A recent decision of the English Court of Appeal may provide some help in situations involving poor drafting.

The Facts

In this case, the claimant obtained an exclusive licence to certain patents and know-how in return for the payment of royalties. The licence agreement defined “licenced products” as meaning any product falling within the scope of the claims of the licenced patent applications or licenced patent. The licensor had filed an application under the Patent Cooperation Treaty (“PCT”). However, there is no application which results in an international patent. The applicant converts the application into national applications during the national phase in which the PCT application is transferred to the national patent offices specified by the applicant.

The licensee began selling a product which fell within the claims of the PCT application but outside of the more limited claims of some of the granted national patents and refused to pay royalties on sales in countries where patents with more limited claims had been granted.

The Proceedings

The licensee brought an action for a declaration that the product was not a licenced product as defined in the licence in those countries where the claims of the granted patents did not cover the product. The licensor sought payment of royalties relating to those sales.

The Trial Judge concluded that royalties were payable on the products falling within the scope of the claims of the PCT application as filed.

The Appeal

On appeal to the Court of Appeal, it was observed that the principles for the construction of contracts and commercial documents were well known and agreed. A Court should attempt to ascertain the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

The Court also said that poor drafting provides no reason to depart from the fundamental rule of construction noted above. However, the poorer the quality of the drafting, the less willing a Court should be to be driven by semantic niceties to attribute to the parties an improbable and unbusiness-like intention, if the language used, whatever it may lack in precision, is reasonably capable of an interpretation which attributes to the parties an intention to make provision for contingencies in a sensible and businesslike basis.

The fact that a particular construction leads to a very unreasonable result may be a relevant consideration. The more unreasonable the result, the more unlikely it is the parties can have intended it.

Applying these principles and looking at the big picture, which it stated was the only way to approach the poorly drafted documents, the Court agreed with the Trial Judge and rejected the licensee’s request for a declaration.

Comment

The approach taken by the Court in this case may be helpful in attempting to interpret ambiguous, poorly drafted documents.