A company seeking to make fuel more efficient and less polluting and a nanotechnology company signed an agreement about how to collaborate. The nanotechnology company was given access to the first company's know-how and material covered by a patent application.
The agreement, though, was ambiguous and drafted by someone without "a deep understanding of the relevant law", according to Mr Peter Prescott QC, sitting as a Deputy High Court judge.
Mr Prescott said that word processors have made it easier for those drafting contracts to create agreements which are ambiguous, error-filled or unclear of purpose.
"The secret of drafting legal documents was best described by Nicolas Boileau, who was not only a literary critic but a qualified lawyer: 'Ce que l'on conçoit bien s'énonce clairement et les mots pour le dire arrivent aisément'," said Mr Prescott in his ruling. "What one conceives well can be stated with clarity and the words to say it come easily. We should all have that framed and displayed on our desks."
"But too often the opposite precept is followed. Bits of legal boilerplate are bolted together so that it is the words that are allowed to shape the concept instead of the other way round. In that regard the invention of the word processor has worked wonders. Sometimes, I fear, it has dispensed with the 'concept' altogether. Misfortune not infrequently follows," he said.
Mr Prescott ruled on the nanotechnology case in which much hinged on the exact meaning of the words 'application' and 'or'.
Neuftec came up with the idea of injecting lanthanoid elements into fuel to increase efficiency and reduce fuel emissions. It agreed to share its idea with university nanotechnology spin-out Oxonica Energy, which would work on the scientific implementation of the idea.
Neuftec made an international patent application according to the Patent Cooperation Treaty (PCT) and the two companies signed an agreement in which Oxonica agreed to pay Neuftec royalties for the use of material covered by the patent.
PCT patent applications are assessed by individual countries which grant or reject patents in relation to the claimed inventions. In Neuftec's case many countries granted patents that covered more limited ground than the PCT application and some rejected it.
Oxonica claimed that it only had to pay royalties for sales in those countries which granted patents covering the technology. It asked the High Court to confirm its position.
The agreement ordered the payment of royalties in relation to "any product, process or use falling within the scope of the claims in the Licensed Application or Licensed Patent".
Neuftec argued that the agreement covered not just material covered by granted patents in particular countries but anything covered in its original PCT patent application.
Mr Prescott pointed out a number of malapropisms, poor uses of terms and drafting errors which made interpretation of the agreement difficult. The biggest problem, though, centred on two definitional questions.
There was a dispute over the word 'application' and whether it referred to material for which a patent was successfully granted in a particular country, as Oxonica claimed, or whether it referred to anything contained in the actual PCT patent application document, as Neuftec claimed.
The parties also disputed the interpretation of the word 'or'. Oxonica said that the application became the patent and the royalties were to be paid for the granted patent or the pending application, depending which was in existence at the time. They could not both exist at the same time, it said.
Neuftec, though, said that the 'or' meant that the royalties were to be paid in relation to any material in a granted patent and any material in the PCT application.
Mr Prescott said that in cases such as this a court had to take an active role in forcing an interpretation out of an ambiguous agreement.
Previous court practice was to interpret agreements very literally to avoid "doing violence" to the exact language used by the agreement by over-interpreting them. Mr Prescott said that court practice had changed in modern times, though, and that courts had to try to ensure that the words in an agreement meant what the person drafting the agreement thought they should mean.
"[When] two meanings are possible, perhaps even plausible … the court cannot just give up. All it can do is to find the interpretation that best accords with business common sense," he said. "And, in doing that, the court will not, in my judgment, be overly swayed by the consideration that it is "doing violence to the natural meaning of the language" if, as Lord Hoffmann pointed out in the later case, it would appear that it was the author of the document who did the violence."
The problem was that the agreement was unclear and partially this was due to modern drafting methods, said Mr Prescott.
"The more I read the document, the more I think: 'A little learning is a dangerous thing'. It contains a number of malapropisms: they cause me to believe that the draftsman was not very familiar with patent practice and terminology. It conveys an impression that he was not always clear in his own mind about what he was doing and, when not clear, allowed his word processor to do his thinking for him. Bits of legal phraseology have been lifted from I know not what precedents and assembled in a strange way," he said.
Mr Prescott ruled that Oxonica should pay the royalties on any technology falling within the scope of the original PCT application. He said that the agreement involved commercial and technical know-how as well as practical details and that the patent application was a "convenient yardstick" used to measure Neuftec's contribution to the venture.