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University of Western Australia v Gray (No 20) (includes corrigendum dated 29 April 2008 and 22 April 2008) [2008] FCA 498 (17 April 2008)

Last Updated: 12 June 2009

FEDERAL COURT OF AUSTRALIA

University of Western Australia v Gray (No 20) [2008] FCA 498

CORRIGENDUM 2

THE UNIVERSITY OF WESTERN AUSTRALIA v BRUCE NATHANIEL GRAY, SIRTEX MEDICAL LIMITED (ACN 078 166 122) and CANCER RESEARCH INSTITUTE INCORPORATED (REGISTERED NUMBER 1001005)
BRUCE NATHANIEL GRAY v THE UNIVERSITY OF WESTERN AUSTRALIA and YAN CHEN
SIRTEX MEDICAL LIMITED (ACN 078 166 122) v THE UNIVERSITY OF WESTERN AUSTRALIA
SIRTEX MEDICAL LIMITED (ACN 078 166 122) v BRUCE NATHANIEL GRAY and CANCER RESEARCH INSTITUTE INCORPORATED (REGISTERED NUMBER 1001005)
WAD 292 OF 2004

FRENCH J
17 APRIL 2008 (CORRIGENDUM DATED 29 APRIL 2008)
PERTH

CORRIGENDUM

1. In the Reasons for Judgment delivered on 17 April 2007 remove Annexure 2 and substitute the attached.
   

Associate:

Dated:

ANNEXURE 2

This annexure covers what were described by Dr Gray in his closing submissions as successful research applications 1985 to 1996 and 'NH MRC Grants’.

* Where the designated invention is asterisked, the claim of relevance to that invention is disputed by the University either on the basis that the named investigators are or include people who are not relevant inventors or that the grant relates to different issues.

** Where an entry is double asterisked, the relevant application is not itself in evidence, but is rather referred to in an endorsement on a separate application for a different grant.

FEDERAL COURT OF AUSTRALIA

University of Western Australia v Gray (No 20) [2008] FCA 498

CORRIGENDUM

THE UNIVERSITY OF WESTERN AUSTRALIA v BRUCE NATHANIEL GRAY, SIRTEX MEDICAL LIMITED (ACN 078 166 122) and CANCER RESEARCH INSTITUTE INCORPORATED (REGISTERED NUMBER 1001005)
BRUCE NATHANIEL GRAY v THE UNIVERSITY OF WESTERN AUSTRALIA and YAN CHEN
SIRTEX MEDICAL LIMITED (ACN 078 166 122) v THE UNIVERSITY OF WESTERN AUSTRALIA
SIRTEX MEDICAL LIMITED (ACN 078 166 122) v BRUCE NATHANIEL GRAY and CANCER RESEARCH INSTITUTE INCORPORATED (REGISTERED NUMBER 1001005)
WAD 292 OF 2004

FRENCH J
17 APRIL 2008 (CORRIGENDUM DATED 22 APRIL 2008)
PERTH

CORRIGENDUM

1 In the Reasons for Judgment delivered on 17 April 2007:
1. Page 2, Order 14 should read:
“Any party in respect of whom an order ......”
2. Page 3 delete “Introduction” and insert “Index”.
3. At [20], after “make orders” insert “as to costs”.

3. At [87] on p 28, the first line after the quotation, delete “London and North Western Railway Co [1893] 1 Ch 16 at 78” and insert “London and North Western Railway Co v Evans [1893] 1 Ch 16 at 28”.

4. At [161], line 6, delete “grant”.

5. At [246], item 14, delete “, and were described by its Vice-Chancellor as being,”. Delete quotation marks around “in a state of disarray” so that item 14 now reads:

“In 1986 UWA’s intellectual property policies and practices were in a state of disarray.”

Associate:

Dated:

FEDERAL COURT OF AUSTRALIA

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] HCA 19; (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] FCA 1065; (1994) 50 FCR 1
Aponte Inc v Welcome Foundation Ltd 2002 SCC 77; [2002] 4 SCR 153
Boll Acceptance Corporation Ltd v GWA Ltd [1983] FCA 269; (1983) 50 ALR 242
Bristol-Myers Squibb Co v FH Failing & Co Ltd ([2000] FCA 316; 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] USCAFED 1225; (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] HCA 77; (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 [1893] USSC 168; 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] FCA 180; (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] HCA 97; (1906) 4 CLR 694
Gunter v Stream 573 F 2d 77 (1978)
Hapgood v Hewitt [1886] USSC 224; 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] HCA 64; (1984) 156 CLR 41
Joos v Commissioner of Patents [1972] HCA 38; (1972) 126 CLR 611
Kimberley Clark Australia Pty Ltd v Arico Trading International Pty Ltd [2001] HCA 8; (2001) 207 CLR 1
Kwan v Queensland Corrective Services Commission [1994] APO 53; (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] HCA 21; (2007) 235 ALR 202
Madey v Duke University (1999) US Dist Lexis 21379
Madey v Duke University [2002] USCAFED 222; (2002) 307 F 3d 1351
Markem Corporation v Zipher Ltd [2005] EWCA Civ 267; (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] HCA 67; (1959) 102 CLR 252
Nottingham University v Fishel [2000] ICR 1462
Polwood Pty Ltd v Foxworth Pty Ltd [2008] FCAFC 9; (2008) 75 IPR 1
Quickenden v O’Connor [2001] FCA 303; (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] UKHL 45; [2005] RPC 10
Seanix Technology Inc v Ircha 53 CBLC (3d) 257
Solomons v United States [1890] USSC 255; (1890) 137 US 342
Spencer Industries Pty Ltd v Collins [2003] FCA 542; (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] FCA 501; (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 [2005] UKHL 59; [2006] 1 All ER 685
Triplex Safety Glass Co v Scorah [1937] 1 Ch 211
United States v Dubilier Condenser Corporation [1933] USSC 85; (1933) 289 US 178
University of Southampton’s Application [2004] EWHC 2107; [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] VSC 33; (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] NSWSC 1135; (2001) 54 NSWLR 60
Yeda Research and Development Co Ltd v Rhone Poulenc International Holdings Inc [2007] UKHL 43; [2008] 1 All ER 425
Viziballs’s Application [1988] RPC 213

Carter, Peden and Tolhurst, Contract Law in Australia (5th ed, Butterworths, 2007)
Chandler PA “Employees’ Inventions: Inventorship and Ownership” [1997] 5 EIPR 262
Corcoran S, First Principles in the Interpretation of University States (2000) 4 Flinders Journal of Law Reform p 143
Cornish W and Llewellyn DM, Intellectual Property – Patents, Copyright, Trade Marks and Allied Rights (6th ed, Sweet and Maxwell, 2007)
La Roche, Collard and Chernys, “Appropriating Invention: The Enforceability of University Intellectual Property Policies” (2007) 20 IPJ 135
Monnotti and Ricketson, Universities and Intellectual Property (2003, Oxford University Press)
Pearce and Geddes, Statutory Interpretation in Australia (6th ed, 2006 Lexis Nexis Butterworths)
Raper E, “Employee Ownership of Inventions – A Re-examination “ (2004) 17 AJLL 81
Ricketson S, The Law of Intellectual Property (Law Book Co, 1984)
Phillips and Hoolahan, Employees’ Inventions in the United Kingdom – Law and Practice (1982) ESC Publishing, Oxford, Ch 2
Swan K, Patent Rights in an Employee’s Invention (1959) 75 LQR 77
Thorley S, Terrell on the Law of Patents (16th ed, London, Sweet & Maxwell, 2006)

THE UNIVERSITY OF WESTERN AUSTRALIA v BRUCE NATHANIEL GRAY, SIRTEX MEDICAL LIMITED (ACN 078 166 122), CANCER RESEARCH INSTITUTE INCORPORATED (REGISTERED NUMBER 1001005),
BRUCE NATHANIEL GRAY v THE UNIVERSITY OF WESTERN AUSTRALIA, and YAN CHEN
SIRTEX MEDICAL LIMITED (ACN 078 166 122) v BRUCE NATHANIEL GRAY and CANCER RESEARCH INSTITUTE INCORPORATED (REGISTERED NUMBER 1001005)
WAD292 OF 2004

FRENCH J
17 APRIL 2008
PERTH

THE COURT ORDERS THAT:

1. 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.

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 Regulations of 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]

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.

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.

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.

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.

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.

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:

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.

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.
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:

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.
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 balance of probabilities that they were promulgated at any particular date before then.
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 a convenient 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] HCA 77; (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] HCA 97; (1906) 4 CLR 694 and Yang v Owners-Strata Plan No 3529 [2001] NSWSC 1135; (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.

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.

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.

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.

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 [1886] USSC 224; 119 US 226; Solomons v United States [1890] USSC 255; (1890) 137 US 342; Dalzell v Duaber Manufacturing Co [1893] USSC 168; 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] USSC 85; (1933) 289 US 178.
133. In Dubilier Condenser Corporation [1933] USSC 85; (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] USSC 255; (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] USSC 85; (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] USCAFED 222; (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] USCA7 673; (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].

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] FCA 542; (2003) 58 IPR 425 and, in a university setting, the decision of Nettle J in Victoria University of Technology v Wilson [2004] VSC 33; (2004) 60 IPR 392. Two other reported decisions are mentioned briefly for completeness. Kwan v Queensland Corrective Services Commission [1994] APO 53; (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 [2003] FCA 542; 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 [2004] VSC 33; 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] FCA 542; (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] HCA 64; (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 Victoria case 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 207 provides 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 and those 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.

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.

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.
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:
     1. 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”. That statement 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-regulations 4(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.
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.
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:

1. 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.

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:

1. 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”.

3. Altered function of specific organs after large doses of internal irradiation.
4. Effect on growth of experimental tumours in mice and rabbits.
5. 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:
     1. 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.
     2. 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.
     3. 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.
     4. The procedure was repeated until the solution contained no free Yttrium and all the radioactive Yttrium ions were attached to the microspheres.
     5. The preceding process was known as “washing”. The end product was to be used for injection into the liver.
     6. 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:
     1. To evaluate the use of the standard ion exchange resins as microspheres to transport doxorubicin and to release it at the site of embolisation.
     2. 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:
     1. 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.
     2. The use of microspheres for that purpose comprising styrene-divinyl benzene copolymer ion exchange matrix to incorporate the Yttrium90.
     3. 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.
     4. 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.
     5. 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.

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:

1. Internal radiotherapy for hepatic metastases by Yttrium90 microspheres;

2. Drug enhanced arterial perfusion of experimental liver tumours; and

3. 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.

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.

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:

1. 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.

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.

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.

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.

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.

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.

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.

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.

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 180º 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”

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.

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.

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.

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.

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 specific activity 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.