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$1.9 Million Award for Medical Device Contract Breach

A company that was deprived of the opportunity to make substantial profits through the distribution of a novel medical device when its contract to do so was unlawfully terminated has been awarded damages of more than $1.9 million by the High Court.

The holders of the intellectual property rights in the device – which used high resolution infra-red technology to treat cold sores – had licensed the company as exclusive distributors of the product in America and elsewhere.

However, before the device was approved for marketing by the federal authorities, the holders purported to terminate the distribution agreement on the basis that the company had failed to pay the sum of £25,000 by a contractual deadline.

In upholding the company’s claim, the Court found that the parties had, by way of an oral variation to the original contract, agreed that the £25,000 would not be payable until federal marketing authorisation was obtained. Even had that not been the case, the holders had, by their conduct, waived their right to terminate the contract.

The termination notice given was not valid and amounted to a repudiatory breach of the contract which the company was entitled to accept. The Court found that the company had thus been deprived of a substantial chance that it would have made a success of the venture and earned a substantial profit. The company’s damages were assessed at $1.9 million, plus interest of $80,750.