Category Archives: Intellectual Property

Licence grant wording: take care over the details

Ken demonstrates the ancient art of invisible cat's cradle

Ken demonstrates the ancient art of cat’s cradle, conceptually, and without the wool

IP Draughts’ favourite commentator on contract drafting issues, Ken Adams, has written an article, Granting Language in Patent License Agreements: An Analysis of Usages. The article has recently been published by Landslide, the magazine of the American Bar Association’s Section of Intellectual Property Law.

It is always interesting to read Ken’s views, particularly when his accompanying blog article issues a challenge to IP lawyers, expressed in Donnesque terms:

IP guys, you are not an island: it’s best to base your contract usages on general guidelines for clear and modern contract prose.

IP Draughts agrees with the sentiment, and with much of what Ken says in the article. That is not entirely surprising: he saw a draft of the article and commented on it. There are, though, a few more IP factors to take into account before reaching any conclusions on the drafting points that Ken identifies – factors that might only be known by an IP specialist.

Cutting to the chase, the article provides “before and after” versions of a typical licence grant clause, the latter being Ken’s approved version. Here is the “before” version:

Subject to the terms and conditions of this agreement, Acme hereby grants to the Licensee, and the Licensee hereby accepts, an exclusive royalty-bearing license under the Patent Rights, with the right to grant sublicenses, in the Field of Use, in the Territory, to make, have made, import, use, have used, offer for sale, sell, and have sold Licensed Products.

And here is the “after” version:

Acme hereby grants the Licensee an exclusive, royalty-bearing (in accordance with section 4.5) license (with the right to sublicense) under the Patent Rights in the Field of Use to make, have made, use, offer for sale, sell, and import Licensed Products in the Territory.

As John Donne nearly said: Every IP lawyer is a piece of the continent, A part of the main. If a clod be washed away by the sea, Europe is the less.

As John Donne nearly said: Every IP lawyer is a piece of the continent,
A part of the main.
If a clod be washed away by the sea,
Europe is the less.

IP Draughts mostly agrees with the latter version, though he would probably make any right to sublicense subject to conditions, which would be set out in a separate clause or section. A cross-reference to that other clause would be appropriate. He would probably not bother to state here that the licence is royalty-bearing, as this means no more than that a contractual payment is due, which can be set out in a separate clause without a cross-reference in the grant clause.

Ken identifies a number of usages in conventional licence grant clauses that are either redundant or sub-optimal. IP Draughts’ brief summary of Ken’s comments, and his response to those comments, follow:

  1. Use the verb grants not licenses. Agreed.
  2. Refer to a licence not a right. Agreed.
  3. Use the expression hereby grants. Agreed.
  4. Don’t say ‘grants and agrees to grant’; the latter is redundant even in the case of future IP. Agreed in the case of licences. There may be some value in the case of assignment, in view of the differing national rules (and different rules for different types of IP within a jurisdiction) on the legal effect of an assignment of future IP. For a discussion of some US issues, see here.
  5. No need to ‘accept’ the licence. Agreed under English law. The advice from the Dutch contributor to our loose-leaf work on biotech transactions was that it was necessary to state that an assignee of IP, or a distributor of products, accepted the IP or appointment, and similar principles are likely to apply to licences. Bearing in mind that many IP licences are international, it may be safer to include some words of acceptance.
  6. Grant a licence, not a ‘covenant not to sue’ or an ‘immunity from suit’. Agreed. For a discussion of covenants not to sue and their usage, see here.
  7. Explain exclusive, sole, etc. Ken makes some subtle points about US drafting practice (eg phrases such as “exclusive, even as to the licensor”) but in the end, his “after” version simply says “exclusive”. IP Draughts’ view is that sophisticated parties are likely to be clear on the meaning of exclusive, but sole and semi-exclusive should be defined. And that if the EU territory is being divided, it would be prudent to be clear on whether sale outside the territory is permitted, and to ensure that whatever is agreed is aligned with EU competition law.
  8. Perpetual, irrevocable. As Ken notes, these terms are not synonyms. A licence could be perpetual, subject to right of early termination. Irrevocable is probably okay as a term in a short licence (if that is what is intended) but ideally the licence would make clear that no form of early termination by the licensor (whether or not properly characterised as revocation) is allowed.
  9. Assignable. IP Draughts shares Ken’s reservations about using the word “assignable” or similar in the long list of adjectives that precede the word “licence”. Instead, address this issue more precisely in separate clauses dealing with assignment and (less commonly) change of control. You may also want to address the question of whether the licensor is permitted to assign the IP that is being licensed, and the consequences for the licence of doing so. Typically, the default position under national patent laws is that a licence registered with the patent office is binding on a future owner, but what is less clear is whether the contract under which the licence was originally granted has any continuing effect. These matters should be addressed explicitly in the licence agreement.
  10. Sublicensing. IP Draughts agrees that the licence should address whether sublicensing is permitted. This is typically a matter for national patent law and the “default” position (ie if not addressed in the contract) varies between jurisdictions. However, if sublicensing is to be permitted, it is usually subject to conditions, eg as to duration, consistency of terms, etc, and those terms should be stated. IP Draughts’ preference is state these things in a separate clause an omit the word “sublicensable” in the grant clause.
  11. Worldwide. IP Draughts understands that, logically, it may be wrong to say a licence is worldwide if the IP is not registered in every country of the world, and of course one should be careful about giving warranties in unpatented territories. Nevertheless, licences are often expressed to be worldwide and usually this will not cause major problems of interpretation.
  12. Royalty-bearing or royalty-free; fully paid-up. IP Draughts can see a point in stating that no payments are to be due (if that is the case) and that a phrase such as “fully paid-up and royalty-free”, while rather jargon-ridden, may the simplest legal shorthand to express the point. He can see no point in stating that a licence is royalty-bearing in the long list of adjectives before the word “licence”. Just have a separate clause dealing with royalties.
  13. Limited licence. IP Draughts agrees that it is unnecessary to say that a licence is limited. The only concern that he identifies with this simple advice is that, particularly for US parties, the Universal Copyright Convention (to which most countries of the world are not parties, preferring the Berne Convention) has, or used to have, a concept of limited licences, which explains why copyright statements referred to limited licences as well as, or instead of, using the phrase “all rights reserved”. Although he is not a US lawyer, he understands that the provisions of this Convention may have been modified in recent years, making these references redundant. No doubt readers who are US lawyers can enlighten us!
  14. Licence to do what? IP Draughts agrees that the licence should state which otherwise-infringing acts the licensee is permitted to do, eg make, use and sell products. He was interested to see Ken’s explanation of why, in light of US law, licence agreements sometimes include a reference to “export”. IP Draughts has found this word problematic in past transactions and usually tries to avoid it.
  15. Subject to the terms of this Agreement. IP Draughts agrees that this expression is probably unnecessary in the grant clause, particularly if a separate termination clause makes clear that on any termination of the agreement, the licence automatically terminates. However, some lawyers clearly have a concern that the licence, once granted, may exist independently of the agreement under which it was granted, as a form of property right. For this reason, IP Draughts has tended to include this phrase, though he is now having second thoughts about its usefulness.



Filed under Intellectual Property, Legal practice, Licensing

Teaching non-lawyers about IP

uclsomYesterday, IP Draughts had a very interesting conversation with Dr Arnaud Gasnier about teaching intellectual property to non-lawyers. Among his many other professional roles, Arnaud teaches at University College London’s School of Management a popular degree module titled Patents and Intellectual Property for Innovators, Entrepreneurs and Managers.

This conversation set IP Draughts thinking about the different ways – the different contexts – in which IP can be taught. Those of us who are legal professionals are used to learning about the ‘hard law’ set out in statutes and case law. Here, the law is the primary focus of the study.

Applying the law to factual situations, such as infringement or licensing, brings in elements of legal practice as well as law.

detailsSome non-lawyers need a detailed understanding of IP law and legal practice, though the level of detail may be less than that required by specialist IP lawyers. For example, an understanding of IP may be essential for business executives who are responsible for the commercial aspects of IP registration, litigation or licensing. These executives are ‘at the coal face’ of IP practice.

IP Draughts has tended to teach people about IP in the above contexts, though sometimes the level of detail is pared down for beginners. The most difficult category to teach, in his experience, has been undergraduate non-law students. They tend not to have any business experience that would provide a context for IP training.

overviewThere is another type of business executive who is responsible for strategic business management. These executives may need to appreciate the nature of IP as a business asset, including its strengths and weaknesses, to help them in formulating business plans and strategies, but they probably don’t need to know the detailed legal rules for those assets. This is probably the context in which many business schools teach IP subjects, if they teach them at all. The focus of the teaching is on business planning, in light of the special features of those intangible assets that are called IP.

An interesting feature of Arnaud’s course at UCL is that by getting students to engage in practical case studies about business, he has managed to bring IP to life for them, even though many of the students are not traditional business school students.

Members of the public, or consumers, may benefit from understanding something about IP, but their needs are often very different to those of business executives. It may be useful for them to have a basic understanding of IP laws in order to avoid being sued for infringement (eg for illegal downloading of copyright works), or to appreciate the meaning of online contract terms, which are often accepted by clicking a box on a website. Those terms tend to include provisions that deal with IP ownership or licensing.

woolySome people encounter IP in a business context, in the very broad sense of what they do to earn a living. For example, a one-man-band design artist may benefit from understanding the basics of IP when signing a contract drafted by a major client, or to avoid copying another person’s design in an unlawful way. Or a person who runs a knitting supplies shop in the high street, and who has their own website, may need to understand the IP risks associated with use of third party materials on the website. These types of business exposure to IP are very different to that of the typical business school alumnus, or the professional IP manager, and are in many ways closer to that of the ordinary consumer. They need a basic knowledge of the law, rather than a more sophisticated understanding of IP as an asset class.

ipocertificateIn light of these varying knowledge-needs, how should we approach the teaching of IP to non-lawyers? IP Draughts is in favour of providing an overview of IP law to non-law students at universities. The UK Intellectual Property Office has picked up this idea, made by IP Draughts and others, and is apparently in discussions with universities to develop it further. We have yet to see what will emerge. In the meantime, the IPO has produced a short (40 minute) online course on IP, known as IP Tutor.

The case-study approach used by business schools would seem to be a good way to teach IP in a lively way, though that approach may need to be adapted for people who are outside the mould of the typical business school student. It will be very interesting to see how IP courses for undergraduate and postgraduate students develop in the next few years.




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Filed under Intellectual Property, universities

Important point of law on patent assignments buried in drossy case

no worriesIP Draughts was idly perusing the recent cases on BAILII this afternoon, when he came across the case of Wright Hassall LLP v Horton Jr & Anor [2015] EWHC 3716 (QB), a decision that was published yesterday.

He probably wouldn’t have bothered to read it, except for the name of the claimant, which he has always found mildly amusing and appropriate for a firm of solicitors. (Note to non-UK readers: in UK idiom, a hassle is an irritating problem or inconvenience, and a right hassle is emphatically so. The conventional US meaning may be different.)

Oh-ho, thought IP Draughts. Could this be a case about solicitors’ negligence? He was even more intrigued when he started to read the case, which concerns the commercialisation of an invention.

Ultimately, the case is a rather boring mess of arguments about the legal effect of various corporate, commercial and IP documents. Only one point stood out for IP Draughts, which was that one of the parties argued that patent assignments are ineffective if consideration is not given for the assignment. See paragraphs 27-49 of the case at the link above.

This is a subject on which this blog has previously commented. For example, see here in the context of discussion of executing assignments as deeds.

IP Draughts is relieved to see that the judge concluded that:

(a) there was no English authority directly on point (ie that IP Draughts might have missed); and

(b) there was no general requirement for consideration in a patent assignment (nor, in IP Draughts view, an assignment of any other type of IP) under English law.

The judge does not get into the question of whether an assignment without consideration is a gift rather than forming part of a contract, presumably because he was not asked to do so.

His conclusion is:

an instrument in writing satisfying s30(6) [of the Patents Act 1977] is effective as a legal assignment without any additional requirement for consideration.

As the judge notes, section 30(6) doesn’t mention consideration. The only requirements of that section are:

(6) Any of the following transactions, that is to say—(a) any assignment… of a patent or any such application, or any right in a patent or any such application… shall be void unless it is in writing and is signed by or on behalf of the assignor…

small winsThis decision by a County Court judge, co-opted to hear a High Court case heard in the Queen’s Bench division (rather than the Chancery Division, where specialist IP cases are usually heard), is not likely to be considered a particularly authoritative decision on this point. In IP Draughts’ view, that is a shame, as it is a sensible decision.



Filed under Intellectual Property, Legal Updates

IP Draughts’ Quiz of the Year 2015

winterTo celebrate the Winter Solstice, IP Draughts has prepared the following quiz for his readers. The answers can be found in postings on this blog during 2015.

The first person to send IP Draughts a correct set of answers to the following questions will receive, if they wish it, a free copy of our book, Drafting Confidentiality Agreements (3rd edition, Law Society Publishing, 2014), which comes with a CD containing template agreements for various types of confidentiality agreement and clause. It costs £64.95 from the publishers (in the region of US$100 on a good day). IP Draughts’ decision will be final on who has won.

The second prize is two copies of Drafting Confidentiality Agreements, says Mr Pettifog.

(1) Who retired from the IP world in 2015? Was it:

(a) Randall Rader, Chief Judge of the US Court of Appeals for the Federal Circuit.

(b) Professor Jeremy Phillips, the founder of the IPKat blog.

(c) Wallace, the inventor, from Wallace & Gromit.

(2) In the case of Parking Eye Limited v Beavis, the UK Supreme Court was asked to decide whether the owner of a fish-and-chip shop had to pay an £85 parking penalty for staying too long in a supermarket car park. Did the Supreme Court say:

(a) You’ve got to be codding! Bring us more important cases than this rubbish.

(b) Penalties are not enforceable under English law.

(c) The amount of the charge is reasonable and legally binding on Mr Beavis.

(3) Who owns a Banksy mural that was painted on the wall of an amusement arcade in an English coastal resort? Is it:

(a) Banksy.

(b) The owner (freeholder) of the wall.

(c) The Queen as owner of all bona vacantia.

(4) Why did Google invite us to sell them our patents? Was their stated reason:

(a) To stop them falling into the hands of patent trolls.

(b) To make more profits for Google.

(c) To allow their patent department to have some fun.

(5) What did Mr Sylvester Stallone have to say about the City of London Police’s Intellectual Property Crime Unit? Was it:

(a) Regular artists borrow, geniuses steal.

(b) I would like to thank [them] for working …to apprehend the suspect.

(c) I look back on “Judge Dredd” as a real missed opportunity.


Filed under Humour, Intellectual Property