IP transactions: a complex legal framework

Seeing the recent review of IP Draughts’ flagship book, Technology Transfer, has reminded IP Draughts of the unusual mix of laws that affect IP transactions. The book is unique in focussing on those laws and discussing their application to IP-related agreements.

They include:

  • IP laws: a limited number of provisions in IP legislation affect IP agreements. They cover issues such as how to assign, license or charge IP, whether a licensee may sub-license, and the rights and obligations of joint owners. Unfortunately, these provisions are not entirely consistent between IP types. They focus on only a small selection of the legal issues that arise in IP transactions. Chapters 3-8 of the book consider these topics.
  • Contract laws: a very small number of provisions in contract laws are directly concerned with IP issues. See, for example, the implied warranty of quiet possession under section 12 of the Sale of Goods Act 1979, which has been held to be breached when a purchaser of a product is sued for IP infringement. See also the exception in Schedule 1 to the Unfair Contract Terms Act 1977; this states that sections 2 and 3 of that Act do not apply to “any contract so far as it relates to the creation or transfer of a right or interest in any patent, trade mark, copyright or design right, registered design, technical or commercial information or other intellectual property, or relates to the termination of any such right or interest”. On a separate contract law theme, the number of cases on the interpretation of IP contracts has grown in recent years. But the number is still small compared with traditional areas of commercial law such as shipping and insurance. Chapter 10 considers these and other contract law topics.
  • Property laws: IP is within the broad category of personal property. Personal property laws will usually apply to IP transactions unless overriden by specific IP laws. For example, to understand fully the nature of co-ownership of IP, it is useful to consider the difference between joint ownership and ownership in common under English law. Or, consider section 2 of the Law of Property (Miscellaneous Provisions) Act 1994. Under this section, certain warranties and obligations are automatically introduced when property is transferred “with full title guarantee”. These provisions apply to assignments of IP. Chapter 9 of the book considers these and other aspects of traditional property law that affect IP transactions.
  • Competition laws: UK and EU competition laws affect the terms that may be included in an IP agreement. Parties to IP agreements often try to fit within an EU block exemption regulation, such as the Technology Transfer Regulation. Chapters 12-15 consider these topics.
  • Tax laws: Payments made under IP agreements may be subject to various types of tax obligation. These include VAT, withholding of corporation tax, and (in some jurisdictions) stamp duty. In some cases the tax rules for IP transactions differ from those for general trading activities. The drafter of an IP agreement may wish to address the parties obligations to deal with tax issues. Chapter 17 of the book provides a brief, non-specialist overview of this subject.

An expert drafter and negotiator of IP agreements will have sufficient awareness of these and other legal issues to ensure that they can issue-spot when a point comes up that may have legal implications.

And, of course, the points mentioned above are concerned only with English law. Different issues may arise if the agreement is made under a law other than English law.

IP Draughts is keen to see an international code for IP agreements, similar in concept to the UN Convention on Contracts for the International Sale of Goods. If such a code were developed, parties could rely on it to provide a default set of legal rules for IP transactions, rather than the incomplete and inconsistent patchwork of national laws that exists at present.

IP Draughts has had preliminary discussions on the idea of developing an international code with UN officials and with Professor Jacques de Werra of the University of Geneva’s Faculty of Laws. But there has been no recent progress. If any reader can help with the diplomacy of interesting UN agencies (WIPO, WTO, and others) in pursuing an international initiative of this kind, he would be very interested to hear from them.

PS WordPress/Anchor offered to turn this article into a podcast. After playing with the settings, IP Draughts uploaded it, and it can be found here. Some of the sentences are far too long to be read out, and perhaps too long for the written version too. IP Draughts has since edited the text above!

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