Fermiscan Pty Ltd v James

Fermiscan Pty Ltd (Fermiscan) and Dr. James were parties to litigation concerning an assignment agreement related to patents. The dispute involved whether Fermiscan had breached the assignment agreement by failing to assign a patent application for a further invention, and whether Dr. James had breached a subsequent settlement agreement by making comments about the efficacy of the first invention, which included a non-disparagement clause. The matter was heard in the Court of Appeal of New South Wales.

The Court of Appeal was required to determine three primary legal issues. Firstly, whether Fermiscan's failure to assign the patent application for the further invention constituted a breach of the original assignment agreement. Secondly, whether Dr. James's comments regarding the efficacy of the first invention breached the non-disparagement clause in the settlement agreement, considering whether these comments were a legitimate expression of scientific views or had a tendency to injure or damage the reputation of the invention. Thirdly, the Court had to characterise an agreed sum payable upon breach of the settlement agreement, which involved the acceleration of deferred settlement payments, and determine whether this clause was a penalty and therefore void and unenforceable.

The Court reasoned that the assignment agreement did not extend to the further invention, thus Fermiscan had not breached it. Regarding the non-disparagement clause, the Court found that Dr. James's comments were a legitimate expression of scientific views and did not tend to injure or damage the reputation of the invention. On the issue of the penalty clause, the Court determined that the objective intention of the parties was for the clause to operate as a deterrent against breach by coercing compliance, and therefore it was a penalty clause that was void and unenforceable.

The appeal was dismissed with costs.