Category Archives: Legal Updates

Who owns a Banksy mural?

art buffA recent case in the English High Court has seen a senior IP judge, Mr Justice Arnold, deciding on the ownership of a Banksy mural that was removed from the wall of a building.

The artist known as Banksy is famous for:

(a) retaining his anonymity;

(b) creating artwork in public places that could be viewed as graffiti, and sometimes has a political message, and which tends to have a high commercial value (hundreds of thousands of pounds); and

(c) causing his works suddenly to appear in unexpected places.

In recent years, a trend has developed of removing Banksy works from the walls on which they have been painted, and selling them at auction, sometimes to raise money for good causes.

The present case, The Creative Foundation v Dreamland Leisure Limited and others [2015] EWHC 2556 (Ch) concerns a mural known as Art Buff that appeared on the wall of a building in Folkestone, a seaside town in England.

art buff 2The tenants of the building, Dreamland Leisure, removed the mural, which involved taking a layer of the wall away, and sought to sell it at auction in the United States. The Creative Foundation sought an order for delivery up of the mural on the basis that it belonged to The Creative Foundation as assignee of the landlord’s interest.

In a case like this, we need to distinguish between the work of art, the copyright in the work, and the slice of wall on which it is painted. As Arnold J said in his judgment:

I should explain before proceeding further that, when I refer to the Mural in this judgment, I am generally referring both to the physical object and to the artistic work fixed on it. For the avoidance of doubt, I am not concerned with the copyright in the artistic work, which prima facie belongs to Banksy.

Thus, Arnold J found himself deciding a case on the respective rights of a landlord (lessor)  and a tenant (lessee) to materials that originally formed part of the demised premises but, when removed from the building, “revert to the status of chattels”. This is not part of the usual legal diet of an eminent IP judge.

After reviewing the cases, and the terms that could be implied into a lease of (real) property, he concluded:

In my judgment the term which is to be implied is that the chattel becomes the property of the Lessor. My reasons are as follows.

First, I consider that the default position is that every part of the property belongs to the Lessor. The Lessee only has a tenancy for a period of time. Thus it is for the Lessee show that it is proper to imply into the Lease a term which leads to a different result.

Secondly, in my view the mere fact that the Lessee is discharging its repairing obligation does not lead to the implication that it acquires ownership of such a chattel. Dreamland’s argument is based upon the Lessee’s need to be able to remove items generated by the act of repair from the premises. But that would only justify the implication of a term dealing with permission to remove (and, where appropriate, dispose of) such items. It does not justify the implication of a term transferring ownership of the items…

Thirdly, even if a term may be implied with respect to the ownership of (i) waste or (ii) chattels with no more than scrap or salvage value, it does not follow that it should be implied with respect to the ownership of a chattel with substantial value. Such a term would not be necessary, would not go without saying and would not be one that would satisfy the officious bystander test.

Fourthly, I do not consider that it makes any difference that the value is attributable to the spontaneous actions of a third party. It is fair to say that, whatever solution is adopted, one party gets a windfall. But who has the better right to that windfall? In my view it is the Lessor. …

Accordingly, I conclude that the Foundation is correct that the defence advanced in paragraph 13 of the Defence is unsustainable as a matter of law.

For the reasons given above, I conclude that the Foundation is entitled to summary judgment on its claim against Dreamland for delivery up of the Mural.

So, now we know. Though one might have expected copyright law to feature prominently in a dispute over a valuable artwork, in fact it came down to implying terms about the ownership of builders’ rubble in a routine property lease. IP Draughts wonders whether the drafters of property leases will, in future, include standard terms to deal with the ownership of works of art that are incorporated into the leased property without the knowledge or permission of either lessor or lessee.

The back story to this dispute is also interesting. It seems that Art Buff failed to sell at auction in the USA because its authenticity as a Banksy work had not been certified by a body associated with Banksy, known as Pest Control. Thus, questions of property law and copyright law were ultimately secondary to questions of provenance.





Filed under General Commercial, Intellectual Property, Legal Updates

Unitary Patent as an Object of National Property

Life seems so sweet that we decide / It's in the bag to get unified / It's delightful, it's delicious, it's D'lovely

Cole Porter: Life seems so sweet that we decide / It’s in the bag to get unified / It’s delightful, it’s delicious, it’s D’lovely

One topic, above all others, is engaging the collective mind of patent lawyers in the UK: the new, European ‘patent with unitary effect’, commonly known as the unitary patent.


Unitary: the word is unfamiliar; its precise meaning, elusive. The first usages that come into IP Draughts’ mind are ‘unitary authorites’ (a type of local government body) and unit trusts (a type of investment – not remotely relevant).

According to the online version of the Oxford English Dictionary (OED), the first meaning is:

Of, relating to, characterized by, or based on unity; unified, inclusive; holistic.

That doesn’t help us much. The fourth meaning given by the OED is closest to the mark:

Of or relating to a system of government or administration in which the powers of the separate constituent parts are vested in a central body, as opposed to two or more tiers of jurisdiction, authority, or responsibility.

This definition doesn’t quite work: we are not concerned here with tiers of political authority, but with having a single patent throughout the EU (assuming all EU member states fall into line and ratify the new law, which has yet to be seen). But we get the general idea. The Unified Patent Court (UPC), in which unitary patents will be litigated, and particularly its central division, fits better within the definition. It is strange that the court wasn’t given the same adjective as the patent – eg Unitary Patent Court or Unified Patent.

The story so far…

At present, where a patent application is made using the route of the European Patent Convention (EPC), upon grant it splits out into national patents in the European countries that the applicant has designated in its application. In future, under the new law governing unitary patents, it will be possible to designate one’s EPC patent as a single patent throughout the participating countries of the EU, rather than as a bundle of national patents.

UK patent lawyers are involved with the unitary patent in different ways. The chemistry and life-sciences part of the central division of the UPC is to be located in London. This will require a new eco-system of court rooms, rules of procedure, administrative staff and judges. UK patent lawyers have been active in discussing these matters with the UK government, and will continue to do so. At least the location of the court has now been decided – the government has taken a lease on some rooms at Aldgate Tower.

Another area of activity for UK IP lawyers is learning how the new system will work, particularly when it comes to litigating unitary patents. IP Draughts’ former employer, Bristows, has taken a strong lead in providing training and dry-runs of how patent litigation might work in the new system.

Transactional IP lawyers are starting to think about how the unitary patent will affect the terms of licence agreements and other patent-related agreements. IP Draughts hopes to contribute to this area in the coming months.

Unitary patent as an ‘object of property’

The EU regulation on the unitary patent is not an erotic masterpiece

The EU regulation on the unitary patent is not considered to be an erotic masterpiece

An area that has not yet received much scrutiny, but which affects both litigation and transactions, is the status of a unitary patent as an ‘object of property’ in a designated EU member state. Despite some ‘harmonisation’ (to use the Euro-jargon), IP laws remain largely national in character. In the area of traditional property laws (which sometimes affect IP transactions, IP being an example of personal property), EU harmonisation has barely scratched the surface. Therefore, transactions in respect of unitary patents will need to be anchored within a system of national property laws, as well as a system of contract law.

You might think that, if the parties have chosen an EU contract law to govern their patent transaction (ie by a choice of law clause in their contract), it would be logical to allow the same, national system of law to govern any property law issues that arise if the parties are in dispute. However, this is not what the new unitary patent law provides. According to Article 7 of EU Regulation No 127/2012 (implementing enhanced cooperation in the area of the creation of unitary patent protection):

Article 7

Treating a European patent with unitary effect as a national patent

1.   A European patent with unitary effect as an object of property shall be treated in its entirety and in all the participating Member States as a national patent of the participating Member State in which that patent has unitary effect and in which, according to the European Patent Register:


the applicant had his residence or principal place of business on the date of filing of the application for the European patent; or


where point (a) does not apply, the applicant had a place of business on the date of filing of the application for the European patent.

2.   Where two or more persons are entered in the European Patent Register as joint applicants, point (a) of paragraph 1 shall apply to the joint applicant indicated first. Where this is not possible, point (a) of paragraph 1 shall apply to the next joint applicant indicated in the order of entry. Where point (a) of paragraph 1 does not apply to any of the joint applicants, point (b) of paragraph 1 shall apply accordingly.

3.   Where no applicant had his residence, principal place of business or place of business in a participating Member State in which that patent has unitary effect for the purposes of paragraphs 1 or 2, the European patent with unitary effect as an object of property shall be treated in its entirety and in all the participating Member States as a national patent of the State where the European Patent Organisation has its headquarters in accordance with Article 6(1) of the EPC.

4.   The acquisition of a right may not be dependent on any entry in a national patent register.

Article 7 gives parties an opportunity to choose which system of property law they would like to govern their unitary patent. For example, an applicant might decide to form a company in a favoured member state and then file the patent application in the name of that company. Or, in the case of joint applications, the parties could agree to name as the first applicant the party that is based in a favoured member state. Just as parties may currently negotiate which contract law will govern their patent agreement, they may decide to negotiate which system of property law will govern a unitary patent, and then make arrangements that ensure, under the terms of Article 7, that their chosen property law prevails. This situation might arise, for example, where parties enter into a research collaboration agreement and inventions are made under the collaboration.

This is a new legal issue that does not currently arise – at present, with purely national patents, the system of property law is that of the country in which the patent is obtained. IP Draughts foresees that applicants may seek advice from their lawyers on which country’s property laws they should choose. It may be a difficult question for a lawyer to answer, if he or she is not qualified to advise on the laws of all of the countries of the EU. However, similar difficulties arise when helping a client to decide which contract law is appropriate.

To make an assessment of which property law might be most suitable or unsuitable, we first need some data on what national property laws provide, in areas that might be relevant to patent transactions, so that different countries’ laws can be compared. This is a very specialist topic, that is rarely discussed. One of IP Draughts’ books, Technology Transfer (Bloomsbury, 3rd edition, 2010) includes a chapter (at pages 359 to 398) on how English personal property laws may affect IP transactions, but he doesn’t recall seeing this subject discussed much in other publications.

If you have any information, or sources of information, on this subject, please let IP Draughts know via the comments section of this posting.

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Post-expiry royalties: what’s the problem?

weirdThere are some weird terms in US licence agreements. Let’s leave aside the general peculiarities of US contract wording. Examples such as “indemnify, hold harmless and defend”, “represents, warrants and undertakes”, “successors and assigns”, and a host of other excrescences, appear in many types of commercial agreement and not just IP licences. Instead, let’s focus on wording that deals with the duration of royalties in licence agreements. This issue came into sharp focus last week, with the decision of the US Supreme Court in the case of Kimble v Marvel Entertainment, LLC.

More on that case later. The general issue, in the US and internationally, is whether it is appropriate to require a licensee of IP to pay royalties after the IP has expired, been revoked, or otherwise ceased to exist. A generation or two ago, there seemed to be a consensus among legislators and the courts that it was not appropriate. This attitude could be seen, for example, in:

  • the US Supreme Court case of Brulotte v Thys Co, a 1964 decision that was discussed and followed in the Kimble case linked above. In Brulotte, the court decided that a contractual obligation to pay patent royalties after the patents had expired was “unlawful per se“.
  • the UK Patents Act 1977, which included a provision in section 45, since repealed, that: “Any contract for the supply of a patented product or licence to work a patented invention, or contract relating to any such supply or licence, may at any time after the patent or all the patents by which the product or invention was protected at the time of the making of the contract or granting of the licence has or have ceased to be in force, and notwithstanding anything to the contrary in the contract or licence or in any other contract, be determined, to the extent (and only to the extent) that the contract or licence relates to the product or invention, by either party on giving three months’ notice in writing to the other party.”
  • the 1984 EC Block Exemption Regulation for patent and know-how licences, which black-listed a provision whereby: “the licensee is charged royalties on products which are not entirely or partially patented …without prejudice to arrangements whereby, in order to facilitate payment, the royalty payments for the use of a licensed invention are spread over a period extending beyond the life of the licensed patents …” Recital 22 to the Regulation clarified that this spreading of payments referred to “spreading payments in respect of previous use of the licensed invention” – ie use during the period when the patents were in force.

A possible solution to this issue is to grant a mixed patent and know-how licence, in which royalties can be charged for use of know-how in circumstances where there are no patents, eg because they have expired or not been applied for in a particular country.

While this solution may work in many countries, there has clearly been a strand of opinion that, in the USA, a more nuanced approach to royalty terms is required. It seems to be thought by some that the licence agreement should state separate royalty rates for use of patents and for use of know-how. Presumably this makes it easier to show that there is no disguised patent royalty after the patents have expired. This approach is consistent with a comment from Kagan J in the Kimble case. She said:

That means, for example, that a license involving both a patent and a trade secret can set a 5% royalty during the patent period (as compensation for the two combined) and a 4% royalty afterward (as payment for the trade secret alone).

IP Draughts has seen some very strange royalty terms that try to finess this issue, eg providing separately for X% for use of patents and another royalty of X% for use of know-how, but stating that for as long as both patents and know-how protect the product, only the patent royalty applies. After the patent expires, only the know-how royalty of X% applies. Hey presto, X% applies both before and after the patent expires! IP Draughts has severe doubts about the effectiveness of this type of legal engineering.

More conventional, in IPDraughts experience, is a clause that sets the royalty at X% and reduces it to 50% of X in any country where there is no valid patent.

Ley lines

Ley lines

IP Draughts’ impression is that economists and competition (or in the USA, antitrust) authorities are no longer as concerned about post-expiry royalties as they once were. For example, the European Commission’s 2014 Guidelines on Technology Transfer Agreements state, at paragraph 187:

Notwithstanding the fact that the block exemption [for technology transfer agreements] only applies as long as the technology rights are valid and in force, the parties can normally agree to extend royalty obligations beyond the period of validity of the licensed intellectual property rights without falling foul of Article 101(1) of the Treaty. Once these rights expire, third parties can legally exploit the technology in question and compete with the parties to the agreement. Such actual and potential competition will normally be sufficient to ensure that the obligation in question does not have appreciable anti-competitive effects.


In Kimble, the parties had settled patent litigation on terms that the inventor, Kimble, assigned a patent to Marvel in return for royalties. The parties set no end-date for the payment of royalties. Some years later, Marvel “stumbled across Brulotte” and sought and obtained a declaratory judgment that it could cease paying royalties at the end of the patent term. On appeal, the Supreme Court upheld the award of the declaratory judgment. In passing, one wonders how such a defective settlement agreement could have been drafted. Presumably the parties were advised in their patent litigation and settlement negotiations by lawyers who held themselves out as specialists in US patent law.

The majority of the justices in Kimble appeared to recognise that the current thinking of economists (and therefore antitrust authorities) does not object to post-expiry royalties. As the majority judgment put it:

A broad scholarly consensus supports Kimble’s view of the competitive effects of post-expiration royalties, and we see no error in that shared analysis.”

However, that consensus was irrelevant, according to the majority, as the issue before them was one of interpreting statutory patent law, and not antitrust law. The Supreme Court was bound by the principle of stare decisis to follow the decision in Brulotte. If the case had been properly considered as an antitrust case, they might well have been prepared to decide Kimble differently.

IP Draughts found this part of the Kimble decision surprising. Though he has no expertise in US laws, he had always understood the general issue, at least as it is understood in the UK and Europe, to be one of competition (antitrust) law.

The 3 minority justices in Kimble also saw things differently. They commented that the earlier Brulotte case “was an antitrust decision masquerading as a patent case”.

stare decisisGood old stare decisis. IP Draughts remembers being taught about the English version of the rule in his first term as an undergraduate law student, in 1979. Courts are sometimes bound by earlier court decisions on points of law. The English rule is not so constraining as the US one, it seems. The UK House of Lords (now the UK Supreme Court) simply announced in 1966 that it would no longer consider itself bound by its previous decisions.

IP Draughts is left feeling perplexed by the decision in Kimble. It is concerned only with a narrow point on the duration of patent royalties. But on that narrow point, US licensing practice and to some extent (because of the strong, international influence of the US) non-US licensing practice, is frozen in time by the opinions and decisions of an earlier generation of US judges. It matters not whether the decision is based on statutory interpretation or antitrust laws, the practical effect is the same.

Practitioners advising on licence agreements that have a US element to them must consider carefully how the royalty duration is expressed. Many of IP Draughts’ licence agreements provide for royalties to be paid, on a country-by-country basis, for the longer of (a) the duration of the licensed patents, or (b) in the case of know-how, for a period (often 10 years) from the first commercial sale of licensed products. At first glance, this would appear to address the issue. What is troubling IP Draughts is whether the agreement needs to go further, in light of this US case law, and have separate royalty rates for patents and for know-how, as some US templates for patent licence agreements seem to prefer. Readers – do you think this is necessary?





Filed under Contract drafting, Intellectual Property, Legal Updates, Licensing

Subject to the jurisdiction of the English courts: exclusive?

inclusiveA small, but important, contract-drafting point: imagine a contract clause that says that disputes will be subject to the jurisdiction of the English courts. Should we interpret this to mean that the English courts will have exclusive jurisdiction, or might it mean that the English courts have only non-exclusive jurisdiction?

A well-drafted contract will state explicitly which law and jurisdiction governs the contract, and whether the jurisdiction is exclusive or non-exclusive.

If the contract states that English jurisdiction is exclusive, the parties must go to the English courts. If a party starts an action in another court (let’s say in China), the English court may order that party to stop proceeding in the Chinese courts. If the order is not complied with, the English court may commit the non-complying party to prison for contempt of court.

If the contract states that English jurisdiction is non-exclusive, a party can ask an English, Chinese or any other court to hear the case. An English court is likely to accept, based on the jurisdiction clause. If there is no jurisdiction clause at all, an English court might accept jurisdiction simply because the contract states that English law applies. A Chinese court might accept, eg if there is a strong connection with China in relation to the parties, the place of execution of the contract, or the place of performance of the contract.The first court to hear an action over the contract may issue an order to prevent a party from starting an action in another court. This would be on the grounds that the first court is “seised” of the action, and not because of the (non-exclusive) jurisdiction clause.

csav2A recent case in the English Court of Appeal illustrates these points. Hin-Pro International Logistics Limited v Compania Sud Americana De Vapores S.A. [2015] EWCA Civ 401, was reported on BAILII last week.

The case concerned a shipping contract – a bill of lading. Cargo was carried by sea from China to Venezuela. The claim was that the cargo had been released without production of the original bills. The relevant part of the jurisdiction clause read as follows:

This Bill of Lading and any claim or dispute arising hereunder shall be subject to English law and the jurisdiction of the English High Court of Justice in London. If, notwithstanding the foregoing, any proceedings are commenced in another jurisdiction, such proceeding shall be referred to ordinary courts of law.

The Court of Appeal interpreted this clause as giving exclusive jurisdiction to the English courts, even though the word “exclusive” does not appear in the clause. The court reviewed a substantial body of case law that supported this conclusion.

Hin-Pro’s counsel argued that the second sentence of the clause showed that the parties accepted that they could start an action elsewhere, but the court disagreed. This sentence was concerned more with the situation where another country’s court did not accept the exclusive jurisdiction clause. It did not affect the interpretation of the first sentence by the English courts.

The interpretation point is clear, at least for the English courts. However, best practice in contract drafting requires you to state explicitly whether the jurisdiction is exclusive:

  • for the sake of clarity among the parties, not all of whom will have read the English case law
  • to avoid court disputes
  • to cater for the possibility that other courts may not agree with the English Court of Appeal (eg the UK Supreme Court, or a foreign court).

If this blog had any sense of decorum, it would stop there. However, IP Draughts cannot resist mentioning some other points that come up in the judgment.

  1. Catch me if you can. One of the parties in this case, Hin-Pro, was a Chinese company. It started court proceedings in China. At first instance in the English High Court, the judge ordered that Hin-Pro cease participation in the Chinese court proceedings because of the exclusive jurisdiction clause. Hin-Pro’s sole director was a Miss Su Wei. Apparently she ignored the order. The English judge committed her to prison for 3 months for contempt of court. As the Court of Appeal drily noted: “Miss Wei has not yet been apprehended.”
  2. csavContra proferentem rule. The contract was drafted by the other party, known as CSAV. CSAV is a long-established shipping company. The Court of Appeal considered whether the contra proferentem rule might assist Hin-Pro. In certain circumstances, this rule requires that an ambiguous contract term be interpreted against the interests of the party who drafted it. A version of this rule, in the US, seems to have led to a boilerplate clause being included in many US contracts, that states that the contract is a joint drafting effort and it should not be interpreted strictly against either party. The court’s conclusion was that the rule didn’t assist Hin-Pro in this case, for a variety of reasons, not least because the clause was not ambiguous, and it could benefit either party.
  3. No understand English? Hin-Pro’s counsel argued that many of the users of the contract would not have English as their first language, and many would understand the clause as granting non-exclusive jurisdiction. The Court of Appeal disagreed:

I do not accept Hin-Pro’s submission that the fact that the bills of lading will probably be issued to companies staffed by those whose first language is not English should affect the way in which they are to be interpreted, or that the court should endeavour to determine what the words would mean to a person in that category. This would be an exercise fraught with difficulty, not least because it would, potentially, produce different results according to the non-English first language chosen, and require a determination, in many cases incapable of ready resolution, of which first language the reasonable man is to be taken as speaking. In agreeing in English to an English law contract the parties must be taken to have agreed that it shall be interpreted with all the nuances of the English language and in the way that a speaker whose first or only language was English would do so.

But which version of the English language should Miss Wei be taken to understand? UK, US, Australian? IP Draughts has doubts over whether an intimate knowledge of idiomatic English helps you to know whether “subject to the jurisdiction” means exclusive or non-exclusive jurisdiction.

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