Court limits damages in Innovate Pharmaceuticals v University of Portsmouth case due to contractual liability clauses, disputes dishonesty allegations

Introduction

In the case of Innovate Pharmaceuticals Limited v University of Portsmouth Higher Education Corporation, the Technology and Construction Court (TCC) was tasked with determining whether Innovate Pharmaceuticals Limited (‘Innovate’) could claim damages due to alleged errors and misconduct in a research paper conducted by the University of Portsmouth (‘UoP’). The paper was published by Dr. Richard Hill and colleagues in the ‘Cancer Letters’ journal. Innovate argued that the paper was infected with serious misrepresentations, undermining the commercial value of their patented liquid aspirin formulation, known as IP1867B.

Key Facts

The High Court assessed numerous allegations including the misuse of beta-actin control blots, false descriptions matched to underlying data, and other substantial errors which led to the eventual retraction of the Cancer Letters paper. Innovate sought compensation for the cost of repeating the research program and for the diminished value of their patent due to the delay in exploiting it. Central to the case was the interpretation of clauses 11.4 and 11.5 of the contract, which contained exclusion and limitation of liability provisions, and their interplay with alleged dishonesty by Dr. Hill.

Legal Principles

Several legal principles were examined in the case, which revolved primarily around the interpretation of exclusion and limitation clauses within contracts, the Unfair Contract Terms Act 1977 (UCTA), and the legal requirements to establish fraudulent misrepresentation or dishonesty.

The court meticulously navigated through the clauses of the contract, assessing their reasonability under UCTA, and observed that explicit language is required to exclude liability for fraudulent or dishonest actions. The case law cited, including Ivey v Genting Casinos (UK) Ltd, provided guidance on establishing dishonesty, indicating that subjective knowledge of falsehood and an objective assessment against the standards of ordinary decent people were key for determining intentional misrepresentation.

The Court ruled that Innovate’s claims were subject to the limitation of liability clause, capping recovery at £1 million, notwithstanding the issues of whether there was a breach of reasonable care and skill under clause 11.1, and whether Dr. Hill’s actions constituted dishonesty. The court also considered whether Dr. Hill had any motive for alleged dishonesty, as well as established case law which requires cogent evidence for proof of fraud, given its inherent improbability.

Outcomes

The Court concluded that Innovate’s claims were limited by clauses 11.4 and 11.5 of the contract, which excluded liability for loss of profits and other significant losses and limited the university’s total liability to £1 million. It also rejected Innovate’s allegations of dishonesty against Dr. Hill. However, it was accepted that errors in the publication of data amounted to a breach of contract by UoP. The Court ordered UoP to pay Innovate damages of £1 million, which is the maximum recoverable under the contract, for the costs associated with repeating the research work, excluding any costs relating to non-GBM tumour testing and Clomipramine, which went beyond the contract’s scope.

Conclusion

The case of Innovate Pharmaceuticals Limited v University of Portsmouth highlights the significance of clear contractual terms, especially regarding limitations on liability and the exclusion of losses. It also underscores the stringent burden of establishing dishonesty or fraud in civil claims as an inherently improbable allegation. The court’s meticulous analysis reaffirmed that while contracts should encompass flexibility, especially during research, this does not extend to acts of misconduct or unreasoned deviations from expected academic standards. This case serves as a cautionary tale for contractual engagements in research, emphasizing that comprehensive provisions and academic integrity are critical to the commercial viability of intellectual property.