Research results: more moonbeams in a jar?

I embarked on this post with trepidation.  It’s always worrying when you start out thinking that you have a problem and that you disagree with IP Draughts.  The problem involves know-how: how should you deal with it, when it is part of the output of a research project?

Many research projects produce identifiable and protectable IP. There may be negotiations over who should own that IP, and the law gives us a set of rules that explain who is the first owner if different terms are not agreed.

But research projects also produce interesting things that are not obviously classified as identifiable and protectable IP – the ill-defined stuff that is sometimes called ‘know-how’.  Partners in the research want (demand, in some cases) rights to continue to use the know-how or to stop other people from using it.   Research funders want to own it as an output of the research.   IP Draughts says it is not something that can be assigned. [Don't take any notice of his maunderings.  Ed.]

Two examples of know-how occupy my world:

Results – actual hard data.  As explained elsewhere, there is no property in information itself.  If it is to be protected, it needs to be covered by confidentiality or fixed as an acknowledged piece of IP.  It could be recorded as a copyright work or entered into a database.  But that approach doesn’t really deal with the whole problem.  The copyright owner can prevent the copyright work from being copied without permission but the data probably also exists outside of the copyright work (eg the difference between a publication and the data it is based on).  As for databases, it is the database, and the investment in creating the database, that is protected by database right and not the data itself.  Database right gives the owner of the database the right to control the use of the database rather than the content of the database.  Neither protects the data itself.  Conclusion: confidentiality is the best bet to protect the data.

Methods – specifically, refinements to established surgical methods that arise in the course of clinical trials.  Again, there is no property in the information itself.  Patenting is unlikely to be the answer (cost, difficulty in demonstrating novelty, exclusion of certain methods from patent protection).  Copyright offers some hope but the same arguments apply.  Conclusion (again): if the method is to be protected at all, confidentiality is the best bet.

Daguerrotype stereotype

The researcher will want to be able to continue to use the know-how.  The funder, stereotypically, will want to protect, restrict and commercialise.  And so we turn to the law to find out who owns the know-how and who can control it and, potentially, how to transfer it.

We know that know-how is practical information that is secret, substantial and identified (EU Tech Transfer Reg (772/2004)) and we know that know-how is not property and cannot be assigned (IP Draughts commentaries).

English law protects trade secrets but will not protect know-how of itself (Faccenda Chicken).  Know-how is treated as a lesser being than a trade secret and needs to shelter behind confidentiality.  The EU is currently considering a draft Directive introducing specific protections for trade secrets (EU draft Dir 2013/0402) that would impose penalties for the unlawful acquisition, disclosure or use of trade secrets.  A trade secret is defined as information that is secret, has commercial value because it is secret and has been the subject of reasonable steps to keep it secret.  On that definition, know-how might amount to a trade secret in some cases.  But again we see that confidentiality is key.  We also see a requirement for that confidentiality to protect a commercial value.

So, it looks like the answer to my problem is that no one really owns know-how, although you can expect to control it if you have the benefit of a confidentiality obligation that covers it.  There might be property in related IP rights but my sense is that these IP rights will often not catch the guts of the know-how – the data or the method.  Phew, I agree with IP Draughts.

And the lessons for our researcher?  Read the definitions in the research agreement and read them carefully.  Then see where and how those definitions are used.  If know-how is referred to in the definition of Confidential Information and the funder controls the Confidential Information, the researcher’s right to use their general know-how may be restricted.  If the definition of Intellectual Property includes data or methods, we may have ‘category confusion’ particularly if that data and those methods are not protected by any recognised form of IP.

A good (?) example of this is the EU’s Horizon 20/20 programme, whose contract terms define Background as follows:

‘Background’ means any data, know-how or information — whatever its form or nature (tangible or intangible), including any rights such as intellectual property rights — that: (a) is held by the beneficiaries before they acceded to the Agreement, and (b) is needed to implement the action or exploit the results.

Faced with a definition like this, which mixes up know-how, information and IP rights, you need to look very carefully at where the defined term is used and how it affects you.

We’re recruiting: excellent associate needed

One of the challenges of practising law in a small firm is getting the heavyweight clients to trust you with their most important projects.  Over the years, IP Draughts has advised many clients who also have used major firms – Slaughter and May, Morrison & Foerster, CMS Cameron McKenna, and others – for “bet the company” transactions such as major financings, Stock Market flotations, and business sales.  For example, our significant biotech client Piramed Limited was sold to Roche in 2008 for about $170M – we didn’t get that project and didn’t expect to!

A more realistic ambition is to develop client trust to such an extent that they use you, rather than one of the big boys, for second and third tier work.  For example, back in the 1990s, one of IP Draughts’ clients – a technology company that was listed on the LSE and NASDAQ – used Slaughter and May for a “strategic” R&D collaboration agreement, then used us for similar agreements that the client made with other companies.  Our fees were certainly much lower than Slaughters’ (whose aren’t?) and we like to think we were better on IP terms and indemnities than the banking partner at Slaughters who had previously advised.  Slaughters have expanded their IP offering since those days and they now have four IP partners.

To make this strategy work, you need to be close to clients and work with them over the longer term. We are delighted that two technology clients who first instructed us about 10 years ago have both expanded their international commercial activities in the last couple of years, and are involving us in related transactions.

We have the impression that we are not alone in seeing this upturn in work.  Several of the speakers on the course that IP Draughts ran last month at UCL (see recent blog postings) expressed concerns about their workloads and the number of lawyers available to deal with them.

Unlike some firms, we have continued to take on trainees through the recession and to employ them once their training contracts came to an end.  Five of our nine lawyers trained or are currently training with the firm. But we are still short of staff, hence our current recruitment campaign.

If you know of any excellent IP associates who have experience of transactional work and want to make a long-term career move to a small firm doing high-quality work, please let Mark know or forward this article using the buttons below.  A detailed job advertisement is here: jobad 140301.

We would also be interested to know of any paralegals who have experience of drafting and negotiating university contracts, and who would like to join our firm. Please contact Mark at mark@andlaw.eu

Unfair IP terms in student contracts

Once upon a time, dear readers, universities knew nothing about IP.  There were both cultural and legal reasons why this was so.

The Stone Age

IP Draughts grew up in the 1970s, when socialist ideas were fashionable and the coal miners’ strikes caused electricity to be rationed during the so-called three-day week. IP Draughts remembers his father showing him how to light an old-fashioned Primus stove, using its pump.  The stove had been brought out of the attic, so that we could cook our dinner, during one of the periods when it was our neighbourhood’s turn to be without power.

At this time, and into the 1980s, there was a great deal of academic disdain for anything connected with commerce.  The term commercial exploitation was, for some, a pejorative term: the word exploitation said it all.

In any case, there was little need for UK universities to be involved in IP commercialisation, as most research was funded by the Research Councils, and the Government required universities to channel any IP that was generated from such research through a governmental body, the National Research and Development Corporation, later renamed British Technology Group. This arrangement ended in 1985, which could be viewed as the Year Zero for technology transfer units in UK universities.

As a result of these factors, universities gave little thought to the question of who owned the IP that was generated by their academic staff, and even less thought to IP that was generated by students who assisted on academic projects.  Typically, therefore, students owned the IP that they generated, and they needed to be persuaded to assign it to the university or its nominee (eg NRDC) in appropriate cases.

The Bronze Age

During the later part of the 1980s and into the 1990s, universities became more familiar with IP issues.  They came to realise that students sometimes owned part of an IP package that the university was trying to commercialise.  In some cases, the student couldn’t be found, as they had left the university and had provided no forwarding address.  While they might be content to be treated in the same way as university employees, and assign the IP to the university in return for a generous revenue-sharing arrangement, there was always the risk that they might not agree.  In that case they could, in theory at least, obtain an injunction to prevent the university or its licensee / assignee from infringing their IP rights.

To address this issue, some universities changed their financial regulations to require students, as well as academic employees, to assign their IP to the university.  Students are required to sign a form as part of the admission process, and the form typically refers to the student agreeing to be bound by the financial regulations.

The Iron Age

The problem with a blanket obligation on students to assign IP is that it potentially captures more IP than the university has a legitimate need to acquire. Several years ago, IP Draughts recalls stumbling across an internet discussion board in which Australian school leavers compared notes on the (seemingly broadly drafted) IP policies of Australian universities.  The contributors’ concerns were that they might lose the IP to any computer games that they created while at university.

Some universities now take a more nuanced approach, and require an assignment only of IP in certain cases, eg as a condition of participation in industrially-sponsored research projects.

Making the Bronze Age agreements legally effective

During the “Bronze Age” mentioned above, IP Draughts was asked to advise on several university IP policies.

Regrettably, the wording of those policies was often decided in an academic committee, without specialist legal involvement. As a result, obscure language like “claims ownership”, “expects”, and “asked to” was sometimes used, which created some doubts about the legal effect.

For example, consider the following wording, from the University of Bristol’s IP policy.  IP Draughts has chosen this for no other reason than that it was the first UK university IP policy that came up on an internet search; the wording is more favourable to the student than some other policies that IP Draughts has seen.  And there are some clues that this wording has gone through a legal review process.

In the event that an undergraduate student or a postgraduate student on a taught course generates intellectual property in the course of a University project, either solely or in collaboration (where the collaborators may be fellow students, members of University of Bristol staff, employees of a sponsoring organisation or collaborative partner or a combination thereof), he or she is asked to assign [emphasis added] to the University any intellectual property that he or she may generate. Assignment will only take place in the event that intellectual property is generated. A student shall then give to the University all reasonable assistance to enable the University to obtain patents or other forms of legal protection for the intellectual property.

Did the university intend the first sentence of this quoted text to create a legal obligation on the student to assign their IP, or alternatively just to give an impression that the student has very little choice in the matter? The third sentence is more conventionally hard-edged, using the word “shall”. A later paragraph, dealing with postgraduate students, uses stronger language:

Postgraduate students will be required to execute agreements and assignments of intellectual property as a condition of participation in University research projects, a copy of which is available from the Research and Enterprise Development Office…

IP Draughts’ best guess is that the university is not claiming ownership of all student IP, and that “asked to assign” means the university will request, but the student will not be obliged to accede to the request.  However, this could be made more clear.

Duties on university to act reasonably to students?

When asked to advise on this type of language, one of the concerns that IP Draughts has raised is whether the university may have duties to the student, or other legal obligations, which prevent it from being too “grasping” in respect of student IP.  There are at least 2 main areas of concern:

1. Students who are under the age of 18 and where the university may have duties to act in the best interests of the student where it is acting in loco parentis as a kind of guardian of the student during their minority.  This will only rarely be relevant, as most students are over 18.  However, might a court impose some similar, but perhaps lesser duty, to that mentioned above, in the case of undergraduates over the age of 18?  IP Draughts doesn’t have any case authority to back up this idea, but instinctively he feels there is a potential issue, perhaps under the law of equity.
2. Are students consumers, and do they benefit from consumer protection legislation? The answer to this question is almost certainly yes.  If that is the case, does consumer protection legislation, and in particular the Unfair Terms in Consumer Contracts Regulations, prevent the university from imposing one-sided IP terms (eg a blanket assignment of all the student’s IP) as a condition of admission to the university?

In IP Draughts’ view, the second of these points is likely to constrain the university in the terms that it can impose, although the limits of what can or cannot be imposed are not clear – as far as IP Draughts is aware, there has been no case law on student IP terms.

Support for this view (and here we finally get to the reason for writing this article at this time) is given in a report by the UK Office of Fair Trading, published this week and entitled Universities’ Terms and Conditions. The report focuses on unfair terms relevant to student debt, and makes no mention of IP.  But some of the statements in the report are made in general terms, and could (in IP Draughts’ view) apply to IP terms.  Consider, for example, the following statements in the report:

1.17 We recommend that universities review their rules and regulations, other terms and conditions, and practices in light of the OFT’s views outlined in the report, and make amendments where necessary. We would expect universities to refrain from using unfair terms and practices, and from misleading students about either the university or student’s legal rights.

3.6 We have identified that the overarching rules and regulations tend to be lengthy and we consider they may be difficult for students to navigate. We understand that some universities may provide students with information in other sources such as in joining information, student handbooks and on intranet sites. However, it is not clear how aware the average student may be about a university’s terms and conditions.

5.5 It is the OFT’s view that a university’s rules and regulations that purport to govern the relationship between the university and undergraduate students are likely to form part of a contract for the provision of educational services. The terms set out in the rules and regulations are likely to be subject to the test of fairness under the [Unfair Terms in Consumer Contracts Regulations].

6.19 Terms which have the effect of irrevocably binding the consumer to terms with which he or she had no real opportunity of becoming acquainted before the conclusion of the contract are open to challenge. A term which deems students to be bound by the university’s rules and regulations, unless they are given an appropriate chance to read them, is likely to be considered unfair. In our view, providing the relevant rules and regulations at the time of the enrolment process is unlikely to be considered sufficient to mitigate the potential unfairness of binding students to terms they have not have the chance to become familiar with.

As the OFT makes clear, it is for the court to decide whether a particular term is unfair and therefore not binding, eg under the Unfair Terms in Consumer Contracts Regulations. However, the OFT’s analysis is persuasive and by publishing their report they have put universities on notice that they should review all of their terms affecting students, including (in IP Draughts’ view) those on the subject of IP.

Reflections on IP transactions course

Another year of our course, Intellectual Property Transactions: Law and Practice, is over. Last Friday at 4 pm, in room LG5 of the graduate wing of the UCL Faculty of Laws, our second group of students completed 29 hours of continuing education over 5 days.

The largest group of students was newly-qualified lawyers working in the IP departments of law firms, but we also had in-house lawyers in industries ranging from whisky to electronics, as well as patent and trade mark attorneys, and technology transfer managers at universities and research charities. A majority of our students were qualified in England, but some were lawyers or patent attorneys from Scotland or further afield, including Belgium, Brazil, Costa Rica, Japan, Switzerland and the USA.

The course is intensive, for both them and for IP Draughts, who was present for most sessions. Over the course of a week we give insights into IP aspects of M&A, R&D agreements, patent and know-how licensing, pharmaceutical industry agreements, software and telecoms contracts and media transactions. As well as discussing IP laws, we have sessions on competition law, insolvency, tax and using IP as security. The course covers a lot of ground in a short space of time!

After two years of running the course and getting positive feedback from students, we have some grounds for optimism that the course will continue for several years.  Its popularity partly lies in the fact that it meets a need and is unique – one of our overseas students told IP Draughts that she had researched the courses available in several countries, including the USA, and considered it to be the only course of its kind in the World.  (She also explained that she was paying personally to attend the course, which surely focuses the mind when it comes to choosing a course that costs several thousand pounds.) The course’s success depends on a large group of specialist speakers, teaching to a focussed agenda and giving practical insights based on their experience, and the ever-excellent support of Lisa Penfold and her colleagues at the Faculty of Laws.

A few points that occurred to IP Draughts during this year’s course:

• new sessions on the licensing of TV programmes, run by John Enser and his colleagues from Olswang, provided insights into how the structuring of agreements in the media sector requires an understanding of both the industry and its delivery technologies.  IP Draughts was interested to learn that the technical definitions in agreements in this sector can be just as complex and multi-layered as he has seen in sophisticated agreements in the biotech sector.
• Choosing which branch of IP law to specialise in may depend as much on your temperament as your technical understanding.  At the risk of making gross generalisations, life sciences practitioners seem to be at one end of a spectrum and media at the other, with IT somewhere in the middle.
• The drafting of warranty clauses in the M&A sector seems to be much influenced by market practice, sometimes to the detriment of clear and straightforward drafting.  It was interesting to hear the defence of “represents and warrants” and market pressure to maximise potential remedies for breach including remedies in tort, even though speakers could not point to any case where the court had awarded damages for breach of warranty using the basis of calculation used in tort cases.  This led on to a interesting discussion of the different approaches taken in the negotiation of terms in “one-off” transactions such as M&A (hard-edged), compared with agreements where the parties are to work together over an extended period, such as R&D and licence agreements (more cooperative).
• one of our speakers, Michael Fealy, became a QC (Queen’s Counsel) during the week of the course – congratulations to him!  IP Draughts is uncertain whether to claim that speaking on the course improves your career, or that he has chosen the highest-calibre speakers for the course, or both.

Now IP Draughts has to write the exam questions and work out whether and how we can enable people from overseas to take the exam remotely.