This article continues a series on the terms that might be included in a commercial code for IP licensing. As explained further in the previous article, the following list is merely for discussion. It tracks the sections of the UK Sale of Goods Act 1979.
- Status of warranties. Unless otherwise stated in the IP licence agreement, no warranties (express or implied, and whether described as warranties, conditions, terms or otherwise) in an IP licence agreement are so fundamental that their breach entitles the non-warranting party to treat the contract as repudiated. [This does not affect a party’s right to terminate an IP licence agreement in accordance with its terms.]
- Implied warranties. Unless otherwise stated in the IP licence agreement, the following warranties are implied for the duration of the licence provided for in the IP licence agreement: (1) that the licensor owns or otherwise has the necessary rights in the IP to grant the licence; (2) the IP is free from any charge or encumbrance not disclosed to or known by the licensee at the time the IP licence agreement is made; and (3) the licensor will not breing any action against the licensee for infringement of any IP other than the licensed IP (“non-licensed IP”) that would be infringed by the making, use or sale of any products or services made under [and contemplated by] the licence. But nothing in this code prevents a licensor from exploiting, itself or through other licensees, any non-licensed IP.
- Rights of a purchaser. The licensor will not bring any action against any purchaser of products or services made under the licence, or against any successor in title of such a purchaser: (1) for infringement of the licensed IP; or (2) for infringement of any other IP owned or controlled by the licensor [and existing at the date of the IP licence agreement]. The provision of sub-section (2) will apply unless the licence agreement expressly draws attention to the existence of other IP that is not licensed under the IP licence agreement.
- No warranty about third party IP. Unless otherwise stated in the IP licence agreement, the licensor gives no warranty as to existence or validity of any third party IP that might be infringed by the making, use or sale of any products or services under the licence.
- No warranty about third party activities. There is no implied term in a licence agreement that (1) either party to it is required to take action against third party infringers of the licensed IP; or (2) either party’s obligations under the licence agreement are affected by the presence of third party infringers in the territory and field of the licence.
- No implied obligation to exploit. There is no implied term in a licence agreement that the licensee is required to use its best endeavours to exploit the licence or to refrain from exploiting any other IP that is not the subject of the licence.
- No warranties about licensee’s products or services. Unless otherwise stated in the IP licence agreement, neither the licensor nor the licensee gives any implied warranty in an IP licence agreement: (1) as to the quality, fitness for purpose, or performance of any product made by the licensee under the licence; (2) as to the quality, care or skill with which services are provided by the licensee under the licence; or (3) as to the safety, legality, compliance with regulations or other characteristics of any such products or services.
- Nature of a licence. Except as may be otherwise expressly provided by applicable IP laws, a licence of IP is a contractual right or permission to use IP within the scope, territory [and other parameters] of the licence. Accordingly: (1) a licence does not create or transfer to the licensee any proprietary right, title or interest in the IP, whether under the laws of personal property, trusts, [mention civil law concepts?] or otherwise; and (2) the grant of a licence does not prevent the licensor from suing the licensee for IP infringement in respect of activities by the licensee that fall outside the scope, territory [or other parameters] of the licence.
- When the licence takes effect. Unless otherwise stated in the IP licence agreement, the licence takes effect on the date on which the IP licence agreement is signed by both the licensor and the licensee or, if they sign on different dates, the date of the last such signature.
- Successors in title. Unless otherwise stated in the IP licence agreement, a licence agreement is binding on any person who derives title to the licensed IP directly or indirectly from the licensor, whether by assignment, operation of law or otherwise, other than a bona fide purchaser of the IP who has no notice, express or implied, of the licence agreement at the time of purchase. For this purpose, registration of the IP licence agreement with a [recognised IP office] will be treated as express or implied notice of its existence and terms.
Sections 11-20 cover a lot of ground. Arguments could be made for different provisions, but the general theme is to avoid having to write terms into the licence agreement to address issues that are unclear under national law or vary between national laws (e.g. whether either party has an obligation to sue infringers).
More instalments of this series will follow in the coming weeks.
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!
Here is a link to my article which appeared in the Law Society Gazette today, titled, “Time to Rethink IP Laws”.
This short opinion piece tackles, from a different direction (changing English law rather than introducing an international convention), a subject that is addressed more fully in my 5,000 word chapter in a University of Geneva Faculty of Laws publication, Technology Transactions, mentioned on this blog here.
After a flurry of posts over the Christmas period, IP Draughts is feeling lazy, so will just note some feedback on recent posts.
First, his poll on whether Captain May should enter the neutral zone to rescue the Kobayashi Maru – an imperfect analogy for the current political dilemma over Brexit. The results are in:
- 55% of readers who responded to the poll favour abandoning the Kobayashi Maru / Brexit. If this involves a mutiny against Captain May, so be it.
- 10% think she should continue with her deal with the Klingons / European Commission.
- 17% think she should go all-guns-blazing into the neutral zone / no-deal Brexit.
- 17% favour other solutions (with no single theme emerging, as far as IP Draughts can tell).
Readers of this blog may not be entirely representative of the country as a whole. The above figures add up to 99% due to rounding.
Next, you heard it first from IP Draughts. A week after his post on the legal aid solicitor who was ordered to pay back £22 million to the Legal Aid Fund, the national press has finally picked up the story and adorned it with colourful details about the central character, Mr Blavo. See, for example, these stories in the Times and the Daily Mail.
Finally, and again on the subject of polls, IP Draughts’ poll about unconscious bias against lawyers produced some interesting results.
- 48% of people who responded thought many lawyers have highly relevant skills for chairing roles – a reassuring result for IP Draughts in his quest for an interesting chairing role.
- 44% were neutral on the subject – they thought it depended on the individual. That kind of objective, analytical stance is also welcomed.
- 6% were sceptical about lawyers as chairs of committees and boards.
- 2% (1 person) had another answer, namely “Should make no difference, diffent people bring different skills.” IP Draughts is inclined to add this result to the “neutral” response mentioned above.
While the results sound very sensible to IP Draughts, he is conscious that the readership of this blog may have a different approach to some of the appointing bodies for chairing roles.
Best wishes for 2019 to all of IP Draughts’ readers, whatever their views.