Category Archives: Legal Updates

Brexit and IP transactions

eliteIP Draughts learnt this week that he was part of a metropolitan elite. Which is nice. #lookingforthepositive

Yesterday the UK electorate decided, unexpectedly, to leave the European Union. At this stage, no-one knows what will happen next, or what “leaving” actually means. The possibilities, however far-fetched some of them may be, include:

  • Change of mind. Nothing changes in the EU (except, perhaps, some face-saving remarks by EU leaders or trivial changes in law), following which the UK electorate has a change of heart and decides not to leave after all. Some point to the Irish experience with the Lisbon treaty as a precedent for this outcome.
  • Squeezing some more concessions. Negotiate real “improvements” in the way in which the EU does things, following which the UK electorate has a second vote in which they decide to remain in the EU, either in a referendum or by voting in a general election for a pro-remain political party. These improvements might be concessions for the UK alone, or general changes in the structure of the EU.
  • demographicsAssociate membership. Create a new, “associate member” category of membership of the EU, which the UK would then transfer to, and which would give associate members some exemptions from EU rules, eg on free movement of labour.
  • Leave and join EFTA. Leave the EU and join the European Free Trade Association, and therefore benefit from some but not all of the legal regime that applies in the EU, but without any special concessions for the UK. In other words, have the same relationship with the EU that Norway has as an EFTA member.
  • Leave and expand EU rights for non-EU members. Leave the EU and change the rules of the EU, so that countries that are outside the EU (ie the UK at that point) can benefit from certain aspects of the EU that are currently only available to members (eg participation in the Community Trade Mark regime). The new arrangements might be designed for, say EFTA members (if the UK decided to join that club) or might be made more broadly available to, say, European countries that are outside the EU.
  • Leave and negotiate one-off trade deals. Negotiate individual, arms-length trade treaties between the UK (as a non-EU-member) and the EU.

social-classesIt is fair to say that the Brexiteers have not focussed on IP during the pre-referendum debates. When Brexit is negotiated, IP legislation is likely to be some way down the list of priorities, after immigration, trade tariffs, and other political topics.

In the area of business regulation, much was made during the referendum campaign of so-called “Brussels red tape” but few examples were given. In one televised debate, IP Draughts heard Boris comment scornfully that the remain campaign didn’t want to change any existing EU laws, “not even the Clinical Trials Directive”, as though this was self-evidently a terrible piece of legislation. For some reason, this law seems to trigger a response in Boris, like a mood-altering drug.  The benefits to the UK economy of pan-European regulation of life-science product development seem to have passed him by.

elite2Perhaps Boris is not aware that the UK has a thriving life-science sector, the best in Europe, and that being part of the EU is a significant benefit for that sector. David Cameron seems to be aware of this, as he negotiated for the UK to have the chemistry and life-science part of the central court for the Unitary Patent.

It is impossible to know what the implications of Brexit will be for international IP transactions until the blueprint for Brexiting has been established. Nevertheless, there are some obvious risks that can be addressed when drafting IP-related agreements. They include:

  1. EU research funding. In research agreements that benefit from EU funding (eg under the Horizon 2020 programme) what will happen if the UK party ceases to receive EU funding on Brexit? Is it still obliged to do the work but not get paid for it? Or can it terminate its participation in the project? As a separate issue, what do the terms of funding say about the grant of IP rights to companies that are outside the EU? Is any preference given to EU parties?
  2. EU territory. Does the agreement grant rights to a territory defined as the European Union or the European Economic Area? What are the implications if the UK is no longer part of the EU or EEA?
  3. UK territory. Does the agreement refer to the United Kingdom? What implications are there for the agreement if Scotland decides to withdraw from the United Kingdom (but possibly try to remain in the EU)?
  4. Definition of IP. How is intellectual property defined in the agreement? Is the definition flexible enough to cater for changes to the IP system, or new types of IP, that may emerge following Brexit?
  5. Export of personal data outside EU. Sometimes, agreements have clauses that refer to the export of personal data outside the EU. Have the implications been considered of what this will mean in practical terms if the UK is no longer part of the EU?
  6. Compliance with regulations generally. Some agreements, eg clinical trial agreements, impose an obligation on a party to comply with applicable regulations. Are these obligations worded in a way that is resilient to the possibility of UK regulations being significantly different from those in the EU?
  7. Law and jurisdiction. Does the agreement have a clear law and jurisdiction clause? If not, bear in mind that if the UK is not part of the EU, the Rome and Brussels regulations will probably no longer apply to tell a UK contracting party which law and jurisdiction will govern the agreement.

This is unlikely to be a comprehensive list of contractual issues that could be affected by Brexit. If you can think of others, please suggest them in the comments below this posting.

 

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10 year campaign by Law Society to change IP law: we’re nearly there

queen speechThis week, Her Majesty the Queen nearly used the words “intellectual property” in public. From her throne in the House of Lords, she outlined the Government’s legislative programme for the current Parliamentary term. The speech focussed on matters of general interest. Perhaps it was unrealistic to expect the Government (which writes her speeches on these occasions) to ask Her Majesty to refer specifically to the Intellectual Property (Unjustified Threats) Bill. Instead, it was swept up in the phrase “Other measures will be laid before you.”

Nevertheless, the Government’s supporting papers, issued at the same time as the speech, make clear that this Bill is one of 21 that they will introduce in the coming months.

The announcement gets us very close to a successful conclusion of a campaign that the Law Society’s Intellectual Property Law Committee initiated in about 2006. The exact date on which we started work is lost in the mists of time, but I have managed to find a committee paper on this subject dated February 2006. As that paper noted:

Today we have an illogical and inconsistent assortment of threats actions relating to various IP rights; they run counter to the over-arching encouragement [e.g. in the Civil Procedure Rules] to communicate and settle rather than precipitately issue legal proceeding and they leave clients and solicitors in jeopardy of  being sued for making actionable threats, simply by reason of the sending of what would otherwise be an uncontroversial letter before action.

Robin Fry

Robin Fry

I am now the Chairman of the IPLC, but credit for this campaign lies mainly with others. Among the many committee members who have worked on the project, two names stand out: Robin Fry, a former member of the committee, who led the discussions and drafted our position papers in the early years, and Isabel Davies, who chaired the committee from 2006 until 2015.

Isabel Davies

Isabel Davies

The IP threats provisions are complex and technical, but in essence they provide a legal remedy to someone who is threatened with IP litigation. The recipient  of the threat can sue the threatener for making “unjustified threats”. How you view these provisions may depend on what question is asked. If you are asked, should we have laws that stop aggressive IP owners from using spurious IP claims to bully smaller businesses and consumers into buying their products (or avoiding competing products), the answer may be yes.

If, on the other hand, you are asked whether struggling creative artists, whose IP is being misused by major companies without acknowledgement or compensation, should be inhibited from asserting their IP rights by satellite litigation that focuses on their precise choice of words in correspondence, then the answer may be no.

At this point, and unusually for this blog, I feel the need to issue a dislaimer. To discuss this subject, we need to get technical, but this journalistic overview should not be used as legal advice. Don’t use any of the information in this article when asserting or defending IP claims!

ceaseEnglish IP owners (or their lawyers) who know about these laws have typically drafted “cease and desist” letters (to use an American term) in the most bland of terms, to avoid being accused of making threats. Unless the recipient of the letter is also in-the-know, and can interpret the code, they are left none the wiser by the letter. Some lawyers have taken the view that even a bland letter is too risky, and that the only safe course of action is to issue proceedings before communicating with the infringer; once proceedings are started, the threats provisions no longer apply. These strategies run completely against the spirit of the English civil procedure rules, where clear and open communication is required.

Yet another strategy is to focus, in the letter, on types of IP that are not covered by the threats provisions. For example, a product might infringe both copyright and design rights. A “clever” lawyer might try to draft a letter threatening (only) to sue for copyright infringement which is not covered by the threats provisions, and avoid mentioning design rights, which are covered by threats provisions.

In other words, the threats provisions are the cause of some absurd behaviour by IP owners and their specialist lawyers.

By contrast, the IP owner who cannot afford specialist UK IP lawyers, and who communicates in clear terms with an alleged infringer, is at great risk of being sued for making threats. Note that the previous sentence refers to “specialist UK IP lawyers”: one of the leading cases on this subject in recent years concerned correspondence from a Spanish law firm that might not have been expected to know the quirks of English law in this area. English law is out of line with most other jurisdictions on this subject.

As specialist IP practitioners, our committee saw that this area of English law wasn’t working properly, and needed to be changed. However, we faced several obstacles. First, the subject was very technical, and unlikely to get much political interest. Secondly, several IP judges were against change, at least in the early days. The IP judges have influence with legislators.

From a judge’s perspective, IP threats provisions might be thought useful as a curb on egregious behaviour by aggressive IP owners. But the judge only sees the cases that come before him or her, and not the large number of claims that are settled before they reach court, or which are not made at all, due to the dampening effect of the threats legislation. As practitioners “at the coalface” we could see what the judges apparently could not see.

law commissionSo, we didn’t get much traction for our ideas in the early years. But we persisted, and kept arguing the case for change, for example in our responses to Government-sponsored reviews of the IP system, including the Gowers and Hargreaves reviews. Eventually the Law Commission decided to take up this issue, with our active encouragement. They issued a consultation document, and later a report recommending changes, which our committee largely supported. The Government mostly accepted the Law Commission’s recommendations. The threats provisions are not to be abolished, but they are to be greatly improved, and made more consistent between IP types.

The Law Commission and the Parliamentary Draftsmen’s Office prepared a draft Bill to effect these changes, on which our committee provided detailed comments. Last year, one of our regular committee meetings focussed on this subject; our invited guests included three representatives of the Law Commission, two from the Parliamentary Draftsmen’s Office, and two from the Intellectual Property Office. My main contribution to that discussion, as a transactional IP lawyer rather than a litigator, was to challenge the use of the term “best endeavours” in the draft Bill; the wording was changed in a later draft.

The Bill is now set to be introduced in the House of Lords by a special procedure that is used for uncontroversial measures.

Sometimes, the law is changed through vigorous political activity. Our campaign illustrates a different approach: it is possible to achieve important, but very technical, changes to the law through patient committee work.

 

 

 

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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.

 

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Bob Marley: dud case lost again in Court of Appeal

blue mountainIP Draughts has previously reported on a case in the English High Court, over the ownership of copyright in some Bob Marley songs, including No Woman No Cry.

The claimant lost that case and appealed. Last week, the Court of Appeal’s decision in the same case was handed down. In BSI Enterprises Ltd and another v Blue Mountain Music Ltd [2015] EWCA Civ 1151, the claimant lost again.

The central issue in the case was whether copyright in a set of Bob Marley compositions had transferred under an agreement made in 1992.  The songs were not mentioned by name in this agreement, unlike many other of Bob Marley’s songs. But the agreement included wording that broadened its scope beyond the named songs.

If the answer to that question was “no”, then copyright remained with the seller, and a later assignment from the seller to the claimant was effective. If the answer was “yes”, then the later assignment couldn’t transfer what the seller didn’t own. Thus, the case turned on an interpretation of the 1992 agreement.

The claimant’s counsel in the High Court, Hugo Cuddigan, had argued that the parties to the 1992 agreement had deliberately omitted the songs in question from a schedule to the 1992 agreement, and that this was part of the factual matrix in light of which the agreement should be interpreted. The judge at first instance rejected this argument, preferring to rely on the words of the agreement. These words made clear “almost to the point of redundant repetition” that all Bob Marley songs were included, whether or not they were listed in the schedule.

On appeal, the claimant had a new counsel, Madeleine Heal. She obtained permission from the court to base her case on a different argument. Her line was that a close analysis of the words of the agreement led to the conclusion that the songs in question were not covered by the assignment.

The agreement provided for the assignment of copyright in the Compositions, a term that was capitalised in the agreement. But what did this term mean? Clause 1 of the agreement set out a list of definitions. Clause 1.8 was headed “Composition” and “Catalogue”. The text of clause 1.8 included, at the end of a lengthy sentence, the words individually a “Composition” and collectively the “Compositions”. Admittedly the definition slightly muddled up the two terms, Composition and Catalogue, but the wording was broad in scope, and included the phrase including, but not by way of limitation, the Catalogue listed on Schedule 2 hereto. There is no suggestion in clause 1.8 that the definition of Composition is limited to the songs listed in Schedule 2.

no noAccording to Ms Heal, one shouldn’t look at the definitions clause to find the definition of Composition. Oh no, no, no, no. Instead, one should look at the warranty clause, which included, at clause 5.10, a warranty by the seller that “Schedule 2 contains a complete and accurate list of all the Compositions.”

Moreover, continued Ms Heal, a recital to the agreement stated that the seller wished to sell “certain” music publishing rights and interests, which proved that only some, and not all, of the seller’s interests were to be transferred.

Oh dear. Kitchen LJ’s mild response to these and similar arguments was that he was “unable to accept” them, they were “unsustainable”, he was “wholly unpersuaded”, and there was “nothing in this criticism”.

Thank goodness for small mercies.

To IP Draughts’ mind, the court at first instance and the Court of Appeal had a relatively straightforward task to interpret the 1992 agreement, and they performed it well. No new point of law arises from the case. There is no guidance that needs to be given to drafters in light of the case. It is an illustration of how far a party is prepared to go to try to protect its business interests, by pursuing a dud case all the way to the Court of Appeal.

 

 

 

 

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