the Controlled Release Conference in Sydney at the end of this year. He thinks that at this stage we had better not publish any results about DOX-metal ion complex microspheres in case it has commercial applications.
Dr Chen also asked Dr Hodgkin to be her referee for a job application in case she did not get any funding for the following year.
573 On page 10 of her laboratory notebook under the date 2 July 1992 she wrote:
send 9/6/92 25% Glu treated Ms to Pathology to do TEM by William Wee.
This meant that she sent samples of biodegradable microspheres crosslinked by 25% glutaraldehyde that she had made on 9 June 1992 to William Wee of the RPH Pathology Department for transmission electronic micrographs of the samples.
574 Dr Chen's next evidence-in-chief relating to DOX-Spheres concerned human treatment with Alb/Dex microspheres. On or about 10 November 1993 Dr Gray, Dr Anderson (a radiologist at RPH), Mr Blackbourn and herself applied to the RPH Ethics Committee for ethics approval for a project entitled "Evaluation of Doxorubicin Controlled-Release Microspheres for the Treatment of Hepatoma". She wrote the first draft of the application which comprised a cover sheet, a description of the proposed treatment and supporting results and research publications. It was proposed to administer doxorubicin loaded iron treated Alb/Dex microspheres to human patients. The principal difference between the microspheres that were to be used in these trials and those she had made on 9 June 1992 was that the human trial microspheres were to be made from human serum albumin rather than BSA and would be produced under sterile conditions in the Pharmacy Department at RPH. The application set out laboratory and animal studies that she had undertaken analysing the release of doxorubicin from Fe3+ treated Alb/Dex microspheres. They were set out in appendices to the application.
575 Appendix A was entitled "Release Profiles of DOX-loaded Microspheres" and showed plots of the release of doxorubicin against time from Aminex microspheres, Alb/Dex microspheres and Fe treated Alb/Dex microspheres. In the ethics application it was said:
Alb/DS/Fe-Dox microspheres show high drug loading capacity and slow/controlled release characteristics, in a fashion similar to Aminex resin. In addition these microspheres are biodegradable as they were totally degraded within 24 hrs in a trypsin solution.
576 Appendix D to which Dr Chen expressly referred comprised bar charts plotting tumour weight against days after treatment for various kinds of microspheres and free doxorubicin. It was entitled "Effect of Different DOX Delivery Systems on Liver Tumour Growth". According to the application it showed that Alb/Dex/Fe-DOX microspheres have superior therapeutic activity when compared to treatment with all other forms of doxorubicin therapy and in particular when compared to both free DOX and Alb/Dex microspheres. The animals that received the Alb/Dex/Fe-DOX microspheres had significantly diminished tumour growth when compared with control group animals. The purpose of the proposed study was described in the application as:
…. to determine the objective response rate of patients with non-resectable hepatoma or sarcoma, treated with targeted chemotherapy using ALB/DS/Fe-Dox microspheres. Should this study show clear evidence of tumour regression in two or more of the five treated patients, then a more extensive evaluation would be designed.
577 According to Dr Chen's laboratory notebook she was involved in the treatment of at least four patients with Alb/Dex microspheres loaded with doxorubicin and treated with Fe3+ ions. The trials were carried out in January, July and August 1994. In the case of the first patient with the initials FP she had written "18/1/93" in her book but suggested that this was an error for 18/1/94. Having regard to the other dates and the projected date of the trials in the ethics application, I accept that the first patient was treated on 18 January 1994.
McCulloch on DOX-Spheres - 1991/1993
578 Ross McCulloch is an organic chemist employed by RPH. He graduated from UWA with a BSc (Hons) in 1969 and undertook a PhD between 1972 and 1976. After completing his PhD he commenced work with RPH. He has worked in research there ever since.
579 Dr McCulloch became involved in the early 1990s with Dr Gray's group in a project to carry out research on the use of ion exchange particles as vehicles for the slow release of doxorubicin in the treatment of cancer. He had previously been involved with Dr Gray in a paper which they co-authored with SG Archer published in 1989 and entitled "A Comparative Study of the Pharmacokinetics of Continuous Portal Vein Infusion versus Intraperitoneal Infusion of 5-Fluorouracil" (1989) Reg Cancer Treat, 2: 105-111.
580 Dr McCulloch was engaged on a half time basis in 1991 to work on a project to develop the optimum conditions to achieve a controlled and sustained release of drug from a doxorubicin microsphere. The release rate was said to be connected with the treatment of the loaded microspheres with different concentrations of ion. He conducted experiments using different ratios of ion to doxorubicin to observe optimal conditions for slow release of the drug. He was directed by Dr Gray and Dr Chen in relation to what his research was to involve. Dr Chen thought that he had commenced working on the project in 1992. It appears that he was funded by the Medical Research Foundation at RPH. Funding was apparently arranged by Dr Gray. Dr McCulloch was at all material times an employee of RPH.
581 According to Dr McCulloch the project experiments in which he was involved were carried out in the Foundation Building of RPH because they had to use the toxic suite to weigh out the Adriamycin. Dr Chen said that studies using doxorubicin were actually undertaken in several buildings, including the MRF Building and in the RPH Pharmacy and the original RPH "North block" laboratory next to the animal house.
582 Initially Dr McCulloch did not know how to make the microspheres. Dr Chen made them and although he eventually learnt the process he used hers for consistency. She agreed with this and added that the microspheres she provided to him were made of albumin and dextran sulphate.
583 Dr McCulloch said in his affidavit that the albumin-based microsphere technology was known as dextran sulphate microsphere technology. Dr Chen disagreed with this. She said that albumin and dextran sulphate are completely different substances, the former being a protein and the latter a polysaccharide which is a chain of carbohydrates. However the statement in Dr McCulloch's affidavit did not mean that he regarded albumin and dextran sulphate as interchangeable terms. Indeed, that would be surprising for someone with a PhD in organic chemistry. Dr Chen's attempt to attribute such an error to him did not reflect particularly well on her as a witness.
584 Dr McCulloch said that he would take albumin microspheres load them with doxorubicin and then work on their iron treatment to control the release of the drug. The recipe for coating or "complexing" the microspheres was set out in a journal article which he wrote at the end of the project. He said the overall objective of his project was to optimise conditions to produce a controlled release of the drug. The only metal he ever used was iron. He did not use any other metal substance in the preparation of the microsphere. Again in her reply affidavit, Dr Chen took a rather insubstantial semantic point against Dr McCulloch when she said:
While it is not correct to say that a metal was used in the production of microsphere, I do agree that the only metal ions that I recall Dr McCulloch using were iron ions.
Plainly, Dr McCulloch was using the metal ions in the coating of the microsphere and it was quite appropriate to say that they were thereby being used in its preparation.
585 Dr McCulloch said he was never involved in working out the optimum size of the microspheres and Dr Chen agreed with that. He also said that he was not involved in their clinical trials. Again she agreed. Those trials commenced after he ceased working on the 1993 MRF project.
586 Dr McCulloch said that over a period of two years, presumably 1992 and 1993, he refined the experiments to create conditions to control the release of doxorubicin. This was what he described as his intellectual contribution to the project. He did this work alone. He said that Dr Chen worked in the same laboratory as he did. She was undertaking a study of the effects of his microspheres on rats. He could not recall what else she did at the time. She was not supervising him. He ran the project himself and she had no input on the chemistry side of it.
587 Dr Chen took issue with Dr McCulloch in her affidavit evidence. She said it was her idea to treat doxorubicin loaded microspheres with metal ions and even before Dr McCulloch joined the 1992 MRF project she had done studies that proved the treatment resulted in desirable sustained drug release characteristics. She said that Dr McCulloch extended her work by investigating optimum conditions for the preparation of metal ion treated doxorubicin microspheres. At the same time, she said she had moved on to undertake other studies that were still part of the projects. She denied that Dr McCulloch worked independently and without supervision during his time with the group. She said:
As joint or sole chief investigator on these projects I was responsible for the projects. Dr McCulloch worked on them under my direction with my consent and he reported his findings to me.
588 She also took issue with his contention that he ran the 1992 MRF project himself and that she had no input on the chemistry side. She said, however, that when he commenced working on the 1992 MRF project she had already completed the first part of it and this involved applying her knowledge of chemistry to come up with the concept of metal ion treatments.
589 Dr McCulloch said that at the end of the project he wrote a paper entitled "Synthesis of albumin-dextran sulfate microspheres possessing favourable loading and release characteristics for the anticancer drug doxorubicin". He said that the article summarised precisely what he did in relation to the project. He said he wrote the entire paper and did all the work described in it apart from making the albumin-dextran sulphate microspheres. He submitted the paper to a journal for review. He identified himself as the first named author because it was his work and he wrote the article. He named Dr Chen as a co-author on the basis of her contribution to making the albumin microspheres and named Dr Gray because he was head of the project. The Abstract of the published article stated, inter alia:
Much of the work so far performed has used albumin based microspheres as they are non-toxic and biodegradable. In a continuation of this research, we report the synthesis of an albumin-dextran sulphate microsphere with very favourable loading (pay loads up to 84%) and release characteristics for the drug DOX. A variety of release profiles for these microspheres can be obtained by loading the particles to different extents. These profiles can be further modified by treating the loaded microspheres with Fe3 which retards the release of DOX. This versatility in the release profiles of these particles offers promise for their use in the clinical treatment of tumours.
Dr McCulloch received the paper back from the reviewer who wanted the results presented in a slightly different way with graphs to show cumulative release effects. Dr McCulloch's graphs had shown results at a particular time. He added in two cumulative release graphs and resubmitted the article which was accepted for publication.
590 Dr McCulloch said that before resubmitting the article Dr Chen approached him and said that as she was applying for grants she wanted her name to appear as first author on the article. At the time Dr McCulloch consideredhe was in full time employment, while she had children and she needed the opportunity. She was applying for grants and needed publications to her name. Dr McCulloch said he agreed and the change was made before resubmitting the paper. He did not recall whether he physically did it himself or somebody else made the change. He did not recall whether he resubmitted the article or whether Dr Chen did so.
591 Dr Chen agreed that Dr McCulloch wrote the first draft of the paper and submitted it for publication. She said he had submitted it without discussing with her who should be an author or the order of authorship. She was annoyed by this as she claimed the manuscript reported a large amount of her work and she was the joint or sole Chief Investigator of the projects. The manuscript was returned in late 1993 at which time Dr McCulloch was finishing work on the 1993 MRF project. Drs Chen and Gray had a discussion about the paper. She raised the issue of authorship. Dr Gray asked what Dr McCulloch's contribution to the work had been. She said he did some of the studies and he had written the paper. She also told Dr Gray that she was the Chief Investigator, she designed and made the biodegradable albumin-dextran sulfate microspheres and came up with the concept of combining them with the metal ion treatment. She also did the continuous release and HPLC studies. Dr Chen recalled Dr Gray saying to her words to the effect:
I agree that you should be named as first author.
She told Dr McCulloch that she had discussed the authorship of the paper with Dr Gray who agreed that she should be listed as first author.
592 In relation to Dr McCulloch's account of how she became first author, she said she could no longer recall whether she put to him that she was applying for grants and had children. In my opinion Dr McCulloch's account of Dr Chen's request for special consideration has the ring of truth. She did not deny it. I am satisfied that it is likely to have occurred as recounted by Dr McCulloch. I am satisfied also that Dr McCulloch's account of the respective parts played by him and Dr Chen in the development of the DOX-Spheres leading up to the paper which he prepared is more likely to be accurate than the account given by Dr Chen. Given Dr Chen's focus on her own interests in her dealings with others and aspects of her evidence already referred to, and to be referred to, I did consider that her recollection was likely to be self-serving on important and contentious points relating to her own role in the research undertaken by Dr Gray's group.
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LCI established - 1989/1990
593 In 1985 Dr Gray established a research program at the University and within the Department of Surgery on the benefits for women of screening mammography for breast cancer. Dr John Chleboun was recruited to the Department and assisted in the project to evaluate how women with breast cancer were treated in Western Australia. The result of that investigation was published in the Australia and New Zealand Journal of Surgery in 1987: Chleboun J, Gray BN, "Survey of the Management of Primary Breast Cancer in Western Australia" (1987) Australian and New Zealand Journal of Surgery, 57: 609-613. Dr Chleboun also assembled evidence supporting the use of mammography screening for breast cancer which involved a study of the profile of breast cancer in Western Australia to establish a data base from which recommendations for a screening program could be mounted.
594 Approaches were made to the Health Department of Western Australia to establish a pilot screening program for the State. According to Dr Gray there was initial opposition from the Cancer Foundation of Western Australia (CFWA). In the event, according to his evidence, the CFWA agreed that there was sound evidence that mammography screening would save lives.
595 On 7 January 1986 Dr Gray was approached by Mr Gary Irvine, a senior figure in Lions Clubs International and Past District Governor of Lions in Western Australia. Dr Gray had frequently addressed Lions Clubs as a guest speaker and had used that forum to promote the idea of a breast cancer screening program for Australia. Mr Irvine indicated his support for the proposal. Dr Gray and Mr Irvine started lobbying government and speaking at Lions Clubs to gather support. In the event, Prime Minister Hawke announced that the Federal Government would fund a breast cancer screening program in Australia beginning with pilot programs, one of which was in Western Australia.
596 By the time the Federal Government pledged support for the screening program, Mr Irvine had become familiar with members of Dr Gray's research team and other cancer research projects that he was promoting. He was keen to promote Lions involvement in other aspects of cancer research. Dr Gray met with many of the senior executives and past Governors of Lions. With Mr Irvine and his co-governors he developed a proposal that a formal research institute be established and located in the RPH precinct with himself as the inaugural medical director.
597 On 26 January 1989 Mr Irvine and Dr Gray put the proposal to Dr Joyner the Chief Executive Officer of RPH. Dr Joyner supported the proposal and agreed to provide the hospital facilities and space so that Lions could establish an independent institute located in the hospital grounds. It would be owned and governed by Lions but would affiliate with RPH. There was no suggestion at that stage that the LCI would in any way be associated with the University. Dr Gray said in evidence that he conferred with Professor Roy Lourens, the Vice-Chancellor (Staffing) regarding the initiative and received a supportive response. His diary entry for Wednesday, 27 September 1989 indicated that he met Professor Lourens at that time apparently with Mr Martin Griffith. I accept that he did confer with Professor Lourens.
598 Dr Gray took the concept of a Lions Cancer Institute to both Professor Parfitt and the Vice-Chancellor, Professor Fay Gale. His diary entry indicates he met with Professor Gale on 16 May 1990 to discuss the Institute. She had a diary entry for a meeting with him and Professor Clyde on the same day. Professor Gale and Professor Parfitt expressed support for the initiative and said that there was no question that he could and in fact should devote time and energy to its development. There was no discussion about any formal affiliation with UWA. The guiding principle was that it was a highly desirable initiative that would add to the corpus of research being undertaken into cancer.
599 Professor Parfitt had diary entries for 7 February 1990 and 25 October 1990 each of which also recorded meetings with Dr Gray concerning the LCI. He recalled meetings on the topic. His involvement was for information only as the proposal concerned Lions Clubs raising funds for Dr Gray's research. There was no discussion touching upon dealings in University intellectual property in favour of the Lions Clubs or any institute established by Lions or the ownership of intellectual property created by employees of the University using funds raised by Lions.
600 Dr Burton gave evidence concerning the formation of the LCI which generally accorded with that of Dr Gray.
601 There was initial opposition to the LCI from the CFWA. The basis of that opposition was that there was only enough public funding for one such organisation and that the LCI would confuse the public and dilute access to funds. The board of the proposed LCI met with the board of the Cancer Foundation. On Dr Gray's account of it the meeting was acrimonious. Another source of opposition in 1989, from within the Lions Organisation, derived from concerns that the LCI would deflect funds from the Lions Eye Institute which had a close association with Dr Ian Constable, the Professor of Ophthalmology at UWA. One Lions District decided not to support the LCI on that basis.
602 There was correspondence put in evidence connected with the formation of the LCI which it is not necessary to review in detail but which may be outlined briefly.
603 The District Governor for the International Association of Lions Club, Mr RJ Thomson, wrote to Club Presidents on 28 February 1990 promoting the formation of the LCI. He referred to Dr Gray and his research group which was, at that time, using a suite of research laboratories at RPH. He said they would be relocating to a new purpose built research building at 50 Murray Street, Perth. The LCI would not be involved with funding the building. The institute would be involved in funding a variety of items of equipment and running expenses.
604 In March 1990 there was an exchange of correspondence between Dr Gray and the UWA Registrar, Mr Orr, about the use of the UWA logo on letterheads to be used to raise funds for the LCI. Mr Orr told Dr Gray, on 9 March 1990, that since the enterprise would involve fundraising final authority had to come from the Vice-Chancellor. Dr Gray accepted Mr Orr's suggestionthat the words "associated with UWA" be used on any letterhead rather than any reference to "affiliation" which required Senate approval.
605 On 21 March 1990 Professor Anthony House, Head of the Department of Surgery, wrote to Professor Lourens expressing concern about a conflict of interest within the Lions Group which was currently supporting the Lions Eye Institute, the Lions Save Hearing and the Australian Kidney Foundation. He said there was likely to be conflict with the CFWA as they would be competing for the same donors. He wrote:
Accordingly, I perceive this new venture as being potentially confrontationalist in its concept and its relationship with its existing areas of fundraising.
He said he had difficulty in supporting UWA's involvement with the project as its relationship with other groups already involved in the area had not been discussed. He wrote:
As presented, the project may involve the University and the Faculty of Medicine in a confrontation situation that might be avoided if action were delayed until the role of the research institute at the Royal Perth, and Professor Gray's relationship to it, are more defined.
606 Professor Allen German, the Head of the Division of Dentistry and Medicine wrote to Professor Lourens a week later, on 28 March 1990. He saw the entire situation as "really too nebulous to react to" because Dr Gray was playing his cards very close to his chest. To try and clarify the situation he and Professor House would approach Lions themselves.
607 On the same day Dr Gray wrote to Dr Joyner bringing him up to date with developments regarding the formation of the LCI. In substance he sought advice from Dr Joyner about the things that might be put in a letter from Lions to Dr Joyner for consideration by the RPH board.
608 Professor Gale, the Vice-Chancellor, wrote to Dr Gray on 5 April 1990 indicating that she was awaiting advice from Professors German and House on the proposed LCI but was unclear whether it was intended that UWA or RPH be involved in the matter. If UWA were to be involved, then any formal proposal and offer would have to be made to her on behalf of the Senate.
609 On 23 April 1990, Professor German wrote to Mr Thomson referring to a lunch which he had had with Lions colleagues of Mr Thomson's recently. He said in his letter that they had been somewhat in the dark about the precise details of the proposal from the Lions Clubs and that there were certain points in Mr Thomson's letter of 28 February 1990 which raised some confusion in university and hospital circles. He believed these had largely been resolved as a result of the lunch itself and further discussions between Mr Thomson's colleagues and RPH. He also said that it appeared that with the planning and development of the new Clinical Sciences block and the eventual move of Dr Gray's research team into part of that block, there would be significant needs for support of various kinds to ongoing research. If the proposed research support were vested in RPH and its research foundation, then UWA would have no further direct involvement. There might, however be issues arising out of any affiliation of that research endeavour with UWA as a defined research centre.
610 Dr Joyner wrote to Dr Gray on 9 April 1990, replying to his letter of 28 March 1990. His letter spelt out some of the complexities of the new clinical block development at RPH and the various parties with whom RPH had to deal in relation to funding for research. He wrote again to Dr Gray on 24 July 1990 to make clear the basis upon which donations to the LCI, for which tax deductibility was claimed, should be dealt with. Money donated for research under the aegis of either RPH or the Foundation had to be specified as a donation to one of those bodies. Because donations to them were tax deductible, they insisted on having the ultimate responsibility for the donated moneys although Dr Joyner said that was "a requirement seldom if ever invoked …". If Dr Gray maintained a tax deductibility based on the association with UWA, then both RPH and the Medical Research Foundation might want to consider "very deeply" their official association with LCI. Dr Gray responded on 30 July 1990 advising that he had referred Dr Joyner's letter to Mr Gary Irvine, the chairman of the steering committee of the LCI. He said, inter alia:
The Institute will provide a high profile centre of excellence that Royal Perth Hospital, the University and the community at large can be justly proud of. The research carried out in the Institute is not confined to members of the University of WA but will, as now happens, involve RPH clinical and scientific staff. I know that the LCI Steering Committee and the subsequent Board of Directors, will continue to foster this relationship.
611 On 14 August 1990 an application was made for incorporation of the LCI under the Associations Incorporation Act 1987 (WA). The LCI was formally incorporated on 25 January 1991. The aims of the LCI included providing a platform for research into the causes of cancer, different forms of treatment for cancer and new methods of management for cancer patients. They included assisting in the provision of adequate facilities for undertaking those forms of cancer research and the provision of sufficient funding to consistently carry out those forms of cancer research in both basic and clinical study settings. Mr Irvine became the Chairman of the LCI, Dr Gray its Medical Director and Dr Burton its Scientific Director.
612 There was considerable evidence given by Dr Gray of conflict between himself and senior members of the Faculty of Medicine in connection with the establishment of the LCI. He alleged that some of the senior academics, including Professor Allen German and Professor Anthony House, met with four Governors of Lions Clubs International in 1991 and attempted to persuade them that support directed to Dr Gray by the LCI should be redirected to work at the QE II Medical Centre which they controlled. This approach was allegedly rejected.
613 It is not necessary for present purposes to explore all the details of this conflict nor, for the most part, to make findings about it other than that it existed. It spread out over a number of years. It involved repeated complaints to Professor Gale including a letter of complaint to her from the Chairman of the Board of Directors of LCI, Mr Irvine, on 1 April 1992. Solicitors acting for Dr Gray, Grant Milner & Co, also became involved and corresponded with the Chancellor of UWA, Justice Kennedy, in 1993 and 1994 concerning the matter. The conflict about the establishment of the LCI had resonances in the initial opposition from within the Faculty of Medicine to the affiliation of the LCI with UWA. The prolonged history of the affiliation process is dealt with later in these reasons. Some aspects of the conflict incidental to that history are dealt with later in these reasons.
CRI established - January 1991
614 On 30 January 1991 the Friends of the Cancer Institute Inc was incorporated under the Associations Incorporations Act 1987 (WA). Its purpose was to raise funds for projects recommended by the LCI. A group of community supporters led by Mrs Leonie Mirmikidis were involved in establishing the organisation. Dr Burton described them as people who wanted to be able to donate their time and energy to attracting funds for research being performed by the research group. They wanted to manage the "process" in tandem with the activities of the LCI. He was happy to be involved with both groups.
615 On 28 October 1993, the name of the Friends of the Cancer Institute Inc was changed to "Cancer Research Institute Incorporated". Broadly the division of their roles was that the LCI provided funding for equipment and staffing of the research program. Funds from the CRI supplemented funds from conventional external funding bodies. The LCI adopted as its primary focus for research support the targeted microsphere technology which was the subject of the work being done by Dr Gray and his group.
Burton encounters resistance and resigns - 1989/1993
616 In 1989 Dr Burton became the Scientific Administrative Officer for the University's Department of Surgery. He described this as a continuation of the role he was already performing at RPH with the addition of management responsibility for research facilities at the Sir Charles Gardiner Hospital section of the University department. This new role brought him into contact with some of the senior professorial staff at Sir Charles Gardiner Hospital including the next head of the Department of Surgery, Professor Tony House, who became his Line Manager.
617 Dr Burton said during that time he came under considerable pressure from Professor House to discontinue his involvement with Professor Gray and fall in line with the new management of the University Department of Surgery and the Faculty of Medicine. It was against this background that he became involved with the formation of the LCI. He was involved himself in discussion with the Lions Clubs organisation about the potential for applying in the area of cancer research the precedents set by the Lions Eye Institute in the area of vision research. He became Scientific Director for the LCI in 1989 and served on its board. He described the formation of the LCI as creating significant problems because of perceived competition for funds from the Lions Clubs organisation.
618 In 1990 Dr Burton secured funding for study leave to go to the USA and became a Visiting Professor in the Department of Radiation Oncology at the Arizona Cancer Centre with the University of Arizona in Tucson. The Arizona group with which he worked in that year was well known for its hyperthermia research. He brought to the group his own expertise in relation to measurement of blood flow using blood flow microspheres. He was involved there in a number of studies and treatment programs using a variety of modalities and hyperthermia techniques. He presented his own research in relation to the production of radioactive microspheres and their use in selective internal radiation therapy. He also gave presentations on the work that had been done using doxorubicin on ion exchange resins and the potential interaction of that treatment modality with hyperthermia. The study leave also allowed him to travel to approximately five leading institutions across the USA where he discussed the research program methods and results of the work which had been done in Perth and in Melbourne.
619 In 1991 and 1992 the research activities of Dr Gray's group continued strongly and attracted reasonable funding. During that period they published a significant number of papers. From Dr Burton's perspective however, he was still encountering what he described as significant antagonism from elements within the UWA hierarchy and particularly the management of the Department of Surgery. He said it was obvious to him that there were limited future opportunities for him as an academic within UWA. He and his wife decided that it was probably the right time for them to look for alternative employment. In 1992 he was offered a lecturing position at Charles Sturt University in New South Wales. He reluctantly accepted that offer which would detach him from the research that had been carried out in Melbourne and in Perth. He found it a difficult decision to take because essentially it left Dr Gray to manage the research group. It was also a significant step down in status and income from his current position.
620 After he left UWA, Dr Burton continued to have the occasional interaction with Dr Gray and the research group and offered support wherever possible. In 1996 he assisted in compiling some of the clinical research results of the selective internal radiation therapy clinical trial and other work with Dr Gray. However that was only a short research spell from his activity at Charles Sturt University.
621 Dr Burton continued some extensions of the research conducted in Melbourne and Perth after joining Charles Sturt University. This took the form of using microsphere technology to transport genetic material as an anti-cancer agent instead of radiation drugs or heat. He continued on that path with no impediment from Dr Gray's research group. He said he has had very little contact with either Dr Gray or Sirtex until recently when he received a letter from the University's solicitors. The letter rather bluntly demanded the return by him of research notes and other items from his time with Dr Gray's group in Perth.
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Chen salary dispute 1990/1991
622 Quite apart from the problems associated with the establishment of the LCI there was much material in Dr Gray's affidavit evidence chronicling an unhappy history of conflict between himself and members of his research group and other members of UWA academic staff and administration. It is part of the history of his relationship with UWA. It is the history which feeds into the history of funding and organisational arrangements which were seen as relevant to his contractual and fiduciary relationships with UWA. Some of them also go to allegations of the history of animosity between himself and Professor Robson, the current Vice-Chancellor. That history is invoked by Dr Gray in support of an allegation of malice on the part of UWA in connection with his cross-claim for defamation arising out of the letter of demand which UWA sent to Sirtex on 26 October 2004. It is neither necessary nor possible nor fair to those against whom allegations were made, some of whom were neither parties nor witnesses, to make findings about the substance of most of them. Dr Gray's testimony, in a very lengthy affidavit, indicated that the emotions generated by disputes which arose between him and other members of UWA may have affected his perceptions and recollections of events. That is not to say that his testimony on these matters was, for that reason, to be regarded as dishonest. But recollections from a perspective of ongoing resentment and anger must be treated with considerable reserve particularly where there is no supporting documentary or independent corroborative evidence. I have no doubt from his testimony and his ready offering of adverse reflections on other people that he could be a very difficult person to deal with. This does not mean he was at odds with everybody. He clearly inspired a degree of loyalty and support from those who worked closely with him. There were also a number of senior administrators with whom it appears he had good working relationships.
623 One of Dr Gray's complaints was that Professor German, the Dean of the Faculty of Medicine and Dentistry and Professor House, the Head of the Department of Surgery, deliberately removed departmental funds from his control. Before 1990 he had run the Department of Surgery in all four teaching hospitals. If it were possible to save funds in one area they could be allocated to another project in the same hospital section of the department. During Professor Gale's term as Vice-Chancellor, UWA devolved administrative and managerial functions to the faculties and the departments. That fact is not in dispute. According to Dr Gray, the devolution had the result that, by the beginning of 1990, Professor German, as Head of the Division of Medicine and Dentistry, controlled all staff positions and all funds. Dr Gray no longer had any discretion to utilise UWA funds in order to promote the Department of Surgery at RPH.
624 Dr Gray alleged that in 1991 Professor German removed funding for initiatives which had already been agreed to by UWA prior to his appointment as Head of the Division. An example cited arose out of the appointment of Dr Yan Chen for a two year period from September 1989. Dr Gray said he had negotiated for UWA to employ Dr Chen for that period and to fund her from salary savings. He alleged that Professor German told him that he was "reversing the arrangement that had been entered into with central University administration and intended allocating the salary savings to his own budget". According to Dr Gray, this meant that UWA reneged on Dr Chen's two year contract. He said that he reminded the UWA administration of the obligations under the contract but was constantly referred back to Professor German who advised him that he needed to find the funds himself if he wanted to continue her employment. In the end Dr Burton was forced to use funds that he had been granted for another project. He agreed to employ her through one of his successful NH & MRC grants which had been intended to employ another research scientist.
625 It is instructive to compare with contemporary documents the breadth and tone of Dr Gray's complaint against Professor German. That complaint was linked to his allegation that Professor German had foreshadowed removal of resources from him "during his infamous meeting with the Board of the Lions Cancer Institute many years earlier". That meeting was in 1991.
626 Professor German's perspective appears from a letter he wrote to Ms Julia Emmerson in Personnel Services on 25 October 1990. He wrote that there had been no commitment to pay Dr Chen against future salary savings. He referred to a letter from the Office of the Director of Personnel Services to Professor House dated 2 February 1990 which set out the situation with regard to payments from 1 January 1991. Professor Gray himself had underwritten those costs in discussion with him, having been told there would be no further salary savings available from January 1991 as all salary savings would revert to the Division which would have to hold on to them in case of budget shortfalls. Professor German said:
In the event, the cuts that are likely to occur in our budget for next year desperately require the availability of salary savings and there will be no further appointments made from this source without my direct approval.
627 Ms Emmerson passed the information from Professor German on to Dr Gray in a memorandum dated 7 November 1990. She referred to a letter from Dr Gray to Professor House dated 2 February 1990 in which it was stated that funds would be made available from "departmental sources" as underwritten by Dr Gray. Dr Gray replied on 12 November 1990 and referred to a letter dated 13 October 1989 from a Ms Nancy Fitzpatrick, apparently an officer of the University, in which she said that continuation of Dr Chen's employment beyond 31 December 1990 was to be a first call against future salary savings generated in the RPH section of the Department of Surgery. He referred to considerable salary savings and said:
The problem that has now arisen is that with the devolutionary structure, all salary savings have been put under the control of the Head of the Division and all salary savings to myself have been denied. I personally regard this as unacceptable but the matter is not under my control.
He stated his belief that the contract which was entered into to employ Dr Chen was enforceable and had to be honoured. He had negotiated the salary savings as Head of Department and on the understanding that there would be further salary savings to be identified in 1990 and 1991. He claimed they were in abundance from the very section of the department that was under his jurisdiction and yet were being denied.
628 The matter of Dr Chen's salary was the subject of further correspondence within the Division. The Director, Personnel Services, Ms Wallace, wrote to Dr German pointing out that if the terms of Dr Chen's appointment were to be honoured funds were required to meet the salary and on-costs of her position. Professor German responded to Ms Wallis on 10 December 1990 making the point that Dr Gray's offer of an appointment to Dr Chen for a period of two years and his intention to base it on salary savings and other funds had never been cleared with the Division and never agreed to. The Division did not have the money to support Dr Chen. He wrote:
This issue is, in my view, a further example of some of the difficulties that have occurred with Professor Gray's tendency to make arrangements irrespective of other groups, bodies, heads of department, head of division etc. I believe that he should, in view of his research funding, be in a position to fulfil his commitment as pointed out by Mr Smith in his letter. The Division has made no commitment. I would very much appreciate Personnel Services dealing with this matter in terms of the realities of the present situation.
629 Ms Wallace wrote to Dr Gray on 12 February 1991 asking him to identify funding from a "non recurrent departmental source" to meet Dr Chen's salary. This was "no longer a divisional matter". Dr Gray then wrote to Professor German on 14 February 1991 saying, inter alia, that as a result of Professor House's actions he was unable to access departmental funds which he had generated himself and even contributed to from personal income. He described the situation as "ludicrous" and sought Professor German's assistance to resolve the problem which he considered to be UWA's. Professor German replied on 22 February 1991. His letter was conciliatory and referred in some detail to funding constraints affecting UWA and the Division. He pointed out that, since the setting up of the Divisions salary savings accrued to them and not to the departments. Part of the arrangement was that Divisions had to repay 2.5% of their annual budget to UWA before they could utilise salary savings. In 1990 the Division of Medicine and Dentistry did not have salary savings available until after July when that debt had been paid off. The situation for 1991 was that the Division would have no salary savings until approximately July or August. Moreover it had been forewarned that those savings might be required to meet part of the cost of an academic staff pay rise. The Commonwealth Department of Employment, Education and Training had informed UWA that it would not fully fund such a pay rise. There were therefore no salary savings available within the Division of Dentistry and Medicine or any other of the UWA divisions. There had never been salary savings available within departments since the beginning of 1990. These matters had been set out in a letter of 27 October 1988 which was sent to Dr Gray by Dr Keith Smith of Personnel Services. Professor German told Dr Gray that research funds would have to be used to meet the balance of Dr Chen's salary. He had sought advice from Mr Peter Johnson, the Assistant Registrar (Research) about the propriety of using them for that purpose.
630 Professor German also wrote to Professor House about the matter proposing the use of NH & MRC research funds awarded to Dr Burton in which Dr Chen had been named as a co-investigator. Professor House then contacted Dr Burton who obtained NH & MRC agreement to use the money to pay Dr Chen's salary. Indeed, Dr Chen had been nominated as the recipient of the salary alluded to in the grant. In the event, Dr Gray authorised the payment of her salary from the grant. This was confirmed by Dr Burton.
631 The evidence of the exchanges relating to Dr Chen's salary has been set out in some detail because it is at odds with Dr Gray's rather negative characterisation of Professor German's conduct. The probability, as appears from the correspondence, is that Professor German was acting in good faith in dealing with a difficult budgetary situation affecting not just his Division and the Department of Surgery, but UWA. While Dr Gray may have had a sense of grievance about the way in which Professor German proceeded, he had no basis to suggest, as seems to have been implied in his affidavit, that he was being personally targeted. This particular example and the nature of the allegations he has made against other members of the academic and administrative staff lead me to treat his evidence on these matters of personal conflict with considerable caution.
632 Dr Gray said that by 1992 it was clear to everyone in his research team that the removal of core funding was going to continue. The only way their research could continue was for Dr Burton and himself to write applications for competitive grant money from outside UWA. By this stage, according to Dr Gray, he had no academic staff members working under him and no UWA research staff with the exception of Dr Burton. He also claimed that Dr Burton found himself the subject of intimidation from Professor House which forced his resignation in late 1992. The allocation for his position was also removed and put under Professor House's control.
633 Dr Gray said that he made many requests to Professor Gale from 1990 to 1992 to intervene in what he regarded as "a concerted attack on our research activities". He saw it as difficulty in getting past Professor German as Professor Gale consistently referred Dr Gray back to him on departmental issues. Professor Gale denied in her evidence that she had been briefed by anyone at UWA with respect to any history of dispute between Dr Gray and Professor German prior to her appointment in 1990. She said she took Dr Gray's complaints about his difficulties with his colleagues in the UWA Department of Surgery seriously. It is fair to say, however, that correspondence over the following year, 1993, indicates that Professor Gale had had enough of Dr Gray's many complaints.
634 In April 1993 Professor Gale had written to Dr Gray reminding him of a meeting they had had in April 1992 and undertakings which he gave to accept the authority of the Head of Department (in that case Professor House) in all aspects of administration and management. She also said in her letter of April 1993 that Dr Gray had undertaken to refrain from writing to or about members of staff in terms which were discourteous and disparaging. She expressed her disappointment about the terms of a letter which he had written to Professor House in March 1993 and directed that he comply with the undertakings which he had given in April 1992.
635 Dr Gray lodged what he called "a further complaint" about the behaviour of Professor House in a letter to Professor Gale dated 21 September 1993. This concerned the placement of a postgraduate student by Professor House in the laboratories which Dr Gray normally supervised. He complained to her that she had refused to grant him an appointment and that her refusal to do so was making his position in UWA untenable. Professor Gale responded to Dr Gray on 1 October 1993 pointing out that the Head of Department had responsibility for the allocation of resources including the use of facilities for postgraduate students. She also reminded him that in her letter of 13 April 1993 she had asked him to apologise to Professor House and withdraw his remarks in writing. She did not consider it appropriate to meet personally with him until such time as he had complied with those requirements.
636 Professor Gale said in her oral evidence that she did meet subsequently with Dr Gray and that there was "eventually an apology, of a kind". Whatever criticisms may be made of UWA administration at this time, none of the evidence supports any inference of malice on the part of senior administrators or malice otherwise attributable to UWA in relation to Dr Gray. That is not to say that some individuals may not have been profoundly irritated by him.
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Irvine complaint - April 1992
637 A letter of complaint dated 7 April 1992 was sent by Mr Irvine, the Chair of LCI, to Professor Gale alleging ongoing harassment of some members of the UWA Department of Surgery, who were being supported by the LCI, from within the Division of Medicine and Dentistry of UWA. Mr Irvine alleged that the harassment was related to a meeting Professor German had organised in April 1990 with four past District Governors of the Lions Organisation and which had been attended by himself, Professor House, Professor Walters and another person. Dr Gray had not been told of the meeting. Mr Irvine alleged that the Lions Governors were informed by Professor German that UWA knew nothing of what the LCI was about and that Dr Gray had not discussed his arrangements with UWA. When the Lions' representatives indicated that they were not interested in becoming involved in domestic matters of UWA, the meeting became hostile. He alleged that Professor German had asked that the Lions Clubs International consider diverting funds from Dr Gray to the QE II Medical Centre and that Dr Gray and his research team might not continue to enjoy research success and support in the future. This letter, which was exhibited to Dr Gray's affidavit, recounts what occurred at a meeting at which nobody who was present was called to give evidence. I do not therefore regard it as evidence of what occurred at the meeting but rather as evidence of the fact that a complaint was made to Professor Gale drawing her attention to the allegations. There can also be little doubt that Dr Gray was involved in the sending of the letter. It indicates another reason why he had adopted the negative view that he had of Professor German.
638 Assuming that the meeting took place as alleged by Mr Irvine, it could be argued that it was imprudent and tactless of Professor German and his colleagues to arrange such a meeting and to put the propositions which were put to the Lions' Governors. It does not, however, support findings of bad faith or improper conduct on their part. If, as alleged, they did not support Dr Gray's activities or the priorities that might be established in terms of public funding of those activities, that is a view they were entitled to have though others might disagree with them. It was a view they were entitled to put to prospective funders. It is not indicative of malice or impropriety.
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Michael Report - October 1992
639 In 1992 Professor Gale appointed Professor Con Michael to inquire into Dr Gray's allegations about the removal of resources from his research team. Professor Michael was to report back to Professor German who would then report on to the Vice-Chancellor. Dr Gray submitted a list of 19 matters that he wanted to be the subject of inquiry including alleged misconduct by Professor German. He complained in his evidence that Professor German closed down the inquiry and gave his own account of events regarding resourcing within the Department of Surgery and that Professor Michael wrote a report based only on Professor German's evidence. Following representations to Professor Gale she asked Professor Michael to undertake a second inquiry. In the end, according to Dr Gray, the written report from Professor Michael addressed space allocation for research and not "the many other issues of bias and removal of resources". Dr Gray said there was a marginal improvement in the core funding situation for a short time after Dr Michael produced his second report. But by the time affiliation occurred in 1995 the original intention of the Institutes to work cooperatively with UWA "had been soured".
640 The second Michael Report, which was dated 28 October 1992, was exhibited to Dr Gray's affidavit. Professor Michael and Mr Bandt of Personnel Services, conducted interviews of staff members from the UWA Department of Surgery on 14 September 1992. They interviewed some 11 people including Dr Burton, Dr Stephen Jones, Dr Yan Chen, and Dr Codde.
641 Professor Michael reported that all members of laboratory staff referred to a deteriorating and stressed atmosphere existing in the research laboratories at the RPH site. The atmosphere was not conducive to research work being undertaken. Laboratory staff working for Professor Hall wanted to cooperate with Dr Gray's laboratory staff but this was not permitted because of the impossible conflict between those two members of the academic staff. The result was fragmentation within the laboratory and intellectual isolation for some of the staff. Whereas equipment allocation had been made jointly to all members of laboratory staff for mutual use, more recently Dr Gray's staff had been denied access to the equipment. The report characterised that situation as "inappropriate" because it did not permit sharing equipment.
642 Professor Michael reported a perception of considerable conflict between the Department of Surgery sited at the QE II Medical Centre and the Department at RPH. The staff believed that there was a hidden agenda to undermine Dr Gray's authority and research credibility. He identified the major current issue as the allocation of laboratory space in the proposed new research building at RPH. There appeared to be inequity of allocation, the greater numbers of staff attached to Dr Gray being allocated a smaller area of the Department. If a perception arose that Dr Gray was not considered as the senior academic in the Department at RPH, then current plans for distribution of space in the laboratory would lead to further isolation and the potential of a department being set up within a department. Professor Michael described the situation as insoluble. He observed that the obvious personality difficulties should not be allowed to influence the quality of work.
643 He also reported that members of the Lions Organisation who were interviewed told the inquiry that they believed that they were discouraged by the Faculty of Medicine from supporting the proposal for a cancer institute. They were disappointed with that reaction. There had been little progress in two years of negotiations for the proposed Lions Cancer Institute. They wanted to have it sited at RPH in Dr Gray's unit. The initiative was supported by RPH. They could not understand the reasons for the active discouragement by the Faculty of their initiative.
644 The report identified issues of conflict between the two Departments of Surgery and the personality conflict between Dr Gray and Associate Professor Hall. He found mutual denigration had occurred between Dr Gray and Associate Professor Hall. It characterised LCI as a legitimate approach by Dr Gray to establish an organisation funded by Lions.
645 The report recommended geographic separation of Dr Gray and Associate Professor Hall. A degree of autonomy should be considered for the Department of Surgery similar to that accorded to the Department of Medicine. A recommendation was also made for an independent review of space allocation in the proposed new Department of Surgery at RPH. Professor Etherington, the Chairman of the Accommodation Committee of UWA, had agreed to investigate the issue of space allocation and to assist in achieving a possible solution. The report also indicated that there appeared to be no good reason for the Faculty of Medicine or any UWA subcommittees not giving consideration to an application made by the LCI.
646 It is notable that in his affidavit evidence, Dr Gray was quite dismissive of Professor Michael's second report. He said:
We gave evidence but the written report from Professor Michael ended up only addressing space allocation for research and not the many other issues of bias and removal of resources.
This was an unfair and inaccurate characterisation of that report and supports the inference that Dr Gray had only a limited capacity in his evidence to recount events, involving conflict with staff and administration at UWA, other than through the distorting prism of his own anger at things that had occurred.
647 Dr Gray said that after Professor Michael completed his second inquiry, Professor Robson, whom he characterised as the Senior Administrative Officer in charge of staffing at UWA, "failed to implement any changes that were highlighted by the Michael inquiry and which would assist in the recovery" of his research team. This was an allegation of some generality involving elements of opinion informed by a very personal perspective. It has nothing much to do with the issues in the case. I disregard it. It was not related to any of the particulars of the history of animosity between Dr Gray and Professor Robson relied upon in support of Dr Gray's cross-claim for defamation against UWA.
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Memorandum of Understanding - LCI and RPH Medical Research Foundation - November 1992
648 On 2 November 1992 LCI and the Foundation signed a Memorandum of Agreement. It provided, inter alia, that the Foundation and the LCI would use their best efforts for mutual support and promotion. Particular provisions regulating the financial relationship between the two bodies were as follows:
2. The Lions Cancer Institute recognises the Medical Research Foundation as an appropriate body to administer research funds generated by the Lions Cancer Institute for cancer research within the University Department of Surgery and Royal Perth Hospital.
3. The Medical Research Foundation recognises and endorses the Lions Cancer Institute as an organisation that will contribute to research into cancer at Royal Perth Hospital.
4. The Lions Cancer Institute will invest funds in the Medical Research Foundation on the understanding that such funds will be used solely for cancer research projects. Such research projects may involve patients and participation from organisations outside of Royal Perth Hospital.
649 The Memorandum also provided that the Medical and Scientific Advisory Committee of LCI would advise the Institute board of projects for which support was recommended. The LCI would then nominate to the Foundation those projects which it wished to support (clause 5). Funds provided by LCI could be invested according to the usual procedures of the Foundation on the basis that interest earned would be returned to the LCI (clause 7). The funds provided by the LCI would be subject to the auditing and accounting procedures of RPH.
650 The terms of the Memorandum of Agreement suggest that the perception of LCI held by those controlling it and those involved with the Foundation was of a body providing funding for research. Sirtex submitted, however, that whatever LCI's role in the early 1990s it evolved into a substantive entity conducting its own research in subsequent years. As Sirtex submitted in closing, it is clear enough from the evidence that at this stage in its existence, LCI was not institutionally connected with UWA. It was associated with Dr Gray's work at RPH. The Memorandum of Understanding was a memorandum entered into with an RPH entity not a UWA entity.
LCI applies for affiliation - 1991/1992
651 On 11 February 1991 Mr Irvine, the Chairman of the LCI board, wrote to the Vice-Chancellor, Professor Gale asking to speak with her about the LCI and its "current and future association with the University of Western Australia". He said that the LCI had selected the cancer research team headed by Dr Gray as the principal beneficiary of its support. He referred to informal conversations between the Governors of both Lions Districts in Western Australia and Professor Parfitt about the work being done by Dr Gray and his team. It was timely that the board now sought the view of UWA regarding some more formal association. He wrote:
The concept of a cancer institute dedicated to research has been a particularly exciting venture for the Lions Clubs and has received overwhelming support from within the organisation. Our Board is confident that we will develop into a major research centre and seeks the opportunity of discussing the possible implications for the University of WA in this initiative.
Mr Irvine met with Professor Parfitt and Professor Lourens, then UWA Deputy Vice-Chancellor (Finance) to discuss the possible association between the LCI and UWA. On 20 March 1991 Professor Lourens wrote to him setting out what the main points of the discussion. The summary was broadly supportive of LCI but said nothing about association beyond a statement that UWA would wish to cooperate in maximising the search for new knowledge of treating cancer and was grateful for the added support by the Lions Clubs. The letter did not suggest any form of affiliation between LCI and UWA. It stated what LCI proposed to do, suggested internal quality control and cooperation with a potential competitor and little else.
652 Mr Irvine wrote to Professor Gale on 3 April 1991. He again sought her guidance on an association "formal or informal" with UWA given the relationship between LCI and Dr Gray's team. He wrote on 24 June 1991 yet again asking whether UWA wished to have an association with LCI or its board. He suggested that LCI might offer an invitation to a representative from UWA to attend a board meeting to keep lines of communication open and ensure that everyone was satisfied with developments at LCI. A handwritten footnote on the letter dated 15 July 1991, apparently from Professor Lourens to Professor German, indicated that the Vice-Chancellor's meeting (with her Deputy Vice-Chancellors) had decided that UWA should not "get in close" but maintain contact and advice. Professor Lourens asked Professor German to suggest a suitable contact.
653 Professor Thomas Norman Palmer, known as Norman Palmer, was Professor of Bio-chemistry at UWA from 1990 to July 1997. For later reference it may also be noted that he was Acting Executive Dean of the Faculty of Medicine and Dentistry between 1 December 1995 and June 1996. In July 1997 he left UWA to take up the position of Pro Vice-Chancellor (Research and Innovation) at James Cooke University, a position he still holds. Following Professor Lourens' request to Professor German to suggest a UWA contact with LCI, Professor Palmer was approached and agreed to join the board. The Vice-Chancellor's personal assistant, Barbara Goldflam, wrote to Mr Irvine on 12 September 1991 advising him of Professor Palmer's consent to being the UWA representative. Professor Palmer attended his first meeting of the board on 12 November 1991. The meetings were held at the University Department of Surgery office in the Medical Research Foundation building at RPH. He recalled that Dr Gray was Medical Director but did not know what the position entailed. Dr Gray prepared reports and he saw some of them. Dr Gray said in his affidavit evidence that Professor Palmer would have kept the Vice-Chancellor informed of the activities of both LCI and CRI. Professor Palmer did not recall any activities of LCI which would have required any report from him to the Vice-Chancellor. As to CRI, he was never a member of its board. He had been invited to join it but had declined. Professor Palmer did not recall any matter of substance relating to CRI being reported at LCI meetings that required him to make any report to the Vice-Chancellor.
654 Professor Palmer had then and said he still has, a very strong view of the benefits of affiliation between medical research institutes and universities. He regarded such arrangements as delivering significant financial and intellectual benefits. It was on that basis that he gave his support to the proposed affiliation.
655 At a meeting of the LCI board held on 11 February 1992 Dr Wal Neal, a member of the Bullcreek Lions Club, was appointed as Administrative Officer in an honorary capacity. The board met again on 14 April 1992 at which time Dr Gray was requested to prepare a plan for a program for the next three years. It met on 12 May 1992 and established an Executive Committee comprising the Chairman, the Medical Director and the Administrative Officer. The question of a closer relationship with RPH was raised. On the matter of affiliation the Chairman reported that it seemed appropriate to seek a formal affiliation with UWA. The advantages would be "recognition, status and support". The board resolved to seek affiliation and to prepare an application for that purpose.
656 In June or July 1992, Dr Neal sent a draft application for affiliation with UWA to Professor Palmer for his comment. Professor Palmer wrote back to him on 31 July 1992 suggesting that the application would be considerably strengthened if the membership of the board were extended to include greater representation from UWA and RPH.
657 On 17 August 1992 Mr Irvine submitted an application for affiliation to Professor German. The members of the board as shown in the application included Dr Burton, Dr Codde, Dr Gray, Professor Palmer and Dr Neal. The application stated that the LCI did not employ staff at the time. Board members, the Medical Director, the Medical and Scientific Consultants, the Administrative Officer and most of the other clerical and support staff offered their services without charge. The application foreshadowed that the situation would change as the LCI was committing itself to supporting a major research project which would involve staff salaries and supporting services.
658 In relation to Dr Gray's research projects, the application stated that while providing general support and publicity to the group the LCI's main financial contribution had been in the purchase of equipment. However it had committed itself to supporting a major extension of the research effort for the next three years.
659 The application listed UWA staff directly involved. It showed Dr Gray as Professor of Surgery and Medical Director of the LCI. Dr Burton was described as "Senior Scientific Administration Officer". Dr James Codde, Dr Stephen Jones, Dr Yan Chen and Dr Ross McCulloch were all described as "Research Officers". Ms Angela Lumsden was described as a "Research Student". The application noted that a number of staff of RPH provided supporting services as consultants and committee members.
660 The board met on 8 September 1992 and 10 November 1992. At the latter meeting Mr Irvine retired as chairman of the board and Mr J Roberts, a Lions District Governor, was appointed in his place. Dr Neal was reappointed as Administrative Officer to undertake the duties of Secretary and Treasurer. He reported that the affiliation application had been referred by the Executive Committee of Dentistry and Medicine at UWA to the University Department of Surgery for examination. He was trying to follow the matter up. The minutes of that meeting also reported the appointment of Dr Elizabeth Williams as an LCI Research Fellow to commence duty on 7 January 1993. Her appointment and subsequent history including dealings with Dr Gray are outlined later in these reasons.
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Faculty defers affiliation - January 1993
661 Dr Gray lobbied to have the application considered by the Executive Committee of the Faculty. It was put on the Executive Committee's meeting agenda for 19 January 1993. Dr Gray attended the meeting which was chaired by Professor James Patterson who was evidently then Dean of the Faculty. According to Dr Gray the application was opposed from the outset by Professor Constable of the Lions Eye Institute. He made a prepared statement of opposition. Professor Patterson himself referred to representations about LCI to the Faculty in a letter written by Mr Clive Deverall the Director of the Cancer Foundation. He told the meeting it would be inappropriate to consider the affiliation proposal while there appeared to be a major dispute between the LCI and the Cancer Foundation. He advised the Committee that the Faculty could reconsider the matter when differences between the two organisations had been resolved. This was Dr Gray's account of the meeting. To the extent outlined I accept it. It is inherently probable that the relevant decision-makers within the Faculty would not wish to have become embroiled, through the affiliation process, in some kind of turf war between the LCI and the Cancer Foundation.
662 Dr Gray, in his affidavit evidence, said he accused Professor Patterson of colluding with the Cancer Foundation to elicit its letter of protest. He offered the opinion in his evidence that opposition to affiliation had been "set up" by Professors Patterson and Constable. He thought Professors Patterson and Constable wanted to prevent any diversion of Lions' funding support from the Lions Eye Institute to the LCI. It is not necessary to reach any final conclusions about this incident beyond observing that it exemplified and explained to some extent the tension between Dr Gray and other senior members of UWA academic staff and had a part to play in ongoing acrimony between him and elements of the Faculty.
663 The next step in the process towards affiliation with UWA was a letter dated 3 February 1993 from Professor Palmer to Dr Gray at LCI advising that the Medical Executive Committee of the Faculty of Medicine had chosen not to discuss the proposed affiliation at its most recent meeting. Professor Palmer opined that members of the Executive Committee would have approved affiliation of the LCI on academic grounds. Their concern was conflict with the Cancer Foundation. He suggested that the conflict could be resolved by discussions with individuals associated with the Cancer Foundation. He looked forward to discussion of affiliation at the LCI's next board meeting.
664 Affiliation was again discussed at the LCI board meeting held on 9 February 1993. The Chairman circulated the letter from Mr Deverall of the Cancer Foundation which had been referred to at the faculty meeting and which outlined objections to the existence of LCI. He also circulated a letter sent by District Governors of Lions expressing concern at some of the things said in Mr Deverall's letter. It was reported that a meeting had been arranged between members of the LCI Board and the CFWA to try to solve the disagreement. Professor Palmer stressed the importance of settling the disagreement. If it were resolved he felt that the affiliation would proceed smoothly.
665 A meeting was held between representatives of LCI and the CFWA on 12 February 1993. A reference to that meeting appeared in a letter dated 1 April 1993 to Dr Gray from Mr Roberts the Chairman of LCI. In the letter Mr Roberts reported that Professor Liveris, the Chairman of the CFWA, agreed to write to the Vice-Chancellor at UWA advising her that the CFWA did not wish to stand in the way of LCI affiliation with UWA. Mr Roberts said in the letter that when he had asked at the meeting why the CFWA had written its letter of opposition to Professor Patterson in the first place, the Chairman of the CFWA replied that Professor Patterson had solicited the letter from the CFWA. Mr Roberts said that Mr Irvine and Dr Neal both attested to the correctness of his report of the comments made at the meeting with the CFWA. Whether the claim about Professor Patterson is correct or not, it is not material here. But the fact it was made goes to the very difficult relationship that existed between Dr Gray and other senior members of the Faculty. His complaint about Professor Patterson's conduct found its way into an exchange of correspondence with the Chancellor of UWA over the period 1990 through to 1995.
666 Professor Patterson was a member of the Medical Board of Western Australia in 1993. According to Dr Gray's affidavit he regarded it as inappropriate for Professor Patterson to sit in judgment on his peers. He therefore contacted the Secretary of the Medical Board and put before it his allegations about Professor Patterson's behaviour. The Secretary advised him subsequently that the Medical Board had discussed the matter and that Professor Patterson would remain as a member of the board. Dr Gray's solicitors wrote to the board in July 1994 saying that it ought to convene a formal inquiry into Professor Patterson's conduct. After further exchange of correspondence the board informed Dr Gray, on 15 September 1994, that it would take no further action in relation to Professor Patterson.
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Jillean Winter/CRI - 1993
667 The name of Jillean Winter appeared peripherally from time to time in the evidence. She was employed by CRI on 14 June 1993 as Laboratory Assistant for research projects involving UWA, LCI and CRI. Her duties, as set out in her CV, were to assist Dr Stephen Jones with the in vivo studies for the hyperthermia project and the continued development and manufacture of human protein, plasmid and magnetic microspheres. She was also involved in testing the integrity of the SIR-Spheres used on patients in trials. She participated in the targeted chemotherapy project and associated clinical trials.Following the Affiliation Agreement referred to later in these reasons, which was made on 30 October 1995, she was on UWA's records as one of its employees although the funding for her position was provided by CRI. A letter was sent to her by UWA on 26 February 1996 on behalf of the Vice-Chancellor offering her a fixed term appointment on the staff of UWA as "Assistant (Laboratory)". The term of her appointment was 29 January 1996 to 28 February 1997.
668 According to Dr Gray, Ms Winter took part in many research experiments including the manufacture of DOX-Spheres used in their clinical trials. I accept that evidence.
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Chen/Gray DOX-Spheres provisional application PN2492 - 18 November 1993
669 Late in 1993 Dr Gray raised with the scientists in his group whether any results had emerged that might be used to support what he called a "provisional patent application" because CRI wanted to raise commercial funds. He said that the following were considered:
1. The original resin SIR-Spheres developed in 1981-1982. However the details of SIR-Spheres had been disclosed into the public domain in 1983.
2. The ceramic SIR-Spheres (SIRT-2) that had been "invented" in 1982 and further developed by Monash University. This he described as a definite candidate for a provisional patent application.
3. Dr Stephen Jones could not provide anything on targeted hysteresis hyperthermia as nothing had been developed.
4. Dr Chen, he said, volunteered that she had experimented with a new way of controlling the release of drugs from microspheres. This was the use of the metal-ion concept to slow the release of the drug.
No suggestion was made for any other intellectual property that could form the basis for a provisional patent specification.
670 About this time Dr Chen drafted a provisional specification. It was for an invention to be called "Controlled Release Matrix for Drugs and Chemicals". It was described in the following statement:
This invention describes a novel formulation for the transport and controlled release of a variety of therapeutic and chemical agents using metal ions-drug interaction as a release control mechanism in combination with either a degradable or non-degradable ionic supporting matrix. One particular application of this formulation is to transport cytotoxic drugs that are designed to be used in patients and animals for the treatment of cancer. The concept of using metal ion-drug complexes in combination with ionic polymers can also be used for the transport and controlled release of other drugs and chemicals for a variety of other applications.
Dr Chen said that the specification contained results of experiments that she had conducted using both cisplatin and doxorubicin containing microspheres.
671 Dr Chen said that she initially named Dr McCulloch as an inventor on the draft application. Dr McCulloch recalled that Dr Chen informed him that he was on the application to accompany the provisional specification. He did not have any input into it and never saw the application.
672 Dr Chen said that she and Dr Gray met on or about 15 November 1993 in his office on the second floor of the MRF building. They discussed, inter alia, the provisional specification application. It was her evidence that Dr Gray told her that he did not think that Drs McCulloch, Burton or Hodgkin should be on the provisional application. He wanted himself and Dr Chen to be named. According to Dr Chen's evidence Dr Gray made notes on his whiteboard as they talked. Dr Gray disputed aspects of her account of their conversation. He said he did not have a whiteboard. He believed that he had proposed Dr McCulloch as an inventor on the provisional application. His recollection was that Dr Chen told him that she alone had been involved in the development of the invention. On that basis Dr McCulloch's name was removed. The omission of Dr Hodgkin's name was based upon Dr Chen's advice to Dr Gray. Dr Gray said that he put his own name in as co-inventor because he had initiated the DOX-spheres project. He had not, however, done any of the experiments testing the use of metal ions to control drug release from the microspheres. He did not check Dr Chen's claims with Dr McCulloch. He also relied upon her advice in omitting Dr Hodgkin's name. He had not had personal contact with Dr Hodgkin for several years. He said that he "could only presume that he had faded from my memory the reason why he was not included as an inventor". Dr Burton had left the team early in the year and relocated to New South Wales. Dr Gray did not contact him to check on Dr Chen's affidavit.
673 It is difficult to place any particular reliance upon the recollections offered by witnesses of oral conversations conducted 14 years previously. I think it probable, having regard to Dr McCulloch's evidence, that Dr Chen had initially proposed that his name be included on the provisional specification but that it took little, if any, persuasion for her, in discussion with Dr Gray, to omit Dr McCulloch's name. Dr Chen presented as a person focussed upon the advancement of her own interests. That of itself is not a matter for criticism in the context of these proceedings. It does however affect the extent to which I can rely upon her uncorroborated testimony to give an objective account of contentious matters affecting her interests. My confidence in the reliability of her testimony was generally affected by the secret tape-recording she made of a conversation with Dr Gray in November 1994 and the way in which she misled him about it. The tape-recording incident is described later in these reasons.
674 Dr Gray returned the draft provisional application at or soon after his meeting with Dr Chen. When she received the draft back from Dr Gray he had written his name first and hers second as inventors. When she discovered this, Dr Chen said to Dr Gray that she should be the first inventor and he acceded. She then typed her name and then Dr Gray's on the patent request form.
675 After meeting with Dr Gray, Dr Chen spoke to Dr McCulloch and told him that Dr Gray had decided he would not be included on the provisional specification application. Dr McCulloch seemed upset and so she said to him:
If you have a problem with the decision you should speak to Bruce.
676 Dr McCulloch said he knew there was a patent application being discussed by Drs Gray and Chen. He did not take any part in those discussions. He remembered Dr Chen telling him that his name had been taken off the patent. He recalled that he was annoyed. However he did not have the resources to do anything about it. He considered the modification of the DOX microspheres to be his project, their evaluation in an animal model to be Dr Chen's project, with Dr Gray ultimately using them in a human model if the animal studies were successful.
677 Dr Chen lodged the provisional specification and accompanying request on 18 November 1993 at the Australian Industrial Property Organisation office (AIPO) in Adelaide Terrace, Perth. She paid the application fee of $80 out of her own pocket. She listed herself and Dr Gray as the actual inventors. This followed a conversation in which Dr Gray, having seen the draft specifications, wrote his name and hers as the inventors. He also told her that the application should use CRI as the address for correspondence as CRI would fund the project and her in the future and were going to fund the patent application. The provisional specification was assigned the number PM2492. The receipt from the AIPO was sent to the post office box of CRI. In the meantime Dr Chen was reimbursed the sum of $80 by Dr Gray's secretary.
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Gray-SIRT-2 application 54724/94 - 21 January 1994
678 On 21 January 1994 Dr Gray filed a patent request dated 19 January 1994 for a standard patent for an invention entitled "Radioactive Particles for Treatment of Cancer". He was named as the inventor, the applicant and the nominated person to whom the patent was to be granted. The patent attorneys filing on his behalf were Davies Collison Cave.
679 The invention was said, in the complete specification, to relate to the treatment of cancer in mammals by the use of small hollow particles (collectively called microspheres) containing a radioactive substance. They were designed to be administered into the arterial blood supply of the organ to be treated whereby they would become entrapped in small blood vessels of the target organ and irradiate it. The claims defining the inventions focussed upon methods for the production of hollow microspheres. Essential steps comprising the grinding of the base materialto a fine powder, combining thebase material with a suitable binder, spray drying the slurry and thermal spraying of the spray dried particles were referred to. The production of microspheres having a diameter from 10 to 200 microns was claimed in one claim. The use of Yttrium or any compound of salt of Yttrium as the basic element of the microspheres was also claimed.
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Revised LCI affiliation application - 1993/1994
680 A meeting of the LCI board on 17 August 1993 received a report from Dr Neal and Dr Gray that they had met with the Executive Committee of the Faculty of Medicine with the result that the affiliation application was deferred for resubmission with further information to be provided. The matter was again discussed at the board's meeting held on 12 October 1993. An outline for a new proposal was to be presented at the next meeting of the board. The next meeting was on 14 December 1993. An outline of a new submission to UWA had been circulated and it was approved as a basis for the submission to be presented to the February board meeting. At the meeting held on 8 February 1994 Professor Palmer suggested that the application emphasise opportunities for UWA through the availability of training for postgraduate students and the possibilities for collaborative research. The board agreed that the draft was a sound basis from which to work and the aim should be to submit it to the Executive Committee of the Faculty of Medicine at its April meeting. Final approval would be left to the Executive Committee of the LCI. The Executive Dean of the Faculty of Medicine was to be invited to nominate a member to the Medical and Scientific Advisory Committee of the LCI.
681 On 30 March 1994 Dr Neal sent the revised affiliation application to Professor German. The application, which described the "Present Activities" of the LCI indicated that it had established an association with Dr Gray and scientific staff of UWA's Department of Surgery at RPH. It stated that financial support was given to a number of research projects but the LCI also had initiated and completely supported several projects. Among projects to which it was giving support were what it described as the hyperthermia research project, "an ongoing project of the Department". Under the heading "Staffing and Facilities" the application named as "staff directly involved" the following:
Prof Bruce N Gray Professor of Surgery, Medical Director LCI
Dr Elizabeth Williams Research Fellow
Dr Stephen Jones Research Officer
Dr Yan Chen Research Officer
Mr Paul Katris Research Assistant
Ms Angela Lumsden Research Assistant
Ms Jillean Winter Lab Assistant
Ms Fiona Mullen Research Nurse
Dr Walter Neal Administrative Officer
It listed postgraduate students who included Mr Simon Harrison, a research student at UWA and Ms G Pravdic, a research student at Monash. The application also reported that a group of people who were not Lions had formed a Cancer Research Institute with the aim of raising funds to support research activities. The application stated that they had had considerable success and were supporting projects of the LCI. Grants obtained by research staff of the LCI were set out in an appendix to the application. They were said to total $1,062,823, listing as their sources the NH & MRC, the Foundation, the Channel 7 Telethon Trust, other research grants and fellowships and scholarships.
682 Professor German responded on 6 April 1994 advising that he would place the application before the Faculty Board after it had been vetted by the Deputy Vice-Chancellor, Professor Robson. He could see no further reason for it being delayed. On the same day Professor German sent a copy of the application to Professor Robson. In his memorandum to Professor Robson he characterised the application as "satisfactory". He said:
Because of the sensitivity of this issue and because of my desire that we should endeavour to recognise Bruce Gray's institute, I am sending this down to you prior to presenting it to the Faculty Board for your assessment, critique and any recommendations you might wish to make. I look forward to hearing from you.
Professor Robson passed the proposal to the UWA Registrar for checking for compliance with the affiliation guidelines. It was examined in the Registrar's office and found to supply information required by the guidelines. As the matter was a potentially sensitive issue the Registrar's office recommended that the proposal go to the Faculty Board before being considered by the Academic Board/Council.
683 At a meeting of the LCI board on 16 April 1994 it was noted that Professor German had written to LCI nominating Dr P Le Souëf to represent the Faculty of Medicine on the Medical and Scientific Advisory Committee of the LCI.
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LCI/UWA affiliation approved - July 1994
684 On 21 June 1994 the Faculty of Medicine and Dentistry resolved to recommend to the Academic Council that the application for affiliation by the LCI be approved. On 26 July 1994 the Senate of UWA resolved to approve the affiliation of UWA with LCI "subject to the drawing up and signing of an appropriate agreement between the Institute and the University".
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International Application DOX-Spheres PCT/AU94/00708 - 17 November 1994
685 An international application claiming priority from PM2492 was filed on 17 November 1994. It was allocated a number PCT/AU94/00708. The invention was entitled "Controlled Release Preparation". There were some fifteen claims which included the following:
(i) a controlled release preparation comprising an ionic polymer matrix loaded with an active compound being complexed with a complexing agent to modify the release of the active compound from the polymer matrix;
(ii) a preparation according to claim 1 wherein the ionic polymer matrix is in the form of microspheres;
(iii) a preparation according to claim 2 wherein the microspheres have a diameter in the size range of 10-200 micron, preferably in the size range of 20-70 micron.
686 Subsequent claims defined the active compound as pharmaceutically active (claim 4). A cytotoxic or cytostatic drug (claim 4), doxorubicin, daunorubicin or cisplatin (claim 6). The claim was made for an ionic polymer matrix comprising a biodegradable cross linked albumin/dextran sulphate matrix (claim 7) and a preparation wherein the complexing agent was a metal ion (claim 8) and in which the metal ion was Fe (claim 9). The loading of the ionic polymer matrix with Fe-complex doxorubicin was claimed (claim 10) and also with chitosan-complex cisplatin (claim 11). Methods of treatment and use were also claimed.
687 The minutes of the board of management of CRI held on 15 November 1994 recorded that Dr Gray advised the board "that an application for an International Patent on Microsphere Control Release had been submitted under the name of the Cancer Research Institute (Inc)". He advised that legal costs might be substantial. A motion was passed unanimously that CRI would assume responsibility for all costs.
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Gray - Thermo-Spheres 1 Application PN0213 - 23 December 1994
688 On 23 December 1994 a patent request provisional application PN0213 was filed in Dr Gray's name together with a provisional specification. The application covered what was referred to in the statement of claim as the Thermo-Spheres-1 Invention being that claimed in patent application PN9782 entitled "Targeted Hysteresis Hyperthermia as a Method for Treating Cancer". The application filed on 23 December 1994 was however allowed to lapse.The specification was in similar terms to that lodged in September 1988.
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Gray and Robson - 1994/1997
689 Dr Gray said Professor Robson had risen to power in the early 1990s. He had the confidence and support of Professor Gale and dealt with many issues that Dr Gray would have expected Professor Gale to deal with. Complaints of misconduct on the part of Professors German and House were diverted to Professor Robson. Dr Gray tried to get Professor Robson to intervene to stop what he called the "relentless intimidation of our research group". He claimed that Professor Robson was not only not prepared to help but became actively hostile to his appeals. He alleged that on one occasion Professor Robson became extremely aggravated by his requests for assistance and started "yelling loudly at me" and insisted that he take his complaints to Professor German. This was denied by Professor Robson.
690 Dr Gray said he met with Professor Robson several times after that incident but because of his hostility it became common practice for him to ask his legal representative, Mr Grant Milner, to attend their conversations. Despite his repeated requests for assistance nothing was done and the intimidation continued until he left UWA several years later. He said it soon became apparent to him that Professor Robson was not going to provide support and that his attitude had progressed from disinterest to open hostility. By about 1994 he regarded Professor Robson as entirely hostile to him. He said:
In all the 1990s there was not a single occasion when he ever acted in my favour or in support of my research group. I recall on one occasion he came to Royal Perth Hospital to intervene into a dispute regarding research facilities that was clearly an issue to be dealt with by the Dean of Faculty. He ensured that I was disadvantaged at every opportunity.
Dr Gray claimed that he was denied access to secretarial assistance within UWA and the hospital.
691 According to Dr Gray, Professor Robson's antipathy towards him grew during the 1990s. By 1996 there was so much bad blood that it was difficult to make the affiliation agreement work.
692 Dr Gray's own conduct in relation to Professor Robson, as it appears from the history of events set out in these reasons, evidenced the level of hostility which he felt towards him. I cannot rely upon his characterisations of Professor Robson's attitude towards him. His opinions are not evidence of Professor Robson's feelings. Moreover I cannot rely upon his account of Professor Robson's mode of speech towards him. As I observed in connection with his evidence about the dispute with Professor German concerning Dr Chen's salary, his recollections, offered from a perspective of ongoing anger and resentment, were unreliable.
The Rindos affair - 1993
693 In Dr Gray's particulars of malice on the part of UWA in connection with the allegedly defamatory letter of demand of 26 October 2004, he alleges that its publication was authorised, for and on behalf of UWA, by Professor Robson in circumstances where there was a history of animosity between them. One of those particulars, said to be an element of that history, was that Dr Gray had given evidence to the Parliamentary Inquiry relating to Dr Rindos where his evidence was opposed to evidence given by Professor Robson and was critical of the administration of UWA.
694 Professor Gale, who was Vice-Chancellor at the time, said that until she read Dr Gray's affidavit she was not aware of his support for Dr Rindos or that he had given evidence at a Parliamentary Inquiry into the affair. She did have a diary entry for a meeting with Dr Rindos and Dr Gray on 19 November 1993 at 4.30pm. However, based on her personal diary, she did not believe that the meeting actually took place as she was involved with the Festival of Perth launch that afternoon. I accept that it is unlikely that Professor Gale was particularly conscious of Dr Gray as a Rindos supporter or held any animosity towards him for that reason.
695 Professor Robson in his affidavit of 2 March 2007, referred to this particular. He said in the course of preparing his affidavit in January 2007 he reviewed, on the relevant parliamentary website, the report of the Western Australian Parliamentary Standing Committee on Public Administration on its inquiry into the events surrounding the denial of tenure to the late Dr Rindos by UWA. Appendix 2 to that report listed Dr Gray as having given oral evidence to the inquiry. To the best of his recollection, until he reviewed that report in January of that year, he was unaware that Dr Gray had given evidence. At the time of swearing his affidavit he still did not know what evidence Dr Gray had given. He had never seen any transcript or report of what he had said. The only transcript of evidence to the Rindos inquiry that he had ever seen was his own. I accept Professor Robson's evidence. I am not satisfied that the support given by Dr Gray to Dr Rindos played any part in the content or timing of the letter of demand sent by UWA to Sirtex in 2004.
Gray begins commercialisation - 1994
696 The history of Dr Gray's endeavours to commercialise the targeted microsphere technology began with his dealings with Uniscan and CABR in the late 1980s. These have already been outlined. In 1987, after taking advice from patent attorneys, the director of CABR, Dr Nicholas, did not think that either the DOX-Spheres or the Thermo-Spheres were patentable. Various approaches were made to potential commercial partners. None of them yielded any positive results. In September 1988, as noted earlier, Mr Hilditch "handed back" the DOX-Spheres project to "the department", presumably a reference to the UWA Department of Surgery. The Thermo-Spheres project was left to Professor Parfitt to deal with but nothing resulted from that. An attempt to establish a collaborative arrangement with CSIRO in relation to Thermo-Spheres did not proceed beyond the conduct of a feasibility study.
697 At some time, which was probably about mid 1994, Dr Gray approached Mr Kevin Karlson, on the recommendation of JB Were, Stockbrokers. They also suggested he approach Mr Peter Jones, a former State Government Minister. Dr Gray said it was late 1994, but the sequence of the documentary evidence suggests if is more likely to have been May or June 1994.
698 Dr Gray told Mr Karlson that he was looking for capital to commercialise three products which he had developed for the treatment of cancer. Mr Karlson was a chartered accountant who had been managing partner of the Perth office of Ernst & Whinney (the predecessor to Ernst & Young) from about 1980 to 1989. He had retired from Ernst & Young on 30 June 1993 but remained active as a consultant because of ongoing insolvency engagements. In 1993 up to the time of his affidavit in 2006, he had held a number of part time appointments including that of consultant for Tolhurst Corporate Limited, a broking/underwriting business based in Perth. Dr Gray told Mr Karlson that JB Were had also recommended that he seek assistance from Mr Peter Jones, a former minister in the Western Australian Government whom he had met from time to time in the course of his business activities.
699 Mr Karlson said that Dr Gray told him he was a Professor in the Department of Surgery at UWA and involved in research for the development of the products to be commercialised. He told Mr Karlson that in substance the research was being carried out by CRI and LCI. Nothing that Dr Gray said then indicated that there was any obstacle in the way of himself or CRI commercialising the products. He said that products had been protected by patents taken out either by himself or by CRI. Dr Gray agreed in cross-examination by counsel for Sirtex that, when he first invited Mr Karlson to become involved with the raising of venture capital, he did not suggest to him that there was any legal constraint on his ability to develop or commercialise the products.
700 On the advice of either Mr Karlson or Mr Peter Jones, Dr Gray contacted a corporate solicitor, Jeremy Shervington. He asked Mr Shervington for advice and assistance on how to seek venture capital funding. Mr Shervington told him what had to be done to set up a company and to seek such funding. Mr Shervington recalled that Dr Gray consulted him about incorporating a company for that purpose in order to develop intellectual property which involved the use of microspheres that were irradiated then injected into people with liver cancer. He did not have a clear recollection of the work that he did for Dr Gray apart from the fact that it involved a proposed capital raising. As an early step Mr Shervington acquired a shelf company for Dr Gray on or about 29 June 1994. It was called Fairburn Investments Pty Ltd (Fairburn).
701 According to Dr Gray, he discussed with Mr Shervington the need to appraise UWA of his involvement and the nature of the business to be carried on by the company. Dr Gray said he wanted UWA to be aware of his interest to set up a company to develop the technology and to accept his involvement in that process. At the time he thought the company could even be a party to the Affiliation Agreement between LCI/CRI and UWA, which was still then in its long gestation period. This is corroborated by Mr Orr's handwritten note of a discussion which he had with Dr Gray in August 1994. That note referred to "… a third party to join with the agreement - a commercial company (yet to be launched) to head up the technology transfer".
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Gray meets Barber - 11 May 1994
702 Professor Barber commenced as Pro Vice-Chancellor (Research) in February 1994. Dr Gray regarded him as "a highly capable administrator with a thorough knowledge of research methodology". Initially they did not have much interaction as Dr Gray was located at RPH and Professor Barber at the Crawley campus of UWA. Most of their communication was by telephone.
703 Dr Gray's diary entries indicated that he had a number of meetings with Professor Barber between 11 May 1994 and 16 January 1997. He said that he discussed with Professor Barber "in detail" the progress of the targeted microsphere technology towards commercialisation as it occurred. He said that in 1994 when he began to explore the possibility of attracting venture capital funding through a corporate vehicle for the technology he kept Professor Barber informed about what was going on.
704 Professor Barber did not remember meeting Dr Gray in May 1994. Dr Gray himself kept no file notes of their discussions. I am satisfied however, by reference to his diary notes that they did meet. This was a critical time in the progress of the Affiliation Agreement between LCI/CRI and UWA. Professor German had promised to place the affiliation application before the Faculty board at its meeting which was to be held in June 1994. It may well be the case that Dr Gray wanted to enlist Professor Barber's support for affiliation. It was, however, also close to the time at which he began seeking professional advice on how to raise venture capital. It is probable that this topic was raised with Professor Barber. Having regard to the history of Dr Gray's dealings with UWA in relation to commercialisation before 1994 which had led nowhere, it is difficult to see any reason why he could have expected to keep plans for commercialisation of the technology secret from UWA. Professor Barber's lack of recollection of a meeting in May 1994 is explained by the passage of the years. It does not undercut the inference that such a meeting occurred.
Gray and Shervington meet Barber - 15 August 1994
705 Dr Gray and Mr Shervington saw Professor Barber again at UWA on 15 August 1994. Mr Shervington made a one page file note of the meeting. His note indicated that reference was made to Mr James Lennon who was, at that time, a Contracts Officer in the Registrar's office. There was reference to an intellectual property committee which had been set up by the Vice-Chancellor and a statement that "Monash's position is much the same". These notes are likely, in my opinion, to have referred to discussions about UWA's approach to the exploitation of intellectual property rights developed by academic staff. The only intellectual property committee in existence at that stage was the Intellectual Property Sub-Committee of the Research Committee.
706 Mr Shervington's note recorded a query about what would happen in the future if the company developed, from its own resources, further intellectual property. The answer he recorded was that it was discretionary and depended on how clearly the result evolved from using UWA's facilities. He added "… but it would be okay to set it up in advance". I take this to refer to a statement either made or acceded to by Professor Barber. His note then read:
so that there is a commercial arrangement in place whereby fee is paid and intellectual pty rests with the company.
There was a reference to intellectual property rights in PhD students. It was also noted that the company would come to the Institute and that the Institute could be used by the company as a vehicle. However the company would remain outside to some extent. There was a note that the affiliation agreement would have implications for government funding between UWA and the Institute.
707 Dr Gray recalled the meeting very clearly. He "vividly" recalled that a major consideration for him in arranging the meeting was to ensure that UWA, through Professor Barber as its head of research, was fully acquainted with all the developments that had occurred and were going to occur. He said he wanted not only to protect UWA's interests but to seek protection from any further attacks against himself and CRI. He said he knew this to be a real possibility in view of the previous four year history of attempts to undermine him, the LCI and CRI and his targeted microsphere technology research.
708 Dr Gray said in his evidence that he told Professor Barber that they had sought the meeting in order to advise him of developments in the technology and to seek approval from UWA to proceed with what they were proposing so that UWA knew of those developments and could give guidance to himself and Mr Shervington. He said that he gave Professor Barber a very comprehensive overview of all the major events that had brought the technology to the point where he and the CRI were seeking commercial funding by a company in which he would play a "pivotal role". He and Professor Barber discussed the fact that he was wearing many hats and that there might be potential for conflicts of interest. By the end of the meeting Professor Barber agreed with the steps that Dr Gray had taken and was proposing to take to deal with those conflicts. They discussed, he said, the provenance and development of the ceramic SIR-Spheres (SIRT-2) that Monash University had developed through funding provided by the CRI.
709 According to Dr Gray, he also told Professor Barber that the proposed commercial entity might have a formal association with UWA and perhaps form part of the affiliation process between the LRI/CRI and UWA. Professor Barber told him that proposal was not workable and advised that the commercial entity should stand outside UWA. According to Dr Gray they discussed how UWA might be involved in further development of the technology. He said they agreed that some form of contractual relationship could easily be developed for access by the commercial entity and/or the CRI. At that time he thought that the UWA Department of Physics had expertise that could be used to develop the hyperthermia technology.
710 Dr Gray did not recall any detailed discussion of the DOX-Spheres or the fact that the CRI had taken out a provisional patent application in relation to it. He said they discussed the Patents Regulations in effect at UWA and how they might impact on him and the development of the commercial entity. Professor Barber apparently expressed some concern about the impact of these developments on research students. That issue was not resolved at the meeting other than being flagged as a matter for ongoing oversight.
711 Professor Barber did not agree in his affidavit evidence-in-chief that the meeting of which Dr Gray gave evidence, took place in August 1994 or at any time. The matters that Dr Gray referred to in his evidence, such as the provenance of specific inventions and UWA's claim to them, confidentiality agreements between the commercial entity and students and the supervision of students within some sort of commercialisation venture were not matters with which he was familiar in August 1994. In cross-examination, however he had no reason to doubt that he met with Dr Gray and Mr Shervington in August 1994. He usually kept file notes of significant meetings but did not know what had happened to the notes of the meeting alleged. In my opinion the probability is that Dr Gray did raise and discuss with Professor Barber his intention of establishing a commercial vehicle to raise venture capital for the exploitation of the technology. I so find.
Gray and Shervington meet Stokes and King - 17 August 1994
712 On 17 August 1994 Dr Gray and Mr Shervington met with Dr Bryant Stokes and Douglas King, the Manager of the Foundation. They met at the Foundation's building at 50 Murray Street, Perth. They discussed whether the company which Dr Gray proposed to set up could rent space in the RPH research facility to continue research into the technology. Mr Shervington recalled that the meeting concerned the use of laboratory space at the Foundation premises. His handwritten file note of the meeting supports that recollection. In the event no arrangement was made for use by the company of RPH research facilities.
713 Mr Shervington did not do a lot more work for Dr Gray after that because initially they were unsuccessful in attracting venture capital funds and when they did attract a partner, Nomura/JAFCO, it instructed Freehills to look after its interests.
The "Newco" Board meets - October 1994
714 From 1994 onwards Mr Karlson met on a regular basis with Dr Gray and with Mr Peter Jones at Dr Gray's offices at 50 Murray Street which he described as "within or connected to Royal Perth Hospital". In the course of these meetings Dr Gray explained the microsphere technology "products" to him and to Mr Jones and showed them the laboratory where the relevant research was being undertaken. He was told that there were three products Dr Gray wished to commercialise, namely:
SIR-Spheres
DOX-Spheres
Thermo-Spheres
715 Mr Karlson had not had any professional association with Dr Gray before the first approach in 1994. He understood that in assisting him he would be bringing to the table commercial experience that Dr Gray lacked. Dr Gray had told him that he had come to the view that he had to set up a company and try and raise funds that way. He had no recollection of Dr Gray telling him that he had discussed the matter of commercialisation with senior administrators at UWA. He did remember Dr Gray saying that he had engaged Mr Jeremy Shervington to assist him on the legal side. The potential directors of the company that Dr Gray wanted to set up, namely himself, Mr Karlson and Mr Peter Jones, had a number of meetings which were minuted as meetings of a board of directors. The potential company was later referred to in some of the minutes as "Newco". Prior to the first minuted meeting of the potential directors, which is referred to below, there had evidently been meetings the records of which were not in evidence.
716 While he was proceeding to establish a commercial vehicle to raise capital, Dr Gray was also in discussion with the Australian Nuclear Science and Technology Organisation (ANSTO) about the manufacture of Yttrium microspheres. On 13 September 1994 he wrote on LCI letterhead, to ANSTO. The letter referred to prior discussions about arrangements between Australian Radioisotopes (ARI), which I take to be an arm of ANSTO, for the manufacture and distribution of Yttrium microspheres. He confirmed in the letter that he would be at ARI on Tuesday 20 September 1994. In the letter he said, inter alia:
Our Company is making progress at this end and it is necessary for us to start to firm up some of the arrangements for the future.
The company to which he referred was either Fairburn, which he had acquired through Mr Shervington or the company he proposed to set up as the vehicle for commercialisation of the targeted microsphere technology. He made suggestions in the letter in relation to:
The appointment of ARI as the sole manufacturer and distributor of Yttrium microspheres for Australasia and Asia in the first instance.
Production by him of raw microspheres.
Establishment of a price for the product in the immediate future and discussion of division of profits between ARI and "our Company".
The arrangement between the company and ARI would work best under a licensing arrangement whereby ARI paid royalties on a per unit sold basis.
Both the company and ARI to have performance criteria in relation to promotion.
The arrangement to be in place for a fixed term such as three years.
He said:
If we can reach firm agreement on these essential points, I think the rest should fall into place fairly quickly. Any arrangements that we come to can then be taken back to our Board for ratification.
717 In the first minuted meeting of the directors of the proposed company on 5 October 1994, a number of priority tasks were identified. These included:
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Gray phones Gale - December 1994
723 Dr Gray said that at some time in December 1994 he made a telephone call to Professor Gale. He could not recall the precise words but he said his call was to tell her about the CRI, about the establishment of a commercial vehicle and commercial funding and his role in it. She did not raise any issues as being a problem. He said that he took this as her agreement with what he was proposing. Professor Gale in her affidavit evidence said she believed, that between 1990 and 1997, Dr Gray had not informed her that he and others with him had developed patentable inventions using UWA resources at UWA's Department of Surgery as part of their work for UWA. She was therefore not in a position to approve or authorise patent applications or any commercial dealings in relation to them and did not do so. She could not recall having any conversations with him or receiving any written communications from him with respect to the discovery of any patentable inventions or commercially significant knowledge deriving from the work in which he participated or which he supervised and directed at the Department of Surgery at RPH. Nor was she informed by him of the lodgement of patent applications or the obtaining of any valuation analysis or financial forecast with respect to the sale of products using the patents while she was Vice-Chancellor.
724 Given the passage of time, I am unable to place much reliance upon Dr Gray's recollection of his telephone conversation with Professor Gale concerning the establishment of a commercial vehicle and his intention to raise venture capital to commercialise the microsphere technology. However he was making no secret of his intentions so far as they related to the establishment of a corporate vehicle. He and Mr Shervington had raised the matter with Professor Barber at their meeting with him in August 1994 and Dr Gray had raised it with Mr Orr in the context of the Affiliation Agreement. There was much that Professor Gale could not recollect. That is no criticism of her. In my opinion however it is at least likely, given the other disclosures of his general intention to UWA officials, that he communicated them to Professor Gale. His evidence does not go so far as to support a finding that he disclosed to her his intention to use any particular intellectual property in the company that he was intending to establish.
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Chen and CRI Board 1992/1994
725 Dr Chen said that at some time in the course of her employment by the University or RPH she joined the Board of Management of CRI. She thought that she started on the board in about 1992 and is sure that she was a member in 1994. She did not recall the names of all the members of the board but did remember that Dr Gray and Mrs Leonie Mirmikidis were members. On 17 October 1994 she sent a letter to Mrs Mirmikidis in the following terms:
Regretfully I shall be terminating my services to Cancer Research Institute Inc as a staff representative on the board of management at the end of next week due to the change of my employment.
Before I depart I would like to discuss with you generally, matters relating to patenting of scientific developments. More specifically this would include aspects of my research projects.
I await your advice.
726 Dr Chen made no reference in her evidence-in-chief to any follow up discussions with Mrs Mirmikidis.
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Chen and DOX-Spheres PCT application - November/December 1994
727 In November 1994 Dr Chen received a copy of a fax sent by Davies Collison Cave to CRI enclosing a draft international patent application based on the request and provisional specification lodged in 1993. The fax referred to a letter from Dr Gray of 4 November 1994 and his instructions to file an international patent application based on Australian Provisional Application No PM2492. He had evidently instructed them to file the international application in the name of CRI, naming himself and Dr Chen as inventors.
728 The patent attorneys identified, as the unique aspect of the invention, the use of a complexing agent such as a metal ion to control the use of drugs from the ionic polymer matrix. They understood that the ionic polymer matrix could be either a biodegradable matrix such as the crosslinked albumin/dextran sulphate matrix specifically exemplified, or a non-biodegradable matrix such as polystyrene-divinylbenzene based ion exchange resin.
729 Dr Gray sent Dr Chen a draft letter on the letterhead of the CRI. It was to be co-signed by herself and Dr Gray addressed to Mrs Mirmikidis as Acting Chairperson of CRI. It was in the following terms:
We hereby confirm our request for the Cancer Research Inc to register an International Patent for controlled release doxorubicin microspheres. The Provisional Patent was taken out in the names of Y Chen and B Gray.
The matter of the intellectual property is to be negotiated.
The first draft of this letter was dated 14 November 1994. At or about that time, and presumably shortly after that letter was sent, Dr Chen was contacted by Dr Gray who told her that they needed to authorise CRI to file an international patent application for the controlled release doxorubicin microspheres and that she should sign the letter that he had sent to her.
730 Dr Chen said in evidence that she was concerned that by signing the letter she would give up rights she might have to share in the proceeds of commercialisation of the invention. She could not understand why she was being asked to give those rights to CRI when she had never been an employee of CRI and believed that the invention was made in or about 1991 while she was still in the employ of the University. At about this time she had a discussion with Dr Gray relating to her concerns about the letter. She raised with him the possibility that UWA might also have a claim to the invention. Dr Gray said he would look into that. At the time of this conversation in November 1994, Dr Chen was not an employee of the University. She wanted, however, to ensure that if the invention were commercialised she would share in the proceeds of its commercialisation.
731 There was evidence of a telephone conversation between Dr Gray and Dr Chen on the evening of 14 November 1994. Dr Chen tape recorded the conversation using her answering machine. She did not tell Dr Gray she was doing so. He asked her about a background noise generated by the recording device. She lied about that noise. As appears from a transcript of the tape, he said to her:
What's that? Have you got a mobile phone or something?
She responded:
I don't know. Something - is just the line or something. Yeah.
Dr Chen said in cross-examination that she wanted a record of their conversation. She had retained the tape until providing it to the court under subpoena in these proceedings. The content of the conversation was directed in part to her concerns that her interests should be protected in the event of signing the CRI letter. She was concerned that the mere fact that her name appeared on the application as an inventor would not give her any beneficial interest if in fact the interests were acquired by CRI.
732 On 15 November 1994, Dr Chen wrote a letter to Mrs Mirmikidis at CRI stating that she fully supported the proposed action by CRI provided that she had a written agreement with it including the following:
1. She would accept that the application be in the name of CRI and would assume that the names of herself and Dr Gray would still be included as inventors in the application.
2. The names of beneficiaries and applied percentages would be indicated.
She asked for a quick response from Mrs Mirmikidis.
733 On 16 November 1994, Dr Chen went to see a patent attorney at Wray & Associates and discussed the proposed letter. Handwritten notes at the bottom of her copy of the letter record that the patent attorney told her that the letter could be signed and would not affect any of her rights. An assignment of ownership had to be done by filling in a formal document, signed by both parties concerned. The assignment would not need to be filed at the same time as the international application. There was a grace period. Apparently the patent attorney suggested that the last sentence in the letter read:
The matter of the ownership of the intellectual property is to be negotiated.
The international patent application No PCT/AU94/00708 was filed on 17 November 1994. The United States was a country designated in the application in which letters patent were sought.
734 On 30 November 1994, Davies Collison Cave wrote to Dr Gray at CRI confirming, after an earlier letter and telephone conversation with him, that they had named CRI as applicant for "all designated states except the United States of America" while the inventors were named as applicants for the purposes of the United States of America only. This was because US patent law required that a US patent application be initially filed in the name of the inventors. This necessitated a formal assignment of the US letters patent from Drs Chen and Gray to CRI and a proposed assignment document was attached. Dr Chen received a copy of the proposed assignment already signed by Dr Gray on 30 November 1994.
735 Davies Collison Cave sent another letter to CRI on 9 December 1994 in relation to a formal PCT request form which had been forwarded under cover of their earlier letter of 22 November 1994 for execution on behalf of CRI and by each of the inventors. A deadline of 1 February 1995 had been set for the lodgment of that document. They asked Dr Gray to arrange for appropriate execution and return as soon as possible.
736 Dr Chen received written advice from John King of Wray & Associates on or about 21 December 1994. Mr King set out his understanding that the bulk of the experimental work carried out in respect of the controlled release preparation invention had been conducted while Dr Chen was an employee of the University, either directly or indirectly through RPH. He stated his understanding that throughout that time she was paid by the University through funds obtained under an NH & MRC grant. He referred to the fact that funds provided for the project by CRI were used in respect of toxicity studies and clinical trials but that the money was forthcoming after conception of the invention and the filing of the provisional specification. He wrote:
On the basis of the circumstances outlined above we believe that the intellectual property of the present invention resides with UWA. The reason being that Professor Gray and yourself arrived at the invention whilst under the employ of the University. In these circumstances, and unless there is a separate agreement to the contrary, the intellectual property of an invention which arises in the course of an employees usual duties automatically belongs to the employer. As such we suggest that you undertake discussions with the university to confirm the ownership of the present invention and any rights that you may have as an inventor.
737 Dr Chen wrote to Dr Gray on 30 December 1994 attaching the letter from Wray & Associates. She observed that the assignment was the "formal document assigning the ownership of intellectual property rights as well as the matter related to the share of the profit/value of the intellectual property". She requested once again a written agreement from CRI before signing the assignment to guarantee that she would always be one of the beneficiaries and would receive the same percentage as applied to other staff currently working at CRI. She characterised her request as "modest" and said she was the major contributor to the invention. As to the involvement of UWA she expressed the opinion that they should be included in the "party" if they wished to participate or a release should be obtained from them. She added that a company called Delta West was quite serious about getting involved in the application of the invention.
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International Application for SIRT-2 filed - 20 January 1995
738 On 20 January 1995 an international application PCT/AU95/0027 was filed at the Australian Receiving Office. The invention was designated "Particulate Material". It was said to relate to a particulate material comprising small hollow or cup shaped ceramic particles called microspheres, a process for their production and methods for its use. The claims in this specification included radioactive particulate material comprising hollow or cup shaped ceramic microspheres comprising a beta or gamma radiation emitting radionuclide and having a diameter in the range of from 5 to 200 microns (claim 5). Narrower claims defined the material as Yttrium and diameters in the range from 20 to 80 microns. A process for the production of the material by forming aggregates of powdered base material with a suitable binder and thermal spraying to melt the base material and vaporise the binder to form hollow or cup shaped microspheres was also claimed. Related method and use claims were made.
Williams at CRI - 1993/1996
739 Elizabeth Williams holds a degree of Bachelor of Agricultural Science from the University of Tasmania conferred in 1975 and a PhD from that University in 1989. From 1987 to 1992 she was employed in the John Curtin School of Medical Research as a Research Assistant, Post Doctoral Fellow and Visiting Fellow. Her PhD thesis was concerned with the processes underlying resin losses in hops following mechanical damage to hop tissues during harvesting.
740 At their meeting held on 14 April 1992 the directors of the LCI observed that with the Institute's funds standing at over $170,000 it was time to consider, inter alia, providing a focus for the Institute which, together with the Screenings, might reinforce fundraising efforts. Dr Gray was asked to prepare a plan for a program for the next three years. On 12 May 1992 Dr Gray presented for consideration a proposal for the appointment of a Senior Research Officer and a Research Assistant to open up a new area of research in the discipline of cancer biology. He proposed that the project be sponsored by LCI for a period of three years initially. The financial commitment would be $100,000 per year for salaries and associated costs plus maintenance and equipment. The board approved the project in principle.
741 Advertisements for the proposed position of Senior Research Fellow were placed with a closing date of 31 August 1992. Dr Williams applied for the position. She was the successful candidate. Dr Gray reported her selection to the board of the LCI at its meeting on 10 November 1992.
742 Dr Neal wrote to Dr Williams on LCI letterhead on 30 November 1992 congratulating her upon her selection. He noted that it was a new venture for LCI to assume the role of employer and so they were a little slow at working out the details. The appointment was for three years with a commencing date of 7 January 1993. The commencing salary was $45,613 in accordance with NH & MRC salary levels. LCI had an agreement with RPH for handling the administration of salary conditions. Under the heading "Intellectual Property" Dr Neal wrote:
As a general guideline we propose a basis of 60% to the Lions Cancer Institute and 40% to the researcher. However we would like to treat each case on its merits depending on the background and circumstances.
We would also expect a reasonable approach to confidentiality of any knowledge and commercial discoveries emerging from work supported by the Institute.
743 As Dr Gray explained it in his affidavit, the appointment was effectively proposed by the Medical and Scientific Advisory Committee and endorsed by the LCI board. From that time on the LCI provided Dr Williams with technical support and funded virtually all of her research needs for the next ten years. It also supported student scholarships and provided research assistants to work with her.
744 Dr Williams said between January 1993 and March 1996 she received her salary through the RPH payroll system. The Foundation supplied her group certificates during that period. She had an office in the premises of the UWA Department of Surgery from 1993 and also worked in laboratories on Level 2. She supervised students including PhD students of UWA. She said that she worked in close proximity with Dr Gray and other UWA staff including, as at 1993, Drs Burton, Stephen Jones, and Yan Chen, Mrs Kathleen Brown and Ms Sylvia Napoli among others.
745 Dr Williams described her field of expertise as a biochemist with a focus on protein structure and function including mechanisms of protein-mediated catalysis. Her work in Dr Gray's unit involved scientific research into cell division regulation with a view to developing an understanding of particular enzymes from a biochemical point of view. She was researching whether a particular protein sometimes found in enzymes known to be critically important in cell division could play a roll in the treatment of cancer. One of the objectives of her project was to design new anti-cancer drugs. Another was aimed at the development of a novel anti-cancer gene therapy. She did not have any specialist expertise in the microsphere research conducted by Dr Gray's group, although she had some understanding of what was involved as a result of working day to day with other members of the group.
746 Dr Williams said that although she understood that LCI and CRI were separate institutes, there seemed to her to be little to differentiate between them. When she was working with Dr Gray on Level 2 of the Medical Research Foundation Building she was aware that he was the Medical Director of both LCI and CRI as well as a professor of UWA. Reports of both Institutes that she read at the time covered the same projects and researchers for SIR-Spheres, DOX-Spheres and magnetic hysteresis.
747 Dr Williams exhibited an annual report from LCI for the year 1996-1997. In that report Dr Gray referred to the establishment of CACS. He noted the recruitment of a Mrs Sally Wright as the Executive Officer of the CRI. She was spending most of her time working with members of the CRI but was "also providing valuable assistance to the LCI".
748 Dr Gray's report referred to the formation of Paragon Medical and securing of venture capital funding for the hyperthermia project and the Yttrium and controlled release projects on which he had been working for the past 15 years. He described this as providing an opportunity of not only promoting the research but also feeding back valuable funds into the research effort. He also referred to clinical trials, including a major international study involving adjuvant chemotherapy in patients undergoing resection of liver cancer. The report included a paper by Dr Stephen Jones, Simon Harrison and Jillean Winter, a laboratory assistant, entitled "The Targeted Hyperthermia Project".
749 Dr Gray's annual report for CRI for 1996/1997 was considerably briefer. He referred to the establishment of CACS and the continuation of Dr Williams as the Lions Research Fellow on her project involving the biochemistry and molecular biology of cancer. Dr Stephen Jones continued to "drive the hyperthermia project forward". Dr Gray said he himself had been "principally involved with Clinical Trials". He referred to the recruitment of two new doctoral students to CRI undertaking studies together with Dr Williams towards their respective PhDs. He also referred to the formation of Paragon Medical in terms similar to those in the LCI report.
750 Dr Williams said that from time to time Dr Gray referred to research work within their unit as taking a rice bowl approach to funding. That is to say all researchers in the unit were fed funds from the same bowl, albeit the funds came from a variety of sources. She said that when she started work in 1993 she was employed as an LCI Research Fellow, funded by LCI. However in early 1996 Dr Gray said that:
The funds for your salary come from an LCI grant. There is no more money for your salary so your salary is now coming from UWA.
or words to that effect. Until she was told by Dr Gray she was not aware that the LCI funding for her position had run out. In any event she went on UWA's payroll in about March 1996.
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Williams at CACS - 1996/2000
751 In or around March 1996 Dr Williams moved from her position as LCI Research Fellow to a position within CACS. She continued to work in the same space and use the same resources in the same premises as previously but her salary was paid by UWA. It supplied her group certificates from March 1996 until her employment ceased at the end of 2003. In practical terms nothing changed for her upon the establishment of CACS. She continued her supervision of UWA students including PhD students. Dr Gray was listed as co-supervisor for some of them.
752 Dr Gray made some generally disparaging reflections upon Dr Williams and her research output at LCI in his affidavit. They did not appear to be relevant to anything and I disregard them.
753 From about 1998 Dr Williams was appointed Deputy Director of CACS. She became its Executive Director several months before November 1999. After becoming Executive Director Dr Williams did not have access to the records that related to Dr Gray's work at UWA between 1986 and 1999, the lab books that were brought into existence during that period and animal or human trial records including patient files or any other data collected in trials conducted by Dr Gray or his team between 1986 and 1999. For the bulk of her time in the Medical Research Foundation building the trial and patient records were kept in a Clinical Trials Room which was locked for the preservation of patient privacy and confidentiality. Correspondence files, personal files, grant applications, records and communications with others within the UWA hierarchy which Dr Gray had maintained prior to Dr Williams' appointment as Executive Director were located in a file room adjacent to the secretary's office.
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Incorporation of Paragon Medical - April/May 1995
754 Paragon Medical was incorporated as a shelf company on 19 April 1995. Dr Gray, Mr Kevin Karlson and Mr Peter Jones became its first substantive directors. Professor Arthur Li also became a director. The company secretary was Grant Boyce. The shareholders were the three initial directors, together with Fairburn and Pine Ridge Holdings Pty Ltd. Mr Boyce was a partner in Mullers, Chartered Accountants. Dr Gray was Managing Director of the new company.
755 Dr Gray said that Mr Karlson had asked Mr Boyce to become involved in the company. They had been colleagues at Ernst & Young. Dr Gray agreed in cross-examination by counsel for Sirtex that he never suggested to Mr Boyce that there was any legal constraint on Paragon Medical developing the new technologies.
756 Not long after the formation of the company, Dr Gray had some discussions with Mr Rod Unsworth of Delta West. Delta West wrote to Paragon Medical on 20 May and Dr Gray replied on 5 June. In his reply he said that Paragon Medical had acquired from CRI an Option to Purchase Intellectual Property relating to "controlled release matrix formulation for cytotoxic drugs" (described in Patent Application PCT/AU94/00708). He enclosed with his letter a copy of a report to the Ethics Committee of RPH on the treatment of five patients with DOX-Spheres. He indicated that he would shortly be producing a protocol for a larger phase 2 trial in Asia.
757 On 2 May 1995 Ernst & Young provided a valuation of the SIR-Spheres and DOX-Spheres technology. The valuation was not received as evidence of the value of the technologies but rather as evidence of the fact that it had been made and of the figures of which Dr Gray was aware. According to Ernst & Young the valuation range for the SIR-Spheres was between $13,526,000 and $9,834,000. That for the DOX-Spheres was between $4,883,000 and $3,726,000. Reference was made to the targeted hyperthermia technology which was valued at nil because of the high discount rates applied, the costs to commercialisation and a number of years to commercialisation. It was not otherwise referred to in the report.
758 It appears that a meeting of the directors of Paragon Medical was held on 3 May 1995. Draft minutes for a meeting on that date were circulated by Mr Boyce on 8 May 1995. At the meeting on 3 May 1995 it was resolved to ask Deloitte Touche Tohmatsu (Deloittes) to become company auditors. Dr Gray declared his associations with LCI, RPH and the CRI. Mr Karlson was to introduce Dr Gray to Kevin Edwards and Andrew Thompson with a view to appointing them as company solicitors. Challenge Bank was to be used as the company bankers. Dr Gray and Mr Boyce were authorised to sign on behalf of the company.
759 A meeting of the board of directors of Paragon Medical took place on 17 May 1995. Messrs Karlson, Gray and Jones were present. Dr Gray reported a positive response from Delta West and that a meeting would be held in two days time to set up an alliance with Upjohn. Mr Karlson indicated that before anybody could approach investors a discount factor needed to be finalised by the board members. This would require finalising details for the absorption of intellectual property into the company structure. A meeting was arranged for Monday, 22 May 1995 with Edwards and Thompson, Solicitors for advice regarding the structure of the company in preparation for a public float.
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Gray deals with ANSTO - February/June 1995
760 On 10 February 1995 Dr Gray, using the LCI letterhead wrote to Mr Sinclair, the Director of Australian Radioisotopes at ANSTO. The letter began:
Following a meeting of our Company Board this week, I was requested to contact you further to our recent conversation to clarify some aspects of our proposal for commercialising the Yttrium-90 project.
The company being referred to was not LCI but the putative "Newco".
761 Dr Gray went on to reiterate the history of the previous ten years in relation to the Yttrium project. He referred to the treatment of patients which had commenced in 1987. He said that since that time "we have treated over 100 patients in Perth and about the same number in Hong Kong". Other isotopes as well as Yttrium had initially been evaluated. Yttrium proved superior and they concentrated on that. ANSTO was not aware of much of that evaluation as some of it was done through another entity, Amersham. The letter went on at some length and then said:
In preparation of the commercialisation of the Yttrium microspheres, our company have entered into a number of alliances with other agencies. Our board has a detailed business plan for penetrating key markets in the near future and we are well advanced in structuring the financial aspects of this development from both governmental and private sources. We would like to see ARI playing a key role in this development, and this has been the subject of numerous discussions over the past two years with ARI.
He referred to links said to have been established with two major US centres for evaluation of the product in the USA and added:
In addition, we are well advanced in formalising business arrangements to promote the Yttrium microspheres on a worldwide basis. As previously discussed with you, our Company does not require any funding from ARI, as all costs associated with the project would be borne either by or through, our Company structure.
He had invited ARI to be a "major player in commercialising the product". The letter gave the impression that treatment and other work which had been done in relation to the development of Yttrium had been done by the company. This was plainly untrue.
762 Dr Gray was cross-examined on the letter and referred to his assertion in the history that:
Since '82 we have had a number of full-time staff working in the area of Yttrium microsphere technology.
He said that should have been 1980. It was put to him that he would not include UWA staff in that description. He said:
Yes. I would not, you're quite right. I wouldn't. No
He was not sure what he meant by saying in the letter that since 1991 results data had been generated under cover of a confidentiality agreement. He agreed that the letter referred to SIRT-1 technology in relation to patients treated in phase 2 trials. SIRT-2 had never been used on a patient. As to the use of LCI letterhead, Dr Gray said that he used that because at the time there was no company letterhead.
763 Dr Gray signed the letter over the designation "Professor of Surgery" and the designation "Medical Director". He said that he was not speaking on behalf of the LCI when he wrote the letter but rather on behalf of himself and Messrs Karlson and Jones and the notional company.
764 Mr Sinclair replied to Dr Gray on 27 March 1995 referring to his letter dated September 13, 1994. Mr Sinclair said that ANSTO was prepared to negotiate in good faith for a licence to irradiate and sell Yttrium90 microspheres in Australasia and Asia. However it had to be satisfied on a number of important issues including an examination of the intellectual property owned by the LCI to determine whether it was novel, unpatented and did not infringe patents owned by third parties. He said:
I understand that the Institute has set up an incorporated entity which will conduct the future development of the project and which will hold the intellectual property to Yttrium-90 microspheres. I assume that future negotiations will be between ANSTO and that incorporated entity.
In cross-examination Dr Gray accepted that as at 27 March 1995 LCI had no intellectual property associated with the SIRT microspheres. Nor did it have any intellectual property in relation to the DOX-Spheres or the Thermo-Spheres.
765 At one point in his cross-examination Dr Gray said he would take the reference to LCI in the letter and replace it with a reference to CRI. He said that he had confused the position by writing on LCI letterhead. He believed that he had conveyed to Mr Sinclair that CRI not LCI was going to set up an incorporated body to conduct the future development of the project. It was put to him that he meant he himself was going to set up an incorporated entity. He denied that.
766 On 31 March 1995, again writing on LCI letterhead, Dr Gray sent Mr Sinclair copies of a proposed Confidentiality Agreement which he asked him to sign and return. The terms of that agreement proposed that it be made between ANSTO and Dr Gray.
767 On 8 May 1995 Mr David Sinclair, the Director of ARI wrote to Dr Gray at LCI advising that ANSTO's solicitor had reviewed a proposed Confidentiality Agreement provided by Dr Gray. He expressed some puzzlement as to why the Confidentiality Agreement which had been sent was with Dr Gray as an individual. It was his understanding that LCI was to be the other party. The draft Confidentiality Agreement which accompanied the letter of 8 May 1995 showed the parties as LCI and ANSTO. Dr Gray made handwritten alterations with the apparent intention that the parties should be Paragon Medical and ANSTO.
768 On 9 June 1995 Dr Gray wrote to Mr Sinclair, this time on Paragon Medical letterhead. He said that LCI was not the proprietor of the technology. The technology for the new microspheres, including techniques currently being used to manufacture Yttrium microspheres, had been "consumed by Paragon Medical Ltd, a public company set up to promote a range of targeted anticancer technologies". Dr Gray said he was happy with the draft that ANSTO's solicitor had prepared, but the party had to be altered to Paragon Medical (in lieu of LCI). He was asked in cross-examination what technology he was referring to in the letter and said he thought it was SIRT-2. However he agreed that ANSTO was manufacturing SIRT-1 microspheres. Asked to explain how Paragon Medical had "consumed the technology", Dr Gray said that there was an agreement between Newco and CRI that all of the targeted technology being patented and owned by CRI would be vested in Paragon Medical. He said that this had been done by agreement. He did not believe there had been a formal written assignment from CRI to Paragon Medical at the time of the letter to ANSTO. He said by June 1995 there had not been a formal assignment but "… there was a clear contract by dint of a handshake contract that that's what would occur at some subsequent stage".
769 On 28 June 1995 Mr Sinclair sent Dr Gray two copies of the Confidentiality Agreement to be signed and one returned to ARI. The Confidentiality Agreement was signed on behalf of Paragon Medical by Dr Gray and dated 20 June 1995. It recited, inter alia, that Paragon Medical was in possession of technical and business information of a confidential nature concerning the manufacture of Yttrium microspheres. It was interested in discussing with ANSTO technical and business information to determine whether the parties wished to establish a business relationship and wanted to ensure that the confidentiality of its technical and business information relating to the topics to be discussed was preserved.
Paragon Medical approaches Tolhurst - June 1995
770 Mr Karlson said that Paragon Medical wanted to raise $3 million by way of capital to allow for the completion of clinical trials and development of the products. This was to be spent over a period of two years in order to prepare the company for a public float. Part of the preparation for that capital raising was the valuation by Ernst & Young which was provided on 2 May 1995. Dr Gray was actively involved in its preparation. Mr Karlson did not recall having any active involvement.
771 At this time Mr Karlson was employed as a consultant to Tolhurst. He introduced Dr Gray to Messrs Richards, Whitely and Tilley at Tolhurst. He sent a fax to Dr Gray on 1 June 1995 enclosing his thoughts on what to do following a meeting that they had with Tolhurst personnel the previous day. Necessary steps included the preparation of an information memorandum, an underwriting agreement to raise $2 million and a number of legal agreements. The agreements would involve the transfer of intellectual property from Dr Gray, CRI and LCI. They would also involve arrangements with RPH, UWA, ARI, Upjohn and Seed Capitalists.
772 On 15 June 1995 Dr Gray, as Managing Director of Paragon Medical, sent a memorandum to the other directors referring to the meeting which had been attended by Mr Karlson, Mr Jones and himself with Messrs Whitely and Tilley from Tolhurst. Tolhurst had indicated it could raise capital in the order of $2 million but would require upfront funding to generate a document which they would use to raise the capital. Dr Gray recommended that all activity from Tolhurst should be done on a success fee basis only. In his memorandum Dr Gray also referred to meetings he had had with the Strategic Industry Research Foundation in Melbourne and Rothschilds Australia Ltd.
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Paragon Medical board meeting - August/September 1995
773 The first meeting of the board of Paragon Medical after 17 May 1995 was on 10 August 1995. One of the items of business was the raising of venture capital. Dr Gray and Mr Karlson spoke of a meeting earlier that day with Bain & Co who proposed a syndication package for intellectual property to be purchased by Paragon as it probably qualified for pre-1985 capital gains taxation exemption. Some discussion ensued about the mechanism for transferring intellectual property into Paragon Medical. This was subject to further clarification from Bain & Co., Tolhurst and Deloittes. It appears that at that stage a draft Information Memorandum had been prepared by Tolhurst. It was discussed and broadly accepted in principle. Mr Karlson was cross-examined about the last entry in the minutes. It was his understanding at the time that Dr Gray and CRI effectively owned and controlled the intellectual property.
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774 The next meeting of the directors of Paragon Medical took place on 25 September 1995. The minutes recorded that several meetings had been held with Tolhurst over the previous weeks. A target list for potential venture capitalists had been identified and Tolhurst would be approaching them on the east coast and in Western Australia.
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The Tolhurst Information Memorandum - September 1995
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775 The Tolhurst Information Memorandum was prepared in September 1995. The memorandum stated in the "Executive Summary" that Paragon Medical proposed to raise $3 million of equity funding to assist in the commercialisation of its range of new products for the treatment of liver cancer and for further research and development of associated technologies. The summary stated:
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Paragon is an unlisted public company based in Western Australia. The Company and the owners of the technology have reached agreement for the Company to acquire the exclusive rights to develop products and intellectual property designed and patented by Professor Bruce Gray, a director of Paragon, and others after 10 years of research and development.
Product acceptance and commercial success was said to be dependent upon successful completion of clinical trials and regulatory approval. Clinical results to that date were said to be "very positive" and to support the likelihood of establishing a market for the product. The three primary products were identified as SIR-Spheres, DOX-Spheres and hyperthermia.
776 Under the heading "Products and Intellectual Property" the Information Memorandum stated:
Paragon is developing a number of new products for the treatment of primary and secondary liver cancer. These products have been developed by Professor Bruce Gray, a director of Paragon, and others over a number of years. Paragon has reached agreement with Professor Gray to acquire the exclusive rights to develop the products and their associated technologies.
A product development for each of SIR-Spheres and DOX-Spheres and for the targeted hyperthermia program was set out in the memorandum.
777 The directors of Paragon Medical at the time were Dr Gray, Mr Karlson, Mr Peter Jones and Professor Arthur Li. The memorandum referred to CRI as "a non-profit organisation focussed on cancer research" and as a tenant of the MRF facility. Dr Gray was described as Medical Director of CRI. It had "undertaken research development and manufacture in the same core areas of technology that Paragon has now purchased and intends commercialising".
778 Financial forecasts of returns from each of the technologies over a 15 year period were set out in the memorandum. They projected a total cashflow after tax in years 13 to 15 of $190, 692,000 made up of $152,658,000 for SIR-Spheres, $9,258,000 for DOX-Spheres and $38,312,0000 for targeted hyperthermia, all less $144,039,000 in costs and $9,536,000 in corporate costs. The net present values of each of the products, said to have been estimated by the directors of Paragon Medical, were:
Product Low High
SIR-Spheres $10,000,000 $13,500,000
DOX-Spheres $ 3,500,000 $ 5,000,000
Hyperthermia $ 1,500,000 $ 3,500,000
Less Corporate Costs ($ 2,000,000) ($ 3,000,000)
Total $13,000,000 $19,000,000
779 A proposed equity structure and milestones were set out. They involved the following elements:
Stage 1 - 6 million fully paid 20 cent ordinary shares to issue at a premium of 30 cents per share to investors for a $3 million equity injection and 6 million fully paid 20 cent ordinary shares to issue at a premium of 30 cents per share to Dr Gray (and associated parties) for the acquisition of the exclusive rights to develop the technology.
Stage 2 - 1,500,000 fully paid 20 cent ordinary shares to issue at a premium of 80 cents to Dr Gray upon the successful completion of each of the phase 3 clinical trials of the SIR-Sphere product being conducted in Hong Kong and Australia.
Stage 3 - 2,000,000 fully paid 20 cent ordinary shares to issue at a premium of 80 cents per share to Dr Gray upon FDA approval of any two of the SIR-Sphere, DOX-Sphere or targeted hyperthermia products (1,000,000 shares for each product approval).
Stage 4 - 5,000,000 fully paid 20 cent ordinary shares to issue at a premium of 80 cents per share to Dr Gray upon achievement of profit targets as further consideration for the acquisition of the exclusive rights to the technology.
In addition to the above, CRI as joint owner of the DOX-Sphere technology was to receive a royalty payment from Paragon Medical calculated at 10% of the gross royalty received by Paragon Medical from the DOX-Sphere licensee. Paragon Medical would enter into a research contract with CRI on commercial terms for a period of at least eight years and would guarantee a minimum level of work of $250,000 per year for the contract period. The directors of Paragon Medical would consider public listing of the company to fund further research and the commercial production, marketing and distribution of its products. The memorandum anticipated a further capital injection of $8 million to $10 million required within the next 18 to 24 months. In the event the Tolhurst Information Memorandum did not yield any immediate response.
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Affiliation Agreement negotiations - August 1994/October 1995
780 On 9 August 1994 the Registrar, Mr Orr, wrote to Dr Gray enclosing a first draft of an agreement between LCI and UWA to give effect to the affiliation approved by the Faculty of Medicine and Dentistry on 21 June 1994 and by the Senate on 26 July 1994. The draft was said to be close to that made with Professor Constable's Ophthalmology and Visual Science Centre. The letter referred to a request from Dr Gray to have all LCI staff paid through the UWA payroll. That request was said to be "… more complex" and to require further consultation before the Registrar could give Dr Gray an answer. There was a handwritten note on the memorandum, presumably prepared by Mr Orr, of a discussion with Dr Gray which I infer followed the sending of the memorandum. The note said:
There is now a third party to join with the agreement - a commercial company (yet to be launched) to head up the technology transfer. The agreement is with their lawyer Jeremy Shervington, who will prepare amendments to the draft agreement to accommodate the third party. There is also a new party emerged (the Cancer Institute) who want to be included in any affiliation deal. They are a sub-group of LCI. Bruce Gray will send their constitution.
At this time, as appears later in these reasons, Dr Gray had begun the process of setting up a company, Paragon Medical, to commercialise the targeted microsphere technology.
781 Another copy of the same memorandum bore a handwritten note from Mr Orr to Professor Barber designated "P.V.C.(R)". Mr Orr said in that note:
This one raises plenty of issues partly because it is Bruce Gray. It focuses on the new rule for "counting" research grants which themselves raise questions for us. I think Bruce will try and exploit maximum benefit from the agreement so we must get it right. At present he wants all Institute staff to be paid by the University to save payroll tax.
Professor Barber said in cross-examination that this notation in August 1994 specifically drew Dr Gray to his attention. In fact, as appears later in these reasons, he had met with Dr Gray in May 1994. Mr Orr also asked, in his handwritten note, whether the matter could be discussed at a Vice-Chancellors' Friday morning meeting. In those days the meetings comprised the Vice-Chancellor who was Professor Gale, Professor Barber, Professor Robson, Mr Orr and Mr Martin Griffith who was then the Executive Director of Finance and Property.
782 On 10 August 1994 Mr Orr wrote to Dr Stephen Jones referring to a letter from him of 25 July 1994 concerning access to UWA facilities. He pointed out that the draft form of agreement which he had sent to Dr Gray required UWA to provide access for LCI staff to UWA facilities. This would be likely to include access to library and computing facilities. The question of eligibility to apply for research fellowships and small grants was unresolved.
783 On 25 August 1994 Dr Gray wrote to Mr Orr on CRI letterhead. He indicated the desire of CRI to be included in the affiliation agreement between UWA and LCI. He attached a copy of its Constitution. He said that formal recognition of its affiliation with UWA would allow CRI to use the UWA name in fundraising and promotional activities. CRI was, at that time, raising a considerable amount of money and was about to embark on a major fundraising drive. Once affiliation was effected, the funds would be channelled through UWA. He said he would write further when the CRI's solicitor had had a chance to put in writing the requirements that would outline contractual arrangements regarding commercial money for research.
784 In his reply dated 31 August 1994 Mr Orr saw a real problem in getting the CRI affiliated as a principal partner in a formal association with UWA as it was clear from its Constitution that in spite of its title, it was an agency for raising funds and not an organisation actively engaged in research. One alternative he suggested was that in the Affiliation Agreement the LCI might be referred to as "the Lions Cancer Institute incorporating the Cancer Research Institute" to indicate a very close operational relationship between the two organisations.
785 The draft of the agreement sent by Mr Orr to Dr Gray on 9 August 1994 recited in cl 2.2 the general objectives of the LCI which have already been referred to. It provided, inter alia, that UWA would process applications for research funding to granting bodies from staff of the LCI who were also UWA staff. It would act as employer and paymaster for such staff as the LCI recruited as a consequence of grants processed through UWA. The LCI would direct current and future applications for grants from UWA staff through UWA in accordance with established UWA procedures. Clause 4.7 of the draft provided:
4.7 The proceeds from intellectual property developed by University funded staff and students at the Institute shall be divided between the contracting parties by negotiation.
4.8 Projects with commercial application which the Institute take on will operate with separate agreements which identify interests in the intellectual property, royalties and costs etc.
As appeared from the evidence of Mr James Lennon, the Affiliation Agreement was based upon template forms of agreement which were used by the Registrar in dealings with third parties for affiliation or for the establishment of collaborative centres for learning.
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786 The LCI board met on 16 August 1994. Dr Gray reported that affiliation with UWA had been granted for a five year period in the first instance subject to written confirmation. He also reported that considerable work was needed to settle the fine detail of affiliation. This included potential administration charges flowing to UWA and the possibility of funds flowing from UWA to LCI. He noted it was also necessary to look at the situation relating to "Intellectual Property" and that some decisions or policy formation might be urgently required in that area. A small subcommittee comprising himself, the Chairman of LCI Mr Robertsand Dr Stephen Jones was established to discuss areas of concern.
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787 On 7 September 1994 Professor Palmer wrote to Dr Gray indicating that he had a copy of the draft affiliation agreement between the LCI and UWA for comment. He said that overall the document looked excellent but he had a number of comments. He thought it essential to emphasise that LCI would approach its objectives on a cooperative basis with other cancer researchers in Western Australia. He also added comments on the respective obligations of the University and the LCI in relation to the enrolment of students and the need to distinguish between research appointments in the LCI and academic appointments in departments of UWA. Dr Gray replied on 20 September 1994 indicating that the board had a number of reservations about the document including the ones which Professor Palmer had raised.
788 The draft agreement was discussed at the LCI board meeting on 11 October 1994. The subcommittee had reviewed it. It was understood that Dr Gray would take up a number of issues with UWA. The meeting also discussed the position of CRI. A copy of a recently issued CRI brochure was tabled which apparently used the LCI logo. The board agreed that the matter required discussions between CRI and Dr Gray. The general view of the board was that there was a danger that LCI would lose its identity and that confusion would develop between the objectives of the two organisations. It was proposed that a meeting be set up with CRI to discuss the matter.
789 On 1 November 1994 Dr Gray wrote to Professor Gale seeking to discuss with her the implications of himself obtaining commercial funding for cancer research. He said that he was proposing to generate commercial funds that would be used for cancer research through the LCI and CRI. With the affiliation of the LCI with UWA there would be major benefits to UWA and he sought her approval for that initiative. Martin Griffith wrote a note to the Vice-Chancellor's personal assistant on the letter indicating that Dr Gray had called on the Registrar and himself to discuss his centre/company/fundraising conflicts. Mr Griffith said they did not have any major problems with the concept and had left it to him to talk to his lawyer and work out legal relationships and come back to them. They had heard no more at that time.
790 On 14 November 1994 Dr Gray sent a letter to the Registrar, Mr Orr, setting out his comments on the Affiliation Agreement. He said that both LCI and CRI were actively sponsoring research, albeit in relation to different projects. LCI was primarily involved in sponsoring skin cancer screening and a molecular oncology laboratory which, as appears later, was headed up by Dr Elizabeth Williams. CRI had sponsored controlled release cytotoxic studies and was establishing a program of research into breast cancer. He said:
The primary reason for seeking affiliation of the CRI together with the LCI is that the CRI has been actively seeking out corporate funds. If successful the CRI would be the conduit whereby commercial funds from the corporate sector are channelled into research. In the future, activities undertaken by the LCI may also attract commercial sponsorship and it would be necessary for both to be able to have those funds used through the University, via the affiliation document, in order to promote the Institute's research effort.
He acknowledged that the CRI's constitution did not state that it was actively undertaking research because that was not what was perceived when it was originally set up. However the board of CRI had indicated its intention to alter its constitution at the next annual general meeting. He said that CRI had its own letterhead, its own constituted board and its own fundraising committee and program of research.
791 Dr Gray made a number of suggestions about the terms of the agreement, including suggestions in relation to intellectual property provisions in clauses 4.7 and 4.8 of the draft as follows:
4.7 As the CRI is currently actively soliciting corporate funds, this statement should be clarified that all funds generated by the Institute would mean that intellectual property derived from those funds should be maintained under the control of the Board of the Institute.
4.8 We felt that this paragraph should be altered to read "Projects with commercial application which the Institute takes on will operate with separate agreements between funding bodies and the Institute."
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792 On 2 December 1994 Professor Gale wrote to Dr Gray noting that a meeting had been arranged for 5 December 1994 between herself, Professor Barber and Dr Gray. However she had been informed by the Registrar and the Vice-Principal (Mr Griffith) that the proposed legal relationship between the LCI/CRI and UWA had not been sorted out. She suggested they reschedule their meeting until the essential background work was done. A meeting was scheduled for 16 December 1994 with Professor Barber, Professor Schwartz, who had become the Executive Dean of the Faculty of Medicine and Dentistry and Mr P Johnson, the Assistant Registrar (Research). It seems that there was discussion of the affiliation arrangement at this meeting although there was no record of the meeting in evidence.
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793 There was evidence given by Dr Gray of a telephone conversation he had with Professor Gale in December 1994 and of which she had no recollection. That conversation concerned his proposal to establish a commercial vehicle and to seek commercial funding for the technology. It is dealt with later in these reasons in the context of his steps to commercialise the technology outside of the UWA framework.
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794 On 13 January 1995 Mr Orr sent Dr Gray a revised Affiliation Agreement which he hoped reflected the points raised during their pre-Christmas meeting. He said:
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What they are aiming for is a simple agreement which gives the Lion's Cancer Institute the benefits of affiliation with the University and protects it from financial exploitation, while ensuring that the University and the Faculty get their appropriate share of grant income to cover direct costs and overheads.
Mr Orr had coupled CRI with LCI in the definition but understood from the Dean that the Faculty wanted an opportunity to comment. Under the revised draft the parties to the agreement were "the University, the Lion's Cancer Institute in association with The Cancer Research Institute (the Institutes)". Clauses 4.7 and 4.8 dealing with intellectual property were unchanged.
795 Mr Orr again met with Dr Gray to discuss the contract in January or February 1995 and on 16 February 1995 sent a copy of a revised draft of the agreement to the Vice-Chancellor and Professors Schwartz, Robson and Barber, as well as Mr Griffith and Mr Johnson. He referred to the extended definition of "Institute" to refer to "the Institutes". In relation to intellectual property he said:
Clause 4.7 of the agreement which deals with intellectual property is not acceptable to the Institutes. They want us to differentiate between intellectual property arising from the work of commercial contract staff (should be exclusively to the benefit of the Institutes) and from the work of research grant staff (negotiable with the University).
He pointed out that Dr Gray wanted an agreement which would provide maximum benefit for the Institutes coupled with minimum requirements to comply with UWA policies and procedures. He said:
Given that the Institutes will be doing high level academic research into Cancer, we clearly have to go as far as we can to accommodate their wishes for which a somewhat unconventional agreement is needed.
796 Professor Barber, in cross-examination, described his involvement with the Affiliation Agreement process as "peripheral". The carriage of the matter was with Mr Orr. He recalled some discussions about it. Questions about intellectual property had been raised with him "fairly generically". He had no detailed recollection of any specific input he made into the affiliation agreement. He did not regard affiliation with a new cancer institute as a hot potato or a contentious issue, albeit there were concerns associated with the removal of potential funding from the Department of Surgery. The proposition that a sub-group of a department could be a beneficiary was a matter of concern to the Faculty. Professor Barber had no recollection of discussing Mr Orr's memorandum of 16 February at the Vice-Chancellors' meeting on the following day. However, he said that the concept of UWA centres had emerged as a way of regularising the interface between UWA and external institutes.
797 On 7 April 1995 Mr Orr again wrote to Dr Gray. He said that the coupling of LCI and CRI was achievable but more detail was required about the composition of CRI. UWA could not take on payroll responsibility for groups of staff outside award conditions. All grants generated by the LCI/CRI had to be processed through UWA and association with UWA was to be acknowledged in everything. He observed that negotiations had reached a stalemate. The position was further confused by a proposal from Mr Deverall of the Cancer Foundation for a global cancer research fund to which all charities would contribute and which UWA would administer by distributing resources in response to grant applications. He suggested another meeting. He sent a further version of the contract to Dr Gray on 19 April 1995. This incorporated the four points referred to in his letter of 7 April 1994. Clause 4.7 was in the same form as offered on 16 February 1995.
798 On 8 May 1995 the Acting Deputy Registrar, Ms Wendy Edgeley, sent a memorandum to Professors Robson and Barber, inter aliaindicating that the Registrar had sent a copy of the Affiliation Agreement to the Vice-Chancellor recommending that she sign it subject to "cosmetic" changes. A further version of the agreement was produced on 29 May 1995.
799 When Mr Orr returned from leave on 29 August 1995 the agreement had still not been resolved. He wrote to Dr Gray saying that UWA could not retreat from the 29 May document but should attempt to accommodate his concerns within it. On the question of intellectual property and clause 4.7 he wrote:
While it is recognised that the Institutes' staff and funds will almost exclusively lead to the development of such intellectual property as the Institutes produce, the University is a stakeholder in the operation and is playing a role of some significance in the partnership, otherwise why is there any need for the affiliation? As such it contends that it should have the right under the agreement to negotiate for a share in the intellectual property proceeds. It may not exercise this right, and if it does it is most unlikely that it would be seeking much more than a nominal recognition of its involvement in the partnership through some financial return. I cannot think that the University will wish to back down on this one and abandon its interests. However this is not something I can rule on and you may wish to contact Michael Barber to negotiate a compromise wording.
As was observed in the closing submissions on behalf of Sirtex, the letter indicated that Mr Orr considered UWA would have no greater interest in the relevant intellectual property than a right to negotiate for a small share.
800 On 5 September 1995 Mr Orr wrote again to Dr Gray with a revised proposal in relation to clause 4.7 to read as follows:
Clause 4.7 - to be softened to read as follows "The University shall be entitled to negotiate for a share of the proceeds from intellectual property developed by staff and students who are funded by Institute grants which are processed by the University." Both parties recognise that in normal circumstances the majority share of the proceeds will go to the staff of the Institutes.
Mr Orr also said that he was not really in a position to give a final verdict on the revised wording of the intellectual property clause and had copied his letter to Professor Barber. Professor Barber did not recall the words being referred to him for a final verdict and did not recall the details of his discussions in relation to the agreement. He suspected that he agreed with the proposed wording.
801 Mr Orr wrote to Dr Gray again on 20 September 1995 enclosing a copy of what he hoped would be the final version of the agreement. He wrote that Professor House had raised with him the question of Dr Gray's status in the Department of Surgery once the agreement was signed and his position in relation to the Institutes was thus formalised by UWA. He said:
Having thought about it for a while, my view is that your appointment was and still is, as a Professor of Surgery in the University and that as such you are entitled to retain a connection with the Department. Whether the new arrangement with the Institutes will have any affect on such funding as you may receive through the Department is a secondary question. In so far as you are continuing to do work for Surgery which is not a function of the Institutes' responsibilities as specified under the agreement it seems to me that you must retain the right at least to bid for an allocation appropriate to your needs.
He suggested that Dr Gray, Professor House and the Executive Dean of the Faculty negotiate a "modus operandi".
802 On 27 September 1995 Mr Orr sent a memorandum to Dr Joyner at Professor Robson's suggestion enclosing a copy of the proposed Affiliation Agreement. He asked Dr Joyner to confirm that the proposed agreement did not raise any particular problems for RPH. Dr Joyner passed that letter on to Mr Douglas King, the Manager of the Foundation. He wrote to Mr Orr on 18 October 1995 referring to the memorandum of agreement of November 1992 between LCI and the Foundation. He said there were clearly points of conflict in the areas of administration of funds, ethics approval and the role of direction. He wrote:
Due to these conflicts, it is quite clear that the Lions Cancer Institute cannot maintain both Agreements. The Medical Research Foundation has no objection to the Lions Cancer Institute entering into an Agreement with the University and relinquishing its Agreement with the Foundation.
Mr Orr then wrote to Dr Gray on 20 October 1995 indicating that RPH had no objection to the affiliation agreement but that the Memorandum of Understanding with the Foundation would become redundant. He understood that this was acceptable to Dr Gray. On 30 October 1995 UWA, LCI and CRI entered into the affiliation agreement.
The Affiliation Agreement - 30 October 1995
803 The Affiliation Agreement was expressed to be made between UWA and "THE LIONS CANCER INSTITUTE in association with THE CANCER RESEARCH INSTITUTE". Its purpose was stated in clause 1, namely, to "facilitate the establishment of the Lions Cancer Institute and the Cancer Research Institute ("the Institutes") by defining their role and their relationships to the University of Western Australia as affiliated research institutes under Statute No 13". UWA's obligations under the agreement included the following:
3.1.1 To be the employer of staff funded by the Institutes.
3.1.2 To process all applications for research funding to granting bodies from staff of the Institutes through its own mechanisms, and to forward such applications under the name of the University.
…
3.1.6 To permit access to other University and Faculty funds and facilities normally available to departments on a competitive basis.
804 The obligations on the Institutes were set out in clause 3.2 and included the following:
3.2.1 To direct current and future applications for grants from staff through the University in accordance with established University procedures.
…
3.2.5 To permit the University to include in any report containing information on its own research activities a list of publications and research grants awarded through the University.
…
3.2.9 To provide supervision for research students enrolled for higher degrees in appropriate academic fields, and such other teaching as may be agreed on from time to time between the Medical Director of the Institutes and the Executive Dean of Medicine and Dentistry.
3.2.10 To obtain clearance from appropriate University ethics committees before commencing experimental work involving human subjects or animals which is funded by grants awarded through the University.
805 Under the heading "RESPONSIBILITY AND AUTHORITY" in section 4 of the agreement, clause 4.1 provided:
4.1 The Medical Director of the Institutes will be accountable for the total operation of the Institutes to the Boards and be appointed for five years or at the sole discretion of the Board. The Medical Director will normally be a professor or associate professor employed by the University and as such will be a member of an appropriate department in the Faculty of Medicine. As a University employee the Medical Director will also be responsible to the Vice-Chancellor through the Executive Dean of Medicine and Dentistry.
4.2 The Medical Director will be expected to operate within the established regulations and procedures of the University, including protocols governing animal and human ethics and will be accountable to the Executive Dean of Medicine and Dentistry for the expenditure of money received through the University.
…
4.5 All staff appointed to positions in the Institutes on funding provided through the Institutes will be employees of the University, will be paid through the University payroll system, and will be subject to standard University conditions of employment. The Medical Director of the Institutes will be responsible to the University for all employment related matters.
…
4.7 The University shall be entitled to negotiate for a share of the proceeds from intellectual property developed by staff and students at the Institutes who are funded by Institute grants which are processed by the University. Both parties recognise that in normal circumstances the majority share of the proceeds will go to the staff of the Institutes.
4.8 Projects with commercial application which the Institutes take on will operate with separate agreements which identify interests in the intellectual property, royalties and costs etc.
806 On 5 December 1995 Mr Dominic O'Neill, the Executive Officer of CRI wrote to Mr Tan of the RPH Accounting Department advising that CRI would be "transferring to the University of Western Australia to which it has been affiliated". He said that the salaries of Dr Stephen Jones and Ms Jillean Winter were "financial only to 31 December 1995". He asked for a calculation of their salaries to 26 January 1996 and said that CRI would provide RPH with the money to cover that additional amount.
807 Dr Gray wrote to Professor Palmer, the Acting Executive Dean of the Faculty of Medicine and Dentistry, on 14 December 1995 advising that LCI and CRI were in the process of transferring their staff from other payrolls into UWA. Following discussions with Ms Ann Johnson in Human Resources they had decided to move people across to UWA with effect from 29 January 1996. All appointments were to be made on a one yearly basis only. He enclosed "Recommendation to Offer Appointment" forms for the staff members under transfer.
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Paragon Medical board meetings - October 1995/February 2006
808 The Board of Paragon Medical met on 18 October 1995. Mr Karlson reported further approaches to potential investors. Deloittes had prepared a document for an Australian Taxation Office ruling on the pre-capital gains status of the technology.
809 The Board met again on 1 November 1995. Capital raising dominated the minutes. Reference was made to reports from Dr Gray about the DOX-Spheres Project, the SIR-Therapy trial and the Hyperthermia Project. Of the latter he said it was progressing well and "a further employee who will be undertaking a Doctorate Degree has been employed through the Institute to work on one aspect of this project". Dr Gray said in cross-examination that he thought this was a reference to Simon Harrison.
810 The Board met on 23 November 1995. Approaches to politicians to lobby for changes to rules governing syndication proposals to go to the Industry Research and Development Board, for the purpose of attracting tax concessions, were discussed. Dr Gray was asked to produce "a flow chart of future costs of patents of the three products".
811 On 13 December 1995 the Board met again. Dr Gray tabled a submission to the Department of Commerce and Trade for a $50,000 grant under the Western Australian Innovation Support Scheme for Research and Development. The application related only to the Hyperthermia Project.
812 At a meeting of the board of directors of Paragon Medical on 1 February 1996 Mr Karlson reported that Tolhurst had not been successful in raising venture capital and that other options were being canvassed. Dr Gray said he would get in touch with JB Were & Co to discuss its potential involvement in venture capital raising and in a public float.
813 The next meeting took place on 14 February 1996. At that meeting Dr Gray "outlined the time and costs for the three patents currently covering the intellectual property of Paragon". The first substantial next cost would be in June when an amount of $50,000-$60,000 would be required to file the patent for the SIR Spheres. The patents and associated costs were referred to in an attachment to the minutes which set them out in tabular form thus:
PATENTS
PROVISIONAL P.C.T. INTERNATIONAL
PATENT REGIONAL
APPLICATIONS
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HYSTERESIS 23.12.1994 -
HYPERTHERMIA (Lapsed)
[102]
DOX SPHERES 23.11.1993 21.06.1995 Approx. December
1996
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PROVISIONAL PATENT $1,000
1/12 LATER - P.C.T. $9,000
4/12 LATER - INTERNATIONAL SEARCH REPORT
3/12 LATER - APPLICATIONS PUBLISHED
1/12 LATER - INTERNATIONAL PRELIMINARY EXAMINATION $1,000
11/12 LATER - FILE NATIONAL PATENTS $50-60,000
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814 Mr Karlson said in cross-examination that he understood that the patents were not in the name of Paragon Medical as the transfer of the intellectual property awaited finalisation of structuring and tax advice. Nevertheless as at February 1996 Paragon Medical was meeting the patent costs. He accepted also that Dr Gray personally paid an amount of $8,500 to Deloittes for its submission to the Australian Taxation Office and had done so on behalf of the company.
Gray's directorship - Gale's response - November 1995/January 1996
815 On 23 October 1995 Dr Gray wrote to Professor Stephen Schwarz, then Executive Dean of the Faculty of Medicine and Dentistry. He said he was writing to advise of further developments in the research effort in LCI and CRI. He wrote:
A non-listed public company has been formed (Paragon Medical Ltd) in which I am a Director. The purpose of that company is to undertake research and development on medical products.
The company has no assets and no fees or income is provided to any Directors. However, it is our intention to use the company to attempt raise [sic] investment capital which would be used for medical research, which hopefully will eventually provide a profit for the company.
It is our intention to use the Cancer Research Institute which is affiliated with the University, as the vehicle to conduct this research. Hopefully this would provide substantial financial benefits to the Institute and therefore to the University.
If and when the company becomes profitable I would expect a financial return from that company, as would other Directors.
I am aware that if this venture is a success, it could impinge on my ability to fulfil my duties with the University. Should that happen I will inform the University through your office accordingly and make appropriate arrangements so that the University's interests are protected.
He also undertook to bring any contract research undertaken by the Institute to UWA at such time as was appropriate.
816 The letter was sent to Professor Schwarz at about the time he left UWA. Professor Palmer was appointed Acting Executive Dean of the Faculty on 1 December 1995. It appears that Professor Palmer dealt with the letter. His initials appear at the bottom under the handwritten word "endorsed". It was Professor Palmer's practice to write "endorsed" on proposals that he supported in principle. This did not mean he had authority at the time to approve any proposal that a person become a director of a company. I accept however that he gave his support to what Dr Gray was undertaking according to his letter.
817 The letter was referred to the Vice-Chancellor, Professor Gale, and by her office to UWA's solicitor, Linda Key. Linda Key caused a company search to be undertaken on 14 December 1995. The search disclosed Dr Gray's directorship of Paragon Medical with effect from 19 April 1995. Ms Key then sent a memorandum to Professor Gale on 21 December 1995. She noted that Professors Paterson and House had both approved Dr Gray's proposal. Ms Key pointed out that Dr Gray's letter was not so much a proposal as for information. She added:
… as to future interference with his University duties he indicates that he will inform the University of it and make appropriate arrangements so that the University's interests are protected.
818 Ms Key drew Professor Gale's attention to the conflict that could arise. If Paragon Medical were to make a profit out of medical research and CRI and UWA were to receive financial benefits as the bodies undertaking the research, then Dr Gray could not negotiate on their behalf with Paragon Medical. She distinguished Dr Gray's position from that of Professor Constable in the Lions Eye Institute. Professor Constable held no directorship in any commercial venture which might enter into research arrangements with UWA.
819 Professor Gale wrote to Professor Palmer on 23 January 1996 and referred to the potential for a conflict of interest. She mentioned recently revised UWA policy guidelines requiring her permission before a staff member could become a director of a company. She said:
Our recently revised guidelines on Consultancies require staff members to have my permission before they become company directors except if a company is 'not for profit'. Professor Gray indicates his company is intended to be profitable in the future. It may thus be necessary to suggest to Professor Gray that his directorship of Paragon Medical Ltd may potentially be in conflict with his position at the University.
Prior to this, I believe that clarification is required on whether there is an exact parallel between the situation of Professor Constable and Professor Gray, as referred to by Professor House. Could I ask you to look into this and let me know if these two cases are the same.
820 Professor Palmer did not recall receiving the letter but had no reason to doubt that he did. There is no evidence that he followed up on the request by Professor Gale. He did write to Dr Gray six days later on 29 January 1996 concerning Dr Gray's relocation into the proposed Centre for Applied Cancer Studies which is discussed later in these reasons. He made no mention of the Paragon Medical directorship.
821 Professor Barber's recollection was that he had been aware of Dr Gray's directorship of Paragon Medical when Linda Key brought it to his attention in or about December 1995. He agreed that he was aware from that time that Dr Gray was a director of Paragon Medical and that the company would be working in conjunction with the Institute. He was aware that Paragon Medical was interested in the commercialisation of research. He said he would have discussed the matter with Professor Gale. They tended to discuss such things at the executive team meetings on Friday mornings.
822 Professor Gale had no recollection of a response from Professor Palmer to her letter of 23 January 1996. She did not take any action by way of letter or other communication with Dr Gray. It was put to her in cross-examination that she did not follow up with him. She said:
Professor Gray had specifically said he would let me know if it came to any point of conflict and I had believed that.
On Dr Gray's assurance she was prepared to accept his continuing as a director of Paragon Medical.
823 It was put to Professor Gale that from January 1996 Dr Gray's directorship of Paragon had been approved by her subject to him undertaking to keep UWA informed of any conflict. She said:
I guess you could read that. I mean I certainly believe that I would hear when there was likely to be any conflict from him as he had promised me and Professor Palmer.
She was pressed on whether the directorship had been approved and said it was not approved "in the sense of having a written letter saying it was approved". She did not raise any objection or concern with Dr Gray.
824 Professor Gale's answer in cross-examination indicated that she was prepared to accept the continuance of the directorship on the assurance that Dr Gray would raise potential conflict concerns with UWA. It is not a reflection upon Dr Gray to say that such an assurance from the person likely to be directly affected by the conflict might be thought less than reliable. This does not affect the characterisation of Professor Gale's conduct which, in my opinion, amounted either to a permission within the terms of the UWA policy or a waiver of its strict application.
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Paragon Medical approach to Western Australian Innovation Support Scheme - February 1996
825 On 20 February 1996 Paragon Medical applied to the Western Australian Innovation Support Scheme (WAISS) for a grant for the development of targeted hyperthermia. The Executive Summary of the application began:
Paragon Medical Ltd has acquired intellectual property developed in Western Australia for inducing highly localised hyperthermia for the treatment of cancer. This technology has been developed as a result of a major research program undertaken over the past six years. Paragon Medical Ltd now requires to undertake a final research and development program in order to commercialise the technology and bring the products of the research to the market place.
826 Dr Gray was cross-examined on the text of the application. He said he would have been involved in its preparation but did not write it. He maintained that Paragon Medical had acquired intellectual property in the hyperthermia technology. He said:
I didn't believe at that stage there had been any formal written agreement but the understanding is absolutely consistent with that.
He said that the intellectual property had been acquired from CRI. He had earlier accepted that there had been no transfer of intellectual property to CRI. He then said in cross-examination:
It didn't require an assignment. It didn't require a formal written assignment.
827 Under the heading "PROJECT RESOURCE" the document stated that Paragon Medical had immediate access to "… the extensive and dedicated laboratory facilities of the Cancer Research Institute Inc". The facilities were said to consist of "eleven dedicated research laboratories". Dr Gray was asked whether he was claiming that CRI had eleven dedicated research laboratories at the Foundation. He said it was just a statement that they had access to them. He accepted that some of the laboratories were being used by UWA. The application also stated that Dr Stephen Jones had been employed for six years as a research scientist on the hyperthermia project. Dr Gray accepted that that was an inaccurate statement because Dr Jones was doing other things as well. As was pointed out in cross-examination Dr Jones was employed by UWA for part of that six year period.
828 Under the heading "COLLABORATORS" the document said that CRI had "… a full complement of research facilities that are at the disposal of Paragon Medical Ltd". It added that the facilities included "several laboratories that have been purpose built and are dedicated to this hyperthermia research project". Dr Gray said in cross-examination that the laboratories were in the animal house at RPH. There was a special facility in the RPH Research Centre. A Faraday Cage had been built there specifically for the project and for use on all sorts of animals. There was also a magnetism laboratory in the Physics Department at UWA to which CRI students had access and which Dr Stephen Jones used on occasions. On any view, the statements about laboratory facilities available to Paragon and CRI were exaggerated and gave an incorrect impression of the scale of the CRI operation at that time.
829 The application to WAISS was successful as appears from a letter dated 10 April 1996 from the Western Australian Department of Trade and Commerce to Paragon Medical. The total amount of the grant was $50,000.
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Paragon Medical board meeting - 28 February 1996
830 The board met again on 28 February 1996 with representatives from Tolhurst Corporate who suggested that the Japanese market could be receptive to high technology projects. An arrangement had been made to meet with a Mr Kiyoshi Arai that day. That meeting was to lead to the involvement of the Japanese technology investment company Nomura/JAFCO in raising capital for Paragon Medical.
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Gray/Hall conflict at RPH - the CACS proposal - December 1995/February 1996
831 On 15 December 1995 Dr Rex Joyner, the CEO of RPH, wrote to the Vice-Chancellor of the University, Professor Gale, about what he called "a long standing situation of conflict within the University Department of Surgery at the Royal Perth Hospital". The conflict had created problems in attracting and retaining academic surgical staff at the hospital and had been detrimental to the development of a surgical academic presence there and therefore of surgical services. He said:
In recent months, this conflict has assumed a crisis proportion which has seriously impacted on the hospital and has culminated with a request by the Associate Professor of Surgery, that he and his research group be removed from the Royal Perth Hospital campus. This request has been addressed by the Head of the University Department of Surgery, Professor Tony House, and related to quite unsatisfactory work conditions.
The Associate Professor of Surgery concerned was Dr John Hall. There was other evidence going to the disputation between Dr Gray and Dr Hall. It is not necessary for present purposes to canvass that evidence. The dispute is significant primarily as the background to the formation of the CACS, which was designed to resolve it.
832 Dr Joyner said the request was naturally of great concern to RPH as Associate Professor Hall was not only a valued member of the clinical and academic staff of the hospital but had also played a significant role in the changed management process which it was currently undergoing. The hospital was especially concerned about the likely ramifications of such a move by Professor Hall and his group, the implications of which they were led to believe would result in the withdrawal of surgical undergraduate teaching at the hospital by UWA's Department of Surgery because of lack of adequate supervision. Dr Joyner wrote:
The loss of Associate Professor Hall would seriously impair the hospital's Department of Surgery functions and our ability to develop surgical services at a super specialty level and result in a further diminution of our resource base in surgery.
He acknowledged that Professor Robson had used his influence to try and obtain a resolution to the problem. He felt that while hard decisions might have to be made, they were essential if the continued viability of an academic surgical presence on the site was to be maintained. There was an urgent need for UWA to take appropriate action. A copy of the letter was sent to Professor Palmer, then the Acting Executive Dean of the Faculty of Medicine and Dentistry. The letter, which was exhibited to Professor Palmer's affidavit of 28 February 2007, was admitted as evidence of the fact of the communication and not as to the truth of its contents. Professor Palmer did not recall having received a copy of the letter but was familiar with the matters raised in it. Those accorded with his recollection of the issues that the Department of Surgery was confronting at the time and that these related in large part to personality conflicts within the department between Dr Gray and others.
833 Professor Palmer attended a meeting at the Vice-Chancellery soon after his appointment as Acting Executive Dean of the Faculty. Professor Robson and Dr Gray were there along with other academic surgeons in the Department of Surgery. The meeting concerned Dr Gray's work within the department. About the time of that meeting, Professor Robson asked Professor Palmer to sort out the problems within the department. He recalled meeting with Dr Gray in late 1995 and/or early 1996. The matters they discussed were of an administrative nature and involved him exploring ways to solve the problems within the department.
834 Professor Palmer recalled an agreement reached to settle the problem which involved the "relocation of Professor Gray". This was not a physical relocation, but rather an administrative adjustment so that Dr Gray was no longer required to report to the Head of the Department of Surgery, notwithstanding that he remained a part of the Faculty of Medicine and Dentistry. Between December 1995 and February 1995 Professor Palmer was involved in negotiations with Dr Gray, the Department of Surgery and RPH to establish Dr Gray in what became known as CACS.
835 Professor Palmer wrote to Dr Gray about CACS proposal on 29 January 1996. He summarised their discussions to that date which he hoped would provide a basis for a settlement. The essential elements of his summary were as follows:
1. The establishment of a centre within the Faculty of Medicine and Dentistry based upon the existing structure of the CRI. The centre would have the status of a department within the Faculty and its director would report to the Executive Dean. The budgetary allocation would be determined on an annual basis in accordance with the Faculty's budget model.
2. The Department of Surgery would provide the equivalent of 0.7 of Dr Gray's salary for a period of up to five years. If he chose to convert his appointment to a part time one, salary savings could be used to support a research division in the Centre.
3. RPH would continue to provide 0.3 of his salary providing he maintained his current level of clinical responsibilities at the hospital.
4. RPH would continue to provide 0.75 of the salary of Ms K Brown, his secretary, for five years or until she vacated the post.
5. The Faculty of Medicine and Dentistry would calculate the EFTSU load for students taught by Dr Gray in his capacity as a consultant surgeon at RPH as part of the surgery component of the MBBS course.
6. The Faculty, the Department of Surgery and RPH agreed not to create a position of Professor of Surgery at RPH for a period of two years following Dr Gray's relocation to the proposed Centre.
One unresolved issue was that there was little prospect of finding resources to fully fund the position of a research officer in the proposed Centre. Professor Palmer was prepared to open negotiations with concerned parties to see if it were possible to provide $20,000 pa for five years towards such an appointment. A copy of the letter was sent to Professor Robson and to Dr Beresford, the Director of Clinical Services at RPH.
836 The minutes of a meeting of the board of CRI held on 15 February 1996 record Dr Gray, as Medical Director, speaking at length about the Institute becoming a Centre at UWA to be known as CACS. A diagram of the relationship between LCI and CRI and UWA was attached to the minutes. It showed both LCI and CRI comprising the proposed Centre with a reporting line to the Executive Dean of the Faculty of Medicine and Dentistry. The UWA Department of Surgery was shown as a separate entity having its own reporting line to the Faculty. At this meeting, Mr Dane Gorn was appointed to chair the Board of Management of CRI and Mrs Mirmikidis who was the Acting Chair vacated in his favour.
837 The Board of the Faculty of Medicine and Dentistry met on 20 February 1996. The minutes of the meeting recorded that members noted a proposed agreement for the establishment of a Centre to replace the Faculty's former affiliation agreement with LCI and CRI. Professor Palmer told the meeting that the proposal was strongly supported by the Department of Surgery and RPH and suggested that the Centre be called "The Centre for Applied Cancer Studies". Professor House reported that an agreement had been reached with CACS which would see post graduate students enrolled through it.
838 As a Category B Centre, the proposed Centre would require an external partner and would only survive if successful in gaining funding through its research strength. This differentiated it from Category A Centres which were formed within departments. Members noted that CACS was required to report annually to the Executive Dean and was to be reviewed at the end of five years of operation. The Board resolved to recommend to the Vice-Chancellor the formation of a Category B Centre to be named "The Centre for Applied Cancer Studies" in partnership with LCI and CRI under and agreement which was attached.
Harrison - rotational hysteresis research 1996
839 Simon Harrison returned to Perth in September 1995 and shortly after his return began working again with Dr Stephen Jones. He was offered a scholarship by CRI on a weekly stipend of $261.80 from 2 October 1995 to 22 December 1995. He accepted the offer. During that time be began working on what was to become his PhD thesis. However he did not enrol in the PhD program at UWA until early in 1996. He recovered custody of the RSM from Paul Gouteff who had improved its measurement by incorporating a "lock in amplifier" which excluded unwanted noise. When he started working on his PhD research Dr Jones took him to meet Dr Gray.
840 Dr Harrison submitted his PhD thesis proposal to UWA on 1 March 1996. He identified Dr Jones and Professor Street as his supervisors. His proposed project was entitled "Rotational Hysteresis Measurements and their Applications". The aims of the project, as set out in the research proposal which he submitted to UWA, included the following:
1. To develop instrumentation capable of making magnetic rotational hysteresis measurements for materials in magnetic fields rotating in the frequency range of 0-20kHz.
…
4. To contribute to the design and construction of a device capable of producing rotating magnetic fields safe for human exposure over a region large enough to accommodate a person.
5. To produce magnetic microspheres suitable for targeted delivery to hepatic tumours. The technology to produce such microspheres and to deliver them to tumour sites in the liver is already well developed.
6. To conduct in vivo tests to assess the effectiveness of induced hyperthermia treatment of liver cancer via rotational hysteresis heating of magnetic microspheres embedded in and around the tumours. These experiments will require animal ethics approvals.
Under the heading "Estimated Costs" he estimated that the annual cost incurred by CACS and the Department of Physics would be $5,000. The estimated annual costs "borne by private sector financial support, averaged over three years" was $350,000.
841 Under the heading "Confidentiality" Dr Harrison wrote:
It is likely that intellectual property issues will need to be considered with this project. As such it may be necessary for the thesis arising from this project to contain information that may be considered to be confidential and/or subject to confidentiality agreements.
842 Dr Harrison was based at UWA's Department of Surgery at the Medical Research Foundation Building for 40 hours a week, four days a week while working on his PhD thesis. He also had a desk in the HiPERM laboratory. He renamed the RSM as the RSCM standing for "Rotating Sampling Coil Magnetometer". He began work on improving the accuracy of hysteresis measurements using the RSCM. This improvement work continued intermittently as and when he received materials for the RSCM until he left for the United Kingdom in 2000.
843 Dr Harrison was aware of the establishment of CACS in 1996. He knew nothing of the reasons for the change from the Department of Surgery to CACS. He and Drs Gray and Jones worked in the same premises on Level 2 of the Medical Research Foundation building. Payment of his Australian Postgraduate Award Fund was unaffected.
844 Dr Harrison wrote a project status report on 9 May 1996. In it he referred to modelling which he undertook as a result of observing electromagnets within the Department of Physics generating fields in excess of what the core material was capable of generating. At the time Dr Jones was investigating the use of electromagnets with core material to generate rotating fields suitable for human application. Dr Harrison hypothesised that fields could be generated suitable for use in a clinical human hyperthermia treatment without using core material. He said that he told Dr Jones at some point prior to May 1996 that a human size hyperthermia apparatus could be built with only coils and no core material. He said that Dr Jones encouraged him to undertake some computer modelling of his hypothesis. He undertook computer modelling of the distribution of magnetic fields generated by a coil configuration comprising two interlinked coil magnets orientated at right angles to each other and excited by alternating currents with a phase shift of 90° between them. This had the effect of generating a rotating magnetic field in the centre of the coils within the sample or treatment space. Dr Harrison presented these modelling results at a CACS seminar.
845 Dr Harrison also said in his evidence-in-chief that on 6 August 1996 Dr Jones emailed him seeking assistance in sourcing core material for the "BIG ONE" which he understood to refer to a human scale apparatus for hyperthermia treatment. Dr Jones told him he was going to do a training course interstate to learn how to use the modelling program. Subsequently, he saw Dr Jones working on an Indy computer for the design work. Dr Jones told him that he was working on a design for a human scale hyperthermia device. It would be a four pole device with core material. Dr Harrison frequently saw Dr Jones' designs for a human scale device. They featured exclusively cored magnets.
846 Dr Harrison did not maintain in cross-examination that he had come up with the idea of using air-cored coils as a new concept. He was merely representing in his evidence-in-chief the conversation he had had with Dr Jones in May 1996. The use of air-cored coils had been referred to as an option some 19 years earlier when Dr Gray had sent to Dr Nichols, for transmission to Davies & Collison, answers to questions they had raised about the Thermo-Spheres technology.
847 Throughout 1996 Dr Harrison worked on his design for a device called a HiFroM which was an acronym for High Frequency Rotational Magnetometer to measure rotational hysteresis in soft materials at high frequencies. The construction of the device was completed in about mid 1996. When it had been constructed he and Dr Jones moved the HiFroM to Dr Jones' laboratory at CACS.
848 S11 was the first material he tested in the HiFroM. He also tested other ferromagnetic materials available at CACS. He wrote computer programs to analyse the data he obtained from the RSCM and from the HiFroM and to model the hysteresis properties of various materials. He found that the HiFroM obtained measurements of rotational hysteresis in a variety of materials including S11 within the range he had expected. He concluded that it would, with minor adjustments, be capable of accurately measuring high frequency rotational hysteresis in soft magnetic materials.
849 At the time he selected his research topic for his PhD, Dr Harrison was aware of the involvement of a commercial entity in the development of a hysteresis hyperthermia device or model. He could not be sure he knew it was Paragon Medical at that stage. The choice of his topic for his PhD thesis was a logical extension of his Honours program. He knew the work he was doing was being done in conjunction with work funded by a commercial entity.He accepted in cross-examination that the matter of confidentiality was stressed to him by Drs Gray and Jones with a view to protecting the interests of the commercial funder of their work.
850 Dr Harrison's interaction with Dr Gray in relation to the commercial entity, which was Paragon Medical, and the requests that he sign a confidentiality agreement and the consequence of those requests are dealt with later in these reasons.
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Dane Gorn/CRI/Sirtex - February 1996/September 2003
851 Dane Gorn was, for twelve years before his retirement, Property Investment Manager for AMP for Western Australia. He retired in 1992 and decided to become involved in community organisations. He was chairman of the Western Australia Youth Jazz Orchestra for about three years in the late 1990s.
852 In 1995 Mr Gorn and his wife attended a CRI fund raising function. After the function he was contacted by a friend of his wife who had been there and who asked if he would be interested in becoming Chairperson of the CRI Board of Management. He agreed to meet the board. As a result of that meeting he understood CRI to be a not for profit organisation set up to raise funds for research into the treatment of cancer and in particular to support Dr Gray's research in developing a procedure for injecting radioactive spheres for the treatment of liver cancer. He was also told that CRI owned some aspects of the technology which Dr Gray was developing. Dr Gray whom he also met with the other members of the board, said he was in the process of conducting clinical trials and further refining the technology at that time.
853 Mr Gorn was elected to the Board of Management on 15 February 1996 and at the same meeting was elected as Chairperson. He succeeded Mrs Mirmikidis who relinquished the office. Mr Gorn served as Chairperson of CRI until October 2000 when he resigned as Chairperson. He said he resigned at the request of Dr Gray who had proposed without notice at a meeting of the board that CRI should elect new directors and that he wanted to be the new chairperson. Mr Gorn continued to serve on the Board of Management of CRI until September 2003 when he resigned from that position also.
854 While Chairperson of CRI, Mr Gorn participated in meetings of the Advisory Board of CACS. Professor Barber and Professor Landau represented UWA on that Advisory Board. Mr Colin Beauchamp represented LCI.
855 In April 1997, Mr Gorn also became a director of Sirtex. He remained a director of that company until 16 December 1999. He resigned because it was then proposed that the company should float publicly and move its offices to Sydney. He considered it in the best interests of the company to have Sydney based directors.
856 Mr Gorn's involvement in particular aspects of the history leading to these proceedings is dealt with in the relevant part of the reasons.
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The Gray Relocation Agreement - 29 February 1996
857 On 29 February 1996 Professor Palmer, on behalf of the Faculty of Medicine and Dentistry, Professor House on behalf of the Department of Surgery, Dr Beresford on behalf of RPH and Dr Gray as Director of CACS signed an agreement relating to Dr Gray's relocation into the Centre (the Relocation Agreement).
858 The document which they signed was entitled "AGREEMENT RELATING TO THE RELOCATION OF PROFESSOR BRUCE GRAY IN THE CENTRE FOR APPLIED CANCER STUDIES." In clause 1 CACS was described as "a partnership between the University of Western Australia and the Lions Cancer Institute and the Cancer Research Institute". It was to be accorded the status of a department within the Faculty with its director reporting annually to the Executive Dean. Other elements of the agreement reflected Professor Palmer's letter to Dr Gray following their discussions which led to the settlement of which the establishment of CACS was part. In particular, the Department of Surgery was to provide the equivalent of 0.7 of Dr Gray's salary for up to five years on the understanding that if he converted his appointment to a part time one, salary savings could be used to support a research position in CACS. (clause 2) RPH would continue to provide 0.3 of his salary on the basis that he maintained his current level of clinical responsibilities at the hospital (clause 3). There was a commitment from RPH to continue to provide 0.75 of the salary of Ms K Brown until her secretarial post was vacated or for five years, whichever was earlier. The balance would be provided by the Department of Surgery (clause 4). Clause 7 provided that the sum of $20,000 would be provided annually for a period of five years by RPH on the understanding that the funds were used as a contribution to the cost of a research appointment in CACS. The agreement became affective from 1 March 1996. .
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The CACS Agreement - 1 March 1996
859 CACS was created by an agreement dated 1 March 1996 between UWA, the LCI and the Centre (the CACS Agreement). The purpose of the agreement was stated in clause 1:
… to facilitate the establishment of the Centre for Applied Cancer Studies by defining its role and its relationships to the University of Western Australia and the Lions Cancer Institute in association with the Cancer Research Institute.
860 Important elements of the CACS Agreement were taken from the Affiliation Agreement. Section 2 of the CACS Agreement set out the functions of the parties describing LCI and CRI as:
… incorporated institutes established to provide a centre of excellence for cancer research and treatment.
CACS was described in the following terms (clause 2.3):
The Centre for Applied Cancer Studies is a collaborative Category B centre dedicated to teaching and research, which is housed in accommodation used by the Lions Cancer Institute and the Cancer Research Institute, but which enjoys a funding relationship with the University through the Faculty of Medicine and Dentistry and a direct resourcing relationship with the Institutes and other collaborating partners.
861 UWA's obligations included:
3.1.1 To act as employer and paymaster for such staff as the Centre recruits as a consequence of grants processed through the University.
The obligations previously imposed on the institutes by the affiliation agreement were now defined as obligations of CACS under clause 3.2 of the CACS Agreement.
862 Under the heading "RESPONSIBILITY AND AUTHORITY" clause 4.1 provided:
The Director of the Centre will be accountable for the total operation of the Centre to the Advisory Board and be appointed for five years or at the sole discretion of the Advisory Board. The Director will normally be a Professor or Associate Professor employed by the University. As a University employee the Director will also be responsible to the Vice-Chancellor through the Executive Dean of Medicine and Dentistry and to the Boards of the Lions Cancer Institute and the Cancer Research Institute.
863 In relation to intellectual property, clause 4.7 now provided:
The University shall be entitled to negotiate for a share of the proceeds from intellectual property developed by staff and students at the Centre who are funded by Centre grants which are processed by the University. Both parties recognise that in normal circumstances the majority share of the proceeds will go to the staff of the Centre.
864 CACS was not a distinct corporate entity. Its legal character was not clearly stated. It had not been carefully thought through by those involved in the formation of the agreement. There was a difficulty in that the agreement purported to be made between UWA, the two institutes and CACS. If CACS were merely an emanation of UWA's own activities, it is hard to see how it could be a party to an agreement with UWA. The difficulty was compounded by the application of terms in the Affiliation Agreement to the relationship between UWA and CACS. Clause 4.4.2 required CACS, so long as it remained in RPH building, to "be responsible in its capacity as occupier" for matters connected with health and safety. UWA was to be responsible "in its capacity as employer". Assuming CACS were merely an emanation of UWA, it is difficult to see how this division of obligations would operate.
865 Clause 4.7 contemplated UWA negotiating with CACS for a share of the proceeds from intellectual property developed by staff and students at CACS.
866 The terms of the CACS Agreement are really only comprehensible if the Centre comprised either UWA and the Institutes or the Institutes themselves. In my opinion the former characterisation is to be preferred on the basis that Dr Gray, as Director of CACS, was being treated as an employee of UWA and paid 0.7 of his salary by UWA. However the obligation of UWA to act as employer and paymaster for such staff as CACS recruited as a consequence of grants processed through UWA (cl 3.1.1) did not make UWA the employer of such staff if they were in truth the employees of LCI or CRI.
867 On 29 May 1996 Dr Gray wrote to Associate Professor B Stokes, the Director of Research at the Foundation. He informed Professor Stokes that UWA had formed a specialised "Centre for Applied Cancer Studies". He described it as "a new development within the University" which would allow for specialised cancer research and treatments to be conducted through his unit at RPH. He said:
I have been appointed Medical Director of that Centre which is independent of any existing Department and answers to the Senate via the Executive Dean and the Vice-Chancellor.
He informed Dr Stokes that all of the facilities at the Department of Surgery that he had accumulated over the past 11 years would be transferred to the new Centre which he described as having "… all of the administrative structure rights and responsibilities of any existing departments". Not much would change other than that the "vast bulk of research activity that was in the old University Department of Surgery at Royal Perth Hospital will now be transferred to the new Centre".
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The CACS Advisory Board
868 An advisory board was set up for CACS. Professors Barber and Landau were members. According to Dr Gray the issue of intellectual property and higher degree students was discussed at meetings of that board.
869 Professor Barber said that the CACS Advisory board did not talk about the scientific work being done within CACS or the commercialisation activities of CRI or Paragon Medical. The substance of the research was generally not discussed. The focus of the meeting which he attended was on the management of the relationship between "the various players" rather than any deep consideration of what was happening with the research programs. I accept his evidence in that respect.
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Gray relodges Thermo-Spheres 1 Provisional - 10 May 1996
870 On 10 May 1996 Dr Gray lodged a provisional patent application PN9782 entitled "Targeted Hysteresis Hyperthermia as a method for treating cancer". The application and the provisional specification were exactly the same as had been lodged by him on 12 September 1988. It attached the two appendices referred to earlier in these reasons. As I have already found the specification did not cover the use of rotating magnetic fields.
871 Dr Gray's evidence, which was admitted as relevant to his state of mind, was that his group had taken several years of research to that point and it had yielded nothing that was patentable. They had been trying to demonstrate that they could heat tumours in animals. That data could not be applied to humans. He resubmitted the provisional application of 1998 "in order to get a priority date". This strategy, as he saw it, would allow a further year in which to concentrate on further experiments to come up with information that could form the basis of a full patent application for the use of targeted hysteresis hyperthermia in humans. He said that the concept as described in the Provisional Application was his own and was "… entirely hypothetical information generated before I was employed by University of Western Australia".
872 A filing receipt issued on 14 May 1996 it allocated a number PN9782 to this application. It issued, in the form of a letter, to Dr Gray at his home address in Riley Road, Claremont.
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Paragon Medical board meetings - 8 and 29 May 1996
873 A meeting of the board of Paragon Medical took place on 8 May 1996 but the minutes were not in evidence. A memorandum to the directors attached correspondence from the Department of Trade and Commerce in connection with the WAISS grant. It also referred to correspondence to Mr Gorn on 2 May about commission arrangements if he were able to introduce new equity investors to the company. A similar document relating to the meeting of 29 May 1996 attached a letter from the Department of Trade and Commerce which enclosed the initial payment of $20,000 from the WAISS grant. A letter dated 6 May 1996 from Bain & Co also attached advice from Ausindustry indicating that it would be many months before the syndication application lodged in November 1995 could be considered.
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Gorn's fund raising attempt - 1996
874 Mr Gorn said that in 1996 he observed the amount of research work being undertaken at the laboratory and the relatively small amount of funds being raised by CRI. The sums being raised did not appear to him to be sufficient to support the research. He made two or three contacts in the Perth business community in an attempt to secure investment capital. He prepared a capital raising presentation document for distribution to potential investors. He based it on other documents prepared by Dr Gray and perhaps other people such as Mr Karlson. He edited the information and took out some of the detail. The document was entitled:
Capital Raising Presentation to raise funds for the further development of a range of new products for the treatment of liver cancer based on concepts developed by Professor Bruce Gray, MS, PhD, FRACS, FACS.
The face sheet of the document referred enquiries to "D N Gorn, Chairman Cancer Research Institute".
875 Mr Gorn's paper began by stating that "the research" which involved a team of twelve doctors and researchers, now operates as the "Centre for Applied Cancer Studies". It stated that the director of CACS reported to the Vice-Chancellor of UWA through the Executive Dean of the Faculty of Medicine and Dentistry. CRI and LCI were administered by duly constituted boards. The activities of CACS were controlled by an Advisory Board comprising:
. the Executive Dean of Medicine and Dentistry
. a nominee of the Vice Chancellor
. the Centre Director
. the Centre Deputy Director
. nominee of the Cancer Research Institute Inc
. nominee of the Lions Cancer Institute Inc.
876 Under the heading 'Paragon Medical Ltd' the paper stated:
The intellectual property has been acquired by Paragon Medical Limited. Paragon is the vehicle for commercial exploitation of the anti cancer products.
Under the heading 'CURRENT PROGRAMS AND COMMERCIAL EXPLORATION' it stated that three major areas of technology had been developed, SIR-Spheres, DOX-Spheres and Targeted Hyperthermia. Each was said to be "… the subject of an international patent". The document went on:
The patients (sic) are held principally by Professor Gray who holds the major interest in the technology. Interests are also held by the University of Western Australia, scientific staff and the Cancer Research Institute Inc.
The paper set out what it described as "the current status of product development and proposals for manufacturing and marketing of each of the major areas of technology/products …".
877 In cross-examination Mr Gorn said that he used the document in discussion with a number of people in Perth in 1996 before the ultimate investor Nomura/JAFCO appeared on the scene. He accepted that his fund raising endeavours were, in effect, on behalf of Paragon Medical.
878 Mr Gorn relied upon information provided by Professor Gray about the research program being carried out in conjunction with RPH and UWA. He had no understanding about Dr Gray's work prior to 1996 when he became Chairperson of CRI. He understood that the doctors and researchers at CACS were somehow associated with UWA although the whole thing was "pretty blurred" as far as he was concerned. He was confident that the association with UWA was an important element in selling the idea. He acknowledged that the small amount of money that CRI had been able to raise at that stage was not sufficient to support the team of twelve doctors and researchers involved in the project. I accept his evidence in this respect.
879 Mr Gorn was also cross-examined on his state of understanding in 1996 about ownership of the inventions. He thought that Dr Gray was the inventor of each of the SIR-Spheres, the DOX-Spheres and the Targeted Hyperthermia and that unless he assigned the rights to those inventions he would in fact own the intellectual property as inventor. He was not aware in 1996 about the interaction of the relationship between an inventor and his or her employer and the inventor's ability to claim intellectual property.
880 In referring, in the paper, to interests held by UWA he was referring to the possibility that UWA might have an interest in the SIR-Spheres and the Targeted Hyperthermia. CIR held the DOX-Spheres patent. He understood that Dr Gray in some way held the major interest in the SIR-Spheres and Targeted Hyperthermia and that in some way UWA and research staff held an interest in those technologies.
881 He acknowledged that potential investors would be interested in who held the relevant patents and what other interests there might be which would have a financial stake in the products.
882 Mr Gorn also understood at the time that Dr Gray was an employee of the University and a Professor at the University and that CRI was not being called upon to pay his salary. At no time in his chairmanship did he think that CRI was funding Dr Gray's salary. I accept his evidence about his state of mind at the time albeit his recollection was necessarily affected by the passage of the years. He was not a person to inquire too closely into the precise details of ownership but rather relied upon the information he had been given and had gleaned from the documents which he used in preparing his paper.
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Paragon Medical meets Panaccio - mid 1996
883 In about the middle of 1996 Paragon Medical, through Dr Gray, began negotiating with Dr Michael Panaccio, the Investment Manager of Nomura/JAFCO regarding venture capital funding for the targeted microsphere technology.
884 Dr Panaccio had a PhD in Medicine from Melbourne University, conferred in 1988. He was a researcher with the Victorian Institute of Animal Science for eight years. He obtained a Masters Degree in Business Administration from the Royal Melbourne Institute of Technology in 1991. In 1994 he was appointed as Head of the Department of Molecular Biology at the Victorian Institute of Animal Science. In May 1996 Dr Panaccio became an Investment Manager with Nomura/JAFCO Investments (Asia) Ltd which was a venture capital investment company based in Singapore. Dr Panaccio was based in Melbourne.
885 Dr Panaccio described Nomura/JAFCO as a joint venture between two Japanese companies, Nomura (an investment bank) and JAFCO (a funds management company). Nomura was formed to undertake venture capital investment in emerging technology companies. Capital was raised from Japanese institutional investment houses. Dr Panaccio's role at Nomura/JAFCO was to identify potential investment opportunities in Australia and to prepare investment proposals for the Investment Committee of Nomura/JAFCO which was based in Singapore.
886 The process followed by Dr Panaccio with respect to proposed investments required him to submit a proposal to the Investment Committee. An evaluation report would be prepared by a member of the Evaluation Department of Nomura/JAFCO and would be sent to the Investment Committee at the same time. Dr Panaccio would have no role in preparing any evaluation report or selecting the personnel allocated to the evaluation process. Typically an investment proposal would take a number of months to prepare from first investigation to submission to the Investment Committee.
887 Dr Panaccio was reviewing a number of business plans in mid 1996 when he came across the Tolhurst Information Memorandum. When he first reviewed it he found the data insufficient to explain why the products would be effective. He also regarded the proposal as fundamentally flawed because the shareholding of investors would be diluted through the issue of further shares to Dr Gray over time regardless of whether real value was being produced. He discussed the memorandum with Mr Richards and advised him that Nomura/JAFCO had no interest in progressing the opportunity further.
888 In late June 1996 Dr Panaccio was telephoned by the Head of Bio-Science Investments, a department of JAFCO. He had received a tip from a friend of his, Mr Ari, that a potential investment opportunity existed in Perth. Mr Ari's wife had travelled to Perth to receive a novel treatment for liver cancer not available elsewhere. Dr Otaki asked Dr Panaccio to investigate. Dr Panaccio was able to work out that the investment opportunity referred to by Dr Otaki was that contained in the Tolhurst Information Memorandum.
889 In July 1996 Dr Panaccio went to Perth and met with a Mr Howard Lange and with Dr Gray at the CRI premises. He was told that Dr Gray was a professor at UWA and a clinician at RPH. Dr Gray told him about the laboratory-based research activities which he conducted and that he was the Medical Director of CRI. Dr Panaccio understood that CRI was affiliated with UWA but did not know the exact relationship.
890 Dr Gray explained that CRI was funding the relevant research and that it was in effect part of UWA. Dr Panaccio regarded CRI as analogous to the Walter and Eliza Hall Institute in Melbourne where staff are affiliated with Melbourne University in order to get PhD students but the Institute retains the benefit of the research done.
891 The science of the technology was explained. It had not been obvious to Dr Panaccio from his initial reading of the Tolhurst Memorandum. From an investment perspective the attraction lay in the concept of the targeted delivery of cancer treatment by way of blood supply.
892 On 14 July 1996 Dr Gray sent Dr Panaccio documents relating to the technology, the patents for the three primary products and Paragon Medical's program for their commercialisation. Dr Panaccio responded on 2 August 1996 saying that he had read and digested the information which he had been sent and wanted to spend a day at CRI to discuss Paragon Medical's technology and possible investment structures and scenarios. He arranged to meet with Dr Gray at CRI's premises in Perth on 2 September 1996.
893 At that time Paragon Medical had little money. It needed additional capital to continue to function.Indeed as Mr Karlson put it, by the time Nomura/JAFCO approached Dr Gray Paragon Medical was desperate for capital and had not been able to attract any other interest.
894 Mr Karlson and Peter Jones each contributed $10,000 to Paragon Medical prior to June 1996. Mr Karlson had been told by Dr Gray that the money was needed to renew or extend patents on the products. On 28 June 2006 Dr Gray wrote to Mr Karlson on the letterhead of Pine Ridge Holdings Pty Ltd advising that he had deposited $78,584 in the Paragon Medical account in addition to having met expenses of $21,416 on behalf of the company. The total sum of $100,000 was to be used "to undertake contract research and development on behalf of Pine Ridge HoldingsPty Ltd".
895 On 26 August 1996 the board met again. The minutes recorded the contributions made by the directors. A sum of $41,785.70 owing to Davies Collison was paid to cover costs relating to the DOX-Spheres patent. A sum of $40,000 was deposited with CRI comprising $20,000 from Paragon Medical and $20,000 being the first increment from WAISS. The money it was said was used to employ Dr Stephen Jones. At the time Dr Jones was working in CACS. He had accepted an offer from Professor Robson on 25 March 1996 to become a Research Fellow (Level B) in LCI at the Department of Surgery in RPH. He ceased working for CRI on 1 February 1997.
896 It was put to Dr Gray by counsel for Sirtex that there was no suggestion in the minutes that he adverted to any issues about the ownership of the intellectual property in which the other two directors thought they were investing. Dr Gray agreed.
897 In respect of UWA the minutes recorded that:
B Gray informed that he had held discussions with the legal officer and the deputy Vice-Chancellor for Research of the University of WA regarding contract research by Paragon at UWA. The research would be undertaken under the umbrella of the Centre for Applied Cancer Studies and with the Cancer Research Institute being the conduit for that research.
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Gray meets Lennon 14 July 1996
898 Dr Gray said that "through the back half of 1996" he held "numerous discussions and meetings with Mr James Lennon, the Contract and Intellectual Property Officer and legal officer of the University of Western Australia". He identified two occasions from his records on which they spoke about the role of UWA in undertaking contract research. The first was in July 1996 and there were at least four over the following four or five months. The second was in October 1996.
899 Mr Lennon had made records of conversations or meetings with Dr Gray on 26 July 1996, October 1996 and 14 January 1997. Dr Chen had given evidence of a meeting between Mr Lennon and Dr Gray shortly prior to 14 November 1994 which I accept occurred. This may have been a reference to the October meeting.
900 Mr Lennon made notes of the telephone conversation with Dr Gray on 26 July 1996. According to his notes Dr Gray told him that Paragon Medical wished to commercialise the intellectual property of CACS. It was proposed that UWA levy a fee on the project. People employed by UWA working at CACS would have to relinquish their intellectual property. UWA would be reimbursed the cost of wages and the use of UWA's systems. Students working on commercial projects would have to assign their rights to CRI. The substance of the discussion was also set out in a letter which Dr Gray wrote on the same day to Professor Barber. It appears that he met Professor Barber in the same week as the letter referred to such a meeting.
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Gray writes to Barber - 26 July 1996
901 Dr Gray's letter to Professor Barber on 26 July 1996 referred to what he called the "first proposal" in terms which may be summarised thus:
1. CRI to contract with Paragon Medical in order to undertake a programme of research to exploit intellectual property. CRI controls and has an interest in the ownership of the intellectual property. It would use funds provided by Paragon Medical for further research and development of that project.
2. Paragon Medical to gain access to the intellectual property and attempt to commercialise it.
3. CRI to undertake further research and development. Paragon Medical as funder would gain exclusive access or ownership to all new intellectual property developed during contract research.
4. CRI to derive income from Paragon Medical either by cost loadings or participation in returns from commercialisation.
5. Research will be undertaken within the existing facilities of CRI and CACS. CRI will employ all research staff through CACS as members of UWA.
6. The role of UWA to be defined. It could levy a charge on the project of contract research for its contribution. Funds raised by CRI would be used within CACS for further research activity. UWA would not have rights to the intellectual property.
7. If the previous proposition were acceptable then Mr Peter Johnson could define the University's return from its project.
8. UWA staff employed through CACS using funds provided by Paragon Medical or CRI would not have a claim through UWA on intellectual property generated by the research. CRI had existing agreement whereby staff undertaking research would participate in any commercial returns.
9. Staff employed by UWA funding would have their intellectual property rights defined by the new University policy. Any departure to be the subject of a further written agreement.
10. Students on projects funded by CRI would relinquish all rights to intellectual property generated by that research.
11. CRI and UWA would guarantee that students would have full rights to production of a thesis or scientific reports as required for completion of studentships.
12. Students undertaking research on scholarship funds provided by CRI would have separate arms length arrangements not impacting on the tax free status of their scholarship.
902 Dr Gray was cross-examined on the letter. He was asked what intellectual property he had in mind to exploit. He said it was "any intellectual property associated with the targeted microsphere technology". CRI controlled the release matrix technology known as DOX-Spheres. It had ownership of SIRT-2, particulate material and an interest and ownership in some of the knowledge developed through work done on the hyperthermia project. He denied that he was saying that in July 1996 CRI controlled SIRT-1. It controlled SIRT-2 and DOX-Spheres and the thermo technology in part. He appeared to equate ownership with control. The ultimate expression of CRI's control was its vesting of the rights in Paragon Medical.
903 Dr Gray's testimony on these questions exhibited a degree of conceptual confusion and alternatively a stretching of concepts to accommodate his interests. It was inconsistent with the terms of a discussion paper which he prepared and which was tabled at a meeting of CRI's board of management on 23 January 1997 reference to which appears below.
904 Dr Gray's attention was also drawn to contrasts between the letter and what appeared in the Tolhurst Information Memorandum of September 1995. The Tolhurst Information Memorandum stated that Paragon Medical had reached an agreement with him to acquire "the exclusive rights to develop the products and their associated technology". He said that the "agreement" referred to was made with him "as agent for CRI". He was Medical Director of CRI. They had had a period of poor housekeeping. There had been four chairpersons in as many years:
… I was running the project at least in part on behalf of the Cancer Research Institute. I was at the forefront of undertaking these negotiations for the Institute. I was a board member.
905 Dr Gray accepted in cross-examination that, in his letter to Professor Barber, he did not disclose his role as an inventor with respect to any of these technologies. He said he had made such disclosure "at a later stage and in connection with Mr Lennon".
906 Professor Barber recalled having had a general discussion with Dr Gray about arrangements for contract research with CACS at about that time. However he could not recall the details of their conversation. At the time of the letter he did not know anything about Paragon Medical. The letter came only a few months after the establishment of CACS. He saw nothing unusual about the proposal it contained. It accorded with the purpose and usual operation of Category B Centres such as CACS. His concern in such cases was to ensure no conflict of interest arose in relation to student intellectual property because of funding arrangements.
907 Professor Barber noted that the letter contained no details of the intellectual property to which it referred. He had no discussion with Dr Gray which provided that detail. Based upon his general knowledge of Dr Gray's work and the nature of CACS he assumed that the intellectual property probably had something to do with cancer treatment. He did not consider it necessary to make any further inquiries.
908 Professor Barber did not regard the statement that CRI controlled the intellectual property as unusual. It was consistent with the position in other Category B Centres where parties other than UWA owned the intellectual property used in CACS. He accepted the statement at face value.
909 After receiving the letter, Professor Barber had a company search carried out in relation to Paragon Medical. The search, carried out on 8 August 1996, showed that Dr Gray was one of its directors. Professor Barber became concerned about the potential for a conflict of interest which could affect students detrimentally. This had happened previously in unrelated circumstances. Professor Barber raised his concerns with Mr Lennon over the next few months. They also had some discussion about the structures necessary to give effect to the proposed funding and research arrangements between CACS, CRI and Paragon Medical.
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Intellectual property clearances pursued - September/October 1996
910 Dr Gray and Dr Panaccio met at CRI on 2 September 1996 where presentations were given on the relevant science and technology. Dr Panaccio asked Dr Gray what other parties were involved in the development of the relevant intellectual property or could potentially claim ownership in some or all of it. He asked whether UWA or RPH owned any of the underlying technology or patient data. Dr Gray told him that CRI had funded all the research and the underlying ownership of the intellectual property had been transferred to CRI sometime ago. Clinical trials for patients had taken place at the Prince of Wales Hospital in Hong Kong, but neither the hospital nor the Chinese University of Hong Kong Medical School, with which it was affiliated, claimed any ownership over the relevant intellectual property. Dr Gray also told Dr Panaccio that Monash University had assisted in developing the ceramic microspheres but did not own anything because it was only contract research.
911 Dr Panaccio asked Dr Gray to inform each of the parties of the proposed investment and to obtain written confirmation from them that they would not claim any interest in the technologies. The purpose of his request was to obtain security from Nomura/JAFCO before implementing the proposal.
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Gray and Panaccio - September/October 1996
912 In September and October 1996 Dr Panaccio again asked Dr Gray to get third party clearances on intellectual property associated with the technologies. About this time, Ms Goh of the Evaluation Department of Nomura/JAFCO visited CRI and Dr Gray with a view to preparing an evaluation report in relation to the proposed investment by Nomura/JAFCO.
913 Dr Gray wrote to Dr Panaccio on 16 September 1996. He reported that he had met with ARI to discuss securing approval for the SIR-Spheres from the TGA and that meetings with the TGA would follow. He was also finalising an agreement between Paragon Medical and ARI about the production marketing and distribution of the SIR-Spheres. He had had discussions about regulatory requirements to allow the use of the product in Asia. He was proposing to sell it initially in Australia and New Zealand under a TGA Special Access Scheme, get TGA approval and then apply to regulatory authorities in Asia. He anticipated that approval by the Federal Drugs Administration in the United States and by European regulators would be facilitated by TGA approval.
914 The Paragon Medical board met on 25 September 1996. Dr Gray reported on his visit to ARI. Under their proposed arrangement ARI would neutron activate, package, market and distribute Yttrium microspheres on behalf of the company. The majority of the profit on sales would come back to Paragon Medical. The minutes also recorded that Dr Panaccio had recommended to Nomura/JAFCO that it fund Paragon Medical. A business consultant would come from Nomura/JAFCO in the next two weeks. This was a reference to Ms Goh.
915 On 14 October 1996 Dr Panaccio and Dr Gray met with ANSTO and TGA representatives in Canberra. Dr Panaccio remembered being told by Professor Li at about this time, that neither the Prince of Wales Hospital nor the Chinese University of Hong Kong claimed any the ownership in the intellectual property of the technologies. On 15 October 1996 Dr Panaccio met with Professor Mary Gani at Monash University. She told him that Monash University did not make any claim to the intellectual property for the ceramic microspheres. At some time prior to 21 October 1996, according to Dr Panaccio, he had a conversation with Dr Gray about seeking confirmation that the relevant parties had no interest in the intellectual property. Dr Gray later had told him he had obtained verbal assurance but nothing in writing.
916 On 21 October 1996 Ms Goh met with Dr Gray, Mr Karlson, Mr Peter Jones, Dane Gorn the chairman of CRI, Dr Stephen Jones and Jillean Winter of CRI. The meeting lasted all day with presentations about hyperthermia and ceramic microspheres.
917 On 26 November 1996 Professor Peter Darvall, Deputy Vice-Chancellor at Monash University, sent a letter to Dr Gray at Paragon Medical about the project involving plasma processing of microspheres. This was a reference to the ill-fated hollow Yttrium microspheres project. He confirmed that Monash University recognised that the intellectual property associated with microspheres had been brought to the project by Dr Gray. The University would not in future "have any claim on the technology for using Yttrium microspheres in cancer treatment". Dr Panaccio sent a copy of the letter to Nomura/JAFCO's legal department.
918 In November 1996 there was an exchange between Mr Karlson and Dr Gray in relation to the shareholding of Paragon Medical. Dr Gray had set out a proposed shareholding based inter alia on "pre-investment" and "post investment" contributions by himself, CRI, Hong Kong University, Mr Karlson, Mr Peter Jones and Pine Ridge Holdings Pty Ltd. Under the proposal Mr Karlson and Mr Jones would get 15,000 shares each, valued at $30,000, in recognition of their respective contributions of $10,000. Mr Karlson, in a handwritten response, asked who Pine Ridge Holdings was. He also asked "where is Steve Jones?" He did not agree that the $30,000 worth of shares allocated to him and Peter Jones was enough given the directors' hours they had contributed in addition to their cash inputs.
919 On 10 December 1996 Dr Panaccio proposed to Dr Gray an investment structure of a kind usually referred to as a "ratchet". He wanted a structure which would remove the need to value the company at the time of the Nomura/JAFCO's investment. He refined the proposal in a further document dated 12 December 1996.
920 Nomura/JAFCO's practice was not to issue final term sheets to other parties until it was confident that they would be accepted. Dr Panaccio sent Dr Gray a document entitled "Draft Term Sheet" on 24 December 1996. It was further refined on 9 January 1997. He then submitted a report to the Investment Committee of Nomura/JAFCO. In the meantime Dr Gray had told him that if his draft terms were offered to Paragon Medical they would be accepted.
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Gray meets Lennon - October 1996
921 Mr Lennon had a meeting with Dr Gray in his office in October 1996. The precise date of the meeting was not in evidence. Mr Lennon made notes of the meeting. Dr Gray evidently referred to "three pieces of likely intellectual property" of which he said:
1. One was produced using money provided by Monash University to CRI and was owned by Paragon Medical.
2. One was a product patented by CRI and the relevant person was employed by CRI at the time (around 1993) and not by UWA.
3. One was generated outside UWA by Dr Stephen Jones who had since become an employee of UWA (from March 1996).
Dr Gray told Mr Lennon that there were funds coming to CRI and thereby to CACS from an outside company. The funding company wanted Dr Gray to be 100% available to provide his services to it. Dr Gray proposed that he be available on a 30%/40% basis to UWA for the purpose of supervising students and to provide services to RPH. He told Mr Lennon that the concept was alright with the Dean of the Faculty, Professor Landau.
922 Mr Lennon's notes indicated that 80% of CACS's funding came from sources outside UWA. The building in which the research was to be carried out did not belong to UWA. Dr Gray was to get back to Mr Lennon with an actual structure and to clarify the real role of CRI. He also noted that CRI might employ people and contract for the use of UWA facilities. Mr Lennon's understanding from his discussion with Dr Gray at this time was that the only connection between UWA and the research underpinning the three likely pieces of intellectual property was "in the context of the establishment of the CACS Centre about six months earlier". On that basis he saw nothing in which the University could or should be interested.
923 On 1 November 1996 Mr Lennon sent an email to Professor Barber about his meeting with Dr Gray. He said they had briefly discussed an agreement relating to students but mainly the nature of the arrangement between the various parties. He said:
Although we discussed several different structures and options, Bruce is still deciding what part the Cancer Research Institute (CRI) should play. His main difficulty is that CRI will be provided funds for a project to be performed which he wants UWA to do through the Centre. That would be done by contract from CRI to UWA. His problem is that he wants CRI to retain some of the money that passes through its hands even though CRI is not currently intending to do the work.
Mr Lennon said he pointed out that this could be a matter of budgeting.
924 They had spoken about the nature of cost recovery and budgets. Dr Gray had expressed some uncertainty about the role to be played by RPH which owns the building in which CACS was situated. They had also discussed the possibility of a conflict of interest. Mr Lennon said:
He is director of the Centre, director of CRI and a director of Paragon Medical which is expected to be the source of funding. These are the three bodies which are intended to be linked by contract. I do not expect that it will be necessary for UWA to have a direct link with Paragon (as we discussed). He indicated that he was aware of the potential for conflict.
Mr Lennon had told Dr Gray that there was a priority for him to retain some employment link with UWA.
925 I accept Mr Lennon's account of his meeting in October 1996 with Dr Gray as reflected in his notes and in his email to Professor Barber.
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Chen and US DOX-Spheres patent assignment - October/December 1996
926 Dr Chen received a letter from Dr Gray on CRI letterhead dated 1 October 1996. That letter was sent to her home address which had not changed since she resigned her employment with RPH in late 1994. Dr Gray said that he had been advised by Davies Collison Cave that both he and she had to sign a power of attorney to lodge the DOX-Spheres patent application in the United States. He asked her to sign a document which was enclosed and return it as soon as possible. He added that a small number of patients had been treated using the doxorubicin microspheres, but they were not nearly as effective as they seemed to be in animals. Dr Chen responded on 9 October 1996, again seeking a written agreement from CRI to guarantee that she would always be one of the beneficiaries. She said she would be pleased to complete the form once the agreement had been reached.
927 Dr Gray responded on 25 October 1996 with a copy to Mr Dane Gorn, then Chairman of CRI. He said that as discussed initially CRI had a policy of providing a financial return to the generators of intellectual property. So far as the doxorubicin microspheres were concerned, CRI had to undertake a much wider clinical trial before any consideration would be given to marketing them. He described this as a "hugely expensive exercise" and said the decision would not be made until some time in the future. In the meantime CRI was simply protecting the property by covering it with the appropriate patents. He concluded the letter:
Therefore, as per the original agreement, you could expect to be a beneficiary if the microspheres are commercialised and this results in a revenue stream for the Cancer Research Institute.
928 On 10 November 1996 Dr Chen wrote back to Dr Gray. She thanked him for his reply and attached a signed copy of the assignment of the US patent rights in respect of the controlled release invention. The assignment was forwarded by Davies Collison Cave to US patent attorneys on 18 November 1996.
929 There was a little follow up correspondence requesting a further signature from Dr Chen to clarify her citizenship. She signed a further document called a Combined Declaration and Power of Attorney on 12 December 1996. On 23 December 1996 he sent her another letter which attached an assignment of any interest in the Canadian patent to CRI for the consideration of $1. She signed that and returned it to Dr Gray. Dr Chen said that other than seeing Dr Gray on social occasions when their children attended the same kindergarten she had limited, if any, contact with him prior to about 2003.
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The Nomura/JAFCO offer - 13 January 1997
930 On 13 January 1997 Dr Panaccio sent to Dr Gray a copy of the term sheet representing Nomura/JAFCO's offer. It was an "indicative principal term sheet". It was not intended to be legally binding. It was subject to "satisfactory legal and financial due diligence". As summarised by Dr Panaccio in his affidavit the investment proposal in the term sheet included:
1. A staggered transfer of $3,000,000 by Nomura/JAFCO upon the achievement by Paragon Medical of certain milestones over two years in consideration of three share tranches at each instalment.
2. The execution of a subscription and shareholding agreement.
3. An employee option scheme.
4. Conditions precedent including satisfactory due diligence, satisfactory transfer of all intellectual property and documented representations and warranties.
Under the proposed shareholders agreement the Fund would have the right to appoint two directors to the Board. Dr Gray would undertake to remain an employee and director of the company and maintain a minimum shareholding, agree to non-competitive clauses and that the company activities would be his main business focus. These undertakings would apply for three years after the initial public offering.
931 It was proposed in the term sheet that the current shareholders of Paragon Medical and the Fund would use their best endeavours to achieve a listing of the company within five years on the stock market (clause 16). Conditions precedent to the offer included satisfactory completion of legal due diligence and:
. Satisfactory transfer of all intellectual property to Paragon Medical.
. Satisfactory documentation of the proposed investment including representations and warranties.
932 The term sheet reflected Dr Panaccio's key objective which was to secure the technology and the ongoing involvement of those who had contributed to its development. He had determined that Dr Gray and certain CRI staff such as Dr Stephen Jones were contributors to the technology and should remain involved. Dr Jones had been introduced to him by Dr Gray as an employee of CRI. Dr Panaccio had been told by Dr Gray that Dr Gray was funding all or part of Dr Jones' salary. He said that prior to the commencement of the present proceedings he was not aware that Dr Jones was employed by UWA. Dr Gray counter-signed the terms sheet on 14 January 1997.
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Gray meets Lennon again - 14 January 1997
933 On 14 January 1997 Dr Gray went to see Mr Lennon again. Mr Lennon made notes of their meeting and on the following day sent a memorandum to Professor Barber. In the memorandum he said that Dr Gray had come to see him about intellectual property developed "in part in the Centre for Applied Cancer Studies". The intellectual property was said to have been developed by Dr Steve Jones who had been working for some years within CRI and whose salary and work had been funded during that time. He had spent the last year employed by CACS. It was intended that he would return to CRI and resume employment there.
934 Mr Lennon told Professor Barber in his memorandum that there was a possibility that the intellectual property was able to be commercialised. Dr Gray and CRI wanted to clarify the intellectual property ownership situation as well as any claims to a share of the proceeds of the commercialisation. The need for this clarification was also driven by a due diligence exercise being done by "a party considering an investment in the CRI".
935 Mr Lennon stated the relevant facts as related by Professor Gray which included:
1. Dr Jones worked on the project developing the intellectual property for several years before becoming an employee of CACS.
2. When employed by CACS all the funds equipment resources and space for the work was paid for by CRI.
3. UWA's only involvement in his work was to process funds received from CRI and paid them as wages in order to employ Jones.
4. There appeared to be some imminent prospect of commercialising the intellectual property. CRI was negotiating with a company to secure further investment in the device and possibly a licence agreement as well.
5. The invention was a mechanical invention and the first prototype had not been built. Dr Gray estimated it would cost approximately $500,000 to build that prototype.
6. There would be some non-financial spin-off for UWA. It was anticipated by Dr Gray that the project would continue to attract more students.
He referred to clause 4.7 of the CACS Agreement which entitled the University to negotiate for a share of the proceeds in intellectual property developed by staff and students at CACS while funded by CACS grants processed by the University. He also referred to Mr Orr's letter to Dr Gray written on 29 August 1995.
936 Mr Lennon made recommendations in the following terms:
1. As the bulk of the research leading to the current invention had been done at CRI, the University should agree that any claims to intellectual property in the invention be assigned to the CRI. It was much easier to commercialise intellectual property with only one owner. The matter of proceeds (money) was different.
2. With regard to proceeds the level of involvement by UWA in the invention had been extremely low. There had been no financial contribution and only a limited administrative contribution. Conversely this would be one of the few opportunities (long term) to extract value from CACS. He suggested UWA should either accept a nominal share of proceeds (if any) or choose to express goodwill by accepting nothing.
3. The assignment agreement (if desired) would extremely short and simple and he would be pleased to draw it up on behalf of both the parties if Professor Barber so instructed.
937 Mr Lennon said in his affidavit that he did not recall Dr Gray advising him during their meetings with him in person or in any discussions by telephone that the University had any interest in the three technologies which he had described to him. He stated his beliefs and understanding about the nature of Dr Gray's assurances. This evidence was received as evidence going only to his state of mind and subject to relevance. I am not however satisfied that its relevance was established. I will disregard it.
938 Dr Gray was cross-examined on the meeting by reference to Mr Lennon's memorandum to Professor Barber. He was asked about the 'relevant facts' set out in the memorandum and attributed to him. He did not agree with the exact words. CRI did not pay for the space in which the work was carried out and did not provide all of the equipment which was used by the research group. He accepted what was attributed to him about imminent commercialisation. The invention referred to in item 5 of the memorandum was "the hyperthermia mechanical invention which is the device for generating an electromagnetic field". The statement in item 6 that there could be some financial spin off for UWA was constructed by Mr Lennon. It was not a misrepresentation of what he, Dr Gray, had said. He could not recall making any reference to clause 4.7 of the CACS agreement. I accept Mr Lennon's memorandum as an accurate account of what Dr Gray said to him.
939 Dr Gray believed that Mr Lennon discussed with Professor Barber the matters which he had raised. He said in cross-examination:
What I was doing at that meeting is suggesting that there may be an equitable position for the University if this commercialisation came off and it looked as though it was certainly going to come off.
940 Dr Gray said he did not tell Mr Lennon at any of the meetings that he was the "inventor" of the three technologies. That would have been untrue. He agreed he was "an inventor" of each of them according to his understanding of that word. Although he did not necessarily say as much to Mr Lennon on 14 January 1997 he had conveyed it to him "with crystal clarity" on previous occasions. He elaborated on this claim by saying that he had told Mr Lennon that "the concepts underlying these three technologies were concepts that I had been involved in developing long before I came to the University of Western Australia". On 14 January he had referred specifically to the DOX-Spheres invention and discussed with Mr Lennon whether the University should be an applicant on that patent. He had conveyed to Mr Lennon his 'involvement in the SIRT-2 program'. He added in cross-examination:
You can take from that the word 'an inventor' if you wish. I don't recall using those words.
He could not recall saying that he was an inventor of the SIRT-1 technology. As to the Thermo-1 technology that did not exist at the time. The application for the Thermo-1 patent was made after January 1997. He did convey to Mr Lennon his involvement in that whole program and as "the conceiver of the concept since … fifteen years before". I accept his evidence about what he told or did not tell Mr Lennon in relation to inventors.
941 Professor Barber referred in his affidavit evidence to the memorandum from Mr Lennon. He could not recall any prior contact with, nor specific knowledge about, Dr Jones. From information supplied by Mr Lennon he understood Dr Jones had been working for several years for CRI during which time he had developed some intellectual property. He had then been employed by CRI for about a year during which his funding, equipment, resources and space had been provided by that organisation. UWA had acted as paymaster for Dr Jones who, it was now proposed, would go back to being employed by CRI. I accept his evidence in this respect.
942 Professor Barber said that Mr Lennon did not provide him with any further detail of the intellectual property referred to in his memorandum. He relied upon Mr Lennon in the sense that, if there were a need to know, Mr Lennon would have included the information in the memorandum or told Professor Barber about it. I accept that Mr Lennon did not go into detail about the intellectual property.
943 Professor Barber also understood that a yet to be constructed prototype of the invention would cost about $500,000. As far as he was concerned, this meant that all there was at the time was an idea or concept. He did not consider it necessary to make any further inquiries about the matters referred to in the memorandum. As to Mr Lennon's recommendation for an assignment of the UWA interest in the invention, that was not implemented. It was, according to Professor Barber, overtaken by the event of a letter from Mr Gorn of CRI seeking a statement from UWA that it had no interest in the relevant technologies. An outline of that event follows.
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The Gorn and Barber letters - January 1997
944 Dr Panaccio was still pursuing Dr Gray, in January 1997, for written confirmation from UWA, RPH, the Chinese University of Hong Kong and the Prince of Wales Hospital they had no claim on the relevant intellectual property. Dr Gray ultimately asked him to put the request in writing. On 17 January 1997 Dr Panaccio sent him a letter in the following terms:
Even though the ownership of the following patents (PCT/AU95/0027 International. PCT/AU94/00708 International and Provisional PN0213 Australian Phase) currently reside with the Cancer Research Institute, it would be prudent to obtain confirmation that other parties do not claim part ownership.
We would appreciate it if you could provide us with correspondence from the University of Western Australia, the Royal Perth Hospital, the Chinese University of Hong Kong and the Prince of Wales Hospital confirming that they do not claim part ownership of any of the above listed patents.
945 Mr Gorn said that on or about 17 January 1997 he was told by Dr Gray that Nomura/JAFCO wanted written confirmation from each of the other parties with whom CRI had been associated that they would not make any claim against the relevant technologies. He visited Dr Gray's office and was given a draft letter to be sent to UWA which included a proposed draft of a letter that UWA would be asked to send in return. He did not draft either of these letters. He read and discussed them briefly with Dr Gray but could not recall what they said to each other. It seemed to him at the time a fairly routine matter.
946 Mr Gorn said, and I accept, that he relied on Dr Gray as to the accuracy and contents of the letter to the University. The statements made in it generally accorded with his understanding. That had largely been derived from discussions with Dr Gray and meetings with the board of management of CRI. The letter referred to statements already having been obtained from Monash University and the Chinese University of Hong Kong. He could not recall having seen statements from either of those entities. He believed that he received that information from Dr Gray.
947 The letter which Mr Gorn signed was addressed to Professor Barber. It is desirable to set out its text in full.
I write to inform the University about the Cancer Research Institute Inc's most recent negotiations to commercialize technology developed through the Institute. As you will be aware, the CRI has been affiliated with the University of WA and is a co-sponsor of the recently formed Centre for Applied Cancer Studies.
There are two matters that need to be considered. The first is the relationship between the CRI and the University of WA, and the second concerns further development of the Institute's intellectual property.
Since incorporation some seven years ago, the CRI has focused it's research effort in developing new forms of cancer treatment. This has meant employing our own research scientists, affiliating with the Royal Perth Hospital Medical Research Foundation and participating in conjoint research ventures with other entities, including Universities and collaborative research groups.
As a result, the Institute has developed intellectual property that may have commercial potential. Our Institute has for several years been attempting to obtain funding from the corporate sector to advance this property into the commercial world. It seems likely that our current negotiations with a potential venture partner will result in infrastructure funding in the near future.
As a result, the CRI in it's own right has agreed to participate with the funding partner in an attempt to develop it's intellectual property. It is important that the University of WA understand that the CRI remains committed to the long term future of the Centre for Applied Cancer Studies. However, as was stressed when the Cancer Centre document was being drafted, the CRI will remain free to develop it's own future as well. I am advised by Professor Gray, our current Medical Director, that the University has benefited from the CRI's research by way of our scientific staff supervising students within the University. I am pleased to say that the CRI will be supporting three students this year who are studying for higher degrees.
The Institute has been involved in three closely related developments with commercial potential. The first involves intellectual property involving the use of small ceramic particles to treat patients. This was funded through the CRI and developed in association with Monash University and the Chinese University of Hong Kong. The second area involves a new matrix for transport of an anti cancer drug and was developed by a scientist working at the CRI in Perth. The University of WA has no interest in these areas of intellectual property.
The third development in the area of targeted hyperthermia has involved a scientist employed by the CRI since 1993. In the past, and as a result of a Memorandum of Understanding with the Royal Perth Hospital Medical Research Foundation, the Hospital undertook the payroll administrative functions for all staff employed through the CRI and the Lions Cancer Institute Inc. When the Centre for Applied Cancer Studies was established last year, the administration duties were transferred across to the University. CRI have continued to provide all the funds for this and other research projects that are particular to our Institute. Therefore, although this particular scientist has nominally been within the University for the past eleven months, the project, facilities and all costs have been borne by the CRI.
As we are currently negotiating for venture capital funding we need to state very clearly that the University has no financial or other interest in the intellectual property that we intend developing. The venture partner has requested that everyone we have associated with provide written statements declaring they have no claim on the technology before any contract with the CRI could be undertaken.
Statements have already been obtained from Monash University and the Chinese University of Hong Kong confirming that no claim will be made against this technology, and we now seek a similar statement from the University of WA. My request is that the University state that they will not in the future make any claim against the ceramic particle, matrix and hyperthermia technology.
I have enclosed a proposed draft letter, and if it is acceptable to the University I would be pleased if you would have the letter prepared and forwarded to the Cancer Research Institute Inc.
Yours faithfully,
DANE GORN Chairman
948 The attached draft which it was proposed that Professor Barber could send to CRI was in the following terms:
I confirm that the University of WA has no interest financially or otherwise in the technology or intellectual property described in your letter and referred to as:
. The use of small ceramic particles to treat patients;
. The use of a new matrix for transport of an anti-cancer drug;
. The use of targeted hyperthermia in the treatment of patients.
949 When he received the letter Professor Barber had not had any prior involvement with Mr Gorn. He knew he was the chairman of CRI and he knew of CRI because of its role in CACS. As an organisation affiliated with UWA he regarded CRI as a "trusted" organisation. He accepted the statements in the letter at face value. There was nothing in them to cause him any concern. He was aware of a relationship between CRI and the Foundation. He was also aware that institutes associated with other Category B centres employed their own research scientists such as the Lions Eye Institute which was associated with the Centre of Ophthalmology and Vision Science.
950 As to the statement that CRI had developed intellectual property and had been attempting to obtain funding from the corporate sector to advance that property he againsaid that there was nothing unusual in a body such as CRI doing that. He saw a connection between those references in Mr Gorn's letter and similar references in Dr Gray's letter to him of 26 July 1996.
951 For some reason which he could not recall Professor Barber believed that Dr Gray had been at Monash University before coming to UWA and that there might be some connection between that and the reference to the first item of intellectual property having been developed in association with Monash University. He accepted, based on Mr Gorn's letter, that the first intellectual property was something that CRI had developed in association with Monash University and the Chinese University of Hong Kong as indicated. He found no reason to suspect that the information was not correct.
952 Based on the letter he also accepted that the second element of intellectual property had been developed by one of CRI's scientists working in Perth and that UWA had no interest in it. As to the third element the letter said that this had "involved a scientist employed by CRI since 1993". It did not identify the scientist concerned but Professor Barber saw a clear connection between the circumstances referred to in the letter and those set out in Mr Lennon's memorandum of 15 January 1997. He understood that the scientist referred to was likely to be Stephen Jones. The third element of the intellectual property was therefore likely to be that referred to in Mr Lennon's memorandum. Based on the letter which, according to Professor Barber, reflected the information and recommendations in Mr Lennon's memorandum he accepted that any involvement by UWA in the third element of intellectual property was extremely low.
953 Professor Barber did not arrange for an independent investigation or assessment of the statements made by Mr Gorn in respect of the three areas of intellectual property involved. On the face of the letter, as he saw it, there was no need for any such investigation or assessment. It was a straightforward request from CRI for a statement that UWA would not make any claim on intellectual property developed and funded by CRI and persons funded by it. There was no suggestion of any technical work conducted by UWA staff to develop any of the intellectual property.
954 Professor Barber was aware that Dr Gray had roles in CRI and Paragon Medical as well as his role at CACS and his status as an employee of UWA. He felt however that because of Dr Gray's various roles any assessment of his involvement would be complicated. He saw no reason to obstruct CRI in proceeding to move forward with capital funding. There was no information in the letter in respect of the three areas of intellectual property which could have allowed an investigation of the provenance of that property. No inventors were named no dates were given and no proper names of intellectual property were provided.
955 Professor Barber said:
For all of these reasons, on the basis of the information contained in Gorn's letter to me, there was nothing in my view to support an inference of any interest by UWA in any intellectual property developed during the limited time that CACS had been operating, and I was convinced that if UWA had any interest in the intellectual property it was negligible, upon the basis of the material disclosed in Gorn's letter.
956 He replied on 22 January 1997 to Mr Gorn's letter. In his reply he stated:
Thank you for your letter of 17 January 1997 concerning intellectual property within the CRI and the Centre for Applied Cancer Studies.
I confirm that, on the basis of the facts in your letter, the University has no interest financially or otherwise in the CRI funded technology (or intellectual property in it) described in your letter and referred to as:
(a) the use of small ceramic particles to treat patients;
(b) the use of new matrix for transport of an anti-cancer drug;
(c) the use of targeted hyperthermia in the treatment of patients.
957 On the next day Professor Barber sent Dr Gray a letter enclosing a copy of Mr Gorn's letter of 17 January 1997. His letter to Dr Gray concerned the reference to CRI on the letterhead used by Mr Gorn. He observed that the letterhead used by CRI was also used by CACS. Both titles were prominent and there was only one address for them both. When Mr Gorn signed as "Chairman" it was uncertain to the reader whether he was signing as Chairman of CRI or Chairman of CACS. He pointed out that the reference to CACS appeared prominently followed by "Affiliates" of CACS. Professor Barber made the point that the University and the other parties could not be said to be affiliates with the Centre in the ordinary sense. CACS had no real independent existence. It was "… really a joint venture and the members might be better thought of as joint owners of the Centre or members of it".
958 Professor Barber asked Dr Gray to liaise with CRI so its letterhead could be adjusted to better reflect the real situation. CRI could refer to itself as "- a member of the Centre for Applied Cancer Studies together with …".
959 It is appropriate to make the following observation about Professor Barber's letter in the context in which it was sought and provided. He was aware, from the Gorn letter, as was the case that the letter was sought for the purpose of CRI's negotiations with a third party financier. The technology referred to in the letter was very broadly defined and plainly not limited to a particular inventive concept. The two limitations in the letter were that the release was confirmed "on the basis of the facts in your letter" and that the technology was "CRI funded". There was no suggestion that the truth of the facts was assumed as distinct from known. Nor was there any suggestion that CRI funding was limited to any particular aspect of the technology concerned.
960 I accept the Sirtex contention that an independent third party reading the letter would properly infer that UWA was not making a conditional release but a release based upon its own inquiries or satisfaction. At the same time I accept that Professor Barber was prepared to sign his letter in reliance upon that provided by Mr Gorn. His less than rigorous approach in this respect was consistent with his less than hard line attitude to the enforcement of what he and others thought were UWA's intellectual property rights. I would not go so far as to conclude, as submitted by Sirtex, that Professor Barber's letter reflected an informed consent by UWA to Dr Gray or CRI or anyone else exploiting what it believed to be its intellectual property rights in relation to the three technologies.
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Panaccio retains Freehills - January 1997
961 Dr Panaccio retained Kon Mellos, a senior associate in Freehill Hollingdale & Page (Freehills) in Melbourne, to act on behalf of Nomura/JAFCO in relation to the investment transaction. He also retained James Cherry a patent attorney at Freehills in Melbourne whom Mellos had recommended.
962 Dr Panaccio referred every draft of every document relating to the investment transaction to the legal department of Nomura/JAFCO's Singapore office. The standard practice of Nomura/JAFCO was to obtain the broadest possible warranties and representations in any investment. Dr Panaccio followed the directions of the legal department as to whether particular warranties or representations were sufficient. He said that he did not instruct Freehills to make inquiries into the ownership of the patents which covered the technology.
963 Mr Mellos said that Dr Panaccio's instructions were that the transaction be effected by investment in a new company to which the relevant intellectual property would be assigned and which would, upon the investment, be owned in equal shares between Dr Gray (or associated entities), CRI and the funds managed by Nomura/JAFCO. The costs of the due diligence and documentation were to be shared equally between the new company and Nomura/JAFCO. Mr Mellos also said that Dr Panaccio:
…was very specific, as far as patent review was concerned, that he only sought an appraisal of the patents on their face, not a thorough review of the relevant underlying intellectual property itself that was the subject of the patents (including its provenance); …
There was to be no legal due diligence save for basic patent appraisal. Mr Mellos received no instructions from Paragon Medical.
964 In a letter which he sent to Mr Mellos on 17 February 1997 Dr Panaccio requested that the lawyers review 'Ownership of all intellectual property'. He did not maintain this as a requirement of the due diligence process and it is not surprising given the difficulties of definitively resolving ownership issues. Indeed Mr Mellos said it was commonplace for clients not to require exhaustive investigation of the ownership of intellectual property the subject of such a transaction. No doubt a prudent cost benefit approach would combine some form of review of intellectual property with appropriate warranties from the party providing it.
965 Dr Panaccio instructed Mr Mellos that all he wanted was a one or two page report on each of the three patents. It was to be a summary of information apparent on the face of each patent. The report was to identify any obvious problems but Freehills and Freehills' patent attorneys were not to undertake any further enquiries. For the purposes of the patent appraisal work he introduced Dr Panaccio to James Cherry.
966 Mr Mellos asked Mr Cherry to provide what Mr Cherry described in his evidence as "limited advice to NJI (on specific questions raised by NJI) in respect of patents on some of the technology the subject of the 1997 transaction". The applicants referred to on the relevant patent documents were Dr Gray and CRI. Mr Cherry's principal instructions in the 1997 transaction came from Mr Mellos. He said that he may also have met Dr Panaccio. They had some telephone conversations. He had no recollection of meeting Dr Gray at that time. Indeed Mr Cherry had very little recollection of any conversations conducted at that time. He did not investigate or review the ownership of the intellectual property.I accept that the instructions were limited as indicated in the evidence of Dr Panaccio, Mr Mellos and Mr Cherry.
967 Mr Mellos said that Dr Gray was represented by a Perth-based firm Blakiston & Crabb. They reviewed and negotiated documentation for the transaction on behalf of Dr Gray. They drafted a deed by which Dr Gray assigned the intellectual property rights to Paragon Medical based upon a document prepared by Freehills.
968 The transaction ultimately involved renaming the existing Paragon Medical Ltd as Australian Surgical Products Ltd and the creation of the new company under the name Paragon Medical Ltd. The new company took an assignment of intellectual property rights of Dr Gray and CRI. It subsequently changed its name to Sirtex Medical Ltd. CRI, which was also advised by Blakiston & Crabb, was to hold shares in Sirtex as consideration for the assignment of its intellectual property assets.
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Paragon board meets - 22 January 1997
969 The Paragon Medical Board met on 22 January 1997. Dr Gray, Mr Karlson and Mr Peter Jones were present. Professor Li was an apology.
970 The minutes recorded that Dr Gray outlined the heads of agreement reached with Nomura/JAFCO. The Board unanimously agreed to accept the proposed arrangements subject to a final document to be discussed at the next board meeting. It was expected that the final document would be available within three weeks. At the same meeting it was agreed that there should be a minimum of five directors. The current directors Messrs Karlson, Gray, Jones and Li were reaffirmed. Dr Panaccio and a further nominee of Nomura/JAFCO were accepted as additional directors to be appointed following the first investment from Nomura/JAFCO. Dr Gray was appointed managing director.
971 The minutes of the meeting of the board on 22 January 1997 foreshadowed that the managing director would receive a salary package of $132,000 per year to be reviewed annually. The wording of the minutes suggested that the remuneration awaited the financial input from Nomura/JAFCO. In the area of staff appointments Dr Gray proposed the immediate employment of Dr Stephen Jones along with a data handler and a research assistant. Dr Jones' proposed salary was $72,000 per annum and shareholding incentives.
972 The minutes reported Freehills' recommendation that a new company be established and the name Paragon Medical Ltd be transferred to it. The board agreed that costs would be shared equally between Nomura/JAFCO and Paragon Medical for Freehills to form the new company, to prepare shareholder and investment agreements and to effect transfer of intellectual property into the company for a fee of $26,000. Additional legal requirements including a leasing contract, employment contracts and a review of the Freehills' documents would be undertaken by Blakiston & Crabb. The current liabilities of Paragon Medical would be paid out by the new company.
Gorn's discussion paper - January 1997
973 Mr Gorn prepared a discussion paper on what he described as the proposed "joint venture" between Paragon Medical, Nomura/JAFCO and CRI for consideration by the CRI board of management at its meeting on 23 January 1997. He recommended in the paper that the board support further negotiations on a joint venture.
974 The CRI board met on 23 January 1997. Dr Gray reviewed CRI's input into the hyperthermia project. Mr Gorn tabled his discussion paper and Drs Gray and Stephen Jones left the meeting. The board then agreed that independent legal and financial advice would be necessary to protect CRI's interests. Mr Gorn and another member of the board, Mr Vibert, were given authority to continue negotiations with Paragon Medical and Nomura/JAFCO along lines set out in the discussion paper. Dr Gray informed Mr Gorn that he had retained his own solicitors, Blakiston & Crabb, to advise him with respect to the negotiations with Nomura/JAFCO. He suggested that they could also advise CRI.
975 Dr Panaccio sent a fax to Dr Gray on 24 January attaching costings from Freehills for setting up the new company and completing the investment process. Paragon Medical and Nomura/JAFCO were each to bear half of the costs. Dr Panaccio suggested that Dr Gray negotiate a fixed fee with Blakiston & Crabb to review the Freehills' documents and that they draft management agreements for himself and Stephen Jones and a lease agreement with CRI. Those costs would be the responsibility of Paragon Medical. Dr Gray said he would do this.
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Paragon Medical's SIR-Spheres price increase - January 1997
976 At some time prior to the end of January 1997 Dr Panaccio had recommended to the board of Paragon Medical and the board had accepted that the price of doses of SIR-Spheres be increased. The current price was $690 per dose which was approximately the actual cost. The increase increased the price to about $2,800 per dose. The price change was implemented. Over the next twelve months or so the Chinese University complained about it and eventually stopped ordering it.
977 A letter was sent on Paragon Medical letterhead to RPH on 30 January 1997 in answer to an enquiry from its Medical Physics Department. The letter advised that each dose of Yttrium90 SIR-Spheres would consist of 5GBq Yttrium90 calibrated to a specified delivery date and charged at $2,800 per dose. The letter appeared over the name of Mr Karlson, although it appears to have been initialled by someone else on his behalf.
978 It was clear that the letter was prepared by Dr Gray and sent out in Mr Karlson's name. I do not accept his evidence in cross-examination that Mr Karlson was involved. Mr Karlson knew nothing about the letter. Indeed, Dr Gray in his affidavit evidence-in-chief spoke of himself as having written to the hospital about the new product cost and billing requirements. The little episode of obfuscation in cross-examination may have been an indicator of stress under some pressure, but it did not show Dr Gray in a particularly good light. It was a factor, along with the argumentative style of elements of his evidence, that causes me to treat his uncorroborated testimony on contentious issues with caution.
Harrison/Jones and Thermo-Spheres patent - January 1997
979 On 15 January 1997 Dr Jones sent Dr Harrison an email in which he said that he was "still working on the patents". He thanked Dr Harrison for a report which he had prepared and said:
I am glad you are so understanding about the secrecy stuff.
980 Dr Harrison recalled Dr Jones telling him that a lot of his time was being taken up with writing a patent for the use of hysteresis to generate hyperthermia in tissue. He claimed that Dr Jones said that Dr Panaccio was helping him to write it. Dr Harrison recalled meeting Dr Panaccio at the laboratory. However, as was pointed out to Dr Harrison in cross-examination, Dr Jones had made no reference to Dr Panaccio in his email. I think it unlikely that he would have suggested that Dr Panaccio was involved in the drafting of a Thermo-Sphere patent application or that Dr Panaccio was involved.
981 On 20 February 1997 Dr Jones sent Gary Cox of Wray & Associates what he described as "my version of the patent document for the Targeted Hyperthermia Device". The document was entitled 'Targeted Hysteresis Hyperthermia as a Method for Treating Cancer'. It identified the Inventors as Drs Gray and Jones. The field of the invention was to be taken from the provisional specification. The document outlined the background of the invention including the statement:
Whilst there has been considerable success in the treatment of superficial tumours, the single obstacle to the wider clinical application of HT has been the inability to heat deep tissues. Major limitations due to insufficient penetration depth and poor focussing capabilities of externally applied microwave or ultrasound beams have meant it is impossible to deliver an adequate heat load to deep cancers without an unacceptable level of coincident damage to surrounding healthy tissue. The present invention of targeted hysteresis hyperthermia will overcome all problems concerning penetration depth and inadequate localisation of heat.
982 The invention was then summarised, the concept being said to depend upon:
(i) selective targeting of tumours with microspheres containing ferromagnetic materials; and
(ii) the generation of localised heating by magnetic hysteresis from those microspheres.
There followed descriptions of selective targeting of tumours with microspheres, the principles of hysteresis heating and the biological effects of oscillating magnetic fields.
983 The description of the invention was expressed in the following way:
The invention is described in terms of four separate but related pieces of technology which combine to form the hyperthermic cancer therapy described in this document. They are;
1) A method of administering microparticulates in such a way that they are preferentially located in the target tumour tissue.
2) The production of microscopic ferromagnetic particles that generate heat when exposed to a time varying magnetic field.
3) A method of incorporating these microparticles into some form of carrier that facilitates their optimal delivery to the site of the tumour by the method used in 1).
4) A device which generates a time varying magnetic field capable of heating these microparticles to therapeutic temperatures. This device must also be capable of producing the required magnetic field in a region of space large enough to accommodate a human torso.
984 In the discussion of the ferromagnetic particles to be used, reference was made to a quantity, evidently devised by Dr Jones called the "Magnetic Heating Efficiency (MHE)". This was defined by a mathematical expression:
"H" is the amplitude of the applied magnetic field. "P" is total power loss per unit volume and "f" is the frequency of the applied magnetic field. The units of the quantity so defined were "kg/A.s2" (although the later documents suggest that this is a mistake, the proper unit being "J.s/A/g"). Dr Jones described this as a more useful way to compare different materials than simply considering "P" in isolation since it also took into account the magnetic field conditions required to achieve the heat output. The major limitations to the generation of heat by magnetic hysteresis for the purposes of treating cancer arose from the effect a time varying magnetic field has on living tissue. In general those effects increase as the product "f.H" increases. It was therefore essential that "P" be maximised subject to keeping "f.H" within safe limits.
985 He went on to discuss the classes of materials suitable for the application. The materials he described included CrO2 and gamma-Fe2O3 also ferrites of the general form MO.Fe2O3 where M is a bivalent metal such as magnesium, manganese, iron, cobalt, nickel or copper, zinc, cadmium or lithium. Another class of material suitable to the application were the super paramagnetic single domain particles. Under the heading "Microspheres" there was an italicised reference in parentheses:
(a lot of this stuff can come from Yans patent)
This was clearly a reference to DOX-Spheres on which Dr Yan Chen had been working. That entry had been crossed out on the exhibit in Court but Dr Jones said it was not his crossing out.
986 Under the heading"Devices for Generation of Time Varying Magnetic Fields" he said:
The applied magnetic field to heat the ferromagnetic particles can be either a linear alternating field or a rotating magnetic field. The device used must be capable of producing the required magnetic field conditions in a region of space large enough to accommodate a human patient and must be such as to maximize the MHE. A number of different designs based on various combinations of induction coils and high permeability cores and pole pieces can be used to generate the appropriately conditioned time varying magnetic field.
987 Dr Jones wrote that a rotating magnetic field could be described in terms of the superposition of two orthogonal linear fields with a 90 degree phase difference between them. Circuit designs for devices to produce such fields were shown in figures attached to the paper. Under the heading "The Preferred Configuration" he wrote:
We have shown experimentally that use of a rotating magnetic field produces a superior MHE compared to a linear alternating field … and is therefore the preferred option….
988 Dr Jones also referred to the work of others, including papers by Gilchrist, Rand, Gordon, Borrelli, Matsuki, Bartlett, Suzuki, Chan, Jordan, Mitsumori and Shinkai. He set out distinguishing features of the proposed method. These were:
(1) a vastly superior system MHE which ensures that totally safe applied magnetic field conditions can be used to generate therapeutic tissue heating,
(2) a clinically proven technique for administration of microspheres ensuring localised tumour heating,
(3) proven performance in an animal model which is highly representative of the human scenario;
(4) machine designed to limit patients exposure to the applied magnetic field.
He set out the comparative table to which reference has been made earlier in these reasons. It included the MHE factors in the work of earlier experimenters.
989 Examples followed comparing heat production efficiency of different materials, superior heating derived from a rotational field as against a linear alternating field and a demonstration of the ability to heat living tissue. Experiments had also been performed to demonstrate that the technique could be used to heat liver tumours to therapeutic temperatures while leaving surrounding healthy tissue unaffected. Tumours had been artificially induced to grow in the livers of rabbits. Once they had grown to a size of approximately 1 cubic centimetre, 50 mg of microspheres were infused into the hepatic artery feeding into the liver. Temperatures were measured in the necrotic core of the tumour, the growing edge of the tumour and nearby normal liver tissue. Temperatures were monitored after the living rabbit was placed in the magnetic field apparatus.
990 Under the heading "Embellishments", reference was made to materials for autothermo-regulation. This process involves magnetic materials which act in the manner of a thermostat to automatically regulate tissue temperature to be in the range 45°C to 60°C. Four physical mechanisms identified in the paper were:
materials with a stoicometrically adjustable Curie temperature in the correct range;
materials with a compensation temperature in the correct range;
materials with a martensitic transition in the correct range;
4. single domain ferromagnetic particles that are configured to have a critical temperature in the correct range (ie marking the transition from a superparamagnetic state to a ferromagnetic one).
S Jones on hyperthermia prior art - 6 February 1997
991 On 6 February 1997 Dr Jones sent to Dr Panaccio, on Paragon Medical letterhead, documentation which Dr Panaccio had requested including summaries of prior publications of work in the US in the hyperthermia area. He also provided his summary of why he considered the work of Dr Gray's group was superior. US patent abstracts were included along with some 48 pages of titles from worldwide patent databases which he had searched.
992 Dr Gray had written to Dr Burton in December 1986 about what he called "Adjuvant hyperthermia in the treatment of cancer". At that time there was already in existence a considerable body of literature about selective heating of cancer tissue. Eleven of the relevant papers and patents up to 1986 were referred to earlier in these reasons. The publications reviewed by Dr Jones went up to 1996.
993 In the summary which he provided to Dr Panaccio, Dr Jones set out, after review of the work of others in the field, another statement of what he called "Distinguishing Features of Present Method". He said that the system delivered by the Gray group incorporated "several unique, distinguishing features which ensure its success as a treatment for cancer by targeted hyperthermia". His statement included the following:
Whilst several groups claim to be able to generate enough magnetic heat from their particles to induce therapeutic hyperthermia they can only do so using a magnetic field strength and frequency that would be, in itself, harmful to patients. This is reflected in the factor called the Magnetic Heating Efficiency (MHE) factor which must be as high as possible. This factor is calculated from the rate of heat generation (in W/g) divided by the field strength and frequency used to generate that heat. We have the highest MHE. (emphasis in original text)
No other groups have discovered how to administer their particular magnetic particle formulation in a way that will ensure adequate heating of the cancer. We have. Most authors describe a process of cellular uptake to get the particles into the target cancer cells. This is a highly theoretical approach which has yet to be demonstrated to work. In fact, any experiments that have been done tend to show that this method cannot work. Direct injection of particles into tumours may work in very limited circumstances but is highly undesirable for a number of good reasons. [emphasis in original text]
He went on to claim that the Gray group's animal model was highly representative of the human scenario and that the results of its therapeutic trials in animals were more emphatic than any published thus far. He included a table setting out a summary comparison between work described by the authors of the various articles to which he had referred. The summary referred to the MHE in each case, the technique for targeted delivery and whether there were results from live animals.
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Barber/Gray re Paragon Medical directorship - February/March 1997
994 On 20 February 1997 Professor Barber wrote to Dr Gray. He had been reflecting upon several conversations which they had had in recent months concerning the commercialisation of intellectual property arising from his research activities. He referred to concerns he had raised with Dr Gray about the potential for conflict of interest arising in his various roles. He said:
In the most recent case concerning identification of Intellectual Property ownership between the Cancer Research Institute and the University of Western Australia, I was in the end convinced that our interest was negligible. In the future, I rather doubt if they will be as clear cut.
995 Professor Barber said that he believed that a clear statement was necessary from Dr Gray concerning his various roles. He understood, although he did not believe Dr Gray had ever advised him, that he was a director of Paragon Medical. He said this raised the potential for the conflict of interest in any dealings between himself and Dr Gray on Paragon Medical/CRI/UWA issues. He said:
On this particular issue, I presume that you have sought approval of the Vice Chancellor as required by the University's policy on Academic Professional and Consultative Work.
996 Dr Gray responded on 5 March 1997. He agreed that there was potential for conflict of interest in the future and a need to "service the University's requirements". He said that in the past he had been Medical Director of LCI and CRI both of which had been and would continue to be unpaid positions. He had not derived any income or other benefit from any institution or company that he had been associated with during his employment with the University. Paragon Medical had been little more than a shell company up until that time. He was acutely aware that there could be conflict of interest in the future. For that reason he had been negotiating with Professor Landau to reduce his commitment to the University and had arranged to reduce from a full time to a 0.3 fraction of full time position to be effective in the immediate future. This would allow him appropriate time to pursue, inter alia, promotional activities associated with the CRI.
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Dr Gray moves to a 0.3 appointment - March 1997
997 On 9 January 1997 Dr Gray wrote to Dr Bill Beresford, the Director of Clinical Services at RPH following a meeting about the level of his appointment at UWA. He told Dr Beresford that he was currently in discussion with the Executive Dean, Professor Landau about the prospect of decreasing his full time position to a 0.3 full time equivalent. He intended to maintain clinical services at RPH by way of operating and caring for patients in the hospital. He would be concerned exclusively with the care of patients with cancer and predominantly with hepatobiliary or GI malignancy. He asked to relinquish on-call duties at the hospital effective from July 1997.
998 On 10 January 1997 Dr Gray wrote to Professor Landau formally requesting that his status within UWA be changed from full time to a 0.3 fractional appointment, effective from 3 March 1997. He observed that the conversion of his full time appointment to a fractional appointment would result in a substantial salary saving which would be used for research appointments within CACS. This accords with Professor Landau's evidence of the reason for the conversion to 0.3 as he understood it at the time. He asked Professor Landau that his office calculate the salary savings to be applied to further research positions so the amount could be agreed before his transition. The relevant approval was given. On the same day, Dr Beresford wrote to Mr Ivan Thomson, the Chairman and Head of Department of General Surgery at RPH saying:
Bruce has had approval from the University to decrease his service commitment to the University however, he will retain 3/10ths of service for Royal Perth Hospital (unchanged). I have requested that he continue part of the on-call service until July, which he has agreed to do. He will then come off the on-call as of July 1997. Bruce's work will be confined thereafter to elective surgery in the surgical oncology area, predominately hepatic primary and secondary cancer.
The effect of this change was that from 3 March 1997 Dr Gray was paid by RPH although he continued under a 0.3 fractional appointment to UWA.
Robson demands payment for damaged equipment - February/May 1997
999 As noted earlier Dr Gray alleges malice on the part of UWA informing its allegedly defamatory letter of demand sent to Sirtex on 26 October 2004. The particulars of malice include an allegation that the publication was authorised by Professor Robson on behalf of UWA in circumstances of a history of animosity between them. One of those particulars relates to a dispute which arose between them in 1997 when Professor Robson required Dr Gray to pay the cost of repairing damage to certain equipment which he had removed from Professor Hall's laboratory at RPH. The clearest account of the incidents appears from Professor Robson's affidavit of 2 March 2007.
1000 The background to the issue arose out of disputes between Professor Hall and Dr Gray following the formation of CACS. The dispute concerned, inter alia, the distribution of equipment between CACS and UWA's Department of Surgery.
1001 It appears from contemporary documents that the dispute flared up and involved Professor Robson in November 1996. One Monday morning Professor Robson received a telephone call at his office at UWA from a police officer who said he was at RPH at the request of Dr Hall who wanted to prefer charges against Dr Gray for stealing equipment from Dr Hall's laboratory. The police officer said that it did not appear to him to be a police matter but as they were UWA employees perhaps Professor Robson could sort it out. Professor Robson was greatly concerned that two senior academics were unable to resolve a dispute without having to have recourse to the police. He discussed the matter with Professor Landau.
1002 Following his discussion with Professor Landau, Professor Robson had a meeting on 27 November 1996 which was attended by Professors Landau, Hall, Robson, Professor David Fletcher from Fremantle Hospital, Professor House, Dr Gray and his solicitor. The solicitor's note recorded considerable debate about the tension and animosity existing between Dr Gray's laboratory and that of Professor Hall and debate about the interpretation of a letter from UWA to Dr Gray dated 29 February 1996 relating to the establishment of CACS. The debate concerned the identity of the equipment to be transferred to CACS. It was said that this did not include what was referred to as an HPLC machine apparently obtained by Professor Hall as the result of a grant. The solicitor recorded that Professor Robson made the point that Drs Hall and Gray had been at warfor ten years and would never see eye to eye in the future. The solicitor recorded that nothing much was resolved, but it appeared clear that the HPLC machine would remain with Professor Hall.
1003 At some point, according to Professor Robson, he told Dr Gray that if he did not pay for damage to the machine which was evidently incurred during the removal of it from Professor Hall's laboratory, then it would be deducted by UWA out of his research grants.
1004 On 5 February 1997 Professor Fletcher who had been at the meeting, wrote to Dr Gray enclosing an account for the repair of the HPLC machine claiming that at the meeting Dr Gray had committed himself to pay the account. On 17 February 1997 Professor Robson sent a letter to Dr Gray indicating that an account had been received from Scientronic Instrument Services for $533 in relation to "the repair of equipment damaged by your unauthorised removal of the equipment from the laboratory of Professor Hall". He insisted that payment be made by close of business on 21 February 1997.
1005 On 15 May 1997 Professor Robson again wrote to Dr Gray saying that he was "amazed" to be told that the account had not been paid. He said that if the account were not paid by close of business on 22 May 1997 he would be obliged to take disciplinary action against Dr Gray. Dr Gray wrote back on 23 May 1997 saying that he would not be intimidated by Professor Robson's threats. He wrote:
Your demand for me to pay debts of the University is totally inappropriate and unlawful, and your threatening me contravenes the Criminal Code of Western Australia.
In view of your unconscionable behaviour I have no option but to take this matter to the appropriate authorities. You will be contacted further in due course.
1006 On the following day Dr Gray wrote to Professor Robson enclosing Professor Fletcher's letter of 5 February 1997 alleging that Professor Fletcher had "dishonestly claimed that I agreed to pay a debt of the University at the meeting called by yourself". He sought the assistance of Professor Robson to bring appropriate action against Professor Fletcher. He wrote:
I would expect that deliberate dishonesty by a Professor to be a matter of grave concern to this University, and deserving of the highest reprimand. Against that expectation is the realization that previous deliberate, repeated and documented dishonesty by Professors in the Faculty of Medicine have simply been swept under the carpet by your administration.
1007 Dr Gray made a complaint to the Director of Public Prosecutions about Professor Robson's letter of 15 May 1997. Not surprisingly the Director of Public Prosecutions declined to take any action against Professor Robson. Dr Gray also wrote to the Hon Kim Chance MLC, Chairman of the Standing Committee on Public Administration of the Legislative Council of Western Australia.
1008 While the preceding events document overreaction by Dr Gray, they do not support any inference of malice which can be attributed to UWA in any way that is relevant to the letter of demand sent in October 2004.
Jones/Cox re MHE figures in Thermo-Spheres-1 - April 1997
1009 On 8 April 1997 Mr Cox of Wray & Associates sent Dr Jones a fax attaching a draft of a patent claim for what was to become the Thermo-Spheres-1 PCT application. The proposed claim read:
The present invention resides in a microsphere carrying ferromagnetic material where the ferromagnetic material is selected such that it has a magnetic heating efficiency (MHE) greater than 3.8 x 10-8 [Steve insert Units if possible].
1010 Dr Jones responded on 9 April 1997 attaching comments including the following:
Should say magnetic heating efficiency to exceed 4.5 x 10-8 since MHE's up to this value can be calculated from data printed in a US patent application by Chen et al 1993 (new data found since the old table was put together).
Cherry/Panaccio - Thermo-Spheres patent - 27 March 1997
1011 On 27 March 1997, as part of the Nomura/JAFCO due diligence process, Mr Cherry sent Dr Panaccio draft reports on the patent specifications which had been supplied to Freehills. These included the SIRT-2 and DOX patents requested from Dr Gray. The draft reports dealt, inter alia, with the 1996 provisional patent application PN 9782 entitled "Targeted Hysteresis Hyperthermia as a Method for Treating Cancer". Mr Cherry pointed out that the same inventor had filed provisional specifications with similar titles on 12 September 1988 and 23 December 1994. Attention was drawn to similarities between the two provisional specifications. Although there were alterations in the December 1994 specification the reasons for them were not clear. Dr Panaccio said he did not recall whether at the time he received the memorandum he understood that there was a live issue as to whether UWA had a legitimate claim to some or all of the inventions. Some argumentative "concessions" were extracted in cross-examination.
1012 Sirtex contended against any conclusion that Dr Panaccio should have been on notice that CRI could not have held an interest in the hysteresis invention. No such suggestion was made by Freehills. The position was consistent with CRI having worked on developing the invention in 1996 and 1997. Hypothetical concessions by Dr Panaccio were of no weight.
1013 I accept the submission by Sirtex that the proper inference is that Dr Panaccio did not make the connection to a possible UWA interest. I agree that if he had done so he would have sought some commercial resolution with UWA by the offer of shares or otherwise.
The Paragon Medical/Nomura/JAFCO transaction - 1 May 1997
1014 The investment transaction between Paragon Medical and Nomura/JAFCO was effected by various agreements executed on 1 May 1997. As described by Dr Panaccio in his evidence-in-chief, the transaction involved the creation of a new corporate entity which would have the name Paragon Medical Ltd transferred to it. This company later became Sirtex. The old Paragon Medical changed its name to Australian Surgical Products Ltd (ASPL).
1015 After the transaction was effected, Dr Panaccio attended meetings of the board of Paragon Medical as an observer on behalf of Nomura/JAFCO. He did not become a director of the company until 11 February 1998. The purpose of his attendance as an observer before that time was to verify the achievement of the investment milestones which had to be met before payments would be made by Nomura/JAFCO under the Subscription and Shareholders' Agreement which form part of the transaction effected on 1 May 1997.
1016 Summaries of various of the agreements are set out in the following sections of these reasons. In addition to those, the new Paragon Medical entered into a Memorandum of Understanding with CRI under which CRI undertook to carry out research work for Paragon Medical for reimbursement of salaries and expenses plus a 30% loading. Any intellectual property disclosed to, or generated by, CRI or any of its employees was to belong to Paragon Medical. There was also a confidentiality clause requiring CRI to use its best endeavours to ensure that its employees did not directly or indirectly divulge Confidential Information, a term widely defined in the memorandum.
Asset Purchase Deed CRI to new Paragon Medical - 1 May 1997
1017 The Assets Purchase Deed provided for the purchase by Paragon Medical of assets of CRI designated the Institute Patent, the Institute Know How and the Institute Rights together with the Institute Equipment. Consideration for the acquisition was as follows:
1. For the Institute Patent - 33,332 B ordinary shares in accordance with the Subscription and Shareholders Agreement.
2. For the Institute Know How and Institute Rights - 400,000 B ordinary shares in accordance with the Subscription and Shareholders Agreement.
3. No separate consideration was provided in relation to the Institute Equipment.
1018 The Institute Patent was in effect the DOX-Spheres patents rights. It was extensively defined. It is not necessary to set out that definition in full. Paragraph (a) of the definition provided:
(a) … every patent and patent application which is derived from international patent application No PCT/AU94/00708 which is entitled 'controlled release preparation'.
The remaining paragraphs covered the derivative and incidental rights including rights in relation to improvements.
1019 The "Institute Know How" was defined to pick up a range of rights and interest of CRI in any of Dr Gray's intellectual property rights associated with a targeted microsphere technology. The term "Institute Know How" was defined as follows:
'Institute Know How' means all of the rights and title of the Institute to, and interest of the Institute in, or in connection with its knowledge or the information in relation to:
(a) the Inventions;
(b) the Patents;
(c) the Rights;
(d) the design, production and delivery of micro-particles for use in the treatment of liver cancer; and
(e) the exploitation of any of the matters which are described in paragraphs (a) to (d) of this definition.
1020 The Institute Rights was defined to mean:
(a) The rights and title of the Institute to and interests of the Institute in, or in connection with, the Gray patents
together with association or derivative rights of interests held by CRI defined in paragraphs (b) to (f) of the definition.
1021 Each of the definitions picked up further definitions in terms including:
the Gray Assets;
the Gray Patents;
the Gray Know How;
the Gray Rights;
the Gray Equipment;
the Gray Inventions;
the Acquired Inventions;
the Assets;
the Intellectual Property.
1022 It is not necessary for present purposes to descend into the detail of these lengthy and interlocking definitions. It is sufficient to say that the obvious purpose of the deed was to effect the transfer from CRI to Paragon Medical of the DOX-Sphere patent held in the name of CRI and any interest that CRI might have in any Patents, Know How, Inventions, Rights, Intellectual Property and the Equipment held by Dr Gray.
1023 Part 3 of the CRI/Paragon Medical Assets Purchase Deed contained representations including representations that CRI was the absolute legal and beneficial owner of all the rights entitled to an interest in the Institute Assets. They also represented that no third party (including, without limitation, Yan Chen) had any right or title to, or interest in or in connection with any of the Institute assets.
1024 In clause 5.1 a general indemnity was provided in the following terms:
The Institute indemnifies the Company against any claim, action, demand, damage, loss, liability, cost, charge, expense, outgoing or payment which the Company pays, suffers, incurs or is liable for in respect of any breach of any warranty or representation in Clause 3.1.
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Asset Purchase Deed ASPL to new Paragon Medical - 29 April 1997
1025 Under this Asset Purchase Deed the new Paragon Medical acquired the ASPL "Former Company Assets" defined as "the Former Company Know How" and "the Former Company Rights". These terms were defined by reference to other defined terms which again picked up the Gray Assets, the Gray Inventions, the Gray Know How, the Gray Patents and the Gray Rights. They also picked up the Institute Know How, the Institute Invention, the Institute Patent and the Institute Rights. The transfer of those rights from ASPL to the new Paragon Medical was made in consideration of $100.
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Subscription and Shareholders' Agreement - 1 May 1997
1026 A Subscription and Shareholders' Agreement was entered into between Paragon Medical, CRI, Bruce Gray, Peter Jones, Kevin Karlson and NJI No 2 Investment Fund.
1027 The Agreement contemplated the transfer of assets from Dr Gray and CRI and the former Paragon Medical, now ASPL, into the new company.
1028 On the terms and subject to the conditions of the Agreement, Dr Gray had agreed to subscribe for:
1,028,333 A ordinary shares at a premium of $1.80 each; and
341,664 B ordinary shares at a premium of $1.80 each.
CRI had agreed to subscribe for 433,332 B ordinary shares at a premium of $1.80 each. Jones and Karlson had each agreed to subscribe for 15,000 B ordinary shares at a premium of $0.47 for each. The NJI No 2 Investment Fund had agreed to subscribe for up to 499,999 A preference shares at a premium of $1.80 each, 1 C preference share at a premium of $1.80, an additional 500,000 A Preference Shares at a premium of $1.80 each and another additional 500,000 A Preference Shares at a premium of $1.80 each.
1029 Schedule 3 contained what were called "Founder and Company Warranties". Schedule 4 contained "Gray Warranties". The Founder and Company Warranties were warranties given by each founder. The founders were defined to mean, CRI, Dr Gray, Mr Peter Jones and Mr Karlson. The Company was a reference to Paragon Medical. Among the Gray Warranties were the following:
1.2 Save for the transactions which are specifically contemplated by this Agreement, the Company
…
(k) has not been a subject of civil, criminal or arbitration proceedings which are pending or threatened.
1030 Part 7 of the Gray Warranties in Schedule 4 dealt with warranties in relation to intellectual property and included the following:
7.1 All Australian or foreign patents, registered designs, know-how or trade secrets, copyrights, trademarks or similar intellectual property rights (whether registered or not) and to the best of the knowledge of Gray and the Company (after Gray and the Company have carefully made all due enquiries), all pending applications therefore, which are material to the business of the Company are (or where appropriate in the case of pending applications will be):
(a) legally and beneficially vested in the Company;
(b) valid and enforceable;
(c) not being infringed or attacked or opposed by any person; and
(d) not subject to any licence or authority in favour of another.
7.2 To the best of the knowledge of Gray and the Company (after Gray and the Company carefully make all due enquiries), there are not any pending claims or applications in respect of any of the Company Patents, Know How, Rights or Intellectual Property Rights in any of the Acquired Inventions or the subject matter of any of them (other than the patent applications which are effectively transferred to the Company pursuant to the Gray Assets Transfer and the Institute Assets Transfer).
1031 There was also a warranty that no trade secrets or confidential information of the Company in connection with any of the Patents, Know How, Rights or Acquired Invention had been disclosed or made available to any person other than a Party.
1032 Clause 7.6 provided:
The Company is the absolute beneficial owner of the Acquired Inventions and all other intellectual property rights including (without limitation) copyright (if any) in the Acquired Inventions and there are no agreements, contracts or licences (whether formal or informal) with any person under which any rights relating to or interest in, the Acquired Inventions has been granted, whether or not those rights are recorded or arise at common law, equity or otherwise.
1033 In clause 7.10 a further warranty appeared:
Gray is the inventor of the Acquired Inventions and of all technologies which are described in the Patents and no other person is an inventor of any of the Acquired Inventions (except Yan Chen in respect of the Institute Patent).
1034 In Part 11:
Future Events
If anything occurs or arises which results to may result in any of the Gray Warranties being unfulfilled, untrue, misleading or incorrect, Gray will immediately give Notice of that thing to the Fund.
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Employment Agreement Gray/Paragon Medical - 1 May 1997
1035 Dr Gray entered into an employment agreement with Paragon Medical on 1 May 1997. The term of the agreement was for an initial period of five years. The salary package was $132,000 per annum and, subject to shareholder approval, participation in an employee option scheme.
1036 Under the Employment Agreement, Dr Gray was to serve the Company as Executive Managing Director. He was required to "devote so much of his time and attention to the Business as the Board, in their reasonable and bona fide exercise of its discretion, considers necessary for the proper management of the Company, but in any event shall not be less than 40 hours per week". Under clause 2.4 the Agreement provided:
The Company acknowledges and consents to the Employee pursuing additional nominal part time employment with the University of Western Australia and the Royal Perth Hospital, which shall not exceed 11 hours per week.
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Services Agreement S Jones/CRI/Paragon Medical
1037 By an agreement which was undated but which I infer was entered into on 1 May 1997, Paragon Medical engaged CRI to provide the services of Dr Jones on terms and conditions contained in the Agreement. Under the Agreement, Dr Jones was to provide his services as "Chief Researcher of CRI". The term "intellectual property" appeared as a defined term in the Agreement. It included in paragraph (a) all species of intellectual and industrial property and in paragraph (b):
…any Inventions in relation to all matters undertaken by the Employee in the Eight years preceding the date of this Agreement.
1038 The term "Paragon Intellectual Property" was then defined to mean:
all intellectual property which is the property of the Company or which the Company has a right to possess and which is communicated by any means by the Company to CRI or the employee in connection with the Services.
1039 Under clause 12.1 the Agreement provided:
CRI and the Employee acknowledge and agree that all right, title and interest in and to the Paragon Intellectual Property is and shall be owned by and vested exclusively in the Company.
1040 Under clause 13.3 it was also provided:
Any Invention, discovery, secret process or improvement in procedure or operation of any kind whatsoever made or discovered by CRI or the Employee during the Term or during the Prior Employment of the Employee which relates directly or indirectly to the Business (or any other business) of the Company or any of its Child Entities or which is capable of being used or adapted for use therein, shall be immediately disclosed by CRI and the Employee to the Company and shall be and shall remain the absolute property of the Company.
1041 The term "prior employment" was defined in clause 1.1 to mean:
All prior employment of the Employee with any employer (including but not limited to the University of Western Australia) of the Employee from 1989 to the Commencement Date.
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Gray/Paragon Medical - Assignment of Intellectual Property Rights - 1 May 1997
1042 The Assignment Agreement between Dr Gray and Paragon Medical recited that Dr Gray was the creator and beneficial owner of the Intellectual Property Rights in the Inventions and in all other property being assigned by him under the Assignment Agreement. The term "Assets" was defined to mean:
(a) The Gray Assets;
(b) The Institute Assets;
(c) The Former Company Assets.
1043 By clause 3 of the Agreement it was provided:
The Assignor, as beneficial owner, for good and valuable consideration receipt whereof is hereby acknowledged, hereby assigns, conveys and transfers to the Assignee, free from all Encumbrances, the Gray Assets.
1044 The purchase price payable by the Company for the Assignment was $2,739,990. The Company agreed that the purchase price would be satisfied by the allotment of 1,028,333 A ordinary class shares and 341,682 B ordinary class shares at an issue price of $2 per share to the Assignor.
1045 The Agreement contained representations and warranties in the following terms:
12. Representations and Warranties
The Assignor represents and warrants to the Assignee that the warranties which are provided in item 7 of schedule 4 to the Subscription and Shareholders' Agreement are true, accurate and not misleading in any respect.
By clause 13 Dr Gray indemnified the Company against any claim damage or loss which the Assignee might incur in respect of any breach of the representation and warranty in the preceding clause.
Robson Complains to ACC re Gray - May 1997
1046 In January 1997 Paragon Medical had increased the price which it charged for the provision of SIR-Spheres to RPH and other hospitals from $690 per dose to $2,800 per dose. At the time Professor Robson was a member of the Board of Management of RPH. He was a member from August 1993 to July 1997. Early in 1997 the issue was raised at the hospital concerning circumstances surrounding the price increase. It came to his attention that inquiries made by RPH revealed that the company that supplied the microspheres to the hospital was Paragon Medical in which Dr Gray had an interest.
1047 On or about 18 March 1997 Colin Waters, the RPH Director of Administrative Services, sought legal advice from the Crown Solicitor's Office about the matter. A copy of the letter from Mr Waters to the Crown Solicitor was sent to Professor Robson. In the meantime Dr Beresford, the Director of Clinical Services, wrote to Dr Gray, on 24 March 1997, telling him that he understood from the Head of the Department of Medical Physics, Dr Fox, that Dr Gray intended to increase the number of patients receiving radioactive Yttrium90 treatment. Dr Beresford pointed to the "quite marked financial implications" and the recent increase in costs. He asked for confirmation that the matter had been discussed with the Divisional Director of Cancer Services and asked how the increase could occur as they had just reduced his theatre sessions from three per week to two per week.
1048 Mr Tannin of the Crown Solicitor's Office replied to Mr Waters on 17 April 1997. He advised that there was sufficient evidence available to RPH to give rise to a reasonable suspicion about Dr Gray's conduct which warranted a formal criminal investigation and it was appropriate and necessary that the investigation be conducted by the Commissioner of Police, Western Australia Police Service.
1049 Dr Gray said in his affidavit that he had first become aware of the matter when he received a phone call from the Western Australian Police who told him they were acting on a complaint from Dr Beresford of RPH. He was interviewed for several hours by the investigating police officer. He provided documents relating to the matter and had another long interview with the investigating police officer.
1050 A file note by Linda Key, UWA's solicitor, indicated a telephone attendance on a Detective Samantha Tough of the WA Police Fraud Squad on 30 April 1997. The detective told Ms Key that her preliminary advice was that Dr Gray was a public officer within the definition in the Criminal Code at the time of the alleged conduct. The Fraud Squad would inform the Anti-Corruption Commission (ACC) which could make a determination as to whether there was corrupt conduct or not. If the ACC determined that it was not, then the Fraud Squad would proceed on the secret commission investigation. The Fraud Squad officer had also advised RPH to take advice about a breach of the Trade Practices Act 1974 (Cth) (the TPA).
1051 Dr Gray wrote to Dr Beresford on 5 May 1997 stating that he had tried to speak with him and make an appointment to see him on a number of occasions. He described the previous charges raised for Yttrium microspheres as heavily subsidised and exceeded by the cost of production. The cost per patient treated was approximately $4,800. The price had been reduced to $2,800. He said he had discussed the matter with Dr Fox a couple of months earlier.
1052 On 5 May 1997 Professor Robson, acting on advice from Linda Key, wrote a letter to the ACC. In that letter he said that UWA suspected on reasonable grounds that "Professor Bruce Gray, a 0.3 fractional tenured academic employee of the University has been involved in conduct which may amount to corruption, a crime or serious improper conduct and which is of concern to the University of Western Australia as employer and to myself as Deputy Vice-Chancellor". He enclosed with the letter a number of documents including Dr Gray's contract of employment with UWA, the advice from Paragon Medical to RPH increasing the charge of SIR-Spheres to $2,800 per dose and extracts from company records of Paragon Medical.
1053 In his letter Professor Robson stated that Dr Gray was a director of Paragon Medical who used Yttrium Oxide in his patient treatments. He understood that as a result of a complaint by RPH to the Fraud Squad of the WA Police Department, the Fraud Squad had referred the matter to the ACC having assessed Dr Gray's activity as potentially constituting corruption of a public officer under s 83 of the Criminal Code. The letter continued:
It is part of a clinical academic's duty to undertake clinical practice at a teaching hospital. The University of Western Australia is paid the clinical salary supplementation payable under the agreement by the teaching hospital and passes the appropriate payment on to its employed clinical academics. The clinical academics such as Professor Gray in addition have a right of private practice under their employment contracts with the University of Western Australia.
The University of Western Australia is a body corporate under section 6 of The University of Western Australia Act 1911. It is arguable that the definition of "Public Officer" in the Criminal Code includes employees of The University of Western Australia. The University of Western Australia is a statutory authority which is subject to the Financial Administration and Audit Act and is therefore a public authority subject to the Anti-Corruption Commission Act 1988.
1054 The ACC sent a comprehensive summary of the evidence along with copies of witness statements and exhibits to a Senior Prosecutor, Mr Fiannaca, at the Office of the Director of Public Prosecutions on 1 August 1997. It sought advice as to whether there was sufficient evidence to determine whether Dr Gray had committed a criminal offence. The advice returned was that the evidence was not capable of establishing a prima facie case of the commission of any offence by Dr Gray. A letter was then sent to Mr Waters of RPH advising him that the police investigation into the matter had been completed and that no action would be taken against Dr Gray. On 6 January 1998 notification of the completion of the inquiry was also given to the ACC by the investigating officer, a Detective Senior Constable, in the Official Corruption Investigation Unit.
Paragon Medical treats ACC inquiry as Gray's problem - June/July 1997
1055 According to Dr Panaccio, it was in or about June or July of 1997 that Dr Gray told him and the Board of Paragon Medical in substance that he was the subject of a police investigation and that it arose out of allegations that he had not disclosed that he was a director of Paragon Medical and had received what RPH was calling "secret commissions". He said at the time he learned of these events, Dr Gray was angry and said it was because of the decision of the Board to increase the price of SIR-Spheres that RPH made the allegations and instigated the police investigation. However Dr Panaccio told Dr Gray that the central issue was whether or not Dr Gray had informed the patients he was treating at RPH of his interest in the treatment he recommended to them.
1056 On 18 June 1997 Dr Beresford wrote to Dr Gray saying that the RPH Ethics Committee were aware that there might have been an irregularity in the administration of his patient trials and that this had been referred to the police who were currently undertaking an investigation. The Ethics Committee had accordingly resolved that recruitment of additional patients for the trial should cease pending the completion of the police investigation. Dr Panaccio said that before the current proceedings he was not aware of the existence of the letter.
1057 At the time of the investigation Dr Panaccio told the Sirtex board and Dr Gray that he was opposed to the suggestion made by Dr Gray that Sirtex should fund his defence of the investigation. Dr Gray had retained Robert Richter QC to represent him. Dr Panaccio said that the investigation only related to allegations made against Dr Gray personally for allegedly breaching his duties to patients at RPH. There were no complaints against Sirtex and so it was not a matter to concern the directors of Sirtex. In 1999, upon Dr Gray being cleared by the investigations, the Board decided to meet his legal costs. Although Dr Panaccio was opposed to that course of action and made his position clear, he supported the motion in the interests of the company.
Gray/CRI assignment to Paragon Medical - 28 October 1997
1058 When the investment transaction with Nomura/JAFCO was completed it was necessary, according to Dr Panaccio, that the patents reflect the assignment of ownership to Paragon Medical. On 23 October 1997, Dr Gray executed a Deed of Assignment to Paragon Medical. The assignment was of all of his right, title and interest in the invention entitled "Particulate material" and patent applications in an annex to the assignment as follows:
Application (Patent No) Country
PCT/AU95/00o27 International
15279/95 Australia
2181254 Canada
95906840.4 Europe
519254/95 Japan
95191698.X People's Republic of China
08/676381 United States of America
CRI followed suit on 28 October 1997 in respect of the invention entitled "Controlled release preparation" and the following patent applications:
Application (Patent No) Country
PCT/AU94/00708 International
81363/94 Australia
2176933 Canada
95900570.3 Europe
514111/95 Japan
94194617.7 People's Republic of China
08/648055 United States of America
Harrison and CACS confidentiality issues - July 1996/October 1997
1059 On 26 July 1996 Dr Gray sent Mr Lennon a draft of an Intellectual Property Rights Agreement for students working in CACS. This began something of a saga. Dr Gray sought to protect, within CACS, for the benefit of Paragon Medical, intellectual property generated by post-graduate students working at CACS on projects supported by funding from the company. Mr Lennon returned a copy of the draft with his comments on 7 August 1996. He wanted to avoid the creation of a sub-class of students who might be disadvantaged by their participation in CACS. He wrote:
Under the UWA IP Regulation both staff and students who assign their IP are entitled to participate in any revenue received by UWA in respect of that IP. Of course, sometimes that doesn't happen, but we need to make sure that the circumstances are appropriate.
Some conversation followed between Dr Gray and Mr Lennon and on 15 August 1996 Dr Gray sent an amended form of agreement to include "the items we discussed".
1060 The proposed agreement had only one party, namely the student. It was in form an assignment by the student to CRI of "all rights in the intellectual property generated from the research in which I participate during my tenure". It included a covenant not to divulge "confidential information generated from this research". It was put to Dr Harrison who took independent advice and sent a memorandum to Dr Gray in September 1996 indicating his concerns. One was that there was no counterparty. Moreover, his research was being done in both CACS and the UWA Department of Physics. He did not think it proper that he assign his rights to all intellectual property generated during his studentship to any one party. He expressed concern about the confidentiality clause and its implications for his right to publish his work and communicate with supervisors and others.
1061 Dr Gray saw the question of intellectual property protection for CRI as "quite a major issue during the term of Mr Simon Harrison's PhD studentship". After his exchanges with Mr Lennon and Dr Harrison he sought advice from Blakiston & Crabb. They prepared a draft Deed of Confidentiality and Ownership. They communicated with Mr Lennon in so doing. The draft was sent to him at the UWA Legal Services Office on 30 July 1997. Mr Lennon responded on 26 August 1997 observing, inter alia, that UWA need not be a party to the Deed.
1062 On or about 9 September 1997 Dr Gray gave a copy of the Deed to Dr Harrison. He also sent a copy to Associate Professor Cyril Edwards, the Head of the Department of Physics. Associate Professor Edwards discussed it with Dr Harrison. He sent a memorandum on 17 September 1997 to Mr Lennon pointing out that Dr Gray, inter alia, "intends to invite him to sign an agreement which appears to lock up all the IP into a company Paragon Medical Limited" of which he believed Dr Gray was a director.
1063 Dr Edwards discussed the issue with Professor Street on 23 September 1997. He sent an email on the same day to Professor Barber. As a result of his discussions with Professor Street, he had found that there were "more things going on than I had thought". He was concerned about the effect of the proposal on the research group based in the Physics Department. He suggested a meeting, convened by Professor Barber, between Dr Gray, Professor Street, himself and one Paul McCormick.
1064 Professor Barber did not convene a meeting. Instead he wrote to Dr Gray on 2 October 1997 expressing his considerable concern that CRI and Paragon Medical were "seeking to have PhD students of this University execute a Deed of Confidentiality and Ownership". While he regarded the confidentiality aspect of the agreement as "appropriate" the proposals relating to ownership of intellectual property created by students in the course of student research were "unacceptable".
1065 In the meantime Dr Harrison felt under pressure by reason of the ongoing intellectual property issue. In his Report on Progress completed in September 1997 he said that "a ludicrous amount of time" had been spent seeking advice on the intellectual property and confidentiality agreement which he was "being pressured into signing".
1066 On 3 October 1997 Professor Street sent an email to Dr Jones. He referred to a "disturbing conversation" with Dr Gray the day before. He reported that Dr Gray was insisting that Dr Harrison sign the Confidentiality Agreement. The reason, as he put it in the email, was "that the financial backing of his company depends on him (Bruce) being able to show that the IP is secure". Professor Street saw two options. Dr Harrison could sign the agreement or Dr Jones could withdraw as his co-supervisor.
1067 A meeting followed on 6 October 1997 between Dr Harrison, Professor Street, Dr Jones and Associate Professor Edwards. Professor Street tabled a paper proposing a compromise under which Dr Harrison's direct association with the hyperthermia project would be terminated and Dr Jones would cease to be his co-supervisor. Dr Harrison would continue to have access to the HiFroM. Dr Harrison decided it would not be in his best interests to sign the Confidentiality Agreement. That was his position prior to coming to the meeting on 6 October. He understood that, as a consequence, Dr Gray would, on behalf of Paragon Medical, instruct Dr Jones to cease acting as his co-supervisor.
1068 Following the meeting Dr Harrison ceased any association with the hyperthermia project save for some paid contract work which he did in taking measurements for Dr Raffaele Cammarano who was working for Paragon Medical. He changed the focus of his work to materials physics rather than medical physics. He completed the research work for his PhD thesis in mid 2000 before going to the United Kingdom. Ultimately his PhD was conferred in 2004. It was titled "Characterisation of the Mechanisms of Magnetisation Change in Permanent Magnet Materials through the Interpretation of Hysteresis Measurements".The Harrison issue played a part in a letter sent on 19 November 1997 in which Professor Robson demanded that Dr Gray resign as a director of Paragon Medical. That letter is referred to later in these reasons.
Robson demands Gray resign Paragon directorship - November 1997
1069 In the particulars of malice alleged against UWA in connection with its letter of demand to Sirtex, Dr Gray pleads as part of the history of animosity between himself and Professor Robson that:
in or about June 1997 the said Robson and others falsely alleged purportedly on behalf of the Cross Respondent that the Cross Claimant had taken up a position of director of a public unlisted company without the consent of the University when in truth the Cross Claimant had the consent of the then Vice Chancellor, Professor Fay Gale;
Particulars
(a) Letter from Alan Robson to Professor Gray dated 19 November 1997.
There is a little history behind the letter which is the document relied upon in support of that allegation and it is necessary to refer to it.
1070 In 1991 UWA had a policy, published in a Human Resources Manual, generally prohibiting a staff member from becoming a working director of a company without the permission of the Head of Division. Charitable organisations were excluded from the prohibition. The 1991 guidelines were varied in September 1995 to require the permission of appointment to a corporate directorship to come from the Vice-Chancellor.
1071 Professor Robson was Acting Vice-Chancellor of UWA from 21 July 1997 to 14 November 1997 when Professor Gale was absent on sick leave. Professor Gale returned from her leave on 19 November 1997. However Professor Robson continued to perform many of her duties on her behalf.
1072 As appears from the history of the complaints to the Fraud Squad and the ACC about Dr Gray's involvement with the purchase of Yttrium microspheres from Paragon Medical in 1997, Professor Robson was acutely aware, in the course of that year, of his involvement with the company. He had seen a copy of the Crown Solicitor's advice to the Fraud Squad and knew of Ms Key's discussions with the police.
1073 On 19 November 1997 Professor Robson wrote to Dr Gray referring to Professor Barber's letter to him in February of that year about the potential for conflict of interest arising out of Dr Gray's various roles as head of CACS, managing director of Paragon Medical and Professor at UWA. He noted Dr Gray's proposal at the time of Professor Barber's letter to reduce his UWA involvement to a 0.3 fractional position. Professor Barber's response had indicated that the reduction did not eliminate the potential for conflict. His letter continued:
It appears that you have never obtained approval from the Vice Chancellor to hold a directorship in Paragon Medical Limited. Accordingly you are in breach of the University's Consultancy Policy and its Policy in respect of professional relationships in the University of Western Australia Workplace.
Recent events in connection with the continuation of a student's involvement in the Centre when questions about the relinquishment of intellectual property by that student to Paragon were questioned, indicates most graphically to me the reality of the potential for conflict of interest in your many roles.
I must therefore insist that in order for you to properly discharge your duties as a Professor of this University you resign immediately from the directorship of Paragon Medical Limited.
Would you advise me within the next seven days that you have done so.
The letter was drafted by Ms Key. Professor Robson had previously read the 1995 memorandum from her to Professor Gale and, I would infer, Professor Gale's letter of 23 January 1996. He did not know what had happened after that.
1074 Professor Robson was cross-examined at some length about the letter. I do not propose to traverse that cross-examination. I am satisfied that he had a legitimate concern that Dr Gray's directorship of Paragon Medical had the potential to generate an unacceptable conflict between his duties as a director and those as a professor of UWA even on a 0.3 fractional appointment. The events involving Simon Harrison referred to in Professor Robson's letter illustrated the difficulties that could arise.
1075 Dr Gray had not sought or obtained prior approval from UWA to become a director of Paragon Medical. He was entitled, quite properly, to complain that Professor Robson's unqualified demand for his immediate resignation was inconsistent with the laisser faire approach adopted by Professor Gale and other officers of UWA on the issue. However I do not accept that Professor Robson acted other than in good faith. He may well have found Dr Gray to be a continuing irritant and source of difficult problems within UWA. His letter did not constitute evidence of, or an element in, "a history of animosity". In particular, it does not either alone or in conjunction with the other matters relied upon by Dr Gray in his cross-claim, support an inference of malice on the part of UWA informing the content and timing of the letter of demand. In any event, as appears later in these reasons, Professor Robson did not see the terms of the letter of demand before it was sent.
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Raffaele Cammarano - 1997
1076 It was Dr Stephen Jones' evidence that in or about late 1997 Dr Raffaele Cammarano became part of the Paragon Medical research team. His first degree was mechanical engineering and his doctoral studies had been in magnetics research at UWA. Other researchers, including Dr Krishnamurthy and Dr Bill Richmond were also involved in the Thermo-Spheres research. Dr Krishnamurthy stayed for about six months.
1077 Dr Cammarano's task initially was to identify or develop the right sort of ferromagnetic material for the SIR-Spheres. It was Dr Gray's evidence that sometime in 1998 Dr Cammarano was seconded onto the hollow Yttrium microsphere project. Dr Jones' recollection was that this was about 18 months after his initial employment. Dr Cammarano eventually left employment with Paragon Medical in 2000.
1078 Dr Gray did not have records of Dr Cammarano's work as they were held by Sirtex. He worked on the project for several years expending a significant amount of funds in the process. At the end of the process, as previously outlined, Sirtex was still unable to manufacture hollow Yttrium microspheres and in 2001/2002 decided to permanently abandon the project.
1079 There were some records to indicate that Dr Cammarano worked with Curtin University and UWA in contract arrangements on the hollow Yttrium microsphere project. According to Dr Gray the arrangements were commercial arms length arrangements and he had invoices from Curtin University to that effect.
Students/CACS/intellectual property - ongoing issue March 1998/July 1999
1080 Questions about the position of students working at CACS continued to be raised at the CACS Advisory Board into 1988 and 1999. At a meeting on 30 March 1998 Professor Barber spoke of the need to identify conflicts of interest in relation to intellectual property arising out of the relationship of CACS and Paragon Medical and to establish guidelines to deal with student involvement in projects. The minutes of the meeting note that recommendations would be presented to the next board meeting. Professor Landau was also present at that meeting.
1081 On 22 June 1998 Dr Gray sent a brief half page Position Paper to Professor Landau relating to potential conflict of interest. Professor Landau did not remember receiving it. However it appears that a copy was sent to Linda Key. The Position Paper recited that CACS employed staff funded through UWA sources being one fulltime Research Fellow (Level B), a 0.3 Professorial position (a reference to Dr Gray) and a 0.75 Administrative Officer position. There were five UWA PhD students in CACS, one of whom was funded by a CRI scholarship.
1082 Dr Gray stated in the paper that the Institutes employed staff and undertook research programs in their own right as well as sponsoring students within UWA. Students undertaking higher degree studies at CACS should be "the subject of normal regulations within the University". They should retain all rights to the results of their research including intellectual property in accordance with UWA regulations. He then said:
If a student should require to either utilise or have access to intellectual property owned by either the Institutes or contractees of the Institutes, then a separate agreement with each student shall be agreed to and will define the rights of the student to such access. Such an agreement will be agreed to by the Institute, the University and the student.
1083 Professor Landau wrote back to Dr Gray on 20 July 1998 advising that the Legal office had reviewed the Position Paper and that it seemed appropriate. The Legal Office had recommended a standard form of intellectual property agreement be provided where intellectual property owned by the Institute or its contractees were to be used by the student.
1084 At a meeting of the CACS Advisory Board on 17 September 1998, the minutes recorded that Dr Gray stated that intellectual property considerations continued to reduce the opportunity for student involvement in the area of magnetic materials development. The current UWA position on student intellectual property was said to have placed too many obstacles in the way of students wishing to be involved in contract research undertaken within CRI.
1085 Professor Landau wrote to Dr Gray on 2 October 1998 informing him that Linda Key had written, following the recommendation of Professor Barber, that he provide a standard form of intellectual property agreement as earlier suggested. She was seeking a draft standard form of agreement for review and finalisation for approval.
1086 Dr Gray wrote back to Professor Landau on 8 October 1998 with some asperity, referring to the earlier agreement which had been prepared by Blakiston & Crabb and which had been "vetted on a number of occasions by the legal department of the University in order to make sure that it met the University's requirements". He claimed there had been "an obvious delaying tactic on the part of the University". Although Linda Key had assured him and other members of the research staff on an open phone call that there were "no problems", he subsequently found out from the CACS Advisory Board meeting that Professor Barber was not going to agree. He said:
Therefore, no student will have access to any intellectual property in the Institute, and no further agreement is necessary. This is a very bad outcome from what was a genuine attempt on our part to address a problem on behalf of the university.
1087 Professor Landau sent a copy of Dr Gray's letter to Ms Key and to Professor Barber on 19 October 1998. He did not recall Professor Barber challenging the correctness of Dr Gray's letter. In a Schedule of events which she prepared, Linda Key challenged the correctness of Dr Gray's assertion that the revised draft deed from Blakiston & Crabb had met her concerns. She said in her Schedule, that it had not and she had received instructions from Professor Barber that he did not believe the document was desirable in any form. She said in her Schedule of Events that she had told Dr Gray of that on 30 October 1997.
1088 The issue of student intellectual property was again briefly discussed at a meeting of the CACS Advisory Board on 11 February 1999. The discussion appears from the minutes to have been inconclusive but the participants thought it unwise to abandon hopes of future resolution. Professor Landau reported on the meeting to Ms Key and suggested that they write to Dr Gray and see if there were an opportunity for reasonable negotiation.She did so on 13 May 1999. In writing to him, she said:
You may recall that the University's principal difficulty with the earlier attempt to come to a satisfactory arrangement was the lack of clarity of the basis upon which Paragon was to attain ownership of intellectual property developed in work created by UWA or the student during the period of the relationship with Paragon.
1089 Dr Gray responded on 25 May 1999 advising, inter alia, that CRI undertook a number of research projects involving either its own or other parties' intellectual property. It had a need to protect that intellectual property. The concern was that if students worked through CACS and had access to the science projects and the intellectual property of the various research projects they should not at a later date lay claim against that intellectual property. He wanted to avoid a situation whereby a student would come into an established project, participate, make a marginal contribution and leave and at some later date make a claim against the project.
P Moroz - 1998/2002
1090 One student who did sign a confidentiality agreement was Paul Moroz. Dr Gray wrote to him on 26 July 1999 requiring that he not disclose in the public domain confidential information provided to him by members of CRI. The relevant confidential information would include non-patented methods and materials used in the generation of targeted hyperthermia. It would be necessary that he not disclose their exact composition unless there were in the public domain or had been patented, unless agreed to by CRI. Mr Moroz agreed to abide by that request for confidentiality.
1091 Dr Moroz is a science graduate with first class Honours in chemistry from UWA. He also held a medical degree from UWA conferred in 1997. He did vacation work with Dr Gray between 1995 and 1996 on statistical analysis concerned with health costs associated with melanoma. He regarded Dr Gray as a mentor.
1092 In 1998 Dr Gray asked him if he were interested in doing a PhD with his group. He commenced that PhD in 1999 under the supervision of Drs Gray and Jones. His research concerned ferromagnetic embolization of hepatic malignancies. He did his PhD through CACS. He was funded by a Federal scholarship of three years duration. He also received an Athelston and Amy-Saw Research Fellowship through the Faculty of Medicine for the second and third years of the research. This was a top-up grant.
1093 Dr Moroz completed his PhD by submission of published articles which comprised the body of his thesis rather than the traditional single thesis format. He published 11 articles. In his Statement of Participation at the commencement of the thesis he said that his experimental work relied upon "the use of existing technology that has been developed and patented by Sirtex Medical Limited, Sydney, Australia". His work was to apply the technology in a biological setting. Two of the papers which he wrote were done in conjunction with Dr Tim St Pierre who was in the UWA Department of Physics doing biophysics.
1094 Dr Moroz said there were no restrictions imposed on his publications and that Dr Gray encouraged him to publish as aggressively as possible. He did not recall any intellectual property issues in relation to his work which involved investigating the feasibility of targeted hysteresis to heat tumours in the treatment of liver cancer. Much of his work concerned the use of a small animal tumour model with rabbits, although he did do some work on pigs and dogs.
1095 He said, and I accept, that the work had to go further before the technique could be used in humans as the strength and frequency of the magnetic field used could have caused neuromuscular and possible cardiac complications. In order to make the technology work it was necessary to improve the power output, that is the generation of heat in small particles, at safer operating frequencies. This involved working on the composition or saturation of the particles.
1096 Dr Moroz gave some evidence of dissatisfaction with Dr Elizabeth Williams who became his supervisor at CACS in 2000. However, nothing turns on that and it is not necessary to explore the details of it.
Paragon Medical news release - 12 November 1998
1097 On 12 November 1998 Paragon Medical put out a news release stating that it had recently filed two new patent applications for new products. The first related to a new composition for its lead product (SIR-Spheres) and the second was a new formulation of particles being used in the company's hyperthermia technology. The company expected to continue to protect the hyperthermia technology which was said to be the subject of "an intense program of RD".
1098 The news release also noted that Paragon Medical had completed the manufacture of the first full sized human hyperthermia coil which would undergo a program of safety evaluation in preparation for human trials, timed to start early in the new year. This was said to be "… the culmination of many years of fundamental research in the area of hyperthermia for the treatment of human cancer and represents an important milestone in the company's development".
ACC refers Robson complaint back to UWA - May 1999
1099 The ACC referred Professor Robson's complaint back to UWA on 27 May 1999. This was two years after the matter had been referred to it. The Chairman wrote to Professor Schreuder, then Vice-Chancellor of UWA. It informed him that it had decided, under s 21(4) of the Anti- Corruption Commission Act 1988 (WA) (the ACC Act) to refer the allegation to UWA for investigatory or other action for the purposes of the ACC Act in relation to the allegation. The letter also advised that the matter had been investigated by the WA Police Service which did not intend to take any further action. The Chairman said in his letter:
It could be contended that there is the potential for a conflict between the duties which Professor Gray owes both to his patients and his employer and his interest as a director/shareholder of Paragon. Accordingly the matter is referred to you as warranting your consideration as to whether your University should take any action in respect of the matter, and, if so, what action.
A letter was sent in similar terms to the Metropolitan Health Services Board.
Key/Robson - 10 June 1999
1100 The ACC letter was referred to Linda Key who then advised Professor Robson, in a memorandum dated 10 June 1999. In her memorandum she raised issues for consideration:
The first is the continued prospect of conflict in Professor Gray holding a position as director of Paragon, the second is the ownership of the intellectual property now claimed by Paragon but which was probably created at least in part during his employment by UWA, and thirdly there is the apparent conflict between his directorship and his employment in the conduct of his clinical rights at RPH and concerning the price differential.
1101 Sirtex made the point in closing submissions that the memorandum indicated that UWA was aware of the ongoing potential conflict but had chosen to do nothing about it. I accept that UWA, by Ms Key and Professor Robson, was also aware that Sirtex claimed ownership in relation to intellectual property "probably created at least in part during" Dr Gray's employment. Further, Ms Key had at that time compiled a list of patents to which she referred in the memorandum. Professor Robson was already a very senior figure in the UWA hierarchy. He was the Acting Vice-Chancellor from 11 to 14 June 1999. He had held that office previously on an acting basis.
Schreuder/Gray - 17 June 1999
1102 Ms Key attached to her memorandum of 10 June 1999 a suggested letter to be sent to Dr Gray. That letter was sent by UWA to him. It was signed by the Vice-Chancellor, Professor Schreuder and sent on 17 June 1999. It included the following:
The Commission advises that the facts disclosed so far appear to include that during the course of your work at Royal Perth Hospital (for UWA), you treat patients with a radio isotope known as Yttrium 90 microspheres. The microsphere technology is reported to UWA to have been developed by you over a number of years in Melbourne and in Perth. It is UWA's understanding that throughout the time you have been in Perth you have been employed by UWA. Presumably therefore the work in relation to the development of the microsphere technology conducted in Perth was done during the course of your employment by UWA.
The Commission further advises that you claim that Paragon Medical Limited has the intellectual property rights in respect of the Yttrium 90 microspheres. The Commission states however, that it is not clear how Paragon Medical Limited gained whatever rights it has.
The University has raised with you before the potential for conflict in your position as a Director of Paragon Medical Limited with respect to your duties to your employer.
Would you explain the origin of the intellectual property rights in the microsphere technology, now allegedly owned by Paragon Medical Limited and provide particulars of any purported transfer of intellectual property rights to that company. If you allege that the intellectual property was created outside your employment by the University please indicate where the work was conducted and at what time.
The letter referred to the significant margin charged by Paragon Medical for SIR-Spheres and continued:
In order that the University can consider whether the exercise of your clinical privileges at Royal Perth Hospital is proper, please explain the Yttrium 90 purchase arrangements and provide the evidence of Royal Perth Hospital's agreement to it.
Gray/Schreuder - 28 September 1999
1103 Dr Gray wrote back to Professor Schreuder on 28 September 1999 saying that the matters he had raised were of a most serious nature but had no basis in fact. He said he would be taking advice before responding further. Heresponded further on 16 July 1999. In relation to the intellectual property question, he said:
With regard to the company Paragon Medical Limited, the intellectual property resident in that company relating to yttrium microspheres has been derived exclusively from a program of research undertaken by the Cancer Research Institute Inc.
He went on to say, inter alia, that CRI employed many senior scientists developing that and other technology. The research program had been "totally undertaken outside of Western Australia over several years under a contract agreement between the Cancer Research Institute Inc and totally independent outside contracting agency in Victoria". CRI had met the full cost of that research program. He did not participate in it. It was neither undertaken by, nor supervised by him. CRI alone had ownership rights to that intellectual property and had transferred that ownership.
1104 Dr Gray said in his letter that he was aware that the Chairman of CRI had already written to the Deputy Vice-Chancellor for Research at UWA several years ago. He referred to that correspondence. He also said:
You should be aware that Professor Barber sits as your representative on the Advisory Committee of the Centre for Applied Cancer Studies together with myself and the Chairman of the Cancer Research Institute Inc. Intellectual property issues relating to the Institutes and the University have been discussed openly at those meetings on several occasions.
He denied any conflict of interest. There was always a potential for a conflict but he had dealt with this by resigning 70% of his appointment with UWA. That had been clearly articulated in his letter to Professor Barber of 5 March 1997. He presumed that the lack of a reply from UWA and the agreement of the Dean of the Faculty was clear enough evidence that UWA agreed with his proposal. He rejected any inference that he might have a conflict between his duty to his patients and his duty as an employee of Paragon Medical.
Key/Sirtex Website - 30 September 1999
1105 As appears from a file note which she kept, Linda Key reviewed the Paragon Medical website on 30 September 1999. Her review disclosed that the SIR-Spheres being produced by Paragon Medical were "resin-based irradiated with Yttrium90". Professor Robson accepted that as part of her activities as the UWA solicitor in 1999 Ms Key monitored the Paragon Medical website.
Schreuder/Gray - 11 October 1999
1106 Professor Schreuder wrote back to Dr Gray on 11 October 1999 asking him to clarify other matters which had arisen during the course of the investigations. Under the heading "University Intellectual Property" he referred to the provisional patent No PP9228 which had been lodged by Paragon Medical in relation to the production of resin-based radionuclide microspheres. He acknowledged that Professor Barber had written to Mr Gorn on 22 January 1997, on the basis of facts set out in Mr Gorn's letter, confirming that UWA had no interest financially in CRI funded technology. However that letter did not affect UWA's ownership of other intellectual property created by Dr Gray in the course of his employment. Professor Schreuder asserted that the resin-based radionuclide microspheres were not the subject of that letter. He said:
As you will be aware funding of itself does not amount to a transfer of ownership of intellectual property, and without specific assignment of any interest. There is a legal relinquishment of its interest.
It does not appear that there has been any assignment of the University's interest as agreed by Professor Barber in the matters mentioned in his letter and you may wish to formalise the assignment if you contemplate passing that intellectual property on to any third party.
Professor Schreuder then asserted:
In relation to the matters the subject of provisional patent PP 9228, and PP8998 and also two granted patents 15279/95 and 81363/94 and insofar as your work forms the basis for those patents, the legal ownership of the intellectual property is still with the University. Your explanation of the inter-relationship of these patents to your work for the University and the University's intellectual property is therefore requested within the next 10 working days.
He also referred to the letter sent to Dr Gray by Professor Robson on 19 November 1997 directing that he resign his directorship of Paragon Medical and noted that he had failed to do so.
1107 Under the heading "Possible Misconduct" the Vice-Chancellor wrote that it appeared that Dr Gray had not sought UWA's approval to the various directorships held by him. He said:
Consistent with the provisions of the University Post Compulsory Academic Conditions Award 1995 (the Award) you are required to provide your response to the allegations raised in this letter within 10 working days. Once I have received your response I will determine the next course of action in accordance with the provisions of the Award.
Professor Schreuder wrote again on 9 November 1999 pointing out that he had not had a reply to his letter of 11 October 1999 and requiring a response within the next seven days.
Gray/Schreuder - 17 November 1999
1108 Dr Gray took legal advice from a solicitor, Mr Bonomelli. Mr Bonomelli drafted a letter for him to send to Professor Schreuder which he did on 17 November 1999. In the letter Dr Gray asked Professor Schreuder to clarify, inter alia, "the facts upon which it is suggested that the University might be the legal owner of the intellectual property the subject of Provisional Patent 9228 and 8998 and Patent 15279/95 and 81363/94". He said:
When this information is provided I may be in a better position to assist you and clarify the misunderstandings that you may have.
He concluded:
In the meantime I confirm that I am no longer employed by the University of WA.
In cross-examination it was put to Dr Gray that as at 17 November 1999 he clearly understood that there was a suggestion from UWA that it might be the legal owner of the intellectual property. He answered:
Yes, that it might be.
In my opinion he did appreciate that UWA could well assert an interest in the intellectual property.
1109 There was no reply by UWA to the letter from Dr Gray. The letter, received at UWA, bore a "received" stamp from the Office of the Vice-Chancellor and was endorsed "cc Key". It also bore a "received" stamp at UWA's Legal Services Office of 14 December 1999. Professor Robson did not remember why UWA did not respond.
UWA's knowledge - November 1999
1110 By November 1999 Professors Schreuder and Robson and Ms Key were aware of the following matters:
1. That Dr Gray told the ACC that the microsphere technology being used by Sirtex had been developed by him in Melbourne and Perth.
2. Dr Gray had been employed by UWA from the time he came to Perth about 1999.
3. There were grounds for suspecting that some of the work done in the development of the microspheres technology might have been done in the course of Dr Gray's employment.
4. Paragon Medical had lodged applications for certain patents and had been granted the patents.
5. There were grounds for suspecting that the patents applied for by Paragon Medical might not be covered by the Barber letter of January 1997.
6. UWA did not regard itself as having assigned any of its interests in the intellectual property.
7. Paragon Medical was conducting its business on the basis that it owned the microsphere technology being used.
8. Dr Gray regarded UWA as having no interest in the intellectual property being used by Paragon Medical.
Professor Schreuder was not called to give evidence. I infer that he knew of the information contained in his letters to Dr Gray and took no action upon Dr Gray's defiance of his demand for information.
Sirtex's knowledge of Gray/UWA 1999 correspondence
1111 Dr Panaccio said that prior to the present proceedings he was not aware of the existence of the correspondence between Professor Schreuder and Dr Gray between June and October 1999. Had he been aware of those letters he would have recommended to Nomura/JAFCO not to advance the final amount of $1 million until the issue with UWA had been resolved. He said he would have also recommended to Nomura/JAFCO to instruct solicitors to advise on any possible breaches of warranties or representations by Dr Gray, CRI and Sirtex.
1112 Mr Karlson had not seen the correspondence prior to the current proceedings. He would have expected Dr Gray to inform the Board of it and, in particular, each and every time an allegation was being made against him by UWA. He said that had he been shown the correspondence or been made aware of its subject matter he would have been concerned because UWA was asserting an interest in the intellectual property of Sirtex which was contrary to his understanding of the position. This would have raised a number of issues for investigation. He did not see how the company could have proceeded with its planned float, which was intended to take place in 2000, unless the issues raised by UWA were resolved.
1113 Dane Gorn gave similar evidence. He added that he had participated in regular meetings of the CACS Advisory Board and that representatives of UWA were members of the Board. He recalled an Advisory Board meeting on 9 September 1999 which was attended by Professor Landau. The discussion did not include, to the best of his recollection, any discussions about UWA's assertions against Dr Gray at that time. He did not recall Professor Landau raising the matter with him at the meeting or at any other time that UWA considered it had an interest in the intellectual property of the technology being developed by Paragon Medical. As far as Mr Gorn was aware, UWA had no interest in the intellectual property of the business of Paragon Medical/Sirtex and there was no issue in that regard. He was very surprised when he first became aware that litigation had been commenced between Sirtex and CRI. Mr Boyce also gave evidence that prior to the litigation he was not aware of the existence of the correspondence between UWA and Dr Gray in 1999.
1114 The evidence of Dr Panaccio, Mr Karlson, Mr Gorn and Mr Boyce that Dr Gray did not disclose the correspondence between himself and UWA in 1999 was not challenged. I find that it was not disclosed. Dr Gray was asked in cross-examination whether he thought, with the benefit of hindsight, he ought to have drawn Professor Schreuder's letter to the attention of the board of Paragon Medical. With the benefit of hindsight he said he was sorry he didn't because it would have obviated some of the problems that had arisen as a result. He said however that he believed then and still believed that he was right to take legal advice and to raise the matter with the Due Diligence Committee. The latter was a reference to the Due Diligence Committee set up in connection with the IPO of Sirtex shares in 2000. He said that he raised the correspondence with Mr Cherry of Freehills who was working with the committee. For reasons given below, I find that he did not raise that correspondence with Mr Cherry or the Due Diligence Committee.
1115 Had Dr Gray disclosed the 1999 correspondence to the board, particularly the letter of October 1999 from Professor Schreuder, the board would have been put upon inquiry as to the security of the intellectual property upon which it was to rely the following year in proceeding to a public float. I also accept that Nomura/JAFCO would have been put upon inquiry in the way indicated by Dr Panaccio. Dr Panaccio was not the kind of person to gloss over that kind of issue when his principal's money was at stake.
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Sirtex public float commences
1116 In January 2000 Paragon Medical, soon to be renamed Sirtex, commenced preparation for a public float which it had always planned. This was underwritten by KTM Capital Pty Ltd (KTM). It was a condition of the underwriting that the company's business be relocated to Sydney and that the company have directors known to the Sydney community. As a result of that advice Messrs Karlson and Gorn resigned as directors of Sirtex, Mr Gorn resigning on 16 December 1999 and Mr Karlson on 22 March 2000. Neither of them was involved in the preparation for the float, including the due diligence or the preparation of the prospectus. Mr Karlson has retained his shareholding in Sirtex.
1117 Dr Panaccio gave evidence of what he designated "the Initial Public Offering" (IPO) undertaken by Sirtex in 2000. Early in that year Sirtex sought funding, by way of a convertible note issue, to support it upon listing. It raised $1 million at a 30% discount to a future IPO price. The following advisors were engaged to act for Sirtex in relation to the IPO. They were:
Freehills as the company's legal advisors.
Deloittes as the company's accountant.
Davies Collison Cave and Wray & Associates to advise on patents.
KPM as underwriters.
Dr Panaccio was directly involved in engaging Freehills and KPM. Freehills were retained to conduct the due diligence for the IPO. Gray arranged the retainer of Deloittes and the patent attorneys.
1118 Dr Panaccio said that Dr Gray wanted the company to engage Freehills. Dr Gray said he did not engage lawyers to act for him in the 2000 float and due diligence process. He also said that no one from Freehills had suggested that his interests and those of Sirtex might not be the same or that he should consider getting independent legal advice. Just why that should have been Freehills' obligation is not clear. They were engaged by Sirtex to conduct its due diligence process as part of the preparation of the prospectus for the IPO.
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Paragon Medical Due Diligence - 2000
1119 In January 2000 the Board resolved to establish a Due Diligence Committee.There was a substantial amount of evidence relating to the meetings of the Committee, the due diligence process generally and Dr Gray's role in verification of prospectus claims with respect to intellectual property. It is not necessary for present purposes to do more than highlight the salient features of the process and particularly Dr Gray's input into it. It is convenient to outline the sequence of those meetings and the matters relevant to these proceedings which were dealt with at them.
1120 The Due Diligence Committee met on 3 February 2000. Drs Gray and Panaccio were present along with Mr Kerridge from KTM Capital Pty Ltd, Messrs. Mellos and Davey of Freehills and Mr Messer of Deloittes by telephone. The minutes recorded, under the heading "Background" that Paragon Medical was proposing to issue a prospectus in relation to an initial public offering of approximately 20 million new ordinary shares in the company to raise approximately $20 million. Mr Mellos tabled a package of draft due diligence documents which had previously been distributed. He provided a brief explanation of the purpose of the due diligence and the process outlined in the package. Mr Messer had not been provided with a package at that time. Each member of the committee including Dr Gray confirmed that he had at least briefly reviewed the documents. The documents included a Planning Memorandum which Mr Mellos asked the members of the committee to review. He asked that they contact Freehills before the next meeting with any questions or comments.
1121 It was never the purpose of the due diligence process to inquire into the provenance of Sirtex's intellectual property. Its purpose was to ensure that the statements in the prospectus were true and included all information likely to influence a person's decision to invest in the company's shares and the price that such a person would be prepared to pay.
1122 The purpose of the committee as explained by Mr Mellos, was to consider, review and oversee the due diligence process associated with the initial public offering and prospectus. He was appointed chairman. Freehills was to act as role of secretary and coordinator. The committee noted that Freehills had been engaged to conduct a "legal due diligence" and assist with certain parts of the prospectus relating to legal matters. It was to provide an opinion in relation to the due diligence process and to advise generally in relation to legal matters concerning the initial public offering. Davies Collison Cave and Wray & Associates had been engaged to provide reports on the company's patents for inclusion in the prospectus. Their draft report and a final report from Wray & Associates were already available. Dr Gray undertook to circulate those reports to the committee. Due diligence on general matters and all business and technological aspects outside the scope of the expert reports was allocated to Dr Gray.
1123 Mr Mellos referred the committee to verification procedures set out in the planning memorandum. They required a line by line verification of the prospectus. Each material statement of fact or opinion would be allocated to a person for verification and confirmation that the statements made in it, where appropriate, was supported by adequate documentation. The minutes recorded:
The Committee noted that Bruce Gray will have primary responsibility for verification of statements concerning the Company or technical matters (which comprise the greatest proportion of the draft Prospectus). Bruce Gray may be required to undertake extensive verification of the clinical trial results. This may require referring back to the primary data.
Bruce Gray noted that he was happy to verify the results he had extracted. Bruce Gray also noted that a statistician in Sydney has interpreted some of the data used in the clinical trial. Kon Mellos suggested that this report be circulated to the Committee.
1124 The meeting discussed the restructuring of shares required for the initial public offering. Mr Mellos said that a general meeting of the company would be required to implement the capital restructure and to adopt a new constitution appropriate for a listed company. In order to ensure that existing shareholder rights were not prejudiced if the float were not to proceed the necessary resolutions required for the capital restructure and adoption of the constitution would be passed in advance but specified only to take effect when the company was admitted to the official list for quotation of the company shares on the Australian Stock Exchange.
1125 Dr Gray said that shares or options could be issued to other persons including Dr Burton and a new managing director at some time prior to or at the initial public offering. The company had not determined how many options would be issued or their terms. He and Dr Panaccio were to prepare a list of proposed option holders, the numbers of options proposed to be issued and a description of their terms. There was also a discussion about changing the company's name. The name "Oncomed Technology Limited" was discussed.
1126 James Cherry, who was by now a partner at Freehills said that in February 2000 he was asked by Mr Mellos to assist him in connection with a limited legal due diligence for the Sirtex IPO in relation to intellectual property issues. Mr Mellos told him that Dr Gray was the officer with knowledge of the intellectual property aspects relevant to the due diligence.
1127 According to Dr Gray he had discussions before or early in the due diligence process with Dr Panaccio about attacks upon him by Professor Robson. Dr Panaccio denied knowing that Dr Gray had left UWA on bad terms. He had, of course, been aware in 1997 about the investigation into Dr Gray in relation to the sale of SIR-Spheres to RPH through Paragon Medical. He must have also been aware that no case of criminal or corrupt conduct had been made out against Dr Gray and that in 1999 the board had agreed to reimburse his legal costs. I do not accept that Dr Gray told him that he had left UWA on bad terms. However, Dr Panaccio is likely to have been aware of some conflict between Dr Gray and the UWA administration. That does not take the case very far as I am satisfied that Dr Gray did not disclose to Dr Panaccio or the Sirtex board the important correspondence with Professor Schreuder in 1999 which flagged the possibility of a UWA claim to ownership of the intellectual property.
1128 DrGray said in cross-examination that he did raise the correspondence with Mr Cherry "or the substantial matters contained in it". This was the first time that he had made the claim in his evidence. It was not in his affidavit nor in his oral evidence-in-chief. Cross-examined, he could not recall providing the correspondence to Mr Cherry "but the substance of the matters were certainly discussed". Asked what he said to Mr Cherry he said he could not remember the exact words. It was seven years earlier and there had been a number of conversations. He could recall the "substantial gist" of what he said.
1129 It was put to Dr Gray that he had made up his evidence in an attempt to gloss over his concealment of the correspondence from Sirtex. He denied that and said "as of that time, as far as I was concerned, and my legal advice was concerned, that the issue was dead". He went on in cross-examination to link the Schreuder correspondence to Professor Robson and said:
… my state of mind was this was just another hand grenade being lobbed in on me in order to provoke my resignation.
1130 If as Dr Gray said, he regarded the issue raised in Professor Schreuder's letter of October 1999 as a "dead issue" following his resignation from UWA, it is difficult to see why he would have raised it at all as he claimed he did. His evidence on the issue was unconvincing. It was contradicted by Mr Cherry's evidence. I do not accept that he told Mr Cherry of the correspondence from Professor Schreuder, either in detail or otherwise, so as to alert him to the possibility that UWA might raise a question about the ownership of the intellectual property the subject of the due diligence process. His evidence to the contrary might be what he believed to be true but if so it was a self-serving reconstruction of events.
1131 Among the list of the things Mr Cherry was asked to do by Mr Mellos was to look at a draft of a letter dated 28 January 2000 which Dr Gray proposed to send to Dr Burton. The letter asked Dr Burton to agree not to disclose to the public any details of the manufacture of Yttrium microspheres in consideration of an allocation of 20,000 ordinary shares in the company upon its listing on the ASX. In that proposed letter Dr Gray referred to the work which he and Dr Burton had done at Melbourne University involving the treatment of resin microspheres by precipitation of Yttrium90 into resin as the final step in incorporating it into the resin particles. He wrote:
As far as we know this has not been previously described, but is a logical procedure in order prevent [sic] the Yttrium leaching from the microspheres. We do not regard this as a novel or inventive procedure, and it is therefore not patentable or protectable as Intellectual Property.
1132 Mr Cherry had a telephone conversation with Dr Gray on 7 February 2000. He made some handwritten notes indicating that he was told by Dr Gray that he and Dr Burton had worked together at the University of Melbourne trying to make microspheres safer.
1133 It appears from emails that Mr Cherry had some discussion with Dr Gray on 7 or 8 February 2000 about intellectual property issues relating to the resin spheres. He had no recollection of the content of that discussion.
1134 Mr Cherry wrote to Dr Gray on 9 February 2000 attaching a proposed draft reply to Dr Burton. He referred to the issue of data arising from clinical trials and said that the best way of handling it would depend on the type of information involved. He was concerned about the confidentiality of such information and its "ownership". He did not believe they could instigate a far-reaching investigation at that stage but asked Dr Gray to send him copies of certain documents so that he could have a better sense of the information in issue. What he sought was a copy of the clinical trial data included with the FDA application, the abstract published in May 1999 relating to the clinical trial data, a copy of the draft publication he was proposing to publish later that year and the dates over which the trials were conducted. He said:
Ultimately, I am hoping that, after a review of this material, the conclusion will be at worst that there is a risk but not one of such size that there is any need to investigate it in any more detail or to take steps to avoid it for the time being. Many of these risks are simply best left to lie. However, clearly I need to review this documentation before we can make any judgment of that nature.
In his redraft of Dr Gray's letter to Dr Burton Mr Cherry added a statement that they were aware that precipitation of a salt of an element such as Yttrium was a common chemical step to more strongly bind it to the microspheres. Resin microspheres incorporating precipitated Yttrium had been sold publicly for sometime and used in the clinical trials necessary for the approval of that method of treatment of liver cancer.
1135 Dr Gray sent Mr Mellos, by email on 10 February 2000, his answers to a due diligence questionnaire. Each of them was the word "nil" in answer to questions about whether any material litigation was threatened or existed by or against the company and whether any circumstances existed likely to give rise to such litigation. There was some dispute about the date of the email. While the covering email from Dr Gray to Mr Mellos was dated 10 February 2000, the printed copy bore the date 22 February 2000. I accept that the later date was that on which the document was printed or saved to file. It was sent on the earlier date.
1136 The second meeting of the Due Diligence Committee took place on 11 February 2000. Participating were Drs Gray and Panaccio, Mr Kerridge, Messrs Mellos and Davey and Ms Sandeep Mann from Freehills and Mr Peter Messer from Deloittes. Draft patent attorney reports from Davies Collison Cave and Wray & Associates had been received. The report from Davies Collison Cave only covered the status of registration of certain patents and patent applications. Mr Mellos indicated that a reconciliation would be necessary between the patents referred to in the reports and the products and processes used by the company. The committee had to know which aspects of the business of the company were or were not protected by patents. He asked who would be in the best position to reconcile the patents with the products and processes. Dr Gray said that the patent attorneys were not familiar with the business of the company and that he would be in the best position to undertake that task. He asked whether the reconciliation should be done with claims under granted patents or whether it should extend to the subject matter of patent applications. Dr Panaccio observed that it would be difficult to make the reconciliation where products and processes were experimental (eg hyperthermia). He suggested that the reconciliation should only be done in relation to products and processes in respect of which the company had been granted patents, they being SIR-Spheres and DOX-Spheres for which patents had been granted in Australia and the USA. The committee resolved that Dr Gray should reconcile the granted patents with the actual products and processes of the company. He also agreed to contact Davies Collison Cave and request that their report be amended so that it included a summary of the subject matter of the relevant patents.
1137 A separate section of the minutes was headed "Intellectual Property Issues". This comprised three parts, headed respectively:
(a) Trade secrets relating to spheres
(b) Results of trials in respect of SIR-Spheres
(c) Mark Burton
1138 Dr Gray explained that the original SIR-Spheres were not protected by patent although a provisional application had been filed which would shortly lapse. The intellectual property protection was based on know-how and trade secrets rather than registration of claims. He had discussed the matter with Mr James Cherry at Freehills who had expressed an initial view that the absence of patent protection for the original SIR-Spheres was unlikely to be materially adverse to the FDA application although he claimed no expertise in relation to the FDA approval process. The minutes went on to record:
Michael Panaccio suggested that the Prospectus should disclose that the University of Western Australia (UWA) has not claimed any intellectual property rights over the SIR-spheres.
1139 Dr Gray said that a further intellectual property issue had also been discussed briefly with Mr Cherry. It related to the property in the results of clinical trials conducted at UWA while Dr Gray was working there. The trials had been conducted in an academic context. Dr Gray noted that extracts of the results had been published by UWA in May 1999 and were in the public domain. However the company had included more detailed trial results in its FDA application. The minutes then went on:
Kon Mellos indicated that it will be a time-consuming and possibly inconclusive process to determine the ownership of the trial results. A review would need to be undertaken of, among other things, the policy of the UWA,the terms of engagement of Bruce Gray and other agreements governing the ownership of intellectual property generated within the UWA. Kon Mellos queried whether a commercial agreement could be reached with the UWA as an alternative to such a review.
Bruce Gray noted that the UWA had previously provided a confirmation to the Cancer Research Institute Inc that it had no claims and would not make any claims in the future in relation to ceramic micro-spheres, DOX or hyperthermia.
This was a reference by Dr Gray to the letter from Professor Barber to Mr Gorn.
1140 Dr Gray explained that Dr Burton had been involved at CRI in the development of the resin microspheres during the 1980s and had developed a technique of fixing Yttrium to such microspheres. Patent protection had not been sought because of want of novelty. Dr Gray said he would write to Dr Burton to seek confirmation that he would make no claim in relation to ceramic microspheres used by the company. The company might offer shares or options in exchange for that confirmation. In cross-examination Dr Gray said that Dr Burton had not had much to do with ceramic microspheres but more with the resin microspheres. The reference to ceramic microspheres in the minutes could have been a mistake. I accept that it was intended to be a reference to resin microspheres. The committee resolved that Mr Mellos would discuss the intellectual property issues with Mr Cherry and report to the committee at the following meeting.
1141 UWA referred to these matters in its closing submissions. It cited a handwritten note of the meeting by Ms Sandeep Mann quoting Mr Mellos as saying that "claim by UWA sufficiently material to disclose". Just what that meant in context is not clear. It is most likely to have referred to a possible claim to clinical data. Sirtex pointed out in its submissions that all the discussion apart from the comment attributed to Dr Panaccio concerned the clinical trial data. It was in that context that Dr Gray referred to the Barber letter of 22 January 1997.
1142 In my opinion, as Sirtex contends, the comments attributed to Dr Panaccio in the minutes should be taken as the most reliable record of his state of mind at the time of the meeting. A significant amount of the evidence in cross-examination in the case was affected by the passage of time. Witnesses, including Dr Panaccio, were repeatedly asked to accept argumentative propositions about what they would have thought, known or said at times long past. Inferences about the past are no substitute for evidence about it. It is for that reason that I am reluctant to place much weight on "concessions" of a hypothetical or inferential character extracted from witnesses.
1143 Mr Cherry received a copy of the minutes of the meeting of the Due Diligence Committee of 11 February 2000 on or about 16 February 2000. He reviewed them and sent some comments to Mr Mellos on 17 February 2000 by email. One of his comments was:
I note that Michael Panaccio suggested that the prospectus should disclose that UWA has not claimed any intellectual property rights over the SIR-Spheres. My question is whether UWA is fully informed of what its rights may be, such that it could make a claim.
He also noted that he had had no response to his communication to Dr Gray of 9 February 2000 concerning UWA clinical trials. It was put to Mr Cherry in cross-examination that he raised his concern about the UWA rights because Dr Gray had told him something of the hostility in his previous dealings with UWA. He said he had no recollection of Dr Gray expressing any hostility with UWA. He had no independent recollection at that time as to why he had raised the matter. On the face of it, it was a question about verification and did not require resort to conversations with Dr Gray about the hostility of UWA to explain it.
1144 Mr Cherry noted the reference in the minutes to the UWA confirmation to CRI that it had no claim on ceramic microspheres, DOX and hyperthermia technologies. He had not seen a copy of the confirmation and thought he should "as such a document would significantly minimise the risk attached to the UWA trials". His focus again was upon the significance of the Barber release for the clinical trial data.
1145 Mr Mellos did not pursue the issue raised by Mr Cherry about whether UWA was fully informed of its rights. Sirtex submitted that this was no doubt because Dr Gray provided the Gorn and Barber letters to verify the absence of any issue of ownership in relation to SIRT-2, DOX or Thermo-Spheres. SIRT-1 was considered to be in the public domain and not patentable.
1146 Had Mr Mellos thought that there was some real risk that UWA was not "fully informed of what its rights may be" and that there was a real risk that it might raise a claim, then it is difficult to imagine that he would simply have decided to disregard the problem. The proposition that UWA was not fully informed of its rights in the circumstances might have seemed a little improbable. It was after all a large well resourced organisation in terms of the advice available to it. It will be remembered that in making the observation that he did, Mr Cherry had not seen the Barber letter.
1147 On 18 February 2000 Mr Cherry telephoned Dr Gray. Dr Gray told him in substance that he would give him a letter providing the confirmation from UWA relating to CRI and information about the clinical trials.
1148 The next meeting of the Due Diligence Committee occurred on 18 February 2000. Mr Mellos advised that Mr Cherry's initial view, that the want of patent protection for the original SIR-Spheres was unlikely to be material, was formed in the context of whether or not it would materially prejudice the FDA application. He had asked for more time to consider the matter relating to the use of results from the UWA trials. Dr Gray said he would contact Mr Cherry to discuss the intellectual property issues and to provide information previously requested in connection with the results of the UWA trials. It follows that, to this point, Dr Gray had not provided Mr Cherry with the information he had sought in relation to the intellectual property issues.
1149 Dr Gray said he had started on the task of reconciling the patents with the company's products and processes. His preliminary view was that the patents granted to the company provided fairly good coverage for its products and processes. He also said he anticipated receiving the amended report from Davies Collison Cave which he had previously requested.
1150 Mr Mellos had discussed with Mr Kerridge the best way to describe the company's technology in the prospectus. He supported the suggestion that the prospectus include an outline of the history of the company's technology in chronological order, namely resin spheres, first-generation ceramic spheres, second-generation ceramic spheres and so on. With respect to each stage of the chronological history it should also indicate the extent to which the company owned any intellectual property in the technology. The outline should appear at the front of the prospectus. Dr Gray agreed to draft the relevant history. Mr Mellos commented that the verification process would commence with the draft of the prospectus incorporating the history of the technology and intellectual property rights that the company owned in it.
1151 Under the heading "Intellectual property issues" Mr Mellos said that the item would be deferred to the next meeting as Mr Cherry was not able to attend the current meeting. In the meantime Drs Gray and Panaccio were to discuss intellectual property issues with him and report to the committee at the next meeting.
1152 Shortly after 18 February 2000 Mr Cherry received a letter from Dr Gray dated 15 February 2000. It attached the letters of 17 and 22 January 1997 exchanged between Mr Gorn and Professor Barber. It also attached the documentation relating to clinical trial date and associated publications.On that day Mr Davey sent a supplementary due diligence questionnaire to Dr Gray. He said in his covering email that although Freehills had been involved in the establishment of the company at the time of the Nomura/JAFCO investment they did not have an intimate knowledge of the day-to-day operation of its business. He encouraged detailed responses from Dr Gray. Dr Gray agreed in cross-examination that he knew Freehills were relying upon him to provide accurate information. In answer to a question in the supplementary questionnaire about any facts, matters or circumstances that might result in litigation, he wrote:
Nil, other than the ownership of clinical trial data and use of original resin based SIR-Spheres which has been discussed with Mr James Cherry at Freehills.
1153 The minutes of the meeting of the Due Diligence Committee held on 25 February 2000 record that Mr Mellos noted Mr Cherry had received information sent by Dr Gray. He was waiting for a copy of the prospectus with amended wording before he confirmed his advice in relation to intellectual property issues concerning the three technologies or the SIR-Spheres trial results. The amended wording was to be prepared by Dr Panaccio. Dr Gray said that he had not yet sent a letter to Dr Burton but that Dr Burton would be given shares out of existing shares held by Dr Gray in accordance with a clause in the Subscription and Shareholders Agreement that permitted Dr Gray to allocate shares to persons nominated by him.
1154 There was discussion about the most recent drafts of reports from the two firms of patent attorneys. Freehills had circulated comments on the drafts. The committee resolved that Freehills should contact Davies Collison Cave and discuss with them amendments to the report. Its purpose was to make the format of the two reports similar. Dr Gray reported that the chronological history of the technology and intellectual property ownership had been prepared. Mr Kerridge suggested that the description needed to be more specific and more detailed.It appears from the minutes that the only intellectual property issues outstanding were the clinical trial data and the question whether Dr Burton was entitled to a shareholding in Sirtex.
1155 On 1 March 2000 Mr Cherry had a discussion with Ms Sandeep Mann of Freehills. She asked him to prepare a brief report on the potential for litigation for the due diligence report and for the prospectus. He received an email from Mr Davey attaching a revised part of the prospectus for his review on 7 March 2000. Further drafts were sent and he made further comments.
1156 It was put to him in cross-examination that he did not turn his attention to the material supplied by Dr Gray for some weeks. In reading it, his principal purpose was to assess whether the information in relation to clinical trials which had been used to support an FDA application, could be the subject of a potential breach of confidence claim. He had little recollection, apart from his own documentary record, of what he considered and conversations that he had. He did reach the conclusion that there was a great deal of information and complexity surrounding the ownership of the data in the clinical trials. For the purpose of advising on the associated risk he assumed that the data was owned by UWA. Asked what he meant by "ownership of data", he said:
The right with which I was concerned was whether there was a breach of confidence.
1157 Mr Davey sent Mr Cherry an email on 15 March 2000 referring to the latest draft prospectus and in particular section 8 concerning risk factors under the heading "Technology and Intellectual Property Rights". Mr Davey noted in his email that Mr Mellos had mentioned that Mr Cherry thought the prospectus should state that the patents were not necessarily beyond challenge. Cherry said he thought it likely he said something like that.
1158 There was further exchange of emails about intellectual property issues surrounding clinical trials. However on 21 March 2000 Mr Cherry received an email from Mr Davey which said:
Just when I thought we had turned the corner, I have received a copy of the due diligence report marked with Bruce's comments. In reference to the statement that your comments on the trial results were based on the assumption that there was no agreement between Bruce and UWA, he has noted that UWA has agreements with all its staff in relation to IP. I would be grateful if you could discuss this with him.
1159 A further meeting of the committee was held on 14 March 2000. Freehills had not yet received the amended report from Davies Collison Cave. A report had been received from Wray & Associates. Both reports were to be amended as a consequence of the change of the company's name from Paragon Medical Limited to Sirtex Medical Limited. In discussion of the proposed capital structure, Dr Gray confirmed that 100,000 new options allocated to CRI were intended for directors of CRI. Five current CRI directors would be offered 20,000 options each.
1160 On 21 March 2000 the committee met again. Drs Gray and Panaccio were present along with the proposed chairman, Dr Chris Roberts (by telephone) and Dr Colin Sutton the proposed Chief Executive Officer (also by telephone). Mr Kerridge participated by telephone. Messrs Mellos, Cherry, Davey and Ms Sandeep Mann were present and Deloittes were represented by Ms Leanne Petrou (by telephone).
1161 The minutes recorded Mr Cherry's statement that Freehills' views on the intellectual property issues arising out of the use of the trial results in the FDA application for SIR-Spheres were covered in the draft legal due diligence report. They continued:
By way of summary, James Cherry explained that there is a risk of litigation (although nothing has been initiated or threatened). However, the remedy for the UWA is, based on the information reviewed by Freehills, most likely to be damages rather than an injunction. James Cherry queried whether the UWA would be able to establish any loss for which it is entitled to damages in any event.
Dr Gray said there was not much the company could do at that stage. Mr Cherry said the risk of litigation became less significant as each day passed. The committee agreed that no specific disclosure was required in the prospectus in relation to that issue.
1162 Mr Cherry explained that many people, including Dr Burton, had arguably contributed to the technology and for that reason absolute ownership was almost impossible to establish. This was not unusual for technology of the kind owned by the company. Mr Cherry read a draft of a statement about this issue proposed for inclusion in the "risk factors" section of the prospectus. The committee discussed the proposed wording and suggested some amendments.
1163 Under the heading "Other matters" Mr Davey noted a reference in the board minutes of the company to a proposed transfer of shares to Dr Chen. Dr Panaccio explained that that matter related to an issue purely between CRI and Dr Chen concerning the development of the DOX-Spheres and did not in any way affect the company.
1164 On 22 March 2000 Mr Cherry telephoned Dr Gray to discuss the issue about clinical trials and in particular the matter raised by Mr Davey in his email of 21 March 2000. In the course of that telephone conversation Dr Gray told him that the current policy of UWA was on its website and there had been other policies in place at the relevant times. Mr Cherry considered that information reinforced the conclusion that the resolution of property issues would be time consuming and might still be equivocal. It informed the drafting of what became Part 3.2 of the due diligence report.
1165 On 23 March 2000 Mr Davey sent Dr Gray an email with a further due diligence questionnaire. It requested that he provide a copy of the agreement between himself and UWA in relation to intellectual property. Dr Gray responded the next day saying that there was no specific policy. UWA had developed several intellectual property policies. The latest could be taken from the web. The current document was not really relevant to the results of trials. What was published (based on the clinical data) was under the banner of UWA and other institutions such as CRI and Sir Charles Gairdner Hospital which supported the trials.
1166 Freehills produced a due diligence report dated July 2000. It was based in part on a due diligence questionnaire dated 3 February 2000 to the company and supplementary due diligence questionnaires dated 18 February 2000, 9 March 2000, 23 March 2000 and 5 July 2000. The questions had been put to Dr Gray and others. The Freehills lawyers involved were Kon Mellos, Ben Davey, Sandeep Mann and Leanne Edwards an articled clerk. The opinions expressed in the report related to due diligence conducted up until 17 July 2000.
1167 Section 3 of the report was entitled "Intellectual property, litigation and conflicts of interest". Under that heading the report stated the likely legal position to be as follows:
. there remains a possibility that the Company has improperly used information which it knowingly received in confidence from Bruce Gray;
. a court is unlikely to grant an injunction against use of the clinical trials information by the Company; and
. if a court were to award damages, these are unlikely to be on the basis of ongoing royalty, but rather a lump sum for the cost of carrying out the clinical trials as a service to a third party.
The report stated that definitive advice could not be provided in the absence of a detailed investigation of all the circumstances relating to the results of the clinical trials. It went on:
The above conclusions are based only on the information provided to date and on various assumptions and qualifications (some but not all of which are described in more detail in paragraph 3.2 of the main part of the report). In particular, it is assumed that the arrangements between UWA and its staff conducting such trials provide that UWA owns any resulting intellectual property but provide no unusual penalties for use of the intellectual property without the express consent of UWA. This is, in our experience, not an uncommon position. If, of course, the position is more favourable to researchers, then the Company's position is improved. In order to make a more definitive assessment of the position, it would be necessary to review a copy of the actual terms that applied to Bruce Gray's work at the UWA.
UWA relied upon this aspect of the report as an indication that Paragon Medical, and thereby Sirtex, knew of UWA's interest or the likelihood that it would have an interest in the relevant intellectual property.
1168 In another section of the report headed "Litigation" the Freehills' group reviewed facts which might give rise to litigation. They mentioned the letter of 22 January 1997. They also referred to a confidentiality agreement signed between UWA, the company and CRI on or about 4 May 1998 relating to the manufacture and applications of ultra fine powders. Dr Gray had instructed Freehills that the document was irrelevant as the powders were made by another department at UWA and there was no follow-up on the issue. The report, also referred to a one page summary paper published in May 1999, was cited. It described clinical trials. It focussed on the use of SIR-Spheres in addition to chemotherapy with FUDR and disclosed improved results. An FDA application filed in October 1999 containing detailed information about Phase II and Phase III trials was also cited and a nine page paper disclosing much of the information contained in that application which was to be published in the near future. The Freehills' report observed:
For the purpose of drawing conclusions as to the ownership of the clinical trial results, it is assumed that Bruce Gray carried out clinical trials at least in part, in his capacity as a Professor with UWA. It is further assumed that the arrangements between UWA and its staff conducting such trials provide that UWA owns any resulting intellectual property but provide no unusual penalties for use of the intellectual property without the express consent of UWA. This is, in our experience, not an uncommon position. If, of course, the position is more favourable to researchers, (for example, if the work falls entirely within the letter described … above) then the Company's position is improved. In order to make a more definitive assessment of the position, it would be necessary to review a copy of the actual terms that applied to Bruce Gray's work at UWA.
The solicitors said they could not provide definitive advice absent a detailed investigation of all the circumstances relating to results of the clinical trials. They then stated the likely legal position which has already been referred to above.
1169 The Sirtex prospectus issued on 17 July 2000. In an "Ongoing Due Diligence Questionnaire" dated 18 July 2000, Dr Gray answered "no" to all of the questions put including questions as to his awareness of any intellectual property of the company or any rights under any licence of intellectual property to the company or any member of the group. Save for the reference to clinical trial data, there was nothing in any of his answers to the questionnaire to suggest that there might be a claim by UWA.
1170 When the prospectus was published it included statements about intellectual property rights and said that while the directors could not exclude the possibility of claims, they were not aware from their investigations of any such claims having been made. Dr Gray signed a Verification Sign Off document on 17 July 2000 saying that he had reviewed statements in the prospectus which had been allocated to him to verify and confirm. The source material was said to support the statements that they were not misleading or deceptive and that there was no omission of information from the statements which was required to be disclosed in the prospectus. Dr Gray was allocated those paragraphs of the prospectus under the heading "Technology and Intellectual Property Rights" and the first paragraph of Section 5. The relevant text appears later in these reasons. He evidently did not look at the relevant documents before signing off.
1171 The due diligence report from Freehills contained no suggestion to Sirtex that there was any issue in relation to the ownership of the patents.
What Sirtex knew - July 2000
1172 UWA pointed to the recurring consideration by the Due Diligence Committee of:
UWA's rights in relation to the clinical trial data.
The terms of Dr Gray's employment relationship with UWA.
3. Contributions to the development of the technology by Drs Burton and Chen and whether those contributions should be recognised.
It submitted that these things should have put Dr Panaccio on notice of the potential interest of UWA in the technology and would have been sufficient to put an honest and reasonable person on such notice. It was submitted that in these circumstances Dr Panaccio, as a member of the Due Diligence Committee, limited the scope of the Freehills' brief so that it did not investigate the provenance of the intellectual property. The conclusion offered was that Dr Panaccio:
wilfully shut his eyes to the obvious;
2. wilfully and recklessly failed to make enquiries an honest and reasonable person would make;
3. knew of circumstances which would indicate the facts to an honest and reasonable man.
1173 I do not accept these submissions. Dr Panaccio was an astute businessman and, in my opinion, not one to take unnecessary risks. It was not unusual to limit the scope of Freehills' enquiries given the uncertain outcome of even the most thoroughgoing investigations as to ownership. He had the benefit of the Barber letter and Dr Gray's assurances. Possibilities can be conjured from constellations of more or less suggestive facts. The constellation of facts in this case was not, in my opinion, sufficient to put Dr Panaccio or an honest and reasonable person in his position on notice that UWA might have or want to pursue, a claim to the intellectual property. To the extent that UWA relies upon Dr Panaccio's involvement to support a case of knowing assistance by Sirtex in a breach of fiduciary duty by Dr Gray and knowing receipt of its proceeds, it cannot succeed.
1174 As to Dr Gray, I have already made findings adverse to his contention that he disclosed the possibility of some "spurious" claim being made by UWA in relation to the intellectual property. I accept the Sirtex submission that UWA's claim to be the owner of some or all of Sirtex's patents was not identified as a possibility in 2000 because Dr Gray did not disclose relevant information and, in particular, did not disclose the Schreuder correspondence of 1999. Sirtex accuses him of deliberate non-disclosure. Dr Gray was aware that UWA, through Professor Schreuder, had raised a real possibility that it would assert a claim to an interest in the intellectual property underpinning the Sirtex float. He must have known that the possibility of such a claim was relevant to the due diligence process and the preparation of the prospectus. In my opinion, despite this knowledge, he decided not to disclose the possibility to Sirtex. In all likelihood that was because he took the view that there was not much chance that the University would follow through. He had convinced himself that the Schreuder correspondence was part of a tactic by Professor Robson to bring about his resignation. He had resigned and therefore there would be little or no purpose in UWA pursuing him. He took a calculated risk in not disclosing the correspondence to Sirtex. It was, as Sirtex alleges, a deliberate non-disclosure.
Gray leaves CACS - April 2000
1175 In April 2000 Dr Gray and his group relocated from CACS to the new CRI and Sirtex premises at Burswood. Dr Williams saw Dr Gray's secretary, Ms Spicer, assembling boxes of documents in preparation for their removal. Other staff of CACS assisted in packing laboratory records and equipment. Dr Williams was absent from Perth for about two weeks in April 2000 and most of the actual removal of the records and equipment happened while she was away. When she returned to Perth on the weekend of 29 and 30 April 2000 she had to move her own staff records and equipment to new CACS premises at Park Avenue in Nedlands. There were a number of students working in CACS including Paul Moroz, Simon Harrison and Paul Katris. Their research equipment, documents and effects also had to be moved. She did not recall any conversations with Dr Gray about the removal of documents and equipment or the extent of those which he proposed to take with him when he left CACS.
1176 After Dr Gray and his team left the only records remaining in CACS related to Dr Williams' work and that of her students, some departmental personnel files and a small amount of correspondence between Dr Gray and others in the Faculty of Medicine and Dentistry.
1177 The Laboratory Manager, Jillean Winter, gave Dr Williams a number of schedules described as "Equipment Lists" which she reviewed before and after Dr Gray's team departed. She endeavoured to reconcile equipment and consumables used by various people in CACS. These had been obtained through a variety of funding sources over the years including RPH, Medical Research Foundation research grants, the Cancer Foundation, the NH & MRC, the Clive and Vera Ramaciotti Foundation, Telethon, UWA and possibly others. Some had also been purchased with LCI and CRI derived funds. Dr Williams wanted to make sure to the extent that any equipment and consumables were identified as going to CRI, the University would be reimbursed if it had paid for them.
1178 On 9 June 2000 Dr Williams wrote to Mr Gorn the Chairperson of CRI stating that she had identified a number of instances in which purchases of equipment and consumables for CRI scientists undertaking contract research on behalf of Paragon Medical were inappropriately paid from CACS' UWA derived funds rather than the CRI account. She attached details of those transactions. She accepted that, given the complexity of the relationships of CRI with CACS and Paragon Medical and the number of purchase transactions, occasional mistakes in invoice processing were unsurprising. She asked for prompt settlement of the enclosed invoice to correct those mistakes. The total invoice was for $16,573.75.
1179 She received a response dated 30 June 2000 from Mr Colin Sutton the CEO of Sirtex attaching a copy of items that he believed should be excluded from costs to be reimbursed by Sirtex. The net amount to be reimbursed was $10,615.62. This was followed on 11 July 2000 by a letter from CRI signed by Mr Gorn attaching CRI's cheque for $10,615.62. Dr Williams wrote back to Mr Gorn on the same day dealing with each of the disputed items and indicating that she would consider the matter settled when CACS received a further $4,211.42 or $2,998.77 together with three books and a dictaphone belonging to CACS. The books and the dictating machine were returned but Dr Williams was referred to the Medical Research Foundation in respect of the outstanding amount. There was a continuing exchange of correspondence into early 2001 concerning some items of laboratory equipment said to be owned by CRI but still at CACS. This led to a complaint to the police and litigation in the Local Court.
1180 Dr Williams said that after the departure of Dr Gray and the CRI scientists and support staff from CACS in early 2000 she did not see any of the laboratory books which they had used or copies of them.
[138]
The Sirtex Prospectus - July 2000
1181 The Sirtex Prospectus commenced with a letter to investors from the Chairman, Dr Chris Roberts dated 17 July 2000. He described Sirtex as having been formed to commercialise a portfolio of three products relating to the treatment of liver cancer. The third product was based on a new generic technology platform which might develop into a treatment for other forms of cancer as well as having other applications in medicines. The three products were described as SIR-Spheres, DOX-Spheres and Thermo-Spheres. General descriptions of the technologies appeared in Section 2 of the prospectus under the heading "Investment Highlights".
1182 In its Prospectus, Sirtex offered for subscription 15 million shares at an issue price of $1 to raise $15 million. Upon listing on the ASX it would have a market capitalisation of $54 million at the "Offer Price". The application list opened on 25 July 2000 and was to close on 11 August 2000. The expected date of quotation of shares on the ASX was 24 August 2000.
1183 Section 3 of the prospectus was an "Information Summary". It described the purposes of the Offer as follows:
. to fund the ongoing development, research and marketing of Sirtex Medical's anti-cancer products for over 3 years ($13.7 million);
. to assist Sirtex Medical in retaining the services of high calibre employees by providing them with the opportunity to own Shares through an employee share option plan;
. to pay the costs of the Offer ($1.3 million);
. to increase the public profile of Sirtex Medical; and
. to allow Sirtex Medical easier access to the equity market in order to fund future growth opportunities both through acquisitions and other business opportunities.
Financial performance for the financial years from 1997 to 1999 were set out. In each of those years there had been negative earnings. Revenue from the sale of SIR-Spheres was $151,444, $155,554 and $126,246 for 1998, 1999 and the six months to 31 December 1999 respectively. Business and investment risks were referred to. These included the risk that the grant of patent protection might not guarantee complete protection of the company's intellectual property.
1184 Section 4 of the Prospectus offered an "Industry Overview" which dealt with the incidence of cancer, liver cancer and current treatment regimens for liver cancer.
1185 Section 5 gave an overview of Sirtex. It began with the statement:
The original concept underpinning the core technology being commercialised by Sirtex Medical was initially developed by Dr Bruce Gray and the Cancer Research Institute Inc (CRI) and have been published in the scientific literature. The CRI is an independently incorporated research institute, founded in 1990 that is now affiliated with the Centre for Applied Cancer Studiesat the University of Western Australia. The CRI has undertaken many research programs investigating cancer over the past decade.
It went on to state that Sirtex had been formed in 1997 to acquire and commercialise a portfolio of three technologies relating to the treatment of liver cancer developed by the CRI and Dr Gray. Reference was made to Nomura/JAFCO's subscription for equity in the company to finance development of the technologies. More detailed product descriptions followed.
1186 The intellectual property position with respect to SIR-Spheres was described thus:
The concepts underpinning SIRT technology were developed and refined over more than ten years in a number of public research institutions. Early data was publicly disclosed and therefore it is not possible to obtain patent protection for the first generation SIR-Spheres®. The Directors believe that the lack of patent protection on the first generation SIR-Spheres® will not affect the Company's prospects of commercialising this therapy since the Company now has developed a second- generation of SIR-Spheres®, with which it plans to replace the current SIR-Spheres® in the marketplace. Patent protection for the improved SIR-Spheres® has been granted in Australia and the USA. Similar patent applications are currently being assessed in four other relevant markets …
This section went on to refer to second generation SIR-Spheres. It distinguished them from the early SIR-Spheres on the basis that they were manufactured from pure Yttrium Oxide and were microscopic hollow ceramic particles. It was said that Sirtex planned to test these second generation SIR-Spheres in patients before the end of the year 2000.
1187 Section 5 of the Prospectus also described Product 2 designated "Controlled-Release Therapy with Dox-Spheres". Under the heading "Intellectual Property Position" it stated:
By combining Doxorubicin with Sirtex Medical's novel matrix, a new formulation for the drug (Dox-Spheres) is created. Patent protection for Dox-Spheres has been applied for in a number of countries and patents have already been granted in Australia and the USA (see Section 9).
1188 Product 3 was designated "Targeted Hyperthermia with Thermo-Spheres". The product concepts were said to have been the subject of a major research program at CRI over many years. Under the heading "Intellectual Property Position" the Prospectus stated that Sirtex had applied for two families of patents to protect its hyperthermia technology. They covered the hyperthermia micro-particles and the device used to generate the electromagnetic fields required.
1189 Reference was made to the risks associated with medical research. The three products were described as being "at different stages of development". Sirtex was managing the risk by performing early experiments that would indicate whether the products could be successfully developed.
1190 Under the heading "Key Drivers to Revenue" the Prospectus stated that the principal factors determining the revenue generated by the company would be market acceptance of its products, the influence of government regulation of its proposed business and the impact of competitive activities by other market participants. Up to the present time the sale of SIR-Spheres had been in the context of clinical trials and test marketing programs.
1191 The overview also referred to the Sirtex website which, it was said, was designed to provide details information to general practitioners to enable them to recommend treatment to their patients.
1192 Section 6 of the Prospectus listed the members of the board of directors, they being Dr Chris Roberts, Non-Executive Chairman, Dr Bruce Gray, Medical Director, Dr Michael Panaccio, Non-Executive Director and Dr Colin Sutton, Chief Executive Officer. The key management team comprised Mr Grant Boyce, the Company Secretary, Dr Monica Hope, the Regulatory Affairs Manager and Dr Steven Jones, the Senior Scientist and Project Leader.
1193 Risk factors were set out in Section 7 of the Prospectus. It stated that the continued services of Drs Gray and Jones were vital to the ongoing success of thecompany. The associated risk was addressed in part by the existence of three year service contracts with each of those key staff members. Medical research and development was said to involve long lead times and that the hyperthermia program was at an early stage. The therapies could fail at any of the stages of research and development from laboratory studies through the phase 3 clinical trials.
1194 Under the heading "Technology and Intellectual Property Rights", the Prospectus stated that the granting of a patent does not guarantee its validity, that the rights of others are not infringed or that competitors would not develop technology to avoid such patents. The Prospectus stated:
There can be no assurance that any patents which Sirtex Medical may own or control in the future will afford Sirtex Medical commercially significant protection of its technology or its products or have commercial application.
As indicated elsewhere, as with most new therapeutic agents, many persons and organisations have been involved in creating and developing the technology being exploited by Sirtex Medical. The Directors cannot exclude the possibility that a person may claim in future an ownership interest in the technology, but the Directors are not aware from their investigations of any such claims having been made against the Company.
1195 An "Independent Accountants Report" from Deloittes comprised Section 8 of the Prospectus. It showed accumulated losses from the end of the 1997 financial year to 31 December 1999 at $2,646,420. The total equity at 31 December 1999 was said to be $18,680,348. Non-current assets designated "Intangibles" were valued at $3,125,857. In a note to the accounts, these were said to represent intellectual property at cost less accumulated depreciation.
1196 Section 9 was entitled "Reports on Patents". A report from Wray & Associates dated 17 July 2000 was included, together with a report from Davies Collison Cave of the same date. The report from Wray & Associates confirmed that Sirtex was the patent applicant in respect of a number of patent applications in a variety of countries described in Schedule A to the report. It identified three streams of patent applications broadly defined as follows:
"Targeted Hysteresis Hyperthermia as a Method for Treating Diseased Tissue";
2. "Improved Targeted Hysteresis Hyperthermia as a Method for Treating Diseased Tissue";
3. "Magnetic Material".
The Davies Collison Cave report dealt with patent applications under the titles "Controlled Release Preparation" and "Particulate Material".
1197 Section 10 of the Prospectus set out additional information. It referred, inter alia, to executive service agreements between Drs Gray, Jones, Sutton and Sirtex. It also referred to a Manufacture and Supply Agreement dated 4 February 2000 between Sirtex, Sirtex Medical Products Pty Ltd (a subsidiary) and ANSTO. This was for the supply of first generation SIR-Spheres. A Research and Development Start Grant Agreement dated 17 June 1998 between Sirtex and the Industry Research and Development Board providing for a total grant of $950,000 between 14 January 1998 and 30 June 2001 to assist with the development of SIR-Spheres and hyperthermia technologies was also mentioned. Financial assistance received under that grant up to the date of the Prospectus was $840,839.
1198 Under the heading "Interests of Directors" the Prospectus pointed out that upon completion of the Offer, the directors of Sirtex and their associates would hold interests in the securities of the company, if they did not apply for any further shares under the Offer, in the following amounts:
Shares Options
Dr Bruce Roberts - 151,000
Dr Bruce Gray ` 19,399,443 114,000
Dr Michael Panaccio 11,786,928 114,000
Dr Colin Sutton - 1,131,000
The shares attributed to Dr Panaccio were held by NJI No 2 Investment Fund and the options attributed to him held by Nomura/JAFCO Investment (Asia) Ltd. The latter company was the manager of the investment fund. Professor Barber said he read the prospectus thoroughly at the time.He took his responsibilities very seriously and wanted diligently to consider the document.
Barber declines to act on Sirtex prospectus - July 2000
1199 Professor Barber first saw the Sirtex prospectus in 2000 when Linda Key brought it to his attention. They had some earlier discussion about the question of intellectual property held by Paragon and Sirtex. He said some such discussion had occurred between October 1999 and August 2000.
1200 In the context of Sirtex's initial public offering Ms Key told Professor Barber in July 2000, that, in her opinion, UWA had an interest in the intellectual property. When he saw the prospectus Professor Barber thought that if UWA were to make a claim in respect of the intellectual property it could affect the share offer and expose UWA to a counterclaim for damages. He agreed in cross-examination that he could have asked Linda Key to seek advice from external lawyers which was common UWA practice at the time. However he did not do so. Nor did he conduct any investigation at the time or ask Linda Key to assemble a file of records and information. He accepted that there was nothing to stop him making inquiries of the auditors or independent accountants named in the prospectus about matters contained in. He could have inquired of Mr Lennon who had recently left UWA and he could have contacted other staff members and Dr Gray. He could have written to Sirtex. He did none of these things.
1201 Professor Barber was cross-examined on the prospectus. He accepted that it appeared from the prospectus that the continued services of Dr Gray and Dr Stephen Jones were vital to the ongoing welfare of Sirtex. He also recalled reading a statement in the document that the directors could not exclude the possibility that someone might in the future might claim an ownership interest in the technology. He understood when he read that statement that it meant that the directors were not aware of any claim and that potential investors would have understood that the directors did not believe the claims had been made. Professor Barber also said that the prospectus indicated that the investment would be highly speculative and that large sums of money would have to be expended in a short time. The directors of Sirtex were giving no assurance about the prospects of the business.
1202 Professor Barber said in his affidavit evidence that any investigations into whether UWA had an interest in the intellectual property would be difficult because of the "messy lineage" of the work carried out in the first eleven months of the operation of CACS. It would have been relevant to a decision to commence action against Sirtex that the company had suffered a loss in every trading period for that year. In light of the negative factors, Professor Barber did not think there was a real prospect of an investigation turning anything up. He told either Linda Key or Professor Landau that he harboured the hope that if Dr Gray made a lot of money out of the float he might donate a "Gray Chair of Surgery" to UWA. He concluded that the risks of legal action were not outweighed by the likely benefits. He did not remember raising the matter with Professor Robson but would probably have mentioned it to him.
1203 At this time Ms Key and Ms Frodsham were preparing to prosecute an intellectual property case against Dr Gray. I accept the Sirtex submission that Professor Barber, acting on behalf of UWA, and in consultation with its legal officers, considered making a claim but decided not to do so because of the cost to UWA and the risk of a counterclaim. I also accept, as was the case, that Professor Barber had already shown a reluctance to invest money on behalf of UWA in what would have been an expensive development process including the possible outlay of some $500,000 for equipment for the hyperthermia hysteresis project.
1204 Professor Barber's knowledge may be taken to be that of UWA for all material purposes in these proceedings. I also find that it is probable, as he said, that he told Professor Robson of his discussions about the prospectus with Ms Key.
Williams raises Sirtex concerns - September/November 2000
1205 Dr Williams saw a copy of the Sirtex prospectus following its issue. She did not recall how she had obtained it. She might have got it from a website. She was watching the affairs of Sirtex in 2000. She had associations with the people who were involved with it and was interested in the progress of their work and its continuance.
1206 Dr Williams believed there were no legal issues about the provenance of Sirtex's intellectual property and that suitable arrangements had been made between UWA and those involved. However, it came to her notice in early September that her belief might not be well-founded. A Mr Greg Barrington who was involved in the commercialisation of another piece of intellectual property had told her that UWA had put a hold on the relevant prospectus until there was an acknowledgement that the property had been developed at UWA. This caused Dr Williams to look again at the Sirtex prospectus. There was no such acknowledgement there. She agreed in cross-examination that there had been no secret about the fact that the intellectual property was being commercialised.
1207 Dr Williams took the view that if there had been a loss of intellectual property from UWA through the Sirtex float then as the Director of CACS she was the person who was liable to be disciplined by UWA. She wrote to Linda Key on 11 September 2000 on CACS letterhead. She referred to s 6 of the IP Regulations and her understanding that she had a duty as Head of CACS to report any circumstance inconsistent with UWA's rights under the Regulations. She enclosed extracts from the prospectus issued by Sirtex and said that Dr Gray was, until November 1999, employed as a professor within UWA. The CACS records did not include any correspondence to indicate that UWA had assigned any or all of its rights in respect of the intellectual property which formed the bulk of the intangible assets of Sirtex. She said:
Are you in a position to reassure me that the University has assigned its rights in respect of the patents entitled "Targeted Hysteresis Hyperthermia as a Method for Treating Diseased Tissue" and "Improved Targeted Hysteresis Hyperthermia as a Method for Treating Diseased Tissue" to Dr Gray, Dr Steven Jones and the Cancer Research Institute? Similarly can you reassure me that the University has assigned its rights in respect of the patent entitled "Controlled Release Preparation" to Dr Gray, Dr Yan Chen and the Cancer Research Institute?
She said that the information was necessary for her to know whether she had a duty to exercise. Dr Williams said in cross-examination that the reference to Dr Chen and to Dr Stephen Jones came from a patent search which she carried out before writing the letter.
1208 Dr Williams did not get a response to her letter. In the week of 9 November she met with Linda Key on another matter. When they met she asked her whether Ms Key had received her letter. Ms Key told her that Professor Barber had intended to speak to her himself about the matters in the letter. As a result she made an appointment to see Professor Barber on 16 November. Professor Barber had been given a copy of Dr Williams' letter on or about 11 September 2000. He and Ms Key had discussed its contents in the light of their discussions about the prospectus in July 2000. He did not recall why there was such a long delay in replying to Dr Williams. At his meeting with her on 16 November 2000 she expressed her concern that if there were a potential breach of the IP Regulations disclosed by the information in the prospectus she, as Director of CACS, might also be in breach of the Regulations.
1209 Dr Barber assured Dr Williams that she was not in breach of the IP Regulations. He wrote to her the next day and said:
As I explained at that meeting, the University appreciates you advising us of a possible breach of the University's Intellectual Property Regulations with regard to the assignment of intellectual property to Sirtex Medical Ltd. However, on the evidence available, I do not propose to proceed further with this matter, and can assure you that the University does not consider you in any sense responsible for any potential breach of the Intellectual Property Regulations.
1210 Dr Williams next communication with Professor Barber was when she forwarded to him her Discussion Paper reviewing the first five years of CACS and proposals for the next five years.
Williams' Discussion Paper - December 2000
1211 In December 2000 Dr Williams prepared and circulated a Discussion Paper to the CACS Advisory Board and to the LCI and CRI boards about the future of CACS. In the Executive Summary she described CACS as having been formed in March 1996 as a partnership between UWA, LCI and CRI. She described it as having been a "spectacular success". She said that during its first five years of operation it had, inter alia:
[139]
Events preceding UWA's letter of demand - September-October 2004
1259 Professor Robson said that in or about March 2003 he received legal advice from Mr Heitman. That advice was received directly in a meeting of the University Executive. He instructed Mr Heitman, on the basis of that advice to engage external solicitors to advise the University on what, if any, claim it might have in relation to the intellectual property referred to in the Sirtex Medical Ltd prospectus. He said that the instruction was provided to Mr Heitman via Peter Curtis and not directly by himself.
1260 In making the decision to engage external solicitors to advise on the matter Professor Robson was conscious of the fact that the decision whether to commence proceedings in relation to intellectual property referred to in the Sirtex Medical Ltd prospectus was a large one. He considered it important that UWA received good, independent, unbiased advice in relation to the matter.
1261 On 23 September 2004, Ms Faulkner, a partner at Jackson McDonald, sent an email to Mr Heitman indicating that bound copies of the joint opinion of counsel would be delivered to him by courier that morning. Upon receiving the opinion Mr Heitman sent an email to Mr Curtis informing him of its conclusion that UWA had a number of viable causes of action against Professor Gray and that the action for compensation was recommended. He said that he would be meeting with counsel the following week to settle the letter of demand and the statement of claim. He would report further and seek Executive approval for the action to commence in those terms. Mr Curtis then sent an email to Professor Robson advising that the Sirtex opinion had arrived and that "… it looks like the case is on".
[140]
1262 Professor Robson said that on or about 18 October 2004 the Administrative Secretary at the Legal Services Office of the University sent an email to Mr Heitman advising him that Professor Robson would like him to "… draft a letter of demand regarding Sirtex which is legally tight to go to Senate". Professor Robson, having refreshed his memory from that email, asked Mr Heitman, on or about 18 October 2004, to prepare a letter of demand "regarding Sirtex Medical Ltd" for the Senate meeting on 25 October 2004. The following day he received a memorandum from Mr Heitman attaching a copy of a letter of demand sent to Dr Gray the previous week. He told Professor Robson that no formal or informal response had been received and that "… Sirtex has not made any announcement to the Stock Exchange". He said he would be happy to prepare a further briefing document for the Senate or give an oral report if required. The content of the letter and the circumstances of its delivery to Sirtex are set out later in these reasons.
[141]
1263 Although Professor Robson had asked for a letter of demand to be submitted to the Senate meeting on 25 October 2004, he said he was not surprised that it had been sent to Dr Gray without his prior approval. He had taken the decision to proceed with the litigation on or about 27 September 2004 and had advised Peter Curtis accordingly. Once that decision was taken, the day to day running of the litigation was in the hands of the Legal Services Department. Professor Robson did not see a copy of the University's letter of demand to Sirtex dated 26 October 2004, prior to it being sent. Indeed, as appeared from Mr Heitman's evidence in cross-examination, no one from the UWA executive checked the letters before they were sent to see if the factual assertions in them were correct.
[142]
1264 The minutes of the Senate meeting of 13 December 2004 indicate that the University solicitor, presumably a reference to Mr Heitman, briefed the Senate on the Vice-Chancellor's intention to seek an injunction restraining transfer of shareholdings by a former employee in Sirtex. There was no reference to the general issue of the institution of proceedings.
[143]
Boyer - expert evidence on Gray patent applications
1265 Stuart Boyer is a patent attorney with Griffith Hack, Melbourne. He is a principal with that firm. His duties include the prosecution of Australian patents, overseas patents, patent opposition, the drafting of provisional patent specifications and PCT applications and infringement opinions. He has an Honours degree in science from Murdoch University and a PhD in Molecular Biology from UWA which was conferred in 1994. His qualifications to give the evidence he did were not challenged. It is helpful first to refer to the overview of the process for lodgement of international and foreign patent applications which he outlined.
1266 As Dr Boyer pointed out, Australia has signed a number of international agreements associated with intellectual property. Two significant agreements are the Paris Convention and the Patent Cooperation Treaty.
1267 Article 4 of the Paris Convention of 20 March 1883, as revised on a number of occasions up to and including 1979, provides a right of priority under which the nationals of one country may be treated in the same manner as the nationals of other countries that are party to the Paris Convention. The relevant part of Article 4 states:
Any person who has duly filed an application for a patent … in one of the countries of the Union, or his successor in title, shall enjoy, for the purpose of filing in the other countries, a right of priority during periods hereinafter fixed.
The term "filing" is defined as "equivalent to a regular national filing under the domestic legislation of any country of the Union". The term "regular national filing" is defined as "any filing that is adequate to establish the date on which the application was filed in the country concerned, whatever may be the subsequent fate of the application". The period of priority is 12 months for patents which shall start from the date of filing of the first application.
1268 As Dr Boyer saw it, the Paris Convention in practical terms allows Australian inventors or applicants to file an Australian provisional or complete patent application in Australia and termed the basic application and within 12 months file corresponding applications in one or more of the Convention countries. Such applications are then treated as if they had been filed on the same day as the basic application filed in Australia, ie on the "priority date" of that application.
1269 Dr Boyer also referred to the Patent Cooperation Treaty which came into effect on 31 March 1980. The PCT is set out in Schedule 2 of the Patent Regulations 1991 (Cth). Applications under the PCT are dealt with in the Patents Act 1990 in ss 88 to 93 and regs 8.1 to 8.4 of the Patent Regulations (Cth). Under the PCT process applicants or inventors may file a single patent application in English with IP Australia within 12 months of the filing date of a basic application to satisfy the requirements of the Paris Convention with respect to maintaining the priority date. That is to say, by filing a PCT application by the 12 month anniversary of the basic application filing date (priority date) the applicant or inventor can preserve their rights under the Paris Convention to have patent protection in several countries.
1270 As Dr Boyer summarised the position, Australian inventors or applicants can file a provisional or complete patent application and within 12 months file a PCT application designating a number of countries and/or regions thereby allowing them to preserve their rights to patent protection in a number of countries from a single filing in Australia. After the conclusion of the PCT process, which is usually around 30 months after the basic application has been filed, the PCT application must be filed in the specific Convention country or countries otherwise all rights will be lost. This step is referred to as "entering the National/Regional Phase". Dr Boyer said that in practice his clients often give up their rights in the majority of countries covered by the PCT especially, smaller African or Asian countries, as they are considered too expensive or of little commercial worth. Most of his Australian clients generally enter the National Phase in the United States, Australia, Canada, New Zealand, Japan, China and the Regional Phase in Europe. Once the National Phase countries or regions have been entered the patent applications proceed under their respective national laws.
1271 Relevant to the progress of the National Phase are quite significant differences in the examination process between countries. These may be procedural. They may relate to the type of claims that are allowed and whether or not particular subject matter is regarded as patentable. The examination process varies. Australia and New Zealand are generally considered to have a rapid examination process which often sees patents granted a long time before corresponding patent applications in other jurisdictions. The examination processes in Canada and Japan are considered to be relatively slow with some patent applications waiting for up to eight years before examination. The stringency of examination varies from country to country. The United States and Europe are often considered by most Australian patent attorneys as difficult jurisdictions within which to prosecute applications. Dr Boyer attached to his affidavit a flowchart which sets out the international patent application procedure. For ease of reference that is attached to these reasons as Annexure 3.
1272 Dr Boyer was provided with a number of certified copies of Australian provisional and complete patent applications as well as PCT applications filed at IP Australia as the designated PCT receiving office. He had also been provided with other details taken from the Register. In reliance upon s 189 of the 1990 Act and the documents provided, he concluded that the inventors of the inventions disclosed in them were as shown in the Register and that the patentee, as shown in the Register at the various dates referred to, was prima facie the owner of the patents applications and/or inventions at that time. He set out his conclusions by reference to documents provided to him. The substance of those conclusions ie set out in the order which appears in his report. They were not disputed:
1. On 16 March 1999 Paragon Medical lodged a provisional patent application entitled "Production of resin based radionuclide-containing microspheres", which was given the number PP9228.
2. On 25 October 2000 a provisional patent application was filed in the name of Sirtex entitled "Polymer based radionuclide containing microspheres" and given the number PR0983. On 25 October 2001 a PCT application (PCT/AU01/01370) was filed claiming priority from PR0983.
3. Australian complete patent application No 2002210278 was filed in the name of Sirtex. The application claimed priority from PCT/AU01/01370 and thus from PR0983. Bruce Nathaniel Gray is recorded as the inventor. Dr Boyer assumed that 2002210278 was the National Phase entry case from PCT/AU01/01370.
5. Australian complete patent application No 54724/94 entitled "Radioactive particles for treatment of cancer" was filed in the name of Bruce Nathaniel Gray as inventor and applicant on 21 January 1994. International Patent application No PCT/AU95/00027 was filed on 20 January 1995, claiming priority from 54724/94. Australian complete patent application No 15279/95 entitled "Particulate material" was filed in the name of Bruce Nathaniel Gray as applicant and inventor and claimed priority from PCT/AU95/00027 and thus 54724/94 (also see 7).
8 Australian complete patent application No 15279/95 entitled "Particulate material" was granted as Australian patent No 690630. The priority claim is to AU54724/94 filed on 21 January 1994, the applicant was Paragon Medical Limited and the inventor Bruce Nathaniel Gray.
9. On 18 November 1993 Yan Chen and Bruce N Gray lodged a provisional patent application entitled "Controlled release matrix for drugs and chemicals" which was given the number PM2492. International Patent application No PCT/AU94/00708 was filed on 17 January 1994, claiming priority from PM2492. PCT/AU94/00708 entered the National Phase in Australia as complete patent application No 81363/94 and was sealed on 5 November 1998 as Australian Patent No 693821.
13. Australian Patent No 693821 is entitled "Controlled release preparation" and Paragon Medical Limited is the patentee. Yan Chen and Bruce Nathaniel Gray are shown as inventors and priority is claimed from PM2492.
13. On 12 September 1988 Bruce Nathaniel Gray lodged a provisional patent application entitled "Targeted hysteresis hyperthermia's for the treatment of cancer" which was given the number PJ0371.
16. On 23 December 1994 Bruce Nathaniel Gray lodged a provisional patent application entitled "Targeted hysteresis hyperthermia as a method for treating cancer" which was given the number PN0213.
17. On 10 May 1996 Bruce Nathaniel Gray lodged a provisional patent application entitled "Targeted hysteresis hyperthermias as a method for treating cancer" which was given the number PN9782. International Patent application No PCT/AU97/00287 was filed on 9 May 1997 and that PCT/AU97/00287 did not enter the National Phase in Australia.
20. On 29 October 1997 Paragon Medical Limited lodged a provisional patent application entitled "Improved targeted hysteresis hyperthermia as a method for treating diseased tissue" which was given the number PP0081.
22. On 3 March 1999 Paragon Medical Limited lodged a provisional patent application entitled "Magnetic material" which was given the number PP8998. International Patent application No PCT/AU00/00151 was filed on 3 March 2000, claiming priority from PP8998 and that PCT/AU00/00151 entered the National Phase in Australia as Australian patent application No 28952/00 entitled "Heating of magnetic material by hysteresis effects."
1273 Dr Boyer said that a number of the provisional patent applications and their corresponding PCT applications referred to might have matured into National Phase or corresponding foreign patent applications or patents. He conducted searches of the European Patent Office (EPO), IP Australia and United States Trademark and Patent Office (USTPO) databases in order to determine if patent applications corresponding to the Gray patent applications (PCT/AU01/01370, PCT/AU95/00027, PCT/AU94/00708, PCT/AU97/00287, PCT/AU00/00151) had been filed in other jurisdictions. He prepared a table showing the foreign applications that corresponded to the Gray patent applications: Appendix 4to these reasons.
1274 There were a number of corresponding patent applications or patents in a number of countries and regions including Europe, the United States, Japan and Canada. The European equivalent application to PCT/AU95/00027 has been granted and validated in France, Germany, Great Britain, Ireland, Luxemburg, Spain and Sweden. Under the PCT process European examination takes place before the EPO. When the application has been granted, the claims must be translated into all three official languages of the EPO which are French, German and English, otherwise the application will lapse. The applicant can then validate the application in any one or more member countries of the European Patent Convention (EPC). Once the application is validated in an EPC country then patent protection is in force there. If validation is not done by the due date, no patent protection will be in force. Except for France, Germany, Great Britain, Ireland, Luxemburg, Spain and Sweden, the European patent corresponding to PCT/AU95/00027 was not validated in all European countries. A similar situation exists for PCT/AU01/01370, PCT/AU94/00708 and PCT/AU97/00287.
1275 Based on the documents which he reviewed, Dr Boyer was of the opinion that Dr Gray along with other named inventors, Yan Chen, Stephen Jones and Raffaele Cammarano, did on the various dates shown in the documents to which he referred and which are mentioned in the table to his report (now an Appendix to these reasons) filed provisional, complete and PCT applications for the various inventions disclosed therein as inventors. Some of the applications have subsequently lapsed, ceased or been granted in Australia and elsewhere. There remain a number of patent applications pending in various jurisdictions. He also concluded that at various dates Dr Gray filed applications as inventor and patentee. Patent applications were filed in the name of Paragon Medical with Dr Gray appearing as inventor. There was a change of name from Paragon Medical to Sirtex at some point.
1276 I accept the conclusions proffered by Dr Boyer in relation to the various documents to which he referred. There was no substantial challenge to them.
Boyer - public availability of patents databases
1277 The legal advisors to Sirtex prepared a document entitled "Historical analysis of Australian Patent Office database". Attached to it were a number of annexures in the form of Australian Patent Office database searches. The prepared document set out the information publicly available on the Australian Patent Office database from various dates which could be located by searches conducted by reference to inventor or applicant names being specifically Gray, Bruce and Paragon Medical.
1278 The information which it was said was publicly available at various times was set out as follows:
1. From 1 January 1997 the following information was publicly available on the database maintained by delegates of the Australian Commissioner of Patents and could be located by searching by reference to the inventor or applicant name "Gray, Bruce":
("SIRT2")
1.1 the following information … regarding Australian patent application 15279/95:
1.1.1 that it had been filed on 20 January 1995;
1.1.2 that it was part of international patent application PCT/AU95/00027 (WIPO no WO95/19841) which had also been filed on 20 January 1995;
1.1.3 that it claimed priority from Australian patent application AU 54724/94;
1.1.4 that Australian patent application AU 54724/94 had been filed on 21 January 1994;
1.1.5 that Bruce Nathaniel Gray was named as inventor;
1.1.6 that Bruce Nathaniel Gray was then named as applicant;
1.1.7 that it was titled "Particulate material";
1.1.8 that its complete specification had been open for public inspection since 8 August 1995;
1.1.9 that Davies Collison Cave were the prosecuting patent attorneys;
("Dox-Spheres")
1.2 the following information … regarding Australian patent application 81363/94:
1.2.1 that it had been filed on 17 November 1994;
1.2.2 that it was part of international patent application PCT/AU94/00708 (WIPO publication no WO95/13798) which had also been filed on 17 November 1994;
1.2.3 that it claimed priority from provisional application AU PM2492;
1.2.4 that provisional application AU PM2492 had been filed on 18 November 1993;
1.2.5 that Bruce Nathaniel Gray and Yan Chen were named as inventors;
1.2.6 that Cancer Research Institute Inc was then named as applicant;
1.2.7 that its title was "controlled release preparation";
1.2.8 that it had been open for public inspection since 6 June 1995;
1.2.9 that Davies Collison Cave were the prosecuting patent attorneys;
("Thermo-Spheres-1")
1.3 the following information … regarding Australian provisional patent application no PJ0371:
1.3.1 that it had been filed on 12 September 1988;
1.3.2 that Bruce Nathaniel Gray was named as applicant;
1.3.3 that it was titled "Targeted hysteresis hyperthermia for the treatment of cancer"; and
1.3.4 that it had lapsed;
1.4 the following information … regarding Australian provisional patent application no PN0213:
1.4.1 that it had been filed on 23 December 1994;
1.4.2 that Bruce N Gray was named as applicant;
1.4.3 that it was titled "Targeted hysteresis hyperthermia as a method for treating cancer"; and
1.4.4 that it had lapsed;
1.5 the following information … regarding Australian provisional patent application no PN9782;
1.5.1 that it had been filed on 10 May 1996;
1.5.2 that Bruce N Gray was named as applicant and inventor;
1.5.3 that it was titled "Targeted hysteresis hyperthermia as a method for treating cancer".
Documents publicly available upon request at the Perth sub-office of the Australian Patents Office as from 1 January 1997
2. From 1 January 1997, the following documents were available for inspection upon request at the Perth sub-office of the Australia Patent Office:
("SIRT2")
2.1 the complete specification for Australian application 54724/94 signed by Bruce N Gray as applicant and dated 19 January 1994 …
2.2 the international application PCT/AU95/00027 …
2.3 the front page from the PCT pamphlet for PCT application PCT/AU95/00027 …
("Dox-Spheres")
2.4 the patent request for Australian provisional application PM2492 signed by Yan Chen and Bruce Gray and dated 15 November 1993 …
2.5 the provisional specification for application PM2492 …
2.6 the international application PCT/AU94/00708 …
2.7 the front page from the PCT pamphlet for PCT application PCT/AU94/00708 …
Information publicly available on the Australian Patent Office database from 1 October 1999
3 In addition to the information set out in paragraph 1 above, as from 1 October 1999, the following information was publicly available on the database maintained by delegates of the Australian Commissioner of Patents and could be located by searching by reference to the inventor or applicant name "Gray, Bruce":
("SIRT2")
3.1 the following information … regarding Australian patent application 15279/95:
3.1.1 that it had been assigned by Bruce Nathaniel Gray to Paragon Medical Limited by a deed of assignment dated 23 October 1997;
3.1.2 that such assignment had been registered on 12 December 1997;
3.1.3 that it had been advertised in the Patents Office Official Journal on 30 April 1998 as being accepted by the Commissioner, and thus had been open to opposition until 30 July 1998;
3.1.4 that it had not been the subject of any opposition;
3.1.5 that it had been sealed on 13 August 1998;
3.1.6 that it was in force as registered Australian patent 690,630;
("Dox-Spheres")
3.2 the following information … regarding Australian patent application 81363/94;
3.2.1 that it had been assigned from Cancer Research Institute Inc to Paragon Medical Limited by a deed of assignment dated 28 October 1997;
3.2.2 that such assignment had been registered on 10 December 1997;
3.2.3 that it had been advertised in the Patents Office Official Journal on 9 July 1998 as being accepted by the Commissioner, and thus had been open to opposition until 9 October 1998;
3.2.4 that it had not been the subject of any opposition;
3.2.5 that it had been sealed on 5 November 1998;
3.2.6 that it was in force as registered Australian patent 693,821;
("Thermo-Spheres-1")
3.3 the following information … regarding Australian patent application no 26277/97:
3.3.1 that it was part of international patent application PCT/AU97/00287 (WIPO no WO97/43005) which had been filed on 9 May 1997;
3.3.2 that it claimed priority from Australian provisional patent application PN9782;
3.3.3 that it was titled "Targeted hysteresis hyperthermia as a method for treating diseased tissue";
3.3.4 that Bruce Nathaniel Gray and Stephen Keith Jones were named as inventors;
3.3.5 that Paragon Medical Limited as named as applicant;
3.3.6 that it had been open to public inspection since 5 December 1997.
4. From 1 October 1999, the following information was publicly available on the database maintained by delegates of the Australian Commissioner of Patents and could be located by searching by reference to the applicant name "Paragon Medical Limited":
("Thermo-Spheres-2")
4.1 the following information ….. regarding Australian provisional patent application no PP0081:
4.1.1 that it had been filed on 29 October 1997;
4.1.2 that Paragon Medical Limited was named as applicant;
4.1.3 that it was titled "improved targeted hysteresis hyperthermia as a method for treating diseased tissue"
4.1.4 that Wray & Associates were the prosecuting patent attorneys;
("Thermo-Spheres-3")
4.2 the following information … regarding Australian provisional patent application no PP8998:
4.2.1 that it had been filed on 3 Mach 1999;
4.2.2 that Paragon Medical Limited was named as applicant;
4.2.3 that it was titled "Magnetic material";
4.2.4 that Wray & Associates were the prosecuting patent attorneys;
("SIRT1")
4.3 the following information … regarding Australian provisional application PP9228:
4.3.1 that it had been filed on 16 March 1999;
4.3.2 that it was titled "Production of resin based radionuclide-containing microspheres";
4.3.3 that Paragon Medical Limited was named as applicant;
4.3.4 that Davies Collison Cave were named as prosecuting patent attorneys.
Documents publicly available upon request at the Perth sub-office of the Australian Patents Office as from 1 October 1999
5. In addition to the documents referred to in paragraph 2 above, as from 1 October 1999, the following documents were available for inspection upon request at the Perth sub-office of the Australian Patent Office:
("SIRT2")
5.1 the summary details for Australian registered patent no 690630 …;
5.2 the complete specification as granted for Australian registered patent no 690630 …;
("Dox-Spheres")
5.3 the summary details for Australian registered patent no 693821 …
5.4 the complete specification as granted for Australian registered patent no 693821 …
("Thermo-Spheres-1")
5.5 the provisional specification for application PN 9782 …
5.6 the international application PCT/AU97/00287 …
5.7 the front page from the PCT pamphlet for PCT application PCT/AU9 …
Information publicly available on the Australian Patent Office database from 1 July 2000
6 In addition to the information set out in paragraphs 1 and 3 above, as from 1 July 2000, the following information was publicly available on the database maintained by delegates of the Australian Commissioner of Patents and could be located by searching by reference to the applicant or inventor name "Gray, Bruce":
("SIRT2")
6.1 the following information … in respect of Australian patent no 690630:
6.1.1 that it had been the subject of a change of name of patentee from Paragon Medical Limited to Sirtex Medical Limited by instrument dated 4 April 2000; and
6.1.2 that such change of name had been registered on 14 June 2000;
("Dox-Spheres")
6.2 the following information … in respect of Australia patent no 693821:
6.2.1 that it had been the subject of a change of name of patentee from Paragon Medical Limited to Sirtex Medical Limited by instrument dated 4 April 2000; and
6.2.2 that such change of name had been registered on 14 June 2000;
("Thermo-Spheres-3")
6.3 the following information … regarding Australian complete patent application no 28952/00:
6.3.1 that it had been filed on 3 March 2000;
6.3.2 that it was part of international patent application no PCT/AU00/00151;
6.3.3 that it claimed priority from Australian provisional patent application PP8998;
6.3.4 that Bruce Nathaniel Gray, Stephen Keith Jones and Raffaele Cammarano were named as inventors
6.3.5 that it was titled "Heating of magnetic material by hysteresis effects";
6.3.6 that Paragon Medical Limited was named as applicant;
6.3.7 that Wray & Associates were named as prosecuting patent attorneys.
Information publicly available on the Australian Patent Office database from 1 February 2003
7 that, in addition to the information set out in paragraphs 1, 3 and 6 above, as from 1 February 2003, the following information was publicly available on the database maintained by delegates of the Australian commissioner of Patents and could be located by searching by reference to the inventor or applicant name "Gray, Bruce":
("SIRT2")
7.1 the information … that Australian patent 690,630 had been advertised since 29 August 2002 as having ceased or expired;
("Dox-Spheres")
7.2 the information … that Australian patent 693,821 had been advertised since 20 June 2002 as having ceased or expired;
("Thermo-Spheres-3")
7.3 the following information … regarding Australian complete patent application no 28952/00:
7.3.1 that it had been open for public inspection since 21 September 2000;
7.3.2 that it had been advertised since 8 August 2002 as having lapsed;
("SIRT1")
7.4 the following information … regarding Australian provisional patent application PR0983:
7.4.1 that it had been filed on 25 October 2000;
7.4.2 that Bruce Nathanial Gray was named as inventor;
7.4.3 that Sirtex Medical Limited was named as applicant;
7.4.4 that it was titled "Polymer based radionuclide containing particulate material";
7.4.5 that international patent application no PCT/AU01/01370 had been filed on 25 October 2001 and was published by WIPO on 2 May 2002;
7.4.6 that international patent application no PCT/AU01/01370 entered the national phase in Australia as complete Australian application no 2002210278;
7.4.7 that these applications had been open for public inspection since 6 May 2002;
7.4.8 that Wray & Associates were the prosecuting patent attorneys;
7.4.9 that information regarding this application had been migrated to a new database on 8 August 2002;
7.5 the following information … regarding Australian patent application no 2002210278 (10278/02):
7.5.1 that it had been filed on 25 October 2001;
7.5.2 that it was part of international patent application PCT/AU01/01370 (WIPO no W002/34300);
7.5.3 that Bruce Nathaniel Gray was named as inventor;
7.5.4 that Sirtex Medical Limited was named as applicant;
7.5.5 that it had been open for public inspection since 6 May 2002, which had been advertised in the Patents Office Journal on 11 July 2002;
7.5.6 that Wray & Associates were the prosecuting patent attorneys;
7.5.7 that it claimed priority from application PR0983 which had been filed on 25 October 2000.
Documents publicly available upon request at the Perth sub-office of the Australian Patents Office as from 1 February 2003
8 In addition to the documents referred to in paragraphs 3 and 5 above, as from 1 February 2003, the following documents were available for inspection upon request at the Perth sub-office of the Australian Patent Office:
("Thermo-Spheres-3")
8.1 Australian patent request provisional application no PP8998 …;
8.2 Australian provisional patent specification for application no PP8998, …;
8.3 International patent application no PCT/AU00/00151 …;
8.4 the front page of the pamphlet for PCT/AU00/00151 ,,,;
("SIRT1")
8.5 the front page of the pamphlet for international patent application PCT/AU01/01370 …;
8.6 the Australian provisional specification for application no PR0983 …;
8.7 the international patent application no PCT/AU00/00151 …
1279 Dr Boyer agreed with the historical analysis subject to comments on paragraphs 6.3.7, 7.4.2, 7.4.5 (in part), 7.4.6 and 7.4.8. His disagreements in summary were as follows:
1. Re 6.3.7 he did not believe that as at 1 July 2000 the name of the prosecuting attorneys would have been captured and shown on the databases.
2. Re 7.4.2, the inventor name would not be shown on the databases for Australian provisional patent application No PR0983.
3. Re 7.4.5, he believed that the databases did not disclose that 2 May 2002 was the date that WIPO published PCT/AU01/01370.
4. Re 7.4.6, the number 2002210278 was published on the databases after 1 February 2003; and
5. Re 7.4.8, he did not believe that at 1 February 2003 the name of prosecuting attorneys would have been captured and shown on the database.
1280 Dr Boyer added that the databases maintained by the delegates of the Australian Commissioner of Patents are not always accurate or up to date. It is often difficult to confirm that particular data or information was available on the databases on particular dates. Before 2003 the Australian Patent Office accorded an Australian application number to all PCT applications which designated Australia as a possible National Phase entry country. As a result, while databases would sometimes show some information about a PCT application, eg applicant name, address, invention title and the like, the vast majority of such information was not captured and disclosed until after National Phase entry had been effected. He pointed out a further complication, namely that the APO changed databases in July 2002. Any new provisional, complete or PCT application filed after July 2002 was entered on the new database not the old one. In August 2002 all PCT applications that had not entered the National Phase in Australia but had been given an Australian application number were migrated to the new database and no further information was added to the old. From August 2002 it was important to check both databases in order to obtain a more accurate and complete picture of the particulars of any case.
1281 In cross-examination Dr Boyer said that subject to the paragraphs with which he had disagreed, he had been able to verify the accuracy of the database. By reference to key-in details and advertisement details he had been able to verify that the database relied upon in the historical analysis was up to date at the relevant times. His comment that the databases maintained by the delegates of the Australian Commissioner of Patents were not always accurate or up to date was "attorney speak". He said it was the caveat that they would put into most of their search reports where they would say they could only go off what the database showed. If somebody had keyed in an incorrect date then obviously they could only report on the date that had been keyed in.
1282 I accept the accuracy of the statements made in the historical analysis proffered by Sirtex, as verified by the evidence of Dr Boyer subject to the qualifications contained in his "cross-examination report".
Chen/UWA coordination on claims - 2003/2004
1283 On about 11 April 2003 Dr Chen telephoned Wray & Associates. She said her purpose in ringing was to find out what the current situation was because she "had a letter from Dr Gray, a so called kind of contract arrangement …". She wanted to ask Wray & Associates whether they could give her any advice about it, whether she should pursue anything or just leave it. She knew that Sirtex was listed. She made a handwritten note of her conversation on the letter of advice she had received from Wray & Associates on 21 December 1994.She also endorsed on it the figure "241 millions". It appears, although she was not prepared to say so clearly in cross-examination, that this referred to the market capitalisation of Sirtex at about that time. Mr Harwood from Wray & Associates said he couldn't find her file and would have to check the archive and get back to her. He also informed her that he was acting for Dr Gray and could not give her independent advice.
1284 At this stage Dr Chen had not engaged solicitors to act for her. It appears, however, that in or about April 2003 she was approached by Mr Heitman at UWA. She sent him an email, which was not in evidence. She engaged Mr Proven and they had a meeting with Mr Heitman. Mr Heitman did not recall the meeting. He said he did not contact her in April but that someone may have done so on behalf of UWA. It would not have been anyone from the Legal Office at UWA but may have been someone from UWA's solicitors, Jackson McDonald.
1285 Mr Heitman was asked in cross-examination whether he had authorised UWA's solicitors to negotiate with Dr Chen about her possible participation in benefits derived by UWA were it successful in the litigation. He said he did. He did not instruct the solicitors to communicate the potential benefits to other prospective witnesses in the proceedings. However, he was aware that there was the possibility that others would claim the benefits of the intellectual property the subject of the proceedings. The UWA solicitors had a general instruction from him that in the event that claimants were identified in the course of their investigations they were to be given an opportunity of making any submissions they wished to make in relation to their claim if UWA were successful.
1286 There is no evidence of any meetings between Dr Chen and UWA's solicitors between April and September 2003. On 22 September 2003 Dr Chen's solicitor, Mr Provan, wrote to Mr Heitman referring to a telephone discussion they had on 18 September 2003 concerning the anticipated claim by UWA against Sirtex and Dr Gray. Mr Provan said that he and Dr Chen were concerned about the length of time it was taking UWA to formulate its claim and make a decision on whether to proceed or not. He said:
Dr Chen is particularly concerned that the claim with which she is involved (ie involving the Dox-spheres) is being delayed because of the other claims (ie involving Sir-spheres and Therm-spheres). Again, while we appreciate that UWA will want to pursue all potential claims and it is more efficient that all are dealt with together, the resulting delay is regrettable.
We are also concerned that the delay may prejudice UWA's rights to pursue the claim, particularly if there are any limitation periods which may expire during the period of the delay. I understand from our discussion that limitation issues have been considered by UWA's legal team and are not considered to be a problem. Nevertheless, we would be grateful if you could confirm that UWA's advice is to the effect that there are no limitation issues which could affect UWA's ability to pursue the claim.
1287 Mr Heitman confirmed that he had told Mr Provan that a claim could be anticipated from UWA and that some delay was being caused because he wanted to pursue all potential claims together. The limitation period had been a matter of discussion with UWA lawyers. He was not sure whether he told Mr Provan. However he did confirm with Mr Provan that UWA's advice was that there were no limitation issues.
1288 Mr Provan's letter went on to point out that one of the key dates was 28 October 1997, the date on which CRI assigned the DOX-Spheres patent no 693821 to Paragon Medical (subsequently to become Sirtex). Dr Chen had an agreement with CRI and Dr Gray on the basis that ownership of the patent would "be negotiated". Arguably by assigning the patent to Sirtex on 28 October 1997 CRI and Dr Gray breached that agreement. Mr Provan acknowledged that there were issues as to whether CRI, Dr Chen and Dr Gray were able to enter into the agreement on the basis that UWA was entitled to ownership of the patent. Nevertheless if Dr Chen were forced to pursue her own claim against Sirtex, CRI and Dr Gray because UWA had failed to act, Dr Chen might need to issue a writ prior to 28 October 2003 to preserve her rights. The letter went on:
Dr Chen would prefer that her claim is made through UWA in the proposed action by UWA. We understand that an agreement as to the distribution of any proceeds of the action is to be prepared. Please could you let me know when the draft of such an agreement will be available.
1289 On 17 October 2003 Mr Provan sent a letter to Jackson McDonald referring to a recent meeting regarding the status of the proposed proceedings against Sirtex, CRI and Dr Gray and the agreement between Dr Chen and UWA. He informed Jackson McDonald that he was now instructed to issue a writ naming Dr Chen as plaintiff and each of Dr Gray, CRI and Sirtex as defendants. It was intended to issue the writ but not to serve it. The purpose was to reserve Dr Chen's rights to bring an action for breach of contract, particularly against CRI with whom she alleged she had an agreement about the patent and the proceeds of commercialisation. Dr Chen's solicitor said:
The issuing of the writ is not intended to interfere in any way with the action contemplated by UWA or Dr Chen's commitment to supporting UWA in that action. Dr Chen intends to cooperate fully with UWA in UWA's action and to enter into the proposed agreement with UWA regarding the action by UWA. In that regard, we look forward to receiving the draft agreement between UWA and Dr Chen.
1290 Some discussion apparently ensued and an email was sent by UWA's solicitors to Mr Provan stating, inter alia:
As discussed with you, we draw to your client's attention the pending AGM of Sirtex to be held on Friday 24 Oct at 2pm (please see the attached). To avoid the risk of your client's writ making it onto Sirtex and Gray's 'radar' we would suggest that any writ be filed after the AGM when the risk of a search revealing your client's pending action may be lower.
1291 Mr Provan confirmed by email on 24 October 2003 that a writ had been filed at the Supreme Court that day on behalf of Dr Chen. It had been filed after the Sirtex AGM commenced in Sydney and it was not intended to serve it. He again said he looked forward to receiving the draft of the agreement between UWA and Dr Chen relating to the proposed action by UWA.
1292 It was put to Dr Chen in cross-examination that in October 2003 she had committed herself to supporting the UWA claim. She said that the letter of 17 October 2003 had been written by her lawyer. Her view was that she would provide all the evidence reflecting the truth and whatever happened at that time to UWA. That is what she meant by supporting. It was put to her that her cooperation was offered in the expectation that she would enter into an agreement with UWA to share in the proceeds of commercialisation of the patent. She responded:
If there's agreement proposed, yes, I would enter that agreement.
She claimed that she was not offering her commitment and support because of the agreement, but if the agreement were a by-product she would welcome it.
1293 Mr Provan again contacted UWA's solicitors on 20 September 2004 by email and asked whether there was any progress with getting the action up and running. Dr Chen would have to serve her writ by 24 October 2004 to keep it alive. He sent a follow-up email on 28 September 2004.
1294 A meeting ensued between Dr Chen's solicitor and UWA's solicitors. It was reflected in an email dated 12 October 2004 to the UWA solicitors by Dr Chen's solicitor. In that email Mr Provan said:
In relation to the agreement between UWA and Dr Chen, I have said to Dr Chen that UWA intends to deal with the inventors on the basis of the current UWA IP policy. This provides that the inventors share in 50% of the net revenue (after certain thresholds are met). Further, there are 3 inventions which will each be allocated one third of the total net proceeds from the action. Please could you confirm that this is what is intended. Dr Chen would like to finalise the agreement with UWA so that we all know where we stand.
He referred back to a meeting held on 21 June 2004 attended by Mr Heitman, the UWA solicitors, Dr Chen and himself.
1295 On 18 October 2004 Mr Provan advised the UWA solicitors that Dr Chen had decided to proceed with her action against CRI only and not against Dr Gray or Sirtex. That was on the basis that it was only the contractual cause of action against CRI only and not Sirtex or Dr Gray. She might in the future consider an action for rectification of the Register of Patents seeking an order that she was the sole inventor of the DOX-Spheres invention.
1296 On 5 January 2005 Mr Provan advised the solicitors for UWA that Dr Chen had served the writ in her action against CRI only. He reiterated that she would like to finalise the agreement between her and UWA regarding the UWA action. The only outstanding issue was her entitlement to share in the proceeds of the UWA action. He asked the solicitors to let him know the method by which UWA proposed to calculate the amount due to Dr Chen. If the agreement were entered into then she might decide to discontinue her action against CRI. He sought a prompt response from UWA.
1297 On 7 January 2005 the UWA solicitors wrote to Mr Provan saying that they were instructed that UWA had no view or comment to make about her action against CRI. It was not a party to those proceedings. It had not been possible for them to obtain instructions in relation to the matters in the remainder of the letter.
1298 A further letter was sent to Mr Provan by UWA's solicitors on 23 March 2005. In that letter the solicitors said that if the Court found that UWA was entitled to the intellectual property brought into existence by Dr Chen in her capacity as an employee, she would be regarded as an originator of that intellectual property for the purposes of the IP Regulations and would have an entitlement to participate in a distribution of the cumulative net revenue realised from its commercialisation. The letter continued:
I am instructed that Dr Chen may apply to the University to participate in any distribution made in relation to such proceeds of commercialisation on the basis that she is an originator. The University will not deny Dr Chen an opportunity to participate at the appropriate time, however, it must be understood that any entitlement will be assessed in accordance with the University's policies at that time. It is premature to purport to calculate entitlements now.
The University's expectation in relation to Dr Chen remains that she will make herself available on reasonable notice:
. to provide information with respect to her work at the University in relation to the discovery of the inventions which were the subject of the various patents for inclusion in a witness statement and any affidavit of her evidence;
. to attend on Counsel in relation to her evidence prior to and during the hearing of the matter (as reasonably required);
. for cross examination (if any) in the course of the proceedings;
. to attend us and/or Counsel in relation to any appeal by the Respondents or the University (if any) and if required.
1299 It appears that the Supreme Court proceedings were discontinued shortly after this letter.
1300 In the statement of claim which she filed in the Supreme Court, Dr Chen asserted that she was the sole inventor of the invention described in Australian patent application no PM2492 dated 18 November 1993. She pleaded an agreement made on 16 November 1994 between herself and CRI under which she agreed to CRI applying for an international patent in its name in consideration for her receiving a share of the proceeds of any sale, licensing or other commercialisation of the Patent Application or any patent applied for and/or granted pursuant to or claiming priority from the patent application.
1301 She alleged that on 28 October 1997 CRI transferred its interest in the patent application and the patents to Sirtex and received the benefit from that transfer. She had not at any time been provided with any proceeds or benefit received by CRI. This, she alleged, was a breach of the agreement. She said she had suffered loss and damage as a result. She claimed, inter alia, a declaration to the effect that she was the sole inventor of the invention which was the subject of the patent application and patents.
1302 In the course of her cross-examination Dr Chen said she always held the belief that UWA had the right to claim ownership of the patent and that they should be the owner, but because the provisional patent was taken out in her name and that of Dr Gray they became the owner at that time. She said she had always held the belief that UWA was entitled to own the patent. This was the advice which she had received from Wray & Associates back in 1994. Plainly this was inconsistent with the claim raised in the Supreme Court proceedings.
1303 In further cross-examination, Dr Chen said there had been no agreement with UWA as to who would bear the legal costs of her action against CRI. She paid the costs associated with the proceedings herself.
UWA's letter of demand to Sirtex, 26 October 2004
1304 On 26 October 2004 the University's solicitors, Jackson McDonald, sent a letter by registered mail addressed to "The Proper Officer, Sirtex Medical Ltd" at an address in New South Wales. The letter bore the endorsement "Private & Confidential". It was headed "Ownership of Technology Developed by Employees of the University of Western Australia". It is convenient to set out the full terms of the letter as it is the subject of the defamation cross-claim. It was as follows:
Dear Sir,
Ownership of Technology Developed by Employees of the University of Western Australia
We act for the University of Western Australia (the University).
1. Between about 11 February 1985 and 21 November 1999 (the "Period of Employment") the University employed Dr Bruce Nathaniel Gray ("Gray") and a team of researchers who at various times during the Period of Employment were, inter alios, under Dr Gray's supervision (the "Research Team").
2. At all relevant times during the Period of Employment Gray and members of the Research Team were involved with both the Department of Surgery within the University (known as the "UDS") and, upon its establishment in March 1996, the Centre for Applied Cancer Studies ("CACS").
3. At all times during the Period of Employment, Gray and each of the members of the Research Team were bound by the University of Western Australia Act 1911(WA) ("University Act") and the Regulations and Statutes made thereunder. Relevantly Gray and members of the Team were bound by the Patents Regulations from the commencement of their employment with the University until 22 July 1996. Thereafter, they were bound by the University's Intellectual Property Regulations.
Breaches of Obligations owed by Gray to the University
4. For the reasons which we provide in this letter, the University alleges, inter alia, that Gray has breached obligations owed by him to the University in the following aspects:
(a) Gray together with other members of the Research Team, made applications for patents during the period of their employment without the permission or knowledge of the University and/or made application seeking protection of inventions developed during their employment without the knowledge of the University;
(b) Gray and possibly one or more members of the Research Team became involved in corporate activities which were unauthorised by the University and which were directly in conflict with obligations owed by Gray to the University; and
(c) Gray and one or more members of the Research Team engaged in activities which purported to transfer property belonging to the University to third parties without any entitlement so to do.
Research Activities Undertaken by Gray and members of the Research Team
5. At all times during the Period of Employment Gray and the members of the Research Team were engaged in undertaking research activities relating to the treatment of cancer.
6. The research activities in which Gray and members of the Research Team were engaged, inter alia, related to the investigation and formulation of therapeutic devices for treatment of particular kinds of cancer. The University provided Gray and members of the Research Team with significant assistance, including additional research staff and facilities as well as funding their research activities through the administration of NH & MRC grants and other internal and external funding.
Unauthorised Applications for Patents during the Period of Employment
7. The University has recently become aware that at various times from about 18 November 1993 and thereafter during the Period of Employment, Gray and members of the Research Team made applications for patents in which Gray and/or members of the Research Team were nominated as the inventor or as inventors without the knowledge or permission of the University.
8. In particular:
(a) In November 1993 Gray made application for provisional patent PM2492;
(b) In December 1994 Gray made application for provisional patent PM0213;
(c) In October 1997 Gray made application for PP081; and
(d) In March 1999, Gray made application for PP8989.
(Provisional Applications).
9. These Provisional Applications were used as the basis for making numerous additional applications, including under the Patent Co-operation Treaty whereby Gray or companies with which Gray was associated or involved became the owner of patents in various countries granted pursuant to these dealings.
10. It is beyond argument that these activities breached Gray's obligations to the University pursuant to Gray's contract of employment, were contrary to the University's policies and procedures, and were in breach of the obligations owed by Gray to the University at law and in equity.
11. In the circumstances, the University is entitled to claim ownership of each of the patents in which Gray and/or members of the Research Team are named as inventor/s and which rely upon the Provisional Applications for priority.
Technologies Underlying the Provisional Applications
12. There appears to be three discrete technologies underlying the Provisional Applications, namely:
(a) Selective internal radiation therapy or SIRT
(b) Micro-spheres consisting of a controlled release preparation; and
(c) thermo-spheres, being micro-spheres which release heat in a targeted manner.
13. In relation to 12(a) above, on or about 21 January 1994, Gray filed Australian Patent Application AU54724/94. On or about 20 January, 1995 Gray relied upon this application to make an application under the PCT. The application made by Gray cites an amount of research all of which was published during the time Gray was employed by the University. Gray was substantially involved with that research, as were other employees of the University. For present purposes, we do not propose to recite the various applications which Gray or Sirtex have made based upon the priority claim made by reason of 54724/94, except to note that applications have been made in a number of countries and patents have been granted to Sirtex by reason of these claims for priority.
14. In relation to 12(b) above, on or about 18 November 1993, Gray and/or one or more members of the Research Team made an application for a provisional specification (PM2492) relating to this technology. In November 1994 CRI made a PCT application relying on PM2492 and listing Gray and a member of the Research Team as inventors. The provisional specification and the PCT application disclose a number of publications and the use of materials and equipment and experimentation with animals. All of these activities appear to have been undertaken using the property and facilities of the University and were apparently undertaken during the time Gray and the member of the Research Team were employees of the University. This PCT application has been relied upon to obtain numerous patents in a number of countries and in which Sirtex is listed as the owner.
15. In relation to 12(c), above, on about May 1996, Gray and/or one or more members of the Research Team made provisional application PM9782. This application names Gray as the owner. On 9 May 1997 what is now known as Sirtex applied for a PCT application relying upon PM9782 for the purposes of claiming priority, and listing Gray and a member of the Research Team as inventors. The PCT application identifies the use of University equipment and facilities and the use of animals. Subsequently Sirtex has relied on the PCT application and the priority of PM9782 to obtain patents in numerous countries.
16. In each of these cases, the University considers that Gray and/or members of the Research Team made application for inventions of which the University is the true owner. After reviewing personnel files and various other files held by the University, we are unable to locate any disclosures by Gray or members of the Research Team to the University concerning these patent applications.
Involvement in Corporate Activities by Gray
17. We are instructed that the University has undertaken additional extensive investigations concerning Gray's involvement in various activities during the period of his employment by the University. In brief, we are instructed as follows:
(a) on about April 1985 Gray was a director of Paragon Medical Limited, which became Australian Surgical Products Limited in about April 2000;
(b) since 21 April 1997, Gray has been a director of what is now known as Sirtex Limited (ACN 078 166 122) but which was known [as] Paragon Medical Limited between April 1997 and April 2000;
(c) Gray has been a director since 11 November 1997 of Sirtex Medical Products Limited (ACN 080 709 897) which was formerly known as Paragon Medical Products Pty Limited;
(d) since 7 October 1993 Gray has been a director of Pine Ridge Holdings Pty Limited (ACN 061 911 564) and, relevantly a beneficiary of the B Gray Trust of which it apparently is the trustee;
(e) Gray has also been involved with and a member of the Board of the Cancer Research Institutes Incorporated, to which we will refer as "CRI";
(f) relevantly, on 17 July 2000, Sirtex issued a Prospectus which was for the purpose of listing on the ASX. This listing occurred on 23 August 2000. Without referring to the entirety of the Sirtex prospectus, we note as follows:
(i) Gray was given significant options;
(ii) it was asserted that Sirtex was formed in 1997 to acquire and commercialise a portfolio of three technologies relating to the treatment of liver cancer developed by the CRI and Gray;
(iii) upon listing Gray were to receive in excess of 19 million shares and CRI was to receive in excess of 4.8 million shares;
(g) the patents and patent applications disclosed in the Prospectus rely upon each of the applications to which we have referred under the heading "Unauthorised Applications for Patents during the Period of Employment"; and
(h) relevantly, in its report to the ASX dated 30 June 2004 Sirtex lists Gray as holding 16,438,283 shares in Sirtex. Pine Ridge Holdings Pty Limited is listed as holding 460,000 shares and CRI is listed as holding 4,864,432 shares;
(i) relevantly, in its notices of changes of Director's interest dated 7 and 15 September 2004 and filed with the ASX, Sirtex gives notice that Pine Ridge Holdings Pty Ltd purchased 100,000 shares in September 2004, bringing Gray's total shareholding, direct and indirect, to 17,258,283 shares.
18. We are instructed that Gray never sought or obtained permission from the University to undertake the above work which Gray now appears to have undertaken during the Period of Employment.
19. Gray took the first steps towards the listing of Sirtex during the Period of Employment. Gray did not disclose to the University that Gray was involved in the listing of Sirtex at any time prior to the publication of the Prospectus.
20. Gray did not disclose to the University that Sirtex (then known as Paragon Medical Limited) had obtained $950,000 in R&D funding from Ausindustry and an additional $3 million in funding from Jafco Nomura. This assistance was obtained during the Period of Employment.
Transfer of Property
21. According to electronic records secured by the University from equipment owned by it in the course of investigating the matters raised in this letter:
(a) on or about 1 May 1997, Paragon Medical Limited held a board meeting in which it approved a Memorandum of Understanding between CRI and Paragon as well as a number of asset purchase deeds between Gray, CRI and Australian Surgical Products Pty Limited;
(b) on about 16 July 1997, Gray purported to enter into an employment relationship with Paragon Medical Limited. Gray did not disclose this to the University or seek the University's approval;
(c) on about 13 August 1997, the board of Paragon considered the subscription and shareholders agreement to which Gray was a party;
(d) on about 12 November 1997, deeds of indemnity and deeds of assignment were presented to the board of Paragon
22. Each of these actions occurred during the Period of Employment. To the extent to that [sic] these actions purported to vest rights in Paragon (as Sirtex was then known), they were in breach of obligations owed by Gray to the University. Gray had no authority to make such agreements.
23. In any event, to the extent to which Gray's actions purported to affect the University's entitlements, it is alleged that at all times Paragon had knowledge of the obligations to the University which were inconsistent with these dealings owed by Gray and others. This is, inter alia, because Gray was a director and the Chairman of Paragon and was relevantly the controlling mind of that organisation.
24. To the extent to which these agreements purported to transfer property from CRI to Paragon, including any intellectual property, they were agreements which had no effect. This is because CRI had no intellectual property which it was entitled to transfer. To the extent to which it is necessary, it will be alleged that at all times CRI had knowledge of the University's entitlements and of the obligations owed by Gray to it by reason of Gray's involvement on the Board of CRI and by reason of the position held by Gray as CRI's Medical Director.
25. Quite apart from Gray's participation in each of the organisations known as Paragon and CRI, all of the facts to which we have referred are facts which we are instructed were at least readily available to members of the founding Board of Paragon.
Sirtex holds University Intellectual Property as Constructive Trustee
26. All of the property in the technologies referred to in paragraph 12 above, and patents and/or patent applications claiming priority from the Provisional Applications (the "Property") belonged to the University.
27. The Property was purportedly transferred to Paragon either directly or through CRI. In either case, Gray was integrally involved in the purported transfer and Gray was the controlling mind of both CRI and Paragon.
28. At all relevant times Gray was aware of the University Act and the Regulations and Statutes made thereunder and Gray was aware that he was bound by the same.
29. Gray, and CRI and Paragon through their involvement with Gray, were aware that the University was the owner of the Property and that the purported transfers were not authorised or consented to by the University.
30. Accordingly, Sirtex holds on constructive trust for the University, all Property. Further, Sirtex has held all Property on trust for the University since such Property was purportedly transferred to it.
31. By reason of its recent investigations, the University is aware that Sirtex has allowed patents and/or patent applications in certain countries to lapse. These countries include but are not limited to Australia and Canada. The University is also aware that Sirtex has failed to make applications for patents in some of the countries designated in the PCT applications referred to in paragraphs 13, 14 and 15 above (the "PCT Applications").
32. By failing to protect the assets of the University through allowing patents and/or patent applications to lapse, and failing to pursue patent protection in countries designated in the PCT Applications, Sirtex has breached its fiduciary duties to the University.
Demand by the University
33. The shareholding received by Gray (and by Pine Ridge) upon the listing of Sirtex was a shareholding which was directly linked to the intellectual property which Gray was said to have contributed to Sirtex. The same is true of the shareholdings received by others, which will be the subject of separate correspondence. For the reasons provided in this letter, the University alleges that the entirety of the intellectual property purportedly vested in Paragon (now Sirtex) was intellectual property belonging to the University. In addition, Gray received a salary and other remuneration which is referable to the administrative activities which Gray performed for Sirtex during the Period of Employment and which Gray has apparently to continue to perform for that company since that time. [sic]
34. This position is consistent with a valuation obtained from Ernst & Young in about 1996. The University obtained details of this valuation in electronic form from University equipment during the course of its investigations.
35. We understand that Sirtex has not paid a dividend to shareholders.
36. In the circumstances, the University demands that Sirtex do the following:
(a) forthwith amend your share register and otherwise take steps to record the University's beneficial entitlement to:
(i) Gray's entire shareholding (and any issued options); and
(ii) Pine Ridge Holdings Pty Limited's entire shareholding (and any issued options),
in Sirtex;
(b) forthwith amend your share register to preclude any dealing in such shares without the prior consent of the University;
(c) fully co-operate with the University and provide such assistance to it for the purposes of permitting the University to determine the amount, if anything, realised from the disposal by Gray or Pine Ridge Holdings Pty Limited of any part of their shareholding (together with interest);
(d) Subject to your acceptance of this offer, the University reserves its rights. You may accept this demand and give the undertaking by signing a duplicate copy of this letter and return it to us.
38. Unless we receive a response to this letter within 14 days, the University reserves it right to commence proceedings against you without further notice to you.
Yours faithfully,
JACKSON McDONALD
Stephanie Faulkner
Timing and purpose of letter of demand
1305 Mr Heitman was cross-examined about the letter of demand. He agreed that he approved the draft before it was sent. He did not regard it as an exaggeration to assert that it was "beyond argument" that Dr Gray's activities had breached his obligations to UWA. He was cross-examined about his awareness of a number of matters said to be inconsistent with the assertions made in the letter. He was generally either unaware of those matters or their detail or disagreed with what was put to him. The letter was prepared as the result of investigations undertaken by the UWA solicitors. He had not had access to the "raw materials" summarised in the letter. He denied the suggestion put to him in cross-examination that the letter contained an exaggerated statement of the UWA position so that Sirtex would be obliged to disclose it to the ASX in terms that would be damaging to it.
1306 On 11 November 2004 Jackson McDonald wrote to Freehills referring to advice from Mr Cherry that he acted for Dr Gray and for Sirtex and that he had copies of the letter of demand sent to them. UWA solicitors said they would allow Dr Gray and Sirtex 28 days to respond to the letters of demand. Under the heading "Continuous Reporting Obligations to ASX" the following appeared in their letter:
We have monitored announcements made by Sirtex to the ASX since the service of the Letters. We note that no announcement has been made to the ASX in relation to them, contrary to Chapter 3 of the Listing Rules … In our opinion, disclosure should be made promptly upon receipt of the allegations and certainly no later than the date on which contact was made with Ms Faulkner by Mr James Cherry.
We also note that since the service of the Letters, Sirtex has had its annual general meeting. On the documents available to us, there is no record showing that the issues raised in the letter to Sirtex were put to the shareholders at that meeting. In the circumstances, our client is considering its position in relation to the additional options issued to Dr Gray at the recent Annual General Meeting.
Mr Heitman was asked about the letter. He denied having instructed the UWA solicitors to tell Freehills that they had been monitoring Sirtex announcements to the ASX. He said he did not direct them to do so. He would have reviewed the letter and approved it before it went out. He denied that he had in mind at the time that the letter of demand was sent out, that it was the day before the annual general meeting of Sirtex.
1307 Freehills responded to Jackson McDonald's letter on 12 November 2004 characterising as "contentious, and premature," the assertion that Sirtex had breached listing rule 3.1A. Freehills asserted that having regard to the unascertained merits of the UWA claim an announcement, without an understanding of the merits of the claim, could create a false market in the securities of Sirtex.
1308 Jackson McDonald wrote again on 19 November 2004 responding to Freehills' letter of 12 November 2004. They noted that it had been almost seven days since the letter was written and that no disclosure had been made to the ASX. They said that UWA did not accept Freehills' interpretation of the ASX listing rules. They denied that the making of a disclosure would create a "false market". In any event, the listing rules contemplated prompt disclosures by the listed entity. They said:
Our client demands that Sirtex makes a disclosure to the ASX without further delay and by no later than close of the market today.
In the event that your client fails to comply with this demand, our client reserves its right to make its own disclosure.
Mr Heitman was not certain whether he saw the letter of 19 November 2004 before it went out. He said he had had a discussion with the solicitor who had the conduct of the matter, Ms Faulkner, about the disclosure issue.
1309 Freehills wrote back on 24 November 2004 rejecting Jackson McDonald's demand, saying:
Your client is not in a position to make any such demand.
They pointed out that UWA was not a listed entity and was not in a position to make its own disclosure to the ASX. Freehills raised the possibility of legal action against both UWA and Jackson McDonald in the event that a "disclosure" were made. They alleged that the making of such a disclosure would be for the sole or dominant purpose of placing pressure on Sirtex to accede to UWA's demand.
1310 On 29 November 2004, Jackson McDonald replied to Freehills' letter of 24 November 2004. They again pressed Freehills on the disclosure issue. They asserted that:
A reasonable person would have expected disclosure to have been made prior to the Annual General Meeting. The failure to do so gives rise to a reasonable basis for supposing that information likely to have a material effect on the price or value of the entity's securities was improperly withheld.
They went on to say that despite UWA's views about the duty to disclose it had not corresponded with the ASX or ASIC in relation to those matters and would refrain from taking any such action provided undertakings were given by Dr Gray. A proposed undertaking by Dr Gray was attached relating to non-disposition of his shares in Sirtex and those held by his company, Pine Ridge Holdings.
1311 Mr Heitman was asked in cross-examination why it was a matter of concern to UWA that there be disclosure of the allegations made by it. He said:
The point was discussed as a legal matter which may come back to the University if the University had failed to make any public statement at that stage. One of the points was that it was considered to be desirable to the extent that this was a claim made against a publicly listed company for Sirtex to make its own declaration.
He said he was not sure why the matter "went cold" after that but did note that Sirtex made a statement when legal proceedings had been commenced.
1312 The letter of 29 November 2004 referred, inter alia, to the decision of the annual general meeting to grant 400,000 options to Dr Gray. It also referred to the considerable degree of shareholder dissent in relation to the grant of such options. Counsel for Dr Gray put it to Mr Heitman that the terms of the letter made plain the intention of UWA in serving the letter of demand to force disclosure prior to the annual general meeting that was to consider the grant of the options to Dr Gray. Mr Heitman denied that was its intention.
1313 It was put to Mr Heitman that the timing of the letter was a deliberate attempt to damage Dr Gray so that he would be deprived of the options. That was denied. Asked what drove the timing of the letter of demand given that proceedings were not commenced until the end of December 2004, Mr Heitman said it was his desire that the letter should be issued as soon as possible after counsel's opinion had been received and analysed. Counsel's advice had been received on 23 September 2004. Professor Robson had advised that the case should proceed on Monday, 27 September 2004.
1314 In my opinion the timing and mode of delivery of the letter was calculated to put pressure on Sirtex and on Dr Gray to accede to the UWA demands and alternatively to open negotiations with UWA. UWA's purposes in pursuing the disclosure issue with Sirtex were not made explicit. Mr Heitman gave a clue when he seemed to suggest in cross-examination that there might be some concern about UWA's position if it stood by knowing that it had sent a letter of demand to a publicly listed company, while the company was trading, and that company failed to make a disclosure. UWA's solicitor was not called to give evidence on the matter and it might well be that evidence she could have given would have been subject to a claim of privilege. In my opinion however it has not been established that it was calculated to inflict damage on Dr Gray in a way that was unnecessary to the pursuit of UWA's demand.
UWA/CRI settlement - 22 February 2007
1315 On 22 February 2007 UWA and CRI reached a settlement in these proceedings. CRI was acting by a court-appointed receiver, Mr Mark Conlon, whose powers to enter into a settlement on behalf of CRI were subject to approval of the settlement by the Court. The receiver was initially appointed as receiver of Sirtex shares held by CRI. His powers were extended on 22 December 2006: University of Western Australia v Gray (No 6) [2006] FCA 1825. The settlement agreement was subsequently approved by Graham J: University of Western Australia v Gray (No 10) [2007] FCA 377. That approval was the subject of an unsuccessful challenge by Dr Gray and Sirtex in an appeal to the Full Court: Gray v Cancer Research Institute Inc [2007] FCAFC 149. An application for special leave to appeal to the High Court is pending.
1316 Under the terms of the settlement, CRI and UWA agreed to take such steps as are required to create a trust to be known as "The Cancer Research Trust" (the Trust). The Trust is to be a charitable trust whose objects are to support and promote cancer research and education including, without limitation, funding cancer research and education at a State, national and international level. It is also to establish, maintain and administer a public fund or funds for any charitable purposes it may decide in relation to cancer research and education.
1317 The Trust is to be managed by a board of management initially to comprise a chairman, appointed by UWA, CRI and the WA Institute for Medical Research (WAIMR) jointly, two nominees proposed by WAIMR, one appointed by CRI and one appointed by UWA. It is acknowledged by UWA and WAIMR that CRI could propose as its nominee a representative of the Walter and Eliza Hall Institute of Medical Research (WEHI). An external national/international scientific committee is to be appointed by the board of management to advise and assist it.
1318 Upon the constitution of the Trust and the appointment of its inaugural board of management, CRI is to transfer all of its assets to the Trust. Subject to being authorised by the Court to do so the receivers of CRI will then take such steps as are necessary to wind up its activities and to have it deregistered as an incorporated association.
1319 It was a condition precedent of the agreement that the approval of the Federal Court be obtained in respect of the settlement.
Sirtex corporate history - Wong
1320 Affidavit evidence was tendered from Gilman Edwin Wong, the Chief Executive Officer and Executive Director of Sirtex. He was appointed Company Secretary of Sirtex on 1 March 2005 and Chief Executive Officer on 26 May 2005. He ceased to be secretary on 26 July 2005. He was appointed an executive director on 28 June 2005.
1321 Mr Wong set out annual reports of Sirtex for the years ended 30 June 1997 to 2006. He summarised the corporate history of Sirtex. While it repeats some elements of what has appeared earlier in these reasons, it is helpful to have that overview in one place.
Sirtex (then new Paragon Medical Ltd) was incorporated on 21 April 1997.
2. On incorporation, the shareholders included Dr Gray, CRI, Mr Jones, Mr Karlson and NJI No 2 Investment Fund.
3. The founding directors were Dr Gray, Mr Karlson, Professor Arthur Li and Dane Gorn. Dr Panaccio and Mr Graham Mitchell became directors on 11 February 1998 as representatives of Nomura/JAFCO.
4. On incorporation, Sirtex was located in Perth. Its name was changed from Paragon Medical to Sirtex on 4 April 2000.
5. On 17 July 2000 Sirtex issued a prospectus for its IPO.
6. In August 2000 Sirtex listed on the ASX.
7. In 2002 Sirtex Medical Inc (Sirtex USA) was incorporated for the purpose of sales and marketing products (principally SIR-Spheres) in the USA. The office of Sirtex USA was located in Illinois and has since been relocated to Massachusetts. Sirtex USA is 100% owned by Sirtex Medical Holdings Inc, which is 100% owned by Sirtex.
8. In February 2003 Sirtex was the subject of a takeover bid from Cephalon Australia Pty Ltd. Cephalon did not obtain the required 90% acceptances from shareholders and the bid failed.
9. In 2003 Sirtex commenced sales and marketing of SIR-Spheres in Europe. On 9 February 2004 Sirtex Medical Europe Gmbh was incorporated.
10. In 2004 a property was purchased in Wilmington, Massachusetts for the purpose of establishing a manufacturing facility for SIR-Spheres. On 3 June 2004 Sirtex Wilmington LLC was incorporated to operate the manufacturing facility. Sirtex Wilmington is 100% owned by Sirtex Holdings.
11. In 2005, Sirtex relocated from its premises in North Ryde in Sydney to its present location in Lane Cove in New South Wales.
12. In 2006, Sirtex conducted a review of its group structure and operations with assistance from PriceWaterhouseCoopers. The review resulted in the formation of five additional subsidiary companies located in Australia and in the United States.
1322 Dr Gray has been a substantial shareholder of Sirtex since its incorporation. He holds shares in his name and through his interest in Pine Ridge Holdings Pty Ltd and the B Gray Trust. On 9 September 2003 he sold 3 million ordinary shares for $15,300,000.
1323 On 21 December 2006 when Mr Wong swore his affidavit the board of Sirtex was made up of Mr Hill as non-executive director and chairman, and Dr Gray, Mr Boyce, Mr Eady and Mr Wong as non-executive directors.
1324 Dr Gray had been appointed a director in 1997. He held the office of Medical Director from 1997 to August 2005 and head of Research and Development Department from about September 2002 to April 2004. Hewas chairman of Sirtex from 19 December 2002 to 22 August 2006 and Chief Executive Officer from 6 June 2003 until Mr Wong's appointment on 26 May 2005. He was retained by Sirtex as a consultant medical advisor from August 2005 to 24 October 2006.
1325 As appears from a supplementary affidavit, which was filed by Mr Wong, Dr Gray was removed from the board by a resolution of shareholders passed at an extraordinary general meeting of Sirtex held on 23 January 2007. His removal was announced to the ASX.
1326 Mr Wong swore his first affidavit on 21 December 2006. At that time Sirtex and its subsidiaries employed 38 people. The primary focus of its business while he has been Chief Executive Officer has been the development, enhancement and sale of SIR-Spheres and in particular the product which Sirtex refers to as "SIRT-1". Mr Wong described this as the "core product" of Sirtex. SIRT-1 is the only product sold by Sirtex. The "enhancement and development" of SIR-Spheres includes clinical trials which have taken place and are planned for the future. In the annual report for 2006 Mr Wong referred to dose escalation studies for patients with metastatic colorectal cancer completed in the year ended 30 June 2006.
1327 Since 1997 Sirtex has spent significant amounts of money in pursuing its business. Mr Wong set out a table illustrating the expenditure based upon an analysis of the annual report. Sirtex intends to continue to invest money in those areas of its business. Between 1997 and 2006 a total of $6,904,643 had been expended on research and development. $23,685,000 was expended on marketing and sales and $14,038,980 on administration. Total expenditure from 1997 to 2006 was $44,628,623. The SIR-Spheres are presently manufactured in Australia under contract by ANSTO.
1328 Sirtex has continued researching the development of other products from the technology which is the subject of the present proceedings. Its major focus has been on targeted hyperthermia. Apart from its own funds it obtained grants from AusIndustry for that project. They included:
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UWA claims against Gray for breach of contract
1331 UWA said Dr Gray was its employee between 11 February 1985 and 21 November 1999. His duties included the obligation to undertake research or to organise and generally stimulate research among the staff and students of UWA. The UWA Act, Statutes and Regulations were imported into and formed part of his contract. Subject to the validity of particular parts of the regulations affecting personal property, this was not in dispute. Particular provisions of the Patents Regulations and of the IP Regulations said to be binding upon Dr Gray as apart of his contract of employment were designated and defined, not always accurately, as follows:
. The Prompt Notification Condition being the requirement under regulation 6(1) of the Patents Regulations that each person bound by them must immediately inform the Vice-Chancellor of any patentable invention made or developed wholly or in part during the course of that person's duty or whilst using the University's research facilities.
. The Assignment Condition being the requirement imposed by regulation 6(3) that, if required by the University, an inventor's rights in any invention made or developed wholly or in part during the course of that person's duty or while using the University's research facilities must be assigned to the University. (This was a misstatement of regulation 6(3) which was depended upon the University first deciding to exercise "its rights in the invention". It was therefore conditioned upon such a decision being made and the University having "rights" in the invention.)
. The Prompt Reporting Condition, being the requirement under regulation 6(1) of the IP Regulations that each person bound by them must promptly report the creation of any intellectual property rights to be commercially significant.
. The Restraint Condition, being the requirement imposed by regulation 4(11) of the IP Regulations whereby persons bound by them must not apply for any form of protection for or commercially exploit or otherwise deal with any intellectual property or do any act or thing in a manner inconsistent with the University's rights under the IP Regulations or otherwise. (This condition operated upon the assumption that the University had "rights" under the IP Regulations.)
. The Naming Condition, being the obligation imposed by regulation 4(13) of the IP Regulations on each person bound by the Regulation not to make any application (whether in Australia or overseas) for the registration of intellectual property otherwise than in the name of the University, unless otherwise determined by the Pro Vice-Chancellor (Research and Innovation).
. The Cooperation Condition, being the requirement imposed by regulation 4(8) of the IP Regulations that persons bound by them must execute any document or do anything reasonably required by the University in relation to any intellectual property created by such person to demonstrate or prove the University's ownership to third parties or to assist the University to commercialise the intellectual property.
1332 Dr Gray was said to have breached the conditions of his contract of employment as follows:
. The Prompt Notification Condition and, after 22 July 1996, the Prompt Reporting Condition by failing to inform the Vice-Chancellor of the University of the SIRT-Spheres Inventions, DOX-Spheres Inventions or Thermo-Spheres Inventions 1, 2 and 3 either immediately or at all. Each of the inventions was said to be patentable and commercially significant (s/c 12, 13, 36, 37, 65, 66, 92, 93).
. The Restraint and Naming Conditions by, after 22 July 1996, making or maintaining:
(i) the Gray, SIRT-2 Applications (s/c 24);
(ii)the Gray/Chen/DOX-Spheres Applications (s/c 49);
(iii) the Thermo-Sphere-1 Invention Provisional Application (s/c 69);
(iv) the Gray/Jones Thermo-Spheres-1 Invention Application; (s/c 79);
(v) the Gray/Jones Thermo-Spheres-2 Invention Application; (s/c 101);
(vi) the Gray/Jones/Cammerano Thermo-Spheres-3 Invention Application (s/c 128).
. The Restraint Condition by the following assignments:
(i) to Sirtex on or about 29 April 1997 of such of the SIR-Spheres Invention and associated rights (s/c 30);
(ii) in or about 1996 to CRI of the rights and entitlement to the DOX-Spheres Invention (s/c 53);
(iii) in or about 1997 to Sirtex of:
(a) all rights and entitlements and associated rights to the Thermo-Spheres-1 Invention (s/c 84); and
(b) all rights and entitlements and associated rights to the Thermo-Spheres-2 Invention (s/c 105);
(iv) in or about 1999 to Sirtex all rights and entitlements and associated rights to the Thermo-Spheres-3 Invention (s/c 132).
UWA claims against Gray for breach of fiduciary duty
1333 UWA alleged that by reason of his employment with it, Dr Gray owed the following fiduciary duties:
(a) A duty to deal with the property rights and interests of UWA so as to protect and preserve that property and those rights and interests for UWA.
(b) A duty not to make any secret profit or receive any secret payment or obtain any secret benefit from any third party with whom he was dealing.
(c) A duty to account for any such secret profit or secret payment or benefit; and
(d) The duties of a trustee of such of UWA's assets and property as were in his possession or control and/or under his direction from time to time;
(all of which duties were said to have survived the termination of his employment relationship with UWA).
1334 UWA alleged various breaches of Dr Gray's fiduciary duties under (a) and (d) above in respect of the SIR-Spheres, DOX-Spheres and Thermo-Spheres Inventions. Each of the things done by Dr Gray was said to have been done without the knowledge, approval or authority of UWA or without disclosing the interest of UWA. It was also said to have constituted a dealing with personal property to which UWA was entitled. Dr Gray was said to have breached his fiduciary duties by doing the following things:
1. by filing and maintaining Australian Patent Applications, Provisional Patent Applications, PCT Applications and applications for patents overseas:
1.1 AU54724/94 on or about 21 January 1994 (First SIRT-2 Australian Application) (s/c 16).
1.2 PCT/AU95/00027 on or about 20 January 1995 (SIRT-2 PCT Application) (s/c 20).
1.3 PM2492 on or about 18 November 1993 (DOX-Spheres Provisional Application (s/c 36 and 40).
1.4 Application for Overseas Patents with Dr Chen (Gray/Chen DOX-Spheres Applications) (s/c 50).
1.5 Application for Provisional Patent AU PN9782 (Thermo-Spheres-1 Provisional Application) (s/c 70).
1.6 Application for Overseas Patents with Dr Jones (Thermo-Spheres-1 Invention PCT Applications) (s/c 80).
1.7 Application for Overseas Patents with Dr Jones (Gray/Jones Thermo-Spheres-2 Invention Applications (s/c 102).
1.8 Applications for Overseas Patents with Drs Jones and Cammerano (Gray/Jones/Cammerano Theremo-Spheres-3 Invention Applications) (s/c 129).
2. by causing or procuring or consenting to Sirtex making or maintaining the following applications:
2.1 On or about 16 March 1996, Australian Provisional Patent Application P9228 (First SIRT-1 Australian Application) (s/c 16).
2.2 On or about 25 October 2000 Australian Provisional Patent Application PR0983 (Second SIRT-1 Australian Application) (s/c 16).
2.3 On or about 25 October 2001 PCT Application PCT/AU/01/0137 (SIRT-1 PCT Application) (s/c 20).
2.4 Applications in overseas countries for patents based upon SIRT-1 PCT Application (Gray SIRT-1 Applications) (s/c 25).
2.5 On or about 9 May 1997 filing PCT Application PCT/AU97/00287 (Thermo-Spheres-1 Invention PCT Application) (s/c 74).
2.6 On or about 29 October 1997 filing Australian Provisional Application AU PP0081 (Thermo-Spheres-2 Provisional Application) (s/c 96).
2.7 On or about 3 March 1999 filing Australian Provisional Application PP8998 (Thermo-Spheres-3 Invention Provisional Application) (s/c 118).
2.8 On or about 3 March 2000 filing PCT Application PCT/AU00/00151 (Thermo-Spheres-3 Invention PCT Application) (s/c 123).
3. by making the following assignments or purported assignments to Sirtex:
3.1 On or about 29 April 1997 of the SIRT-Spheres Inventions and associated rights (s/c 31).
3.2 In or about 1997 of the Thermo-Spheres-1 and Thermo-Spheres-2 Inventions and associated rights and entitlements (s/c 83, 89, 106 and 111).
3.3 In or about 1999 of the Thermo-Spheres-3 Inventions and associated rights and entitlements (s/c 133 and 138).
4. by assigning, with Dr Chen, to CRI in or about 1996 the DOX-Spheres Invention and associated rights and entitlements (s/c 54 and 61).
5. on or about 17 November 1994 by requesting, with Dr Chen, that CRI file the DOX-Spheres PCT Application (s/c 44).
6. failing to answer or comply with a UWA demand made by letter dated 12 October 2004 for the transfer of his shareholding in Sirtex, including Sirtex shares acquired by the exercise of options, otherwise to account to UWA for benefits derived from the inventions and sale of any Sirtex shares.
UWA claim against Sirtex for knowing involvement in breaches of fiduciary duty
1335 UWA made several distinct claims alleging Sirtex's knowing concern in Dr Gray's alleged breaches of fiduciary duty:
1. UWA alleged that Sirtex was knowingly concerned in breaches by Dr Gray of his fiduciary duty to UWA by reason of its awareness of facts which constituted and would have indicated those breaches to a reasonable person and by its conduct in:
1.1 making each of the First SIRT-1 and Second SIRT-1 Australian Applications (s/c 16).
1.2 preparing and filing the SIRT-1 PCT Applications (s/c 20A).
1.3 preparing and filing the Gray SIRT-1 Applications (s/c 25A).
2. UWA alleged that assignments of right by Gray to Sirtex for consideration were dealing in personal property to which UWA was entitled. Sirtex held the rights on trust for UWA or is liable to account to it for any benefit received. The assignments were:
2.1 The SIRT-Spheres assignment (s/c 32 and 34).
2.2 The CRI DOX-Spheres assignment (s/c 63).
2.3 The Thermo-Spheres-1 invention assignments (s/c 90 and 91).
2.4 The Thermo-Spheres-2 invention assignments (s/c 113).
2.5 The Thermo-Spheres-3 invention assignments (s/c 140).
3. UWA also alleged that Sirtex was knowingly concerned in Dr Gray's breaches of his fiduciary duty to UWA in relation to:
3.1 His consent to the Thermo-Spheres-1 Invention PCT Application (s/c 75).
3.2 His consent to the Thermo-Spheres-2 Provisional Application (s/c 97).
3.3 His consent to the Sirtex Thermo-Spheres-3 Invention Provisional Application (s/c 119).
3.4 His consent to the Sirtex Thermo-Spheres-3 Invention PCT Application (s/c 124).
4. UWA alleged that the receipt by Dr Gray of shares issued by Sirtex in its public float constituted a breach by him of his fiduciary duty to UWA and that Sirtex was liable for knowingly assisting him in that breach (s/c 146B).
[145]
Gray's cross-claim against UWA for unjustifiable threats, misleading or deceptive conduct and defamation
1336 Dr Gray's cross-claim against UWA in brief alleged:
Unjustifiable threats of infringement proceedings.
The proceedings threatened in the UWA letter of demand were substantially similar to patent infringement proceedings which, by reason of s 128 of the Patents Act and matters raised in the amended defence gave rise to a claim for relief for loss and damages resulting from UWA's conduct. The claim was for loss of salary and loss of value of Dr Gray's shareholding in Sirtex. (C/C 3.4).
Misleading or deceptive conduct
UWA was said to have represented that it did not assert and would not in future assert a claim as to the intellectual property the subject of Dr Gray's research in connection with the three technologies. The statement is said to have constituted a representation about the future which was misleading or deceptive in contravention of s 52 of the TPA.
Defamation
The letter of demand from UWA's solicitors to Sirtex was said to have meant and been understood to mean that:
(a) Dr Gray wilfully and deliberately breached his employment obligations to UWA;
(b) Deliberately misappropriated the property of UWA.
The publication of the letter to Sirtex was said to have been defamatory and to have been made in circumstances attracting aggravated and exemplary damages.
Misleading or deceptive conduct (2)
The allegedly defamatory representations were said to have been misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the TPA.
[146]
Sirtex's cross-claim against UWA for misleading or deceptive conduct and unjustifiable threats
1337 Sirtex cross-claimed against UWA for damages and other relief for misleadingor deceptive conduct, declaratory and injunctive relief in respect of alleged unjustifiable threats of infringement or similar proceedings and a declaration for an equitable lien against the inventions acquired by Sirtex. The essential elements of each cause of action may be summarised as follows:
1. Misleading or deceptive conduct - this was based on Professor Barber's letter of 22 January 1997 and the statements in it that UWA had no interest in technology funded by CRI. Gray and CRI are said to have relied upon the letter in making various assignments and in giving warranty. Sirtex's incorporation and entry into various transactions is also pleaded as a consequence of the letter. Sirtex's primary position is that the representations were not misleading or deceptive and that they represented the true position of the University. The cross-claim is based upon the alternative of the representations being false.
2. Unjustifiable threats - The letter of demand from the UWA solicitors dated 26 October 2004 was said to have involved threats of infringement or other similar proceedings under s 128 of the 1990 Actand to have been unjustifiable (c/c 193). If the University were to succeed in its claim for ownership of the acquired inventions Sirtex said it ought to be entitled to an equitable lien against the inventions corresponding to its investment in their development protection and marketing (c/c 194A).
Sirtex's cross-claim against Gray for breach of warranties
1338 Sirtex's cross-claim against Dr Gray had two limbs:
1. If UWA is beneficially entitled to any right or entitlement to the acquired invention then Sirtex alleges that Dr Gray and CRI breached various warranties given to it in connection with their assignments of rights relating to the inventions. These are known as the Gray Sirtex Warranties and the CRI Warranties. Sirtex also pleads that in that event representations made by Gray and CRI were false inaccurate and misleading. (c/c 166)
2. Regardless of whether UWA succeeds in the proceeding or not Sirtex alleges that Dr Gray breached warranties given to it and that they were false inaccurate and misleading.
Sirtex also relies upon an indemnity which it says Dr Gray provided to it against any liability incurred by Sirtex in respect of Dr Gray's breach of the Gray Sirtex Warranties.
[147]
Sirtex's cross-claim against CRI for misleading or deceptive conduct and breach of warranty
[148]
1339 Sirtex cross-claimed against CRI, in the event that UWA succeeds against Sirtex. It claimed for breach of warranty and misleading or deceptive conduct. It also invoked an indemnity provided by CRI in similar terms to that provided by Dr Gray. If UWA were not to succeed Sirtex claims against CRI for misleading or deceptive conduct arising out of the CRI representations.
[149]
Gray's cross-claim against Chen
1340 Dr Gray sought a declaration against Dr Chen that she had had no interest "at any material time" in the DOX-Spheres provisional application.
Pleading amendments - reserved rulings
1341 There were two amendments to the pleadings and particulars which were handed up in Court on the last day of hearing and reserved for judgment. The first was an amendment sought by Dr Gray to the further and better particulars of his cross-claim against UWA. This was an additional particular of UWA's alleged malice. It related to UWA's intentions as to the receipt and effect of its letter of demand upon Dr Gray. The letter is said to have been intended by UWA to be received by the Sirtex directors prior to the Annual General Meeting and to be expressed in terms which UWA intended should be forthwith disclosed to the market and shareholders of Sirtex in compliance with its obligations as a listed disclosing entity. It was thereby intended to cause harm to Dr Gray in that the shareholders of Sirtex to UWA's knowledge were to consider at the Annual General Meeting and if they thought fit resolve to approve the issue to him of 400,000 options to acquire shares.
1342 The intention that the letter be disclosed was said to be inferred from its hand delivery by a process server on 26 October 2004 and letters from Jackson McDonald to Freehills written in November 2004.
1343 UWA's knowledge of the options resolution awaiting consideration at the Annual General Meeting was to be inferred as UWA was monitoring Sirtex's affairs. Reliance was placed upon the emails between Mr Provan and Jackson McDonald in October 2003 and September 2004 which have been referred to earlier in these reasons.
1344 I am satisfied that the conduct of the case and, in particular, the cross-examination of Professor Robson was consistent with this particular and that there is no prejudice to UWA in allowing the amendment. The amendment to the particulars of Dr Gray's cross-claim will therefore be allowed in accordance with the minute handed up in Court on 27 July 2007.
1345 The second reserved amendment was to the defence and cross-claim of Sirtex. This related to the Sirtex pleading about the terms of Dr Gray's contract of employment with UWA set out in paragraph 10 of the Sirtex defence. Sirtex wished to make an additional contention as follows:
(da) says further, in the alternative to paragraph 8(b)(4) above that it was an implied term of the contract of employment between the Applicant and Dr Gray that:
(i) an inventor's obligation to recognise the Applicant's interest in a patentable invention was dependent on the Applicant continuing to take active steps to exploit that invention; and
(ii) if the Applicant ceased taking active steps to exploit an invention, then an inventor's obligation to recognise the Applicant's interest in the invention did not arise or ceased as the case may be.
Particulars
The term was implied from the nature of the employment contract and the commercial context, including the research environment, in which it was agreed, to give business efficacy to the agreement.
Sirtex refers to paragraphs 41 to 46 of its Closing Submissions for further particulars.
(db) in the alternative to subparagraph (da) above, Sirtex says:
(i) the Applicant and the researchers employed by the Applicant, including Dr Gray, proceeded on the assumption that sub-paragraph (da) was a term of their contracts of employment;
(ii) the Applicant represented to Dr Gray that sub-paragraph (da) was a term of his contract of employment;
(iii) the Applicant knew that Dr Gray was proceeding on the assumption referred to in sub-paragraphs (db)(i) and (db)(ii);
(iv) Dr Gray and the Applicant organised their business on the basis of the assumption referred to in sub-paragraphs (db)(i) and (db)(ii); and
(iv) in the circumstances, UWA is estopped from denying that the term referred to in sub-paragraph (da) was a term of Dr Gray's employment contract.
Particulars
Sirtex refers to paragraphs 41 to 46 of its Closing Submissions.
1346 Again, in my opinion, this amendment can be allowed as it is consistent with the conduct of the case by both Sirtex and Dr Gray. The amendment to the Sirtex defence will therefore be allowed in accordance with the minute handed up in Court on 27 July 2007.
UWA "interests" and "property rights" in relation to inventions
1347 UWA alleged in its statement of claim that the filing of various provisional applications, PCT applications and applications for patents by Dr Gray failed to disclose "the interests of the University" and constituted "a dealing with personal property to which the University was entitled". In the case of the provisional and PCT applications the "personal property" was elaborated as "the right to proceed under the Patents Act 1990". No implied term of his contract of employment was pleaded to support the creation of the claimed interests and personal property. It is necessary to consider their nature and sources.
1348 In opening, counsel for UWA handed up a written outline in which he said that "by operation of the statutes and regulations each of the patents constituted property belonging to the University". However, in the course of his address, counsel agreed with the proposition that the rights asserted by UWA flowed entirely from its contractual relationship with Dr Gray. This was subject to the additional contention that in making claims for intellectual property protection on his own behalf Dr Gray held the benefit derived from those claims on trust for UWA as a consequence of his fiduciary obligations to UWA. The fiduciary duties were said to derive from his employment. The fiduciary claim was distinct. The case was "not just a contract case".
1349 In written closing submissions UWA asserted its property rights variously in "any patentable inventions and other intellectual property","the inventions that [were] the subject of its claim in these proceedings"and "the inventions (including patentable inventions) and other intellectual property". The rights were said to arise as "an incident" or a "term" of its contracts of employment with Drs Gray, Chen and Jones. The rights were also said to "arise as a matter of law" from the nature of its employment relationships with them.
1350 In oral closing submissions counsel for UWA relied upon Sterling Engineering Co [1955] AC 534 for the proposition that there was a term implied or inherent in Dr Gray's contract of employment whereby "property in inventions" vested in UWA. At one point counsel seemed to shift ground by relying upon the assignment obligation under reg 6 of the Patents Regulations as a source of rights. However, he returned to the position reflected in the written submissions that the structure of the Patents Regulations assumed the existence of a right with its source in contract.
1351 Counsel for Dr Gray complained that UWA had departed from its opening position which relied upon the Regulations as the source of property rights. In my opinion however the UWA case as ultimately propounded in opening and as set out in its closing submissions depended, during the period that the Patents Regulations were in force, on the general law as the source of the "interests" and "personal property" with which Dr Gray was said to have dealt. The position with respect to the IP Regulations was a little more ambiguous but I accept that UWA relied upon those regulations as conferring a property right.
1352 There are some difficulties with the terminology used by UWA in describing the property rights which it claims. Metaphorical references to "ownership" of the inventions should be treated with caution. An invention is not a chattel. Nor is it a chose in action. It is a manner of new manufacture the subject of letters patent and grant of privilege within s 6 of the Statute of Monopolies and includes an alleged invention. It is possible to speak, in a metaphorical sense, of the owner of an invention thereby referring to the person who has the right to apply for or who holds a patent in relation to it. But the metaphor must not misdirect the legal analysis. A fortiori the concept of ownership of an invention which is not patentable is not only metaphorical but elusive.
1353 At the time that Dr Gray was employed by UWA the 1952 Act was still in force. The effect of a patent granted under the Act and the nature of the rights conferred by it were specified in s 69. Persons who could apply for a patent under s 34 of the Act included a person who would, if a patent were granted to one of the persons referred to in s 34(1)(a) to (f), be entitled to have the patent assigned to him. There was no reference to ownership of an invention anywhere in the Act. The word "ownership" appeared as part of the heading to s 153 entitled "Co-ownership of patents". This referred to a circumstance in which a patent was granted to two or more persons and created the entitlement in such persons, subject to contrary agreement, to an equal undivided share in the patent.
1354 The word "Ownership" appears at the head of Pt 2 of Chapter 2 of the 1990 Act. Section 15, the first section in that Part, like s 34 of the 1952 Act, specifies the persons who may be granted a patent. Section 16 provides for one or more patentees to hold equal undivided shares in the patent absent contrary agreement and s 17 for the Commissioner to give directions where there are two or more patentees. Ownership in this context referred to the patent rights.
1355 The exclusive rights to exploit a patent which are conferred upon a patentee by s 13(1) are "personal property and are capable of assignment and devolution by law" (s 13(2)). An application for a patent, whether made under the 1952 Act or the 1990 Act, is an application not a species of property right. Section 34(1)(fa) of the 1952 Act and s 15 of the 1990 Act both recognise that a right to take an assignment of a patent when granted may come into existence while an application is pending or before an application is made. Such a right may find its source in agreement or by operation of the general law. None of this confers on inventions or applications the character of property rights. The nature of the interests and personal property claimed by UWA did not emerge with clarity from its pleading. However it may be inferred that UWA intended to refer at least to a right to take an assignment of the relevant patent when granted. That would attract a right to apply for the patent pursuant to s 34 of the 1952 Act and s 15 of the 1990 Act.
1356 To the extent that the pleading was relevant to the regime introduced by the IP Regulations, those Regulations defined intellectual property vested in UWA as including "all rights in relation to any … invention". The term "invention" was in turn defined as an invention which may be patentable under the 1990 Act. Rights in relation to an invention in that context may be taken to include the right to apply for a patent and a right to take an assignment of a patent.
Implications from Dr Gray's contract of employment
1357 The question arises what, if anything, was to be implied in Dr Gray's contract of employment in relation to patentable inventions developed by him while a full time employee at UWA. On the UWA case, there would have been an obligation implied by law to assign to it the right to apply for a patent. That obligation might be modified to the extent that it was dependent upon a demand from UWA: see eg regulation 6(3) of the Patents Regulations.
1358 Putting aside misleading metaphors about the ownership of inventions, the question is whether or not an implied obligation existed as an incident of Dr Gray's contract of employment which conferred on UWA the right to apply for a patent in respect of any invention developed by him for which a patent could be sought. That requires a consideration of the incidents of his contract of employment.
1359 Dr Gray was appointed as a Professor of Surgery. He was a full time officer of UWA, required to devote his whole time to his UWA duties, except in so far as he undertook private and consultative work pursuant to clause 11 of his Conditions of Appointment. His responsibilities were:
(i) To teach, conduct examinations and to direct and supervise the work in his field in accordance with the statutes and regulations of UWA and the directions of the Senate.
(ii) To undertake research and to organise and generally stimulate research among the staff and students; and
(iii) To perform such other appropriate work as the Senate from time to time determines.
Under the terms and conditions of employment he was expressed to be subject to the UWA Act, the Statutes and Regulations of UWA. The obligations imposed upon staff by the Regulations were imported into his terms and conditions.
1360 Dr Gray had no duty to invent anything. He had a duty to undertake research and to stimulate research amongst staff and students at UWA. He was working for a university. Prior to the introduction of the IP Regulations there was no prohibition expressed or to be implied which would prevent him from publishing the observations and discoveries he had made and details of the technologies he had developed. He was, at least until 30 November 1997, under no obligation to protect by non-disclosure the patentability of any invention he developed in the course of his employment at UWA. In this important respect his employment obligations differed from those of a person employed by a private commercial entity whose inventions in the course of employment could benefit or affect the business of the employer.
1361 It is also not without significance, that Dr Gray was employed by a university, a statutory body established for public purposes. He was not merely an employee. He was, by virtue of the definition of the "university" in the UWA Act a member of it and linked historically by that definition to the idea of the University as a community of teachers and scholars. The statutory definition which incorporated that idea can be traced back at least to the 16th century statute by which Oxford University was incorporated.
1362 The contemporary reality is that most, if not all, universities, including UWA, engage in commercial activities. UWA was held by a Full Court of the Federal Court in Quickenden v O'Connor (2001) 109 FCR 243 to be a trading corporation and thereby a constitutional corporation for the purposes of the Workplace Relations Act 1996 (Cth). But that holding was on the basis of trading activities unconnected to the teaching and research functions for which Dr Gray was employed. Dr Gray was not required to advance a UWA commercial purpose when selecting the research work he would undertake.
1363 Research of the kind that Dr Gray was engaged to do carried with it the possibility that he would develop inventions capable of attracting patent protection. The duty to undertake research could be discharged in a variety of ways. These were within the discretion of the researcher. One of the ways in which the duty could be discharged was the development and testing of new technologies. It could be said therefore that an invention made in the course of Dr Gray's research activities as an employee of UWA was an invention made within the scope of his employment and doing what he was employed to do. It does not follow that there was an implied term that the rights to which his invention gave rise belonged to UWA.
1364 UWA contended for implication by law of a term in Dr Gray's contract of employment which would vest in UWA rights in relation to inventions developed by him. The implication of the term as a matter of fact was not pleaded and was not part of its case. Where a term is implied by fact the burden of proving the term rests upon its proponent. If a common law rule implies the term into a particular class of contract then the onus is upon the party wishing to deny it to show that the rule is displaced for that particular contract: Carter, Peden and Tolhurst, Contract Law in Australia (5th ed, Butterworths, 2007) at [11-13].
1365 The common law affecting contracts of employment has been discussed in the context of the English and Australian authorities. The position in the United States, Canada and New Zealand has also been discussed. There is an apparent threshold question whether the legal principles developed at common law apply to all contracts of employment regardless of the nature of the employer's business or activity and, in particular, whether or not they apply to a contract of employment with a university. The question is only apparently a threshold one. It really reduces to a consideration of the nature of the particular contract by reference to the business or activity of its employer and the scope of the employee's employment in relation to that business or activity. To that extent the onus is upon the proponent of the term to show that the contract is of a kind to which the legal implication applies.
1366 While each case falls to be decided according to its own circumstances, the approach foreshadowed in the earlier discussion is applicable to Dr Gray's case. The circumstances of his employment lie against the implication necessary to establish UWA's property rights. They were:
The absence of any duty to invent anything.
2. The freedom to publish the results of his research and any invention developed during that research notwithstanding that such publication might destroy the patentability of the invention.
3. The extent to which Dr Gray, as a researcher and those working with him, were expected to and did solicit funds for their research, including the development of inventions, from sources outside UWA. The relevance of those considerations is not affected by the arrangements under which UWA would administer funding, eg in the case of CSIRO or NH & MRC grants.
4. The necessity, consistent with research of the kind he was doing, to enter into collaborative arrangements with external organisations such as CSIRO.
The history of the research undertaken by Dr Gray and his colleagues discloses that the role of the researcher at UWA in the area in which Dr Gray and his colleagues were working required him and them to act to a significant degree as entrepreneurs in securing the resources which would enable them to carry out their work. The circumstances of his employment were a long way removed from the situations which gave rise to the common law implications discussed in the English cases. The Victoria University of Technology (2004) 60 IPR 392 case arose in a different factual context which gave rise to a breach of fiduciary obligations. It did not require consideration of a factual situation and research of the character involved in the present case.
1367 In my opinion the circumstances of Dr Gray's employment at UWA and those of the other academics employed as researchers with him negated the implication of any term whereby UWA acquired rights in relation to inventions developed in the course of their research. In that respect the case demonstrates the validity of the cautionary observation by Monotti and Ricketson in their book Universities and Intellectual Property - Ownership and Exploitation (Oxford University Press, 2003) (at p 6.59):
… it will be unwise for a university to rely upon general principles if its intention is to claim title to inventions that are made by its academic employees during their working hours and using university facilities and funding.
Dr Gray's work at RPH
1368 Apart from the work he was required to do for UWA, Dr Gray had a right under clause 11 of his conditions of appointment to engage in private consultative practice. Provided such work fell under clause 11(3) it was not dependent upon permission from the Senate or any UWA officer. Work done by Dr Gray under clause 11(3) would not be within the scope of his employment by UWA.
1369 The work done by Dr Gray at RPH was said to be outside the scope of employment. From the commencement of his appointment in 1985 RPH paid 30% of his salary. The balance was paid by UWA. The evidence did not indicate the arrangements in place between UWA and RPH although it seems likely that RPH would have reimbursed UWA for 30% of Dr Gray's salary. I do not accept that any of Dr Gray's work at RPH was outside the scope of his employment at UWA. The UWA Department of Surgery was located there. He was there to teach and research and to do clinical work. The teaching and research were clearly within the scope of his employment by UWA. The clinical work was done by him as a full time employee of UWA. He was not an employee of RPH. The clinical work which he undertook was not private consultative work for which he was separately paid. The fact that UWA allowed him to provide services to RPH in consideration of RPH paying 30% of his salary does not change his status as a full time employee of UWA. Nor does it take the provision of those services outside the scope of that employment.
Agreements said to affect Dr Gray's contractual obligations
1370 Dr Gray submitted that during the time of his employment by UWA it entered into agreements that were of direct relevance to him and to his employment.The "agreements" identified were:
[150]
Counsel for the Applicant Mr TK Tobin QC and Mr M Green
[151]
Counsel for the First Respondent: Mr ML Bennett and Mr IR Freeman
[152]
Solicitor for the First Respondent: Lavan Legal
Counsel for the Second Respondent: Mr JD Elliott SC, Mr EJC Heerey and Mr JS Emmett
Solicitor for the Second Respondent: DLA Phillips Fox
Counsel for Dr Chen: Mr G Provan
Solicitor for Dr Chen: Mr G Provan
[153]
Dates of Hearing: 15-16, 19-23, 26-30 March,
2-5, 11-13, 16-19 April,
1-3, 7-11 May, 28-31 May.
1. 11-15, 18-20 June, 5, 23-27 July 2007
[154]
Date of Judgment: 17 April 2008
[155]
ANNEXURE 2
Summary of relevant patent documents
1 A number of patent documents in respect of each of the claimed inventions were tendered under certification as part of Exhibit 435. It is convenient to summarise their contents.
1. SIRT 1.
1.1 Provisional Patent Application PR O983 filed 25 October 2000.
The invention title was "Polymer based radionuclide containing microspheres". The applicant was Sirtex Medical Ltd and the actual inventor, Bruce Gray.
1.2 Provisional specification in connection with Application PR 0983
This is entitled "The provisional specification for polymer based radio nuclide - containing microspheres". The detailed description of the invention referred to irradiation of Yttrium oxide to form the isotope Yttrium90 which was solubilised. Ion exchange resin was provided as an aqueous slurry of microspheres having a particle size of 20 to 50 microns, preferably 30 to 35 microns. Yttrium90 solution was added to the slurry to absorb the Yttrium90 onto the microspheres. The Yttrium90 was precipitated as a phosphate salt to stably incorporate it into the microspheres. The resulting product would have a high pH which could cause serious side effects in a patient. To decrease the pH the microspheres were washed to remove unprecipitated Yttrium. It was very important that the pH of the microspheres suspension was to be lower than 9.5 and preferablyless than 9 and, most preferably, less than 8. Mechanisms for providing a suspension of the required pH were described. The technique of Selective Internal Radiation Therapy was also described as involving either laparotomy to expose hepatic arterial circulation or insertion of a catheter into the hepatic artery via the femoral brachial or other suitable artery. Angiotensin-II could be infused to redirect arterial blood to the metastatic tumour component of the liver and away from normal parenchyma. Repeated injections of the microspheres were made until the desired radiation level was reached.
1.3 International Application PCT/AU01/01370 filed 25 October 2001
This application was for an invention entitled "Polymer based radionuclide containing particulate material". The field of the invention was said to relate to a particulate material comprising a polymer, particularly a polymer and a radionuclide, to a method for the production thereof, and to methods for the use of the particulate material. In a specific aspect it related to microspheres comprising a polymer and a radionuclide such as radioactive Yttrium and to their use in the treatment of cancer in humans and other mammals. There were some 23 claims. They included the following:
(i) a particulate material having a diameter in the range of from 5 to 200 microns comprising a polymeric matrix and stably incorporated radionuclide;
(ii) the particulate material according to claim 1 wherein the radionuclide is incorporated by precipitation;
Claims 3 to 5 covered the particulate material wherein the polymeric matrix is partially cross linked, comprises 1% to 20% cross linking, and alternatively comprises about 4% cross linking.
Claim 6. The particular material according to claim 1 wherein the polymeric matrix is an ion exchange resin.
Claims 7 to 10 specified different varieties of ion exchange resin including, in claim 10, an ion exchange resin comprising polystyrene partially cross linked with divinyl benzene.
Claims 11 and 12 covered various radionuclides, claim 12 relating specifically to Yttrium90 . Claim 13 specified a microsphere and in claim 14 a particulate material having a diameter in the range of from 30 to 35 microns comprising a copolymer comprised of styrene and divinyl benzene and precipitated Yttrium90 .
Claims 15 to 17 related to the process for the production of the microspheres. Claims 18 to 23 related to methods of administration and the use of the particulate material.
2. SIRT-2
2.1 Standard status report and patent request 54724/94, filed 21 January 1994.
This was a request for grant of an invention entitled "Radioactive Particles for Treatment of Cancer". Dr Gray was shown as the actual inventor and applicant and also as the nominated person to whom the patent was to be granted. Davies Collison Cave were the Patent Attorneys. An international applicationclaiming priority from 54724/94 was filed on 20 January 1995. It was allocated a number PCT/AU95/00027 through the PCT system and published by the World Intellectual Property Organisation (WIPO) on 27 July 1995. It entered the Australian national phase and was allocated Complete Patent Application number 15279/95 entitled "Particulate material". It was open to public inspection on 8 August 1995 and accepted on 6 March 1998. It was sealed on 13 August 1998 and given Australian Patent No 690630.
2.2 Complete specification in connection with application 54724/94, filed 21 January 1994.
The invention title was "Radioactive Particles for Treatment of Cancer". It was said to relate to the treatment of cancer in mammals by the use of small hollow particles (collectively called microspheres) containing a radioactive substance. They were designed to be administered into the arterial blood supply of the organ to be treated whereby they become entrapped in small blood vessels of the target organ and irradiate it. The claims defining the inventions focussed upon the methods for the production of hollow microspheres. Essential steps relating to grinding to a fine powder, combining base material with a suitable binder, spray drying the slurry and thermal spraying of the spray dried particles were referred to. The production of microspheres having a diameter from 10 to 200 microns was claimed in one claim. The use of Yttrium or any salt of Yttrium as the basic element of the microspheres was also claimed.
2.3 International application PCT/AU95/00027, filed at Australian Receiving Office on 20 January 1995.
This invention is described as "Particulate Material". It was said to relate to a particulate material comprising small hollow or cup shaped ceramic particles called microspheres, a process for their production and methods for its use. The claims in this specification included radioactive particulate material comprising hollow or cup shaped ceramic microspheres comprising a beta or gama radiation emitting radionuclide and having a diameter in the range of from 5 to 200 microns (claim 5). Narrower claims defined the material as Yttrium and diameters in the range from 20 to 80 microns. A process for the production of the material by forming aggregates of powdered base material with a suitable binder and thermal spraying to melt the base material and vaporise the binder to form hollow or cup shaped microspheres was also claimed. Related method and use claims were made.
2.4 Entry in the Patents Register in respect of Patent Number 690630.
This certified entry showed Paragon Medical as patentee and Dr Gray as inventor of an invention entitled 'Particulate material' and was given Application number 15279/95. The term of the patent was 20 years commencing 20 January 1995. It was stated to take priority from number 54724/94 dated 21 January 1994. The entry also recorded a change of name of Paragon to Sirtex, registered on 14 June 2000.
2.5 Patent specification 690630.
The invention entitled "Particulate Material" showed Paragon as applicant and Dr Gray as inventor. Again it related to the production of hollow or cup-shaped ceramic microspheres comprising the relevant radionuclide and having a diameter from 5 to 200 microns.
3. DOX
3.1 Status report and provisional patent request in connection with Provisional Patent Application Number PM 2492.
This document was a request in the name of Yan Chen and Dr Gray for the grant of a patent for an invention entitled "Controlled Release Matrix for Dugs and Chemicals". It was dated 15 November 1993. The address for service in Australia was shown as Davies Collison Cave. A letter from IP Australia indicated that an International Application claiming priority from PM2492 was filed on 17 November 1994. The International Application through the PCT system was allocated number PCT/AU94/00708 and was published by WIPO on 26 May 1995. The International Application entered Australian national phase and was allocated a Complete Patent Application No 81363/94 entitled "Controlled release preparation". That application was open for public inspection on 6 June 1995, accepted on 2 June 1998, sealed on 5 November 1998 and given Australian Patent No 693821.
3.2 Provisional Patent Application PM2492, filed on 18 November 1993.
This was a provisional specification for an invention entitled "Controlled Release Matrix for Drugs and Chemicals". The invention was said to describe a novel formulation for the transport and controlled release of a variety of therapeutic and chemical agents using metal ions-drug interaction as a release control mechanism in combination with either a degradable or non-degradable ionic supporting matrix. One particular application of the formulation was to transport cytotoxic drugs designed to be used in patients and animals for the treatment of cancer. The concept of using metal ion-drug complexes in combination with ionic polymers could also be used for the transport and controlled release of other drugs and chemicals for a variety of other applications.
The invention was said to involve the use of metal ion complexation of the active drugs as a mechanism to control their release. Experimental results demonstrated that this resulted in many advantages over other formulations of drug-matrix complexes such as high loading, reduction of the initial burst release of drug, control of drug release and biodegradability.
3.3 International Application PCT/AU94/00708 filed 17 November 1994.
This related to the invention entitled "Controlled Release Preparation". There were some 15 claims. They included the following:
(i) a controlled release preparation comprising an ionic polymer matrix loaded with an active compound being complexed with a complexing agent to modify the release of the active compound from the polymer matrix;
(ii) a preparation according to claim 1 wherein the ionic polymer matrix is in the form of microspheres;
(iii) a preparation according to claim 2 wherein the microspheres have a diameter in the size range of 10-200 micron, preferably in the size range of 20-70 micron.
Subsequent claims defined the active compound as pharmaceutically active (claim 4). A cytotoxic or cytostatic drug (claim 4), doxorubicin, daunorubicin or cisplatin (claim 6). The claim was made for an ionic polymer matrix comprising a biodegradable cross linked albumin/dextran sulphate matrix (claim 7) and a preparation wherein the complexing agent was a metal ion (claim 8) and in which the metal ion was Fe (claim 9). The loading of the ionic polymer matrix with Fe-complex doxorubicin was claimed (claim 10) and with chitosan-complex cisplatin (claim 11). Methods of treatment and use were also claimed.
3.4 Entry in the Patents Register in respect of Patent Number 693821.
This entry showed Application No 81363/94 entitled "Controlled release preparation" as held by Paragon which changed its name to Sirtex. The inventors were shown as Yan Chen and Dr Gray. Its term was 20 years commencing 17 November 1994.
3.5 Granted patent specification in respect of Patent Number 693821.
This was a certified copy of Patent Number 693821 entitled "Controlled release preparation" in the name of Paragon as applicant and showing Yan Chen and Dr Gray as inventors. It contained the same claims as set out in PCT/AU94/00708.
4. Thermo 1
4.1 Publicly available details in connection with Provisional Patent Application PN 0213, filed on 23 December 1994.
This recorded the filing of a provisional specification for an invention entitled "Targeted hysteresis hyperthermia as a method for treating cancer". The applicant's name was "Bruce Gray".
4.2 Status report and Provisional Patent Request in connection with provisional patent application PN 9782, filed on 10 May 1996.
The request was for the grant of a patent entitled "Targeted hysteresis hyperthermia as a method for treating cancer." The applicant was Dr Gray and the actual inventor was Dr Gray. A letter from IP Australia indicated that the application was given number PN9782. An International Application claiming priority from it was filed at the Australian Receiving Office on 30 May 1997. The international application, through the PCT system, was allocated number PCT/AU97/00287 and was published by WIPO on 20 November 1997. The international application entered Australian national phase and was allocated a complete patent application number 26277/97 entitled "Targeted hysteresis hyperthermia as a method of treating diseased tissue". The application was open for public inspection on 5 December 1997 but never entered the Australian national phase.
4.3 Provisional patent application PN9782, filed 10 May 1996.
The provisional specification for Thermo 1 was entitled "Targeted hysteresis hyperthermia as a method for treating cancer". The provisional specification was signed by Dr Gray and dated 10 May 1996. It appended two documents. The first described the concept of the invention in greater detail, while the second described the preliminary investigations said to confirm its scientific credibility. The first document was entitled "Patent Application for Tumour Hyperthermia by Hysteresis Heating". The second did not bear a title. It reported, under the heading "Scope of This Study" on the minimum power levels required, possible health and environmental effects and engineering constraints.
4.4 International application PCT/AU97/00287 filed on 9 May 1997.
The invention was entitled "Targeted Hysteresis Hyperthermia as a Method for Treating Diseased Tissue". The claims defining the invention included the following:
1. a method for site specific treatment of diseased tissue in a patient comprising the steps of:
(i) selecting at least a magnetic material which has a magnetic heating efficiency of at least about 4.5 x 10-8 J.m./A.g, when magnetic field conditions are equal to or less than about 7.5 x 107 A/s;
(ii) delivering the magnetic material to diseased tissue in a patient; and
(iii) exposing the magnetic material in the patient to a linear alternating magnetic field with a frequency of greater than 10kHz and a field strength such that the product of field strength, frequency and the radius of the exposed region is less than about 7.5 x 107 A/s to generate hysteresis heat in the diseased tissue.
Magnetic material with different characteristics was covered by claims 4, 5 and 6. Claim 7 was in the following terms:
A method according to claim 1 wherein the magnetic material is selected from compounds within the group of CrO2 metallic iron, cobalt, nickel, gamma-ferric oxide, cobalt treated gamma-ferric oxide, ferrites of general form, MO.Fe2 O3 where M is a bivalent metal, cobalt treated ferrites or magnetoplumbite type oxides (M type) with general form MO.6Fe2O3 where M is a large divalent ion…
5. Thermo 2
5.1 Publicly available details in connection with Provisional Patent Application PP 0081, filed 29 October 1997.
These details indicated the applicant in respect of provisional application PP0081 was Paragon under the invention title "Improved targeted hysteresis hyperthermia as a method for treating diseased tissue". The provisional filing date was 29 October 1997.
5.2 Certified Provisional Patent Application PP 0081.
This is a provisional specification for an invention entitled "Improved Targeted Hysteresis Hyperthermia as a Method for Treating Diseased Tissue". A summary of the invention indicated that it was directed to the use of a rotational magnetic field thus:
The present invention provides an improved method for site specific treatment of diseased tissue in a patient, which comprises the steps of:
(i) selecting at least a magnetic material which has a magnetic heating efficiency of at least about 4.5 x 10-8 J.m/A.g, when rotational magnetic field conditions are equal to or less than about 5 x 108 A/m.s;
(ii) delivering the magnetic material to diseased tissue in a patient; and
(iii) exposing the magnetic material in the patient to a rotational magnetic field with a frequency of greater than about 10kHz and a field strength selected such that the product of field strength, frequency and the radius of the exposed region is less than about 7.5 x 107 A/s to generate hysteresis heat in the diseased tissue.
6. Thermo III
6.1 Status report and Provisional Patent request in connection with Provisional Patent Application PP 8998, filed on 29 October 1997.
This is a copy of the provisional specification in connection with the application PP0081 and entitled "Improved Targeted Hysteresis Hyperthermia as a Method for Treating Diseased Tissue". The application was filed by Paragon. The description of the invention follows that in the provisional specification mentioned in the preceding entry and bears the same title.
6.2 Status report and Provisional Patent request in connection with Provisional Patent Application PP 8998, filed on 3 March 1999.
The patent request accompanying the provisional specification was lodged on behalf of Paragon as applicant under the invention title "Magnetic Material". An International Application claiming priority from PP 8998 was filed at the Australian Receiving Office on 3 March 2000. The international application was allocated the number PCT/AU00/00151 and published by WIPO on 8 September 2000. It entered Australian national phase and was allocated a Complete Patent Application Number 28952/00 entitled "Heating of magnetic material by hysteresis effects". Ultimately it lapsed and was advertised in the Official Journal of 8 August 2002.
6.3 Provisional Patent Application PP 8998, filed 3 March 1999.
The invention was entitled "Magnetic Material". Under the heading "Disclosure of the Invention" the provisional specification stated:
The present invention consists in a magnetic material having a magnetic heating efficiency of at least 4.5 x 10-8 J.m/A.g in a rotational magnetic field where the product of the amplitude and frequency of the applied field is less than or equal to 5 x 108 A/m.s, and the frequency of the applied field is at least 20kHz.
6.4 International Application PCT/AU00/00151 filed 3 March 2000.
The invention was entitled "Magnetic Material". It was said to relate to "…magnetic materials that exhibit high magnetic hysteresis heating in a cyclic magnetic field".
ANNEXURE 3
[156]
ANNEXURE 4
Application Type Application Number Current Status Applicant at PCT filing Investors at PCT filing
International Application PCT/AU01/01370 (WO02/34300) Concluded Sirtex Medical Limited Bruce Nathaniel Gray
Priority Document PR0983 Ceased
National Phase
Australia 10278/02 (2002210278) Pending
Canada 2426602 Awaiting Examination
Europe 01978015.4 Awaiting Examination
Japan 2004511576 Filed
USA 20030007928 (10/173496) Notice of Appeal Filed
[157]
International Application PCT/AU95/00027 (WO95/19841) Concluded Bruce Nathaniel Gray Bruce Nathaniel Gray
Priority Document AU54724/94 Ceased
National Phase
Australia 15279/97 (690630) Granted now Ceased
Canada 2181254 Ceased
China 1075959 Lapsed
Europe 0740581 Granted
France In force
Germany In force
Great Britain In force
Ireland Lapsed
Luxembourg Lapsed
Spain In force
Sweden In force
Japan 03770906 Granted - In force
USA 5,885,547 Granted - In force
6,258,338 Granted - In force
6,537,518 Granted - In force
[158]
International Application PCT/AU94/00708 (WO95/13798) Concluded Cancer Research Institute Yan Chen; Bruce Nathaniel Gray
Priority Document PM2492 Ceased
National Phase
Australia 81363/94 (693821) Granted/ceased
Canada 2176933 Ceased
China 1139380 Lapsed
Europe 0727984 Granted
France In force
Germany In force
Great Britain In force
Ireland Lapsed
Italy In force
Sweden In force
Japan 09505059 Awaiting examination
USA 5,932,248 Granted - In force
[159]
International Application PCT/AU97/00287 (WO97/43005) Concluded Paragon Medical Limited Bruce Nathaniel Gray; Stephen Keith Jones
Priority Document PN9782 Ceased
National Phase
Canada 2253963 Ceased 28/2/03
China 1218415 Lapsed 30/4/03
Europe 0952873 Granted
France In force
Germany In force
Great Britain In force
Ireland In force
Luxembourg In force
Spain In force
Sweden In force
Japan 2000503879 Refused
South Korea 0034772 Lapsed
USA 6,565,887 Granted
6,167,313 Granted
[160]
International Application PCT/AU00/00151 (WO00/52714) Concluded Paragon Medical Limited Bruce Nathaniel Gray; Stephen Keith Jones; Raffaele Cammarano
Priority Document PP8998 Ceased
National Phase
Canada 23654403 Ceased
Europe 1166291 Awaiting examination
Japan 2002538616 Awaiting examination
USA 6,599,234 Granted
University of Western Australia v Gray (No 20) [2008] FCA 498
INTELLECTUAL PROPERTY - patents - inventions - inventions made by employees - academic staff of university - employed to research - whether duty to invent - whether implied term in contract conferring rights on university - no duty of non-disclosure - no duty to invent - significant requirement for external funding - no implied term - inventorship - discovery - inventive concept - identification of inventive concept - specification or claim by claim analysis - unjustified threats of infringement or similar proceedings - claim for constructive trust in patent rights - whether "similar proceedings" - not similar proceedings - no unjustified threats
CONTRACT - employment - implied term - invention - academic staff - employment to teach and research - whether duty to invent - whether implied term vesting invention rights in university - no implied term
DELEGATED LEGISLATION - regulations - university - regulation making power - promulgation requirement as condition of operation - content of requirement - construction - whether regulations may validly acquire intellectual property rights from academic staff - presumption against alienation or interference with property rights - no valid authority to acquire or interfere with property rights by regulation - not related to control or management of university property
TRADE PRACTICES - misleading or deceptive conduct - representations - future matters - application of s 51A - requirement to plead or demonstrate implied representations as to reasonable grounds
CORPORATIONS - directors - director's duties - failure to disclose material information to company in due diligence prior to float - information indicating risk of claim against intellectual property held by company - loss of opportunity to company to avoid claim by negotiation or otherwise
TORT - defamation - qualified privilege - malice - letter of demand - whether content and timing of letter of demand actuated by malice
The University of Western Australia Act 1911 (WA) s 3, s 16E, s 31,
The University of Western Australia Act Amendment Act 1929(WA) s 2, s 3
The University of Western Australia Act Amendment Act 1970 (WA)
The University of Western Australia Act Amendment Act 1975 (WA
Interpretation Act 1918 (WA) s 36
Patents Act 1952 (Cth) s 69, s 152(1), s 34, s 26,
Patents Act 1990 (Cth) s 15, s 32
Patents Act 1960 (Cth)s 5
Patents Act 1969 (Cth)
Patents Regulations
Intellectual Property Regulations
Adamson v Kenworthy (1932) 49 RPC 57
Advanced Building Systems Pty Ltd v Ramset Fasteners (Aust) Pty Ltd (1998) 194 CLR 171
AMP Inc v Utile Pty Ltd (1971) 45 ALJR 123
Anaesthetic Supplies Pty Ltd v ResCare Ltd (1992) 111 ALR 205
Anaesthetic Supplies Pty Ltd v ResCare Ltd (1994) 50 FCR 1
Aponte Inc v Welcome Foundation Ltd [2002] 4 SCR 153
Boll Acceptance Corporation Ltd v GWA Ltd (1983) 50 ALR 242
Bristol-Myers Squibb Co v FH Failing & Co Ltd (2000) 97 FCR 524
British Celanese Ltd v Moncrieff (1948) 1 Ch 564
British Reinforced Concrete Engineering Co Ltd v Lind (1917) 34 RPC 101
British Siphon Co v Homewood (No 2) [1956] 73 RPC 225
Burroughs Welcome Co v Barr Laboratories Inc (1994) 40 F 3d 1223
Charles Selz Ltd's Application (1954) 71 RPC 158
CI Covington Fund Inc v White (2000) 10 BLR (3d) 173
CJ Burland Pty Ltd v Metropolitan Meat Industry Board (1968) 120 CLR 400
Collag Corp v Merck and Co Inc [2003] FSR 15
Commissioner of Patents v Microcell Ltd (1959) 102 CLR 232
Comstock Canada v Electec Ltd (1991) FTR 241
Dalzell v Duaber Manufacturing Co 149 US 315
Durack v Associated Pool Builders Pty Ltd (1983) 1 IPR 545
Eastland Technology Australia Pty Ltd v Whisson (2005) 223 ALR 123; [2005] WASCA 144
Edisonia Ltd v Forse (1908) 25 RPC 546
Electrolux Ltd v Hudson [1977] FSR 312
Empress Abalone Ltd v Langdon (2000) 2 ERNZ 53
Florida State Board of Education v Bourne (1942) 150 Fla 323
Fine Industrial Commodities Ltd v Powling (1954) 71 RPC 253
French v Mason [1999] FSR 597
Fubilan Catering Services Ltd v Compass Group (Australia) Pty Ltd [2007] FCA 1205
Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82
Goddin and Rennie's Application [1996] RPC 141
Greater Glasgow Health Board's Application [1996] RPC 207 at 222
Greville v Williams (1906) 4 CLR 694
Gunter v Stream 573 F 2d 77 (1978)
Hapgood v Hewitt 119 US 226
Harris' Patent [1985] RPC 19
Henry Bros (Magherafelt Ltd v Ministry of Defence and the Northern Ireland Office I [1997] RPC 693
Hicton's Patent Syndicate v Patents and Machine Improvements Co Ltd (1909) 26 RPC 339
Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41
Joos v Commissioner of Patents (1972) 126 CLR 611
Kimberley Clark Australia Pty Ltd v Arico Trading International Pty Ltd (2001) 207 CLR 1
Kwan v Queensland Corrective Services Commission (1994) 31 IPR 25
Lamb v Evans [1893] 1 Ch 218
Lane-Fox v Kensington and Knightsbridge Electric Lighting Co (1892) 29 RPC 413
Lockwood Security Products Pty Ltd v Doric Products Pty Ltd (2007) 235 ALR 202
Madey v Duke University (1999) US Dist Lexis 21379
Madey v Duke University (2002) 307 F 3d 1351
Markem Corporation v Zipher Ltd (2005) RPC 31
Marshall and Naylor's Patent (1900) 17 RPC 553
Mellor v William Beardmore & Co Ltd (1927) 44 RPC 175
Mueller Brass Co v Reading Industries Inc 325 F Supp 1357 (1972)
National Research Development Corporation v Commissioner of Patents (1959) 102 CLR 252
Nottingham University v Fishel [2000] ICR 1462
Polwood Pty Ltd v Foxworth Pty Ltd (2008) 75 IPR 1
Quickenden v O'Connor (2001) 109 FCR 243
LH Hoare Pty Ltd's Application [1976] Tas SR 156
Robb v Green [1895] 1 QB 215 315
Rogers v Commissioner of Patents (1911)10 CLR 701
Sabaf SpA v MFI Furniture Centres Ltd [2005] RPC 10
Seanix Technology Inc v Ircha 53 CBLC (3d) 257
Solomons v United States (1890) 137 US 342
Spencer Industries Pty Ltd v Collins (2003) 58 IPR 425
Spencer Industries Pty Ltd v Collins (2002) 54 IPR 434
Spiroll Corp Ltd v Putti (1975) 64 DLR (3d) 280, aff'd (1976) 77 DLR (3d) 761
Stack v Davies Shephard Pty Ltd (2001) 108 FCR 422
State of Florida v Neal (1943) 152 Fla 582
Staeng Ltd's Patents [1996] RPC 183
Stanlec Fibre Optics Ltd's Application [2005] RPC 15
Stephenson Jordan & Harrison Ltd v MacDonald & Evans (1952) 69 RPC 10
Sterling Engineering Co Ltd v Patchett [1955] AC 534
Sython BC v SmithKline Beecham plc [2006] 1 All ER 685
Triplex Safety Glass Co v Scorah [1937] 1 Ch 211
United States v Dubilier Condenser Corporation (1933) 289 US 178
University of Southampton's Application [2005] RPC 11
University of Southampton's Application [2006] RPC 21
University of Western Australia v Gray (No 17) [2007] FCA 924
Victoria University of Technology v Wilson (2004) 60 IPR 392
Windsurfing International Inc v Tabur Marine (Great Britain) Ltd [1985] RPC 59
Worthington Pumping Engine Co v Moore (1903) 20 RPC 41
Yang v Owners-Strata Plan No 3529 (2001) 54 NSWLR 60
Yeda Research and Development Co Ltd v Rhone Poulenc International Holdings Inc [2008] 1 All ER 425
Viziballs's Application [1988] RPC 213
A non-radioactive powder form of Yttrium Oxide (Y2O3 ) (also known as Yttria) was irradiated by neutron bombardment at the Lucas Heights Reactor in Sydney.
The resultant isotopic form of Yttrium Oxide was dissolved in a solution of sulphuric acid and the ion exchange resin (the microspheres) added to the solution. The solution contained free Yttrium ions which were then attracted to the oppositely charged ion exchange microspheres resulting in the Yttrium becoming attached to them.
The microspheres would sink to the bottom of the container. The rest of the solution would be decanted and replaced with non-radioactive water, mixed again, and again allowed to sink and have the remainder solution replaced.
The procedure was repeated until the solution contained no free Yttrium and all the radioactive Yttrium ions were attached to the microspheres.
The preceding process was known as "washing". The end product was to be used for injection into the liver.
The procedure was simplified by washing the solution through a sieve-like filtration unit which strained out the microspheres several times. Dr Gray referred to this procedure in his affidavit evidence. It involved modifying a ready made device used for sterilising liquids by passing them through a small membrane filled container. By modification of this device they were able to construct a small scale "hot-cell" that could be used in the production of radioactive SIR-Spheres.
The problem of Yttrium90 leaching off the microspheres into the blood remained. Dr Gray arranged for Dr Burton and Dr Self to visit Dr Jonathan Hodgkin, a research scientist employed at the CSIRO in Melbourne to explore ways of chemically fixing Yttrium90 so that it would be permanently embedded in the microsphere matrix and not leach out into the blood stream. Dr Hodgkin gave evidence about this approach, which he said occurred in 1982 or 1983. He initially considered coating the beads then suggested that the Yttrium be precipitated onto the beads as an insoluble salt. He looked up the most insoluble Yttrium salt he could find. It was the phosphate.
295 Dr Hodgkin explained in his evidence that the microsphere material was a highly cross-linked polymer. Its molecule had a "chelating structure" which enabled it to attract and bind the Yttrium. However, because the material was very porous the Yttrium could be displaced into the body by other ions from the blood stream. Precipitating the Yttrium as an insoluble phosphate salt enabled it to bind more strongly with the sphere. Ultimately, of course, the sphere would break down but the radioactive Yttrium90 with a half life of three days or less, would have decayed within that time and not pose a threat to other organs. Dr Hodgkin recalled the approach from Dr Burton and Dr Self and the advice he gave because he talked about it in the course of a newspaper interview which he was giving on another project related to water purification. The Age newspaper published an article about it.
296 Dr Burton and his colleagues tried out Dr Hodgkin's suggestion. It had the merit that it only required one extra step in their production sequence after the Yttrium Oxide had been combined with the ion exchange resin. That step was the addition of a phosphate salt to the Yttrium when it was on the microspheres. The salt would turn the Yttrium from a soluble ionic form into an insoluble phosphate form less likely to dissociate and to be exchanged for other ions in the blood. As Dr Burton explained in his evidence, the production of the microspheres using this technique remained relatively easy. It resulted in a much more stable microsphere with significantly reduced leaching when injected into the blood stream but with the same irradiating qualities. He described the use of phosphate solution as a "break through" and as a "critical achievement" which was essential in opening the way to human experiments. I accept his characterisation of the application of phosphate solutions to the better binding of Yttrium to ion exchange resin microspheres.
297 The majority of Dr Burton's research to that point was conducted in the latter half of 1983 and throughout 1984 at the University of Melbourne while he was part of Dr Gray's team. Typically he and the other researchers would meet with Dr Gray on a weekly basis. Dr Gray had a number of research projects on foot and was not involved full time in the laboratory work. Their weekly meetings were in depth and they used them to ensure that Dr Gray was informed of the direction and progress of the research and to obtain his feedback and suggestions.
298 Manufacture of the SIR-Spheres was initially undertaken by Dr Gray and then by Dr Burton at St Vincent's Hospital. On 31 January 1984, Dr Self prepared a set of notes detailing what he described as "… major aspects of techniques which [he] had used during 1983-84". The techniques related to the preparation of Yttrium90 microspheres. They had the character of detailed instructions for production of such spheres. The notes were entitled "Yttrium-90 Microspheres Project - Experimental Procedures and Equipment".
299 In 1984 Dr Gray undertook a review of possible adverse effects of injecting SIR-Spheres into human patients. He collected the data together with experimental data generated over the previous four years and submitted it to gain approval to commence the first use of the SIR-Spheres in patients with liver cancer. This was to be at St Vincent's Hospital. He submitted an application to the Therapeutic Goods Administration (TGA) in Canberra and to the Human Ethics Committee of St Vincent's Hospital. He was given approval to start human experiments.
300 The optimal dimensions of microspheres for use as SIR-Spheres was an ongoing question. Dr Burton recruited a higher degree student from the University of Melbourne, Veronica Meade, to help in this respect. She was given the task of evaluating different sized microspheres. Dr Burton described her work as an extension of ideas being considered within the research group relating to the use of different ion exchange resins to transport anti-cancer agents. They had been trying different ion exchange resins to attach different ionically charged agents. Because these spheres tended to be of different sizes the group wanted to see if size affected distribution in the liver. Ms Meade wrote her thesis and subsequently published the results of her evaluation as Meade, Burton, Gray and Self, "Distribution of Different Sized Microspheres in Experimental Hepatic Tumours", (1987) European Journal of Cancer and Clinical Oncology, 23; 37-41. She and her co-authors concluded that arterially embolised 15 and 32.5 micron diameter microspheres shared equal tumour perfusion properties in that the numbers lodged in tumour tissue were about three times more than the numbers which lodged in ambient normal liver tissue. Fifty micron microspheres concentrated less in tumour than in normal tissue. Homogeneity of distribution improved as microspheres increased in diameter from 15 to 50 microns. They recommended that in view of the good distribution of 32.5 micron spheres and their ability to preferentially lodge in tumour tissue, they should be regarded as the optimal microsphere size for the animal model in order to study tumour blood flow.
301 Initially the radioactive isotopes required for the research group to undertake animal studies were provided by the Australian Radioisotopes Division of the Australian Nuclear Science Organisation (ANSTO). They were supplied at no cost on the understanding that if any of the research was ever commercialised, ANSTO would be the manufacturer of the radioactive products.
The DOX-Sphere concept
302 Dr Burton recalled many discussions with Dr Gray in Melbourne about the potential applications of microsphere technology to other modalities such as chemotherapy. They also talked about the possibilities of immunotherapy and hyperthermia. Dr Gray said it was always his intention to develop microspheres to carry drugs for targeted chemotherapy and magnetic material for targeted hyperthermia. One of the projects in Melbourne involved using the microspheres to bind the widely available anti-cancer drug, doxorubicin. The development of what he called the "DOX-Spheres project" was limited at the University of Melbourne because it required a chemist to progress it further and funding was limited. Microspheres used in that application are referred to in these reasons as "DOX-Spheres" to avoid a multiplicity of designations.
303 Despite the limited funding the group decided to commence studies examining the use of doxorubicin. Dr Burton described their proposed activities thus:
To evaluate the use of the standard ion exchange resins as microspheres to transport doxorubicin and to release it at the site of embolisation.
To examine the potential of work being done elsewhere using protein microspheres to carry doxorubicin, the suggested advantage being that this methodology would alleviate immunological interaction with the particles by using the patient's own albumin.
Findings of fact on SIR-Spheres as at 1985
304 By the time Dr Gray commenced his employment with UWA in 1985 various elements of the use of microspheres to deliver targeted radiotherapy to liver tissues had been established by him and those working with him. Some of those elements emerge from literature which Dr Gray had reviewed covering the period between 1948 and 1982. The elements were:
The use of microspheres to transport an irradiated isotope of Yttrium into the vasculature of liver cancers in order to deliver lethal radiation to the tumour without significant harm to normal liver tissue.
The use of microspheres for that purpose comprising styrene-divinyl benzene copolymer ion exchange matrix to incorporate the Yttrium90.
The use of vasoactive agents including angiotensin-2 to create enhanced vascular flow into cancerous tissue and effect preferential distribution of injected microspheres into that vasculature.
Precipitation of Yttrium90 as a phosphate salt to bind it sufficiently strongly to the microsphere matrix that the risk or incidence of leaching of the Yttrium90 into the general circulation while it remained radioactive was reduced to acceptable levels.
The possible use of microspheres in the size range of 30 microns to optimise preferential lodgment in tumour tissue.
305 As appears later in these reasons further work done by Dr Cameron Jones, as part of Dr Gray's research team at UWA, led to improvements in the phosphating process to improve the binding of Yttrium90 to microspheres. In 1988 he determined that leaching of Yttrium from microspheres during storage could be reduced by storing them in a solution kept at the physiological pH of 7, that is the pH level of blood.
The Thermo-Sphere concept
306 Drs Gray and Burton also had a number of meetings, while working in Melbourne, to develop the idea of "Targeted Hysteresis Hyperthermia". They received some assistance from the Department of Medical Physics at St Vincent's Hospital. Dr Gray described the concept in evidence. It was well known that raising the temperature of internal tissues by as little as 3 degrees Celsius could be very effective in causing cell death. Even very small increases in the temperature of tumours would greatly increase their susceptibility to ionising radiation and chemotherapy. If tumours could be heated selectively by as little as one or two degrees, a greatly enhanced cellular kill rate from the SIR-Spheres or DOX-Spheres could be expected. Targeted hyperthermia involved the use of microspheres loaded with ferromagnetic materials and directed to tumours in the same way as the SIR-Spheres. Heat could be generated from the spheres by subjecting them to an externally applied alternating electro-magnetic field. The heat would arise from the hysteretic behaviour characteristic of all magnetic material subject to such a field. Microspheres used in this application are referred to in these reasons as Thermo-Spheres, the term used by Dr Gray and his associates.
307 I accept the evidence of Drs Gray, Burton and Hodgkin concerning conception, commencement and development of the targeted microsphere technology research program at the University of Melbourne as outlined in the preceding sections of these reasons.
The lodgement of international patents by mid November - it was noted that Dr Gray agreed to cover the costs of obtaining an international cover note for SIR-Spheres and DOX-Spheres.
The finalisation of financial arrangements regarding the purchase of intellectual property by mid November.
The finalisation of financial arrangements with CRI, LCI and UWA.
Dr Gray outlined the likely relationship with CRI, UWA and research workers. Mr Jones and Mr Karlson agreed that, prior to the next meeting, they would investigate the possibility of purchasing an existing company. All three men agreed that an attempt should be made to go to a public float in either January or early February.
718 The second minuted meeting was held on 16 November 1994. Mr Karlson outlined five streams of activities that needed to be undertaken in order to activate the company. These involved the raising of seed capital and registration, determining the company type, obtaining an intellectual property valuation, patent protection and industry assistance, the conduct of medical trials and submission of the relevant products to the TGA and "FDA", presumably a reference to the Federal Drugs Administration of the United States. The first priority was to raise seed capital and to produce documentation for that purpose and decide the company's structure. They agreed that purchase of a shelf company would obviate many of the problems associated with a public float in the first instance. Mr Karlson was to meet with Ernst & Young to decide the appropriateness of purchasing a shelf company and determine the documentation required for raising seed capital. The amount of seed capital contemplated at that time was $1 million. Various other contacts were to be made, which it is not necessary to outline here.
719 The third minuted meeting was held on 23 November 1994. A possible source of seed capital had been identified. Mr Grant Boyce had agreed to become company secretary.
720 Dr Gray prepared a document dated 28 November 1994 entitled "Proposal to Delta West/The Upjohn Company for Raising Seed Capital in Preparation for the Floatation of a Public Company". The document referred to the formation of a company for the purpose of commercial development of several novel technologies designed to be used for the treatment of cancer and other diseases. It referred wrongly to the formation of the company as though it had already occurred. It stated that the company either had been, or was in the process of, acquiring assets relating to new and promising technology that was considered to have the potential to generate income for the company. In addition, the company was acquiring contracts and strategic alliances to develop and commercialise its technology. It was said that the assets of the company would consist of:
i Two international patents for cancer treatment products.
ii Contracts of ownership of other unprotected new technology.
iii Binding contracts with key scientists to undertake further research and development.
iv Strategic alliances with existing pharmaceutical companies for commercial exploitation of products generated from intellectual property owned by the Company.
v Strategic alliances with an existing research institute in the University of Western Australia to undertake further research and development of key products of the Company.
UWA, in its closing submissions made the point that, on 28 November 1994, no company existed and no assets had been transferred. The "existing research institutes" at UWA were not identified. The letter was misleading in this respect.
721 The fourth minuted meeting, and the first in which the proposed company was referred to as "Newco", was held on 1 December 1994. Dr Gray tabled a submission to the Upjohn company proposing either a strategic alliance or a suggested investment in Newco as seed capital. Mr Unsworth of Delta West had agreed to transmit the proposal to Upjohn. The State Department of Commerce and Trade had invited Newco to submit a proposal to the government for seed capital.
722 Dr Gray informed the meeting of his discussions with ARI. He had discussed a commercial arrangement with the new chief executive of that company, Mr D Sterling. He was due to meet with Mr Sterling in Sydney on 12 December 1994. A strategic alliance would be entered into between Fairburn and ARI. This would allow the public company to take over the strategic alliance from Fairburn at a future date.
Commercialised a new targeted treatment for liver cancer with the creation of Sirtex.
Moved further research into controlled release pharmaceuticals and targeted hyperthermia into the commercial arena.
Built an intellectual property portfolio consisting of five applications at various stages of the patenting process.
She projected CACS' activities for the next five years.
1212 In her discussion of what she called "microparticle technologies" she set out a figure detailing the involvement of various participants in the commercialisation process used to make new treatments available to patients. She described Sirtex as the "commercialisation vehicle created to achieve this". The figure set out under three headings the participants, the contributions of each and the benefit derived from each. The participants she listed included UWA, CRI, LCI, Sirtex, Drs Gray, Stephen Jones and Chen, the NH & MRC and the Cancer Foundation of WA. All of those appeared under the sub-heading "Innovators". Sirtex, ANSTO, Nomura/JAFCO appeared under the heading "Manufacturer/Distributor". The paper elicited an acerbic email from Dr Gray to Dr Williams dated 8 December 2000 in which he said it contained many incorrect assumptions which had to be changed because they gave a false impression. The commercialisation of the microparticle technology was performed by CRI and not CACS. CRI had always been an independent institute that undertook its own research and development outside CACS. Patents developed within CRI could not be credited to CACS as they had nothing to do with it. Sirtex had nothing to do with CACS and any reference to Sirtex should be removed other than as providing an opportunity for PhD students such as Paul Moroz. What could be included was the clinical work, that is clinical trials, using radioactive microspheres as they had been undertaken within the framework of UWA and RPH. The scientific articles which came from these could be treated as CACS' activities. Nomura/ JAFCO had never had anything to do with CACS as it only dealt with CRI.
1213 Dr Williams said that when she wrote the Discussion Paper she believed the matters contained in it to be true. Her assumptions about ownership of the intellectual property were based on her understanding of the law relating to intellectual property created in the course of employment, her understanding of UWA's intellectual property policy which she obtained and read during her employment and her understanding and belief, when she commenced employment in 1993, that all other personnel then in the Department of Surgery were employed by UWA. She did not see any of the employment contracts for the people whom she assumed to be employees of CRI nor did she know when any of them became employed by CRI. She also accepted that at the time she wrote the Discussion Paper she had not personally undertaken any research in relation to the microsphere technology and had no knowledge of whether or when Dr Gray, LCI or CRI had entered into any contractual arrangements with UWA to assign what she assumed to be UWA's intellectual property in SIR-Spheres, DOX-Spheres and magnetic hysteresis.
CACS Advisory Board - 25 January 2001
1214 Dr Gray's response to Dr William's discussion paper was considered by the CACS Advisory Board at its meeting on 25 January 2001. Dr Gray was not present. Professors Barber and Landau, Dr Williams and Mr Beauchamp were there. The minutes record that they were agreed that the discussion document did not make any inappropriate claims. Professor Barber volunteered to follow up with a discussion with Dr Gray.
1215 Sirtex submitted that it may be inferred that Professors Barber and Landau, Dr Williams and Mr Beauchamp understood that it was Dr Gray's position that CRI's work was independent of CACS. They clearly took the view that it was appropriate for CACS (ie UWA) to claim an involvement in the CRI microspheres work. Professor Barber, who had the relevant responsibility at UWA, took no action in light of that knowledge.
Williams/CRI litigation - 2001/2002
1216 On 14 March 2001 Dr Gray wrote to Dr Williams on CRI letterhead stating that at a meeting of the CRI board on 1 March 2001 the board unanimously requested that equipment purchased by CRI be returned to it at the expiration of the life of CACS. The major items in question were said to consist of "the thermolyne 8 nitrogen storage, the phat system and the barnstead nanopure water system". Dr Gray said that as Dr Williams would be continuing on until June 2001 they would be happy that she continue to use the equipment, until that time, in order to ensure no disruption to her activities until then. He would make arrangements to have the equipment collected at the end of June.
1217 Dr Williams wrote back to Dr Gray on 15 March 2001 stating that CACS would be pleased to return the equipment and that Dr Williams would contact Dr Gray in June about arrangements for its removal from CACS Park Avenue laboratories.
1218 On 13 September 2001 Dr Williams wrote to the members of the board of CRI referring to the CRI request for the return of three items of equipment. She acknowledged that CRI had generously allowed her the use of the items until the end of June 2001. She told the board that the relevant research was not ceasing as expected upon the expiration of CACS as her group had been relocated to the Department of Pharmacology at the QEII Medical Centre. She said that it would be very useful if CRI could allow her and her group to continue using its equipment as they extended research into the design and development of new anti-cancer drugs.
1219 Dr Gray evidently tried to contact Dr Williams. She wrote to him on 20 September 2001 and referred to the remaining CRI equipment which she had. She said she would like CRI to consider selling the items to UWA provided it was within the terms of the grants from which they were purchased.
1220 On or about 24 September 2001, Dr Gray made a complaint about Dr Williams to the police. This was an extraordinary thing for him to do. Not surprisingly no action was taken. There had been no theft.
1221 On 27 September 2001 Dr Williams wrote to Colin Sutton at Sirtex confirming that UWA would sell to it certain equipment belonging to UWA. She referred in her letter to the provision to the police of false information by "a person of influence in your company". Her own lawyers had called the complaint a 'criminal defamation' of her. As a result there had been an "erosion of trust" between CACS and Sirtex. She required a cheque made out to UWA to be cleared before handing over the equipment the subject of the agreement.
1222 The next step in relation to the CRI equipment still held by CACS was a letter of demand dated 20 December 2001 sent by Dr Gray's solicitor, Grant Milner & Associates on behalf of Dr Gray, "in his capacity as Chairman of the Cancer Research Institute Inc". The solicitors accused Dr Williams of refusing to return the three items to CRI and threatened legal action if they were not returned. In the event a Local Court summons issued on 22 March 2002. It named Dr Williams personally as the defendant. UWA provided her with legal representation through Louisa Case of the Legal Services Office.
1223 According to Dr Gray CRI commenced the legal proceedings as a last resort. Ultimately they were settled a short time before trial on the basis that UWA would return the equipment to CRI and would pay its legal costs.
1224 Mr Heitman who had been DeputyDirector of Legal Services in May 2002 was aware of the case and although he had general oversight of the work of the office, he had no direct involvement of the carriage of the matter. He only became aware of the existence of Dr Gray and CRI when he heard of the CRI proceedings in the Local Court.
1225 Dr Williams was called as a witness by UWA. She denied that she bore Dr Gray any animosity by reason of his complaint against her to the police. She said she had seen him behave in other circumstances so as to alienate people. She accepted that that was how he operated and that there was nothing personal in it. This reaction was a little difficult to accept. She had described the incident as giving rise to an "erosion of trust" affecting her attitude to dealings with Sirtex. She had been told that she had been criminally defamed. She is likely to have had a degree of antagonism towards Dr Gray. In the event nothing really turns on that and I otherwise accept her evidence as generally reliable.
Boyce - Sirtex director - 2002
1226 Grant Boyce was Dr Gray's personal accountant from December 1999 and continued in that role until August 2006. He was, as already noted, company secretary of the old Paragon Medical from its registration on 19 April 1995 to its deregistration on 21 September 1999. He was company secretary of the new Paragon Medical, which became Sirtex on 4 April 2000. He continued as its secretary until 28 February 2001. He was also company secretary of its subsidiary Paragon Medical Products Pty Ltd, later Sirtex Medical Products Pty Ltd, from 11 November 1997 to 28 February 2001. He held no position at Sirtex between 1 March 2001 and 18 December 2002.
1227 In 2002 Mr Boyce was approached by Dr Gray to become a director of Sirtex. Dr Gray told him he wanted someone with financial expertise on the Board. Mr Boyce was appointed a non-executive director on 19 December 2002. He was unaware at the time that UWA asserted that it had an interest in the intellectual property of Sirtex. He did not become aware of that until he was informed of correspondence from UWA to Dr Gray and Sirtex in October 2004. He remembered the letter of demand from UWA's solicitors being tabled at the board meeting. He reacted with surprise and shock. It was completely unexpected. He regarded it as an attack on Sirtex and on Dr Gray.
S Jones/ Gray and laboratory books - 2002/2005
1228 On 2 May 1991 at a meeting of the Department of Surgery at RPH attended by Drs Gray, Burton, Chen, Codde and Stephen Jones, one of the items discussed was "Record of Experimentation". The minutes record that Dr Jones had investigated the matter and recommended implementing a formal research record book system. The record books were to be the property of the Department and to be kept in the Department at all times. All articles bearing authors' names submitted for publication were to be accompanied by written authority of each of the authors. Dr Jones agreed to implement the system for research at RPH immediately.
1229 It was Dr Jones' evidence that he subsequently implemented such a system which require each researcher to enter experimental data into bound books rather than on loose pieces of paper. Although the system took some time to implement the Department ordered a number of bound A4 notebooks which he kept in his office area until he issued them to researchers. Each of the books had a sticker on it with a sequential number. In a smaller bound notebook he kept a separate register of the laboratory book numbers. The register recorded four columns of information setting out the sequence number of each book, the title of the project to which it related, the name of the researcher to whom the book had been issued and the date of issue. Dr Jones recorded all of his own experiments in those laboratory books and encouraged other researchers to do the same. However, he did not actively police the system. Researchers kept their laboratory books at their workplaces.
1230 Dr Jones endorsed his own laboratory books with the titles "SKJ Bk I", "SKJ Bk II" and so on in sequence. He continued that sequence from his first days at the Department of Surgery at RPH. He did not restart it when be began working for CRI or Sirtex, but continued it. At the time of swearing his affidavit on 19 December 2006 his current laboratory book at Sirtex was "SKJ Bk X".
1231 In about June 2002 Dr Jones had a telephone discussion with Dr Elizabeth Williams. He prepared a file note of that conversation on 23 October 2002. He could not recall why he prepared the file note so much later. He recalled receiving a telephone call from Dr Gray about that time in which he told him that he might get a call from UWA and that he should not talk to them. It is probably the case that he prepared the file note after that call.
1232 Dr Jones' note indicated that he could not remember the exact text of his exchange with Dr Williams. She informed him of the legal actions between UWA and CRI because of non-return of CRI equipment. UWA would be countersuing. It would require the return of any lab books belonging to it. His response was that he did have some lab books but was not sure if he had those to which she was referring. That was the last conversation he had with her.
1233 Following the conversation with Dr Williams, Dr Jones checked the laboratory books held by Sirtex which were stored in its compactus file. He looked to those relevant to his work at UWA and RPH and noted that there were about four laboratory books which were in that category.
1234 On 19 November 2002 Dr Jones received a telephone call from Louisa Case, a legal officer employed by UWA. He made a file note of their conversation on the same day. She said that her office had received a letter from Dr Gray's solicitor stating that Dr Jones did not work for CRI. He asked what she wanted. She said they needed the University Department of Surgery lab books that he had. Dr Jones said he did not know what lab books she meant. He had several lab books which he did not believe had anything to do with UWA. She listed those books. She then asked whether he would return them. He said he would have to talk to Dr Gray to find out what was going on. She said she would have to write a letter to Sirtex if he did not return the books.
1235 Dr Jones no longer specifically recalls the laboratory books listed by Ms Case but said they appeared to include those relevant to his work at UWA which had been located in the Sirtex compactus following his telephone conversation in June 2002.
1236 Following his conversation with Ms Case he telephoned Dr Gray and told him about the conversation. Dr Gray told him that he should not have spoken to her and that he had already advised Dr Jones not to speak to people from UWA. He told Dr Jones he was coming to Sydney soon, either that evening or in a few days time. He asked if Dr Jones had the laboratory books. He said he thought he did. Dr Jones then located and removed the laboratory books relevant to his work at UWA. He met Dr Gray in Sydney where he handed over the books. Dr Gray examined them and asked him to leave them with him. According to Dr Jones he said that in substance the books were all the property of CRI.
1237 On the same day as her telephone conversation with Dr Jones, Ms Case sent a letter to Dr Colin Sutton, the CEO of Sirtex. In her letter she said that Dr Jones had informed her that he held property of the University being UWA Department of Surgery laboratory record books:
. Book No 14 - Subject: Magnetic Hysteresis Hyperthermia Book 1
. Book No 15 - Subject: Magnetic Hysteresis Hyperthermia Book 2
. Book No 17 - Subject: Magnetic Hysteresis Hyperthermia Book 3
. Book No 24 - Subject: Hyperthermia; and
. Book No 35 - Subject: Magnetic Hysteresis Hyperthermia Book 4
Ms Case said she had requested that Dr Jones return the books to UWA. He had told her that Dr Gray had instructed him not to return them and not to communicate with UWA in relation to them.
1238 Dr Sutton responded on 25 November 2002 to Ms Case. He advised that neither Dr Jones nor Sirtex were in possession of the items cited and suggested that she direct all future correspondence directly to Dr Gray as Sirtex had no involvement in the dispute that she cited. Before sending the letter Dr Sutton had cleared it with Dr Gray who said, in an email dated 25 November 2002, that the reply was "correct and appropriate". He said:
As you know the CRI, and not myself, is attempting to recover CRI equipment that Williams misappropriated. The CRI is suing Williams for recovery of the goods. Please make absolutely sure that any further conversations with her or her minders are passed through myself.
Dr Jones did not see either of the letters before this litigation.
1239 After the commencement of the current proceedings in 2004 and while he was still reporting to Dr Gray at Sirtex, Dr Jones had a brief conversation with him in which Dr Jones said to Dr Gray that the issue of the laboratory books would come up in the litigation. Dr Gray responded, "what lab books?" The words stuck in Dr Jones' mind. He cannot recall the precise time and location of the conversation but distinctly recalls Dr Gray saying those words.
1240 In cross-examination Dr Gray said it was true that he had instructed Dr Jones not to return the books to UWA. It was also true that he had instructed him not to communicate with UWA in relation to the books. He did not dispute that Dr Jones was holding the books but qualified the statement by saying he did not necessarily have all of the books. Asked upon what basis he directed Dr Jones not to return the books, he said it was as Chairman of CRI. He claimed the books belonged to CRI even though they were held by Dr Jones at Sirtex. He was not sure whether it was under the Sirtex umbrella. Asked about his statement in his email to Dr Sutton that the proposed reply to Ms Case at UWA was "correct and appropriate" he agreed that he meant by it that the books were not in the possession of either Dr Jones or Sirtex.
1241 Dr Gray agreed that in conversation with Dr Jones he asked him whether he had the lab books. He agreed that they did meet. He agreed that Dr Jones brought with him a number of lab books, but he had asked him to do so. He wanted to find out what Dr Williams and the UWA solicitor were looking for. He denied that this was an attempt on his part to get possession of lab books relating to the hysteresis project.
1242 Dr Gray said he thought Dr Jones gave him two or three books. He did not recall four. Each related to the laboratory work on the hysteresis project. Dr Gray said that he claimed at the time that the books were in fact the property of CRI. He denied that this was not a true statement. Asked about the conversation with Dr Jones following the commencement of the present litigation, he did not remember saying "what lab books?"
1243 The lab books in question were not produced in these proceedings. It was put to Dr Gray that the reason they had not been produced was that he had "sent them away in circumstances where the other parties couldn't get access to them". Dr Gray denied that. He said he never had possession of the books. They were repatriated to the CRI together with a number of other documents inadvertently sent to Sirtex. He denied that he had made any deliberate attempt to hide or destroy the books or get rid of them. He accepted the proposition that they would be the best contemporaneous evidence of the process of invention and the development of the technologies.
1244 On 2 May 2005 Dr Gray, signing himself as Chairman of CRI, wrote to Dr Jones at Sirtex. Under the heading "Re: discovery of Documents" he pointed out that part of the legal process involved parties revealing documents to other parties. This would only apply to documents between the plaintiff and defendant and not between the defendants. He referred to significant data related to the research activities of CRI generated by Dr Jones while he was employed at the Institute. He said:
All research activities, data, documents, correspondence, knowledge and documentation of any kind as well as the source and location of any such information that related to any and all activities undertaken during your employment with the CRI are not to be disclosed to any other party, including Sirtex Medical Limited and their legal representatives, unless specifically authorised in writing from the Chairman of CRI or Mr Paul Tottle the legal representative of CRI.
Dr Gray asserted that Dr Jones' obligations to CRI to maintain confidentiality survived the period of his employment and threatened legal action should confidential information be disclosed without written authority. Copies of this letter were sent to the CRI Board and Mr Tottle, the CRI's solicitor, and Mr Bennett, who was acting for Dr Gray.
1245 Dr Jones' evidence in relation to the laboratory books was not challenged in cross-examination on behalf of Dr Gray. Dr Gray did not, in substance, contradict Dr Jones' evidence. I accept Dr Jones' evidence that he was requested by Dr Gray to deliver the laboratory books to him and that he did so. I also accept that when he asked Dr Gray, in January 2004, about the laboratory books, Dr Gray said:
What lab books ?
1246 There are a number of hypotheses open on this evidence. One is that Dr Gray has knowingly refused to produce the books in the discovery process. Another is that he had lost them and forgot about them. Another is that he sent them to a third party (eg CRI or Sirtex) and had forgotten about them. Dr Jones appeared to have placed the worst construction on the "what lab books?" comment at the time, thinking it was a deliberately false denial of possession. On the other hand the words are consistent with forgetfulness. Absent nuance and tone of voice, no judgment can be made from the bare words. Dr Jones' impression, recalled more than three years after the event, is not evidence of Dr Gray's meaning. Dr Jones had given the books to Dr Gray in mid 2002 and Dr Gray's last communication about them, before his January 2004 conversation with Dr Jones, was in November 2002 in his email to Mr Sutton. The circumstance that the laboratory books are missing is suspicious. However, the evidence does not allow me to conclude positively that Dr Gray has deliberately withheld them. It does cause me, however, to doubt the reliability of his recollection where it serves his interests to forget.
UWA investigates Sirtex IP - 2002
1247 Mr Heitman, as noted earlier, was aware in 2002 of the Local Court proceedings involving Dr Williams and CRI and Dr Gray. Those proceedings were begun in March 2002. He became Acting Director of Legal Services in May 2002 after the death of Ms Key. He succeeded her as Director in November 2002. There was no evidence during the period from March to November 2002 that UWA did anything to pursue its claims against Sirtex.
1248 Dr Andrew Sierakowski was employed by UWA as Director of the Office of Industry and Innovation (OII) from January 2001. When he commenced that employment he reported directly to the Pro Vice-Chancellor (Research) Professor Barber.
1249 In October or November 2002 Dr Sierakowski met Dr Williams in relation to a project she wanted to commercialise. During their conversation she made a comment about Dr Gray and Sirtex. Dr Sierakowski did not recall the comment but it did inspire him to ring Dr Williams after the meeting to further discuss what she had said.
1250 Dr Williams told Dr Sierakowski that she did not think Dr Gray had behaved well towards his researchers. He had made Dr Chen, who was working under him, assign her intellectual property to him for a token amount. These comments caused Dr Sierakowski to wonder about the intellectual property said to have been developed by Dr Gray. He could not understand how UWA intellectual property could be assigned to some other party without UWA being involved. He told Dr Williams that he would investigate the matter on behalf of UWA. However he did not do so immediately because the matter did not fall within his core duties at OII.
1251 About two weeks after speaking with Dr Williams, Dr Sierakowski asked Professor Barber why UWA did not have any shares in Sirtex. He could not recall Professor Barber's reply but said that he did not receive a clear answer to his question. Dr Sierakowski said in cross-examination that Professor Barber just sort of said "don't worry about that".
1252 In February 2003 Dr Sierakowski decided, after discussion with a number of people at UWA, that the ownership of the intellectual property said to have been developed by Dr Gray warranted further inquiry. He reviewed files on Dr Gray, Sirtex and Paragon Medical on the UWA filing system. He inspected Sirtex websites and researched Sirtex on the ASX.
1253 Dr Sierakowski sent a memorandum on 28 February 2003 to the then Pro Vice-Chancellor (Research) with a copy to Mr Heitman. In his memorandum he stated his concern that UWA had been compromised. He also provided a copy of the files he had extracted to Mr Heitman. Mr Heitman, after reviewing the memorandum, read the Sirtex prospectus. This gave him a record of the relevant patent applications and grants. He also saw the statement that the directors were not aware of any claims to ownership of the technology.
1254 Dr Sierakowski met with Professor Barber on 5 March 2003. By that time Professor Barber was working for the CSIRO. Dr Sierakowski's contemporary file note records Professor Barber informing him that in 2000 Julia Frodsham and Linda Key were getting ready to prosecute an IP case against Dr Gray. Professor Barber told him that he had put a hold on the action at that time believing that there was not a strong enough case and that the costs to UWA to fight such an action would be too high.
1255 Dr Sierakowski gave Mr Heitman an account of his meeting with Professor Barber. On 11 March 2003 he obtained a copy of the Sirtex prospectus and sent it to Mr Heitman and the Pro Vice-Chancellor (Research), attached to an email referring to the patents which had been filed. He posed the question, "So who owns background IP going into the future technology (patents listed on pgs # 55/56)?". He referred to the CACS agreements and UWA and said "all looks very fishy".
1256 One of the reasons underpinning Mr Heitman's decision that an investigation ought to take place included a proposed bid for Sirtex by Cephalon Inc. He said in evidence that this had given an indication that the intellectual property had a significant commercial value which made it an interesting case for investigation. Sirtex submitted that there was nothing in the evidence to suggest that Mr Heitman or anyone else from UWA had become aware of any facts material to determining whether UWA had an interest in the inventions that were not already known long before. I agree with that submission.
1257 In the middle of March 2003, Mr Heitman was given the go ahead to engage external solicitors. He instructed Jackson McDonald on 26 March 2003 to undertake enquiries into the matter for UWA. He did not conduct any further investigations into the matter after that time, although he had the carriage of it within the Legal Services Office and received progress reports from Jackson McDonald.
1258 Professor Robson accepted that the UWA Executive did not initiate any formal approach to seek external advice until 2003. The matter only arose after the death of Linda Key and when Dr Sierakowski was working as the Director of Industry and Innovation.
the sum of $950,000 advanced from 1998;
the sum of $1,311,515 advanced from 2004 and continuing to 2007.
Apart from funds expended on the renewal of DOX-Spheres patents there had been no other expenditure by Sirtex in relation to DOX-Spheres.
1329 Mr Wong also set out a shareholding history of the company up to 21 December 2006. He exhibited a confidential exhibit to his affidavit containing information from Registrys Ltd. Because it contained personal details of current and former members he was concerned to avoid any suggestion that he might have disclosed their details. The history indicated substantial shareholder trading during the time of Sirtex's existence. I accept Mr Wong's evidence.
UWA's causes of action against Sirtex - some defined terms
1330 UWA alleged breaches by Dr Gray of his contract of employment with UWA and of fiduciary duties he owed to UWA. There are some defined terms in the statement of claim which are used in respect of particular inventions, patent applications and assignments of inventions and associated rights. It is convenient to set out those terms before outlining the causes of action as it is the conduct of Dr Gray in relation to the designated inventions, applications and assignments that are said to have constituted the various breaches of his contract of employment with UWA and of his fiduciary duty. The causes of action against Sirtex arise out of its alleged knowing involvement in Dr Gray's breaches of fiduciary duties to UWA. The terms are as follows:
The SIRT-Spheres Inventions comprising:
1.1 The invention disclosed in Australian Provisional Patent Application No PR0983 dated 25 October 2000 entitled "Polymer based Radionuclide Containing Microspheres" and in Patent Cooperation Treaty Application PCT AU/01/01370 entitled "Polymer based Radionuclide Containing Particulate Material" (SIRT-1).
1.2 The invention disclosed in Patent Application AU 54724/94 entitled "Radioactive Particles for Treatment of Cancer" (SIRT-2)(s/c 12).
The DOX-Spheres Invention being that disclosed in Patent Application AU PN2492 entitled "Controlled Release Matrix for Drugs and Chemicals" (s/c 36).
The Thermo-Spheres-1 Invention being that disclosed in Patent Application AU PN9782 entitled "Targeted Hysteresis Hyperthermia as a Method for Treating Cancer" s/c 65).
The Thermo-Spheres-2 Invention, being that disclosed in Patent Application AU PP0081 entitled "Improved Targeted Hysteresis Hyperthermia as a Method for Treating Diseased Tissue" (s/c 92).
The Thermo-Spheres-3 Invention being that disclosed in Patent Application PP8998 entitled "Magnetic Material".
The Gray SIRT-2 Applications. These refer to applications made by Dr Gray for patents in countries including Canada, Europe, Japan, the Peoples Republic of China and the United States of America in reliance upon the priority date created by Australian Patent Application AU54724/94 filed on or about 21 January 1994 (the SIRT-2 Australian Application) and the Patent Cooperation Treaty Application PCT/AU95/0027 filed by Dr Gray on or about 20 January 1995 (the SIRT-2 PCT Application).
The Gray/Chen DOX-Spheres Applications, being applications for patents made by Dr Gray and Dr Chen in counties including, at least the United States of America in reliance upon the DOX-Spheres PCT Application filed on or about 17 November 1994 by CRI at the request of Dr Gray and Dr Chen and relying upon the DOX-Spheres Provisional Application filed on or about 18 November 1993 by Dr Gray and Dr Chen (s/c 47).
The Thermo-Spheres-1 Invention Provisional Application being an application filed by Dr Gray on or about 10 May 1996 (s/c 67).
The Gray/Jones Thermo-Spheres-1 Invention Application, being an application by Dr Gray and Dr Jones for patents in countries including, at least, the United States of America relying upon the Thermo-Spheres-1 Invention PCT Application filed by Sirtex on or about 9 May 1997 with the consent of Dr Gray and the Thermo-Spheres-1 Invention Provisional Application.
The Gray/Jones Thermo-Spheres-2 Invention Application, being the application by Dr Gray and Dr Jones for patents in countries including, at least, the United States of America, relying upon the Thermo-Spheres-2 Invention Provisional Application filed by Sirtex on or about 29 October 1997 with the consent of Dr Gray and Dr Jones (s/c 99).
The Gray/Jones/Cammerano Thermo-Spheres-3 Invention Application, being an application for patents in countries including, at least, the United States of America, by Dr Gray, Dr Jones and Dr Cammerano relying upon the Thermo-Spheres-3 Invention Provisional Application filed by Sirtex on or about 3 March 1999 with the consent of Dr Gray.
The LCI/RPH Memorandum of Agreement made on 2 November 1992.
The LCI/UWA Affiliation Agreement made 27 October 1995.
The CACS Agreement made on 1 March 1996.
To them Sirtex added the Relocation Agreement of 29 February 1996.
1371 UWA was not a party to the Memorandum of Agreement between LCI and the Foundation. It was an arrangement, not of any legal force, whereby LCI would direct funds for cancer research to the Medical Research Foundation and advise it of the projects which it supported. As was submitted by Dr Gray, it created a source of funding for him external from, and independent of, UWA. This occurred at a time when he was experiencing difficulty in obtaining the funding he wanted from within his department. Moreover, Uniscan had not proven to be a source of any significant funding.
1372 Dr Gray submitted that LCI had disclosed its interest in funding cancer research from as early as February 1991. I accept that UWA was aware that LCI was interested in funding cancer research from that time.
1373 Dr Gray submitted that from 1992 LCI was an "outside organisation" for the purposes of Patent Regulation 3(1). That regulation prohibited the acceptance, without the prior consent of the Vice-Chancellor, of offers of financial support from outside organisations which might claim rights in any invention made or developed in the course of work undertaken with such support. I am not satisfied that LCI was at that time an organisation which fell into that classification. In any event, there was nothing in the Memorandum of Agreement or in UWA's awareness of LCI's funding intentions which could be taken to have affected Dr Gray's contractual relationship with UWA.
1374 Dr Gray next pointed to the UWA/LCI/CRIAffiliation Agreement of 27 October 1995. Under that agreement UWA was to be the "notional employer" of staff funded by the Institutes. It would also process all applications for research funding from granting bodies. The Institutes were to direct funding applications for their staff through UWA. Dr Gray was the Medical Director of the Institutes. It is clear however that he remained a UWA employee responsible to the Executive Dean of Medicine and Dentistry.
1375 Shortly prior to the Affiliation Agreement being finalised Mr Orr had written to Dr Gray stating his view that his appointment as a Professor of Surgery in the Department of Surgery continued. It was submitted by Dr Gray that by entering the Agreement UWA consented to him taking on a role which had the capacity to create conflicts of interest. That may be so, but it made no difference to his status or the terms of his employment as an employee of UWA.
1376 Both the Affiliation Agreement and the CACS Agreement were in very similar terms. There was an inappropriate transposition from the Affiliation Agreement into the CACS Agreement treating the newly designated centre as a distinct entity in place of the Institutes as though UWA were making an agreement with it. In my opinion, CACS comprised UWA and the Institutes. Dr Gray's responsibilities as Director of CACS were effectively in the same terms as his responsibilities as Medical Director under the Affiliation Agreement. These aspects did not affect his status as an employee of UWA.
1377 Clauses 4.7 and 4.8 of the Affiliation Agreement and of the CACS Agreement did appear to constitute an agreement about how UWA would approach the question of intellectual property developed by its staff at the Institutes and at CACS. Counsel for Dr Gray acknowledged that there was an obvious tension between those provisions and the clauses which provided that UWA would be the employer of the staff of the Institutes and CACS. Clauses 4.7 and 4.8 were also at odds with the standard terms of the Patents Regulations. But Dr Gray was not a party to either the Affiliation Agreement or the CACS Agreement. Neither in terms purported to affect his conditions of employment as a member of the UWA academic staff.
1378 It was submitted that Dr Gray's contractual obligations were to be read against the effect of the agreements under either the Patents Regulations or the IP Regulations. It was submitted that the incorporation of the Regulations, which made provision for special agreements, had the effect that the incorporated contractual obligations were varied to the extent that any special agreement covered Dr Gray's work.
1379 Sirtex submitted that the CACS Agreement indicated an understanding between the parties that some research conducted through CACS would have no connection with UWA. Clause 3.1.1 indicated that UWA's formal status as an employer and paymaster was not intended to carry with it a right to all intellectual property conceived within the scope of the former employment. The legal relationship between UWA, LCI, CRI and the personnel in CACS was said to be similar to the previous position between UWA, LCI and CRI under the Affiliation Agreement, namely:
To the extent that CACS developed intellectual property through funds possessed by UWA, UWA would have a right to negotiate for an interest; and
To the extent that CACS developed intellectual property through funds unconnected with UWA, UWA would have no interest.
1380 Sirtex submitted that the way in which the parties treated CACS, namely as a partnership and the words of clause 4.7 made it clear that CACS was not subject to UWA's internal intellectual property policy. To put it another way, and consistently with the IP Regulations, UWA had expressly agreed for an arrangement "governing ownership of intellectual property" which was intended to prevail over any pre-existing arrangements.
1381 In discussing the Affiliation Agreement, UWA submitted that on his own evidence Dr Gray was never a staff member of LCI and never employed by CRI. His position as Medical Director was not that of an employee. I agree with that proposition.
1382 UWA submitted that the terms of the Affiliation Agreement and the CACS Agreement had no effect upon the claims it makes against Dr Gray or Sirtex. Relevantly, UWA submitted that the language of the CACS Agreement establishing CACS as a collaborative Category B Centre did not establish or modify any rights to which UWA was otherwise entitled. Neither LCI nor CRI was a tenant of the Medical Research Foundation building. At all times Dr Gray's research group occupied space provided by UWA. Under the Affiliation Agreement UWA was obliged to be the employer of staff funded by the Institutes and in the case of the CACS Agreement, staff funded by grants processed through UWA. Clause 4.1 of each agreement recognised that Dr Gray as a UWA employee remained responsible to the Vice-Chancellor through the Executive Dean of Medicine and Dentistry.
1383 UWA's case was that neither Dr Gray nor Sirtex had identified any Institute grants or CACS grants which funded the relevant development of intellectual property for the purposes of clause 4.7. As to clause 4.8 there was no suggestion that UWA had been made a party to any separate agreements relating to projects with commercial application. UWA submitted that there was nothing in the Agreements to modify the obligations owed by Dr Gray or any other employee of UWA to UWA. There was nothing in either agreement which created an assignment of rights or obligations in relation to intellectual property or otherwise.
1384 In Victoria University of Technology (2004) 60 IPR 392, Nettle J observed that the work which an employee is retained to perform can and often does change over the period of employment. The nature of the work that an employee is retained to perform at any point of time must be assessed by reference to the work performed at that point of time. That principle has application to the changed circumstances in UWA's claims to intellectual property rights reflected in clauses 4.7 and 4.8 of the Affiliation Agreement and the CACS Agreement. If there were, contrary to my primary conclusion, an implied term in Dr Gray's contract vesting rights in relation to his patentable inventions in UWA, then the Agreements negatived that implication in the circumstances to which they applied. Clauses 4.7 and 4.8related to intellectual property rights developed through work funded by Institute grants under the Affiliation Agreement or CACS grants processed by UWA under the CACS Agreement.
1385 Sirtex pointed to the Relocation Agreement of 29 February 1996 entered into between UWA, RPH and Dr Gray in his capacity as Director of CACS. In that agreement it was stated that CACS was a "partnership" between UWA, LCI and CRI and on that basis would be accorded the status of a department within the Faculty. Under the agreement UWA was to pay 70% of Dr Gray's salary for up to five years and RPH 30% of his salary. UWA agreed to pay 25% of his secretary's salary and RPH 75%. The arrangements were foreshadowed in a letter from Professor Palmer to Dr Gray on 29 January 1996. Under clause 7 of the Relocation Agreement, RPH was to provide $20,000 annually for five years to be used as a contribution to the costs of a research appointment in CACS. The agreement made no express provision for which entities had an interest in intellectual property developed through CACS. That was a matter covered by clauses 4.7 and 4.8 of the CACS Agreement.
1386 Sirtex referred to Dr Gray's work for the old Paragon Medical, ASPL. It pointed out and I accept that there was no suggestion that Dr Gray did any research in his capacity as an officer of ASPL. Any work he did for Paragon Medical was clearly outside the scope of his UWA employment. UWA was aware of his role in ASPL from 1994 onwards. Dr Gray's work for Sirtex was also clearly outside the scope of his work for UWA. He did not conduct any research for Sirtex until, at the earliest, May 1997 when the transactions between Nomura/JAFCO, Sirtex, CRI and Gray were effected.
1387 As to the 0.3 fractional appointment which came into effect on 3 March 1997, Sirtex submitted that it significantly reduced the scope of Dr Gray's employment and made it clear to him and UWA that the majority of his time would be spent on work outside the scope of UWA's employment. I accept that proposition. His work at RPH was clinical. If there had been an implied term in relation to the inventions he developed as a fulltime employee of UWA it was negatived by the new arrangements. After March 1997 he was neither employed by UWA to invent, nor to research.
1388 In summary I find that from 1985 until the Affiliation Agreement in 1995, Dr Gray was a full time employee of UWA and any research he conducted was within the scope of his UWA employment. Whether or not such work was done with funding support from LCI or CRI did not change his status as a full time employee of UWA nor the character of the work that he did.
1389 From the time of the Affiliation Agreement in October 1995 to the CACS Agreement in March 1996 intellectual property derived from work funded by LCI or CRI under the Affiliation Agreement was for the benefit of LCI or CRI subject to UWA having a right to negotiate for a share of the profits. Work for RPH was within the scope of Dr Gray's UWA employment.
1390 Following the CACS Agreement, his work for CACS was within the scope of his UWA employment but subject to the terms of the CACS Agreement which meant that intellectual property developed during that time was for the benefit of CACS staff subject to UWA having a right to negotiate for a share of the profits.
1391 To the extent that Dr Gray worked for old Paragon Medical or ASPL his work was outside the scope of his UWA employment.
1392 From his fractional appointment conversion in March 1997 to his resignation from UWA in November 1997 Dr Gray worked for UWA, RPH, CRI, LCI, CACS, old Paragon Medical and Sirtex. He was only employed as to 30% of his time at UWA. That employment was for clinical work at RPH. On any view of UWA's rights to Dr Gray's invention,I am satisfied that the intellectual property generated by research work funded by LCI and grants processed through CACS during that time did not vest in UWA. At best it had aright to negotiate in respect of it. His work for Sirtex during that time was outside the scope of his UWA employment.
Dr Gray's defences based on the Affiliation and CACS Agreements
1393 In paragraphs 2A to 2K of the defence, Dr Gray pleaded what he called the 1995 Cancer Centre Agreement. On the facts pleaded, this was a reference to the Affiliation Agreement. He pleaded the terms of the Affiliation Agreement and two implied terms. The first implied term was that all cancer research that had been undertaken by Dr Gray or under his supervision would in future be undertaken as part of the activities of "the centre to be established pursuant to the 1995 Cancer Centre Agreement". He also pleaded that ownership of the cancer research, that he had undertaken or that had been done under his supervision or would in future be undertaken as part of the activities of the CACS, "would be determined in accordance with the terms of that agreement". He pleaded the Relocation Agreement (2E) and the CACS Agreement (2H). He alleged identical implied terms in the CACS Agreement.
1394 In paragraph 2K of his defence he pleaded that if in March 1996 UWA had any rights in respect of cancer research that had been undertaken by him or under his supervision, it had elected not to maintain or enforce those rights or alternatively had waived them. This was referred to in UWA's submissions as the "Transfer or Abandonment Argument". The point was made that the defence was not responsive to any allegation made in the statement of claim.
1395 I accept the UWA submission that there was no basis for the implication of the terms pleaded. The agreement did not require either of them for the purpose of efficacy. It did not speak at all about the transfer of research activities.
1396 In responsive submissions, Dr Gray argued that there was evidence that existing cancer research would be undertaken as part of CACS. He referred to a letter from Professor Palmer. It was said to be plain from the terms of the letter that his entire research would be undertaken as part of CACS. That, of course, says nothing about the transfer of existing rights. Dr Gray said there were no existing rights of UWA in respect of intellectual property developed by employees of CRI such as Dr Jones, who were transferring their appointment nominally to UWA pursuant to the CACS Agreement. Then he suggested the issue was not so much a transfer of rights but a modification of rights by the express terms of clause 4.7.
1397 The transfer and abandonment pleas set out in paragraphs 2A to 2K inclusive of the defence are not made out.
Agreement 5 March 1997
1398 Dr Gray pleaded in his defence an agreement which he said was made in the course of negotiations on or about 5 March 1997 between himself and the Dean of the Faculty of Medicine and Dentistry. Those negotiations were said to have led to the alteration of his terms of employment so that he was employed on a 30% basis, his employment was restricted to the performance of clinical surgical duties at RPH and RPH paid UWA the whole of his salary. He said that it was agreed in the course of the negotiations leading to that arrangement that when he was not engaged in the employment of UWA he would be seeking to commercialise the results of research undertaken by him or under his direction and with the financial support of CRI in connection with the treatment of cancers and in particular liver cancers.
1399 In his affidavit evidence Dr Gray said that in January 1997 he was "in conversation with Professor Landau … over possible conflicts in my duty of care and negotiating a reduction in my University employment". He referred to negotiating with Professor Landau about the need to reduce his employment with UWA to remove the potential for conflicts of interest.
1400 Professor Landau denied that Dr Gray negotiated with him on the basis that his reduction to a 30% appointment would reduce the potential for conflict of interest. Professor Landau recalled, after reviewing the relevant correspondence, that Dr Gray wanted to use the salary savings from his reduction to fund staff at CACS. He did not recall Dr Gray at any time asking him to vary any terms of his employment contract relating to ownership of intellectual property or the application of the intellectual property regulations. I am not satisfied that the agreement pleaded by Dr Gray is made out on the evidence.
Modification of the Regulations
1401 At a number of points in the defence, Dr Gray pleaded that the terms of the Affiliation Agreements disapplied the Patents Regulations to him during his appointment "as Director of the Cancer Centre". The defence designated the Affiliation Agreement as the "1995 Cancer Centre Agreement" and the CACS Agreement as the "1996 Cancer Centre Agreement". In [8A.2] of the defence Dr Gray can be taken as alleging that the Patents Regulations did not bind him upon his appointment as Medical Director of LCI and CRI. There was also said to be an implied term of the CACS Agreement that the Patents Regulations would not apply to any employees of UWA who were employed to work within CACS (8A.8). The Regulations were also said to have ceased to apply to Dr Gray when he was appointed Director of CACS. (8A.9) Similar pleas were made with respect to the IP Regulations (13.5 and 23.1.5 and 23.1.6). In my opinion the agreements did not avoid whatever application the Patents Regulations or the IP Regulations had when and to the extent that they were in effect. There is no legal mechanism by which that result could occur. The defence pleas that the Regulations were somehow disapplied by reason of the Affiliation Agreement or the CACS Agreement, cannot succeed.
Inventions for treatment of the human body
1402 None of the parties in these proceedings had an interest in contending that the subject matter of the various patents in issue was not patentable on the basis that they were methods for treatment of the human body. That issue has not been finally settled by the High Court but has been resolved in favour of patentability by the Full Court of the Federal Court.
1403 The question of the patentability of methods for treating humans appears to have been discussed in three High Court decisions and mentioned in a fourth. Maeder v Busch (1938) 59 CLR 684 concerned a patent for an improved process for producing permanent waves in human hair. The patent was held invalid because of prior common knowledge and public user. However the court did raise a question about whether a claim for a new method of conducting an operation on a part of the human body, as distinct from a claim relating to an appliance or substance which could be used upon, or in connection with, the human body could be protected under the law relating to patents. Latham CJ was "very doubtful" whether a claim for a new method of conducting an operation upon a part of the human body could be regarded as a "manner of manufacture" (at 699). Dixon J left open the general proposition that a mere process or method for the treatment or manipulation of the human body could not afford patentable subject matter (at 707). McTiernan J recognised the doubt about the question (at 708). The doubts revolved, to some extent, around the question whether a treatment would be a mere process and not patentable.
1404 The second High Court decision in which the issue was canvassed was National Research Development Corporation v Commissioner of Patents (1959) 102 CLR 252 at 275 the Court referred to Maeder 59 CLR 684 and observed that:
The exclusion of methods of surgery and other processes for treating the human body may well lie outside the concept of invention because the whole subject is conceived as essentially non-economic…
1405 The third High Court decision was Joos v Commissioner of Patents (1972) 126 CLR 611, a decision of Barwick CJ. It concerned a patent for an invention entitled "Process for improving strength and elasticity of keratinous material". It was said to claim as an invention a process for the treatment of parts of the human body, namely human hair and nails while attached to or growing upon the human body. Barwick CJ held that a process otherwise appropriate for the grant of a monopoly under the Statute was not incapable of being the subject of the grant only on the ground that it was a process for the treatment of part of the human body. The treatment was cosmetic. Barwick CJ said that for the purpose of deciding the question of whether the cosmetic treatment was a proper subject for a patent (at 619):
… it may be granted that a process for the treatment of the human body as a means of curing or preventing a disease, correcting a malfunction or removing or ameliorating an incapacity is not a proper subject for the grant of a monopoly under the Act.
The concession was limited to the medical treatment of disease, malfunction or incapacity.
1406 The three High Court cases were considered by the Full Court of the Federal Court in Anaesthetic Supplies Pty Ltd v Rescare Ltd (1994) 50 FCR 1 which was concerned with a patent for a device for treating sleep apnoea. The Court held the patent invalid on the ground of an inadequate description of the invention in the provisional specification and consequent lack of fair basing of the patent claims upon that specification.
1407 Lockhart J reviewed decisions in a number of jurisdictions. There was no case in Australia where a process for the treatment of a human ailment or disease had arisen for consideration. His Honour said (at 19):
In my opinion, there is no justification in law or in logic to say that simply because on the one hand substances produce a cosmetic result or a functional result as opposed to a curative result, one is patentable and the other is not. I see no reason in principle why a method of treatment of the human body is any less a manner of manufacture than a method for ridding crops of weeds as in NRDC. Australian courts must now take a realistic view of the matter in the light of current scientific development and legal process; the law must move with changing needs and times.
Wilcox J took a similar approach. Sheppard J dissented.
1408 In Advanced Building Systems Pty Ltd v Ramset Fasteners (Aust) Pty Ltd (1998) 194 CLR 171, the High Court discussed the scope of s 100(1)(d) of the 1952 Act. That provision provided for revocation of a patent on the ground that the claimed invention "was not an invention within the meaning of the Act". Section 6 of the Statute of Monopolies had excluded any means of new manufacture which was "contrary to law" or "generally inconvenient". The Court said, without elaboration, (at 190):
The classification of certain methods of treatment of the human body as an inappropriate subject for grants under the Act appears to rest on this footing.
1409 In Bristol-Myers Squibb Co v FH Faulding & Co Ltd (2000) 97 FCR 524 the Full Court followed the obiter views of the majority in Anaesthetic Supplies Pty Ltd 50 FCR 1. The case concerned an invention for a method of administering an anti-cancer drug called Taxol. Black CJ and Lehane J considered that they should adopt and apply the view of the majority in Anaesthetic Supplies Pty Ltd 50 FCR 1 which had been reached after "a close and persuasive analysis of principle and authority" (at 529-530):
In taking this course, we are fortified by two considerations. The first of these is what seems to us to be the insurmountable problem, from a public policy viewpoint, of drawing a logical distinction which would justify allowing patentability for a product for treating the human body, but deny patentability for a method of treatment: see per Davison CJ in NZ Wellcome Foundation Ltd v Commissioner of Patents [1979] 2 NZLR 591 at 620…
They also referred to Gummow J at first instance in Anaesthetic Supplies Pty Ltd v Rescare Ltd (1992) 111 ALR 205 at 238. I accept, on the basis of the decisions of the Full Court of the Federal Court, that to the extent that the inventions in issue in this case involved methods for treatment of disease, they were not thereby deprived of patentability.
The development and/or discovery of inventions
1410 In its statement of claim UWA pleaded that in the course of his work at UWA and within the scope of his employment Dr Gray and/or Dr Chen and/or Dr Jones and Dr Cammarano "developed and/or discovered certain inventions" which were patentable and commercially significant. The inventions and their developers or discoverers were pleaded as:
The SIRT-Spheres inventions - by Dr Gray.
The DOX-Spheres invention - by either or both Dr Gray and Dr Chen.
The Thermo-Spheres 1 invention - by either or both Dr Gray and Dr Jones.
The Thermo-Spheres 2 invention - by either or both Dr Gray and Dr Jones.
5. The Thermo-Spheres-3 invention - by either Dr Gray or Dr Gray and Dr Cammarano.
The definitions, in the statement of claim, of the terms used to designate the inventions have already been set out in these reasons.
1411 The term "developed and/or discovered" does not appear in the Patents Regulations or the IP Regulations. The notification obligation in reg 6 of the Patents Regulations applies to "any patentable invention made or developed" by the relevant staff member. The IP Regulations apply to "intellectual property" which is "created" and is likely to be "commercially significant". Neither in the statement of claim nor otherwise were particulars given by UWA of what acts, by what persons, gave rise to the development and/or discovery of the inventions. It alleged the employment dates of Drs Gray, Chen and Jones and the filing of various applications which were not in dispute. UWA's explanation of the basis of the pleaded allegations really appeared for the first time in its Inventions Submissions filed on 25 June 2007. The discussion that follows proceeds on the assumption that the primary conclusion that there was no implied term in Dr Gray's contract vesting rights to his inventions in UWA is incorrect.
1412 In its Inventions Submissions, UWA characterised the inventions it was pleading as broadly made up of three streams of technology comprising six families of patents. The streams of technology and the respective families were identified thus:
A. Radioactive microspheres (SIRT 1 and SIRT 2)
Family 1: resin-based radioactive microspheres (SIRT 1)
Family 2: ceramic-based radioactive microspheres (SIRT 2)
B. Chemotherapeutic microspheres (DOX-Spheres)
Family 3: Chemotherapeutic microspheres
C. Heat generating microspheres (Thermo-Spheres)
Family 4: Thermo 1
Family 5: Thermo 2
Family 6: Thermo 3
Each family heading appeared above a list of patent applications of various kinds.
1413 UWA also relied upon the inclusion of "alleged invention" in the definition of "invention" in the 1990 Act (as in its predecessors). That term was explained by Isaacs J in Rogers v Commissioner of Patents (1911) 10 CLR 701 at 713 as "what, if novel, would be an invention". In Commissioner of Patents v Microcell Ltd (1959) 102 CLR 232 at 236 Menzies J treated it:
… as intended to do no more than make clear that when an application is made it can proceed in accordance with the Act without the applicant having to establish as a prerequisite to any step being taken that it is for an invention, ie a manner of new manufacture, and that the Commissioner is not bound by the applicant's allegation that his manner of manufacture is new any more than by the allegation that what is claimed is a manner of manufacture.
Although an appeal against the decision was allowed by the Full High Court, it did not disapprove the quoted proposition.
1414 UWA submitted, inaccurately, that any provisional application for a standard patent, any complete application for a standard patent and any applications for patents under the Patent Cooperation Treaty fell within the meaning of the words "alleged invention". It is clear that an application is not an invention. This part of the submissions was confusing. There followed a digression into the area of confidential information, it being said in effect that the subject matter of a provisional specification is confidential information, the confidentiality of which is admitted by the filing of the relevant application. There was no pleading of any cause of action in relation to confidential information. And as I have earlier found, there was no contractual obligation on Dr Gray to keep confidential information derived from his research.
1415 UWA said that the word "discovery" used in its statement of claim was intended to comprehend a patentable discovery. The term "developed" was to be given its ordinary and natural meaning. In context it was a reference to "the process of making of an invention and includes incremental advances incorporated in an invention for which protection is claimed". It would not be necessary for the Court to undertake an inquiry into patentability nor to determine whether any application for patent or claim contained within a patent is valid. Rather it should consider the specifications pleaded in relation to each invention and satisfy itself on the balance of probabilities as to whether the inventions described were made during and in the course of the employment of the alleged inventors, Drs Gray, Chen and Jones, at UWA.
1416 UWA said it could discharge the onus of specifying the date or dates of the inventions in respect of which it claimed an interest by having regard to the most specific of the claims. Those claims presented the most specific elaboration of the invention. They reflected the outcome of the research process containing the core of the inventions and hence were most useful for determining the time of the inventions. This was the contention most favourable to UWA as the most specific claims were likely to embody developments latest in time.
1417 UWA submitted that the patents in issue depended upon the PCT applications which had been made and they in turn depended upon the relevant provisional applications for their priority dates. It was said to be "only necessary for the University to demonstrate that the invention as defined in the PCT claims was developed and/or discovered at the latest by the priority date".
1418 Sirtex criticised UWA's approach. It argued that the following steps were appropriate:
Identify the "inventive concept" of each relevant invention as defined by the claims in the relevant Patent Cooperation Treaty.
Determine inventorship including the person responsible for the inventive concept and the time of conception as distinct from its verification and reduction into practice.
Determine how many contractual or fiduciary relationships between UWA and the inventors at the time of the inventorship gave rise to the proprietary rights claimed by UWA.
Before proceeding to determine the correct approach to identification of the relevant "invention" in each case, it is helpful to draw some distinctions relevant to the definition of the inventions in issue.
Ideas, discoveries and inventions
1419 If, contrary to my primary conclusion, there was an implied term in Dr Gray's contract conferring on UWA proprietary rights in relation to his inventions, the scope of the subject matter of the term depended upon the meaning of "invention" in that context. The same question arises if, contrary to my primary conclusions, the Notification Obligation under the Patents Regulations applied. More precisely it is:
When has an invention been made or created for the purposes of the implied term and the regulations?
1420 In order to identify the point in the research and development process at which it could be said that an invention had been made or created, it is necessary to consider related concepts such as "idea'" and "discovery" and the distinctions between them and the "invention" which is based upon them. It is also necessary to consider when an inventive concept may constitute an invention to be distinguished from products or processes that may be used to verify its utility or reduce it to practice.
1421 A distinction between mere discovery and invention has long been made on the basis that it is only when a discovery is applied to a useful end that it comes within the concept of a manner of new manufacture: Lane-Fox v Kensington and Knightsbridge Electric Lighting Co (1892) 29 RPC 413 at 416 (Lindley LJ) . The dividing line is not clear. The High Court said in National Research Development Corporation 102 CLR 252 (at 264):
The truth is that the distinction between discovery and invention is not precise enough to be other than misleading in this area of discussion. There may indeed be a discovery without invention - either because the discovery is of some piece of abstract information without any suggestion of a practical application of it to a useful end, or because its application lies outside the realm of "manufacture".
The Court took as an example the case of a person who finds that a useful result can be produced by doing something which has not been done that way before. The claim for a patent would not validly be answered by saying that although the discovery was ingenious no ingenuity was involved in showing how it might be applied. The Court said (at 264):
The fallacy lies in dividing up the process that he puts forward as his invention. It is the whole process that must be considered; and he need not show more than one inventive step in the advance which he has made beyond the prior limits of the relevant art.
1422 The notion of the "inventive concept" is reflected in the judgment of Fletcher Moulton LJ in Hicton's Patent Syndicate v Patents and Machine Improvements Co Ltd (1909) 26 RPC 339 in which he referred to Watt's idea for the condensation of steam from which the steam engine was developed. The following passage from the judgment was quoted with approval in National Research Development Corporation 102 CLR 252 (at 264):
Now can it be suggested that it required any invention whatever to carry out that idea when once you have got it? It could be done in a thousand ways and by any competent engineer, but the invention was in the idea and when he had once got that idea, the carrying out of it was perfectly easy. To say that the conception may be meritorious and may involve invention and may be new and original, and simply because when you have once got the idea it is easy to carry it out, that that deprives it of the title of being a new invention according to our patent law, is, I think, an extremely dangerous principle and justified neither by reason nor authority.
The point with which the High Court was concerned in quoting that passage is not the point with which this Court is concerned in these proceedings. However, it does indicate that the Court recognised a distinction between the inventive idea or concept and its reduction to practice. So an inventive concept may be patentable when steps taken from the inventive concept to the invention as described in a patent specification are not inventive. It may be that in this context there is some overlap between the category of discovery and that of an inventive concept which is not patentable.
1423 The difference between certain classes of discovery and invention was maintained in the joint majority judgment in Advanced Building Systems Pty Ltd 194 CLR 171. The Court recognised the long established and "clear distinction … between the discovery of one of nature's laws and of its application to some new and useful purpose".
1424 It should be recognised, in drawing these distinctions, that the term "invention" itself is used in different ways. These were considered by the majority in Kimberly-Clark Australia Pty Ltd v Arico Trading International Pty Ltd (2001) 207 CLR 1. The Court observed that the definition of "patentable invention" in s 18(1) of the 1990 Act suggested that "invention" is not used in a uniform sense throughout that Act. There had been debate before the Court about the way in which the complete specification is required by s 40(2) fully to describe the "invention" and end with a claim or claims "defining the invention". McTiernan J had explained the point with reference to s 40 of the 1952 Act in AMP Inc v Utilux Pty Ltd (1971) 45 ALJR 123 where he took the term "invention" as used in s 40 to mean "the embodiment which is described and around which the claims are drawn". In so doing he borrowed from the 3rd (1962) edition of Blanco White Patents for Inventions at 12. The Court pointed out that the term "invention" may give rise to difficulty because it is used in various senses in ordinary parlance and in patent legislation. The 4th edition of Blanco White which it cited referred to four possible meanings:
Dr Self's paper in 1984.
Its use by Veronica Meade in her experiments in 1983/1984 as disclosed in her article.
Dr Gray's proposal written for Uniscan in 1987.
Various grant applications.
He also said it was refined by Dr Richmond in 1998 in an attempt to get a patent.
1467 Dr Gray submitted that the invention in relation to SIRT-1 comprised the discovery and incorporation of the "phosphating method" used to chemically fix the Yttrium so that it was permanently embedded in the microsphere matrix. Drs Burton and Self had consulted with Dr Hodgkin in late 1983 who suggested that they precipitate the Yttrium90 into a soluble salt, phosphate. The method was adopted and solved the leaching problems. Their process was documented in the 1984 Self paper and the Burton protocol document in 1986/1987. Cameron Jones had confirmed that the method resolved leaching issues and that the group was using it when he joined. It was documented in a research grant application made to the Utah Foundation in October 1982. It was also set out in a letter from Dr Burton to Dr Fox dated 12 March 1985 and in a CSIRO application written in 1985 which Dr Hodgkin said was written by him in 1984. Dr Gray submitted there were no issues to resolve in relation to SIRT-1. Nevertheless he made detailed submissions in respect to each of the "problems" identified by UWA. So too did Sirtex.
SIRT-1 - Conclusions
1468 In relation to the various points made by UWA, my conclusions follow:
Microsphere selection
1.1 Microsphere size
Veronica Meade's 1987 article demonstrated that 32.5 micron microspheres combined optimal properties in tumour/normal liver tissue perfusion and homogeneity of distribution. Although the work done was performed on rats, Dr Burton supported its extrapolation to human liver tissue on the basis of their similar vasculature. Dr Gray had relied upon that extrapolation in Appendix 2 to the Thermo-Spheres 1 provisional application lodged on 12 September 1988. There he cited Dr Meade for the proposition that "studies on the distribution of different sized microspheres in hepatic tissues have shown that the optimum therapeutic microsphere size is 32.5 microns". (Meade et al)
I also accept the submissions by Sirtex that the particular size, 32.5 microns, was not part of the inventive concept giving rise to property rights associated with the SIRT-1 PCT application. Only claim 14 alleged the particular size and did it in conjunction with the phosphate precipitation of Yttrium90.
1469 1.2 Microsphere density.
The need to use microspheres of a density sufficiently low to achieve optimal distribution in liver tissue was recognised in 1993. The specific gravity cited in the SIRT-1 PCT (as in the provisional application) was that discussed by Kim et al in the 1962 paper "Radiating Microspheres for treatment of Malignancy" (1962) 52 Surgery.
1.3 Microsphere composition.
The UWA argument appeared to be incomplete on this point. The use of styrene/divinyl benzene was an element of the invention well before Dr Gray arrived at UWA.
1.4 Cross-linking.
The use of 32 micron Yttrium90 microspheres which were 4% and 8% cross linked was described in the Self 1984 paper.
2. Stable incorporation
The use of phosphate precipitation to bind Yttrium90 to the microspheres occurred before 1985. Dr Burton referred to it in the application he wrote for CSIRO/UWA collaborative funding in late 1984 and which he submitted in 1985. In my opinion the use of phosphate precipitation to bind Yttrium90 to the microsphere was conceived before Dr Gray was employed at UWA.
Treatment
3.1 Microsphere size.
This has already been dealt with.
3.2 Use of angiotensin-2.
The use of angiotensin-2 to achieve preferential distribution of blood flow into tumour tissue was established before 1985.
3.3 Radiation dosage.
In my opinion the particular level of dosage was not an element of the inventive concept underlying SIRT-1. It was a result of the use of the irradiated microspheres as point sources delivering discrete radiation dosages to the liver tumour which permitted the use of higher dosages at the level of 80 Gy than would otherwise have been tolerated by human tissue.
1470 The inventive concept underlying SIRT-1 was discovered prior to Dr Gray commencing employment at UWA.
SIRT-2 invention - hollow Yttrium microspheres
1471 In paragraph 12 of its statement of claim UWA alleged that in the course of his work at UWA and within the scope of his employment by UWA, Dr Gray developed and/or discovered the SIRT-2 invention, being the invention disclosed in Patent Application AU54724/94 entitled "Radioactive Particles for Treatment of Cancer".
1472 In the complete specification the invention was described in the following terms, inter alia:
In order to overcome the problem of leaching of the radionuclide from the microsphere carrier, while at the same time maintaining a microsphere with a low density, a microsphere with improved characteristics has been invented. This invention relates to the formulation of pure Yttria microspheres that are either hollow or cup shaped. These microspheres (to be called SIR-Spheres) are formulated to be of a size, shape and density so that they have improved distribution characteristics when administered into the arterial supply of target organs to be treated. In addition, as SIR-Spheres are composed entirely of Yttria each microsphere can deliver a higher amount of ionising radiation. This in turn means that a lesser number can be administered to the target organ in order to deliver the same radiation dose. In another improvement of SIR-Spheres, the composition of the microspheres is of pure Yttria, thereby removing the unwanted ionising radiation emanating from unwanted radionuclides in the microspheres. In another improvement the SIR-Spheres can be neutron activated after manufacture, thereby improving the manufacture process.
1473 The specification went on to describe the production of hollow Yttria microspheres by a process of rapid solidification of particles of Yttria using a process of thermal spraying. In the process of manufacture some microspheres did not form hollow spheres but took on a cup-shaped configuration. The cup-shaped particles were of similar size to the hollow microspheres and also comprised of pure Yttria. They did not significantly alter the characteristics of the batch of microspheres that were produced and could be used for administration to patients. The invention also included the production of cup-shaped particles with a size distribution similar to that of hollow microspheres. The thermal spraying technique resulted in microspheres with a variable size range. Microspheres of the desired size could be sorted by a process of sieving, or using other well described techniques for sorting of small particles based on size. Similarly, the microspheres could be sorted into batches of similar density using conventional techniques separating particles on the basis of density.
1474 The process was then described by reference to the grinding of base Yttria to a fine powder and spray-drying of the powder in the form of a slurry. The slurry contained a binding material which would allow it to form into microspheres when fed through a spray-drying apparatus. Spray dried Yttria could be fed into a thermal jet which resulted in solidification of the spray dried particles. The binding material vaporised in the thermal jet during the process of melting of the Yttria which distended the microspheres into the form of hollow particles. The essential steps for the formation of the hollow particles included the grinding of the basic material to a size of up to several microns in diameter, the formation of aggregates of the basic material containing a suitable binder by spray drying, solidification of the spray dried material in a plasma torch and vaporisation of the binder material during the plasma spraying so that hollow spheres were reliably produced during melting and solidification. There were some 17 claims defining the invention.
1475 In his defence, Dr Gray pleaded that any research in respect of microsphere preparation incorporating radioactive material carried out by him in the course of his employment by UWA was substantially developed and completed prior to that employment and was not research in respect of a patentable invention. He also pleaded that SIRT-2 was discovered by Dr McPherson in or about 1981 in the performance of work at the Department of Material Science at Monash University commissioned by Dr Gray. It was the subject of public disclosure by Dr McPherson in an article entitled "Formation of Metastable Monoclinical Rare Earth Sesquioxides from the Melt" (1983) Journal of Material Science 18,1341-1345. It was further disclosed by Gordana Pravdic in December 1994 in her thesis for the degree of Masters of Engineering Science entitled "Modification of Ceramic Remedy by Plasma Techniques" (PhD thesis, Monash University, 1994). The thesis was supervised by the Department of Materials Engineering at Monash University and funded by a scholarship from CRI. It was the subject of an agreement between Monash University, CRI and Dr Gray that the inventions of McPherson and Pravdic so far as they related to the creation of hollow ceramic microspheres for use in the treatment of cancer would be the intellectual property of Dr Gray.
1476 Sirtex in its defence took the position that SIRT-2 was at all times patentable and commercially significant and was invented prior to Dr Gray's employment by UWA.
1477 It is not entirely clear what the SIRT-2 debate is really about. Despite the expenditure of large amounts of money over many years no workable version of the hollow Yttrium microsphere was ever produced. Those that were produced tended to crack under neutron irradiation. The value of the invention as an asset at present is questionable, although it is not beyond the bounds of possibility that the problems of production, purity and structural integrity under irradiation could be overcome. Sirtex discontinued the hollow microsphere project in 2001/2002. Through Dr Andrew Ruys it developed further iterations of ceramic microspheres for which it obtained separate patents, which are not the subject of these proceedings.
1478 UWA undertook a lengthy analysis, in its written closing submissions, of the problems SIRT-2 sought to solve. These were identified as follows:
Distribution - the need to develop particles of a particular size, shape and density to ensure optimal homogeneous distribution within the target organ and ready administration into the arterial blood supply of the target organ.
Dosage - the need to develop microspheres containing sufficiently high doses of ionising radiation so that an excessive number of microspheres was not required to deliver the required radiation dose to the target organ.
Contamination - the need to ensure the microspheres did not contain unwanted radioactive substances which would cause unwanted and deleterious radiation effects in the target tissue.
Manufacturing - the problem of the method of manufacture of non-leaching microspheres requiring the use of specialised facilities and being potentially hazardous to manufacturing personnel.
Stable incorporation against leaching - the risk of irradiation of normal tissue as a result of the unintended separation or leaching of Yttrium90 particles from microspheres.
Each of these problems, according to UWA, was addressed by the combination of features in the claims to the SIRT-2 Australian application. In my opinion however, the problem oriented approach did not adequately address the inventive concept of SIRT-2 which it was necessary to identify in order to determine the point of invention and the identification of inventorship. In that respect the submissions put by Sirtex were of assistance.
SIRT-2 invention - identifying the inventive concept
1479 Sirtex referred to the claims in the SIRT-2 PCT application as appropriately identifying the inventive concept of SIRT-2 for these purposes.
1480 The SIRT-2 PCT application, PCT AU95/00027, was filed on 20 January 1995. The PCT application described the field of the Invention by stating that it related to a particulate material comprising small hollow or cup-shaped ceramic particles, referred to as microspheres, to a process for their production and to methods for their use. A particular aspect of the invention related to hollow or cup-shaped ceramic microspheres consisting of or comprising a radioactive material and to their use in the treatment of cancer in humans and other mammals. They were designed to be administered into the arterial blood supply of the organ to be treated whereby they would become entrapped in its small blood vessels and irradiated. An alternative form of radiation was to inject the microspheres directly into the tumour to be treated. The background to the invention, as set out in the PCT application, referred to the desirability of having a size, shape and density that would result in optimal homogeneous distribution within the target organ. It referred to the need for radiation emitted to be of high energy and short range. The microspheres should be of such a composition that they contained only the single desired radionuclide. Yttrium90 was the preferred radionuclide. The size of the microspheres should be in the range of 20 to 80 microns and be stable so that no material would leach from them.
1481 The background statement referred to the earlier clinical use of Yttrium90 incorporated into a polymeric matrix formulated into microspheres. There were, however, several instances in which the Yttrium90 leached and caused inappropriate radiation of other tissues. The use of solid glass radioactive microspheres was referred to, as well as the production of light polymeric ion exchange microspheres that did not leach.
1482 The invention as summarised in the PCT application was said, in one aspect, to provide a particulate material comprising hollow or cup-shaped ceramic microspheres having a diameter in range of 5 to 200 microns. In another aspect it provided a process for the production of a particulate material as described above which comprised the steps of:
(a) forming aggregates of powdered ceramic base material with a suitable binder;
(b) heating the aggregates to melt the base material and vaporise the binder to form hollow or cup-shaped microspheres; and
(c) solidifying the molten hollow or cup-shaped microspheres.
1483 After the detailed description, there followed examples and then the claims in the PCT application of which there were 18. Sirtex submitted that claims 3, 12 and 16 appropriately identified the inventive concept of SIRT-2 for the purposes of determining inventorship and entitlement. It is helpful in that context to set out claims 1, 3, 11, 12 and 16 thus:
The Burton 1988 article relating to the use of angiotensin-II.
2. The Meade 1987 article relating to the use of microspheres of approximately 25-50 microns in diameter.
3. The article by Burton et al "Selective Internal Radiation Therapy: Distribution of Radiation in the Liver" (1989) Europ. J Cancer Clin Oncol 25:1487-1491, which was the Burton 1989 article concerning the use of microspheres with a specific gravity of the order of 2.0.
Sirtex submitted that the work described in those papers was published before the earliest possible priority date arising from the SIRT2 Australian Patent application filed on 21 January 1994. The explicit reference to the prior art on the face of the patent meant that the matters set out in such prior art could not form any part of the inventive concept claimed in the SIRT-2 PCT application.
1485 The history of Dr Gray's dealings with Professor McPherson and Professor McPherson's production of particles some of which were spheroidised has already been set out. The funding arrangements entered into between CRI and Monash University for Gordana Pravdic to undertake research into the production of hollow microspheres have also been described. Ms Pravdic's thesis summarised her research as follows:
Investigations have been carried out to determine the conditions that lead to the production of spherical hollow ceramic oxide powders with diameters from 5 to 80 [micron] by melting agglomerated ceramic powders in a DC plasma jet and then rapidly quenching the particles in water. The experimental results indicated that hollow particles were formed from materials which melted over a narrow melting temperature range. It also showed that the type of porosity within the hollow particles as well as the surface morphology was dependent on the material system. It was also found by studies carried out using Yttria that the relative size of the pore is dependent on particle size and it is proposed that the major controlling factor is the thickness of the outer layer through which the gas in the agglomerate could escape during the melting of the agglomerate rather than surface tension or under cooling effects. Surface tension or under cooling effects were shown to produce only minor effects on the relative size of the pore within the particle.
It was submitted by Sirtex that Ms Pravdic's thesis revealed that her work was building upon rather than discovering or otherwise conceding the inventive concept claimed in the broad terms of the SIRT-2 PCT application.
SIRT-2 - Conclusion
1486 I accept the Sirtex submission that, by 1982, Dr Gray had completed the inventive concept of SIRT-2 in the broad terms of claims 1, 11, 12 and 16 of the PCT application. The further work that was undertaken was in the nature of verification or reduction to practice. It was not by way of conception giving rise to inventorship and entitlement. If UWA had been entitled, under Dr Gray's contract of employment to rights in relation to inventions developed in the course of that employment, it would have had no rights in relation to SIRT-2.
DOX-Spheres
1487 UWA pleaded that in the course of their work at UWA and within the scope of their employment by UWA, either or both of Dr Gray and Dr Chen developed and/or discovered the DOX-Spheres invention disclosed in provisional patent application AU PM 2492 entitled "Controlled Release Matrix for Drugs and Chemicals". The application was filed on 18 November 1993.
1488 The invention was said by UWA to comprise the following:
(a) the use of ionic agents to form ionic polymer matrices to carry and control the release of drugs and chemicals containing cationic groups;
(b) the use, according to subparagraph (b), where the ionic agent is dextran sulphate (presumably that should be a reference to subparagraph (a);
(c) the use, according to subparagraph (a), where the ionic agent is amylopectin sulphate, carrageen, chondroitin sulphate, heparin sulphate, heparin, fucoidan, polyaspartic acid, polyglutamic acid, polyinosinic acid, plyactic acid, polyvalent polymeric acids, SP-Sephadex, CM-Sephadex, dextran sulphate cellulose, dextran sulphate agarose, cationic ion-exchange resins or any other agent that contains acidic/anionic groups;
(d) the use of metal ions to complex the drugs loaded onto the ionic polymer matrices according to subparagraphs (a) to (c) to control the release characteristics of active drugs;
(e) the use, according to subparagraph (d), wherein the metal ions are iron, copper, zinc, cobalt, chromium, nickel, palladium, zirconium, titanium, vanadium etc.
(f) the formulation of a degradable supporting matrix carrier system which is suitable for combining with an ionic agent and various ions, including albumin, casein, gelatine, haemoglobin, transferrin, collagen, fibrinogen, fibrin, zein, ferritin, actin and any other agent of similar nature that can form ionic polymer matrices with dextran sulphate or any ionic agent according to subparagraph (c) and metal ions to carry and control the release of drugs and chemicals.
1489 In his defence Dr Gray denied the allegations of invention in the course of his employment by UWA ([36]). In further answer he said that any patentable invention was discovered not in the course of Dr Chen's employment with UWA but in her employment with CRI. He also alleged that she did not discover the invention. It was an idea or concept suggested by himself and Dr Burton or either of them and that all research in respect of it up to and including the developing of the patent specification was carried out by Dr McCulloch, who was an employee of RPH. Dr McCulloch's services as a research chemist were said to have been seconded to Dr Gray by RPH. The defence pleaded Dr McCulloch's paper entitled "Synthesis of Albumin-dextran sulphate microspheres possessing favourable loading and release characteristics for the anti-cancer drug Doxorubicin". It also alleged that while Dr McCulloch's article was in draft, Dr Chen, without Dr Gray's knowledge, obtained Dr McCulloch's agreement to allow her to be named primary researcher and first author to improve her prospects of future employment.
1490 Dr Gray also pleaded in his defence that at all material times microsphere preparation incorporating chemotherapeutic cytotoxic drugs to be used in the treatment of cancer was a concept in the public domain. He particularised this allegation with a number of references to articles and scientific journals, including a number of papers in which Dr Chen was named as co-author. He relied upon Dr Chen's pre-appointment research at the University of Strathclyde. The defence also alleged that any DOX-Spheres invention was the product of work preceding the commencement of, or alternatively, outside the scope or course of Dr Gray's employment by UWA, funded by CRI and further or alternatively, by LCI or conducted at CACS.
1491 A further alternative plea by Dr Gray alleged that if a patentable invention was made by Dr Chen as claimed by UWA, and if it was in the course of her employment by UWA, then it only extended to the introduction of a metal ion into existing known technology in respect of microsphere preparation incorporating cytotoxic chemotherapeutic drugs. The invention was not commercially significant in that clinical tests carried out by Sirtex and others established that it was a less effective method of delivering doxorubicin treatment to tumours than other existing forms of treatment.
1492 Dr Gray also pleaded that, by reason of various prior publications in respect of microsphere preparation incorporating cytotoxic chemotherapeutic drugs for use in the treatment of cancer (other than the introduction of a metal ion) carried out by either or both himself and Dr Chen in the course of employment by UWA, such a process was, as a matter of law, not a patentable invention.
1493 In its defence, Sirtex denied that Dr Gray developed and/or discovered the DOX-Spheres invention within the scope of his employment by UWA. It admitted that the DOX-Spheres invention is and was at all material times patentable, but did not admit that it was commercially significant. Sirtex also replicated the defence pleaded by Dr Gray that the DOX-Spheres invention was a product of work which preceded the commencement of his employment by UWA, was funded by CRI or LCI or conducted at CACS subject to the agreements and arrangements referred to earlier.
The DOX-Spheres provisional specification
1494 The description of the invention in the provisional specification was as follows:
This invention describes a novel formulation for the transport and controlled release of a variety of therapeutic and chemical agents using metal ions-drug interaction as a release control mechanism in combination with either a degradable or non-degradable ionic supporting matrix. One particular application of this formulation is to transport cytotoxic drugs that are designed to be used in patients and animals for the treatment of cancer. The concept of using metal ion-drug complexes in combination with ionic polymers can also be used for the transport and controlled release of other drugs and chemicals for a variety of other applications.
The emphasis on the use of metal ion complexation of the active drugs was apparent in the opening description of the invention.
1495 The background statement in the provisional specification set out two basic requirements for targeted microsphere delivery of chemotherapy to be effective. There was a need to localise sufficient quantities of the drug at the target site to have the desired cytotoxic effect. There was also a need to control the rate of delivery into the tumour milieu that would cause maximum cell destruction. It was therefore essential to design or develop a polymer matrix system that could carry a high load of cytotoxic drug as well as provide a controlled or sustained drug release profile. The Background Statement identified the problem posed for the formulation of sustained release matrices. Matrices with a high drug loading would often release the drug rapidly. This was known as a burst release effect. The conventional approach of using a coating technique could sustain the release of the drug but usually decreased the drug loading. The desirability of a bio-degradable drug complex permitting repeat doses was also identified. The Background Statement continued:
To formulate a system with high drug loading, sustained release but minimum burst release effect and biodegradability, we have developed a biodegradable ionic polymer as the matrix, and used an ionic interaction as the drug-polymer binding mechanism which has achieved a high drug loading. We have developed the formation of drug-metal ions complexes to suppress the burst release. This has resulted in a carrier matrix with all the required properties for clinical use.
1496 Reference was made in the provisional specification to experimental examples. These were set out and described the use of albumin and dextran sulphate as polymer matrices for ionic drugs such as DOX and CDDP. The former was used to provide the supporting structure, the latter the anionic sites for cationic drugs of DOX and CDDP to achieve high drug loading. The development of the drug metal ion complexation was said to minimise the burst release without affecting the favourable high drug loading of the system. The Background Statement continued:
It is known that certain metals have affinity to drugs as well as to polymers. [Referenced to Lee VA, Musin RI and Tashmukhamedov RI, et al, 1990, "Metal complexes of polymers with amino acid residues, formation, stability and controlled biological activity" J Controlled Release, 14, 61] In some cases, the drug-metal complexes can be biologically active. DOX-iron is an example. [Referenced to Beraldo H, Garnier-Suillerot A, Tosi L and Lavelle F 1985, "Iron (III)-adriamycin and iron (III)-daunorubicin complexes; physicochemical characteristics, interaction with DNA, and antitumour activity". Biochem 24, 284] However, drug-metal ion complexation has never been explored before as a drug release control mechanism. Here we are not interested in the controlled release of DOX-iron but rather using the formation of DOX-metal ion and DOX-metal ion-polymer complexes as a control release mechanism to design the system with optimum/desirable release of native DOX.
An example was then given of a technique for the manufacture of both degradable and non-degradable drug complex using DOX. A second example was said to show how the concept of drug-metal ion complexation could be applied to the formation of sustained release systems for metal-based drugs in that case Cisplatin complexed with polymer matrices comprising albumin dextran and chitosan.
1497 The claim set out in the provisional specification was in the following terms:
We claim that we have invented a novel technique for incorporating drugs into a carrier matrix which is superior to other techniques and methods. This claim includes the following techniques
i The use of dextran sulphate as an ionic agent to form ionic polymer matrices to carry and control the release of drugs and chemicals containing cationic groups. Examples of other ionic agents that can be used instead of dextran sulphate include, amylopectin sulphate, carrageen, chondroitin sulphate, heparin sulphate, heparin, fucoidan, polyaspartic acid, polyglutamic acid, polyinosinic acid, polylactic acid, polyvalent polymeric acids, SP-Sephadex, CM-Sephadex, dextran sulphate cellulose, dextran sulphate agarose, cationic ion-exchange resins and any other agents that contain acidic/anionic groups.
ii The use of metal ions to complex the drugs loaded onto the ionic polymer matrices to control the release characteristics of the active drugs. Examples of ions that can be used in his formulation include Iron, Copper, Zinc, Cobalt, Chromium, Nichol, Palladium, Zirconium, Titanium, Vanadium etc.
iii The formulation of a degradable supporting matrix carrier system which is suitable for combining with dextran sulphate or any other ionic agents described above (section i) and various ions, including albumin, casein, gelatine, haemoglobin, transferrin, collagen, fibrinogen, fibrin, zein, ferritin, actin, and any other agent of similar nature that can form ionic polymer matrices with dextran sulphate or any ionic agent above and metal ions to carry and control the release of drugs and chemicals.
1498 It is also relevant to have regard to the claims set out in the DOX-Spheres international PCT application AU94/00708. The claims were as follows:
1. A controlled release preparation comprising an ionic polymer matrix loaded with an active compound, said active compound being complexed with a complexing agent to modify the release of the active compound from the polymer matrix.
2. A preparation according to claim 1, wherein the ionic polymer matrix is in the form of microspheres.
3. A preparation according to claim 2, wherein the microspheres have a diameter in the size range of 10-200 micron, preferably in the size range of 20-70 micron.
4. A preparation according to claim 1, wherein the active compound is a pharmaceutically active compound.
5. A preparation according to claim 4, wherein the pharmaceutically active compound is a cytotoxic or cytostatic drug.
6. A preparation according to claim 5, wherein the cytotoxic or cytostatic drug is doxorubicin, daunorubicin or cisplatin.
7. A preparation according to claim 1, wherein the ionic polymer matrix comprises a biodegradable crosslinked albumin/dextran sulphate matrix.
8. A preparation according to claim 1 wherein the complexing agent is metal ion.
9. A preparation according to claim 8, wherein the metal ion is Fe.
10. A preparation according to claim 1, wherein the ionic polymer matrix is selected from a crosslinked albumin/dextran sulphate matrix and a polystyrene-divinylbenzene based ion exchange resin, and the ionic polymer matrix is loaded with Fe-complexed doxorubicin.
11. A preparation according to claim 1, wherein the ionic polymer matrix is selected from a crosslinked albumin/dextran sulphate matrix and a polystyrene-divinylbenzene based ion exchange resin, and the ionic polymer matrix is loaded with chitosan-complexed cisplatin.
12. A pharmaceutical composition comprising a controlled release preparation according to any one of claims 1 to 11 wherein the active compound is a pharmaceutically active compound, together with a pharmaceutically acceptable carrier and/or diluent.
13. A method of treatment of a human or animal patient, which comprises administration to the patient of a therapeutically effective amount of a controlled release preparation according to any one of claims 1 to 11 wherein the active compound is a pharmaceutically active compound.
14. A method according to claim 13, wherein said controlled release preparation is administered parenterally, preferably intraarterially or intravenously.
15. Use of a controlled release preparation according to any one of claims 1 to 11 wherein the active compound is a pharmaceutically active compound, in the manufacture of a pharmaceutical composition for use in the treatment of a human or animal patient.
DOX-Spheres - Contentions and Conclusions
1499 UWA submitted that the DOX-Sphere's invention was complete at the latest by 18 November 1993 when the provisional application was filed. It was made between 31 January 1991 and 18 November 1993. The significance of the first date was derived from an application that Dr Chen made with Mr Blackbourn, a pharmacist at RPH, to the Medical Research Foundation for funding of a project entitled "Formulation of Sustained Release Carriers for Cisplatin". This application contained the earliest reference in the evidence to the use of chitosin microspheres. There was however at that point no reference to complexing chitosin with cisplatin which appeared in the provisional specification. So, it was said, the complete invention had not been identified at that time so far as it embodied that element.
1500 UWA again took a problem/solution oriented approach to the identification of the invention breaking it down into various individual components and attributing them to the work of particular researchers over particular periods. It listed the problems addressed by the DOX-Spheres inventors:
Identification of a way of delivering sufficient quantities of the relevant drug to a target site.
Identification of a way to suppress burst release of the drug from the controlled release preparation following administration to a patient and to control the rate of drug delivery into the tumour milieu.
1501 Components of the solution to the first problem were said to comprise selection of the appropriate ionic polymer matrix material for the microspheres, selection of appropriate microsphere size, selection of suitable active compounds and the use of the matrix material to deliver active compounds in the treatment of human or animal patients. As to the controlled delivery problem, its solution had, according to UWA, one component which could be identified with one or more of the claims in the DOX-Spheres PCT application. That component was the use of complexing agents to suppress burst release of the active compound from the matrix and to sustain its release.
1502 In my opinion the UWA approach did not address the inventive concept at the heart of the DOX-Spheres invention. This did not include, as it seemed to contend, the use of combined albumin/dextran sulphate microspheres. Dr Chen herself had accepted in cross-examination that the combination which UWA sought to attribute to inventiveness was not a new invention:
I don't think this combined Albumin plus Dextran sulphate itself is a new invention, no.
The microsphere size selection has been dealt with in the context of the SIRT-1 invention. It was not an inventive step as at 1991. Nor, in my opinion, was the selection of anti-cancer drugs. They were reductions of the inventive concept into practice.
1503 In my opinion the inventive concept at the heart of the DOX-Spheres invention was the use of metal ions to suppress burst release of doxorubicin from the microsphere carrier. For the reasons already given, that was not an idea which can be attributed to Dr Chen. The relevant principle had been foreshadowed by Dr Hodgkin in 1982/1983 when he wrote "Metal Chelating Polymers" for the Encyclopaedia for Polymer Science. He had referred to "metal selective ion exchange resins (for potential microsphere carriers)" in a collaborative research application which he signed in March 1986. He had conducted his own experiments using drugs such as doxorubicin in combination with metal ions. The drugs he had obtained from his wife's oncological co-workers at the Alfred Hospital. The availability of these drugs allowed him to experiment with chelating resins.
1504 Dr Chen had made handwritten notes in 1991 of a telephone conversation she had with Dr Hodgkin, one of which read "Metal Chelat … ion exchange resin + DOX". In my opinion the most probable explanation of the note is that it resulted from a comment made to her by Dr Hodgkin. And in February 1992 the notion of using metal ions and sulphonated dextran was communicated to her by Dr Hodgkin.
1505 Much of the experimental development of the practical application of metal ion complexing to reduce burst release was carried out by Dr McCulloch, an RPH employee. I have already referred to his evidence and preferred it to that of Dr Chen where there was conflict in their testimony about their respective roles.
1506 I am not satisfied on the evidence that Dr Chen was a contributor to the inventive concept as distinct from its reduction to practice and its verification in animal trials. The inventive concept seems to have been developed by a combination of Dr Gray, Dr Burton, Dr Hodgkin and Dr McCulloch. It may be debatable whether Dr Gray's contribution is sufficiently material that he could be regarded as a co-inventor albeit he initiated the line of research that sought to develop the idea of using microspheres to deliver anti-cancer drugs. I am not satisfied that Dr Chen made an inventive contribution which would qualify her as co-inventor.
1507 The invention in my opinion was developed within the general timeframe enunciated by UWA. That is to say it was developed at the time that Dr Gray, Dr Burton and Dr Chen were employees of UWA.
Thermo-Spheres-1 invention
1508 UWA pleaded that in the course of their work at UWA and within the scope of their employment by UWA, either or both of Dr Gray and Dr Stephen Jones developed and/or discovered the invention or inventions known as Thermo-Spheres-1 invention disclosed in Patent Application AU PN 9782 entitled "Targeted hysteresis hyperthermia as a method for treating cancer". The invention was said to be patentable and commercially significant. The description of the invention was set out in 27 subparagraphs reflecting claims. It is not necessary to set out those 27 subparagraphs.
1509 In his defence Dr Gray denied the allegation and denied that Thermo-Spheres-1 was developed and/or discovered in the course of, or within the scope of, his or Dr Jones' employment with UWA. He also asserted that the Thermo-Spheres-1 invention was not commercially significant. He said it was a product of work preceding his employment by UWA, funded by CRI and alternatively LCI or conducted at CACS to which the agreements and arrangements pleaded earlier in the defence applied.
1510 Sirtex made a similar pleading, but added references to other external funding sources in relation to the work which led to the invention.
Thermo-Spheres-1 provisional specification
1511 The provisional specification No PN9782 dated 10 May 1996 has been referred to earlier in these reasons. As noted, the application and provisional specification were the same as those lodged by Dr Gray on 12 September 1988 and 23 December 1994. The 1996 provisional application is claimed as the priority document for international application PCT/AU97/00287 entitled "Targeted hysteresis hyperthermia as a method for treating diseased tissue" which was filed on 9 May 1997. However UWA contends that the PCT application claimed an invention with components additional to the earlier application from which it derives priority.
1512 The content of the 1988 provisional specification has already been discussed in these reasons. It will be recalled that it included two appendices, one of which was said to provide a description of "the concept of the invention in greater detail". The other was said to describe "preliminary investigations that confirm the scientific credibility of the invention".
1513 The PCT application summarised the invention thus:
The present invention provides an improved method for site specific treatment of diseased tissue in a patient, which comprises the steps of:
(i) selecting at least a magnetic material which has a magnetic heating efficiency of at least about 4.5 x 10-8 J.m./A.g, when magnetic field conditions are equal to or less than about 7.5 x 107 A/s;
(ii) delivering the magnetic material to diseased tissue in a patient; and
(iii) exposing the magnetic material in the patient to a linear alternating magnetic field with a frequency of greater than about 10kHz and a field strength such that the product of field strength, frequency and the radius of the exposed region is less than about 7.5 x 107 A/s to generate hysteresis heat in the diseased tissue.
Preferably, steps (i) to (iii) in the method are repeated until the diseased tissue has been destroyed or treated sufficiently to ameliorate the disease.
1514 The summary of the invention thus formulated also comprised the first of the claims defining the invention.
Thermo-Spheres-1 - Contentions and Conclusions
1515 UWA admitted that the 1988 and 1994 provisional applications were materially identical to the 1996 provisional application so that the date upon which the invention disclosed in the 1988 provisional application was made should be treated as the date of the invention in the 1996 provisional application.
1516 The PCT application embodied elements reflected in a letter of instruction from Dr Stephen Jones to Gary Cox of Wray & Associates dated 20 February 1997. This letter, which has been referred to earlier in these reasons, identified the inventors as Drs Gray and Jones. A description of the invention set out in that letter has also been set out earlier in these reasons and, in particular, the development of the quantity devised by Dr Jones called the magnetic heating efficiency.
1517 UWA submitted that because the instructions to the patent attorney named Dr Jones as inventor of the invention to be disclosed in the Thermo-Spheres-1 invention PCT application it followed that it must have been completed after he commenced working with Dr Gray in January 1990. It was UWA's case that the Thermo-Spheres-1 invention was "finally settled" at some time between Dr Jones commencing work at UWA with Dr Gray and the end of 1993.
1518 UWA identified the three problems addressed by the Thermo-Spheres-1 invention and the elements of those problems as follows:
the principles of hyperthermia;
the possibility of embolising particulate magnetic particles within microspheres;
the principles of hysteresis hyperthermia being generated by an electromagnetic field.
He was also aware of the potentiating effect of targeted hysteresis hyperthermia when combined with other treatment modalities.
1526 The first research grant application was written in June 1987 to the Clive and Vera Ramaciotti Foundation but was unsuccessful. Dr Gray wrote the whole of the application himself without input from Dr Detchen who was the co-author and before any experiments had been performed at UWA on target hysteresis hyperthermia. It was submitted that Dr Gray had a thorough understanding of all the concepts that underpinned targeted hysteresis hyperthermia before any research work was done at UWA. They were recast to become the provisional patent application that he wrote in 1988. It was submitted on behalf of Dr Gray that he did this at the request of Dr Nicholas. Dr Gray said he lodged the specification on instructions from Uniscan and I have found that he did it of his own accord. It was submitted on behalf of Dr Gray that there was no experimental work carried out by him at UWA. The entire idea had been developed conceptually, rather than experimentally.
1527 Dr Gray's submissions then referred to the collaborative agreement with the CSIRO to carry out tests of the effects of magnetic fields on appropriate sized particles. Evidence relating to discussions between UWA, Dr Gray and CSIRO about intellectual property in relation to work done by CSIRO has already been outlined in these reasons.
1528 Dr Jones was appointed in January 1990 under a Raine Research Fellowship and until his appointment no research experiments at UWA had been done on hysteresis hyperthermia. He made a successful grant application on 16 February 1990 to the Foundation. He referred in that application to new magnetic materials that had become available from commercial sources. He proposed to design and construct a benchtop alternating magnet system that would enable proper testing of a range of magnetic powders. It would be necessary to measure the heat generated from hysteresis effects as a function of field strength and frequency for particles of different composition, shape and size.
1529 On 20 June 1990 Drs Gray and Jones successfully applied to the Clive and Vera Ramaciotto Foundation for funding for the purchase of a Malvern series laser diffraction particle size analyser. Successive grant applications in relation to the hysteresis heating project were made on 31 January 1991 (to the Medical Research Foundation) and 20 February 1991 (to the NH & MRC). Unsuccessful funding applications were made in February 1992 and 11 August 1992 and on 5 March 1993. A successful application was made to the Medical Research Foundation in February 1994 for funds to purchase an induction heating coil for in vivo experimentation.
1530 Dr Gray's submissions referred to the article published by Jones, Gray, Burton, Codde and Street in 1992 referring to a combination of small ferromagnetic particles, high field strengths and low frequencies.
1531 The submissions on behalf of Dr Gray sought to identify the timing of the experimental work that led to the PCT application by reference to the identity between a graph attached to that application and Dr Jones' laboratory book which was said to identify the relevant research program as conducted between February and June 1996. Figure 2 in the PCT application was also said to be reproduced from a laboratory book started in March 1996. It was submitted for Dr Gray that the conclusion that followed was that the PCT application for the Thermo-Spheres could not have been completed as at August 1994, but was completed substantially with work conducted after 1996. There had been funding problems in the period 1993 and 1994. When Dr Jones was funded by CRI from 1994 onwards his work significantly developed.
1532 Sirtex sought to identify the inventive concept of Thermo-Spheres-1. It made the point that the first claim, referred to earlier in these reasons, contained several integers of a general and publicly known nature which could not possibly of themselves constitute the inventive concept of the invention in light of the prior art which was in evidence. It referred to the papers of Gilchrist et al in 1957, Borelli's 1982 US patent and the paper by Luderer and Borelli in 1983. Rand's 1991 US patent disclosed that at frequencies below 10Khz certain neuromuscular responses would be induced in a warm blooded animal because of the induction of current flow in nerves controlling those muscles. The requirement that specific magnetic field conditions be equal to or less than about 7.5 x 107 A/s was derived from Atkinson et al 1984.
1533 Claim 1 of the PCT application defined what Sirtex identified as the crucial parameter of magnetic heating efficiency of at least 4.5 x 10-8 J.m./A.g. There was no evidence of any public disclosure of MHE of at least that amount prior to the filing of the Thermo-Spheres-1 PCT application on 9 May 1997. In view of the prior art forming the source of the various parameters set out in claim 1 of the Thermo-Spheres-1 PCT application, Sirtex submitted that the inventive concept of Thermo-Spheres-1 resided in the combination of:
Selecting a magnetic material with an MHE of at least about 4.5 x 10-8 J.m/A.g.
When frequency is greater than 10kHz; and
When magnetic field conditions are equal to or less than about 7.5 x 107 A/s.
As Sirtex noted, none of those integers, let alone their combination, was disclosed in the provisional application PN9782 from which Thermo-Spheres-1 PCT application purported to derive priority. The Thermo-Spheres-1 PCT application named Drs Gray and Jones as inventors, whereas the provisional application named only Dr Gray as inventor. I accept the submission by Sirtex that it was not arguable that the Thermo-Spheres-1 PCT application was fairly based on provisional application PN9782. This means that the relevant priority date of the claims set out in Thermo-Spheres-1 PCT application was not earlier than its own filing date of 9 May 1997.
1534 The next question was, at what time was the inventive concept of Thermo-Spheres-1 formed?
1535 The exchange of faxes between Mr Cox and Dr Jones concerning the minimum MHE figure to be claimed took place on 8 and 9 April 1997. Dr Jones gave evidence that it was around this time that he first used the formula. As was submitted for Sirtex, Mr Cox' fax of 8 April 1997 supported that evidence because it indicated that Dr Jones had not previously communicated the formula for inclusion in the draft patent claim. The evidence also demonstrated, as Sirtex suggested, that the inventive concept was not conceived as a result of any particular experiment but following analysis of prior art to devise a new invention which lay beyond it.
1536 Sirtex then referred to the significance of the missing laboratory books which Dr Jones delivered to Dr Gray. These were the books SKJ Bk I to SKJ Bk IV. It was pointed out that Dr Jones' laboratory book SKJ Bk V covered the period from 27 March 1996 to 29 October 1998. The earliest reference in it to the calculation of MHE was 23 April 1997. The next reference was on the following page dated 23 June 1997. All of that suggested that the missing laboratory books were unlikely to contain evidence of the conception of a defined MHE of 4.5 x 10-8 J.m/A.g. It was not put to Dr Jones in cross-examination that there was any reference to a defined MHE of that amount in the missing laboratory books. I accept that I cannot draw an inference from the absence of the books that they were likely to have contained the MHE figure ultimately inserted in the PCT application.
1537 I accept the submissions by Sirtex defining the inventive concept for Thermo-Spheres-1. I accept that there was no evidence that that inventive concept came into existence prior to April 1997. By that time Dr Jones was an employee of old Paragon Medical. He had resigned from CACS on 22 January 1997 with effect from 31 January 1997. Moreover, there was no evidence that Dr Gray was involved in the conception of the defined MHE. His employment by UWA, as already noted, was limited to the performance of clinical duties and not research. I accept therefore that the Thermo-Spheres-1 invention was not developed in the time that Dr Jones was an employee of UWA and was not developed in the course of Dr Gray's employment at UWA.
Thermo-Spheres-2 Invention
1538 UWA pleaded, at [92] of its statement of claim that in the course of their work at UWA and within the scope of their employment by UWA either or both Dr Gray and Dr Jones developed and/or discovered the invention or inventions (the Thermo-Spheres-2 invention) disclosed in patent application AUPP0081 entitled "Improved Targeted Hysteresis Hyperthermia as a Method for Treating Diseased Tissue" which invention or inventions were said to be patentable and commercially significant. Dr Gray denied the allegation and said that any invention by him and Dr Jones was not in the course of their employment by UWA and in the alternative said it was done for and on behalf of CRI.
1539 It was not in dispute that the only substantive difference between the Thermo-Spheres-1 PCT application and the Thermo-Spheres-2 provisional application relates to the use of a rotational magnetic field.
1540 UWA submitted that where statements in the Thermo-Spheres-2 invention provisional application were identical to those in the PCT application and those statements were the basis for claims defining the Thermo-Spheres-1 application, then the same statements in the Thermo-Spheres-2 provisional application were a sufficient basis for the identical claims in relation to Thermo-Spheres-2. It was said to follow that the timing of the inventions submitted by UWA in the case of Thermo-Spheres-1 applied equally to Thermo-Spheres-2. UWA submitted that the only analysis it needed to consider was the timing of the identification of the rotational magnetic field.
1541 Although the differences between the two inventions were limited, protection was sought for them as separate inventions. Thermo-Spheres-2 was not filed as a patent of addition under Chapter 7 of the Patents Act. It was filed on 29 October 1997. Its applicable prior art base included the information contained in the prior Thermo-Spheres-1 PCT application filed on 9 May 1997 and the provisional application PN9782 filed 10 May 1996.
1542 Sirtex submitted that even if the only new integer of Thermo-Spheres-2 was the addition of rotational magnetic fields, that was not novel as at 29 October 1997 because the concept of using rotational magnetic fields had been mentioned in the report attached to the Thermo-Spheres-1 provisional application PN9782 where four possible methods of field generation, including "rotating permanent magnets" were mentioned. There was, however, no evidence of any document before the filing of Thermo-Spheres-2 disclosing the combination of:
Selecting a magnetic material with an MHE of at least 4.5 x 10-8 J.m/A.g.
Where frequency is greater than about 10kHz; and
3. When rotational magnetic field conditions are equal to or less than about 5 x 108 A/m.s.
1543 Sirtex submitted and I accept the submission that the inventive concept for the purposes of determining inventorship and entitlement to Thermo-Spheres-2 resided in this combination of integers. It criticised the UWA submissions as ignoring the factor of MHE of at least about 4.5 x 10-8 J.m/A.g and its contention that it need only consider the timing of the identification of the rotational magnetic field for use in therapeutic application of hysteresis heating. That approach, it was said, could not assist in establishing entitlement to the inventive concept of Thermo-Spheres-2.
1544 I accept that the inventive concept of Thermo-Spheres-2 was not developed during the course of Dr Gray's employment at UWA or that or Dr Jones.
Thermo-Spheres-3 Invention
1545 At [114] of the statement of claim UWA alleged that Dr Gray alone or in association with Dr Cammarano, then an employee of CRI, and/or in association with Dr Jones, then an employee of either CRI or Sirtex, developed and/or discovered the Thermo-Spheres-3 invention disclosed in patent application PP8988 entitled "Magnetic material" which invention or inventions were said to be patentable and commercially significant. In the defences no inventorship by any other person was raised.
Thermo-Spheres-3 - contentions and conclusions
1546 The provisional specification for Thermo-Spheres-3 stated that the invention sought to provide a magnetic material with improved heating characteristics that can be used in diverse methods such as, but not limited to, the heating of cements and in the treatment of diseased tissue. Under the heading "Disclosure of the Invention" it was said, inter alia:
The present invention consists in a magnetic material having a magnetic heating efficiency of at least 4.5 x 10-8 J.m/A.g. in a rotational magnetic field where the product of the amplitude and frequency of the applied field is less than or equal to 5 x 108 A/M.s, and the frequency of the applied field is at least 20kHz.
Preferably, the magnetic material has a predominantly cubic magnetocrystalline anisotropy. Particles with predominantly cubic magnetocrystalline anisotropy come closest to approaching the specified behaviour in a rotational magnetic field since they have a hysteresis loop squareness as high as 0.86.
1547 The provisional application was filed on 3 March 1999 in the name of Paragon Medical, now Sirtex. The international application number PCT/AU00/00151 was filed on 3 March 2000. Dr Jones sent a preparation guide to Wray & Associates for the preparation of the provisional specification for the invention. This was relied upon by UWA as listing the inventive contribution of himself, Dr Gray and Dr Cammarano to the invention. Their contributions were said to be substantially similar to those identified in the patent preparation guide which Dr Jones sent to Wray & Associates for Thermo-Spheres-2.
1548 UWA pointed to similarities between the three Thermo-Sphere applications. It submitted that the timing of the dates upon which the inventions took place, identified by UWA in relation to each of those inventions are relevant to the timing of the Thermo-Spheres-3 invention. It did not allege that either Dr Jones or Dr Cammarano invented the Thermo-Spheres inventions while employed by UWA. The relevant conduct was that of Dr Gray. Neither of the patent preparation guides relied upon were prepared or sent or received by him. Each was prepared by Dr Jones. Neither was put to Dr Gray in cross-examination.
1549 Sirtex submitted that the Thermo-Spheres-3 provisional and PCT applications again stood as independent patents. The patent preparation guide for Thermo-Spheres-3 which Dr Jones prepared, described the contribution to that invention by Dr Gray as follows:
. identification of the original concept of targeted hyperthermia therapy usinghysteretically heated magnetic micro particles;
. all details relating to medical aspects of the clinical application of the technique including the method of targeted delivery of magnetic micro particles;
. specification of required micro particle density and size.
1550 In my opinion that evidence was insufficient to establish that the inventive concept of Thermo-Spheres-3 was developed by Dr Gray while he was an employee or in the course of his employment at UWA.
UWA contract claims against Gray
1551 The causes of action in contract asserted by UWA turned entirely upon alleged breaches of the Patents Regulations and the IP Regulations. It is convenient to deal with them in groups according to the Regulations said to have been breached.
1552 The Prompt Notification Condition pleaded was that imposed by regulation 6(1) of the Patents Regulations. Regulation 6 was directed to "any patentable invention made or developed wholly or in part during the course of [the employee's] duty or whilst using the University's research facilities". It was a regulation based on the premise that in such circumstances UWA would have property rights in connection with such an invention. So much was clear from the reference to UWA's "rights in the invention" in subregulations 6(2), 6(3) and 6(4). For the reasons already given that assumption, in its generality, was incorrect. The notification condition has no application to an invention in which UWA has no rights. In any event, as I have found, UWA had effectively abandoned the system for which the Patents Regulations provided from about 1988.
1553 Dr Gray submitted that throughout this time at UWA he made extensive and ongoing disclosures of his research activities, the outcomes of that research, his attempts to obtain funding, his role in old Paragon Medical and his intention to commercialise the technology. He said he had made disclosure of the research and development of microsphere treatment of liver cancer in his original application for the position of Professor of Surgery. In that application he had cited his research publications in the area. He submitted that UWA was on notice that he proposed to continue his work in Perth. This, he said, arose specifically out of his request that Dr Burton be appointed to the Department of Surgery following upon his own appointment so that they could continue with the research they had been doing together. He relied also upon the progress report which he tendered at the end of his first three years at UWA.
1554 Dr Gray's submissions also referred to dealings with Uniscan and the proposals he wrote for the three technologies in 1987/1988 in attempting to attract commercial interest for them. He submitted that by these three proposals, his dealings with Uniscan and UWA patent attorneys from 1986 to 1988, he made disclosure to UWA of the hyperthermia, SIR-Spheres and DOX-Spheres technologies. The disclosures were not in issue and are dealt with in the factual history set out earlier in these reasons.
1555 Assuming, contrary to my primary findings, that there were patentable inventions developed or made during Dr Gray's employment at UWA in respect of which UWA had rights, the kind of disclosure to which he referred would not, in my opinion, have constituted notification under regulation 6(1) of the Patents Regulations. That required a notification to the Vice-Chancellor of a patentable invention when it was made or developed. Disclosure of ongoing research activities and results to other elements of UWA would not have sufficed.
1556 Given the absence of any UWA rights in any of the inventions which it pleaded and the abandonment of the Patents Regulations process, there was no breach of contract flowing from the want of formal notification under the Prompt Notification Condition.
1557 The Restraint Condition was that imposed by regulation 4(11) of the IP Regulations. It prohibited an originator from applying for any form of protection for or commercially exploiting or otherwise dealing with any intellectual property or doing any act or thing in a way inconsistent with UWA's rights under the Regulations or otherwise.
1558 Dr Gray's breach of the Restraint Condition is said to arise out of applications and assignments made after 22 July 1996. That plea assumed that the IP Regulations came into effect on that date. For the reasons I have already given, it was not established that they came into effect before 30 November 1997. Moreover UWA could not, for reasons I have already given, validly acquire by regulation, rights in relation to inventions made or developed by Dr Gray or others employed to research. There was no relevant inconsistency between the conduct alleged against him and UWA's rights under the IP Regulations or otherwise which could have rendered that conduct a breach of regulation 4(11) or of his contract of employment.
1559 The Naming Condition was derived from regulation 4(13) of the IP Regulations and again, said to be in effect from 22 July 1996. It was said by UWA to require Dr Gray to make all applications for registration of any intellectual property in the name of UWA unless "expressly otherwise determined by the Pro Vice-Chancellor (Research)". The regulation applied, if at all, only after 30 November 1997. For the reasons already given, it could not validly apply to interfere with the property rights of academic staff arising from inventions made by them in the course of their research. To the extent that it depended upon UWA's assertion of ownership in regulation 4(11), it had no valid foundation. UWA could not by regulation acquire that which it did not own. There was no breach of contract based upon the Naming Condition.
1560 Dr Gray was also said to have breached the Prompt Reporting Condition imposed by regulation 6 of the IP Regulations. A condition of the application of that regulation was the creation of "any intellectual property to be owned by the University, which is likely to be commercially significant". Absent any relevant intellectual property interest in UWA in relation to the inventions, this regulation had no application regardless of the period over which it applied.
1561 The final category of breach of contract relied upon was failure to comply with the Cooperation Condition. Dr Gray was said to have failed to comply with this condition by failing to transfer upon demand his shares in Sirtex to UWA and by failing to account to UWA for any amount received from the disposition of any of those shares. He was also said to have breached the condition by failing to provide a full account to UWA of all benefits received in relation to the exploitation of the inventions in issue. Given the absence of any UWA interest in the inventions, this claim also fails.
1562 For the preceding reasons the claims against Dr Gray for breach of contract cannot succeed. In any event as far as the timing of the inventions is concerned, the findings I have made are adverse to UWA in all cases save for that of DOX-Spheres. I have not analysed the claims by reference to their application to particular inventions. Absent the global rejection of the contract claims for the reasons already set out, their viability with respect to each invention would depend upon the timing of the inventorship issues which have already been discussed. It is not necessary, however, to undertake that essentially hypothetical exercise nor to consider the plurality of pleaded defences to the contract claims.
Claims for breach of fiduciary obligations by Dr Gray
1563 UWA's case as pleaded in paragraph 11 of the statement of claim was that Dr Gray owed it the following fiduciary duties:
(a) a duty to deal with the property rights and interests of UWA so as to protect and preserve that property and those rights and interests for UWA;
(b) a duty not to make any secret profit or receive any secret payment or obtain any secret benefit from any third party with whom he was dealing;
(c) a duty to account for any such secret profit or secret payment or benefit; and
(d) the duties of a trustee of such of UWA's assets and property as were in his possession or control and/or under his direction from time to time;
all of which duties survive the termination of Dr Gray's employment relationship with UWA.
1564 The way in which UWA framed its claim for breach of fiduciary obligation against Dr Gray was exemplified in the pleading with respect to the SIRT-Spheres inventions. Paragraphs 15 and 16 of the statement of claim were in the following terms:
15(a) The SIRT 1 Australian application:
(i) was filed without the knowledge, approval or authority of the University;
(ii) was filed while Dr Gray was an employee of the University;
(iii) did not disclose the interest of the University; and
(iv) constituted a dealing with personal property to which the University was entitled, namely the right to proceed to registration under the Patents Act 1990 (Cth).
(b) Each of the first SIRT-1 application and the second SIRT-1 Australian Application:
(i) was filed without the knowledge, approval or authority of the University;
(ii) was in respect of a patentable invention developed and/or discovered while Dr Gray was an employee of the University;
(iii) did not disclose the interest of the University; and
(iv) constituted a dealing with personal property to which the University was entitled.
16. By reason of:
(a) making and maintaining the SIRT-2 Australian application pleaded in paragraph 14(a) hereof;
(b) causing or procuring Sirtex to make each of the first SIRT-1 Australian application and the second SIRT-1 application; and
(c) the matters pleaded in paragraph 15 hereof,
Dr Gray breached, and continues to breach, the fiduciary duties set out in subparagraphs 11(a) and 11(b) hereof.
1565 Dr Gray was said to have breached the first and fourth obligations by the various filings of patent and related applications in connection with the three families of inventions. It was also alleged that his receipt of shares in the Sirtex float constituted a continuing and further breach of those fiduciary duties.
1566 UWA in its submissions referred to what it said was Dr Gray's awareness of his fiduciary obligations and his awareness "… at critical times that he had made discoveries or had participated in the discovery or development of inventions of the kind which engaged his obligations to the University to protect that property and to conduct himself accordingly". The evidence was said to disclose that he preferred his own interests over those of UWA in relation to each of the inventions and the benefits which he derived from dealing with them. There was reference made to letters about each of the technologies, which Dr Gray had written, indicating his awareness of the existence or potential existence of intellectual property, its commercial significance and the need to enter into protective arrangements. They were said to demonstrate that with regard to each of the inventions Dr Gray knew of each of the matters that he was required to bring to the attention of UWA under the Patents Regulations and subsequently under the IP Regulations. It was also said that he was aware of dealing with the property in the manner in which the evidence established that he so did was in breach of those Regulations. Thereafter, Dr Gray's continued dealing with UWA's property was a continuing breach of his fiduciary obligations.
1567 Accepting the existence of the fiduciary obligations as pleaded, UWA's case as encapsulated in the closing written submissions, rested upon the premise that Dr Gray was dealing for his own benefit with rights in relation to various inventions which UWA owned or in which UWA had an interest. For the reasons already given, that premise is misconceived. UWA failed to establish that it had any rights or interests in any of the inventions even if they were made by Dr Gray or others in the course of their employment as researchers with UWA. There was no breach of fiduciary duty by Dr Gray. And on the findings I have made about inventorship, the only invention made within the timeframe asserted by UWA was DOX-Spheres.
UWA's claim against Sirtex
1568 UWA's claim against Sirtex is that it was aware of facts constituting (and which to a reasonable person would have indicated) the breach of the fiduciary duties owed by Dr Gray to UWA in respect of the various inventions. It was said to have been knowingly concerned in those breaches in various ways eg:
by making each of the first SIRT-1 application and the second SIRT-1 Australian application (s/c 16A);
by preparing and filing the SIRT-1 PCT application (s/c 20A);
by preparing and filing the Gray SIRT-1 applications (s/c 25A);
by undertaking of the SIRT-Spheres assignments (s/c 29);
by making, with the consent of Dr Gray, the Thermo-Spheres-1 invention PCT application on or about May 1997 (s/c 75);
by undertaking the Thermo-Spheres-1 invention assignments (s/c 83 and s/c 91);
by filing the Thermo-Spheres-2 invention provisional application on or about 29 October 1997 (s/c 94 and 97);
by undertaking the Thermo-Spheres-2 invention assignments (s/c 106 and 113);
by making the Thermo-Spheres-3 invention provisional application (s/c 119 and 116);
by making the Thermo-Spheres-3 invention PCT application (s/c 121 and 124);
by undertaking the Thermo-Spheres-3 invention assignments (s/c 113 and 140);
the issue by Sirtex of further shares and the receipt by Dr Gray of those shares (s/c 146A).
It is also alleged that by reason of the issue of the further shares to Dr Gray, pleaded in paragraph 146 of the statement of claim, Sirtex knowingly assisted Dr Gray in breaching the fiduciary duties owed to him by UWA (s/c 146B).
1569 The case against Sirtex for knowing involvement in Dr Gray's alleged breaches of fiduciary duty and knowing assistance depends crucially upon the primary case against Dr Gray. That case having failed, the claim against Sirtex cannot succeed and will be dismissed.
1570 I should add as I have already found that Sirtex was not at any time on notice of a potential claim by UWA through any of its directors other than Dr Gray. The application of any cause of action based on knowing involvement in his alleged breaches of fiduciary duty would have depended entirely upon his role as a director of Sirtex and whether his knowledge could be attributed to the company.
Sirtex cross-claim against UWA
1571 The Sirtex cross-claim against UWA raised two causes of action. The first was for misleading or deceptive conduct said to arise out of the Barber letter to CRI dated 22 January 1997. The second, was a claim for relief against groundless threats of infringement constituted by UWA's letter of demand of 26 October 2004 and these proceedings.
1572 Sirtex contended that the Barber letter of 22 January 1997 contained express representations made by UWA to CRI that it had no interest, financially or otherwise, in technology funded by CRI being that identified in the letter. In that letter UWA was also said to have impliedly represented that:
It had made reasonable inquiries as to whether it had any interest in or claims in the intellectual property in or related to the CRI Claimed Technologies; and
It had determined on the basis of those inquiries that it had no interest in or claim to the intellectual property in or related to the CRI Claimed Technologies.
The CRI "Claimed Technologies" was a term used by Sirtex to refer to the three technologies mentioned in the Barber letter. Sirtex alleged that UWA made the Barber representations in the course of trade or commerce and that they were as to a future matter. It relied upon s 51A of the TPA.
1573 Sirtex alleged that in reliance on the Barber representations it entered into the various transactions concluded on 1 May 1997 which have already been referred to. It then pleaded loss or damage on the condition:
If (which is denied) the Barber representations were false …
1574 Given the way the cross-claim was pleaded the falsity of the representations did not turn upon whether UWA actually had an interest in the relevant intellectual property but whether it had made reasonable inquiries about the existence of such an interest and had determined that it had no interest. Nevertheless in its closing written submissions Sirtex put its case on the basis that if UWA were to succeed in its claim against Sirtex, then one or other of the representation was misleading.
1575 The proposition that the cross-claim against UWA was confined by the condition that it succeeded in its claim against Sirtex was borne out by the particulars of loss and damage which Sirtex asserted. These related to its investment of moneys in the acquisition, protection and development of the relevant technologies and in the acquisition of plant, equipment, infrastructure and distribution networks. It also referred to the money it had agreed to pay to Dr Gray, CRI and ASPL.
1576 As UWA has not succeeded in its claim against Sirtex, the cross-claim for misleading conduct will be dismissed.
1577 The second aspect of the Sirtex cross-claim against UWA arose out of the letter of demand from Jackson McDonald of 26 October 2004 and the commencement of these proceedings. Sirtex referred to UWA's assertion of entitlement to six families of patents applied for and/or registered in Sirtex's name and the orders which it sought against Sirtex in the amended application. It submitted:
As such, by the present proceeding and by the antecedent threats contained in Jackson McDonald's letter to Sirtex dated 26 October 2004, UWA has threatened and sought remedies against Sirtex as if it were the owner of the relevant patents and Sirtex were infringing those patents. Such a proceeding clearly falls within the scope of "other similar proceedings" for the purpose of s 128.
1578 Sirtex asserted that UWA's claim amounted to an allegation that all of its sales of the SIRT-1 product, the only product which it has thus far sold, ultimately constituted an infringement of UWA's asserted rights. It made the point, which is correct, that a threat is not justifiable on the ground that the person making the threat has an honest belief that the relevant conduct infringed or would infringe a claim of a patent. It referred in that context to Durack v Associated Pool Builders Pty Ltd (1983) 1 IPR 545 at 553.
1579 This aspect of the cross-claim depended upon s 128 of the Patents Act which provides, inter alia:
(1) Where a person, by means of circulars, advertisements or otherwise, threatens a person with infringement proceedings, or other similar proceedings, a person aggrieved may apply to a prescribed court, or to another court having jurisdiction, to hear and determine the application, for:
(a) a declaration that the threats are unjustifiable; and
(b) an injunction against the continuance of the threats; and
(c) the recovery of any damages sustained by the applicant as a result of the threats.
(2) Subsection (1) applies whether or not the person who made the threats is entitled to, or interested in, the patent or a patent application.
1580 The general principle underlying the action for groundless threats of infringement was stated in Cornish W and Llewellyn, Intellectual Property (6th ed, London, Sweet & Maxwell, 2007) (at 2.93 and 2.95):
If a potential claimant chooses to do what damage he can merely by threatening to sue, again those affected may find it difficult to force his hand. Apart from instituting revocation or rectification proceedings … a person who suffers by the threats may not be able to prevent them, save in exceptional cases. In general the common law has not limited the freedom to institute claims or to threaten that they will be begun. Rather it insists that those who choose to succumb to a claim instead of fighting must abide by the consequences of their faint-heartedness. If the claim was in fact groundless, they are not in general permitted to re-open the controversy by having the settlement rescinded, by claiming back money paid or by suing for loss suffered because of their submission.
…
In the case of patents, where the expense and uncertainty of infringement and validity proceedings is acute and the threat to sue is accordingly grave, an exception has long existed by statute … A person aggrieved by the threat that he himself or someone else (such as a customer) will be sued for patent infringement may claim relief in civil proceedings in the form of a declaration that the threats are unjustifiable, an injunction against their continuance and/or damages for any loss that they cause (for example because a customer switches his orders to the threatener).
The common law tort of injurious falsehood imports a requirement for malice which, as Cornish and Llewellyn point out, severely limit that form of tortious relief. Against that background the provisions of s 128 provide an exceptional remedy in respect of a particular class of threat. It is not to be read so expansively as to pick up conduct beyond the range of the particular mischief to which it was directed.
1581 In my opinion, the institution of proceedings does not constitute a threat of proceedings. No reliance can be placed upon the relief claimed in proceedings actually instituted to characterise the threat which preceded them. In the present circumstances the threat, if any, resides only in the letter of demand of 26 October 2004.
1582 The letter of demand did not threaten infringement proceedings. It asserted that Sirtex held the rights in relation to the claimed inventions under a constructive trust for UWA. It did not assert that Sirtex was not the legal owner of those rights. In addition, it had allegedly breached the constructive trust in allowing certain of the patent applications to lapse and by failing to pursue patent applications in countries designated in the PCT application. The letter does not foreshadow an infringement proceeding. The question is whether it foreshadows "a similar proceeding". A patent grants to the patentee exclusive rights, during the term of the patent, to exploit the invention and to authorise other persons to exploit it. Those exclusive rights are personal property and are capable of assignment and devolution by law (s 13).
1583 Infringement proceedings necessarily relate to dealings in products or processes of the kind identified in the definition of "exploit". Section 117 extends the concept of infringement to contributory infringement including the supply of patents for infringing purposes. In my opinion, whatever the scope of the term "other similar proceedings", proceedings in equity asserting dealings with a patent and associated rights as personal property contrary to the rights of their beneficial owner, do not fall within its range. The section was not intended to pick up actions in equity or contract about the disputed property rights generated in patents. To so extend it, would take it well beyond the mischief to which it was directed which relates to the peculiar character of infringement proceedings. There is no reason in that respect why threatened litigation about property rights to patents, which rights have their source in contract or equity, should be treated any differently to threats about property generally.
1584 In my opinion the cause of action for unjustified threats of infringement cannot succeed. The Sirtex cross-claim against UWA will be dismissed.
Gray's cross-claim against UWA
1585 The first element in Dr Gray's cross-claim against UWA was a claim for a transfer from UWA of any intellectual property in respect of which it had decided to exercise its rights. The claim was based upon UWA's obligation under the Patents Regulations to assign back to an inventor rights which UWA itself had decided not to exercise. Dr Gray's pleading referred to the Uniscan decision in 1989 by which he said UWA abandoned any attempt to commercialise any of the research projects which he was undertaking. The cross-claim was posited upon UWA having had rights in relation to the relevant inventions. It had no such rights so this element of the cross-claim will be dismissed.
1586 The second cross-claim was for unjustified threats of infringement proceedings. It depended upon the letter of demand sent to Sirtex by UWA's solicitors on 26 October 2004. for the reasons I have already given I relation to the like cross-claim brought by Sirtex, Dr Gray's cross-claim for unjustified threats of infringement cannot succeed.
1587 The third cause of action in Dr Gray's cross-claim against UWA alleged misleading or deceptive representations by UWA that it did not assert and would not in future assert, a claim as to the intellectual property the subject of Dr Gray's research into microparticle delivery of radioactive material in the treatment of liver cancer in human beings. The occasions of the representations were said to have been two. The first was Uniscan's alleged abandonment at the beginning of 1989 of any attempt to commercialise any of Dr Gray's research projects and the fact that it informed him of that. The second was the letter from Professor Barber of 22 January 1997. In the cross-claim it was said that in so far as UWA's representation was a representation as to a future matter, Dr Gray relied upon s 51A of the TPA.
1588 Section 51A of the TPA provides, inter alia:
(1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.
(2) For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation.
(3) Subsection (1) shall be deemed not to limit by implication the meaning of a reference in this Division to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead.
1589 I considered the operation of s 51A of the TPA in Fubilan Catering Services Ltd v Compass Group (Australia) Pty Ltd [2007] FCA 1205 and repeat here the substance of the analysis set out there. It is well established that the making of a promise which is not performed or a prediction which is not fulfilled is not of itself misleading or deceptive: Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 88; Boll Acceptance Corporation Ltd v GWA Ltd (1983) 50 ALR 242. A promise or prediction may contain an implied representation of present fact such as the promisor's intention or capacity to perform the promise. If such implied representations are false then the promise may be misleading or deceptive within the meaning of s 52 of the TPA. A prediction or promise apparently based on the expertise or experience of the representor may carry with it an implied representation as to the existence of that necessary expertise or experience and an implied representation that relevant inquiries have been undertaken to support the opinion being offered.
1590 Section 51A does not introduce a new rule of law that a promise which is not performed or a prediction which is not fulfilled is thereby deemed to be misleading or deceptive. It requires that a statement about a future matter made without reasonable grounds be treated as if it is misleading or deceptive. In many if not most cases, a person making a statement about the future will be treated as making an implied representation that he or she has reasonable grounds for the statement. If they do not exist, the statement will generally be misleading or deceptive although that need not always be the case. Pleading of misleading or deceptive conduct which relies upon s 51A should make clear that it involves an allegation that the representor did not have reasonable grounds for making the statement alleged. The section will then operate to require the conduct of the representor, if established, to be treated as misleading or deceptive. That is its substantive operation. Its adjectival operation puts the evidential burden on the representor and supports it with a deeming provision. If a pleading of misleading or deceptive conduct based upon a statement about future facts does not expressly plead want of reasonable grounds yet invokes s 51A then it should be taken to so plead or if that implication is not open it should be regarded as deficient.
1591 Dr Gray has not pleaded any implied representation but just a promise about the future conduct of UWA. A statement on behalf of a corporation that it will or will not do a certain thing does not convey an implied representation that its mind is unchangeable. No such representation was pleaded or can be implied in the conduct attributed to Uniscan or Professor Barber. In any event, given the circumstances in which Professor Barber's letter was prepared and Dr Gray's own knowledge of the foundation of the letter based as it was on the Gorn letter, no unpleaded implied representation as to reasonable independent inquiries being carried out by Professor Barber is apparent.
1592 In my opinion this is not a case to which s 51A can be applied. The grounds upon which Professor Barber's letter were written were identified in the letter itself and known to Dr Gray. This aspect of the cross-claim fails.
1593 Although there was a further pleading in the cross-claim by reference to matters referred to in [69.7] and [70.3] of Dr Gray's defence, this did not correlate with the numbering of the paragraphs in the defence. It appears to have been another representation extracted from the Barber letter that UWA did not assert any claim as to the DOX-Sphere's technology. This cross-claim fails for the same reason as its predecessor. The same is true of that element of the cross-claim relating to Thermo-Spheres.
1594 The next substantive cross-claim is Dr Gray's cross-claim for defamation based on the letter of demand. He pleaded that in its natural and ordinary meaning the letter meant and was understood to mean that:
The embodiment which is described and around which the claims are drawn. This is the sense used in the Act: cf the phrase of s 32, "the invention so far as claimed in any claim".
The subject matter of a claim - especially that of the broadest claim.
The inventive step taken by the inventor.
The advance in the art made by the inventor which was likely to be broader and more fundamental than would correspond with any claim.
Each is consistent with the proposition that an invention is essentially described by the inventive concept, albeit it may be manifested in the invention as variously claimed.
1425 In Lockwood Security Products Pty Ltd v Doric Products Pty Ltd (2007) 235 ALR 202, the Court again considered the question of the patentability of ideas. The distinction drawn between "idea" and "invention" seemed to be much the same as that drawn between "discovery" and "invention". The Court observed that distinctions between the idea or concept or principle informing an invention and the means of carrying out or embodying it in a manner of new manufacture have long been made despite expressions of caution from time to time. It also referred to inventive concept:
In a sense, an idea simpliciter cannot be patented as no patent will be granted except to a manner of manufacture within section 6 of the Statute of Monopolies. An idea which is part, even the main part of an inventive step "has got to end in a new method of manufacture". When an idea is incorporated into a means for carrying out an idea, the idea itself can be taken into account when considering validity, and inventiveness may repose largely in the idea. As a matter of language it is almost inevitable that the subject matter of an invention which involves an improvement to a known combination will be spoken of as "an idea" or "a concept"…
The term "inventive concept" was expressly mentioned in the context of obviousness. The Court acknowledged that the inventive concept is important for what has come to be regarded in the United Kingdom as a "structured approach to determining obviousness under its current statutory definitions": see eg Windsurfing International Inc v Tabur Marine (Great Britain) Ltd [1985] RPC 59. It characterised the English approach as the problem-and-solution approach mandated by the European Patent Convention. The Court then said:
Although the recognition of the need to identify an 'inventive idea' justifying a monopoly is not new in Australia, the developments in the United Kingdom which emphasise the need to identify the 'inventive concept' in terms of 'problem and solution' have raised the threshold of inventiveness.
Lockwood 235 ALR 232 did not reject the idea of "inventive concept" but rather the problem and solution approach in the English cases.
1426 The inventive concept marks a boundary between invention and verification. An example arose in 1994 and 2002 in decisions reported in both the United States and Canada in relation to the use of the drug AZT to treat AIDS. Glaxo/Wellcome had identified a new use for an old compound in conceiving the idea that AZT would work in humans against the HIV retro virus. It used external scientists employed by the National Institutes of Health (NIH) to perform critical blind testing on the AZT and on other compounds (none of which were identified). The NIH scientists found that the AZT did inhibit HIV replication and so advised. The Glaxo/Wellcome patent was considered in the US Court of Appeals in Burroughs Wellcome Co v Barr Laboratories Inc (1994) 40 F 3d 1223. The argument had been raised there that the patent was invalid because of the wrongful exclusion as inventors of the NIH scientists. The argument focussed on when the inventors conceived the invention. Burroughs Wellcome said it was before they learnt the results of the NIH tests. The respondents argued that the NIH confirmation of the inventions operability from the NIH tests was an essential part of the inventive process. The Court of Appeals held that the NIH scientists were not joint inventors. It set out the following principles as established by US appellate courts:
Conception is the touchstone of inventorship, the completion of the mental part of inventions.
Conception is the "formation in the mind of the inventor of a definite and permanent idea of the complete and operative invention as it is hereafter to be applied in practice". It is complete only when the idea is so clearly defined in the inventor's mind that only ordinary skill would be necessary to reduce the invention to practice without extensive research or experimentation.
An inventor need not know that the invention will work for conception to be complete. The inventor need only show that he or she had the idea. The discovery that an invention actually works is part of its reduction to practice.
It is not the law that the inventor's definite and permanent idea must include a reasonable expectation that the invention will work for its intended purpose even when it deals with uncertain or experimental disciplines where the inventor cannot reasonably believe that an idea will be operable until some result supports that conclusion.
The propositions set out in Burroughs Wellcome (1994) 40 F 3 1223 define "invention" by reference to completion in concept which distinguishes the invention from its verification and reduction to practice.
1427 The Glaxo/Wellcome patent was also considered by the Supreme Court of Canada in Apotex Inc v Wellcome Foundation Ltd [2002] 4 SCR 153. Apotex Inc which was a generic drug manufacturer challenged the validity of the Canadian patent on the ground, inter alia, that the disclosure was misleading because it omitted any reference to the NIH co-inventors. It was unsuccessful at first instance, then in the Federal Court of Appeal and finally in the Supreme Court. The Supreme Court held that the NIH scientists were not co-inventors. Despite their contribution they had not participated in the inventive concept as opposed to its verification. Binnie J, delivering the judgment of the Court, referred to s 34(1) of the Patent Act RSC 1985 which required that, at the time the patent application was filed, the specification should "correctly and fully describe the invention … to enable any persons skilled in the art or science to which it appertains … to … use it…". It was not enough to have a good idea. The idea must be reduced to a definite and practical shape. He continued:
Of course, in the steps leading from conception to patentability, the inventor(s) may utilize the services of others, who may be highly skilled, but those others will not be co-inventors unless they participated in the conception as opposed to its verification. As Jenkins J notes in May and Baker Ltd v Ciba Ltd (1948) 65 RPC 255 (Ch D) at p 281, the requisite "useful qualities" of an invention "must be the inventor's own discovery as opposed to mere verification by him of previous predictions".
Identifying inventions for the purposes of entitlement in England
1428 Section 8(1) of the Patents Act 1977 (UK) (the 1977 UK Act) provided that at any time before a patent has been granted for an invention any person may refer to the Comptroller the question whether he is entitled to be granted (alone or with any other persons) a patent for that invention or has or would have any right in or under any patent so granted upon application for such a patent. The closest analogy with the 1990 Act would appear to be proceedings under ss 32 and/or 36.
1429 Judicial exegesis in the United Kingdom has considered the question of how an invention is to be identified for the purpose of determining entitlement under s 8. In considering the English authorities on this point it is necessary to do so having regard to their particular statutory setting. However, the problem of identifying an invention for the purpose of determining entitlement raises the same conceptual question that is raised in the present proceedings.
1430 Section 125 of the 1977 UK Act was an interpretation provision that provided that an invention is to be taken as that specified in a claim (as purposively interpreted) unless the context otherwise requires. Thorley S, Terrell on the Law of Patents (16th ed, London, Sweet & Maxwell, 2006) at 3-87, points out that entitlement disputes can arise before any application for a patent has been made or on the basis of an application filed without claims. The problem so identified is therefore similar to the problem in the present proceedings. The application of the implied term and the Regulations does not depend upon the prior existence of claims in a patent or patent application.
1431 The distinction between inventive concept and verification of an invention was drawn by Jacob J in Henry Bros (Magherafelt) Ltd v Ministry of Defence and the Northern Ireland Office [1997] RPC 693. In identifying the inventor Jacob J rejected the submission that an invention could be divided into contributed elements and patents awarded accordingly. He said (at 706):
I do not think it is right to divide up the claim for an invention which consists of a combination of elements and then to seek to identify who contributed which element. I think the inquiry is more fundamental than that. One must seek to identify who in substance made the combination. Who was responsible for the inventive concept, namely the combination?
In the Court of Appeal which dismissed an appeal from the decision of Jacob J, Robert Walker LJ, delivering the judgment of the Court, defined what he called "two antecedent questions" in the case:
What was the inventive concept underlying the relevant claim in the specification of the patent in suit?
Who devised that inventive concept, one or other of the two claimants or the two of them together?
His Honour referred to the passage quoted from the judgment of Jacob J above. He disagreed with it to the extent that it characterised the relevant invention as a "combination" of elements. That disagreement was an artefact of the particular case and not a disagreement with the principle enunciated by Jacob J.
1432 In Collag Corp v Merck and Co Inc [2003] FSR 15, Pumfrey J, at 70, referred to the decision of the Court of Appeal as the leading modern authority on inventorship and said:
It is clear that it is the function of the Court to identify the inventive concept of the specification, and then to determine who devised the inventive concept. The approach is simply stated: the problem is to apply it when there are a number of distinct concepts disclosed by the specification, including an important commercial embodiment.
In some cases where each relevant individual feature of the invention was the subject of a claim it could, in effect, be dealt with claim by claim: citing Viziballs's Application [1988] RPC 213 and Goddin and Rennie's Application [1996] RPC 141.
1433 In Stanelco Fibre Optics Ltd's Application (No 2)[2005] RPC 16, Floyd QC, sitting in the Patents Court, discussed the term "inventor" defined in the 1977 UK Act as "the actual devisor of the invention". Pointing out that the definition of the term "devisor" in the New Shorter Oxford English Dictionary included inventor, Floyd QC observed that the term seems to have been used to distinguish between the person who was actually responsible for making the invention and a mere importer. If that be right then the term "actual devisor" did not add anything to the concept of inventor. While UK authorities applying the 1977 UK Act have to be read in the light of the particular definition the general jurisprudence is still relevant for Australia. Floyd QC pointed out in the light of the Court of Appeal decision in Henry Bros [1977] RPC 693 and the decision of Pumfrey J in Collag Corp [2003] FSR 15, that the Court in determining inventorship by reference to inventive concept is not concerned with issues of validity or inventiveness merely with the concept as described. He approved the proposition put by counsel in the case that an inventor is not the person who comes up with a vague idea or pipe dream saying "wouldn't it be nice if we could do such and such" - but without any idea as to whether "such and such" can in fact be done or how it might be done. Such a person will not be the devisor of an invention subsequently made by another even though without the initial prompt the invention might never have been made. Floyd QC said (at [14]):
… It is never going to be enough for an antecedent worker to rely solely on an initial prompt of the vague kind [counsel] refers to: a "but for" approach would lead to all sorts of people being treated as inventors. But where the antecedent worker comes up with and communicates an idea consisting of all the elements in the claim, even though it is just an idea at that stage, it seems to me that he or she will normally, at the very least, be an inventor of the claim. What US patent law calls "reduction to practice" is not, it seems to me, a necessary component of a valid claim to any entitlement."
1434 The meaning of "invention" in s 8(1) of the 1977 UK Act was considered by the Court of Appeal in Markem Corporation v Zipher Ltd (2005) RPC 31. The Court held that s 125 did not apply to the construction of "invention" in s 8. After adverting to the need to apply s 8 in the absence of claims, Jacob LJ said at [101]:
Accordingly we think one is driven to the conclusion that s 8 is referring essentially to information in the specification rather than the form of the claims. It would be handy if one could go by the claims, but one cannot. S 8 calls for identification of information and their rights in it. Who contributed and what rights if any they had in it lies at the heart of the inquiry, not what monopolies were actually claimed…. As a general rule one will start with the specific disclosure of the patent and ask whether that involves the use of information which is really that of the applicant, wholly or in part or as joint owner. What one is normally looking for is 'the heart' of the invention. There may be one 'heart' but each claim is not to be considered as a separate 'heart on its own'.
Terrell observed of this judgment that (at 3-87):
It is thus necessary to determine what the heart of the invention disclosed is and this is frequently referred to as the inventive concept.
The decision of the Court of Appeal in Markem Corporation (2005) RPC 31 was overruled by the House of Lords in Yeda Research and Development Co Ltd v Rhone Poulenc Rorer International Holdings Inc [2008] 1 All ER 425but the overruling did not affect the proposition cited. In a passage referred to with approval by the Full Court of the Federal Court in its recent decision: Polwood Pty Ltd v Foxworth Pty Ltd (2008) IPR 1 at [41] Lord Hoffman said that the first step in a dispute over entitlement is to decide who was the inventor or inventors of the claimed invention. This required a determination of the person who devised or contributed to the inventive concept. It was not sufficient that someone contributed to the claims because they may include non-patentable integers.
1435 Another important distinction for present purposes was drawn by Laddie J between devising an invention and formulating an enabling disclosure. In University of Southampton's Applications [2005] RPC 11 he said (at [46]):
In my view, devising an invention and providing enabling disclosure are two quite different things. Although both may be necessary to secure valid protection … they relate to different aspects of the law of patents. It is very possible to make a good invention but to lose one's patent for failure to make an enabling disclosure. The requirement to include an enabling disclosure is concerned with teaching the public how the invention works, not with devising the invention in the first place.
This passage was subsequently quoted with approval by Lord Hoffman in Synthon BV v SmithKline Beecham plc [2006] 1 All ER 685 at [46]. Laddie J observed that an inventive concept frequently comes from a contribution of more than one mind with each putting the pieces together. Where it was impossible to distinguish the contributions of a number of individuals to a "single inventive concept" they would all be inventors. This did not mean that those whose only contribution was to supply data for enabling disclosure thereby qualified as inventors.
1436 Laddie J's decision at first instance, which was on appeal from the Comptroller, was reversed in the Court of Appeal but not so as to cast doubt upon the principles he enunciated. Jacob LJ, delivering the judgment of the Court of Appeal, said (at [39]):
In the context of entitlement to a patent a mere, non-enabling idea, is probably not enough to give the patent for it to solely the devisor. Those who contribute enough information by way of necessaryenablement to make the idea patentable would count as "actual devisors", having turned what was "airy-fairy" into that which is practical. [emphasis in original]
University of Southampton's Applications [2006] RPC 21
1437 It should also be borne in mind that the term "inventive concept" appeared in the 1977 UK Act and in particular in the collocation "single inventive concept" in s 14(5)(d). That subsection required that the claims in the specification should, inter alia, "relate to one invention or to a group of inventions which are so linked as to form a single inventive concept". A determination of that question was left to the Comptroller because, by s 26 of the Act, no person could in any proceeding object to a patent on the ground that the claims related to more than one invention or to a group of inventions not so linked as to form a single inventive concept. In Sabaf SpA v MFI Furniture Centres Ltd [2005] RPC 10, Lord Hoffman said (at [25]) that although s 14(5)(d) imposed a procedural requirement it did suggest that the references in the Act to an "invention" were to the expression of a single inventive concept and not to a collocation of separate inventions.
1438 The recent decision of Polwood Pty Ltd 75 IPR 1 concerned parties each claiming sole authorship of the method and apparatus for producing potting mix using waste materials. The primary judge held that neither was entitled to the grant of the patent as sole inventor but that they were joint inventors. The Full Court agreed with his Honour's conclusion. It found "two hearts" to the invention, one in the concept of the method and the other in the apparatus which had been devised by the respondent. The appellant had argued that the invention resided "solely in the concept".
1439 The Full Court stated that what constitutes the invention can be determined from the particular patent specification including the claims. Sometimes the invention can be identified as "the conception of a solution" to a problem: Stack v Davies Shephard Pty Ltd (2001) 108 FCR 422 at [22]. But as their Honours said (at [38]):
However, the conception of the solution may not be sufficient to claim sole inventorship or correlate with the invention that is described and claimed. There may not have been a recognised problem to be addressed and not all inventions or inventive steps can be analysed in terms of problem/solution.
1440 Their Honours referred to the discussion of inventive concept in Gunter v Stream 573 F 2d 77 (1978), where the "conception" of the invention was described as the complete performance of the mental part of the inventive act. That is to say the invention is the formation in the mind of the inventor of a definite and permanent idea of the complete and operative invention as it is thereafter to be applied in practice: see also Burroughs Wellcome (1994) 40 F 3d 1223 cited above. What remains belongs in the department of construction. A concept can be complete although experimentation may continue. It is complete when a person of ordinary skill in the art could construct the apparatus without unduly extensive research of experimentation. Their Honours referred also to Mueller Brass Co v Reading Industries Inc 352 F Supp 1357 (1972) at [16], [17] for the proposition that inventorship is a role in the final conception of that which is sought to be patented (at [46]):
It is clear that, in working out the inventive concept in a patent, each patent will be different and it will be necessary to ascertain the inventive concept from the whole of the specification. Contribution after the invention was fully conceived where that contribution was under the direction of the inventor does not give rise to entitlement to the invention. A person must be able to say that without his or her contribution to the final conception it would have been less.
Their Honours described that philosophy as "apt". For joint inventorship, each inventor had generally to contribute to the conception of the invention.
1441 Plainly there are no bright lines to be drawn between inventorship based on inventive concept and verification or reduction to practice. In the Polwood 75 IPR 1,case the Full Court found that the patent application described the apparatus as an aspect of the invention. It was described and claimed. Polwood did not itself play any part in its design and construction prior to the filing of the patent application. The apparatus was held at first instance to be "an invention" of Foxworth. So there was a finding of inventive contribution by Foxworth. The concept itself was not found sufficient to encompass the machine that made it workable. Those factors argued against Polwood's contention that the concept equated with the invention of the patent application.
Conclusion on general principles
1442 In my opinion the approach propounded by Sirtex is in accordance with the established notion of "inventive concept" and the identification of an invention for the purposes of the 1990 Act. It yields a workable construction of the implied contractual term (were it to exist) and of the Regulations. It is consistent with authority in this country, Canada and the United States and the approach taken by the Court of Appeal to the determination of entitlement to patents. It must be recognised, in adopting Sirtex's approach, that there may be more than one contributor to the inventive concept and perhaps more than one inventive concept. However, the approach properly eschews a claim by claim analysis and does not accept that selection of the narrowest claim discloses the invention. It does not require a search for who contributed each element of the narrowest claim or claims.
1443 In my opinion, the invention in each case in these proceedings is generally to be found described in the relevant specification which will be, for the most part, the applicable PCT specification. The time at which the invention was developed and the person by which it was developed is to be ascertained by reference to the inventive concept of the invention so described. The time of invention, and the identity of the inventor will not be affected by the subsequent process of reduction to practice some elements of which may have found their way into the claims in the application.
SIRT-Spheres inventions
1444 At paragraph 12 of its statement of claim, UWA alleges that in the course of work at UWA and within the scope of his employment by it, Dr Gray developed and/or discovered the SIRT-Spheres inventions which were patentable and commercially significant. They were comprised in the "Gray assets" referred to in the Deed of Assignment between Dr Gray and Sirtex made on or about April 1997 and included:
(a) the invention disclosed in Australian Provisional Patent application No PR0983 dated 25 October 2000 entitled "Polymer based radionuclide containing microspheres" and in Patent Cooperation Treaty Application PCT AU/01/01370 entitled "Polymer based radionuclide containing particulate material" (SIRT-1); and
(b) the invention disclosed in Patent Application AU54724/94 entitled "Radioactive particles for treatment of cancer" (SIRT-2);
SIRT-1 was particularised by a three line description and referred to the provisional application, PR0983 and the PCT application PCT/AU01/01370. SIRT-2 was particularised by reference to the claims in the application.
1445 Dr Gray said, in relation to SIRT-1, that if there were any patentable invention it was discovered prior to his employment by UWA and, alternatively, after termination of that employment. Part of his defence in relation to SIRT-2 did not seem to make sense. It stated that the microparticle created from particulate ceramic material was not, and had not, been used by him or Sirtex because of the cost of its manufacture.
1446 Dr Gray pleaded that at all material times prior to 1980 microparticle preparation incorporating radioactive material to be used in the treatment of cancer was a concept in the public domain. He referred to a number of articles to support that proposition. He also said that before the commencement of his employment by UWA he carried out research into the use of microsphere and microparticle preparations incorporating radioactive material to be used in the treatment of cancer and primarily liver cancer and published his research. Any such research carried out by him in the course of his employment was substantially developed and completed by him before that employment and was not research in respect of a patentable invention.
1447 Sirtex denied that the SIR spheres inventions were developed or discovered in the course of Dr Gray's work at UWA or within the scope of his employment by UWA. It admitted that each of the SIRT-1 and SIRT-2 inventions were patentable and commercially significant. It alleged that each of them was invented prior to Dr Gray's employment by UWA.
SIRT-1 invention - microspheres bearing Yttrium
1448 The SIRT-1 provisional application lodged on 16 March 1999 by Paragon Medical was entitled "Production of Resin Based Radionuclide-Containing Microspheres". The provisional specification summarised the invention as providing a particulate material comprising resin based microspheres having a diameter in the range of from 20 to 80 microns, preferably from 20 to 40 microns and more particularly in the range of from 30 to 35 microns, said microspheres having a specific gravity of less than 2 and having an Yttrium radionuclide stably incorporated in them. The resin based microspheres were formed from an ion exchange resin particularly a cation exchange resin. A particularly preferred cation exchange resin was the styrene/divinyl/benzene copolymer resin commercially available under the trade name Aminex 50W-X4. The radionuclide incorporated into the microspheres in accordance with the invention was preferably a Yttrium radionuclide and most preferably Yttrium90. It did however extend to encompass the incorporation of other radionuclides such as the unstable radionuclides of phosphorous and holmium.
1449 The invention was said particularly to provide a method for the production of a particulate material comprising resin based microspheres as described characterised by the steps of:
(i) absorb a radionuclide into resin-based microspheres having a diameter in the range of 20 to 80 microns and a specific gravity of less than 2; and
(ii) precipitating the radionuclide as an insoluble salt to stably incorporate the radionuclide into the microspheres.
Preferably the radionuclide was stably incorporated into the resin base microspheres by precipitating it as a phosphate salt, particularly the phosphate salt of an Yttrium radionuclide. The invention extended to the precipitation of the radionuclide as other insoluble salts including carbonate and bicarbonate salts. The reference to stable incorporation was to be understood as meaning incorporation of the radionuclide so that it did not leach out of the microspheres under physiological conditions.
1450 A detailed description of the invention followed. Examples were set out. The first focussed on the manufacture of the microspheres and, in particular, the placing of Yttrium oxide in sulphuric acid with gentle heating and stirring to form a clear colourless solution of Yttrium sulphate. The Yttrium sulphate solution was then added to a reaction vessel containing microspheres of approximately 30 to 35 microns which had been added to water to form a slurry. This was stirred at a speed sufficient to ensure homogeneity to absorb the Yttrium solution into the resin based microspheres. Tri-sodium phosphate (10% w/v) was added to the reaction vessel to precipitate the radionuclide as Yttrium phosphate. The microspheres were then washed with water, resuspended and diluted, if necessary, with water. Resin based Yttrium microspheres so produced had 0.01-0.4% unbound Y90 when tested in a leaching test which was specified.
1451 The second example related to the mode of administration and referred to the infusion of angiotensin-2 into the hepatic artery to redirect arterial blood to flow into the metastatic tumour component of the liver and away from the normal parenchyma. This was followed by embolisation of the resin based Yttrium90 into the arterial circulation so that they would become lodged in the microcirculation of the tumour. Repeated injections were made until the desired radiation level was reached:
By way of example, an amount of yttrium-90 activity that will result in an inferred radiation dose to the normal liver of approximately 80 Gy may be delivered. Because the radiation from SIRT is delivered as a series of discrete point sources, the does of 80 Gy is an average dose with many normal liver parenchyma cells receiving much less than that dose.
1452 The provisional specification from which PCT/AU01/01370 claimed priority was application number PR0983 filed on 25 October 2000 under the title "Polymer Based Radionuclide containing Microspheres". This provisional specification was very similar to its 1999 predecessor, however there were some differences. In the summary of the invention the diameter of the microspheres was described as "… in the range of from 15 to 100 microns, preferably from 20 to 50 microns and more particularly in the range of from 30 to 35 microns". A reference was added to them having a "suspending solution pH of less than 9". There was an additional paragraph which read:
The conditions under which the radionuclide is incorporated into the resin matrix must be carefully regulated in order to prevent the final product having a pH greater than 9 as this may have deleterious effects when injected into patients.
1453 There was more reference to the pH of the solution in the later provisional specification with particular reference to the need to avoid an excessive pH which could cause patient discomfort. A graph showing the pH of the wash solution against the wash number was incorporated. That graph had not appeared in the earlier version. The principal change to the first example again related to the pH of the suspension in which the resin based microspheres were to be kept.
The SIRT-1 PCT application claims
1454 The SIRT-1 PCT application contained 23 claims which are set out as follows:
A particulate material having a diameter in the range of from 5 to 200 microns comprising a polymeric matrix and stably incorporated radionuclide.
The particulate material according to claim 1 wherein the radionuclide is incorporated by precipitation.
The particulate material according to claim 1 wherein the polymeric matrix is partially cross linked.
The particulate material according to claim 3 wherein the polymeric matrix comprises from about 1% to about 20% cross linking.
The particulate material according to claim 4 wherein the polymeric matrix comprises about 4% cross linking.
The particulate material according to claim 1 wherein the polymeric matrix is an ion exchange resin.
The particulate material according to claim 6 wherein the polymeric matrix is a cation exchange resin.
The particulate material according to claim 6 wherein the ion exchange resin comprises a partially cross linked aliphatic polymer.
The particulate material according to claim 6 wherein the ion exchange resin comprises a partially cross linked polystyrene.
The particulate material according to claim 9 wherein the ion exchange resin comprises polystyrene partially cross linked with divinyl benzene.
The particulate material according to claim 1, wherein the radionuclide is an isotope of yttrium, holmium, samarium, iodine, phosphorus, iridium or rhenium.
The particulate material according to claim 1, wherein the radionuclide is yttrium-90.
The particulate material according to claim 1 being a microsphere.
A particulate material having a diameter in the range of from 30 to 35 microns comprising a copolymer comprised of styrene and divinyl benzene and precipitated yttrium-90.
A process for the production of a particulate material according to claim 1 comprising the step of combining a polymeric matrix and a radionuclide in solution for a time and under conditions sufficient to stably incorporate the radionuclide in the matrix to produce a particulate material having a diameter in the range of from 5 to 200 microns.
A process according to claim 15 wherein the radionuclide is stably incorporated by precipitation into the polymeric matrix.
A process according to claim 15 wherein the radionuclide is yttrium-90.
A method of radiation therapy of a patient, which comprises administration to the patient of a particulate material having a diameter in the range of from 5 to 200 microns comprising a polymeric matrix and a stably incorporated radionuclide.
A method according to claim 18 wherein the radionuclide is yttrium-90.
A method according to claim 18 wherein the radiation therapy comprises treatment of a primary or secondary liver cancer.
Use of particulate material having a diameter in the range of from 5 to 200 microns comprising a polymeric matrix and a stably incorporated radionuclide in radiation therapy of a patient.
The selection of microspheres with characteristics suited to use in therapeutic treatments involving the targeted delivery of radioactive isotopes to diseased tissue.
A method of incorporating the radioactive isotopes in the microspheres so that they were unable to dislodge or leach from the microspheres following administration to a living organism.
The use of the microspheres with immobilized radioactive isotopes in the treatment of diseased tissue.
1457 The microsphere selection problem was subdivided, in the UWA submissions, into the following problems and association solutions:
(i) Microsphere size. If the microspheres were too small an unacceptable portion of them could leak out of the liver vasculature and lodge in the lungs. The size of microspheres set out in claim 14 of the SIRT-1 PCT application was 30-35 microns. UWA said the adoption of that size to prevent breakout occurred between early 1987 and February 1990 during the time at which Dr Gray was an employee of UWA.
(ii) Microsphere density or specific gravity. Density was not specified in the SIRT-1 PCT application claims. The specification indicated the importance of density below 3g/cc with a preference for less than 2g/cc. The desirable density was said to have been indicated by Dr Burton in a letter to Dr Berndt of Monash University on 9 May 1990 and also by Dr Gray in a letter to Dr Gani on 22 March 1991. The required density was said to have been known by May 1990. That did not of course indicate the earliest date by which it was known.
(iii) Microsphere composition. The narrowest claims for microsphere composition, SIRT-1 PCT application claim 10, was said to require a partially cross-linked divinyl benzene ion exchange resin matrix. Before Dr Gray began working at UWA it was said that he used commercially available microspheres comprising styrene/divinyl benzene ion exchange resins. It is not clear where this submission was supposed to lead. It did not appear to lead to a proposition that Dr Gray only began using divinyl benzene ion exchange resins after commencing his employment at UWA.
(iv) The extent of cross-linking. The narrowest relevant claim required only 4% cross-linking of the polymeric matrix comprising the microspheres (SIRT-1 PCT application claim 5). The evidence was said to point to the cross-linking referred to in claim 5 being chosen at the same time as the move to 32.5 micron microspheres, ie between early 1987 and February 1990.
1458 The Stable incorporation problem was described. Leaching was a phenomenon whereby Yttrium90 could be detached from the microsphere matrix and enter the circulatory system. The SIRT-1 PCT application proposed, in claim 16, precipitation as a method of stable incorporation. UWA accepted that Dr Hodgkin's evidence indicated that his suggestion that the Yttrium90 be phosphated predated Dr Gray's commencement at UWA. It submitted, nevertheless, that the problem of leaching had not been solved before that commencement. The second SIRT-1 Australian application referred to incorporation of the Yttrium90 into a polymeric matrix but indicated that there were several instances in which it leached from the microspheres and caused inappropriate irradiation of other tissues. The statement did not identify the clinical work as that of Dr Gray however the absence of any literature citation was said to support that inference and was consistent with his clinical work in November 1986. The evidence was said to suggest that the methods he and his colleagues used to make radioactive microspheres for use in the early clinical trials did not satisfactorily incorporate the radionuclides into them.
1459 The method which had been described to deal with the leaching problem involved suspending the microspheres in a precipitation solution, stirring it and then washing them with water until there was "no unbound activity". Absent evidence as to the composition of the precipitating solution, the Court was invited to infer that the solution used in 1987 to manufacture radioactive microspheres was the same as that specified by ANSTO in its specifications dated 29 November 1996 for the microspheres it produced for Sirtex. The Sirtex method involved suspension of the microspheres in precipitation solution for 30 minutes, then their removal and resuspension in a fresh precipitating solution. UWA submitted that the knowledge that the microspheres needed to be exposed to the precipitating solution for more than 30 minutes was critical to allowing them to be used in the clinical treatment. The evidence was said to suggest that the method of precipitating the radioisotope was finally settled on between 1987 and November 1996.
1460 The third problem identified by UWA was not defined with any nicety in its submissions. It stated:
The third problem concerned the use of microspheres with incorporated radioactive isotopes in the treatment of diseased tissue.
The components of a solution to the so-called third problem were:
(a) microsphere size
(b) targeting of microspheres to tumour and the use of angiotensin-2.
(c) the delivery of sufficient doses of radiation to be therapeutic.
UWA submitted that the development of microspheres suitable for treatment did not occur before Dr Gray commenced his employment at UWA. Although he claimed to use SIRT-1 to treat patients at St Vincent's Hospital in Melbourne before 1986, it was clear that he was using traces and not Yttrium90 microspheres.
1461 On the microsphere size issue, UWA revisited its submissions in relation to microsphere size as part of the microsphere selection problem.
1462 In relation to the use of angiotensin-2, the SIRT-1 PCT application specification described the contemporaneous or prior administration of a vasoactive substance such as angiotensin-2 to redirect arterial bloodflow into the tumour and prepare it for the receipt of particulate material. This did not, however, appear in the claims. UWA referred to Dr Gray's pre-employment study of the distribution of tracer microspheres in rat and rabbit livers following intra-aorta injection under the influence of angiotension-2. The study indicated that Dr Gray knew that angiotension-2 could successfully target 15 micron diameter tracer microspheres. However, it was asserted, somewhat improbably on the part of UWA, that the study was not predictive as to the effect of angiotension-2 upon the distribution of larger microspheres in the range 30 to 35 microns. There was no evidence, it was said, to suggest that prior to his employment at UWA Dr Gray was aware that large mammal tumour blood vessels under the influence of angiotension-2 would remain sufficiently open enough to allow the larger microspheres to enter the tumour blood supply. It was submitted that the suitability of using angiotension-2 was settled at some time after the commencement of the Phase 1/2 clinical trials in or about 1986 and at about May 1989.
1463 As to radiation dosage, UWA noted that claim 18 of the SIRT-1 PCT application claimed a method of administering radiation therapy. It did not describe how the therapy was to work except by reference to the microspheres being administered to the patient. There was no reference to the preferred dosage although in example 3 in the SIRT-1 PCT application a dose of 80Gy to normal liver was reported to be permissible.
1464 UWA referred to a paper by Dr Gray accepted for publication in May 1989 in which he reported the results of experiments on ten patients treated with radioactive microspheres. He mentioned that radiation doses had generally been kept below 30Gy. He also reported on a paucity of reliable data on liver tolerance but said that doses in excess of 30Gy given by conventional fractionated techniques were regarded as likely to result in radiation hepatitis. UWA submitted that the state of knowledge prior to the commencement of the Phase 1/2 clinical trial was that radiation dosage should have been close to but below 30-40Gy. In a paper by Dr Gray, accepted for publication in September 1989, he reported that the findings of the study he had carried out confirmed that mean radiation doses of the order of 80Gy can be tolerated by the human liver when delivered as a series of point sources:
This is the first confirmation in humans that these doses can be tolerated.
1465 UWA relied on a rather tenuous linkage based on binding capacity studies on DOX-Spheres carried out by Dr Gray and Dr Chen and their conclusion that with 32.5 micron microspheres, that is the Bio Rad 50 Wx4 samples, more drug molecules could easily gain access to ionic binding sites in the resin. Given the likelihood that the larger microspheres could bind significantly larger quantities of "radiation" [sic] it was said to be possible that the increase in dosage to the liver was a consequence of the change in size of microspheres. This was a somewhat speculative submission. In any event, it was submitted, that by about September 1989 Dr Gray was aware that doses of the order of 80Gy could be tolerated by the liver.
SIRT-1 invention - Dr Gray's submissions
1466 Dr Gray's primary position was that if there were anything patentable under the heading SIRT-1 it was invented before his employment with UWA commenced. The content of SIRT-1 as described in the 1999 provisional patent application had first been disclosed in the 1983 Chamberlain article and thereafter repeatedly in various grant applications and articles. He cited:
A particulate material comprising hollow or cup-shaped ceramic microspheres having a diameter in the range of from 5 to 200 microns.
A material according to claim 1, wherein the microspheres consist of or comprise Yttria or another Yttrium-containing compound as base material.
A method of radiation therapy of a human or other mammalian patient, which comprises administration to the patient of a radioactive particulate material comprising hollow or cup-shaped ceramic microspheres, said microspheres comprising a beta-or gamma-radiation emitting radionuclide and having a diameter in the range of from 5 to 200 microns.
A method according to claim 11, wherein the microspheres consist of or comprise Yttria or another Yttrium-containing compound as base material and the radionuclide is Yttrium-90.
Use of a radioactive particulate material comprising hollow or cup-shaped ceramic microspheres, said microspheres comprising a beta or gamma-radiation emitting radionuclide and having a diameter in the range of 5 to 200 microns, in radiation therapy of a human or other mammalian patient.
1484 The background to the invention set out in the specification of the SIRT-2 PCT application referred to:
The ability to maximise heating within the diseased tissue while maintaining hyperthermia within safe operating limits for the patient. The solution to that problem required the following:
1.1 selecting the appropriate magnetic material;
1.2 identifying the correct field/frequency parameters;
1.3 maximising tumour heating rate.
The ability to localise heating to a particular site in the body of a living organism:
2.1 creation of microspheres - size;
2.2 creation of microspheres - density;
2.3 creation of microspheres - composition;
2.4 delivery of magnetic material to diseased tissue.
The ability to combine clinically effective hyperthermia with other treatment modalities such as radiotherapy:
3.3 combination of hysteresis heating with cytotoxic drugs;
3.4 combination of hysteresis heating with ionising radiation.
The various "solutions" to the problems identified were cross-referred to claims in the PCT application.
1519 In relation to 1.1, UWA referred to the concept of magnetic heating efficiency (MHE) developed by Dr Jones and the reference in claim 7 of the PCT application to a range of substances suitable for use in the invention. Reference was then made to Dr Jones' NH & MRC application with Dr Gray and Professor Street on 20 February 1991 which referred to the study of barium ferrite. It was submitted that one of the class of compounds specified in claim 7 of the PCT application had been identified. Another application for grant funding dated 5 March 1993 was referred to in which reference was made to materials including acidular ion oxides, chromium dioxide and cobalt modified iron oxides having desired characteristics for hysteresis heating. It was submitted that the identification of these materials satisfied at least the requirements of claims 8 and 10 and, on a fair reading, claim 9. Thus it was said these components of the invention were identified by 5 March 1993.
1520 Evidence referred to earlier in these reasons concerning the attempts to obtain additional samples of S11, a form of cobalt modified gamma ferric oxide was also referred to. In particular, UWA mentioned Dr Jones' letter to Dr Eldridge of 16 November 1993 describing the Bayer S11 sample that they had been given as "extremely useful to us". It was submitted that measurements must have been made by that date of the hysteresis heating properties of S11. This was then linked to claim 5 of the magnetic material which required the MHE of the material to be above 1 x 10-7 J.m/A.g when the magnetic field conditions were equal to or less than 7.5 x 107 A/s. In the PCT specification one substance was described as meeting that requirement. It was described as being a gamma-Fe2O3 obtained from Bayer Chemicals. This, by a process of inference, led UWA to submit that the selection of cobalt treated gamma-ferric oxide compound referred to in claim 8 of the PCT application was finally settled upon between December 1992 and November 1993 and that Dr Gray and Dr Jones were employees of UWA during that period.
1521 As to the identification of the correct field/frequency parameters, UWA adopted a similar approach by reference to correspondence and applications concerning the development of apparatus to develop a suitable magnetic field. On the basis of those submissions it was said that claim 22 was finally settled on between about early 1993 and the end of 1993 and that during the entirety of that time both Dr Gray and Dr Jones were fulltime employees of UWA.
1522 UWA referred to claim 18 of the Thermo-Spheres-1 invention PCT application which required the rate of tumour heating to be above 100 mW/cm3. The CSIRO report of 30 July 1988 predicted that therapeutic heating would occur when magnetic microspheres were able to provide an input power of 60kW/m3 of tissue. Reference was then made to old Paragon Medical's application for WAISS funding on 20 February 1996 which stated:
In order to test this hypothesis we have developed prototype microspheres incorporating a particular form of gamma-Fe2O3 which, when exposed to the correct magnetic field conditions, produces heat energy at the rate of 100W/g. The magnetic field is generated inside a 13cm diameter water cooled copper coiled hyperthermic device …
Then there was a reference to a fax from Dr Jones to Mr Cox of Wray & Associates on 14 March 1997 confirming that microspheres made from gamma-Fe2O3 could produce upwards of 100W/g under the right conditions. On this basis it was said that claim 18 was finally settled between July 1988 and February 1996. The UWA submissions then went over into the general issues canvassed in relation to SIRT-1 of size, density, composition and delivery of the microspheres.
1523 Dr Gray submitted that the concept of targeted hyperthermic hysteresis was a logical extension of his targeted microsphere technology. He also submitted, and I accept, that while in Melbourne he conceived and developed the concept of hysteresis hyperthermia with Dr Burton. Dr Burton, as indicated earlier in these reasons, had a particular interest in the use of hyperthermia. There was already a significant amount of published literature in existence in 1985 and 1986 to which reference has been made.
1524 In Dr Gray's letter to Dr Burton of 3 December 1986 he attached notes entitled "Adjuvant Hyperthermia in the Treatment of Cancer". He referred to the use of microspheres to enhance tissue heating. At the time his interest was in the use of fluctuating magnetic fields to induce heating in microspheres bearing magnetic material. He coined the term "thermospheres" for microspheres containing magnetic material. As he acknowledged at the time, the development of the technology was going to be expensive and beyond normal funding mechanisms.
1525 As was pointed out in the submissions on behalf of Dr Gray, he used the words that he had "finally put together some thoughts" which was consistent with a long standing interest in the targeted hysteresis hyperthermia concept. This was said to reinforce the evidence of both Dr Gray and Dr Burton that the concept was developed from their days in Melbourne. I accept the submission that before he came to UWA Dr Gray was aware of:
he wilfully and deliberately breached his employment obligations to UWA;
he deliberately misappropriated the property of UWA.
It alleged that by reason of the publication of the letter, Dr Gray:
had been brought into hatred, contempt and ridicule;
had had his reputation lowered in the estimation of right thinking persons
and had thereby suffered loss and damage. There were claims for aggravated and exemplary damages.
1595 In its defence UWA pleaded, inter alia, that the letter was published by it on an occasion of qualified privilege in that:
(a) it was published pursuant to UWA's duty to, and in furtherance of, UWA's interest in, protecting its proprietary and legal interests; and
(b) it was received by a person being Sirtex with an interest in receiving information in relation to the matters referred to in the letter in that it contained information about the proprietary and legal interests of Sirtex.
The University also said that in publishing the letter:
(a) it believed on reasonable grounds that Sirtex had an interest or apparent interest in receiving information in relation to the matters referred to in the letter;
(b) it acted in the course of giving Sirtex information in relation to the matters referred to in the letter; and
(c) it acted reasonably.
1596 Dr Gray accepted that, absent malice, the letter would be protected by qualified privilege. In reviewing the long history of events leading up to these proceedings I have made findings of fact in relation to the various matters upon which Dr Gray asserted malice including the timing and circumstances of the sending of the letter. For reasons previously given, I am not satisfied that any relevant malice was made out. If there were people at UWA who bore Dr Gray ill-will there was no causal connection shown between any such ill-will and the content or timing of the letter. Its content and timing seems largely to have been in the hands of Mr Heitman and UWA's solicitors. Assuming the letter to have contained the innuendos for which Dr Gray contended and to have been defamatory, the publication to Sirtex was on an occasion of qualified privilege. The defamation claim fails.
1597 The letter was revisited on the basis that the alleged defamatory representations were misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the TPA. The pleaded innuendos were characterised for the purposes of this cross-claim as representations and to be misleading or deceptive or likely to mislead or deceive
"… for the reasons pleaded in the cross-claimant's defence filed herein".
1598 The letter was, on the face of it, a letter of demand asserting rights on behalf of UWA in respect of Dr Gray. It was addressed to a publicly listed company comprising professional and business people with the resources to obtain proper legal advice. It was a letter of demand from a legal practitioner on behalf of a client addressed to a commercially sophisticated recipient, it was never going to be accepted at face value or to raise a belief unexamined that Dr Gray had engaged in the conduct alleged. In my opinion there is no basis to the cross-claim for misleading or deceptive conduct founded on the letter of demand.
1599 Dr Gray's cross-claim against UWA is dismissed in its entirety.
Sirtex' cross-claim against Gray
1600 The only live elements of the Sirtex cross-claim against Dr Gray were those which stood independently of the outcome of the UWA proceedings against Sirtex.
1601 In paragraph 195 of the cross-claim Sirtex repeated paragraphs 162 and 164 to 171A of the defence. Paragraph 162 pleaded the incorporation of Sirtex in connection with the venture capital fundraising from Nomura/JAFCO and the conditions satisfied by that incorporation. Paragraphs 164 through to 171A pleaded the various agreements entered into in May 1997. Warranties provided by Dr Gray in the Gray Deed were pleaded. These included his warranty that to the best of his knowledge there were no pending claims or applications in respect of the patents, know how rights or intellectual property rights in any of the Acquired Inventions or the subject matter of any of them other than the patent applications transferred to Sirtex by the Gray Deed and the CRI Deed. Another warranty cited was that there was no allegation or threat of infringement of any rights by reason of use of any of the acquired inventions that had been made against any person.
1602 Paragraph 171A of the Sirtex defence, incorporated by reference into the cross-claim, alleged that if Dr Gray knew of various matters pleaded in the statement of claim then in the premises pleaded in paragraphs 162 to 171A of the defence he was:
(i) in a position where his duties to Sirtex at law, in equity and pursuant to ss 232(2), 232(4), 242(6), (1000)(1)(b) and/or (c) and 1002G(1) of the Corporations Law of Western Australia were in conflict with his personal interests and/or his duties to CRI; and
(ii) acting in breach of those duties and provisions; and
(iii) further or alternatively, acting in fraud of Sirtex;
to secure the benefits to himself or further or alternatively CRI of acquiring and/or maintaining ownership of shares in Sirtex being a company in which NJI had covenanted to subscribe, and/or NJI and others subscribe, moneys for the development of the acquired inventions the benefit of which accrued to Dr Gray and CRI in proportion to their respective shareholdings from time to time, in Sirtex.
1603 Particularising paragraph 171A Sirtex referred to Dr Gray's non-disclosure of various matters including:
(a) an advice provided to Dr Yan Chen by Wray & Associates dated 21 December 1994 and forwarded to Dr Chen by Dr Gray on 30 December 1994 which raised the question of UWA's ownership of the DOX-Spheres invention and by the same reasoning the SIRT-2 invention.
(b) communications between him and UWA between 1997 and 2000 which included assertions by UWA of its claim to ownership of some or all of the acquired inventions.
The documents referred to included letters from Professor Barber to Dr Gray of 20 February 1997 and 5 March 1997, a letter from Professor Landau to Dr Gray of 5 March 1997 and the letter from Professor Robson to Dr Gray of 19 November 1997. In addition, Sirtex relied upon the letters from Professor Schreuder to Dr Gray on 17 June 1999, 7 October 1999 and 9 November 1999 as well as Dr Gray's letters to Professor Schreuder dated 28 June 1999, 16 July 1999 and 17 November 1999. Sirtex alleged that at all times on and after 1 May 1997 until receipt of the solicitor's letter of demand to Sirtex dated 26 October 2004, Dr Gray maintained that no person other than Sirtex had, or claimed any entitlement to each of the acquired inventions.
1604 The reference to s 232 of the Corporations Law of Western Australia may be taken, as at 2000, to be a reference to s 180 and s 181 of the Corporations Law as it stood in 2000 following the enactment of the Corporate Law Economic Reform Package Act 1999. The provisions of s 180 and s 181 were as follows:
180(1) A director or other officer of a corporation must exercise their powers and discharge their duties with the degree of care and diligence that a reasonable person would exercise if they:
(a) were a director or officer of a corporation in the corporation's circumstances; and
(b) occupied the office held by, and had the same responsibilities within the corporation as, the director or officer.
180(2) A director or other officer of a corporation who makes a business judgment is taken to meet the requirements of subsection (1), and their equivalent duties at common law and in equity, in respect of the judgment if they:
(a) make the judgment in good faith for a proper purpose; and
(b) do not have a material personal interest in the subject matter of the judgment; and
(c) inform themselves about the subject matter of the judgment to the extent they reasonable believe to be appropriate; and
(d) rationally believe that the judgment is in the best interests of the corporation.
The director's or officer's belief that the judgment is in the best interests of the corporation is a rational one unless the belief is one that no reasonable person in their position would hold.
180(3) In this section:
business judgment means any decision to take or not take action in respect of a matter relevant to the business operations of the corporation.
181(1) A director or other officer of a corporation must exercise their powers and discharge their duties:
(a) in good faith in the best interests of the corporation; and
(b) for a proper purpose.
181(2) A person who is involved in a contravention of subsection (1) contravenes this subsection.
1605 The Sirtex pleading was not without ambiguity in relation to its invocation of alleged breaches by Dr Gray of his duties to Sirtex at law, in equity and pursuant to the provisions of the Corporations Law. Dr Gray took the point in closing submissions that although paragraph 171A of the defence was incorporated in the cross-claim there was no attempt made to advance an independent claim against him for breach of his duties to Sirtex. In closing oral submissions, counsel for Sirtex submitted, and I accept, that the case had been conducted on the basis that the claim against Dr Gray of breach of his duty to Sirtex was independent of the outcome of the UWA proceedings against Sirtex. No relevant prejudice was demonstrated on the part of Dr Gray. There was no unfairness to him in the way that Sirtex put its case in closing submissions and he met it in his. I will therefore deal with the cross-claim on the basis submitted by Sirtex.
1606 I do not consider that Dr Gray was required, in the discharge of his duties to Sirtex, to specifically refer to the letter sent to Dr Chen in 1994 by Wray & Associates. Nor do I consider that the 1997 exchange between himself and Professor Barber required disclosure. Professor Barber flagged the possibility that he doubted that the identification of intellectual property ownership between CRI and UWA would in future be as clear cut as he considered it was when he sent his letter of 22 January 1997. The focus of their exchange was otherwise on the possible conflict of interest that Dr Gray might have as a director of Paragon Medical and an employee of UWA. The November 1997 letter from Professor Robson related primarily to his directorship of Paragon Medical at the time.
1607 In my opinion the heart of the case by Sirtex against Dr Gray is to be found in Dr Gray's non-disclosure to Sirtex of the correspondence from Professor Schreuder in 1999. As Sirtex submitted, the correspondence indicated that UWA claimed to be entitled to some or all of the patents then being exploited by it. Dr Gray accepted that if the allegations in Professor Schreuder's letters were true, they would be very important for Sirtex. He said that in his view the allegations were spurious. Sirtex submitted that he could not reasonably have held that view. The allegations led to substantial litigation against it. Although Dr Gray had obtained legal advice in respect of the correspondence he did not give Sirtex the benefit of it. Sirtex submitted that it was a breach of Dr Gray's obligations as a director to fail to disclose the correspondence.
1608 In his closing submissions dealing with the merits of the Sirtex cross-claim, Dr Gray met the allegation of non-disclosure of Professor Schreuder's letter by arguing that he had given significant disclosures to Mr Cherry of Freehills. The disclosures he relied upon related to his involvement with Dr Burton working together at the University of Melbourne before their move to Perth and the work they had done there in relation to precipitation treatment of resin microspheres. Mr Cherry, he said, was aware that he had been working on the SIRT technology in 1983 with Dr Burton. Dr Gray's submissions also referred to a note of a telephone conversation between himself, Sandeep Mann and Ben Davey of Freehills on 24 March 2000. The note, apparently made by Sandeep Mann, contained the following reference:
… raises a problem. UWA stoush. Unfavourable terms left on. Potential conflict couple of years ago. Now not so. Quadruple cost of SIR-Sphere at Perth Hospitals RPH not related. Seek permission issue made. BGC clarification of conflicts of interest situation …
This file note was said to evidence the disclosure by Dr Gray to Freehills of disputes between him and UWA and to put Freehills on notice. Mr Cherry was said to have had experience as early as 2000 that universities have polices and regulations relating to intellectual property. He had been a lecturer at Monash University in 2000. He recognised that UWA might well have a policy relating to intellectual property ownership. Dr Gray also referred to Mr Cherry's understanding, by 13 March 2000, that clinical trials were carried out by Dr Gray in his capacity as a Professor at UWA. He considered the need to check whether UWA had terms relating to intellectual property ownership in its professorial staff as he understood that many universities did have such terms. Dr Gray said this was sufficient to put Sirtex on notice of the potential for UWA to claim an interest in intellectual property.
1609 Dr Gray further submitted that he was entitled to view Professor Schreuder's correspondence of 1999 as part of a campaign intending to force him to resign from UWA. His resignation effectively ended UWA's complaints. They did not respond to his correspondence.
1610 I do not consider that the "disclosures" relied upon by Dr Gray and arising out of his communications with Mr Cherry and the other Freehills solicitors discharged the duty that he undoubtedly owed to Sirtex to draw to its attention the 1999 correspondence from Professor Schreuder. That correspondence indicated the possibility that UWA could inquire into whether it had interests in the relevant intellectual property. It was immaterial to that duty that Professor Robson was behind the letter or that Dr Gray thought it might "go away". It was a breach of his duties, including his statutory duty under s 180 and s 181, as a director of the company, not to disclose it.
1611 Having regard to his provision of the Barber letter of 20 February 1997 and his answers to the due diligence questionnaires, Dr Gray's silence on the 1999 letter was, in my opinion, misleading or deceptive. That is to say, the circumstances of his silence were such as to convey the wrong impression that no possibility existed that UWA had or was likely to be interested in the intellectual property underpinning the Sirtex float.
1612 In my opinion Sirtex is entitled to relief in respect of Dr Gray's breaches of his duties as a director and for misleading or deceptive conduct in contravention of s 10 of the Fair Trading Act 1987 (WA). Had it been aware of the correspondence it would, in all probability, have been advised to make further inquiries of UWA. It would either have been notified of a potential claim or would have negotiated a release for some consideration, perhaps by way of a share issue. It lost the opportunity to so resolve the matter with UWA and has been exposed to this litigation. The fact that the litigation was unsuccessful does not affect the Sirtex causes of action against Dr Gray in respect of his duties as a director and in respect of the claim for misleading or deceptive conduct. Sirtex is entitled to compensation or damages for the loss which it has suffered as a result of opportunity to avoid the instigation of these proceedings and to resolve matters in advance with UWA. The measure and assessment of damages will be a matter for a separate hearing if the quantum cannot otherwise be agreed between Sirtex and Dr Gray. Counsel for Sirtex indicated in argument that the recovery it would seek from Dr Gray would be related to the costs of the proceedings. If that is so, having regard to the outcome of the proceedings, the compensation or damages should be able to be agreed.
1613 Sirtex also sought to erect a rather elaborate case of fraud against Dr Gray based upon a constellation of circumstances and events. It is unnecessary to make any such finding. The finding of misleading or deceptive conduct and breach of the duty as a director of Sirtex does not require any finding of fraud.
The Sirtex/CRI cross-claim
1614 Sirtex's cross-claim against CRI, as put in closing submissions, was based on warranties in the CRI Deed. The breach of warranty claim was posited on UWA succeeding against Sirtex.
1615 The claim for misleading or deceptive conduct against CRI was based upon its provision of the Barber letter to Nomura/JAFCO and Sirtex. Again the claim, as put in the closing submissions, was posited on the UWA claim being successful. The Sirtex cross-claim against CRI will be dismissed. CRI took no part in the proceedings so there will be no order as to costs on the cross-claim.
Gray/Chen cross-claim
1616 Dr Gray cross-claimed against Dr Chen. He alleged that on or about October or November 1993 she falsely represented to Dr Gray that she was the inventor or an inventor of the invention specified in the DOX-Spheres provisional application ultimately filed on 18 November 1993. Dr Gray sought a declaration against Dr Chen that she "had no interest at any particular time in the patent application [sic] referred to in paragraph 38 of the further substituted statement of claim". Dr Chen denied any false representation as alleged. She claimed that she was the inventor or at least an inventor of the invention specified in the provisional specification.
1617 I have read the submissions of both Dr Gray and Dr Chen in support of and in opposition to the cross-claim. I am unable to see the basis upon which Dr Gray can contend that he has an interest sufficient to warrant the granting of a declaration. Although I have made findings adverse to Dr Chen in the context of the dispute between UWA and Dr Gray, I decline, as a matter of discretion, to make a declaration. In any event the terms of the declaration sought are meaningless. There can be no interest in an application.
1618 The cross-claim by Dr Gray against Dr Chen is dismissed. In the circumstances that Dr Chen's factual contentions did not succeed there will be no order as to costs.
Conclusion
1619 For the preceding reasons the claim and all cross-claims will be dismissed save for the Sirtex cross-claim against Dr Gray which will be stood over for assessment of damages.
I certify that the preceding (1619) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French.
Use according to claim 21 wherein the radionuclide is yttrium-90.
Use according to claim 21 wherein the radiation therapy comprises treatment of a primary or secondary liver cancer.
SIRT-1 invention - UWA submissions
1455 UWA contended that the SIRT-1 invention was first disclosed in Australian Provisional Patent application PP9228 filed by Dr Gray on 16 March 1999 under the title "Production of Resin Based Radionuclide-Containing Microspheres" and allowed to lapse on 16 March 2000.
1456 UWA submitted that the evidence showed that the invention disclosed in the SIRT-1 application was made sometime between the commencement of the Phase 1/2 clinical trials of SIRT-Spheres in or about November 1986 and the commencement of the Phase 3 clinical trials in or about May 1991. In that period three problems were solved and the invention was then complete. The three problems which UWA identified were: