Previous articles and papers from IP Draughts have proposed a set of standard contract terms for IP assignments and licences, either by way of UK legislation or a UN convention. These terms would provide a ‘default’ set of rules that would apply to such transactions in the absence of specifically-agreed alternative terms.
Equivalent default terms exist for contracts for the sale of goods, whether under national laws (e.g. the UK Sale of Goods Act 1979 (SGA) or the US Uniform Commercial Code), or under the United Nations Convention on Contracts for the International Sale of Goods (sometimes known as the Vienna Convention).
This article is the first of a series in which IP Draughts goes through his trusty paper copy of the SGA*, section by section, and suggests equivalent terms for IP licence agreements. They are offered merely as first drafts for discussion, rather than anything more deeply considered or settled. Some details are omitted, where they deal with technical issues such as transitional arrangements.
- This code applies to contracts for the licensing of IP made on or after 1 January 2020.
- An IP licence agreement is a contract under which one party, the licensor, grants rights under IP owned by it to another party, the licensee. Where the licence is to be granted at a future date, or subject to a future condition, it is an agreement to license, and becomes an IP licence agreement at the future date or when the condition is met.
- The requirements for a legally-binding contract made under English law, including capacity of the parties, intention to create legal relations, offer and acceptance, consideration, complete agreement and certainty of terms, apply equally to IP licence agreements as they do to other types of contract.
- An IP licence agreement made be made in writing, or orally, or partly in writing and partly orally, or may be implied from the conduct of the parties.
- The IP which is the subject of an IP licence agreement may include patents, trade marks, copyright, design rights [etc] existing anywhere in the World; and may be existing or future IP. To the extent that an IP licence agreement provides for the licensing of future IP, not in existence at the time the agreement is made, it will be treated as an agreement to license and will operate as an IP licence agreement when the IP comes into existence.
- Where there is an IP licence agreement and all of the IP [without the knowledge of the licensor] has expired or otherwise ceased to exist at the time the agreement is made, the IP licence agreement is void.
- Where there is an IP licence agreement and after the date of the agreement all of the IP, [without any fault on the part of the licensor or licensee] expires or otherwise ceases to exist, the agreement is avoided [but allow spreading of know-how royalties over defined period of time?]
- The price to be paid under an IP licence agreement may be fixed by the contract or may be left to be fixed in a manner agreed by the contract. Where a price is not determined in accordancy with the previous sentence, the licensee must pay a reasonable price. Price for this purpose may be or include a royalty based on sales by the licensee.
- Unless a different intention appears from the terms of the contract, stipulations as to time of payment are not of the essence of an IP licence agreement.
- In an IP licence agreement, references to “month” mean calendar month, “person” includes corporations and unincorporated associations, references to a gender include any gender, references to the singular include the plural, and vice versa, references to clauses and schedules mean clauses of, and schedules to, the IP licence agreement, and “including” means “including without limitation”.
Items 11-20 will appear in a future article on this blog.
* Copied and bound for him by his secretary at Bristows in 1987, along with the Supply of Goods and Services Act 1982 and the Unfair Contract Terms Act 1977. Technically, the paper belongs to Bristows, and the content is Crown copyright. But apart from that it’s mine!
Mr Pettifog
Mark Anderson
Paul Maclennan
Stephen Brett
Victor Warner
IP Draughts 
Thanks, Vance. For now, I am taking the easy course of adapting sections of the SGA. Once I have done that (in several weeks’ time) I will then reflect on making further changes. In the meantime, some brief responses to your points:
1. For now, I will stick with what seems logical in my head, which is that licences and assignments are distinct and do not overlap. Perhaps when (if – big if!) this project reaches negotiations in UNCITRAL or WIPO, the US ambassador can argue for the US way of thinking about exclusive licences of copyright. As for whether exclusive licences should be in writing, that is a slightly different issue, and I would be more open to this one. I can see, for example, that the rights of an exclusive licensee to sue for infringement (again, the UK rather than US system) might justify a greater evidential burden of the existence of the licence.
2. Ah, conflict of laws. You may well be right. Eg should an English court be able to override US law on an author recovering copyright if the publishing agreement is made under English law? See earlier articles on this blog.
3. I put wording in square brackets because there was something similar in the SGA. If it is a know-how licence and the know-how has become public due to breach by the licensee, there may be an argument that the agreement should continue. But I am very open-minded on this one.
4. Yes, I can see that. I was thinking about the English case law that says that the court can decide on a reasonable royalty.
5. You are right. I did hesitate when I saw “time of the essence” but left it. It is probably fusty because the SGA has a long history. The commencement date of the SGA 1979 is 1 January 1894!!!
It feels premature to suggest anything before part II apears, but I think a definition of “Intellectual Property” would be useful, perhaps together with a direction to be as precise as possible about which rights are being dealt with. I’ll wait to see whether termination and warranties feature in items 11 to 20 before saying more!
Thanks Peter. Perhaps I should have made clear that I am expecting several further outings on this subject, not just one. The SGA has 64 sections!
I agree about defining IP. I made a half-hearted attempt in item 5. For now, I will just track through the SGA and then when I have finished I will think further about bits that are missing due to the inherent differences between IP and goods.
In principle, defining IP (or IP Rights) is a good idea. In practice, the exercise can be stupefying and worrisome. A comprehensive definition needs to be breathtakingly general, while an exemplary one risks something being accidentally omitted or missing a later-developed genre. I once attempted a general definition (with optional list of examples) and still gingerly use it when the circs seem to require it:
“Intellectual Property Rights” means the rights granted by statute, treaty or rule of law in any jurisdiction (i) for the exclusive exploitation of the intangible products of the mind incorporated into a tangible embodiment, [including among other things patent rights, rights to patent applications, copyrights, trademark and service mark rights, trade secrets, mask rights, neighboring rights, and unpatented know-how,] and (ii) protecting the rights of the possessor to exclude others from exploiting the name, likeness, voice, and other personal attributes of that possessor, as well as the moral rights of that possessor with respect to any work of authorship.
I’m not sure this fully does the job, in which case I challenge anyone to come up with something that does.
A few random thoughts:
1. Should it be made clear that these rules apply only to *nonexclusive* licenses? Under US copyright law, for example, an exclusive license is tantamount to an assignment of the copyright and must follow the rules for assignments. UK law may differ on this point, but it might be wise to revise point 4 so that exclusive or sole licenses must be in writing.
2. You might want to split up item 5 between geographic and temporal issues. There should always be a savings clause on geography that voids any license term in conflict with the IP law of the jurisdiction in which the license is to be effective. After all, IP laws are strictly national.
3. Items 6 and 7 should be operative irrespective of knowledge or fault. A license to nothing is everywhere and always a license to nothing. If the licensor knows that there was nothing to license, then he should be made liable for sanctions, but I suppose this shouldn’t be part of the statute governing the terms of a license.
4. For item 8, you should also allow for license rates to be fixed by statute, as they are in many cases.
5. Item 9 is pretty fusty and doesn’t really make the point it wants to make. I’d rewrite it thus:
“Unless the contract provides otherwise, the failure of the licensee to make payment of a licence fee or royalty at the time prescribed by the contract does not terminate the licence, but may be the basis for the licensor’s claim for damages in accordance with the contract or under the law of contracts generally.”