Category Archives: Intellectual Property

Post-Brexit trade policy and UK IP

12-stepsPlease don’t confuse UK IP with UKIP! They are not the same thing, at all.

This blog recently commented on the UK Prime Minister’s 12 point plan for Brexit. IP Draughts tried to find clues as to future policy on international IP protection. They were not easy to find.

The Government’s White Paper, The United Kingdom’s exit from and new partnership with the European Union, was published last week. Running to 75 pages (plus forewords), its stated purpose is to “set out the basis for these 12 priorities and the broad strategy that unites them in forging a new strategic partnership between the United Kingdom and the EU”. One might expect that it would provide more detail on the Government’s approach to IP and other international trade issues.

References to IP

There are several explicit and implicit references to IP in the White Paper.

Cross-cutting regulations

8.36 A range of cross-cutting regulations underpin the provision and high standards of goods and services, maintaining a positive environment for businesses, investors and consumers. For example, a common competition and consumer protection framework deals with mergers, monopolies and anti-competitive activity and unfair trading within the EU on a consistent basis, and EU-wide systems facilitate the protection of intellectual property.
8.37 As we leave the EU, the Government is committed to making the UK the best place in the world to do business. This will mean fostering a high quality, stable and predictable regulatory environment, whilst also actively taking opportunities to reduce the cost of unnecessary regulation and to support innovative business models.

A global leader in international collaboration

10.12 One of the UK’s key strengths in research is international collaboration: 47.6 per cent of UK articles in 2012 were internationally co-authored – a share that has been increasing.90 With just 3.2 per cent of global research and development expenditure, the UK accounts for 6.4 per cent of articles and 15.9 per cent of the world’s most highly-cited articles. The UK also exported over £11 billion of intellectual property globally in 2015. [Reference: ONS Pink Book 2016, July 2016.]

10.14 As we exit the EU, we would welcome agreement to continue to collaborate with our European partners on major science, research and technology initiatives.

[emphasis added]

The White Paper also includes a table that illustrates the export of services from the UK to the EU, and has a line item for IP showing £4 billion of exports of IP. (IP Draughts has no idea what this figure means, but it looks impressive, and this alone should help to focus the Government’s mind on IP issues.)

The above references to IP have a slight air of being an afterthought – tacked on to the most relevant paragraphs of the White Paper, as if the Government felt it should mention IP but hadn’t really formed its ideas on what to do about it. Is IP part of the cumbersome EU regulatory system, to be made better once the UK leaves the EU, or a valuable export asset to the EU that sits with the UK’s success in international R&D, and where continuing cooperation with the EU is to be encouraged?

There is a sense of non-sequitur, perhaps caused by this tacking on. The EU regulatory system for IP seems to be considered beneficial in paragraph 8.36 above, but paragraph 8.37 seems to suggest that the UK will be better off without EU regulations.

By contrast, the above references to exports of IP seem to suggest a more positive attitude to cooperation with the EU, post-Brexit.

In IP Draughts’ view, it would be better to think of IP as an asset that helps to protect and support the UK’s trade, rather than as a regulatory burden or asset class in its own right. Other parts of the White Paper focus on the importance of various trade sectors to the UK economy but give little clue as to the shape of any future cooperation between the UK and the EU in relation to trade.

Ending the jurisdiction of the CJEU

What can't be curia'd must be endur'iad

What can’t be curia’d must be endur’iad

The Prime Minister has been very clear about ending the jurisdiction of the Court of Justice of the European Union (CJEU). Her primary focus when saying this is probably on core political areas such as immigration.

Yet there are numerous other areas, including IP, that probably don’t have the same political sensitivity, and where the CJEU currently has a role in adjudicating disputes. Assuming that the UK will continue to cooperate with the EU in areas such as trade, standards, IP, and research cooperation, some form of international decision-making body will be required, that may look very similar to the CJEU. For example, the UK may wish to cooperate with other EU countries in the area currently covered by the Euratom treaty, and this is likely to require a supervisory body. Currently, while the UK remains a party to that treaty, the body is the CJEU.

This issue also comes up in relation to IP. If a way is found for the UK to participate in the Unified Patent Convention, post-Brexit, it is likely to involve either CJEU jurisdiction or something very similar. Similarly, if the UK is to continue as a member of the pan-EU trade mark and design systems, something of this kind will be required.

There are hints in the White Paper that the UK Government may “get” this point, but they are so subtle and unspecific that it requires a degree of faith to believe that they exist. In particular, though the White Paper refers to ending CJEU jurisdiction, it spends several paragraphs discussing the benefits of international dispute resolution mechanisms and the likely need for such mechanisms in the UK’s future relationship with the EU:

2.3 …We will bring an end to the jurisdiction of the CJEU in the UK. We will of course continue to honour our international commitments and follow international law.

2.4 We recognise that ensuring a fair and equitable implementation of our future relationship with the EU requires provision for dispute resolution.
2.5 Dispute resolution mechanisms ensure that all parties share a single understanding of an agreement, both in terms of interpretation and application. These mechanisms can also ensure uniform and fair enforcement of agreements.

2.8 The UK already has a number of dispute resolution mechanisms in its international arrangements. The same is true for the EU. Unlike decisions made by the CJEU, dispute resolution in these agreements does not have direct effect in UK law.

2.10 …The actual form of dispute resolution in a future relationship with the EU will be a matter for negotiations between the UK and the EU, and we should not be constrained by precedent. Different dispute resolution mechanisms could apply to different agreements, depending on how the new relationship with the EU is structured. Any arrangements must be ones that respect UK sovereignty, protect the role of our courts and maximise legal certainty, including for businesses, consumers, workers and other citizens.

It is possible to read into these words an acceptance, for example, of the CJEU (or a similar body with a face-saving, different name, perhaps) having a limited, supervisory jurisdiction over the Unitary Patent, as a form of dispute resolution mechanism over the “interpretation” of the UPC, particularly when combined with the Government’s comment about the UPC being part of the European Patent Convention, which is a non-EU treaty.

sovereignIt may be a slightly tougher sell to fit continuing participation in pan-EU trade mark and design registrations within this thinking, as they clearly are part of the EU system. But perhaps in 2 years there will be a greater acceptance that close cooperation in EU trade-related institutions is in the UK’s interests and doesn’t prejudice the UK’s new-won “sovereignty”.

IP Draughts is relieved to see that IP is not the only area where the issue of post-Brexit CJEU jurisdiction is rearing its ugly head. It seems to be an issue across numerous other areas, including mutual recognition of civil judgments, nuclear research cooperation, aviation safety, and international standards generally. IP Draughts hopes that the Government will quietly find a way of ensuring continuing cooperation with the EU in these areas that side-steps the Government’s avowed intent to escape the clutches of the CJEU.

 

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Can you assign IP that doesn’t yet exist?

sign-upIt’s that time of the year again, when IP Draughts starts to prepare for the 5-day course that he runs, with up to 30 volunteers, at the UCL Faculty of Laws: Intellectual Property Transactions: Law and Practice. If you haven’t yet booked but would like to, please complete the booking form at the end of the brochure, linked above.

This year, we plan to introduce a few new sessions, and retire some others, as part of our continual improvement plan.

IP Draughts is currently working on a new session, titled “What does this IP drafting mean, and what is its legal effect?” In it he explores the differences in meaning and legal effect between:

  1. agreeing first ownership of future IP;
  2. agreeing to assign future IP to one of the parties; and
  3. assigning (now) future IP.

These issues might arise, for example, in the IP terms of a collaborative research agreement, or in an employment contract.

You might think this topic is rather theoretical, but the purpose of including it is to get the students to think carefully when engaged in the practical subject of drafting IP ownership provisions.

Declarations of ownership

Consider, for example, the following clause, taken from one of the standard, UK Lambert research agreements:

The Collaborator will own the Intellectual Property Rights in the Results, and may take such steps as it may decide from time to time, at its expense, to register and maintain any protection for the Intellectual Property Rights in the Results, including filing and prosecuting patent applications for any of the Results…

What is the legal effect of this clause? Will the (future) IPR automatically belong to the Collaborator without further formality or documentation?

In IP Draughts’ view, the answer to this question could be yes in the UK, but is likely to be no in the USA. Let us make the following factual assumptions:

  1. An employee of the other party to the contract, defined in the Lambert agreements as the Institution, makes an invention when doing work under the contract.
  2. A patent application is to be filed in respect of that invention.
  3. As between the employee and the Institution, the employer owns the invention and patent application under section 39 of the Patents Act 1977, as it was an invention made in the course of specially assigned duties of the employee.

Relying on declaration of ownership in UK

air-ukCan the Collaborator file the patent application and be the first owner of the subsequent patent? In the UK the answer is yes. Under section 7 of the Patents Act 1977:

(1) Any person may make an application for a patent either alone or jointly with another.

(2) A patent for an invention may be granted—

(a) primarily to the inventor or joint inventors;

(b) in preference to the foregoing, to any person or persons who, …by virtue of an enforceable term of any agreement entered into with the inventor before the making of the invention, was or were at the time of the making of the invention entitled to the whole of the property in it

(c) in any event, to the successor or successors in title of any person or persons mentioned in paragraph (a) or (b) …

Thus, someone other than the inventor can both apply for a UK patent and be “entitled to the whole of the property” in a UK patent and therefore be granted the patent as its first owner.

This entitlement could, in IP Draughts’ view, arise without the need for any separate, written assignment from the inventor or the Institution, and simply by virtue of the employment duties of the inventor, and the above clause in the research contract between the Institution and the Collaborator.

Need for assignment in the USA

airThis probably doesn’t work in the USA, in view of the different language of the patent legislation. Traditionally, the inventor was required to make a patent application in the USA. Under amendments to 35 USC 118 that were made by the America Invents Act:

A person to whom the inventor has assigned or is under an obligation to assign the invention may make an application for patent.

This wording refers to “assigning” the invention, rather than use the UK concept of the grant of a patent to someone who is entitled to it by virtue of an agreement.

Assignment language for future inventions

In the UK, in IP Draughts’ view, there doesn’t need to be an assignment (a formal transfer of title to property) in order for this entitlement to arise. Nevertheless, a prudent Collaborator might well want to have some “belt and braces” wording in the contract such as an obligation on the Institution to execute further assignment documents and to cause its employee to do so, and/or include assignment language in the contract.

What language should you use in the contract to assign future IP? Should you say “hereby assigns”? Will the law recognise a present assignment of IP that doesn’t (yet) exist? If you say “agrees to assign”, does this imply that a further assignment needs to be executed once the IP comes into existence?

UK copyright law recognises the possibility of assigning future IP. Section 91 of the Copyright, Designs and Patents Act 1988 provides:

Where by an agreement made in relation to future copyright, and signed by or on behalf of the prospective owner of the copyright, the prospective owner purports to assign the future copyright (wholly or partially) to another person, then if, on the copyright coming into existence, the assignee or another person claiming under him would be entitled as against all other persons to require the copyright to be vested in him, the copyright shall vest in the assignee or his successor in title by virtue of this subsection.

UK patent law has no equivalent provision, but arguably section 7 of the Patents Act 1977, quoted above, achieves a similar result, at least when the parties are at the stage of obtaining a patent. At least this was the view of Arnold J in the case of KCI v Smith & Nephew [2010] EWHC 1487. In that case he was concerned with an employment contract that included the following language:

I hereby assign and agree to assign to the Company all right, title and interest in all confidential information, inventions and improvements conceived or developed by me…

Referring to section 7, Arnold J said (obiter): “In my view, this [section] must mean that it is possible to assign the legal title (and not just the beneficial interest) in an invention before it is made”.

fudgeIn IP Draughts’ view, the phrase “hereby assign and agree to assign” is a bit of a fudge, in that it is not entirely clear whether, for any particular item of IP, it is being “hereby” assigned or is merely the subject of an agreement to assign that must, at a later date, be perfected by a further assignment document. Nevertheless, given the complexity of the legal issues involved, and in the interests of brevity, IP Draughts is inclined to go along with the fudge.

In taking this approach, he draws some comfort from the US Supreme Court decision of Board of Trustees of the Leland Stanford Junior University v Roche Molecular Systems Inc, et al. (number 09-1159) June 6, 2011. In that case, an inventor had signed two documents that dealt with the question of ownership of an invention, one with his employer Stanford University, and the other with a predecessor of Roche, Cetus Corporation. Even though the Cetus document was executed at a later date than the Stanford document, the Supreme Court held that the later document prevailed. As Breyer J (dissenting) put it:

In the earlier agreement—that between Dr. Holodniy and Stanford University—Dr. Holodniy said, “I agree to assign . . . to Stanford . . . that right, title and interest in and to . . . such inventions as required by Contracts and Grants.” In the later agreement—that between Dr. Holodniy and the private research firm Cetus—Dr. Holodniy said, “I will assign and do hereby assign to Cetus, my right, title, and interest in” here relevant “ideas” and “inventions.”

The Lambert agreement from which the above-quoted clause was taken (Lambert 5) also includes the following clause, which takes a more rigorous and lengthy approach to this issue:

To the extent that any Intellectual Property Rights in the Results are capable of prospective assignment, the Institution now assigns those Intellectual Property Rights to the Collaborator; and to the extent any Intellectual Property Rights in the Results cannot prospectively be assigned, the Institution will assign those Intellectual Property Rights to the Collaborator as and when they are created, at the request of the Collaborator.

Conclusions

Contracting parties find it natural to state who will own future IP. A prudent drafter will go on to provide for assignment of IP. There are some technical issues with assigning future IP, which the drafter may wish to address in a number of ways, including having a “further assurances” clause to require further documents to be executed where necessary under national IP laws.

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IP and Brexit

may1So, at last the UK Prime Minister has spoken. In a speech today, she set out her 12-point plan for Brexit. The point that seems most relevant to IP commercialisation is the tenth:

10. The best place for science and innovation

A Global Britain must also be a country that looks to the future. That means being one of the best places in the world for science and innovation.

One of our great strengths as a nation is the breadth and depth of our academic and scientific communities, backed up by some of the world’s best universities. And we have a proud history of leading and supporting cutting-edge research and innovation.

So we will also welcome agreement to continue to collaborate with our European partners on major science, research, and technology initiatives.

From space exploration to clean energy to medical technologies, Britain will remain at the forefront of collective endeavours to better understand, and make better, the world in which we live.

jojoThe UK’s Minister of State for Universities, Science, Research and Innovation, Jo Johnson MP, has recently added the job of IP Minister to his portfolio, which is a recognition that these subjects are connected. IP Draughts hopes that the above reference to collaborating with European partners on technology initiatives will be interpreted, within government, as including collaboration on European IP initiatives such as the Unitary Patent.

There are some signs that it might be. The government has announced its intention to ratify the Unified Patent Convention. That announcement was accompanied by the following, careful wording:

We will seek the best deal possible as we negotiate a new agreement with the European Union. We want that deal to reflect the kind of mature, cooperative relationship that close friends and allies enjoy. We want it to involve free trade, in goods and services. We want it to give British companies the maximum freedom to trade with and operate in the Single Market – and let European businesses do the same in the UK.
But the decision to proceed with ratification should not be seen as pre-empting the UK’s objectives or position in the forthcoming negotiations with the EU.

A possible stumbling block to UK participation in the UPC post-Brexit is the requirement for participants to recognise the supervisory jurisdiction of the Court of Justice of the European Union (CJEU). This potentially runs up against the Prime Minister’s determination, albeit focused on other areas, for the UK to cease to be subject to the CJEU. As she put in point 2 of her speech today:

2. Control of our own laws

That means taking control of our own affairs, as those who voted in their millions to leave the European Union demanded we must.

So we will take back control of our laws and bring an end to the jurisdiction of the European Court of Justice in Britain.

Leaving the European Union will mean that our laws will be made in Westminster, Edinburgh, Cardiff and Belfast. And those laws will be interpreted by judges not in Luxembourg but in courts across this country.

Because we will not have truly left the European Union if we are not in control of our own laws.

Thus, there appears to be a conflict between the Prime Minister’s desire to collaborate with EU countries on science and technology (assuming this extends to the legal protection of science and technology through IP rights such as the UPC) and her desire to escape the jurisdiction of the CJEU.

Some commenters have assumed the worst and concluded that this makes post-Brexit, UK participation in the UPC (and, for that matter, participation in pan-EU IP rights such as trade marks) impossible.

There is, however, a potential way through this tricky issue, if there is the political will to pursue it. Our former IP Minister, the astute Baroness Neville-Rolfe, caused the following statement to be added at the end of the announcement about ratification of the UPC:

Notes to editors
The UPC itself is not an EU institution, it is an international patent court. The judiciary appointed include UK judges.

This point was repeated by the new IP Minister when he gave evidence to the House of Commons’ Science and Technology Committee last week. In IP Draughts’ view, it is a coded signal to the Brexiteer faction within government, and it is reasonable to extrapolate from this slightly obscure statement as follows:

  1. The political objective of “taking back control” by removing the jurisdiction of the CJEU is concerned with how domestic UK laws are made and interpreted, as distinct from cooperation on international trade.
  2. The UPC is an add-on to the European Patent Convention, which is separate from the European Union. It forms part of the UK’s arrangements for cooperation on international trade.
  3. The main courts of the UPC are being established separately from the CJEU and will include British judges (and indeed a retired British judge is leading the recruitment process).
  4. Yes, the UPC will involve a supervisory CJEU jurisdiction, but this should be viewed as a hybrid arrangement concerned with international trade and not part of EU membership. In other areas of international trade, the UK accepts the jurisdiction of international bodies (eg arbitration of WTO disputes) and this is not considered to damage national sovereignty.

dsbThere are some technical weaknesses in these points (which IP Draughts prefers not to dwell on, as it will only muddy the case), but the broad thrust is a reasonably strong argument.

Ultimately, whether the argument is accepted by the government and argued for strongly will depend not on its detailed, technical merits but whether it is acceptable to enough Tory MPs and right-wing newspapers. There are plenty of other areas of international trade where similar arguments are being raised. For example, representatives of the Law Society and English Bar made similar points about the mutual recognition of court judgments in the UK and EU, post-Brexit, when they gave oral evidence to the House of Lords’ Justice Sub-Committee recently.

IP Draughts hopes that, in Brexit negotiations, the international trade card, and the protecting science and technology card, will be used to ensure that there is continuing international cooperation on IP laws, despite the faint spectre of the CJEU lurking in the background.

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What is a patent troll, and how can you defeat it?

trollWhen witnesses appear before committees of the British House of Commons, they are not told in advance what the questions will be. When IP Draughts and Dr Daniel Nelki of Wellcome Trust appeared before the Science and Technology Committee in December, we were not expecting to be asked “what is a patent troll?”, but we tried our best to answer the question.

IP Draughts burbled on for a while about non-practising entities, pointed out that universities fell within this description but should not usually be considered as trolls, and suggested that (a) it was a particular, aggressive way of pursuing patent litigation that was troll-like, rather than the assertion of patents per se; and (b) patent trolls were more of a US than a European phenomenom.

In IP Draughts’ understanding, though he is not a litigator and certainly not a US litigator, a number of factors create a favourable environment for patent trolls in the USA:

  1. The poor quality of some patents in the USA, which should not have been granted. These sometimes claim developments that are used widely across an industry, thereby creating a large pool of potential infringers.
  2. texas2The pro-patent bias of some courts in the USA; the United States District Court for the Eastern District of Texas is a particular favourite for patent owners. Or just a lack of understanding of patents in some non-specialist courts, which creates uncertainty of outcome of patent actions.
  3. The possibility of jury trials in patent cases, which also adds to uncertainty.
  4. The cost of litigation in the USA, partly as a result of very extensive discovery procedures.
  5. The absence of a general “loser pays” approach to legal costs (except in “exceptional” cases – see below). This reduces the risk to a patent owner who bring a speculative law suit; he won’t be hit with a large bill for the defendant’s legal costs if he loses the case.
  6. The availability of legal representation on a contingency fee basis, where the patent owner has no obligation to pay its lawyer’s legal costs other than a percentage of any damages that the owner wins in the litigation. This also reduces the risk to a patent owner who brings a speculative law suit.

These factors sometimes encourage patent owners to bring spurious claims, and make it easier for a defendant to pay a “nuisance value” amount to a patent owner rather than defend a patent claim, no matter how weak the patent.

reachOccasionally, IP Draughts’ UK clients have asked him about letters from US law firms asserting patents in terms that were considered troll-like. In one case, many years ago now, the patent was for a method of testing for a chemical compound. It was a US patent, probably weak, and the client was based in the UK so it was unlikely there would be any immediate infringement. However, the patent had broad claims that included products discovered using the testing method, known as reach-through claims. If these claims were upheld in relation to the client’s products, and if the products were sold in the USA as was hoped, the patent could have done significant harm to the client’s (future, hoped-for) business.

The client consulted specialist patent attorneys, who advised that the risk of infringement of a valid patent was low.

But how should the client respond to the US lawyer’s letter? The letter claimed that many companies in the industry had taken licences and that a good deal could be struck if the client responded promptly. It also claimed that the inventor (who had assigned the patent to a non-practising entity) was a US academic who was going to use the royalties for the benefit of science. This last part seemed designed to position the plaintiff as a “good guy” in any future jury trial.

In the end, the client decided to ignore the letter and subsequent follow-up letters and eventually the US law firm stopped writing. Perhaps a small biotech company in a foreign land was not the primary focus of the patent owner’s efforts.

An alternative approach to dealing with a non-practising entity is to stand up to it and devote resources to fighting any litigation. If you have enough money, and the right judge, this may work.

coteIt is heartening, in this context, to read the recent decision by Judge Denise Cote, of the United States District Court for the Southern District of New York, in the case of Gust, Inc v Alphacorp Ventures, LLC and Richard Suarez, of December 8, 2016, reported here.

Not only did the judge decide the patents were invalid, she awarded costs against both the patent owner and their lawyers. It seems from the report that the patent owner is unlikely to be able to pay the approximately $500,000 awarded to the defendant, so their attorneys may be forced to pick up the tab.

Her reasons for awarding costs, on an exceptional basis, included the fact that the patents were clearly invalid, and the aggressive way in which the patent owner, via his attorneys, had conducted the litigation. From a quick scan of the decision, this seems to have included:

  1. The patents claimed methods of raising money via crowdfunding, albeit dressed up as the use of software for this purpose.
  2. It was obvious in light of the Supreme Court’s 2014 decision in the Alice case that these patents claimed unpatentable material. The patent owner had “attempt[ed] to masquerade its otherwise abstract idea by highlighting allegedly ‘inventive’ elements… But these generic computer elements do not confer patent eligibility”.
  3. The case was initially brought in the Eastern District of Texas (and, according to a press report, a jury trial was sought) “a venue that bears no relationship to the parties or facts at issue in this case …further supports a finding of inappropriate motivation”.
  4. When the defendant managed to get the case transferred to New York, the patent owner tried to withdraw its case by providing a covenant not to sue (see article about that subject on this blog). However, the defendant didn’t accept that this brought the matter to an end.
  5. The patent owner, which was a non-practising entity, had pursued the case in an aggressive way despite acknowledging that it was “not worth litigating”. Its goal was “not to secure a reasonably royalty for infringement of a valid patent, but rather to extract a nuisance settlement …on the theory that Gust would rather pay an unjustified albeit minimal license fee than bear the costs of the threatened expensive litigation in a distant venue”.
  6. Awarding costs against the patent owner’s attorneys, the judge commented on the attorneys’ “bad faith motivation” in bringing the case in Texas, and conducting it in the way that they did.

Heady stuff. This is just one case, though according to the final paragraph of the judge’s Wikipedia entry she has form in awarding costs in patent cases. It will be interesting to see if other US judges follow this judge’s approach and make the USA a less attractive environment for non-practising entities bringing patent infringement actions.

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