Last week, the Draughtatrix took IP Draughts to see the latest George Clooney film, the Descendants. IP Draughts was intrigued to see George Clooney playing the role of a low-key property lawyer (albeit one who is the sole trustee, and one of the beneficiaries, of a large family inheritance on a Hawaiian island).
The unlikely premise of the film is that the family inheritance is at risk under the Rule Against Perpetuities, which invalidates certain trusts if the beneficiaries are defined too widely. George, as trustee, needs to take a decision on whether to sell a large area of beautiful, unspoilt land to property developers. The beneficiaries, led by a raddled bar-fly played by Beau Bridges, naturally want the land to be sold.
The other main plot-line concerns George’s screen wife, who is in hospital on a life-support machine, after a speedboat accident.
As the film dragged on, IP Draughts felt that it would have been more interesting if George had delivered a lecture on how the rule against perpetuities applied under Hawaiian law.
English lawyers of IP Draughts’ generation were taught at law school to be wary of the English version of the rule. In an IP context, a provision stating that a licence was “perpetual” rang an alarm bell in the mind of a right-thinking lawyer, and the instinctive reaction was to delete the word “perpetual” and replace it with wording stating a long, but definite, time-period.
IP Draughts recalls doing some research on this point in the 1980s and concluding that the English rule, if it applied at all to IP licences, could only apply to the situation where future improvements of the licensed IP were brought within the scope of the licence for an unlimited period. Such a provision was also problematic under Article 85 of the Treaty of Rome (now Article 101 of the Treaty on the Functioning of the European Union), and this was the area of law that it was worth spending time on; the perpetuity point was theoretical and of marginal significance.
At around the same time as he did this research, IP Draughts recalls seeing a trade mark licence agreement, drafted by a prestigious firm of lawyers in the City of London, in which there was a clause stating that the perpetuity period, for the purposes of the agreement, was 80 years. Specifying a perpetuity period was a way of avoiding the invalidating effect of the rule. This is the only time that IP Draughts has seen such a provision in an IP agreement.
English law on perpetuities has been overhauled since the 1980s, most recently by the Perpetuities and Accumulations Act 2009, and the revisions make it even less likely than before that the rule is an elephant trap for the IP contract drafter. In summary, for instruments created after 2010, the Act only applies to a limit category of trusts and wills. Most IP licence agreements do not create trusts, so it seems that the rule cannot apply to them.
IP Draughts would be interested to know if the rule has any continuing application to IP agreements under the laws of any other country or US state. Can any reader enlighten us?