Category Archives: Intellectual Property

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?


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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Filed under Contract drafting, Intellectual Property

Ring in the new, or make better use of the old?

newReaders of the The Times (or, if you insist, The Times of London) may be interested to see its offer to provide, free of charge, a copy of the front cover of the paper on the day they were born.

In the case of IP Draughts’ birthday, the front cover consists mainly of very old advertisements and announcements; he is so old that he predates the decision to put news on the front cover of The Times.

One of the adverts from his birth date caught his eye, and is retyped below.

In 10 years, the National Research Development Corporation has advanced £3.6 million to help inventors get their brainchildren to marketing point. Splendid reading as this makes, the sponsored developments have been even more so. We wish all concerned well.
But in the same 10 years the occasional lone voice has been heard asserting that what we need is not so much new devices as a fuller exploitation of existing equipment.
We believe this to be largely true. Our records over a much longer period show clearly what can be done in the process steam field alone, if only sufficient informed thought be given to it.
Valuable and laudable as new inventions may be, higher production at lower cost must still mainly come from making two blades grow where only one grew before.
This at any rate is the thesis concisely set out in our bulletin “Steam for Process”. It doesn’t speak of spectacular developments, but offers practical guidance on how to get each bit of a steam installation to do its full whack.
Correspondence on steam problems to :
SPIRAX-SARCO Ltd., Cheltenham

patheTo an English ear, the tone of this marketing announcement is fascinating, a mixture of formal and informal with a very British voice from a bygone era. Like the cinema newsreels of Pathe News, only in print.

The organisations mentioned in the piece still exist, after a fashion. The National Research and Development Corporation became, in the 1980s, British Technology Group, now BTG plc. It no longer has a monopoly to commercialise inventions coming from UK universities, but did at the time this advert was written.

Spirax-Sarco still exists, as an international group of companies, and its UK headquarters is still in Cheltenham.

IP Draughts has no settled opinion on whether it is better to improve the efficiency of existing industrial installations or to introduce new inventions (or, indeed, do both), but he suspects that some of his clients may have a view on this subject!



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Slim pickings for IP in the New Year Honours

downing streetGovernments claim to be interested in intellectual property, but their interest in sporadic. Sometimes, the interest is aligned with a greater commercial or political interest, such as protecting and promoting the national economy. This blog never tires of praising the Prime Minister, David Cameron, for personally negotiating to have the UK as the location for the life science part of the central division of the unified patent court. This is a rare example of political capital being used at the highest level to further an IP-related national interest.

At other times, the UK Government’s interest in IP seems all fur coat and no drawers. Every New Year’s Day, the Queen, on the advice of the Prime Minister, makes awards to people who have contributed to Britain. Sometimes, a few people from the IP world are honoured.

In passing, we should recognise that not everyone thinks the honours system has merit. For some, it smacks of an outdated, cosy, “establishment” view of the world. Others dislike the hierarchical nature of the awards, with knighthoods for the toffs, and the lowly British Empire Medal for salf-of-the-earth types. There is a feeling that it honours mainly civil servants, donors of cash to bennettpolitical parties, and celebrities, none of whom “deserves” an award. Yet the system continues to be popular. In the words of the UK playwright and national treasure, Alan Bennett, in his play, An Englishman Abroad, “In England, you only have to be able to eat a boiled egg at ninety, and they think you deserve the Nobel Prize.” This quote, though it uses the example of a private, Scandinavian honour, sums up both the enthusiasm and the scepticism that Britons variously feel about the honours system.

The 2015 New Year’s Honours List names 1,164 award recipients. Searching the list for IP-related words sometimes reveals a clutch of interesting names. This year the pickings are slim.

A search of “intellectual property” produces just one name, Trevor Baylis, the inventor of the wind-up radio in the 1990s, and more recently the founder of a company that provides services to small-scale inventors. He received an award in 1997 and might not have expected another, classier one, in 2015. Is it impertinent of IP Draughts to mention that Mr Baylis is now aged 77?

Searches using terms such as “patent”, “copyright” and “technology” revealed nothing that caught IP Draughts’ eye.

Two other names in this year’s list attracted IP Draughts’ attention, though the awards were probably not IP-related. The first is the award of an MBE to Ralph Antony Smith for legal services to the British Embassy in Madrid, Spain. IP Draughts assumes this is the Ralph Smith with whom IP Draughts worked at Bristows over 20 years ago, and who now works in Spain; if so, congratulations Ralph! The citation doesn’t state whether the legal services provided to the embassy concern IP.

The second name that IP Draughts spotted was that of Philip Wood, formerly a prominent banking partner at the major London law firm, Allen & Overy, who receives a CBE. IP Draughts recalls seeing, in the late 1980s, a copy of an internal Allen & Overy document, prepared by Philip Wood, that provided drafting notes on a wide range of contract clauses. The notes were well ahead of their time (nothing like them existed then at Bristows), and helped to inspire IP Draughts to write several books on contract drafting issues.

Readers, have we missed anyone in this year’s list who should be mentioned?

Happy New Year, everyone!



Filed under Intellectual Property, News