Oxford Gene Technology Ltd v Affymetrix Inc & Ors

A contractual reference to succession to a business in products does not require the business to have reached commercialisation. The term must be construed in the context of the agreement, its commercial purpose and the background reasonably available to the parties. Research and development directed towards commercialisation may constitute a business. Where a licence permits licensing to members of a qualifying consortium, the consortium itself must have development and commercialisation as a principal objective; the objective of only one member is insufficient. Any resulting licence is limited to the consortium’s purposes.

The claimant owned patents relating to DNA arrays. It sought declarations that it was not obliged to license the defendants and that the defendants had no licence. The dispute concerned two alleged routes to a licence under an agreement originally made with Beckman: membership of a qualifying consortium and succession to Beckman’s business in licensed products.

Jacob J rejected both routes. The defendants appealed. The Court of Appeal considered the proper construction of the consortium provisions and the assignment provision, including whether Beckman had a business capable of transfer and whether the Asset Purchase Agreement transferred it.

1. Appeal partly allowed. Affymetrix acquired a licence through the purchase of Beckman’s business. Oxford Gene Technology was ordered to pay Affymetrix’s costs here and below, subject to the orders concerning fresh-evidence applications.
2. Applying the contextual approach to contractual interpretation stated in ICS v West Bromwich Society [1998] 1 WLR 896, the words “business in products licensed hereunder” had to be construed as part of the agreement and against its commercial background. The reference to “business” did not impose a requirement that commercial sales had begun.
3. The licence covered manufacture, use, sale and offer for sale of products, and clause 6 contemplated activity both before and after commercialisation. The recitals also recognised that Beckman was engaged in designing, developing, manufacturing and selling. Accordingly, research and development directed towards commercialisation could amount to a business within clause 16.2.
4. On the facts found, Beckman had such a business. The Asset Purchase Agreement transferred the relevant technology, equipment and associated business to Affymetrix. What Affymetrix later did with the acquired business was immaterial to whether it had succeeded to it.
5. The consortium appeal failed. Clause 3.11 required development and commercialisation to be an objective of the consortium itself. An arrangement under which Affymetrix carried out the research, development and manufacture, while Beckman remained involved in a limited supporting role, was in substance a sublicence rather than a qualifying consortium. Any licence under clause 9.2 would also have been limited to the consortium’s purposes.
6. The alternative argument that the consortium clause was void for uncertainty was unnecessary to decide. Aldous LJ indicated that he would have rejected it, construing the clause as requiring a licence for consortium purposes on reasonable terms rather than as an agreement to agree.

• Court of Appeal (Civil Division): allowed Affymetrix’s appeal in part and held that it had a licence as a result of purchasing Beckman’s business.
• Chancery Division: Jacob J had held that Oxford Gene Technology was not obliged to grant Affymetrix a licence and that neither Affymetrix nor Affymetrix UK was licensed.