Transactions in IP: an incoherent, statutory mess

This week, IP Draughts comes back to a topic that is of interest to only a few: the patchy, incoherent, incomplete, unthoughtful mess of UK legislation in the field of IP transactions.

It seems as though Parliamentary draftsmen, writing Bills for different types of IP at different times, run out of steam by the time they get to the bits that deal with transactions. The subject is a niche (IP transactions) within a niche (property transactions) that is also part of a separate niche (IP law) within a niche (technical commercial laws); the draftsmen seem not to have engaged properly with the complexities of the subject. Perhaps their energies have been sapped responding to Home Office requests for new and unnecessary laws that send people to prison, to satisfy the baying lust of the mob and their interlocutors in Parliament. [Controversial!]

There seem to be several problems:

  1. A failure to consider properly the status of IP as personal property and the extent to which the rules governing IP are intended to be different from or the same as the rules governing other types of property (e.g. goods, land or other intangibles).
  2. A failure to consider properly whether the type of IP under consideration (e.g. copyright) should have rules that are the same as, or different from, the rules governing other types of IP (e.g. patents).
  3. A failure to think through all the implications of the above treatment, and clarify the legal issues that arise.
  4. A failure to consider the international aspects, including the desirability of consistency of treatment of IP transactions in different countries. [This is not a uniquely UK issue.]

Time for some brief and incomplete examples, without references. (This is only a blog article!) Some of the questions raised below have been considered or answered in other articles on this blog (e.g. whether consideration is required for a valid assignment of IP).

  1. Legal status of IP. Traditionally, IP was treated as a “chose in action” or, if you prefer to avoid Norman French legal jargon, a thing in action. The Patents Act 1977 (PA) clarifies that patents are personal property without being a thing in action. But none of the other IP statutes deny thing/chose in action status. The status of IP as property affects whether you can look to general principles of property law to determine issues that are not specifically addressed in the IP legislation. E.g. certain rights of co-owners – see below.
  2. Ownership. When unregistered design rights were introduced, the legislation stated that a party commissioning a design would own it – the opposite of the position for other types of IP. It took about 15 years for this anomoly to be corrected by an amendment to the legislation.
  3. Co-ownership. We know that in the case of patents, co-owners have an equal, undivided share, unless otherwise agreed. This is not stated in the legislation governing all other types of IP. But what does this mean? Is it equivalent to tenancy in common, in land law, and therefore unlike joint tenancy? What is the relevance of saying “equal” unless a party is entitled to a half share of any revenues generated by the other co-owner – a point more explicitly addressed in some other countries’ IP laws?
  4. Formalities for assignment. Can you assign IP that doesn’t yet exist? Copyright, Designs and Patents Act 1988 (CDPA) says you can for copyright; PA is silent on the subject. Why is only the assignor required to sign an assignment, unlike the position for European patent applications? Why is the assignee not required to accept the assignment, as apparently is required under Dutch law? Is consideration required for a valid assignment?
  5. Rights and obligations of assignors and assignees. Do obligations accepted by an assignor (e.g. to pay royalties to a previous owner of the IP) pass to the assignee? Probably not, under the principle of privity of contract, though a good argument could be made for saying they should. Does the assignor give any implied warranties, e.g. of title or the right to assign free of encumbrances?
  6. Legal status of an IP licence. Is an IP licence an interest in property? Possibly not, it is only a contractual right, though an exclusive licensee has certain statutory rights. The answer to this question may affect whether traditional property laws, e.g. on whether a new owner of the property is bound by previously-granted interests, apply to IP. To a certain extent, this issue is addressed in some IP legislation, eg CDPA refers to licences being binding on subsequent owners other than a purchaser in good faith for valuable consideration and without notice of the licence. Other IP legislation, e.g. PA, is silent on this subject but some protection is given by registering the licence.
  7. Formalities for licensing. The Trade Marks Act 1994 (TMA) requires licences to be in writing, but there is no such requirement for licences of other types of IP; the implication being that for other types of IP, licences can be oral.
  8. Rights and obligations of licensors and licensees. Under the PA, a licensee can sub-license “to the extent the licence so provides”, whatever that means. The position for certain other types of IP is not stated in the relevant legislation. What warranties does the licensor give, e.g. as to title? This is not stated in the legislation.

Further questions arise at an international level. For example, if a licence agreement is made under English law, the licensed IP includes a German patent, and the agreement is silent on whether the licensee can sub-license, should one look to UK patent law or German patent law to determine whether sub-licensing is permitted?

Many of these questions are obscure and haven’t been tackled clearly in the legislation, or not with IP transactions in mind. IP Draughts would welcome the Law Commission taking this on as a project, given the increasing importance of IP transactions to the UK economy. Ideally there would a consistent and complete set of statutory provisions governing transactions in all types of IP, unless there is a clearly-identified need for a different treatment in an individual case. In fact, why not go further, and introduce a code for IP licences, equivalent to the rules for the sale of goods under the Sale of Goods Act 1979?

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Filed under Intellectual Property, Legal policy

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