Who owns what employees invent? UWA v Gray v Sirtex [2008] FCA ...

Who Owns an Academic’s 

Invention? 

Implications on IP Ownership and Commercialisation 

UWA v Gray & Sirtex Medical Limited 

(2008) 246 ALR 603 76 IPR 222 

Justice French, Federal Court, 17 April 2008 

Special CRC for Polymers Seminar 

10 July 2009 

Ed Heerey 

Victorian Bar 

Junior Counsel for Sirtex Medical Limited

UWA v Gray & Sirtex: the parties 

� Applicant: University of Western Australia 

� Incorporated under University of Western 

Australia Act 1911 (WA) 

� 1 st Respondent: Dr Bruce Gray 

� 2 nd Respondent: Sirtex Medical Limited 

� Public company, incorp 1997, listed 2000 

� 3 rd Respondent: Cancer Research Institute 

� Charitable association

Gray’s employment by UWA 

� January 1985 to March 1997 

� Full time Professor of Surgery 

� Based at Royal Perth Hospital (RPH) 

� Required to teach and to conduct and stimulate 

research 

� March 1997 to November 1999 

� Fractional 30% appointment focussing on clinical 

work at RPH

Contracts and UWA regulations 

� 26 October 1984 written contract 

� 1971 UWA Patents Regulations 

� employee must: 

� inform VC of patentable invention made wholly or 

partly during the course of that person’s duty or 

whilst using UWA’s research facilities 

� If required by UWA, assign rights to UWA

Contracts and UWA regulations 

� 1996 UWA IP Regulations 

� employee must: 

� promptly report the creation of any IP likely to be 

commercially significant 

� not apply for any form of protection or exploit or 

deal with any IP inconsistently with UWA’s rights 

� not apply for registration except in UWA’s name 

� if required, execute documents to prove UWA’s 

title or assist UWA’s commercialisation

UWA’s pleaded fiduciary obligations 

� On Gray during and after employment: 

� a duty to deal with the property rights and interests of 

UWA so as to protect and preserve that property and 

those rights and interests for UWA 

� 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 

� a duty to account for any such secret profit or secret 

payment or benefit 

� the duties of a trustee of such of UWA’s assets and 

property as were in his possession or control and/or under 

his direction from time to time

Gray and Sirtex 

� 1997: Sirtex incorporated 

� 1997: Gray assigned inventions to Sirtex 

� 2000: Prospectus and listing on ASX 

� Gray a director of Sirtex from 1997 to 2007 

� Also Chairman, CEO and Medical Director 

� Since litigation started in 2004, disputes between 

Gray and other Sirtex directors 

� Sirtex cross-claim against Gray for non-disclosure 

of UWA’s patent claims prior to ASX listing 

� Gray still Sirtex’s largest shareholder

Field of technology 

� Treatment of liver cancer 

� Use of microspheres injected into hepatic 

artery to attack tumors in liver by: 

� radiation by yttrium 

� cytotoxic drugs (doxorubicin) 

� hyperthermia (heating) by magnetic hysteresis 

� General concepts not novel 

� Patents focus on specific developments

Field of technology 

� Key problem – radioactive microspheres 

� Targetting radiation to tumors, limiting radiation 

to other parts of the body 

� Radioactive yttria leaching off microspheres, 

travelling in blood out of liver into lungs etc 

� Key problem – doxorubicin microspheres 

� Need controlled release of drug, not burst 

� Key problem – hyperthermia microspheres 

� High magnetic fields affect nervous system

Gray’s inventions – SIRT 1 

� “Selective Internal Radiation Therapy” 

� Method for making resin-based microspheres 

containing radioactive yttrium 

� Key inventive concept: 

� use of phosphate precipitation to bind yttrium into 

the microspheres 

� addressed problem of yttrium leaching off the 

microspheres to other parts of body


� Idea conceived by Gray prior to 1985 

� ie, before employment with UWA 

� Early 1990s, Gray supervised clinical trials 

at UWA (RPH) 

� Commercialised by Sirtex 

� Substantial sales worldwide 

� Sirtex has not yet sold any other product


� Hollow or cup-shaped ceramic 

microspheres of pure yttrium 

� Addressed problem of heavy microspheres 

not travelling in the blood to the tumours 

� Idea conceived by Gray before 1985 

� ie before employment with UWA 

� Early 1990s - further research with Monash 

� Never clinically trialled or commercialised

Gray’s inventions – Dox Spheres 

� Named co-inventor on patent: 

� Dr Yan Chen, UWA employee 

� Gray claimed there were other inventors 

outside UWA 

� Key inventive concept: 

� use of metal ions to suppress burst release of 

doxorubicin from microsphere 


Gray’s inventions: Thermo Spheres 1, 

2 and 3 

� Co-inventor named on patents: Steve Jones 

� Employed by UWA 1990 – 1997, Sirtex 1997 to present 

� Prior art: use of magnetic fields to cause metal 

microspheres to heat and kill tumors 

� Thermo 1: specific magnetic heating efficiency of metallic 

material 

� Thermo 2: use of certain rotational magnetic fields 

� Thermo 3: further developments 

� Tested on animals only – serious problems 


Assignments and patent filings 

� 1993 – Dox Spheres patent application 

� 1994 – SIRT 2 patent application 

� 1997 – assignment by Gray to Sirtex 

� 1997 – Thermo 1 & 2 patent application 

� 1999 – Thermo 3 patent application 

� 1999 – end of Gray’s UWA employment 

� 2000 – SIRT 1 patent application

French J: implied term UWA owns IP? 

� 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 [Patents] 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.


� Citing Monotti and Ricketson in Universities 

and Intellectual Property who expressed: 

� "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".


� Citing Monotti and Ricketson’s Universities 

and Intellectual Property: 

� A general obligation of secrecy may be imposed 

on the employee who has a duty to invent, with 

safeguards on the duration of secrecy. 

� However, an automatic implied obligation sits 

uncomfortably with the notion of "academic 

freedom", shared ownership and free exchange 

of research results.


� Citing Monotti and Ricketson in Universities 


� “... 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.”


� Citing Monotti and Ricketson’s Universities 


� “... 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 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: 

� no basis to imply a contractual duty for academic 

staff 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: 

� difficult to see basis for a term to be implied as a 

matter of law that the university has entitlement to the 

inventor’s property rights in the invention.


� Implied term even more problematical where 

researcher expected to secure funding from 

sources external to UWA. 

� This was even though UWA administered funding 

received from sources such as NH&MRC and 

CSIRO. 

� 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.

French J: Gray a “member” of UWA 

� Gray employed by UWA, a statutory body 

established for public purposes. 

� Not merely employee, but a “member” of UWA. 

� Linked historically by definition of "university" in 

UWA Act to the idea of a university as a 

community of teachers and scholars. 

� Statutory definition traces back to the 16th 

century statute for Oxford University.

French J: Commercial activities of 

UWA? 

� Contemporary reality: universities, including UWA, 

engage in commercial activities. 

� Eg Quickenden v O’Connor (2001) 109 FCR 243: 

UWA a trading corporation for the purposes of the 

Workplace Relations Act 1996 (Cth). 

� But Quickenden considered trading activities 

unconnected to teaching and research. 

� Gray was not required to advance a UWA 

commercial purpose when selecting the research 

work he would undertake.

French J: fiduciary breach? 

� UWA’s case for breach of fiduciary 

obligations rested on premise that Gray 

was dealing with rights owned by UWA. 

� That premise was misconceived. 

� UWA failed to establish it had any rights in 

any of the inventions even if made by Gray 

in the course of employment with UWA.

French J: validity of UWA IP Regs? 

� UWA’s IP Regulations assert ownership by 

UWA of all intellectual property developed 

by its staff (apart from most copyright). 

� UWA’s Regulations which purport to vest 

intellectual property rights in UWA or 

interfere with the intellectual property 

generated by its academic staff, are not 

valid.

French J: validity of UWA Regs? 

� UWA was authorised, by the UWA Act, to 

make regulations relating to the control and 

management of its own property. 

� UWA was not authorised by the Act to 

make regulations acquiring property from 

others or interfering with their rights.

French J: how could UWA acquire IP? 

� 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 [50 days] 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.

Inventions during employment? 

� French J accepted Sirtex’s defence that: 

� Only conception, not reduction to practice, gives 

rise to patent entitlement 

� The inventive concepts for SIRT 1 & 2 were 

conceived before Gray’s employment at UWA 

� All research and trials at UWA on SIRT 1 & 2 were 

merely reduction to practice, not conception 

� Thermo Spheres 1, 2 & 3 were conceived after 

Gray’s employment at UWA

Timing of invention – narrowest 

claim? 

� French J rejected UWA’s contention: 

� that timing of invention could be established by 

reference to the narrowest claim in patent as 

specifying the most specific elaboration of the 

invention [usually later in time] 

� French J accepted Sirtex’s submission: 

� analysis of entitlement should focuss on the 

broad “inventive concept” [usually earlier in time]

Timing of invention – 

conception v reduction to practice 

� French J: “The inventive concept marks a 

boundary between invention and 

verification.” 

� Cited US and Canadian authorities: 

� Wellcome discovered that AZT might work 

against HIV/AIDS 

� Idea tested and proved by US NIH scientists 

� NIH only reduced idea to practice 

� NIH not involved in conception, no entitlement



� French J rejected UWA’s claim by claim 

analysis. 

� cited several English decisions and Polwood v 

Foxworth (2008) IPR 1 on the relevance of the 

“inventive concept” or “heart” of the invention.



� French J: 

� The “invention” is generally as described in the 

specification. 

� Time of invention and identity of inventor are 

ascertained by reference to that inventive 

concept so described. 

� Time of invention and identity of inventor are not 

affected by subsequent process of reduction to 

practice, some elements of which may have 

found their way into the claims in the application.

Dox Spheres – other inventors? 

� French J found Dox-Spheres invented 

during time of Gray’s employment by UWA 

� But French J accepted Gray’s defence that: 

� Dox-Spheres was not in fact invented by Chen 

� Dox-Spheres co-invented by other persons 

outside UWA 

� Dox-Spheres probably not invented by Gray at all

Subsequent developments 

� French J appointed Chief Justice of High 

Court of Australia 

� Pending Full Federal Court decision on 

appeal by UWA against Gray 

� No appeal against patent owner Sirtex 

� Appeal heard November 2008 

� Outstanding costs disputes between all 

parties


� Commonwealth v Charlesworth [2008] APO 

16 (3 June 2008) 

� S 32 & 36 application to Commissioner. 

� Commonwealth successfully claimed 

entitlement to a patent lodged by a former 

employee.


� Commonwealth v Charlesworth (2008) 77 IPR 170 

� Delegate applied UWA v Gray approach to entitlement: 

� Identify the "inventive concept" of invention. 

� Determine inventorship including the person responsible 

for the inventive concept and the time of conception as 

distinct from its verification and reduction into practice. 

� Determine how “many” [should be “any”] contractual or 

fiduciary relationships between employer and inventor at 

time of inventorship give rise to proprietary rights claimed 

by employer. 

� NB “many” is typo by French J, now repeated by APO!


� Novogen Research Pty Ltd v G.J. Consultants Pty Ltd 

[2008] APO 24 - opposition to patent registration 

� Patent Office’s approach to entitlement summarised further: 

� Identify the "inventive concept" of each relevant invention as 

defined by the claims. 

� Determine inventorship including the person responsible for the 

inventive concept and the time of conception as distinct from its 

verification and reduction into practice. 

� Determine if contractual or fiduciary relationships between the 

parties at the time of the inventorship give rise to the proprietary 

rights claimed by the opponent. 

� Summary avoids typo: [m]any


� Other applications of UWA v Gray & Sirtex by the Patent 

Office in disputes over patent entitlement: 

� Razmik Abnoos v CSR Building Products Limited 

[2009] APO 7 

� Craige Jonathan Henrick v Granite Works Pty Ltd 

[2008] APO 21

Advice for public sector employers? 

� Review incorporating legislation 

� statutory purposes include the creation and 

commercialisation of IP? 

� statutory power to take IP rights from employees? 

� Review own employment contracts 

� Review assignments and licences 

� to other parties – valid? 

� from other parties – infringement of true owner’s rights?

Advice for private sector employers? 

� Review your employment contracts 

� explicit duty to invent? 

� explicit term vesting IP in employer? 

� Review rights assigned or licensed from 

academics, universities or other public 

organisations 

� validly assigned or licensed? 

� infringing true owner’s rights?

Advice for employees? 

� Academics and other University staff 

� Universities exploiting employees’ inventions 

without employee’s consent? 

� Right to demand royalties? 

� Employees of other public organisations 

� Review employer’s enabling legislation 

� Compare employee to academic - duty to invent?

Who owns what employees invent? UWA v Gray v Sirtex [2008] FCA ...

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