Mark Richard Jones v Irmac Roads Limited

UK Patent No. 2 506 097 (“the Patent”) was granted on 13 September 2017. It claims an invention entitled “Improvements relating to road repair systems”. The invention took the form of an improved infra-red heater of road asphalt and a method of heating an asphalt road surface. It is used for road repairs.

Two inventors are identified on the cover of the specification: Mark Jones and Ben Gedroge. Mr Jones is the claimant in this action. Mr Gedroge is a director of the defendant (“IRL”). IRL is the current proprietor of the Patent.

It was accepted by IRL that Mr Jones was the only inventor of the invention claimed in the Patent.

By this action Mr Jones seeks a declaration that he, not IRL, is the proprietor of the Patent. The declaration is sought under s.37 of the Patents Act 1977 (“the 1977 Act”). The application for the declaration was first made as a reference to the comptroller, who transferred the matter to this court pursuant to s.37(8).

Maxwell Keay appeared for Mr Jones, Michael Edenborough QC for IRL.

In about 2009 Mr Jones devised an infra-red heater for road surfaces (the “IRH”). He incorporated a company called Clean Fast UK Limited through which he developed and manufactured the IRH. It was marketed by a company called Asphalt Re-Lay Limited. By 2010 the two companies had contracts for road repairs with local authorities in North West England and were trading successfully. They operated from premises in Crewe leased from a company owned by Ben Gedroge and his father Terry. Mr Jones continued to work on improvements to the IRH.

In June 2010 there was a fire at the Crewe premises. It forced Asphalt Re-Lay Limited to cease trading and to be wound up in December 2010. Mr Jones was in financial difficulty and unable to pay rent. He was approached by Ben and Terry Gedroge with a proposal to start a new venture for marketing the IRH. Mr Jones was also introduced to Robin Higham, a partner at O’Neill Patient Solictors LLP, who could handle legal matters and to Peter Black, a business consultant, who could handle financial matters.

The proposal led to the incorporation of a company named Irmac Limited (“IL”) on 7 October 2011. The directors and shareholders were Ben and Terry Gedroge, Mr Higham and Mr Black. Mr Jones was given a 45% share option which he could take up in the future if he wished.

Later the same month discussion turned to the intellectual property rights in the improvement to the IRH on which Mr Jones had been working. Broadly it concerned a means for varying the level of heat in a programmed heat wave cycle with a set heating range. On 18 October 2011 there was a meeting between Mr Jones and three of the directors of IL. The attendees discussed whether Mr Jones would assign his rights to IL and that IL would file a patent application. Ben Gedroge kept the minutes which refer to the IRH as the “gas burner”. They included the following paragraphs:

On or shortly before 25 November 2011 IL filed a patent application (“the IL Application”), which identified Mr Jones (only) as the inventor and IL as the proprietor. On 25 November 2011 IL’s patent attorney informed Mr Jones and Ben Gedroge that the UK Intellectual Property Office had allocated to it application no. 11203803.3.

On 22 December 2011 IL and Mr Jones entered into two written agreements, a Patent Option Agreement and a Share Option Agreement. Under the Share Option Agreement, in consideration of the payment to IL of £1 by Mr Jones, he was granted the option to subscribe for and be allotted 45% of IL’s shares. I will return to the Patent Option Agreement.

On 12 June 2012, pursuant to his understanding of the Patent Option Agreement Mr Jones served IL with an Option Notice and £1 in cash. Mr Jones believed that this having been done, “Completion” within the terms of the Patent Option Agreement would follow, i.e. that within 7 to 21 days IL would deliver a written assignment of the IL Application to him. The 21 days were to expire on 3 July 2012.

On 20 June 2012, without informing Mr Jones, Ben Gedroge contacted the UK IPO and withdrew the IL Application. On 22 June 2012 Ben Gedroge filed a new patent application, identical in all respects to the IL Application save that he added his own name as a joint inventor with Mr Jones. It was this application (“the IRL Application”) which resulted in the Patent.

I heard evidence from Mr Jones, Mr Higham and Ben Gedroge at a trial in Manchester. I am sure that all three were doing their best to give truthful answers to the questions put to them.

IRL’s analysis of the sequence of events concerning the rights in the IRL Application and the subsequently granted Patent was the following.

Mr Jones was the inventor. Therefore he was the person entitled to be granted a patent for the invention pursuant to s.7 of the 1977 Act.

At the meeting of 18 October 2011, Mr Jones agreed to assign all rights in the invention to IL subject to the conclusion of other agreements. No rights were assigned to IL at that stage.

On 25 November 2011 IL made the IL Application and was accordingly owner of the legal interest in the IL Application. Since Mr Jones was the party entitled to apply for a patent for the invention, he was equitable owner of the IL Application.

On 22 December 2011 the parties entered into the Patent Option Agreement, the Share Option Agreement and an oral agreement by which Mr Jones assigned his IP rights in the invention to IL. The effect of the latter was that the legal and equitable interests in the right to apply for a patent for the invention were orally assigned by Mr Jones to IL and the equitable interest in the IL Application itself was assigned by Mr Jones to IL.

IRL’s primary case is that service of the Option Notice by Mr Jones on 12 June 2012 could never have had any effect in law. No rights were assigned solely by reason of service of the Option Notice. All interests held by IL in the right to apply for a patent and in the IL Application itself remained with IL. IRL’s secondary case is that the same result was achieved because Mr Jones did not properly serve the Option Notice, for reasons discussed below.

On 20 June 2012 IL withdrew the IL Application, so both legal and equitable title in it were extinguished. The legal and equitable interests in the right to apply for a patent for the invention remained in being, both still held by IL. Between 20 and 22 June 2012 both interests were orally assigned by IL to IRL.

On 22 June 2012 IRL made the IRL Application at the UK IPO and so obtained legal and equitable title to the IRL Application. As holder of the legal and equitable interests in the right to apply for a patent for the invention, IRL was entitled to make that application. On 13 September 2017 the Patent was granted pursuant to the IRL Application. IRL was therefore then, and remains, the correct proprietor of the Patent.

The following is the analysis argued on behalf of Mr Jones.

At the meeting of 18 October 2011 Mr Jones agreed to assign his IP rights in the invention to IL in return for the option of a 45% shareholding in IL. That option was given to Mr Jones by the Share Option Agreement of 22 December 2011. In common with IRL’s analysis, counsel for Mr Jones said that the relevant IP right was the right to apply for a patent for the invention. Unlike IRL’s analysis, according to Mr Jones’ case this was a right within the meaning of s.30(6)(a) which could therefore only be assigned in writing. It followed that under the oral agreement of 18 October 2011 and following the provision of consideration on 22 December 2011, Mr Jones assigned the equitable interest in the right to apply for a patent to IL, but not the legal interest.

Under the Patent Option Agreement Mr Jones was entitled to serve an Option Notice. Upon service, IL was required assign back to Mr Jones the IP rights in the invention – specifically the right to apply for a patent. The Option Notice was validly served. The effect of valid service was an assignment of the equitable interest in the right to apply for a patent back to Mr Jones. He thus held both legal and equitable interests from that point. He held them at the time that IRL made the IRL Application and still does now. The application made by IRL could only have been lawfully made by Mr Jones. Therefore pursuant to s.37(1) Mr Jones is entitled to a declaration that the Patent should have been granted to him and that he is the true proprietor of the Patent.

Section 37 of the 1977 Act sets out the criteria which govern whether a party other than the registered proprietor of a patent is entitled to claim ownership:

Section 7 of the 1977 Act determines which person or persons are entitled to be granted a patent:

When an invention is made a property right comes into existence, distinct from any subsequent right there may be in a patent application or patent. In Yeda Research and Development Co Ltd v Rhone-Poulenc Rorer International Holdings Inc [2007] UKHL 43, Lord Walker described this as an “inchoate property” in the invention (at [53]):

Thus, upon an invention being made, a person or persons who satisfy s.7(2)(b), or if there are none the inventor or inventors under s.7(2)(a), acquire the right to file an application for a patent. That right is exclusive to them or, where it arises, exclusive to their successor or successors in title. Succeeding in title is akin to acquiring an inchoate property in the invention, the property being the right to apply for a patent.

Section 30(6) provides:

The meaning of a “right” in a patent or patent application is defined in s.130(1) of the 1977 Act:

It was argued by Mr Edenborough for IRL that a right in a patent or patent application does not include the right to file a patent application. Mr Keay for Mr Jones argued that it does.

In Hartington Conway Ltd’s Patent Application [2004] RPC 6, Peter Hayward, Hearing Officer acting for the Comptroller said (his references to s.130(7) appear to have been intended to be to s.130(1)):

On appeal, Hartington Conway Ltd’s Patent Applications [2004] RPC 7, Pumfrey J approached this in a different way, but there is no doubt that he endorsed what Mr Hayward had said:

Mr Edenborough argued that the Hearing Officer and Pumfrey J were wrong. He focussed on counsel’s proposition in Hartington Conway, recorded in the penultimate sentence of paragraph 65 and accepted by the Hearing Officer, that the clear purpose of s.30(6) was to regulate the way in which monopolies can be transferred from one person to another. Mr Edenborough said that the Hearing Officer had been right to accept this proposition. Yet the right to apply for a patent is not a monopoly right. Two persons may separately make the invention. They both acquire the right to file an application, showing that the right cannot be characterised as being necessarily a monopoly right.

I agree that the right to apply for a patent is not perforce a monopoly right. To that extent the Hearing Officer was led astray. But the mistake formed no necessary part of his reasoning. He was of the view that ‘right’ is broadly defined in s.130(1), that it includes the right to apply for a patent, and that the definition read on to s.30(6). As I have said, Pumfrey J approached the matter in a different way, arriving at the conclusion that tracing a successor in title to the right to apply for a patent means following the devolution in title by a line of transactions and he ruled that s.30(6) requires these transactions to be in writing. I respectfully agree. The right to apply for a patent is a ‘right’ within the meaning of s.30(6)(a) and can only be assigned in writing.

Since there was no written assignment, the legal interest in his right to apply for the Patent was never assigned. However, at the meeting of 18 October 2011 Mr Jones agreed to assign the right for consideration. The consideration was subsequently given, at which point the equitable interest in the right passed to IL. An agreement to assign property – here the inchoate property in the right to apply for a patent – will cause the equitable interest in that property to pass even if the legal interest remains unassigned, see Baxter International Inc v Nederlands Produktielaboratorium voor Bloedtransfusiapparatuur BV [1998] RPC 250 at 253-254.

The next issue is whether that equitable interest ever passed back to Mr Jones.

The Patent Option Agreement included the following:

On the face of the Patent Option Agreement, if IL had not commenced and continued trading activities within 6 months of the allocation of a patent application number, Mr Jones had the option to require IL to assign to Mr Jones all rights in the Patent. The option could be exercised after 6 months following the allocation of the pending patent number to the Patent. The option had to be exercised by Mr Jones serving on IL an option notice substantially in the form set out in Part 2 of the schedule to the Agreement. Assignment of the rights had then to take place between 7 and 21 days following service of the option notice. Upon assignment, Mr Jones was required to pay IL one pound.

It was common ground that the IL Application was given patent application number 1120383.3 on 25 November 2011. The Conditions of the Patent Option Agreement required IL or any subsidiary to commence and continue “trading activities” within 6 months of that date, i.e. by 24 May 2012, failing which the Option became available to Mr Jones for the duration of the Option Period.

During the 6 months up to 24 May 2012 an Investment and Funding Mechanism was prepared to attract investment to IL, together with Business Plan Framework, draft sale and cash flow accounts, a parts list and costings for the heaters. A website was set up for the company. A video was created and posted on the website which showed the original IRH but not the prototype of the heater as later claimed in the granted Patent. In cross-examination Mr Gedroge accepted that in fact no such prototype was made during that period. A marketing brochure was produced, although the evidence did not show whether it was distributed and if so, to what extent. There were discussions with and interest from potential investors, but no investment was received by IL.

It was not in dispute that during the 6 months up to 24 May 2012 no orders for any goods were received IL and nothing was sold by IL either in the way of goods or services.

Whether IL engaged in trading services therefore depends on the correct construction of that term. The law on the interpretation of a contract was not in dispute. Counsel for Mr Jones relied in particular on the recent summary of the relevant principles by Carr LJ in ABC Electrification Ltd v Network Rail Infrastructure Ltd [2020] EWCA Civ 1645:

Mr Keay argued for Mr Jones that the natural and ordinary meaning of “trading activities” is the selling of goods or services. The commercial context of the Patent Option Agreement was that IL was required to show that IL had been established to exploit the invention. Against that background, the commencement of trading activities required at the minimum the placing of an order with IL for the sale of a heater.

Mr Edenborough argued for IRL that the parties chose the term “trading activities” deliberately in favour of “sales” or “orders”. A reasonable person would interpret “trading activities” to include at least the cumulative activities which IL had accomplished by 24 May 2012, particularly since the 6 month timeframe was tight and so sales and orders would not have been expected by the end of that period.

Mr Edenborough had an alternative argument that the words “commencement and continuation of trading activities” meant that IL merely had to show that it was continuing the activities it had started before the 6 month term started.

Dealing with the latter argument first, I reject it. It ignores the word “trading” which is the key word. “Continuation” meant only that if IL started trading activities but had ended them, for example abandoned them, before 25 May 2012, the Option would have become available to Mr Jones.

Turning to the main argument between the parties, in my view the natural and ordinary meaning of “trading activities” is the buying or selling of goods and/or services. The key part of the background facts, it seems to me, is that IL had to show by 24 May 2012 that it was it was likely to be able to exploit the invention. A sale would be a reasonable criterion by which IL’s ability to exploit the invention could be sufficiently established. I think the reasonable person’s understanding of the term would stretch beyond the usual meaning of trading to include anything which could reasonably be taken to indicate an ability to exploit the invention, so I would include orders for the patented heater. By contrast, none of the activities by IL before 24 May 2012, stated above, could reasonably be taken to show that IL was capable of conducting a business in the sale of the heaters. A hypothetical enterprise that was hopelessly incapable of selling anything could have carried out all of those activities. They were not, even cumulatively, in my view trading activities. Accordingly, the “Conditions” as defined in the Patent Option Agreement were satisfied.

The Option Period in the Patent Option Agreement presents a difficulty. Aside from its definition, it is mentioned only in clause 3 which “grants to [Mr Jones] the Option to require [IL] to assign to [Mr Jones] all of the Rights at any time during the Option Period”. Taken by itself it is ambiguous. It could mean that Mr Jones had to exercise the Option within the Option Period or alternatively that if the Option were exercised, IL had to assign the Rights within the Option Period. Both sides assumed it was the former. Given clause 3.1, that seems to be right.

The parties both noted that the definition of Option Period was not straightforward. It is the period commencing six (6) months from the date of allocation of the pending patent number to the Patent. I was told, and understood it to be common ground, that a number is first allocated to a Patent when the patent application is published pursuant to rule 26 of the Patents Rules 2007. In this case that happened on 26 March 2014. Yet if the period in which IL had to satisfy the Conditions ended on 24 May 2012, it made no obvious sense for Mr Jones to be required to wait nearly 2 years before he could serve an Option Notice.

The pleaded objections in the Defence to the valid service of the Option Notice were three and none of them concerned the date on which the Option Notice was served. Moreover, the Defence pleaded that on a correct construction the Option Period commenced 6 months after the application date. This implied no end to the Option Period and Mr Jones undoubtedly served the Option Notice within the Option Period so construed. For that reason, at the trial Mr Edenborough withdrew any argument on the date of service.

The only other pleaded ground of objection to the validity of service of the Option Notice pursued at the trial related to the date of the Notice.

The Option Notice was dated and was served on 12 June 2012 and specified that Completion had to take place by 4 June 2012. Clause 3.1 of the Patent Option Agreement required Completion to take place between 7 and 21 days after service of the Option Notice. Completion by 4 June 2012 was self-evidently impossible. Therefore, Mr Edenborough argued, the Option Notice was defective and its service could be ignored.

I can see no substance in this argument for two reasons. First, it must have been clear to IL when the Option Notice was served that the date specified for Completion was a mistake since the date had already passed. Secondly, there was no breach of the Patent Option Agreement. As I have said, clause 3.1 required Completion to take place between 7 and 21 days after service. There was no term requiring Mr Jones to specify a date within that window. Clause 4.1 required a date to be determined for Completion and allowed the parties to agree a date outside the 14-day window. Part 2 of the Schedule to the Patent Option Agreement set out a model Option Notice, followed by Mr Jones, which included the specification of a Completion Date, but doing this was not a requirement of the Patent Option Agreement.

In my view, the Patent Option Agreement Completion had to take place within the 14-day window unless the parties agreed otherwise. They did not agree otherwise. The specification of a Completion Date in the Option Notice was nothing more than a proposal by Mr Jones and self-evidently a date he did not mean. The obligation on IL to assign the right to apply for a patent for the invention within the window remained.

Upon service of the Option Notice IL was under a contractual obligation to assign the legal interest in the right to apply for a patent for the invention. From the date of service the equitable interest in the right passed from IL to Mr Jones.

Mr Jones is at present the owner of both the legal and equitable right to apply for a patent for the invention. The IRL Application was an application for a patent for the invention, giving rise to the granted Patent. Pursuant to s.37 Mr Jones is entitled to a declaration that he is the true proprietor of the Patent.