+ Improvements in Technology Contracts

Printer Friendly Version

Defining improvements in technology contracts

A technology licence will typically address the important issue of the respective rights and obligations of the licensor and licensee in relation to 'improvements' to the licensed technology developed by either the licensor or licensee, separately or jointly.

A recent decision of the Court of Appeal of the Supreme Court of NSW (Fermiscan v James [2009] NSWSCA 355 (11 November 2009)) illustrates the difficulties that can arise in deciding whether a particular development is an 'improvement'.

Dr James was a physicist and mathematician who developed a process using x-ray diffraction of human hair samples to screen for breast cancer. She obtained a patent over the process, and assigned the patent together with all 'Improvements' (as defined in the assignment agreement) to Femiscan. Dr James continued to work in the field of x-ray diffraction, and subsequently filed a patent application covering a diagnostic process using x-ray diffraction of human nail and skin. Fermiscan claimed that this second process was an 'Improvement' as defined, and that the relevant patent should therefore have been assigned to Fermiscan.

Fermiscan argued that the second process 'replaces' the first process by giving an alternative process for the detection of pathological conditions.

However, the Court decided that the word 'replaces' means 'to take the place of the claims' of the first invention, and stated that a new process with one or more further integers in addition to the claims of the first invention would replace the first process. The Court also said that a new process which omitted one of the essential integers of a claim in the patent of the first process, or a process which added a new essential integer, to give the same or a better result, would also constitute an improvement as defined.

However, the second process did not involve the addition or removal of an integer to the first process as claimed, and it was therefore not an improvement as defined. This case highlights the risks associated with using pro-forma or generic definitions of terms such as 'improvements' in technology contracts.

Parties entering into a technology contract need to think carefully about how the relevant technology might be further developed, and to define and allocate rights to improvements accordingly.

We have experience in the negotiation and drafting of technology contracts, and regularly advise clients in relation to these issues in technology licences, research contracts and other agreements.

Back