Category Archives: Intellectual Property

Just sign the _____ form

sign here1A reader has asked IP Draughts the following question.


A university has entered into a research collaboration agreement with a commercial company, under which any inventions made in the course of the research are to be licensed to the company. Employees of the university – academic researchers – are engaged on the research and make an invention. The university asks the academics to execute a written assignment of the invention in favour of the university.

persuadeThe academics query the need to execute the assignment. Perhaps they are suspicious that they are being asked to give away their rights, or they are naturally loathe to commit themselves in writing. Perhaps they secretly know that someone else has rights in the invention. Or they just hate anything to do with the university’s administration. They point out that the university has a written IP policy which states when an invention belongs to the employer, and say that this should be sufficient.

Why, asks a reader of this blog, should the academics execute the assignment?

Several points occur to IP Draughts, not all of which are suitable for publication. We will leave aside the general argument that an employee should comply with all reasonable instructions from his employer. Even though this argument is strong in law, there is a strand of thinking among academics that rejects such a proposition, and a university’s senior management (eg its President or Vice Chancellor) may be slow to walk in that minefield. Instead, this article focuses on some pragmatic points.

  1. General duty of cooperation in relation to external contracts. The university has entered into the collaboration agreement at the request of the academics. This imposes some duties on the academics to cooperate with the university to ensure that the university can comply with its contractual obligations to the company. If an academic is not willing to give such cooperation, he shouldn’t ask the university to enter into contracts.
  2. Responsibility lies with the administration. The university’s administrators (eg its research contracts or technology transfer teams) are responsible for managing contractual obligations in relation to IP. The academics’ starting point should be to cooperate with, and comply with requests from, those administrators in relation to those obligations, unless they are manifestly wrong.  If the academics think that a request is inappropriate, the onus is on them to articulate why it is wrong and to persuade the administration to take a different line.Where a request is reasonable and conventional, any argument for refusing needs to be exceptionally strong.
  3. Invention is subject to external contractual obligations. The premiss of the question is that an invention has arisen under a research collaboration agreement with a company, and is subject to a licensing obligation to the company. If the academics think there is any doubt about this, they have a duty to articulate to the university what their concerns are. In the absence of any such explanation, the university is entitled to assume that the invention should belong to the university so that it can comply with its obligation to license the company.
  4. Company expectations. The company will expect to see a formal assignment from the inventors to the university, so that that university can grant a licence to the company. This is a normal part of the paper trail that a company would expect to see as part of its ‘due diligence’ into its rights to exploit the invention.
  5. Executing assignments is normal. It is normal for academics to execute assignments in favour of their employing university, particularly when patent applications are made or the university has obligations to a sponsor to license or assign the invention. The academic should be reassured that this is not an exceptional request; it is a conventional practice. Indeed, it may be necessary to enable the university to pursue patent applications in some countries.
  6. Legal reason for executing assignments. In the UK, the question of whether an employer or an employee owns an invention made by an employer is subject to the detailed and complex rules set out in section 39 of the Patents Act 1977. Oversimplifying, if the employee’s employment duties include the making of the invention, the invention will belong to the employer; otherwise it belongs to the employee. Nothing in an employment contract can override that statutory position, at least in relation to future inventions. Whether an academic employee has a duty to make inventions is unclear. Unlike many researchers in companies, researchers in universities rarely have contracts of employment that state explicitly that they are employed to invent. For this reason, IP Draughts would usually recommend to a university that it obtain a specific assignment of IP after an invention has been made, rather than rely on an argument that the IP belongs to the university as a matter of general law or under the employment contract. The latter argument may sometimes be valid, but the uncertainties mentioned above make a specific assignment highly desirable.
  7. Don’t rely on the IP policy. A university’s IP policy is generally useful to clarify the university’s approach, and to set expectations among its employees, but it should not be treated as an alternative to a formal assignment of IP as recommended above. There are several reasons for this, including: (a) it is not always clear whether the policy has been incorporated into an individual’s contract of employment or otherwise made legally binding; (b) the policy cannot override section 39 of the Patents Act 1977; and (c) the wording of the policy is sometimes inadequate from a legal perspective, particularly if its drafting has been the subject of negotiation with a union, or has not been supervised by a specialist IP lawyer, or the wording has been copied from another university’s IP policy that suffered from these problems. For example, many policies say that the university “claims” certain rights, the meaning of which is obscure from a legal perspective but is probably designed to be more conciliatory than a simple statement that the university owns those rights.
  8. No good reason to refuse. For the reasons mentioned above, an academic inventor should generally comply with a university’s request to execute an assignment. Assuming that the academic has acted in good faith, there should not be any personal risk on the academic from signing a simple document that transfers title to the invention to the employer. By executing such an assignment, the academic is not entering into a direct contract with the external company that could expose him to liability, and anyway his employer has a general duty to indemnify him against liabilities arising from the performance of his employment duties. This is subject to some exceptions, eg if he has acted fraudulently, but these cases are likely to be very rare. If the employee thinks there is a good reason to refuse, he should explain to his employer what the issue is. For example, if an academic is concerned that the invention may incorporate material owned by a third party, then he almost certainly has a duty to make this clear to the university so that the university can decide whether to disclose the issue to the company.

In summary, just sign the form!get on


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Issue spotting in IP agreements

ip manAnother year has gone by. Last week we had the fourth annual outing of the UCL 5-day course, IP Transactions: Law and Practice. This year’s students came from City and specialist law firms, well-known companies, government departments and public bodies, and universities in the UK and overseas.

Several students made favourable comments to IP Draughts on the high quality of the teachers and the practical content of the talks. Thanks are due to our volunteer speakers from Anderson Law, Ashurst, Baker & McKenzie, Bristows, Bird & Bird, Eversheds, Farrer, Hill Dickinson, Linklaters, Nabarro, Olswang, Pennington Manches, Pinsent Masons, Taylor Wessing, and other organisations. You are giving your time and expertise to help train the next generation of specialist IP lawyers, and your efforts are appreciated.

The course provides insights into legal and practice issues that are relevant to IP transactions across different market sectors, including M&A, life sciences, IT, media, universities, and finance transactions. As well as covering core topics such as the law affecting IP ownership, assignment and licensing, we explore some of the wider legal issues that IP lawyers need to be aware of, including competition law, tax, insolvency, charges and dispute resolution.

red flagNo-one can be expert in all of these areas, but you can be aware of when an issue needs to be explored further, and when specialist advice should be sought. When reviewing an IP agreement, you should be able to spot these issues. They should sound a warning bell, or raise a red flag, in your mind.

Does the draft agreement contain provisions about insolvency that may not be legally effective (eg a reversion of IP), or terms that breach EU competition laws (eg an assignment of licensee improvements), or payment terms that address tax issues in an unfavourable way to your client (eg grossing up of witholding tax), or terms that are unlikely to be acceptable to a university (eg an absolute ban on publications)? None of these examples concerns intellectual property law, but they are part of the larger category of commercial laws that affect IP transactions. Having at least a basic awareness of them is part of the legal toolkit of the transactional IP lawyer.

mastersHopefully, this course will continue for many years to come. In addition, IP Draughts is planning to create another course on IP transactions, this time for LLM students. This is a more difficult category of people to teach a subject of this kind, as LLM students tend to have very little experience of practice. The teaching style and content need to be tailored. If you are an IP practitioner and are interested in helping to design and teach on a future LLM module, to be run by UCL Faculty of Laws from 2017 or 2018, please let Mark know on or 01865 858 878.


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March-in to glory

marchesIn January this year, over 50 US Congressmen wrote to Sylvia Burwell, the US Secretary of Health and Human Services, asking her to consider using so-called government march-in rights as a way of reducing the price of pharmaceutical drugs. In February, Secretary Burwell is reported to have responded positively to this suggestion, or at least not dismissed it out of hand.

The rights in question arise under the Bayh-Dole Act 1980. Other aspects of this Act have been discussed on this blog here. The relevant sub-sections of the Act (35 USC 203) read as follows:

(a) With respect to any subject invention in which a small business firm or nonprofit organization has acquired title under this chapter, the Federal agency under whose funding agreement the subject invention was made shall have the right, in accordance with such procedures as are provided in regulations promulgated hereunder to require the contractor, an assignee or exclusive licensee of a subject invention to grant a nonexclusive, partially exclusive, or exclusive license in any field of use to a responsible applicant or applicants, upon terms that are reasonable under the circumstances, and if the contractor, assignee, or exclusive licensee refuses such request, to grant such a license itself, if the Federal agency determines that such—

(1) action is necessary because the contractor or assignee has not taken, or is not expected to take within a reasonable time, effective steps to achieve practical application of the subject invention in such field of use;
(2) action is necessary to alleviate health or safety needs which are not reasonably satisfied by the contractor, assignee, or their licensees;
(3) action is necessary to meet requirements for public use specified by Federal regulations and such requirements are not reasonably satisfied by the contractor, assignee, or licensees; or
(4) action is necessary because the agreement required by section 204 has not been obtained or waived or because a licensee of the exclusive right to use or sell any subject invention in the United States is in breach of its agreement obtained pursuant to section 204.
The Congressmen’s letter proposed that action should be taken under sub-section (a)(2), quoted above. It seems that these march-in rights are rarely used, and that the US government has previously refused to use them as a general means of applying pressure on drug prices, regarding this as a subject that would require primary legislation.
This is consistent with what IP Draughts has previously been told by US lawyers, eg when doing due diligence on a company that had entered into an IP licence agreement that included a clause that specifically referred to these march-in rights. In the past, he has been told that many companies consider the risk of a US government march-in to be theoretical rather than real. Whether this is still a common understanding in light of Secretary Burwell’s recent comments is less clear.
IP Draughts has noticed a rash of march-in rights recently. A kind-of-march-in-right features in national patent laws. For example, section 22 of the UK Patents Act 1977 allows the government to step in if a patent application contains information that might be prejudicial to the defence of the realm. The section enables compensation to be paid to the applicant in certain circumstances.
There is no direct equivalent to the Bayh-Dole provisions in UK law, but the standard contract terms of several UK government departments contain analogous provisions. IP Draughts sees these terms in research collaboration agreements to which a government department is a party, or where a government department has funded research done by others.
onionsFor example, such terms exist in certain research funding conditions of the UK Department of Health. An example sometimes used is that if there were a major outbreak of influenza, this might be a national emergency. If private companies were not able to meet the demand for drugs to treat the condition, the government might need to make very urgent arrangements to do so.
IP Draughts has also seen such terms in UK Department of Defence contracts. For example, Defcon 705, which is an often-used contract term on intellectual property rights, includes several provisions that could be viewed as march-in rights.
These and other provisions have the potential to devalue the IP assets of private companies and other organisations. If the government can march-in and license the IP to someone else, the rights of an IP owner or exclusive licensee may be prejudiced. But is this risk real, or are the government’s rights more honoured in the breach than the observance?
So far, it seems that march-in rights are rarely used. They probably fall into the category of very small risk of a major event. Plenty of other risks fall into that category. IP Draughts wonders whether it is possible to insure against this risk at a reasonable price; he hasn’t heard of any such insurance.

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What is intellectual property for?

zeugmaThis is a huge subject, and a short article.  (Did IP Draughts nearly create a zeugma?)

The theme of today’s sermon is that IP is a business asset, and only a business asset, and that thinking of it in this way is desirable, and leads to good IP policy decisions by government.

An alternative view, apparently held by some designers and others in the creative industries, often working in small businesses, is that IP is the legal mechanism by which the little man (or woman) protects his creative labour and integrity from assault and exploitation by others, including major corporations.

The little man can’t afford to spend much, or sometimes any, money in IP litigation. IP is inherently good and beneficial for society and the little man who creates IP should be supported. If one has this perspective, then one is likely to be in favour of making infringement of IP a criminal offence, and a social disgrace. IP infringement becomes a matter that the state gets involved in, rather than a private property dispute.

raggedAccording to the logic of this alternative view, Government policy should support and protect the interests of IP owners. For example, school pupils should be taught to ‘respect’ the rights of IP owners, eg by not making illegal downloads of music from the internet. Recent UK government statements, eg in the IPO’s 5 year strategy document, suggest that the government leans towards this general approach. After all, such an approach is consistent with the present government’s positive attitudes towards (a) IP, and (b) SMEs.

In IP Draughts’ view, this approach is misguided, and a surprisingly interventionist one for a Conservative government to take. Traditional IP laws (eg copyright) should not be used to protect a person’s creative integrity; ‘moral rights’ (the paternity and integrity rights) are better suited to this objective. The poverty of the creative artist should be addressed by having inexpensive enforcement mechanisms, eg in the small claims branch of the IP court. The state should not generally intervene or act as a champion of IP owners.

The better way of looking at IP is that it is a business asset. IP creates monopolistic rights which reduce competition; this is justified but only up to a point. Go too far in the direction of the owner and legitimate competition is stifled. Go too far in the direction of the competitor, and the IP creator has no financial incentive to create the IP. The system needs to be kept in balance for the good of the overall economy. Once the system is roughly in balance, changes should be kept to the minimum: investment decisions are based on what the system is, and certainty and consistency may be preferable to tinkering with the system, however well intentioned. IP rights are best asserted and defended privately. We should have good and cost-effective courts for IP litigation, and many people think that IPEC achieves these objectives. If the financial amounts at stake are too small to justify even the limited cost regime of IPEC, then this is no different to any other private dispute where the costs outweigh the benefits. In those circumstances you shouldn’t go to court. Life is sometimes unfair.

IP Draughts is not sure how best to fit the existence of criminal offences for IP infringement into his preferred system. Perhaps some infringement is so bad that the state should intervene. But where the threshold for this exceptional state of affairs should lie is not clear. Perhaps it would be clearer to IP Draughts if he were an IP litigator.

Consistent with IP Draughts’ approach is the view that one should only spend money in protecting IP if having the IP is considered likely to lead to a financial benefit or avoid a financial disbenefit. For example, academics should not use patents as an alternative to publications.

charityOccasionally, IP protection may be considered justified in support of a non-business objective, eg to support an open-access policy for a university’s technology. In other words, you promote the dissemination of the technology, for the public good, via a licensing programme, where you use your ownership of IP as the legal peg on which to hang contractual obligations on the part of licensees. While IP Draughts can see the potential, theoretical attractions of such an approach, he is instinctively suspicious of public bodies spending money on IP protection in support of objectives whose value may be difficult to determine.

This posting has turned out making IP Draughts seem more right-wing, economically, than he thought he was, and certainly than the present Conservative government of the UK seems to be. He looks forward to being shown the error of his ways by commenters!


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