The UK Court found that during confidential discussions between the two parties, Stanelco had misused information given to them, breaching an obligation of confidence. As a result, Stanelco went on to form patents and patent applications to the technology based on BioProgress' core products.
A further hearing has been scheduled to determine details of the transfer of patent ownership to Bioprogress along with other patent and patent applications worldwide. The hearing will also decide the extent of damages to be awarded to Bioprogress for Stanelco's misuse of confidential information.
The ruling brings to a close the legal wrangling between the two companies that started in October last year. BioProgress had started legal proceedings against Stanelco Fibre Optics alleging ownership of several patents related to processes used in gelatine-free encapsulation.
Later that month, Stanelco licensed rights to a non-gelatine encapsulation process developed by its subsidiaries Adept Polymers and Stanelco Fibre Optics to Isracaps, an Israeli company.
In commenting on the ruling, Graham Hind, CEO of BioProgress, said: "The technology will strengthen our position in the global encapsulation market and adds significant revenue earning potential to our SWALLOW liquid capsule technologies."
BioProgress' XGEL SWALLOW liquid fill capsule technology makes use of a single, compact machine that is claimed to improve on the lengthy, multi-step manufacturing process required for gelatine soft capsules.
"By combining the intellectual property in this patent with our existing technologies, BioProgress will now be able to deliver a liquid encapsulation product which is a large global market," he added.
To that end, June saw BioProgress sign a license option deal for the liquid fill technology with US drug company Wyeth. The agreement marked the company's second partnership in the over-the-counter (OTC) drug sector. Wyeth is thought to be the first commercial partner for this technology.
Along with the SWALLOW capsule technology, Bioprogress also produce a range of tablet coatings. TABWRAP is one of four new dosage forms BioProgress is developing under the XGEL family of products. The others are: SWALLOW, a non-gelatine liquid filled capsule process; NROBE, a powder delivery dosage form; and SEPTUM, a dosage form which enables the encapsulation of two non-compatible active ingredients in the same shell, delivering each at a different time or site in the body.
In an unrelated event, Bioprogress announced it had raised £5 million (€7.25m) from the issuing of 4 per cent unsecured convertible bonds. The bonds will be convertible into fully paid ordinary shares in the company at any time during the five-year life of the bonds.
"While we have no immediate plans for the funds, it is important that we have the added comfort of these additional resources in executing our business strategy," commented Hind.
Meanwhile, BioProgress last week posted sales of £992,000 for the first half ended June 30, 2004, with gross profit of £430,000. As the previous interim results covered only the few weeks of May 22-June 30, 2003, direct comparisons to the year-earlier period cannot be made.
Pretax loss was £3.8 million, and loss per ordinary share 3.4 pence, after administrative expenses of £4.4 million which absorbed a number of exceptionally high legal, consultancy and other items not expected to reoccur, BioProgress pointed out. At 30 June 2004, the firm held a cash balance of £13.3 million.