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Mr D E Conway Group Research & Development Centre Brltish-American Tobacco Co Ltd Regent's Park Road SOUTHAMPTON S09 Ron~dArmstrong BSc MIMechE PauIAuton ~DM~ns~ Guy Fou~e~ ~ Ro~ H~k~O Paul L~e~eld ~ Robin Smith-~le ~O MIEE Cambridge Consultants B~ Hil~ ~bdd~ ~ ~, ~l~d and ~bddga 62466 (ST 0 0~3} Telex ~ (~ G) Registered Num~r 1 ~6~8 E~l~d. 25 October 1978 RCH/D/Q331 Dear Mr Conway, Ouotation No 0331/RCH - Investigation into the use of Ink Jet Printing for . Printi~ pnto Ci~rette Wrappin~ Paper Thank you for your letter of 6 October referring to the above quotation, and my apologies for the late reply. I have been away on business recently and it has taken me a few days to work through the inevitable pile accumulated in my in-tray. We are delighted that you wish tO proceed with the project, and I hope therefore we can resolve your queries rapidly, so that the work may be put in hand. My comments are as follows: First, I should like to make a general point which reflec~ particularly on clauses 7 and 11. It is usual for CCL not to place restrictions on the ownership and assignment of rights in connection with development contracts, because we are ordinarily bringing just the requisite skills to bear in performing the contract and clearly if the client has paid for these he should ~ave the rights of exploi- tation in such ways as he thinks fit. However, occasionally we undertake contracts which require not only our skills, but also "know-how" acquired as a result of our own investments, and in such cases we are anxious to maintain some level of control on how and by whom the benefits of the work ~%y be exploited. The work described in the above proposal is a case in point. CCL has been working in the field of 'Ink Jet Technology, for some ten years now, during which time a not inconsiderable investment has been made in the acquisition of industrial property rights including know-how and patents etc. In the circ~u~s~ances then~ we feel it reasonable to place restrictions on the assignment and ownerships of the industrial property. In short, it is our intention that BAT should be able to en~oy the f~ll benefits of the work arising from this contract insofar as the objective of the work is concerned; ~amely, using Ink Jet Printing to obliterate print on ci~rettes. However, we are not prepared to give BAT carte-blanche to exploit the results In other w~ys, which could prejudice CCL'e position in the field. I. CAause 7: Assignment We propose that the existing clause stands but on the ~nderstanding that CCL will not withhold consent for a reasonable request from BAT to assign its ~Ighta and obliE~tlons, in the light of the above comments. R. Clause 8__~Ter~atio~n As is usual in this business, we do ~ot propose to assign copyright in ~he ma~erlnl arising from the contract, and in the light of my preceding co~nents you will understand why this is particularly desirable for CCL in respect of this contract. A Su~ia~ ofA~h~O U.le L~,te¢l /con%d

Mr D E Conway 25 October 1978 We will, of course, ensure that BAT has sufficient freedom of use of information for it to use the results of the work for the purpose intended. We therefore insist on the present wording used. 3. Clause 9 - Acceptance and Delivery As in all research and development work we cannot guarantee to complete work within a specified period, although we do of course use our best efforts ~o do so within an estimated period. Clause 9 is simply intended to make this clear and does not replace Clause 13, which refers to any delay or failures to obligate the contract due to reasons beyond our control. 4. Clause 10 - Warranty We/will accept deletion of the last words "it being accepted that this is the /responsibility of the Client." A specific point I should like to make clear in connection with the warranty clause concerns the safety in the choice of ink used to print on the cigarettes. CCL is employed in this instance to determine, in conjunction with BAT, an ink formulation suitable for Ink Jet Printing. It is considered that BAT has all the requisite experience and know-how to determine whether or not such an ink would represent a health hazard, and therefore CCL accepts no liability in this respect. ~We believe that your proposed additional sentence could he prejudicial in a case in which a third party takes legal proceedings against BAT and CCL and would therefore prefer to omit this. 5. Clause 11 - Industrial Property R.~hts From my previous comments, I believe it is self-evident why we wish the original clause to stand, with the exception of one change, as follows: An omission from our first contract schedule, and for which I apolo~se, concerns the ink formulations which arise from the work. We have recently licenced ink technology from ICI which could very likely be used in pursuance of this contract. If this is the case, and BAT become directly involved in either making or having made inks which utilise this technology, then royalties will be payable to CCL. In order to provide for this in Clause 11, I have made the following modification. "Any invention discovery or improvement whether patentable or not made by the Company its servants or agents in connection with the Contract shall belong wh~lly and exclusively to the Company but insofar as it is able to do so, and with the exclusion of ink manufacturing rights, the Company shall without charge permit the Client to use any such invention, discovery or improvement enly-~n-the-msn~acture .o£any produceproduced by the Company .for the Client in carrying out the Work, and in respect of any patented invention, discovery or improvement will grant to the Client a royalty-free licence to use such patent for such other purpose as shall be agreed by the Company. The Company will negotiate on' reasonable terms such licences as are required by the Client to manufacture or cause to be manufactured inks for the purpose of the work under the Contract. /contd ...... CD

Mr D E Conway 25 Oc~x)ber 1978 6. Clause 13 - Liability We have not made an exclusion in respect of death or personal injury as you imply. Loss or damage, however, is intended to cover more than just the Client's property, e.g. loss of profits. I believe the clause should sta/id. I enclose two copies of a modified contract, one is for your retention and the other is to be signed and retunled to CCL. If you have any further queries please do not hesitate to contact me. Regarding your comment on the technical aspects of the work, we realise the desire for a white ink but insofar as we are aware the particles of titanium oxide, which would usually be used to make such an ink, are too heavy for IJ? applications. Clearly this matter requires some discussion at an early stage in the programme, at which time the requirements of the Marketing Department can he more fully explored. I hope you will be in a position to accept our proposal in the near future, and look forward to working with you on this interesting application of Ink Jet Printing. With kind regards. Yours sincerely, Dr R C Hook Director Encls.