First shot fired in milk row

By GEOFF SENESCALL

A legal wrangle is looming between the Dairy Board and A2 Corporation over the commercial rights to potentially ground-breaking research linking milk with the onset of diabetes and heart disease.

The two parties say they are still discussing a possible joint venture. But the board has taken legal action against the corporation.

Its lawyers have lodged an objection with the Patents Office in Lower Hutt challenging the validity of patents taken out by the Dunedin company.

A2 Corporation shares are still fizzing on the unlisted market at the prospect of milking profits from the $8 billion dairy industry.

Board spokesman Neville Martin said it believed there was an overlap between its patent and that of Dr Corran McLachlan.

Dr McLachlan sold his research to A2 Corporation in February.

"By issuing the notice, the board is reserving its right to commercialise the science should it believe it is worth doing," said Mr Martin.

Mr Martin would not comment on any possible deal with the corporation.

The board's patents on what is now known as A2 milk go back to 1997.

They were taken out with the Child Health Research Foundation after research by Professor Bob Elliott identified an A1 protein in milk with links to the onset of insulin-dependent diabetes and heart disease.

Professor Elliott called for cows with the A1 protein - 75 to 80 per cent of the national herd - to be phased out in favour of cows with the A2 protein.

The board is continuing to do research in this area, but it has yet to act on the findings.

Moreover, there is a legislative bar stopping the board, rather than one of the manufacturing dairy companies, from producing milk.

So, should the board want to proceed, it would have to license someone else to do so.

Meanwhile, A2 Corporation - with the backing of South Island multi-millionaire Howard Paterson, who has major dairying interests - is ready to go.

It has been talking to the board for more than a month and, if no agreement is reached, is confident its patent is watertight.

It will defend any challenge.

David Parker, a lawyer and executive of A2 Corporation, believes the board's patent is defective.

"Essentially what their patent does not claim, and what our patent does cover, is the selection of A2 cows from a herd of previously mixed cows by way of a geno-typing test," he said.

"This is a test of the DNA of the cow to identify the desirable cow and, through the selection process, the production of a pure A2 milk.

"I am very confident on the basis of the legal advice we have had all along, confirmed in New Zealand and overseas, that ... the central planks of our patent position will be sustained."

Mr Parker said the corporation had expected the legal challenge.

"One of the reasons that I always expected this is that it really does show the commercial potential of these intellectual property rights.

"If ever you want to see evidence that there are some real gold nuggets out there at the end of the rainbow, this is as good evidence as you are ever going to get."

Mr Parker declined to comment on how far down the track the corporation was in producing and commercialising A2 milk.

Despite the secrecy surrounding A2 Corporation, its shares continue to trade at a huge premium compared with their listing price this year of 10c.

They closed yesterday at 150c, though this is well down on the 450c they reached two months ago.