This blogger’s experiences at the WIPO mediation course, reported here, continue to occupy his mind. The course included a role-playing exercise in which your correspondent presented legal argument to the mediator about the strength of a party’s case (based on a set of facts that we had studied prior to the course). A question came up about whether prior disclosure of an invention by the licensor made a licensed patent invalid. This, in turn, led to a discussion of whether the licensor was in breach of any express or implied warranty to the licensee that the patents were valid.
Of course we wouldn’t have warranted that the patents were valid, and no such warranty would be implied, argued your correspondent. Oh, so it’s different in Europe, then, queried the mediator (a US lawyer). The German patent attorney representing the other side in the mediation agreed with me: no such term would be implied.
It may be difficult to predict whether a judge in any particular jurisdiction would imply a warranty that the licensor has not invalidated the licensed patents by its own prior disclosure. To take a couple of examples: English case law suggests that there is ordinarily no implied warranty of validity in a licence agreement.* The Spanish contributor to our book on biotech transactions points out that article 77 of the Spanish Patent Law (why is the only English translation of this law that I can find one from the Japanese Patent Office?) includes something along the lines of:
Unless otherwise agreed, any person who transfers a patent application or a patent already granted or who grants a corresponding license against payment shall be responsible if subsequently it is declared that ownership or the means necessary for completing the business in hand are lacking.
Reading these words, it is not entirely clear to me whether the above wording is concerned with validity, rather than title. In relation to the US, the authors of Drafting Patent License Agreements (Brunsvold et al, sixth edn, BNA Books) comment at page 236 that a licensor may wish to include a contractual disclaimer of patent validity, not least because of:
the very real chance that [such a warranty] (if not expressly disclaimed) may be believed by the licensee to apply, whether such belief is in accordance with or contrary to law. Experience shows that the latter possibility contains seeds of controversy costly enough, regardless of outcome, to justify fully the negotiating and drafting time require to resolve doubts in advance.
This advice seems eminently sensible; the inclusion of an express disclaimer of validity should help to avoid uncertainty as to whether any term would be implied. Possible wording for such a disclaimer might be:
The Licensor makes no representation, and gives no warranty or undertaking, that the Licensed Intellectual Property is or will be valid or subsisting or that, in the case of an application, the application will proceed to grant.
But is even this enough to deal with the situation where the invalidity arises from the licensor’s own actions? I have seen pro-licensee warranties about the licensor not having made false statements to a patent office; perhaps the converse of this would be to disclaim any warranty about the effect that the licensor’s past statements, actions or omissions may have on the validity of the licensed patents? This thought is speculative; I have not encountered any such disclaimer, as far as I recall.
There are, of course, many other IP disclaimers that a licensor may wish to include in a licence agreement, but discussion of them will have to wait for another day.
*A blog is no place for legal footnotes!