Category Archives: Intellectual Property

10 tips for dealing with non-performing licensees

performanceTypically in exclusive licence agreements, and sometimes in non-exclusive licence agreements, the licensee has obligations to “perform” – to bring licensed products to market and to maximise sales. One of the reasons for including such obligations is that the licensor wants to avoid the  licensee “sitting on” the licensed IP, failing to exploit it yet preventing the licensor from doing so.

Below are 10 tips for dealing with the situation where a licensor considers that its licensee (under an existing licence agreement) is not performing its obligations to exploit the licensed IP, and is unable to get satisfactory information from the licensee that provides reassurance that the licensee is in compliance with its contractual obligations. In IP Draughts’ experience, this situation is not uncommon. Sometimes, it happens because the licensee is undergoing a corporate reorganisation and the project in which the licensed IP is used has been put “on ice” for many months while a new strategy is developed; the licensee may be unwilling to admit this has happened. Other times, the licensee is just very poor at communicating, or doesn’t wish to spend the time and effort necessary to keep the licensor fully informed of progress. On a few occasions IP Draughts has encountered a licensee who has stopped developing the licensed technology altogether, but is unwilling to admit this or negotiate a termination agreement, or sees no pressing need to do so. Meanwhile the licensor’s patent life is ticking away.

treborIn all of these situations, the licensor’s attempts to communicate meaningfully with the licensee have failed, and something a little stronger is required. It may not be necessary to go as far as starting litigation, or formally terminating the licence agreement (though sometimes it will), but the licensee needs to see a determined course of action on the part of the licensor that is likely to lead to these outcomes if the licensee fails to respond appropriately.

Having said that, IP Draughts is not in favour of bluffing as, once the bluff is called, it is difficult to get the licensee to take the licensor seriously thereafter. Steady, unflashy, unexaggerated, clear, patient, determined, timely and above all believable action, with consistent follow-through, is the order of the day.

These are general tips, and different actions may be required in individual situations. The most important point to make is that you should consult at an early stage with your legal adviser and together work up a strategy for dealing with the non-performing licensee.

prejudiceThe tips are set out in order of activity, but some of them should be happening at roughly the same time. For example, it is conventional to assert rights in an “open” letter at the same time as making proposals for settlement in a “without prejudice” letter. Your legal adviser should be familiar with all of these steps and advising you on them.

  1. Take legal advice. This point goes before all others. Don’t think in terms of legal advice meaning that you have to escalate the problem into something larger than it needs to be, or spend a huge amount on legal fees. A good lawyer will help you to take appropriate action, which may be a very light hand on the tiller in the early stages, to make sure you don’t steer into the rocks. At some stage, it may be appropriate to obtain a formal opinion on your rights and remedies, eg before you decide to give formal notice of breach or terminate the agreement.
  2. Read the contract. What, exactly, are the licensee’s obligations under the contract, and what are the consequences of failure to perform the obligations? Sometimes, people make assumptions on these points without checking the contract carefully.
  3. Marshall your facts. Put together a file of all relevant documents, including the agreement, correspondence, and reports. Make sure that people in your organisation who have had dealings with the licensee have made file notes of those dealings, particularly if they are relevant to the question of performance, eg if the licensee made statements on the subject in conversations. But do all of this in a disciplined way, based on advice from your lawyer (see above). Too often, a situation of this kind causes clients to send internal emails to one another that comment on the rights and wrongs of the situation. Those emails and other documents may be disclosable to the other side in litigation, and they may say things that don’t help your case. Your lawyer will be able to advise you on whether such communications and documents (a) should be avoided altogether, or (b) should be conducted in a managed way. For example, sometimes it may be appropriate to send such emails to the lawyer and thereby take advantage of “legal privilege” exceptions to disclosure. Other times, discussions should happen face-to-face, and not be recorded.
  4. Reserve your rights. If you have evidence that suggests that the licensee is not performing, don’t wait for weeks before communicating with the licensee. Sometimes, it is important to send a holding letter in which you indicate that you have concerns and are investigating them, and in the meantime you “reserve all your rights”. This should help to avoid an argument that you have waived your legal rights by delay.
  5. Follow a clear strategy. Develop a clear strategy for dealing with the dispute, and don’t fall into the trap of just reacting to communications from the licensee. Follow through on your strategy in a steady way. Make sure that senior management has bought into the strategy and is not deflected by noise emanating from the licensee (or from doom-merchants within your organisation). At the same time, keep re-assessing your options in light of any further information received from the licensee.
  6. Give notice of breach. Once you know your facts, have taken legal advice and are clear that a breach of contract has occurred, you may wish to give formal notice of that breach to the licensee. Think ahead a few steps as to what you want to happen. Are you intending to go through with termination or just try to shock the licensee into action. How will they react to a formal notice? How will your organisation react if the licensee escalates hostilities in light of the formal notice? Is your organisation prepared to follow through?
  7. Try to keep talking. In parallel to any formal legal action, such as giving notice of breach, it is usually desirable to try to engage in a dialogue with the licensee, with a view to resolving what has now become a dispute. A conventional way of doing this is to send the licensee communications that are marked “without prejudice” and which are intended to be part of negotiations to settle the dispute. These communications are run in parallel to the “open” communications that set out your organisation’s legal position. An advantage of without prejudice communications is that they shouldn’t be seen by the judge and therefore it is easier to be a little freer in what you say. As with all of these tips, individual jurisdictions may have different rules on these matters, so it is important to take advice from a local lawyer.
  8. Don’t lose focus. Dealing with a non-performing licensee may not seem the most valuable or inspiring use of your time, particularly if you think the reason for non-performance is that the market for the licensed products is not good. It may be tempting to try to deal with the matter during lulls in your workload, when you are not busy doing deals that look likely to generate greater income. Unfortunately, this attitude can result in a patchy and inconsistent approach to resolving the dispute. This often looks weak, and results in delays. In IP Draughts’ experience, the best way of working to resolve disputes is to be steady and consistent. If the licensee doesn’t respond to your letter, don’t wait 6 weeks before following up. Make a note in the diary to follow up in, say, 16 or 17 days (2 weeks plus a couple of days for postal delays). Keep acting in a timely way. Plan ahead as to how and when you will escalate if the licensee ignores you. Don’t act precipitately, but also don’t fail to act. The best credit controllers take a similar approach and so should you.
  9. Be prepared to compromise. Even if you think you have a cast-iron case, it is usually worthwhile to bend a little to achieve an agreed outcome. And most cases are not cast-iron, in which case it becomes even more attractive to try to settle the dispute.
  10. Try to enter into a written settlement agreement. Even if the outcome is to terminate the agreement, it is generally desirable to have an agreed basis of termination, recorded in a termination and settlement agreement.

 

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Who owns copyright in an academic’s work?

butterflyRegular readers of this blog will know that IP Draughts is sceptical about the value of some of the articles in academic law journals. Too many of them seem to be engaged in a private conversation between academics that has very little connection with the world that IP Draughts inhabits.

A recent article in Legal Studies, the journal of the Society of Legal Scholars (SLS), bucks this trend. Make the butterflies fly in formation? Management of copyright created by academics in UK universities, by Dr Andreas Rahmatian of the University of Glasgow (Legal Studies Vol 34 No 4, 2014, pp 709-735) makes some interesting points about the ownership of copyright in works created by an academic employee. Not only are the points interesting, but they have practical relevance to anyone who is involved in drafting, interpreting or advising on IP ownership issues within a university. It is to SLS’s credit that it provided funding for the work that led to the article being written.

Astute readers may already be asking themselves: who owns the copyright in an article written by an academic, on the subject of who owns the copyright in articles written by academics? Does Dr Rahmatian, or his employer, the University of Glasgow? What does his contract of employment say on this subject?

In IP Draughts’ experience, it is often a term of an academic’s contract of employment that the university’s financial regulations (or similar) form part of the contract of employment. Many universities have adopted an intellectual property (IP) policy, and in many cases the policy is made a part of those regulations. In such cases, the IP policy is considered to be binding on the academic as it forms part of their contract of employment.

So what does the University of Glasgow’s IP policy say about ownership of copyright in academic works? IP Draughts looked on the university’s website, and couldn’t immediately find an official-looking document that appeared to have the status of an employment term. Instead, he found an explanation on the website (legal status unclear) which reads as follows:

The University owns IP generated by University staff in the course of or incidental to their employment, including teaching or university materials.  Ownership may, in part, be determined by the terms and conditions of any external funding.

The University waives its rights to ownership of any copyright in scholarly materials, except in relation to any work created by an employee of the University whose job description specifically includes the creation of printed or electronic materials.

This form of words reflects a set of broad principles that many universities seem to follow in their IP policies, and which Dr Rahmatian rightly criticises as flawed. As will be discussed below, these principles are woolly around the edges, but they seem to be commonly understood by universities as:

  1. The university owns IP created in the course of the employee’s employment. [This is the default position for UK copyright, but not for patents, and the position for patents can’t be overriden by contract terms, so the wording is defective. But today we are discussing copyright.]
  2. Pretty much everything the academic does is done in the course of their employment. [This is an extrapolation, but probably reflects the university’s position. As Dr Rahmatian’s article explains, it is doubtful whether this is true in the case of public lectures, and perhaps also in the case of other non-teaching materials.]
  3. This includes “scholarly materials”, but the university graciously “waives” its rights to these. Depending on who you ask, scholarly materials might include articles, books and public lectures, but not course materials. [The legal status of a statement that someone “waives” their ownership rights is unclear. Is this intended to mean (a) I own the IP but I won’t sue you, (b) I agree that you own the IP in the first place, or (c) I will assign the IP to you? The use of the word “waive” seems to be a fudge, to avoid tackling the ownership question head-on.]
  4. The terms of funding contracts may transfer ownership in the funder. [This assumes, of course, that (a) the funding contract assigns IP to the funder, and (b) that the funding contract is made with the original owner of the IP. If the contract is made with the university but the academic owns the IP personally, this won’t work.]

sls_logo_largeSo, who owns the copyright in Dr Rahmatian’s article: him or the university? According to a footer on each page of the article, the answer is that neither of them do. Instead, the Society of Legal Scholars does. The article does not reveal whether SLS obtained an assignment of copyright from Dr Rahmatian, or from the University of Glasgow, or from both of them. Or, indeed, from neither.

Dr Rahmatian’s article reports on a study that he conducted, in which he attempted to interview the custodians (IP Draughts’ name) of IP policies at several UK universities, to find out what the policies were and how they were applied. While he was able to obtain copies of several policies, it diffidenceproved to be more difficult to secure interviews, as the custodians were sometimes “diffident” about discussing the policies. The causes of this diffidence seemed to include (a) the custodian not wanting to show his ignorance by incorrectly describing the policy or its legal effect, (b) the policy had not been finalised or was not, in practice, followed, or (c) making comments about the policy could get the custodian into trouble, given its political sensitivity.

Dr Rahmatian did, however, manage to secure interviews with at least 8 universities.

Several themes emerge from the article that chime with IP Draughts’ experience, including:

  1. The issue of academic copyright is politically sensitive, and formulating a copyright policy sometimes involves negotiations with an academic trade union.
  2. The resulting wording is sometimes a messy compromise, and its drafting may not have involved a specialist IP lawyer.
  3. Many of the respective policies of UK universities have a similar look and feel. They sometimes use odd words like “the university claims ownership” or “the university asserts ownership”, which suggests an unresolved negotiating position rather than a clear ownership statement.
  4. Sometimes, it appears that the university considers that it owns all IP generated by the academic, without fully focussing on issues such as (a) what falls within the scope of the academic’s employment duties (the patent test, in summary) or (b) what is done in the course of employment (the copyright test).
  5. More generally, the university’s staff who administer the policy are not always clear on the detailed effect of the policy, or how it is affected by the underlying law on ownership of employee-generated IP.

Dr Rahmatian rightly refers to the case of Stevenson Jordan & Harrison v MacDonald & Evans (1952) 69 RPC 10, in which the court discussed the position of a university lecturer who delivers a public lecture. The following quotation, and in particular the word “inconceivable”, forms the basis of much of Dr Rahmatian’s premise in the article:

Lectures delivered, for example, by Professor Maitland to students have since become classical in the law. It is inconceivable that because Professor Maitland was in the service at the time of the University of Cambridge that anybody but himself, one would have thought, could have claimed the copyright in those lectures.

As Dr Rahmatian points out, this case has been cited in more recent cases such as the important patent case of Greater Glasgow Health Board’s Application [1996] RPC 207 @ 223.

IP Draughts has a feeling that Dr Rahmatian hinges a great deal on this one case, and it make him want to play devil’s advocate, while recognising that it may be right to rely on the case. Counter-points that might be made include:

  1. The comments are obiter dicta.
  2. The case is over 60 years old, and assumptions about academic duties have moved on since then, as have the terms of their employment contracts.
  3. The example given is of an even older set of lectures, and given at Cambridge, which has a distinctive approach to the ownership of academic IP, even today.
  4. The example seems to have concerned a public lecture, as distinct from a lecture given as part of a course. How far one should extrapolate from that example to articles and books is not clear.

Other parts of Dr Rahmatian’s article are less convincing to this practitioner. Mindful no doubt of SLS’s plea that articles in Legal Studies should include “particular reference to doctrinal, conceptual, theoretical, comparative or socio-legal analyses”, the author discusses the impact of “managerialism” on university IP policies, which “provides the technocratic illusion of seemingly rational and unquestionable managerial rules that replace substance by procedure …this military-like uniformisation is a typical effect of modern human resource management …the assertion of copyright ownership by universities can serve as a first step in this development.”

1984Wow. In other words, a university’s copyright policy is part of a Orwellian nightmare where a university’s central administration acts as “big brother” and treats academics as units of production. IP Draughts expects that this characterisation will appeal to many academic readers.

Coming back to the legal content of the article, the take-away message for IP Draughts is the reminder that university administrators sometimes have misguided views on the extent to which the university automatically owns the intellectual output of its academic employees; to put it mildly, there are some areas where the legal position is not clear. Prudent universities will obtain formal assignments from their academic inventors and creators before seeking to commercialise that output.

 

 

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Give me a child until he is seven and I will show you… a copyright expert?

Lenin reads Copyright Education and Awareness - he seems to be impressed!

Lenin reads ‘Copyright Education and Awareness’

Apologies to the Jesuits among you, for mangling the quotation that is attributed to St Ignatius of Loyola. Or to his mate, St Francis Xavier. He/they supposedly said  “Give me a child until he is seven and I will give you the man”. Or something similar. Presumably in Latin. Or Spanish. Or perhaps Catalan or French.

Alternatively, we could adapt the quotation attributed to Lenin: “Give me four years to teach the children and the seed I have sown will never be uprooted.”

In other words, the best way of getting your point across is to teach it to children for several years, and the lesson will stay with them during their adult lives.

The UK Prime Minister has an Intellectual Property Adviser, Mike Weatherley MP. Or rather, he did until recently. One of Mike’s last acts before he resigned from the role was to publish a Discussion Paper, Copyright Education and Awareness. Its main recommendation comprises a paragraph of text that uses too many buzz words for IP Draughts’ taste. They include: “strategic partnership”, “sharing of best practice”, “strategic outreach plan”, “various stakeholders”, “cross-industry working group”, “consult on strategic vision”, “review progress”, and “working together”. Blah blooming blah. The essence seems to be that Government should develop a plan to raise public awareness of IP, and then convene a committee every 3 months to see whether the plan is working. No harm in that, you might think. Why couldn’t they just say it simply?

More interesting, in IP Draughts’ view, are the more detailed or “additional” recommendations, which can be summarised as follows (summary followed by IP Draughts’ reaction):

  1. Measure. Develop mechanisms to measure the public understanding of IP and how they behave in relation to IP (eg do they download music illegally). [Seems sensible.]
  2. Introduce IP education into the school curriculum. [Potentially a good idea, if done well.]
  3. The BBC should create a copyright education programme using online, on-air and face-to-face channels. [Pie in the sky. BBC is not there to lecture people on IP.]
  4. Provide good information. This recommendation reverts to buzz words like “obvious synergies”, so IP Draughts can’t be bothered to summarise it. [Yawn.]
  5. Create a fund to incentivise SME digital businesses to educate citizens about IP rights – again too many buzz words for IP Draughts’ short attention span. [Yawn.]
  6. Create a new IP Education Coordinator or a broader IP Director General role. In other words, there should be an IP czar, similar to the one in the USA. [Hurrah! Or Yawn! Can’t decide which.]
  7. Produce an annual Copyright Education Evaluation Report. If this doesn’t achieve the desired results, introduce a statutory duty on the Secretary of State to “inform and educate on IP and copyright awareness”. [Yawn.]

media studiesThe most substantive and realistic of these recommendations, at least in IP Draughts’ eyes, is the proposal to increase education in schools and universities.  The report discusses some current initiatives in this area, such as the development of copyright materials for inclusion in an AS/A level course in Media Studies. It also records, with regret, the Government’s refusal to include IP law as a subject within the national curriculum.

The report recommends various steps to increase understanding of IP by school pupils, university students, and their teachers. Many of these initiatives are being led by the UK Intellectual Property Office. In general, they are at an early stage.

IP Draughts’ solution would be more radical. He would set up an IP training academy, completely independent of government, and led by experts in IP and education. But who would pay for it?

As with much of government life, successful education of the public about IP will require the expenditure of money. Is public money to be spent on developing educational materials? Who will do it and at what price? Should this be a priority at a time of economic hardship?

IP Draughts has some direct experience of this subject, having been commissioned a few years ago by the European Patent Academy (part of the European Patent Office) to develop “train the trainer” course materials on IP licensing. He was subsequently commissioned to deliver the course, both in a traditional meeting and in series of online, one-hour courses run from his office, using a computer, camera and microphone. Three things have stuck in IP Draughts’ mind about those experiences. First, that the Academy was a well-resourced body in its own right, with its own specialist staff, and not a secondary activity of a Patent Office. Secondly, there was a decent fee for writing the materials (after IP Draughts publicly tendered for the work). And thirdly, the materials went through an intensive peer review process, with 3 reviewers, which greatly enhanced the quality of the slides and notes.

nittyIP Draughts wishes the UK government would take a similar approach to the EPA, but fears that the focus currently is too much on the political and administrative sides – the high-level aspiration and political process – and not enough on making sure that initiatives are well-thought-out, run by professionals, and properly funded. It was ever thus.

 

 

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Is it career-limiting to practise IP law?

This provocative thought is prompted by considering the careers of two prominent lawyers and judges, and comparing them with those of specialist IP judges. IP lawyers who become judges seem to reach a glass ceiling at appeal court level.

Baron Neuberger of Abbotsbury

Lord Neuberger, before he became President of the Supreme Court

Lord Neuberger, before he became President of the Supreme Court

IP Draughts calls as his first witness Lord Neuberger, the current President of the UK Supreme Court. Lord Neuberger has the necessary skill-set to have been a successful IP barrister, and in fact he has been involved in judging some of the leading UK patent cases of recent years. His scientific aptitude is demonstrated by a chemistry degree from Cambridge, while his clarity of thinking and writing can be seen in his judgments and speeches. When IP Draughts ran Lord Neuberger’s judgment in the recent patent case of Virgin Airways v Zodiac through the BlaBla Meter, he scored 0.15, which is a phenomenally good score. Instead, fate took David Neuberger to Falcon Chambers, a set specialising in property law.

A few years ago, IP Draughts sought advice from specialist insolvency counsel on behalf of a university client. The question was whether patents could be assigned to a spin-out company on terms that enabled an automatic reversion of the patents if the spin-out company went into liquidation.  This is a notoriously difficult objective to achieve. Counsel’s best line of argument – an assignment of a determinable interest – relied for authority on comments from Neuberger J in a non-IP case, Money Markets v London Stock Exchange [2002] 1 WLR 1150, where he said:

It does appear well established that an interest granted on the basis that is inherently limited on insolvency is recognised by the court. In other words, a determinable interest, that is an interest with a limitation until insolvency, is valid, see the discussions in Snell’s Equity, Underwood and Hayton, and Professor Goode’s book and the passage quoted above from Fry LJ in Ex p Barter, ex p Black, ex p Walker (1884) 26 Ch D 510 at 519–520. It must, I think, follow that an interest granted on the basis that it is inherently limited on some other event is effective, even if that event occurs on or after an insolvency.

A full discussion of this legal issue must wait for another day. IP Draughts’ general point is that Lord Neuberger’s stellar career has intersected with IP at various places, but he has not been a specialist IP barrister. Might his career have been more limited if he had practised at the IP bar? Would he have become Master of the Rolls and then President of the Supreme Court? Based on the precedents of specialist IP judges, IP Draughts wonders.

Viscount Alverstone of Southampton

Lord Alverstone

Lord Alverstone

IP Draughts’ second witness may be less familiar to present-day lawyers: Lord Alverstone, who was Lord Chief Justice from 1900 to 1913. His witness statement takes the form of a book of memoirs, titled Memories of Bar and Bench, published in 1914. Some years ago, IP Draughts’ friend Edmund Longshanks QC gave IP Draughts a second-hand copy of this book. Before his elevation to the Bench, Lord Alverstone’s name had been Richard Webster. Webster had a very successful career as a barrister, appearing in most of the leading patent cases of the day, and taking instructions from clients as diverse as Lord Kelvin, Thomas Edison and Florence Nightingale (and from leading firms of solicitors such as Linklaters). The summit of his career as a barrister was being appointed Attorney General, at which point he had to turn his hand to prosecuting criminal cases, including that of the famous murderer, Dr Crippen.

Dr Crippen

Dr Crippen

In his book, Lord Alverstone emphasised the importance to his career of not allowing himself to be typecast as a patent barrister. He maintained a broad commercial practice before becoming Attorney General. For instance, he handled many railway compensation cases (compensating landowners whose land was taken over by the railways) and was leading counsel in a Board of Trade enquiry into the Tay Bridge disaster.

Admittedly the world was less specialised in the late nineteenth century than it is today. But the lesson that IP Draughts takes from these two examples is that if you focus predominantly on IP law, you may find there are some natural limits to your judicial career, no matter how talented you are. IP judges in the UK seem to get no further than the Court of Appeal, while the summit of US IP judges’ careers may be to become Chief Judge of the US Court of Appeals for the Federal Circuit. It would be interesting to see a specialist IP judge in the Supreme Court of either jurisdiction.

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