Investment fund manager Porton Group and the Ministry of Defence subsidiary Ploughshare Innovations* today won a court battle with 3M over the multi-national company's failure to promote a test for the "superbug" MRSA. The High Court in London found 3M was "in material breach of its obligation" under an agreement to actively market the product, BacLite.
Porton Group CEO Harvey Boulter said:- "I am delighted that we have been vindicated in our attempt to force 3M to face up to their responsibilities. "But the victims here are those infected with MRSA. A weapon in that fight was wrongfully abandoned by 3M. "This is a question of trust and honour which in my opinion seems to have been sadly lacking in 3M's behaviour. "The Judge has made it quite clear that 3M did not live up to its promises."
BacLite detects MRSA within 5-6 hours, a rapid detection time that could save lives around the world.
Judge Mr Justice Hamblen awarded Porton Capital Technology Funds, Porton Capital Inc and the Ministry of Defence's technology development arm, Ploughshare Innovations Ltd (hereafter "MoD"), damages of approximately $1.3 million ($1,299,808) in compensation. The Judge also said that Porton and the MoD had not been unreasonable when they objected to 3M's decision to shut down the project on December 31 2008, just a day before a 12-month earn-out period, under which the sellers would be paid part of the profits, began. The issue dates back to February 2007 when 3M agreed to buy a company called Acolyte Biomedica - part-owned by Porton and MoD - set up to exploit the BacLite technology.
3M convinced Acolyte that 3M had the medical device expertise and the global sales and marketing expertise to take over successful sales of BacLite worldwide and specifically in four major markets - the EU, including the UK, the US, Canada and Australia. But the Judge said that 3M was not only in breach of its obligation to "actively market" BacLite but also failed to gain regulatory approval in the US. "I find that from the end of March 2008 3M was in breach of its obligation diligently to seek regulatory approval for BacLite in the US and that had it complied with its obligation such approval would have been obtained by the beginning of February 2009," the Judge said.
The test was originally developed by the British Government's Defence Science and Technology Laboratory at Porton Down, Wiltshire, to detect biological weapons.
In the course of the trial, the Judge heard that 3M's original estimate of the earn-out payment under the Share Purchase Agreement in January 2007, a month before the purchase, was $33 million. While the companies and the MoD were not unreasonable to reject 3M's decision to close down the project, he added: "It was also reasonable for them to suspect that the failure of the business had been contributed to by 3M's own breaches of the SPA."
Referring to 3M's compensation offer before the trial, the Judge went on: "The reasonableness of the vendors' refusal is borne out by the fact that there were a number of 3M estimates at the time which exceeded the figure offered and that the figure was meant to be conservative." The failure by 3M "diligently" to pursue approval for BacLite by the US regulator - the Food and Drug Administration ("FDA") - after March 2008 was an important element in the project's termination, the Judge said. [166]. The judge found that 3M could have achieved US FDA regulatory approval by February 2009 "at the earliest" if they had corrected their own errors. Despite having identified problems with the methodology of the pre-approval testing, which had been changed by 3M from that carried out originally in the UK, and with 3M scientists suggesting solutions, there were concerns at the highest level in the company that the project was not making money fast enough. In an internal email of 7 March 2008, the Judge said, 3M's chairman and Chief Executive Officer, George Buckley, since awarded a knighthood, suggested "pulling the plug." A day later he said in another email he stated "tell them to deliver or tell them that we are likely pulling the plug" and warned "its time to fish or cut bait."