Category Archives: Intellectual Property

Are universities difficult to negotiate with?

difficultThere is a strand of opinion among companies that deal with universities, that the latter (and in particular their technology transfer departments) overvalue their technology; that they are difficult to negotiate with; and that contractual discussions take for ever.

IP Draughts discussed this point earlier this week with a poacher-turned-gamekeeper, who used to work in a university TT department, and now works for a company that in-licenses IP from universities. As this person freely admitted, it was difficult for a university to trust complaints of this kind, when made by a company in the course of negotiations, particularly if, in the next breath, the company demands very wide commercialisation rights that could be viewed as a “land grab”. The company in that situation is not an objective witness.

And yet the accusations persist. They are not just made in the heat of negotiations. They feature in national reports on university technology transfer. They are usually anecdotal rather than being based on solid, statistically-valid data. By repetition, the comments acquire a reputation for accuracy, and an impression of objective truth. But how much substance is there in them?

common mythAt one level, it hardly matters whether the accusation has any universal truth, or is just a convenient whinge to lower a university’s commercial expectations. The fact is that the rumour has taken hold in some quarters, and needs to be recognised and addressed. And universities are sometimes their own worst enemies: no matter how good their intentions, a lack of resource in TT offices, and the oddities of the university decision-making process, can conspire to make contract negotiations less commercially-focussed than they would be in a business environment.

Bad impressions can be countered in a number of ways: by providing data to demonstrate that the accusation is false; by acting in a way that is designed to give a positive impression; and by employing the dark arts of public relations. The most productive of these alternatives is to demonstrate that you are easy to deal with. But easiness comes in different forms. An easy manner may help the flow of commercial discussions. Easiness about the substance – the commercial terms on offer – may be appreciated by the licensee, but is it in the university’s best interests? Is there a danger that eagerness-to-please on deal terms may result in the university not getting market value for its valuable IP? Might this be a breach of charity laws? In a European context, could it amount to an unlawful State Aid under EU laws?

easy skankingThis blog has commented before on an initiative that started at the University of Glasgow, and has since been copied by an increasing number of universities, particularly in the UK and Australia. The initiative is called Easy Access IP, and it is designed to make the process of negotiating technology licences with industry as painless and simple as possible. Typically, the licence is free of upfront payments and is either royalty-free or requires the payment of a small royalty on commercialisation. A simple, one-page licence agreement is used, that doesn’t require negotiation.

Advocates of the initiative point to the non-licensing benefits that can result from offering licences on easy-access terms, including PR/reputational, supporting local industry, and demonstrating industrial “impact”. In some cases, easy-access licensing results in increased funding of university research. Cynics may suggest that technology tends to be offered on easy-access terms after it has languished on the shelf for several years, unable to attract buyers on full commercial terms.

easyThe initiative has been running now for about 5 years, and it is a good time to take stock of what it has been achieved. Various organisations in the university sector have clubbed together to commission a study by independent consultants on whether Easy Access IP has been successful. The study has resulted in a report, and the report was published earlier this week. It is worth a read.

Among the points that IP Draughts took from the report (and in his own words):

  1. Small data. Most of the universities that claim to offer easy-access licences only do so with a small minority of their available technologies (perhaps 10%). Licensing on easy-access terms has been on a relatively small scale. The majority of easy-access licences have been granted by just two universities: Glasgow, where the initiative was born, under the management of Kevin Cullen; and New South Wales, where Kevin now works.
  2. Soft benefits. There are soft benefits in offering easy-access licences. It demonstrates that you care about being seen to be easy to deal with, and counters the lazy impression that all university support departments are bureaucratic and negative in their approach.
  3. Not the main issue. Offering easy-access terms does not make a huge difference to the time it takes to get university technology out into the community. In reality, the negotiation of commercial licence terms is not a slow or difficult process, when compared with other factors, such as the difficulty of marketing university technology and finding licensees. It is easy to blame the lawyers but they are not really the problem.
  4. Uptake by SMEs. The main recipients of easy-access licences are small businesses located near the university. For them, any contractual terms are difficult, because they don’t have much experience of negotiating them, nor much of a budget for obtaining legal advice. A non-trivial proportion of those local-business licensees are start-ups formed by the academic who created the technology. In other words, easy-access licensing is sometimes used as a way of letting the academic commercialise the technology.
  5. No thanks. Large companies tend not to like easy-access licence terms, because they have their own template licence agreements that they prefer to work with. These are usually more complex than the one-pager that the university offers. Similarly, investors in spin-out companies are not willing to accept the simplified terms of an easy-access licence, and want to include detailed warranties and other provisions to address legal risk.
  6. Gotcha. At one level, offering easy-access licence terms could be viewed as calling industry’s bluff. You think we are difficult, and we understand that and want to help – here are some very easy terms. Oh, you don’t want easy terms after all? You actually want detailed and complex terms, you just want us to be amenable to those terms.
  7. Where’s my money? Some other stakeholders dislike easy-access terms. Where university research has been funded by an external agency such as a funding charity, the funder may consider it important to see a financial return from its funding. Offering free licences doesn’t achieve this objective. Similarly, some academic inventors dislike easy-access terms, for the same reason – they want to generate a financial return from industry’s use of their technology.
  8. Yeah, whatever. Another important stakeholder is the university itself. The technology transfer manager may be a convert to the new religion of easy access licensing, but is the university finance director still following the old theology where TT offices are expected to maximise the financial return from IP commercialisation? Are TT staff still incentivised to maximise income, eg through bonus arrangements? Easy access programmes work best where senior management actively supports the idea of easy-access licensing. In some universities it is difficult to get senior management support for, or interest in, any aspect of technology transfer activities.

Dear reader, what are your thoughts on easy-access licensing? Is it a really important initiative, or a minor diversion? Is it a nice idea, like the Lambert Agreements, that hasn’t really achieved what its advocates hoped?

Finally, a drafting point. At the end of the report is an example of an easy-access licence agreement. Is IP Draughts alone in thinking that the drafting of this agreement is terrible? Perhaps the author wanted to avoid having the agreement written in a “legal” style that might be offputting to some readers. But surely we can do better than this example, which is poorly written by any standard.

 

 

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Filed under Intellectual Property, Legal practice, Licensing, News

Official recognition for IP Draughts: certified by the IPO

ipocertificateIP Draughts is delighted to announce that he has successfully completed a training programme in IP law that has recently been established by the UK Intellectual Property Office.

A copy of IP Draughts’ certificate, signed personally by Rosa Wilkinson, Director of Innovation at the IPO, is shown left.

The UK’s IP Minister, Baroness Lucy Neville-Rolfe, announced the creation of the course in a speech earlier this week. It is part of the IPO’s drive to increase understanding of IP in universities and schools.

The online programme is intended to take 40 minutes to complete, and covers all of the main types of intellectual property: trade marks, patents, designs and copyright, as well as trade secrets.

The course is lively and reasonably entertaining. Money has been spent on making it look professional. The video interviews of people describing how they chose and applied for different types of IP protection are particularly engaging. An interactive flow-chart, showing how an inventor has choices to make – does he talk to an angel investor, get him to sign a non-disclosure agreement (NDA), apply for a patent or keep his idea secret, etc – is thought-provoking and illustrates that there is more than one way to commercialise IP. The flow-chart can be reset and replayed, enabling you to go down a different route and come out with a different end result.

As a “taster” for undergraduate students, introducing them to IP, it has much to commend it. It is much more impressive, in IP Draughts’ view, than the guides for SMEs that the IPO produced some years ago (some of them with IP Draughts’ help as a member of an advisory committee). There is greater ambition in this new training programme, and much more money has been spent, and spent well, to make a dry subject interesting.

lunchA huge amount of legal and commercial content has been packed into a 40 minute show. Probably too much, and probably some of it will be a turn-off, eg the summaries of the different periods of protection for copyright works. Yet it may be no bad thing to make students aware that the subject contains a lot of complex detail that cannot be learnt in a lunch-break.

As a picky lawyer, there were times when IP Draughts’ winced at the over-simplification, or at a few schoolboy errors in the legal explanations. To take some examples:

Wrong information: The course is right when it says that you don’t need to get your patent lawyer to sign an NDA, but that is because they are bound by professional duties of confidentiality, not (as the course stated) because they are “subject to legal privilege”.

Unhelpful information: It is not  helpful to have a comment appear when you hover over the words “legally binding [contract]” that says simply “the contract has been entered into consciously and all parties know what is expected of them”. As every law student should know, there is more to making a contract legally-binding than that. In this case, the explanation should have been omitted.

Partial information: When the course mentions crowdfunding, it rightly refers to the need to investigate “IP considerations” before inviting crowdfunders. But because of its narrow focus on IP, the course fails to alert the reader to what may be a more important and immediate legal consideration – the need to avoid breaking the law on marketing investment opportunities.

IP Draughts is happy to be corrected, but he suspects some of these deficiencies have arisen because the IPO has taken expert advice from patent and trade mark attorneys, but not from IP lawyers. See this announcement from the Institute of Trade Mark Attorneys that mentions the involvement of patent and trade mark attorneys in the development of the course. Protecting and commercialising IP requires an understanding of commercial, financial and corporate law, as well the important but narrow subject of how to generate the IP in the first place.

IP Draughts doesn’t under-estimate how difficult it is to translate complex legal content into a simple and entertaining 40 minute introductory course for non-law students. Generally, he is impressed with the content. However, his instinct would have been to remove some of the legal explanations, and perhaps save them for a more detailed course where there may be more space and time to get them right.

It is a worthwhile exercise, developing a training programme in IP for non-law, university students. The visual appeal of this course is good, and most of the content is good. It just needs a bit more editing. This is not a big surprise; IP Draughts’ courses have tended to improve over time as the content has been tweaked. He has even been known to edit blog posts after they have been published!

IP Draughts hopes that the IPO will get feedback from students who take the course, and will fine-tune the content in response to their comments. He also hopes there will be a decent budget for producing revised editions.

 

 

 

 

 

 

 

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Copyright reform and the bottom line

eames yellowIP Draughts has a comfortable office chair. It is a reproduction of a design by the famous, mid-twentieth-century designers, Charles and Ray Eames. The design is known as the lobby chair, because it was originally designed for the lobby of the Rockefeller Center in New York, in about 1960.

The chair was a bit of a luxury item, as it cost IP Draughts several hundred pounds. It was certainly more than his previous chair, which was also of good quality, but was bought in a clearance sale when Rio Tinto shut one of its offices in London. That one cost £10. The average price paid by IP Draughts for his office chairs is not too unreasonable.

eames redThere must be thousands of reproduction Eames lobby chairs in circulation across the World. They vary in quality and price, but many of them look very similar. You can spend nearly £5,000 on one at the Conran Shop in London, if that is your choice. Or you can get them much cheaper. This one costs AUS$499, while this one seems to cost only US$70-150 if you buy 20 of them, and pay the costs of importing them from China.

With such a disparity of prices, IP Draughts idly wonders whether it is possible to have a reproduction of a reproduction, or a rip-off of a rip-off, to put it less charitably. No doubt, readers who are copyright litigators will be able to answer that one.

IP Draughts is not an expert in US copyright and design laws, but assumes that the Eames design is no longer protected. He is on safer ground discussing the position under UK copyright law. UK copyright law in this area is about to change very significantly, and will make the sale of modern reproduction furniture more difficult (or more expensive).

Let us take the fictional example of a chair designed and first marketed in England in 1960, by the fictional English designers, Karl and Jay Eaves, who both died in 1976. The chair would probably have benefitted from UK copyright, as a type of artistic work known as a “work of artistic craftsmanship”. Usually the period of copyright protection for artistic works is the life of the author plus 70 years. However, section 52 of the Copyright, Designs and Patents Act 1988 limits the period of copyright protection for articles that are manufactured by an industrial process, to 25 years. A statutory instrument states that this provision applies if more than 50 articles are manufactured.

In the above example, assuming that the current law applies, copyright expires in 1985 rather than 2046. (As this is only a blog article, we will skip over the fact that the chair would have first been protected under the Copyright Act 1956 and the effect of the transitional provisions in the 1988 Act for works that existed before the 1988 Act came into effect. This subject is far too boring and complicated for IP Draughts’ brain.)

In principle, this shorter period of protection seems right to IP Draughts. There may be arguments for a long period of copyright protection for creative works such as books and paintings, to give a revenue stream to struggling individual creators and their descendants. But industrially-manufactured items seem to IP Draughts to be in a different category, and the duration of design right (much shorter than copyright) reflects this difference.

morrisThe precise meaning of a “work of artistic craftsmanship” has not been fully established. There has been very little case law on the subject. It probably covers a chair that was designed specially for a building in New York, by leading designers, but this is not certain. This category of works was originally introduced into UK copyright law in response to the UK’s Arts and Crafts Movement, led by William Morris, in the late nineteenth and early twentieth centuries. William Morris wallpaper designs are still selling today.

Part of the problem in deciding what is the right period of protection for works of artistic craftsmanship is that they straddle the line between purely creative works and industrial works. They have both art and craft.

Never mind the historical position, the UK Government is now proposing to repeal section 52, to align UK copyright law more closely with that in the rest of the EU. This will result in a much longer period of copyright protection for iconic furniture designs and other works of artistic craftsmanship. The Government’s detailed proposals, published last week, can be summarised as follows:

  1.  Section 52 will be repealed in the near future. The repeal will take effect from 6 April 2020. In other words, there will be a period of about 5 years in which makers and sellers of reproduction articles can adjust to the new legal regime, in which copyright will last for the life of the designer plus 70 years.
  2. Following the effective date of the repeal, traders will be allowed to sell off existing stocks, and trade in copies that already exist, but will not be allowed to make or import new unlicensed copies.
  3. The Government will issue non-statutory guidance about the types of product that are within the category of works of artistic craftsmanship.

The effect of this change on traders in reproduction furniture and other artistic products is likely to be dramatic. A large number of items will be brought back into copyright. It may be necessary to stop selling items or take licences. It will be interesting to see what happens to the trade in reproduction ‘designer’ chairs. Will the bottom drop out of the market?

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Filed under Intellectual Property, Legal policy, Legal Updates

Royalty-stacking clauses

When negotiating royalty-stacking clauses, make sure you don't get fleeced!

When negotiating royalty-stacking clauses, make sure you don’t get fleeced!

One of the pleasures of teaching is learning from your audience. This happened in abundance recently when IP Draughts, presently in Australia, delivered his advanced IP licensing course to a group of in-house lawyers and licensing managers. In fact, he delivered the course twice to the same organisation: last Friday to a team in their close-to-Sydney office, and yesterday to another team in their close-to-Melbourne office.

IP Draughts’ knowledge of Australian suburbs has increased greatly, but this posting will focus on legal issues rather than the architecture of Melbourne bungalows, or the surprise felt by a Brit who learns that St Kilda is close to Richmond.

Royalty-stacking refers to the situation where a licensee must pay royalties to multiple parties in order to commercialise a product. The royalties are said to be stacked, one on top of another. A licensee may seek to negotiate a clause in his first licence agreement, stating that if he has to pay a royalty to another IP owner, the royalties payable under the first licence agreement will be reduced. These clauses are known as royalty-stacking clauses.

Two key issues arise when such clauses are negotiated:

  1. In what circumstances will the clause operate. In particular, is its operation limited to the situation where the licensee must obtain the third party licence in order to practise the intellectual property licensed under the first agreement? Alternatively, may the clause apply even where the third party licence relates to “add-on” technology that is not strictly required in order to practise the licensed IP under the first agreement but which is useful for the final marketed product? Usually, a licensor will wish to limit the clause to the first of these alternatives. An example of the latter alternative might be where the first licence is in respect of a pharmaceutical drug, and the licensee combines the drug with a drug-delivery technology, licensed under the second agreement.
  2. What is the formula for making deductions from the first royalty? Is all or only a part of the third party royalty deducted (eg 50%)? Is it deducted from net sales or directly from the first royalty? Is it subject to a cap or floor, eg that the first royalty should not be reduced by more than 50%?

Licence agreements vary significantly in how they address these issues, and not all licence agreements have royalty-stacking clauses. In IP Draughts’ experience, some parties negotiate tailored clauses while others rely on what they perceive to be a “standard” clause, culled from some earlier agreement or templeate.

Whatever the clause says, if enough money is at stake its correct interpretation may be litigated: see the leading UK case of Cambridge Antibody Technology v Abbott, decided in about 2003 (look it up on Google) which concerned a royalty-stacking clause in a licence agreement in respect of the market-leading product known as HUMIRA.

In IP Draughts’ Australian talks, several interesting points came up in discussion that he had not fully considered before. From a licensor’s perspective:

  1. Should the licensee be required to satisfy the first licensor that he needed to take the second licence and that the terms of the second licence were appropriate? Should the first licensor be involved in the negotiation of the second license between the second licensor and the licensee, to ensure that the first licensor is not financially disadvantaged? (IP Draughts perceives a danger that if this is insisted upon, it may make the licensee inclined to put more of the onus on the first licensor to “sort out” third party IP problems.)
  2. Should the first licensor have a right to audit the terms of the second licence to ensure that the correct deductions have been made? How will this be affected by the confidentiality terms of the second licence? Will the second licensee be willing to have the terms of its agreement disclosed to the first licensor?
  3. Do these royalty stacking clauses make the assumption that deductions have to be made from the “first” licence agreement (in which the clause appears)? Are there situations in which it should be the other way around, ie any deductions should be made from the other licence agreement?

To IP Draughts’ mind, these are all good questions, which are not always addressed in negotiations. Readers, what is your experience? Should these clauses get more tailored negotiation than they typically receive at present? How, in your view, should they be structured? Should they be included at all?

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