Ownership of improvements to inventions

In the recent decision Fermiscan v James [2009] NSWSC 546, a second invention for a method and instrument for analysing nail and skin samples using X-ray diffraction to screen for disease was found not to be an improvement on a first invention by the same inventor for substantially the same method and instrument, the difference being that the first invention was for analysing hair samples using X-ray diffraction to screen for disease.

In this case, an issue in dispute was who owned a PCT application covering the second invention.

Dr James was granted an Australian and US patent for the first invention.  She assigned those patents, along with the rights to any of her improvements on the first invention, to Fermiscan.  “Improvements” was defined broadly in the assignment agreement, and included enhancements or replacements for the first invention.

Subsequently, Dr James continued to research the use of X-ray diffraction to screen for disease.  She discovered that nail and skin samples could also be used to screen for disorders and she filed a PCT application for that (second) invention.

Fermiscan claimed it was the owner of the PCT application on the basis that the second invention was an improvement on the first invention.  Fermiscan said that the use of different biological material samples (nail and skin, rather than hair) did not give rise to a new invention of a kind that was outside the definition of an “improvement” on the first invention.

The Court agreed with Dr James that the second invention was a different invention to the first invention, in particular because the second invention was not within the scope of the claims of the Australian and US patents.  It seems a different decision might have been reached if the claims of the Australian and US patents covered analysis of any biological material samples, as the second invention would have then presumably have fallen within the scope of those claims.

The Court also relied on the fact that the PCT application described the second invention as being an
“alternative test…which may overcome at least some of the…disadvantages” of the first invention.

It was relevant also that Dr James had signed a non-exclusive consultancy agreement with Fermiscan at the same time she assigned the Australian and US patents.  The Court said that if Dr James was required to hand Fermiscan the results of all work she conducted relating to using x-ray diffraction to screen for disease, her non-exclusive consultancy agreement would be rendered meaningless.

The Court further relied on evidence that the second invention would not in all circumstances “replace” the first invention.

This decision is a reminder to parties who wish to purchase future improvements to an invention, to ensure that the purchase agreement is drafted broadly and clearly enough to capture any such improvements.