Pancreas Technologies Pty Ltd v the State of Queensland Acting through Queensland Health

[2005] APO 1

OFFICIAL NOTICE

DECISION OF A DEPUTY COMMISSIONER OF PATENTS

Application  :          No. 68102/00 in the name of Pancreas Technologies Pty Ltd.

Title:          Treatment of Pancreatic Disease

Action: Requests under Sections 32 and 36 of the Patents Act 1990 by The State of Queensland acting through Queensland Health.

Decision:          Issued 05 January 2005.

Abstract

Entitlement – Whether invention made within course of employment – whether employer had explicitly or implicitly waived entitlement or by its conduct was estopped from asserting entitlement – invention relating to the treatment of pancreatic disease through administration of cyanohydroxybutene.

Found that an inventive contribution was made by Dr Kelly in the course of her employment as a Research Fellow but later development of the invention, although supported by her employer, was not in the course of her normal employment as a part time clinical oncologist. The State of Queensland therefore derived entitlement from Dr Kelly in part only. Since Dr Kelly had consistently acted on the basis that Queensland Health did in fact have a partial claim, Queensland could not be said to have explicitly or implicitly waived its rights and was not estopped from claiming entitlement. Direction that the application proceed to grant jointly in the names of both parties

PATENTS ACT 1990

DECISION OF A DELEGATE OF THE COMMISSIONER OF PATENTS

Re:Patent Application No. 68102/00 by Pancreas Technologies Pty Ltd and requests under Sections 32 and 36 of the Patents Act 1990 by The State of Queensland acting through Queensland Health.

BACKGROUND

1. Patent Application 68102/00 was filed as an international application under the Patent Cooperation Treaty (PCT/AU00/01026) on 30 August 2000 by the named inventor, Lyndell E Kelly. The application claims priority from Australia provisional application PQ2536 filed on 30 August 1999.

1. Subsequently, an assignment of interests occurred between Dr Kelly and Peplin Research Pty Ltd and, more recently, between Peplin and the current applicant, Pancreas Technologies Pty Ltd (Pancreas).

1. Requests under sections 32 and 36 were filed on 31 October 2002 by the State of Queensland acting through Queensland Health (Queensland) asserting entitlement to the grant of a patent for the invention by virtue of an employment relationship with the inventor Dr Kelly.

1. Following evidentiary stages, including issuance of Notices to Produce and Summons to Witness, the matter came to hearing in Brisbane on 2 and 3 September 2004. Queensland was represented by Mr P D T Applegarth SC, instructed by the Crown Solicitor of Queensland. Pancreas was represented by Ms R Kelly of Counsel, instructed by Dr Kelly.

THE PATENT SPECIFICATION

1. The specification indicates that the invention relates to treatment of pancreatic diseases of humans and animals with particular but not exclusive application for treatment of acinar cell carcinoma, mixed cell (including acinar cell) pancreatic carcinoma, and acute and chronic pancreatitis.

1. In the discussion of the prior art it is observed that the pancreas is a secretory gland comprising approximately 80% of acinar cells, 1% to 2% of islet cells in clusters, and 10% to 15% of single layered cuboidal ductal cells interlaced with blood vessels, lymphatics, nerves, and collagenous stroma. Despite the large population of acinar cells, acinar cell carcinoma only accounts for 1%-3% of pancreatic carcinomas. In addition only 5%-10% of pancreatic carcinomas comprise mixed cell populations including acinar cells. However, pancreatic mixed cell carcinomas and acinar cell carcinomas are said to be reported as aggressive diseases with a high fatality rate.

1. Another disease of the pancreas is acute pancreatitis. While said to arise when the pancreatic duct is obstructed by a gallstone or tumour, or when toxins to the pancreas such as ethanol are ingested, the events which regulate the severity of acute pancreatitis are said to be unknown. However, studies are identified which have shown that mild pancreatitis was found to be associated with extensive apoptotic acinar cell death while severe pancreatitis was noted to involve extensive acinar cell necrosis but very little acinar cell apoptosis.

1. The discussion of the prior art then goes on to report studies on the administration of cyanohydroxybutene (CHB) and its apparent effect on the pancreas. CHB is said to be a glycosinolate breakdown product found in cruciferous vegetables, raw canola and many stock feeds. CHB administered to rats is said to cause, at particular dosage levels, severe pancreatic toxicity including, inter alia, acinar cell apoptosis and vacuolation. The relationship between acinar cell apoptosis and the severity of pancreatitis in one study is said to have shown that severity is reduced when the disease is induced during the period in which apoptosis is most extensive.

1. The invention of the present application is said in the specification to arise from the surprising discovery that subcutaneous injection of CHB produces an unusual and unsuspected result of acinar cell apoptosis of normal acinar cells and acinar cell carcinoma. Furthermore, “It was found that subcutaneous injection of CHB at an appropriate sub-lethal dosage caused apoptosis of the substantially entire population of acinar cells. The pancreatic lesion was unusual in that there was observed a marked early edema with limited inflammatory infiltration, rapid synchronous onset of acinar cell apoptosis and advanced atrophy with only a severely limited regenerative response. The application of this discovery to treat acinar cell carcinoma has led to the development of the current invention.”

10.Various aspects and preferred embodiments are set out which correspond to various claims. Claim 1, in its current form, reads as follows:

“1. A method of providing selective, substantially total, non-regenerative apoptosis of pancreatic acinar cells comprising a single-dose, subcutaneous or intra-arterial administration of a composition of cyanohydroxybutene and a pharmacologically acceptable aqueous carrier.”

Other of the claims are directed to methods of treating pancreatic disease, pancreatic carcinoma and pancreatitis essentially according to this method. Dependant claims further define the invention according to specific dosages and other preferred features as described.

11.In the detailed description, various experiments involving CHB administration to Wistar or Athymic rats are described. A number of these involved the inoculation of the subject with acinar cell carcinoma and administration of CHB with the discussion noting the elimination of normal acinar cells by a single subcutaneous dose of 140mg/kg in the Wistar rat. It was also noted that only very limited regeneration of acinar cells occurred.

12.An advantage of the invention is said to be that the method can kill acinar carcinoma cells in the pancreas and elsewhere if spread throughout the body. The method appears to leave other cells in the pancreas biologically functional and therefore the patient would possibly avoid becoming diabetic, an effect of surgical removal of the pancreas.

EVIDENCE

13.The evidence in support of Queensland’s Section 32 and 36 requests includes the following declarations:

• Richard Olley, District Manager of the Royal Brisbane Hospital and the Royal Brisbane Hospital Health Service District, concerning a range of issues in relation to Dr Kelly’s employment in the period between 1984 and 2002 (Dated 31 October 2003).

• Mike Kalimnios, Executive Director, Financial Services, Royal Brisbane and Women’s Hospital and Health Service District, concerning, inter alia, the Royal Brisbane Hospital (RBH) Trust Fund, the Queensland Radium Institute (QRI) Staff Research Fellowship and payments made to the Queensland Institute of Medical Research (QIMR) for laboratory space (Dated 31 October 2003).

• Dean Thorvaldsen, Senior Asset Advisor, Queensland Health, concerning his dealings with Dr Kelly from July 2001 (Dated 31 October 2003)

• Mike Kalimnios, Executive Director, Financial Services, Royal Brisbane and Women’s Hospital and Health Service District concerning, inter alia, the Research into Cancer Fund and the Private Practice Trust Fund (Dated 16 July 2004).

• Steve Lawrie, Team Leader, Statutory Financial Services, Queensland Health concerning the nature of the General Trust Funds within Queensland Health (Dated 16 July 2004).

• William Evans, Manager Information Access, Legal Services, Royal Brisbane & Women’s Health Service District, concerning meetings of 17 August 2000 and 14 August 2001 involving Dr Kelly and others at the RBH (Dated 10 August 2004).

• Dr Richard Ashby, Executive Director of Medical Services of Royal Brisbane & Women’s Health Service District, also concerning the meetings of 17 August 2000 and 14 August 2001 (Dated 10 August 2004).

• Dr Roger Allison, Director of Oncology, Royal Brisbane & Women’s Health Service District, also concerning the meetings of 17 August 2000 and 14 August 2001 (Dated 10 August 2004).

• Mark Holtz, Senior Coordinator Payroll Operations HR/Payroll Services of Royal Brisbane & Women’s Hospital Health Service District, in relation to employment records for Dr Kelly (Dated 19 August 2004).

14.For Pancreas the following declarations and statements were served:

• Dr Lyndell Kelly, medical specialist in radiation oncology, concerning, inter alia, her employment with QRI and later RBH, the awarding to her of research funding and the development of the subject invention (Dated 26 February 2003).

• Gary Redlich, Director of Peplin Research Pty Ltd concerning the assignment of the invention to Peplin on 28 February 2002 and its involvement with certain patent applications (Dated 26 February 2003).

• Dr Lyndell Kelly principally in response to matters raised by Mr Olley in Queensland’s evidence (Dated 4 June 2004).

• Dr Lyndell Kelly in relation to advice from the payroll office of RBH concerning whether appointment as a Research Fellow constituted a contract of employment and matters relating to a FOI request made by Dr Kelly with Queensland Health (Dated 25 July 2004).

• Dr Bruce Kynaston, Dr Mary Hughes and Robert Bourne concerning duties performed by Radiation Oncologists at QRI (Dated 24 January, 22 February and 25 February 2004 respectively).

15.Of the declarants, Dr Kelly, Mr Olley, Mr Kalimnios, Dr Ashby, Dr Allison and Mr Evans were summonsed and appeared for cross-examination.

DECISION

16.The person entitled to the grant of a patent or the “eligible person” is determined under Section 15(1) of the Act:

"15. (1) Subject to this Act, a patent for an invention may only be granted to a person who:

(a)   is the inventor; or

(b)would, on the grant of a patent for the invention, be entitled to have the patent assigned to the person; or

(c)derives title to the invention from the inventor or a person mentioned in paragraph (b); or

(d)is the legal representative of a deceased person mentioned in paragraph (a), (b) or (c)."

There is no dispute between the parties that Dr Kelly is the inventor of the method of treating pancreatic disease described and claimed in the subject application. Rather, the principal question for decision is whether entitlement to the invention lies with Pancreas by assignment from Dr Kelly (s.15(1)(c)), with the State of Queensland by virtue of her employment (s.15(1)(b)) or both.

Background to the dispute

17.Dr Lyndell Kelly obtained her Bachelor of Medicine and Bachelor of Surgery degrees from Queensland University and, after serving as an intern and junior house officer at the Ipswich General Hospital, applied on 22 November 1983 for a position as a trainee radiotherapist with the Royal Brisbane Hospital or, more accurately at that time, the Queensland Radium Institute. A letter of appointment was issued on 26 November 1983 indicating that salary and conditions would be governed by the Award for Senior Medical Staff – Public Hospitals, Queensland and the Queensland Radium Institute as well as other conditions attached to the letter. Dr Kelly accepted the appointment and apparently commenced duties on 16 January 1984. Dr Kelly describes her duties at that time as the treatment of cancer patients using radiation and chemotherapy and palliative care. She completed her training and obtained qualifications as a specialist radiation oncologist in 1987.  Subsequently in January 1988 she was appointed to the position of a senior medical officer, specialist radiation oncologist at QRI.

18.It is apparent from the incomplete minute extracts provided in evidence that the QRI Council at its meeting of 4 August 1987 agreed in principle to the establishment of a “Staff Research Fellowship for the Queensland Radium Institute” and formed a subcommittee to investigate and prepare a detailed program for a subsequent meeting. This apparently was done and at the meeting of 1 September 1987 various amendments were accepted and on that basis the Institute resolved to establish a position for the QRI Research Fellowship and the position advertised. The minutes also indicate that “At the next annual review (in 1988) the Institute requested consideration be given to tying the percentage increase in salary to the N.H and M.R.C level of research salary”. The rules or guidelines governing the Fellowship, including amendments, were contained in a document titled “Queensland Radium Institute Research Fellowship” (eg Annex 14 to Mr Olley’s declaration). This indicates that the purpose of the fellowship was to “provide the Institute with a means for encouraging specialist staff to pursue training in research in fields involving or related to the activities of the Institute.“ Assistance was to be provided for a largely full time research programme which was considered by the Institute to be of substantial merit but more specifically eligible research was to be “in the field of clinical or experimental oncology, radiobiology, cancer epidemiology or such other as approved by the Institute”. Various forms of assistance were envisaged including financial assistance in the following terms:

“5.2 Financial Assistance

1. Salary $30,000 per annum, to be reviewed annually.

Payment of salary from time to time will be made through the research account in the Institute’s Trust Fund. Appropriate adjustments will be made through the Central Pay Office to reflect both the reduced level of payment and the change in cost centre.

Superannuation contributions will continue to be deducted in full (i.e. based on the applicant’s previous salary). The institute will be responsible for the employer’s contribution as is the case with other contributors.

1. Research Costs

Laboratory and travelling expenses up to a maximum of $5,000 per annum may be available to support the Fellow’s research project. Details of research and travelling expenses estimated must be submitted with the application. In addition, the Fellow may apply to other grant giving bodies for further research support (excluding personal remuneration).

(iii)Additional remuneration

The fellow will be permitted to undertake a maximum of three by three hour paid clinical sessions per week provided that the annual income from the sessions does not exceed $AU 30,000 at a Queensland Public Hospital, the Mater Misericordiae Hospital, the Queensland Radium Institute or a teaching hospital approved by the Institute.”

Other terms indicate that the Fellow would be required to enter a contract including a period of contracted service beyond the completion of the research. Eligible Officers included radiation oncologists working within QRI and meeting certain requirements or suitably qualified staff interested in applying for appointment.

19.Dr Kelly took maternity leave in 1989 and in 1990 returned to her clinical duties at RBH on a part time basis. (QRI had by this stage been incorporated into the Division of Oncology at RBH.) In early 1992 Dr Kelly spoke to Dr Bruce Kynaston, then Director of the Division, seeking funding for research into the effect of certain seeds on rat pancreas. This line of research was suggested by a retired academic pathologist Dr T H Vickers based on CSIRO feeding experiments including Crotalaria spinosa that had indicated pancreatic atrophy in rats. Dr Vickers had apparently posed the question “Could an agent that causes pancreatic atrophy have a cytotoxic effect on pancreatic cancer?”. Dr Kynaston apparently provided Dr Kelly with the QRI research fellowship guidelines referred to above and she subsequently submitted an application on that basis although this document does not appear in evidence. Subsequently, Dr Kynaston indicated in a letter to the Medical Superintendent of RBH, Dr Wilkey, that 9 months had been estimated for the work “at 7 half days per week, which she can cover in her own time whilst being employed half-time”. Accordingly he recommended that Dr Kelly be awarded a QRI Research Fellowship for nine months and that an adjusted sum of $28,800 for the fellowship and $4,800 for expenses be provided from the Research into Cancer Trust Account. This recommendation was in fact adopted by the relevant RBH Executive Committee at its meeting of 15 April 1992.

20.The administrative arrangements put in place to implement this decision are not entirely clear, but in a memorandum to the OIC Payroll services on 8 July 1992 the Acting Administration Officer of the division indicated that “after consultation with Dr Kelly it is now requested that a fortnightly payment be provided to her by way of salary to be evenly divided up over the next nine (9) months …”. In relation to this Dr Kelly on 3 July 1992 completed an employment application/personnel record form. A letter of appointment (the Amended Letter) dated 21 July 1992 was issued to Dr Kelly indicating her appointment to the position of Research Fellow and that the “salary attaching to the position” was $1,440.00 per fortnight. A further clarifying letter, apparently in response to concerns raised by Dr Kynaston, was issued on 3 August indicating:

“You will work mornings Monday to Friday in radiation Oncology and receive half your current salary for this work.

Research will be performed on afternoons, Monday to Friday, as well as a half day on each Saturday and Sunday for care of your animals, and you will be paid a fellowship allowance of $1444.00 per fortnight for these duties.”

21.Dr Kelly initially focussed on repeating the CSIRO feeding experiments and utilised laboratory facilities of the Queensland Institute of Medical Research (QIMR) which were leased by the Division of Oncology.  By late 1992 it appears Dr Kelly’s investigations of Crotalaria spinosa had not been successful but that other specific pancreato-toxins had come to her attention. Consequently Dr Kelly submitted an application for a 12 month extension of tenure based on “Salary for 5 half days weekly, being 5/7 of QRI research fellowship” and estimated expenses of $3,900. The research plan included in the application proposes “an attempt to reproduce lesions in the rat pancreas of both high dose zinc oxide and CHB”, the production of synthetic CHB and the culture of pancreatic carcinoma cells. This application was approved. While the nature of the work conducted during 1993 is not entirely clear to me, it appears that at least CHB toxology experiments were done to confirm the results of earlier studies (Wallig) and that this had demonstrated severe loss of acinar cells at low dose.

22.Dr Kelly submitted a request for a further 12 month extension of the Research Fellowship on 7 February 1994. In the accompanying “plan for the PhD project” the research is said to be to confirm and further examine the reported toxic effects of CHB and Zinc and the potential for treatment of adeno-carcinoma and pancreatitis. The experimental plan is a useful summary of Dr Kelly’s understanding of the subject at this time and the nature of the further investigations required, including time-course studies for particular doses in rats. The research “Timetable” includes:

1. Toxology of CHB.

A. Measurement method for CHB ………………………………… Aug-Nov 93.

B. Range of doses oral & IV ………………………………………. Feb-May 94.

C. Time-course studies ……………………………………………......... June 94.

D. Recovery study …………………………………...…………..… July-Aug 94.

E. Other species …………………………………………….………. Sep-Dec 94.

F. D & L isomers …………………………………………….…… Jan-March 95.

G Long-term effects ………………………………………...……… Apr-Sept 95.

2. Effect on adeno-carinoma of the pancreas.

A. In vitro ………………………………………………………….. Aug-Nov 93.

B. In vivo ……………………………………………………….. Nov 93-Feb94.”

Dr Allison, by then director of the Division of Oncology, indicated support of the request to the Medical Superintendent and the extension was again approved. Dr Kelly’s PhD candidature at Queensland University was confirmed in mid-1994. I note at this point that the University makes no claim of entitlement in relation to the present invention with her PhD supervisor clearly ascribing the theme and research outline of the work to Dr Kelly.

23.Dr Kelly was granted maternity leave from January 1995 to January 1996 but in that period apparently continued her research, at least to the extent of writing up previous experimental work. An application for research funding was made in December 1995 and provides an overview of the work conducted to that date, including paragraphs relating to the following:

a. Synthesis of CHB.

b. Pilot study reproduced pancreatic atrophy in rats.

c. Method of measuring pancreatic CHB content.

d. Literature search.

e. Multiple-organ toxology based on a range of doses.

f. Sensitivity studies on human pancreatic adenocarcinoma cell lines.

g. Lactating females

h. Significance of first dose comparing single 150mg/kg dose to 4 daily doses and indicating that effect occurs due to first dose only.

i. Primed pancreases.

j. Time course study investigating the effect over time following a single 150mg dose. Apoptosis is present at 12 hours for most acinar cells. This progresses to a necrotic picture then to atrophy of the whole organ which does not recover by 28 days.

k. Weight study showing dose/kg gives greater effect as absolute dose increases.

The ongoing research plan then includes:

1. Investigation of the mechanism of action

2. Metabolism of CHB in vivo and in vitro

3. Effect on Ca pancreas

The detailed budget included in the application allows an amount for salary of “20 hours per week being 5/7 of QRI Research Fellowship”, research assistant’s time equivalent to $4000 and $13,250 for laboratory expenses (less funds carried over). Only the expenses component was approved assumedly because the maximum 3 year tenure of the fellowship had expired. A similar request without reference to salary was made in December 1996 for $17,250 and approved. The summary of work conducted and research plan in this application is virtually identical to the previous. Notes to the research plan indicate that all experiments should be completed during 1997.

In 1998 it appears Dr Kelly was considering submitting her work for publication. Dr Kelly was aware this could have implications for securing intellectual property protection and apparently approached Dr Allison concerning financial support for obtaining patents. This was not forthcoming and Dr Kelly then caused provisional application PP5676 and petty patent application 83084/98 to be filed in her name on 2 September 1998. The specifications associated with these applications appear to me to substantially disclose the same invention as in the present application but with some differences in the experimental results presented. The provisional specification was withdrawn on 25 August 1999 and the petty patent application advertised lapsed on 10 February 2000.

24.Dr Kelly with Dr Leonard and Mr Goodall of QIMR applied for a grant in relation to the research in November 1998 with the “Administering Institution” listed on the grant application being the Department of Oncology RBH and the research institution the Queensland Radium Institute Lab, QIMR. Dr Allison sought reviews of the grant application from specialist referees and, in a letter to the medical superintendent on 2 February 1999, Dr Dickie, the Deputy Director of the Oncology Division, recommended that 12 months financial support be given to the project as a seeding grant with the aim of submitting the project to outside bodies for funding later in the year. An executive minute of 10 February records that an amount of $55,852 was in fact approved. During 1999 it is assumed that further research occurred with the assistance of Mr Goodall. Dr Kelly was also given approval for various periods of study leave for the purpose writing up her PhD thesis and caused on 30 August 1999 the filing of provisional application PQ2536 from which the present application claims priority.

25.In a letter to Dr Allison on 19 July 2000, Dr Kelly provided a brief background to the filing of the patent applications and stated:

“The provisional patent is about to expire and must either be abandoned or matured at the cost of $10,000 to $12,000. As I consider my options, I need to know the position of RBH with regard to the ownership of this intellectual property. Does RBH regard itself as having part ownership of this intellectual property? If not, I require this in writing. If RBH does regard itself as having part ownership in this IP, is it willing to pay for the cost of maturation, or, alternatively to assign this part-ownership to me.”

As a result of this letter a meeting occurred on 17 August 2000 between Dr Kelly, Dr Allison, Dr Menzies, Dr Ashby and Mr Evans. Despite an alleged meeting record dated 28 August 2000 being in evidence there is a considerable difference in views as to what occurred at this meeting. Dr Kelly states that:

“they were unable to make any claim to ownership, nor any compensation or other claim arising out of the fellowship assistance I had received”

and 

“While they made no claim to ownership they made it clear they (being the crown) had neither the intention nor the capacity to make a financial contribution to the cost of the subsequent patent applications, but advised me to proceed personally to pay the patent costs. They reiterated there were no guidelines for ownership of intellectual property within Qld Health and accordingly I was in a novel position for which there was no precedent”.

The alleged file note by comparison indicates that “as the guidelines from Queensland Health would indicate that the intellectual property belongs to the State of Queensland but that there needs to be consideration of rewarding Dr Kelly and the Unit for the work done, there would have to be a decision made by the District as to whether to come to some agreement with Dr Kelly if development of the research had some potential or to formalise the handing over of the intellectual property in full to Dr Kelly.”

There is some speculation that Dr Menzies may have been responsible for the file note but the evidence of Allison, Ashby and Evans is that the meeting focussed on the commercial potential of the research rather than ownership and at least Ashby and Evans dispute the statement that “they were unable to make any claim to ownership” (Allison “cannot recall this”). They do however agree that Dr Kelly was advised at the meeting to pay the costs of the patent personally if she wanted to progress the matter. Dr Kelly caused the international application to be filed in her name on 30 August 2003.

26.On 25 May 2001 Dr Kelly wrote to Dr Allison referring to the August 2000 meeting, subsequent progress of the patent application and stating that she did not intend to proceed with the research because it would involve the use of pigs at a vet research establishment. She indicated that by February 2002 about $60,000 would be required with the alternative to attempt to sell the intellectual property and requested that:

“… the hospital document and finalize the ownership division of this IP. I also ask that the hospital give me authority to negotiate on its behalf in this matter, while keeping you informed.”

Dr Allison wrote to Dr Menzies on 18 July 2001 concerning “Dr Kelly’s Patent Application” but the letter does not broach the ownership issues. It however includes his view of the value of Dr Kelly’s research including his belief that the hospital “should aim to pursue this at least to the next stage”. A meeting on 14 August 2001 was organised by Dr Kelly with a Professor Powell, Dr Dickie, Dr Ashby and Mr Evans. Dr Kelly’s view is that “they endorsed my personal ownership of the intellectual property of my research in this PhD program” and “Ashby stated in this meeting words to the effect that it was outside the scope and ability of RBH and Qld Health to own or manage the IP and that neither RBH nor Qld Health had any funds or means to pay for securing the IP rights by way of patent application, or for my ongoing research to proceed.”

Evans and Ashby deny acknowledging Dr Kelly’s ownership or that “… it was outside the scope and ability of RBH and Qld Health to own or manage the IP …”. However they agree that it was left up to Dr Kelly to push the matter forward using her own resources.

Despite Dr Kelly’s view of the meeting she says also that Professor Powell mentioned the name of Dean Thorvaldsen of Asset Management Services at Qld Health “as someone whose job it was to sort out IP issues. Following this lead, I phoned Dean Thorvaldsen and arranged a meeting on 29 August 2001 to seek some formality to the Crown’s position.” It is apparent however that Mr Thorvaldsen had been involved in discussions before the meeting and on the day received an email from Mr Evans to the effect that the meeting had occurred and “It is understood that the proportion would be something like 60% of her own time and 40% of Hospital time including the funding use of equipment etc” with a proposal for Dr Kelly and a number of the others to meet Mr Thorvaldsen to hear proposals from Dr Kelly and “to develop a proposal for QH to determine whether they wish to support the project and to look at other options for Lyndell if they do not wish to support it.”

27.Mr Thorvaldsen and Dr Kelly met with Biostart director Dr Giuliani in September 2001 as a preliminary to filing an application for support under that Queensland Government initiative. However the matter of the IP ownership was raised by Biostart and caused Dr Kelly to write to Dr Story of Start-up Australia Ventures (a partner in Biostart) that “In July 2000, I formally requested RBH to stake a claim in this IP if they believe they have any ownership of it. I have had no response in writing but the question is now in the hands of Dean Thorvaldsen of QHealth. He is submitting it to Crown Law.”

At about the same time Dr Kelly wrote to Mr Thorvaldsen stating:

“I have found that most experiments relevant to the [sic] were performed in 1994, when I was in receipt of the QRI Research Fellowship. The work was written up in 1998 and 1999, the fellowship having being finished in 1995.

I have received a reply from Start up Australia, Dr Shane Storey. They are absolutely unable to consider supporting this project unless the ownership issue with the Health Dept is resolved. I am asking that because of the short time we have, that a special agreement is drawn up between Pancreas Technologies Pty Ltd and your department for sharing of this patent.”

Dr Kelly also wrote to the Queensland Minister for Health on 21 October 2001 indicating that she had requested resolution of the ownership issue in June 2000 but that “There has been no result from this request”. She further mentions that Biostart are not able to consider her application without resolution of the ownership issue and asks:

“… that you meet with me and with Dean Thorvaldsen of your Asset management Unit for a discussion of this. We agree that a division of 60% to me and 40% to Qld Health is acceptable in view of the circumstances of the research, but this cannot be formalised without higher (your) intervention.”

28.On about 25 October 2001, Mr Thorvaldsen prepared a proposal for assignment of Queensland Health’s interest in the patent application to Pancreas on the basis of the payment of an Assignor’s Fee which was defined as “an amount equal to 40% of the Proceeds of Commercialisation”. This was apparently passed through the organisation and to Crown Law. The advice from Crown Law was however that “the discovery to which the patent relates” was made in the course of Dr Kelly’s employment with Queensland Health and, during January and February 2002, this advice was conveyed to Dr Kelly in correspondence from Statewide Asset Management Services and from the Minister of Health together with a proposal for a sole license arrangement whereby Dr Kelly would acknowledge Queensland Health’s ownership of the IP right arising from the research and Queensland Health would retain 40% of commercial returns and use for non-commercial purposes.

Dr Kelly indicated in a letter of 4 February 2002 that the arrangement was totally unacceptable but that “it has always been my position that RBH does have part-ownership rights” and “The patent is not in the name of Qld Health or RBH despite my attempts to have it so.”. She also disputed that the research had anything to do with her employment by Queensland Health, indicated that the original agreement had been acceptable and stated that Queensland Health had insulted her by “wrongly assuming complete ownership”. In discussions with Mr Thorvaldsen on that day, Dr Kelly had indicated that the license option “was still not on” and that she had been in negotiations with Peplin Biotech. An assignment was executed between Dr Kelly and Peplin on 28 February 2002 and subsequently between Peplin and Pancreas as noted above.

Period in which the invention was developed

29.The making of an invention can be a matter of momentary inspiration, or more usually, the work of many years of research, trial and contemplation. In this regard, what amounts to an inventive contribution, whether by one person over time or by a group of individuals, has been held in a number of Australian decisions to be that which had a “material effect on the final concept of the invention" (see, for example, Row Weeder Pty Ltd v Neilsen and Ors (1998) AIPC 91-438). Each inventive contribution may give rise to entitlement or joint entitlement to any patent subsequently granted and it is possible that the inventive contributions of one person at different times may give rise to multiple entitlements. Primmcoy Pty Ltd v Barry Charles Teer [2003] APO 37 was such a case where joint entitlement was found between two companies that had employed a particular inventor in different periods.

In the present case there is no assertion that any person other than Dr Kelly has made a contribution to the invention described in the application. Submissions were however made concerning the entitlement that may arise to work conducted by Dr Kelly during the period of her appointment as a research fellow which could be taken as the period in which she had been paid a salary or allowance under the research fellowship. This was essentially from June 1992 to March 1995.

30.There was effectively no evidence presented to contradict Dr Kelly’s account of the technical development of the invention and consequently my findings in this regard are based on her evidence and the few contemporary documents including particularly Dr Kelly’s annual funding applications. From these it appears most likely that much of the basis of the current invention including the limited regenerative response was known to Dr Kelly by the time the December 1 1995 application for research funding was drafted.  However, other elements including the in vivo testing of CHB on pancreatic carcinoma were apparently pursued at a later time. It is also evident from the evidence that a number of the key rat experiments including the time course study were conducted in 1994 and the results analysed between then and December 1995. In the circumstances I accept Dr Kelly’s assertion that the invention in its final conception was developed after the period she was paid a salary or allowance under the research fellowship but also find that key experiments were conducted during that period as she admitted in a number instances including her letter to Mr Thorvaldsen. My conclusion is that there were inventive contributions by Dr Kelly both during and after the period she was paid a salary or allowance under the research fellowship.

Relevance of the Trust Funds

31.Much was made by Ms Kelly in submissions concerning the nature of the funding received by Dr Kelly for the benefit of her research. This evidently came mainly from the Research into Cancer Trust Fund which, according to Ms Kelly, did not constitute public monies but were funds held in trust for a specific purpose so that Queensland Health could claim no beneficial interest. I will not explore Ms Kelly’s submissions in detail because ultimately they miss a key point. The monies associated with either the Research into Cancer Fund or the Private Practice Trust Fund were not held in trust for a third party beneficiary but, on the evidence, were clearly vested in the Brisbane North Regional Health Authority or successor entities under Queensland’s health legislation for use by that Authority for a particular purpose. In relation to the former, the monies were specific gifts or donations which the Authority was entitled to acquire under the Queensland Health Services Act 1991 and other applicable legislation and, in the latter, funds to which medical specialists had assigned “all rights, title and interest” to the Authority under private practice agreements. Save any limitation as to purpose, the Authority enjoyed beneficial ownership of the funds in providing health services to the people of Queensland. In relation at least to the Research into Cancer Funds, the money was used to purchase equipment, for the education of its employees and perhaps more significantly for the employment of people to carry out research into cancer. Of these, the evidence indicates that at least a number of Research Data Managers were employed by Queensland Health and also apparently research staff at the QIMR including Dr Leonard and Mr Goodall. The suggestion that the benefit of such employment including the results of any research or even entitlement to any invention made through it would not ultimately lie with Queensland Health but with its employee would be rather strange.

Was the invention made in the conduct of Dr Kelly’s employment

32.The Act does not deal expressly with the circumstances under which an employer of an inventor may be entitled to the grant of a patent as it is under Section 39 of UK Patents Act. Rather, the question of entitlement is to be determined on the basis of common law and equitable principles governing the employee-employer relationship. In this case there is no explicit agreement concerning intellectual property that Dr Kelly may have generated either as a clinical oncologist, under the Research Fellowship or otherwise. However, in the absence of any express contractual obligation it is not inevitable that an invention made by an employee is the property of the employer. What is relevant is whether there was an employment relationship and, if so, did that particular employment relationship suggests that the invention concerned was made in the course of employment. The law in this regard was summarised in Fine Industrial Commodities Ltd v Powling 71 RPC 253 as follows:

"The law relating to the position of officers or employees who make an invention affecting the business of the company which they serve is well settled. The principles applicable are stated in Worthington Pumping Engine Co v Moore (1902) 20 RPC 41; British Reinforced Concrete Co v Lind (1917) 34 RPC 101; and Triplex Safety Glass Co v Scorah [1938] Ch 211; 55 RPC 21. The mere existence of a contract of service does not in itself disqualify the officer or employee from taking out a patent for an invention made by him during his term of service, even though the invention may relate to subject matter germane to, and useful for, his employers in their business, and even though the employee may have made use of his employer's time and servants and materials in bringing his invention to completion, and may have allowed his employer to use the invention while he was in their employment. But all of the circumstances must be considered in each case. It is very material to see what is the nature of the inventor's position in regard to the business, and it may be a term of his employment, apart altogether from any express covenant, that any invention or discovery made in the course of the employment of the employee in doing that which he was engaged and instructed to do during the time of his employment, and during working hours, and using the materials of his employers, should be the property of the employers and not of the employee, and that, having made a discovery or invention in the course of such work, the employee becomes a trustee for the employer of that invention or discovery, so that as a trustee he is bound to give the benefit of any such discovery or invention to his employer."

33.There is no dispute that Dr Kelly was employed by Queensland Health as a part time radiation oncologist throughout the time in which the invention was developed but there is a question of whether she was separately employed when conducting research under the Research Fellowship or in receipt of other funding. The significance of this is that in my view there is no evidence to suggest that research of the nature now contemplated was at any stage part of Dr Kelly’s normal clinical duties. In this regard I note particularly Dr Kynaston’s statement, being a senior member of staff at QRI and in the Division of Oncology at the relevant time. It is clear from this evidence that while research was carried out at a clinical and practical level, laboratory research was not funded or encouraged until the establishment of the Research Fellowship.

34.As to whether or not Dr Kelly was employed as a Research Fellow, control has traditionally been associated with an employment relationship and indicators of this were set out by Lord Thankerton in Short v J & W Henderson Ltd (1946) 62 TLR 427, to be:

"(a) the master's power of selection of his servant; (b) the payment of wages or other remuneration; (c) the master's right to control the method of doing the work; and (d) the master's right of suspension or dismissal."

However, it has been found that this test does not satisfactorily meet the complexities of the modern workplace particularly where, as in this case, what is considered is the standing of highly qualified, professional people.  Consequently a number of alternatives have been put including the "organisation test" as in Stevenson Jordan and Harrison Ltd v MacDonald & Evans [1952] 1 TLR 101 where Lord Denning stated (at 111):

"It is often easy to recognise a contract of service when you see it, but difficult to say wherein the difference lies. A ship's master, a chauffeur and a reporter on the staff of a newspaper are all employed under a contract of service; but a ship's pilot, a taxi man and a newspaper contributor are employed under a contract for services. One feature which seems to run through the instances is that, under a contract of service, a man is employed as part of the business, and his work is done as an integral part of the business; whereas under a contract for services, his work, although done for the business, is not integrated into it, but is only accessory to it."

Finkelstein J in reviewing these principles in Konrad v Victoria Police [1999] FCA 988 however pointed out that:

“In Australia the High Court has criticised the "organisation test": see Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 at 26 et seq per Mason J. On the other hand, Mason J said (at 24) that the existence of control, while significant is not the sole criterion by which to judge whether a relationship is one of employment. He said that it is merely one of a number of indicia which must be considered. Others include the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work and provision for holidays. That is to say, "it is the totality of the relationship between the parties which must be considered" (Stevens at 29).”

35.Without a specific and detailed agreement covering Dr Kelly’s appointment as a Research Fellow, the general terms of the Fellowship, and the related conduct of the parties reflected in the evidence, is critical to understanding the relationship between Dr Kelly and Queensland Health at the relevant time. In this regard, the terms of the Fellowship indicate that it was for the training of specialist staff in research, required a full report on completion or if seeking renewal, attracted the payment of salary through the Central Pay Office, required superannuation contribution to be deducted, could not be supplemented by personal remuneration “from other grant giving bodies” and subject to termination for lack of performance. Dr Kynaston’s statement confirms the understanding that the Fellowship payment was intended as salary indicating that because it did not equate to a full time salary it could be topped up by part time clinical work. In its application Dr Kelly signed an employment application form, was formally appointed to the position of Research Fellow and had tax deducted from her regular payments. Furthermore, while Dr Kelly suggested the line of research, she required approval for it, the person who was to be her research supervisor, the venue and the times devoted to it on an ongoing basis.

36.As such, the conditions under which Dr Kelly was engaged as a Research Fellow tend to be far more suggestive of an employer-employee relationship than of the giving of a research grant and indeed, if that were the case, a number of these conditions would be considered unreasonable and restrictive. That Dr Kelly did not accrue leave relating to this service does indicate it was different to her normal ongoing employment but, despite what advice RBH payroll services may have given 10 years later, this can not be taken as determinative of the relationship. It was after all a relatively short term arrangement with a specific purpose that was complementary to Dr Kelly’s ongoing employment as a clinical oncologist. It is clear that the terms of the Fellowship were accepted by her in applying for and taking up her appointment as Fellow and in doing so I believe Dr Kelly submitted to Queensland Health’s control of her research activities and accepted remuneration for it to the extent of establishing a master servant relationship. With all the other circumstances I find that the Research Fellowship amounted to an employment agreement or an extension of her existing employment agreement with Queensland Health.

37.On this basis it is difficult to say that any inventive contribution arising from the research was not made in the course of Dr Kelly’s duties. Pancreas argue that the research was not that in which QRI had an interest and the Fellowship was an agreement whereby the Fellow pursued their own research interests in return for a promise to stay with QRI for a set period. This does not seem a fair assessment. The evidence shows that the original purpose of the Fellowship was to “encourage specialist staff to pursue training in research in fields involving or related to the activities of the institute” and subsequently that there was specific interest in and approval of the nature of the work by the Division of Oncology. It might be argued that the Fellowship was a training program with research a mere by-product but, if that was the case, the nature and importance of the research would not have been emphasised to the extent that it was in the guidelines and in actual practice. The research had to be within a relevant field, be of “substantial merit” and pursued diligently to its successful conclusion. This suggests that the QRI in establishing the program was far from disinterested in benefit the research may produce within its field of responsibility and in fact was seeking to encourage serious and beneficial research by its staff.

38.Dr Kelly’s research was considered by Dr’s Kynaston and Allison, as directors of the Division, as well as others who appear to have been consulted, to be important and relevant and, for example, I note that in his certification of the December 1992 fellowship extension application Dr Kynaston states “I certify that the project is appropriate to the general facilities in my department and I am prepared to have the project carried out in my department – meaning the “QRI” lab. [illegible word] in QIMR centre.” . That Dr Kelly chose the field of research is not determinative of the situation. Senior professional people often suggest and individually promote fields of investigation that may be useful to their employers. It was not part of Dr Kelly’s normal duties to do this but the Fellowship gave her the opportunity to do so and once engaged in that position I conclude that she was employed to do research. It was not research carried out in a private capacity but was approved and carried out within the Division of Oncology and specifically supported in a Fellowship program that was designed to encourage such research and the development of research skills. Dr Kynaston’s statement very much suggests the understanding at the time was that the Fellowship was the opportunity for QRI staff to do the sort of basic research that the organisation had been seeking to encourage for some time but had not been given the resources to do so. It is not apparent to me what Dr Kelly’s understanding of this would have been in 1994 but every indication subsequently is that she accepted that Queensland Health did have a partial claim arising from its support of her research and stated as much to Mr Thorvaldsen as late as February 2002.

39.In the period after March 1995, Dr Kelly ceased to receive a Fellowship salary payment but continued to apply for and received funding for her research expenses and had the use of the QIMR laboratory. The research at this time included work she conducted at home, for example, while on maternity leave, at the Queensland University and in her own time in the laboratory. It was work done essentially out of her interest in pursuing the research originally conducted under the research fellowship and was not part of her normal work as a clinical oncologist. Consequently, as opposed to the situation above, I do not see that any inventive contribution in this period can be said to have been made in the course of Dr Kelly’s employment. There remains however the question of whether Dr Kelly otherwise owed a fiduciary or other duty to Queensland Health in relation to that contribution. Unfortunately, unlike the Fellowship arrangement which is documented to some extent, the conditions on which ongoing financial support for Dr Kelly was provided are not clear to me from the evidence. For example I do not know whether the funding was given to Dr Kelly on the basis of her being an employee of Queensland Health and prior Fellowship holder or whether such funding was commonly provided to non-employees. However, Dr Kelly was a senior medical officer within that organisation, had previously been appointed to a position of Research Fellow, was in receipt of a degree of ongoing public funding for her research and continued to use the “QRI” lab within the QIMR for that purpose. In those circumstances I believe it very likely that she did owe Queensland Health a fiduciary duty in relation to her research work but, given she was no longer paid to do research and clearly had no responsibility to her employer to ensure that the research was continued or finalised, this would appear to be limited to protecting Queensland Health’s interests rather than holding the whole benefit of the invention in trust. To the extent that Queensland Health contributed to this part of the research effort it must be seen as a grant conditional only on the approval process that was applied.

40.I would on this basis hold that both the State of Queensland and Pancreas are jointly entitled to the invention described in the present application. However, it has also been argued that Queensland by conduct has waived its entitlement or is estopped from asserting entitlement and this now falls for consideration.

Waiver of rights and estoppel

41.I have considerable sympathy for Dr Kelly’s difficulties in seeking to deal with a large public bureaucracy such as Queensland Health in relation to her research and in resolving related intellectual property issues. While in some respects the absence of intellectual property management capability or established policies and practices in such an organisation, even in recent times, would not be wholly surprising, the lack of diligence in addressing the matters of intellectual property protection and entitlement apparent in this case is disconcerting and reflects no credit on the management of Queensland Health. Certainly it is in contrast to the propriety that Dr Kelly has apparently exhibited in pursuing these issues and in seeking to resolve the entitlement issue so that the benefit of her research could be realised. However, if it can be said that Dr Kelly had become a trustee of an interest or part-interest in a discovery or invention for her employer it is normally not sufficient at law for her to say merely that Queensland Health has abandoned it to her by not pursuing the research or patent protection, that it allowed her to pay for the filing of patent applications or that it was not diligent in resolving the question of entitlement. These may be indicative but what would be required is evidence of conduct that in its totality would amount to an express or implied waiver of her fiduciary obligations (Triplex Safety Glass Co., Ltd. v Scorah [1938] Ch 211; [1937] 4 All ER 693 and (1938) 55 RPC 21) or, on a similar basis, that Queensland is estopped by its conduct from denying Dr Kelly’s entitlement or in asserting any entitlement of its own. In relation to estoppel, Dixon J in Grundt v Great Boulder Pty Gold Mines Ltd [1937] 59 CLR 641 explained:

“The principle upon which estoppel in pais is founded is that the law should not permit an unjust departure by a party from an assumption of fact which he has caused another party to adopt or accept for the purpose of their legal relations. This is, of course, a very general statement. But it is the basis of the rules governing estoppel. Those rules work out the more precise grounds upon which the law holds a party disentitled to depart from an assumption in the assertion of rights against another. One condition appears always to be indispensable. That other must have so acted or abstained from acting upon the footing of the state of affairs assumed that he would suffer a detriment if the opposite party were afterwards allowed to set up rights against him inconsistent with the assumption. In stating this essential condition, particularly where the estoppel flows from representation, it is often said simply that the party asserting the estoppel must have been induced to act to his detriment. Although substantially such a statement is correct and leads to no misunderstanding, it does not bring out clearly the basal purpose of the doctrine. That purpose is to avoid or prevent a detriment to the party asserting the estoppel by compelling the opposite party to adhere to the assumption upon which the former acted or abstained from acting. This means that the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumption were deserted that led to it. So long as the assumption is adhered to, the party who altered his situation upon the faith of it cannot complain.”

42.On these principles I find that while Queensland Health’s conduct has not been exemplary it was also not such that it gave rise to estoppel because whatever Dr Kelly’s view on the representations said to be made to her by Queensland Health, she clearly did not act or rely upon them to any appreciable extent. She may say that this was because of “an abundance of caution and my understanding of the vicissitudes of bureaucracies” and that she had no legal understanding of the legal position of the parties, but the fact remains that at all relevant stages she has clearly acted on the basis that Queensland Health did have a claim. Dr Allison and others apparently indicated to her that the Division of Oncology could not provide the resources to pay for the patent applications and suggested that Dr Kelly do so from her own resources. However the letters of 19 July 2000 and 25 May 2001 to Dr Allison clearly show that even in the circumstances where she had been left to file patent applications from her own resources Dr Kelly did not have the understanding that Queensland had waived any claim to entitlement. Similarly, shortly after the meeting of 14 August 2001 where Dr Kelly says “they endorsed my personal ownership of the intellectual property of my research in this PhD program” she phoned Mr Thorvaldsen who she was told was “someone whose job it was to sort out IP issues” and arranged a meeting “to seek some formality to the Crown’s position.”. Subsequently, Dr Kelly prepared a Biostart application indicating against question 18 that “Qld Health will have some ownership of the patent but the matter is still the subject of discussion within Qld Health.”

43.As such I find it difficult to conclude that Queensland Health explicitly or by implication represented that it would make no claim of ownership. In fact in recognising the “vicissitudes of bureaucracies” Dr Kelly appears to have accepted that the conduct of Queensland Health officials however dilatory or misleading was not sufficiently authoritative to resolve her questions on entitlement and that she needed to go further and ultimately to the Minister of Health to resolve them. Consequently, there appears to be no stage where Dr Kelly could be said to have adopted or accepted an assumption of fact which Queensland Health has departed from to her detriment. It has been unclear and extremely slow in ultimately expressing an assertion of entitlement but it has continued to support Dr Kelly’s research in one way or another over a considerable period and has not otherwise, as far as is apparent to me, acted in a way that creates an estoppel or, on a similar basis, an explicit or implicit waiver of Dr Kelly’s fiduciary duty in relation to the invention. Therefore I find that Queensland’s claim to joint entitlement under section 15 is sustained.

CONCLUSION

44.For the reasons given above, I find that the State of Queensland acting through Queensland Health is jointly entitled to any patent granted in relation to the invention and, under Section 32 of the Act, I direct that the application proceed to grant jointly in the names of both parties, preferably with associated amendments to the patent request and notice of entitlement. In the absence of agreement the later is not mandatory as in Austgen Biojet Holdings Pty Ltd v Mervyn Goronszy [1997] APO 49.

The parties requested, and I agreed at the hearing, that they be given time to file submissions on costs when the reasons for the decision had been issued. In the circumstances I allow the parties 30 days from the date of this decision to file submissions on costs.

P M Spann
Deputy Commissioner of Patents

05 January 2005