Buchanan v. Alba Diagnostics Limited

The House of Lords dismissed the appeal. The court held that an assignation by way of security of existing patent rights and "improvements" in those rights included future patents that were improvements on the earlier application, applying the Scots doctrine of accretion. Clauses in the security deed (clauses 5.3 and 5.4) which discharged certain personal obligations on the assignors upon the assignee's election to retain or sell the charged assets did not operate to exclude future improvements from the Charged Assets. The assignation was not an unreasonable restraint of trade and the later patent (the 321 patent) was, on a broad commercial construction, an improvement on the earlier application (the 311 application), so title to sue for infringement vested in the assignee.

This was an appeal from the Inner House of the Court of Session concerning ownership of a patent (GB 2 287 321, "the 321 patent") and the right to sue for its infringement. The appellant, Mr Nigel Buchanan, was the registered proprietor of the 321 patent and alleged that Alba Diagnostics Limited infringed it by marketing a brake fluid tester. Alba took the preliminary point that Buchanan had no title to sue because he had assigned rights in an earlier patent application (WO90/12311, "the 311 application") to Mr Mills by a deed of assignation made as security for a loan; the deed purported to include all "improvements" and future rights, and Mr Mills later assigned those Charged Assets to Alba.

The action in the Court of Session was for interdict against infringement, an accounting of profits (count reckoning) and alternatively damages. The parties were allowed a proof before answer restricted to ownership and infringement. The Lord Ordinary found for the defendants on the assignation point; the Inner House affirmed. The case came to the House of Lords.

Issues considered by the House included:

• Whether an assignation by way of security of present patent rights and "improvements" conveys future patent rights when they come into existence (the doctrine of accretion under Scots law);
• Whether clauses 5.3 and 5.4 of the 1993 assignation, which extinguished further personal claims by the assignee in certain events, operated to prevent accretion of future improvements to the assignee;
• Whether the putative assignation of future improvements was an unreasonable restraint of trade; and
• Whether the 321 patent was properly characterised as an "improvement" on the 311 application or was a distinct invention.

The House reasoned that under Scots law an assignation of future incorporeal property can vest in the assignee immediately on the property coming into existence (accrotion). Clauses 5.3 and 5.4 were construed in their commercial context and were held to discharge certain personal obligations and to limit the assignee's personal recourse, but they were not intended to (and did not) exclude future improvements from the Charged Assets. Allowing a borrower to offer future improvements as security is commercially sensible and not contrary to the public interest provided the transaction is not unfair or overreaching. The House agreed with the lower courts that the 321 patent was an improvement on the 311 application, both in a broad commercial sense and, on analysis, as falling within the scope of the earlier invention with an additional inventive step. Because title to the 321 patent had vested in Mr Mills and through him in Alba, Buchanan lacked title to sue and the infringement issue did not arise. The appeal was therefore dismissed.

Appeal dismissed. The House held that the 1993 assignation by way of security of the 311 application and of 'improvements' conveyed future improvements when they came into existence (doctrine of accretion). Clauses 5.3 and 5.4 did not negate that effect; the assignation was not an unreasonable restraint of trade; and the 321 patent was an improvement on the 311 application, so title to sue vested in the assignee.

Appeal from the Inner House of the Court of Session (see [2001] SCLR 307) following the Lord Ordinary (Lord Hamilton). The Lord Ordinary and the Inner House were unanimous that the preliminary point on title was well founded; the House of Lords dismissed Buchanan's reclaiming motion on that point.