Cambridge Antibody Technology v Abbott Biotechnology Ltd & Anor

Contractual royalty-sharing provisions are construed objectively, by reference to the language used in its commercial and factual context. A pedantic or dictionary-led reading is inappropriate where it produces an uncertain or commercially irrational result. The relevant boundary may be identified from the technology and responsibility allocated by the agreement, read as a whole. Where the parties’ objectively shared intention differs from the written instrument, rectification may be available if a continuing common intention was outwardly manifested and is proved on the balance of probabilities with convincing evidence.

Cambridge Antibody Technology licensed antibody gene-library and phage-display technology to Knoll, later acquired within the Abbott group. The agreements provided for royalties on sales of products and addressed the sharing of royalties paid to third parties for rights needed to practise the licensed technology.

Abbott deducted royalties paid for downstream technology used in developing and manufacturing HUMIRA. CAT contended that the contractual offset applied only to third-party rights required for CAT’s own library and phage-display technology. It also advanced alternative claims for rectification and estoppel. The central issues were the proper construction of the royalty provisions and, if necessary, whether the agreements should be rectified.

1. Construction. CAT’s construction was preferred. The expressions concerning technology claimed, described, covered or disclosed in the patents referred to the common inventive subject matter of the Winter 2 and McCafferty patents: CAT’s antibody-library and phage-display technology. They did not extend generally to downstream technology used exclusively by Abbott.
2. The court applied an objective, contextual approach. The provisions had to be read consistently with the agreements as a whole, including the warranty, infringement, termination and express exclusion provisions. Abbott’s construction would create a fluctuating boundary dependent on the claims or descriptions in patents granted in different jurisdictions and at different times. It would also produce commercially irrational results.
3. The reference to royalties payable to the Medical Research Council was a separate, sui generis arrangement. It did not establish that downstream patents such as Boss or Cabilly fell within the general sharing obligation.
4. The words referring to rights needed by Knoll did not alter the result. The whole development programme was undertaken for Knoll, and Knoll required rights relating to the licensed technology even though CAT performed the early technical work. The provisions nevertheless did not cover every post-phage licence.
5. Rectification. The court considered that the parties had a continuing common intention that CAT’s sharing obligation should be confined to third-party rights covering CAT’s own technology. That intention was outwardly manifested in the negotiations and contemporaneous documents. If the construction were wrong, both agreements would therefore be rectified accordingly. The unilateral-mistake and estoppel claims failed because there was no unconscionable conduct or misleading concealment by Knoll.
6. CAT succeeded. The judgment records that the royalty-sharing obligation did not permit Abbott’s claimed downstream deductions.