Category Archives: Intellectual Property

When is an exclusive licence not an exclusive licence?

In IP Draughts’ experience, clients sometimes query the use of the term “exclusive” in licence agreements. Different questions arise. Below are some of them, and IP Draughts’ short-form answers (good enough for a rough guide, but more work is required when considering the quesiton in an individual case).

What does “exclusive” typically mean in a licence agreement?

  • Does it mean that the licensor is not allowed to exploit the IP within the scope of the licence? Yes.
  • Does this need to be stated explicitly (eg through the use of a phrase such as “even as to the licensor”)? No, though IP Draughts would sometimes define exclusive, particularly if the parties have a different view of the world, or there is an EU element (see below).
  • Can you divide up the fields in which the IP is to be commercialised, and grant exclusive licences in separate fields under the same IP? Yes
  • If a licensee sells a licensed product for use in its field, but the purchaser (or a purchaser from that purchaser) uses it outside the field, can they be prevented from doing so and is the licensee in breach of their licence? Difficult legal issues, but often no.
  • Can you grant exclusive licences in different territories under essentially the same IP? Yes.
  • Does this mean that the licensor guarantees that no-one else (eg another licensee) will exploit in the licensed territory? No, particularly in the EU where passive sales by other licensees are allowed.
  • Does this mean that the licensee promises not to sell outside its licensed territory? No, particularly in the EU where passive sales outside the territory are allowed.

Meaning of exclusive in the (UK) Patents Act 1977 (“PA”)

Under the PA, an exclusive licensee has the right to bring proceedings against infringers in its own name. Exclusive licensee is defined in the PA, but only for the purposes of clarifying who has the statutory rights of an exclusive licensee – there is no general assumption that this definition is relevant when interpreting licence agreements. Section 130 of the PA provides:

‘exclusive licence’ means a licence from the proprietor of or applicant for a patent conferring on the licensee, or on him and persons authorised by him, to the exclusion of all other persons (including the proprietor or applicant), any right in respect of the invention to which the patent or application relates, and ‘exclusive licensee’ and ‘non-exclusive licence’ shall be construed accordingly.

A recent case in the English High Court explores what this definition means, and in particular whether a licence that is stated in a licence agreement to be “exclusive” is, in fact an exclusive licence for the purposes of the PA.

The decision in the case of Oxford Nanopore Technologies Ltd & Anor v Pacific Biosciences of California, Inc & Anor [2017] EWHC 3190 (Pat) was published on 14 December 2017. It is a decision of a (part-time) deputy judge, David Stone, who is a solicitor and a partner at Allen & Overy. The deputy judge reviewed the limited case law in this area, including the recent case of Illumina Inc and Ors v Premaitha Health PLC and Anor [2017] EWHC 2930 (Pat), which this blog discussed here. And, helpfully, he came up with 10 propositions in light of that case law and his assessment of the law, which are reproduced below:

i) Whether or not a licence is an exclusive licence for the purposes of section 67(1) of the Patents Act is a matter for English law: Dendron, paragraph 9;

ii) A licence which purports to be an exclusive licence may not necessarily be so. Identifying an exclusive licence depends on a proper construction of the document or documents: Dendron, paragraph 9. An exclusive licence will be expressly so: circumstances in which an exclusive licence will be implied will be rare, if they exist at all;

iii) It is for the party asserting that it is an exclusive licensee to demonstrate that it is: Dendron, paragraph 9;

iv) The assessment of whether or not a licence is exclusive is not a “once and for all assessment”: Dendron, paragraph 11. An exclusive licence may confer upon the patentee a power to convert the licence into a non-exclusive licence: Dendron, paragraph 11;

v) The “essential element” of an exclusive licence is that is it a licence to the exclusion of all other persons, including the patentee or applicant: Dendron, paragraph 11;

vi) It is possible to have a plurality of exclusive licences in respect of any one patent: Courtauld’s, page 210; Illumina, paragraph 475;

vii) But each exclusive licence may only be granted to one person – a licence will not be exclusive if granted to a number of entities, even if they are under the same control: Illumina, paragraph 254;

viii) An exclusive licensee may grant sub-licences to “persons authorised by him”: Dendron, paragraph 11; Illumina, paragraph 254;

ix) There is a distinction to be drawn between a licence and an equitable right to call for a licence: Courtauld’s, page 210; and

x) Where an equitable right to call for a licence is conditional (as it was in Illumina – the Hong Kong Government had to satisfy itself that the public mission of the Commissioner needs to be fulfilled, or that it is in the public interest to request the licence), the otherwise exclusive licence will remain exclusive unless and until the contractual conditions are fulfilled that enable the grant of the licence: Illumina, paragraph 476.

An interesting point of detail mentioned in this case, that IP Draughts had not previously spotted, is that in the Illumina case, Carr J had held that where an academic licensor reserves rights to use the licensed IP for academic research and publication, this does not prevent the licence from being an exclusive one. At paragraph 475 of the Illumina judgment, as reported in Oxford Nanopore, Carr J said:

475. Premaitha argued that since CUHK had reserved rights to use and develop Lo 2 and Lo 3 for academic research and publication at all times, the licence was not exclusive to Illumina. My conclusion on this issue is the same as in relation to the Quake Patents. The reservation does not extend to authorisation of any third party for commercial purposes. The licence [is] an exclusive licence of the right to exploit for commercial purposes and, according to section 130(7) [Stone: I think this was a reference for section 130(1)] an exclusive licence may be in respect of any right.

David Stone

This conclusion, which was focussed on whether a licence was exclusive for statutory purposes, may also be persuasive when considering the contractual issue, ie whether it is appropriate to describe a licence as exclusive when the licensor reserves rights of this kind.

IP Draughts admires the way in which David Stone has reduced the previous case law to a series of propositions, and hopes that we will see many more decisions by this talented judge in the field of IP agreements.


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Brexit and IP: priorities for the UK government

Just before Christmas, the Law Society of England and Wales sent to UK government ministers and officials a short, 3-page note on Brexit and IP. The note identifies the top 5 priorities of the UK IP professions in relation to IP issues arising from Brexit. A copy of the note can be found here.

The note is signed by the chairs or presidents of CIPA, CITMA, the IP Bar Association, the IP Federation and the Law Society’s IP Law Committee (IPLC). It will be interesting to see whether and how the government responds to the note. The most important response will be the action the government takes to continue cooperation between the UK and EU members states in areas such as the UPC and pan-EU IP rights. Actions speak louder than words.

As chair of the IPLC, IP Draughts instigated the note, prepared the first draft, and moderated the preparation of revised drafts to take account of comments from members of the organisations mentioned above. Once it was finalised, he then had to persuade the Law Society to adopt it, and send it out. These were substantial tasks, in effect a multi-party negotiation between expert, strong-minded but ultimately cooperative professionals. By way of illustration of the amount of work involved, there are well over 250 emails in the electronic folder that IP Draughts has used for this project. The resulting note has certainly had careful scrutiny!

The IP professions have generated, and will continue to generate, many documents on Brexit and IP; after all, this is the single most important event in IP law and policy for a generation. Most of the notes that IP Draughts has seen are technical notes, that consider in great detail the dozens or hundreds of issues that are thrown up by Brexit in the field of IP. Some of them are designed to be read and used by the UK Intellectual Property Office, which has responsibilities for IP policy within the UK government.

What is different about the note mentioned above is its scope and intended audience. It became apparent to IP Draughts that the UK government will need to take decisions on a huge number of trade-related issues, and that IP will be just one of these. The officials taking those decisions may have little or no familiarity with IP, and will not have time to consider in detail the dozens of issues that Brexit raises for IP law and policy.

In that context, it seemed desirable to have a short list of the IP professions’ top “asks”, that didn’t go into a lot of detail, and could be read fairly quickly by a non-specialist. The note started off as two sides of A4 paper. During its evolution it grew to three sides of A4, and IP Draught repeatedly pruned it, and cut out subsidiary phrases, to keep it within that limit. Another word or two would have brought it on to four pages.

It still manages to pack a fair amount of detail into those three pages, perhaps too much, but overall IP Draughts thinks the document is clear and fulfills the purpose that he set for it. It is good to see the IP professions cooperating on this important issue and speaking with a single voice.


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New Year Honours 2018

Congratulations to Sean Dennehey, Deputy Chief Executive of the UK Intellectual Property Office, for being made a Commander of the Order of the British Empire (CBE) in the New Year’s Honours list of 2018.

IP Draughts has had regular interactions with Sean in recent years, and has found him straightforward, humane, talented, wise, a good civil servant, an excellent role model, and very helpful within the political constraints of his role. IP Draughts has learnt a lot from Sean, and he can’t think of anyone more deserving of this senior honour.

Regrettably, Sean seems to be the only person connected with IP, business law or technology transfer to receive an honour in this year’s list. The closest to these categories – and it is something of a stretch – that IP Draughts was able to find is Nulifer von Bismarck, Head of Equity Capital Markets at Slaughter and May, who is awarded an OBE for services to financial services.

IP Draughts can’t help wondering whether the lack of honorees in the IP and legal fields reflects this government’s disdain for the legal community, or is due to a shortage of genuine national leaders in these fields. But that is a debate for another day.

Congratulations again, Sean Dennehey!


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How to draft a FRAND licence agreement

2017 has been a productive year for writing activities at Anderson Towers.

Articles in legal journals

Since this morning, IP Draughts’ article, How to draft a licence agreement that is fair, reasonable and non-discriminatory: a 10 point plan, has been available to subscribers on the Oxford University Press (OUP) website for the Journal of Intellectual Property Law and Practice (JIPLP). It is due to be published in the paper version of JIPLP during 2018.

The article considers the implications of the recent, English High Court case of Unwired Planet International Ltd v Huawei Technologies Co Ltd & Anor for drafters of licence agreements. It considers various aspects of this important case, including:

  • how to negotiate in a fair, reasonable and non-discriminatory (FRAND) way
  • how to draft terms that are FRAND
  • the implications of the case, not only for the licensing of standards-essential patents, but also for other types of licence agreement that must be FRAND, including licences granted pursuant to Horizon 2020 grant terms

This article follows the publication of another article by IP Draughts and his colleagues Lisa Allebone PhD and Mario Subramaniam, in JIPLP earlier this year. Contract law for IP lawyers was published in the paper version in October 2017.

In each case, when IP Draughts uploaded the articles to the JIPLP website, the computer told him sternly that articles should be no more than 5,000 words. In fact, both articles are close to 10,000 words. There’s just too much to say…

Books and legal encyclopedias

At the beginning of October, IP Draughts received the first copies of the 4th edition of A-Z Guide to Boilerplate and Commercial Clauses, which had been published by Bloomsbury Professional. Originally published by Butterworths nearly 20 years ago, the 4th edition contains 695 pages of useful information on the reasons for including boilerplate clauses, practice issues that arise, and examples of clauses.

Also recently published was the latest version of the Confidentiality title in the Encyclopedia of Forms and Precedents (LexisNexis). This is one a number of volumes of EF&P that we created some years ago and continue to update. Our other volumes include Research and Development, Patent and Know-how Licensing, and Commercial Services.

Policy submissions

Last Friday, the Law Society of England and Wales submitted to UK government ministers and officials a paper on Brexit and IP that had been written jointly by the Law Society, Chartered Institute of Patent Attorneys, Chartered Institute of Trade Mark Attorneys, IP Bar Association and IP Federation. IP Draughts was the lead author of this paper. It should be made available on the Law Society website early in the new year.

Happy reading!

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