Oral, exclusive licences are legally enforceable

A recent case in the English Patents Court, Select Healthcare (UK) Limited v Cromptons Healthcare Limited and another [2011] EWHC 1830 (Pat), found Kitchen J grappling (among other issues) with the question of whether the claimant in the action had been granted an exclusive licence under the patent in suit by the second defendant. The products that were the subject of the action were patient slide sheets.

There was no written licence agreement, just a course of dealing and a face-to-face meeting (which neither of the witnesses could recall in cross-examination), in which the parties agreed, in effect, that the claimant would have an exclusive licence to make and sell products, in return for the payment of royalties. Kitchen J concluded that this amounted to an oral agreement for the grant of an exclusive licence, despite the fact that the parties were “practical men” who were not familiar with patent law or with expressions such as “sole licence”.

There is, of courseFor most types of IP, there is no requirement in English law that an IP licence, or any agreement under which such a licence is granted, must be in writing, although parties would be strongly advised to record any such licence and agreement in writing, so as to provide evidence of the terms of their agreement in case of dispute.  In the case of registered UK trade marks, section 28 of the Trade Marks Act 1994 requires a licence to be in writing (thanks to Ben Mooneapilly for reminding us of this quirk of trade mark law).

“Exclusive licence” is defined in the UK Patents Act 1977, but only in the context of the use of that term in the Act itself.  There is no general presumption that an exclusive licence has this meaning in licence agreements, although most IP lawyers would probably understand an exclusive licence in this way unless, for example, their written licence agreement employs a different definition.

The definition in section 130(1) of the Patents Act 1977 reads as follows:

“exclusive licence” means a licence from the proprietor of or applicant for a patent conferring on the licensee, or on him and persons authorised by him, to the exclusion of all other persons (including the proprietor or applicant), any right in respect of the invention to which the patent or application relates, and “exclusive licensee” and “non-exclusive licence” shall be construed accordingly;

Note that there is no reference to writing in this definition.  Note also the words “to the exclusion of all other persons (including the proprietor or applicant)…” (emphasis added).  By contrast, a sole licence is usually understood as not restricting the proprietor or applicant from exercising the rights granted to the sole licensee.  In other words, if you wanted a definition of a sole licence, you could modify the above definition by replacing “including the” with “except for the”.

This case is interesting as an illustration of how informal a licence under IP, even an exclusive licence under IP, can be.

Thanks to IP Draughts’ friend Ashley Roughton of Hogarth Chambers, who appeared as counsel for the claimant in this case, for alerting us to the judgment.

1 Comment

Filed under Licensing

One response to “Oral, exclusive licences are legally enforceable

  1. Regarding: “There is, of course, no requirement in English law that an IP licence, or any agreement under which such a licence is granted, must be in writing, although parties would be strongly advised to record any such licence and agreement in writing..”

    Section 28 (2) of the Trade Marks Act 1994 states that a licence is ineffective unless it is in writing…

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