Category Archives: Licensing

Antitrust issues in IP licensing: competing guidelines

ftcVia the IP Finance blog comes news of a proposed update to the current US Antitrust Guidelines for the Licensing of Intellectual Property, which date from 1995. Although he has read the US guidelines in the past, IP Draughts is much more familiar with the equivalent European Commission Guidelines and the associated block exemption regulation for technology transfer agreements.

The European rules seem to require much more attention for run-of-the-mill licence agreements than the US rules require. He doesn’t recall ever having had a US lawyer refer him to the US guidelines in relation to a transaction under negotiation that included a US territory, whereas European lawyers working on a licensing transaction will frequently have recourse to the EU guidelines and block exemption regulation when the territory of the licence includes all or part of the EU.

Looking at the redline version of the proposed US guidelines, issued by the Department of Justice and Federal Trade Commission, IP Draughts had several thoughts:

  1. The US guidelines are more positive about the pro-competitive effects of licensing than the EU guidelines. To take one detailed example, bans on the licensee selling competing products may be acceptable under the US rules (eg see section 4.1.2.1 of the guidelines), but would ring alarm bells in an EU setting, particularly if the competing product was developed by the licensee (eg see section 4.2.7 of the EU guidelines and Article 5(2) of the block exemption). In the absence of careful and detailed economic analysis, IP Draughts would need strong persuading that such a restriction could safely be included in an EU licence agreement.
  2. Many of the proposed changes to the 1995 US guidelines are technical and don’t make major changes to the antitrust analysis of licence agreements. Where substantive changes are made, they tend to move the guidelines in a more liberal direction, that is to say taking a more positive attitude to licensing. For example, the discussion of resale price maintenance indicates that vertical price restraints in licence agreements will be treated under the rule of reason rather than as per-se illegal, following an important Supreme Court decision in 2007.
  3. Particularly helpful to the practitioner are comments in the US guidelines about the main concern being horizontal agreements between competitors. As most IP licensing is not between competitors, and often has no horizontal element, this provides a very useful context to the analysis set out in the document. By contrast, though the EU guidelines express greater concerns about agreements between competitors, there are plenty of rules about agreements between non-competitors, eg in the block exemption, and no general suggestion that vertical agreements are to be treated much more favourably than horizontal ones.
  4. Not only are the US guidelines more positive about IP licensing, they are also more helpful than the equivalent EU guidelines in explaining, with numerous illustrative examples, where no significant antitrust issue will arise. By contrast, the EU guidelines use up far too much space in simply regurgitating what is permissible under the technology transfer block exemption.
  5. Where shall we three meet again? In Brussels or in Luxembourg?

    Where shall we three meet again? In Brussels or in Luxembourg?

    IP Draughts has heard it said that the thinking of those in the European Commission who are responsible for antitrust policy is strongly influenced by the approach of the US authorities. Certainly some of the economic concepts that are seen in the US guidelines, such as innovation and technology markets, have found their way into the EU guidelines and block exemption. But the way in which those concepts are used has a very different flavour in the EU model. It is as though the US concepts have been mixed up in the cooking pot with the desire to promote the EU single market, deep suspicion about IP rights generally as a monopolistic  right, a lack of experience of routine licence agreements, and a Mediterranean statist approach.

  6. IP Draughts was reminded that the US guidelines include a “safety zone” for certain types of agreement, which could be viewed as analogous to the EU block exemption regulation or to the EU Notice on Agreements of Minor Importance. Section 4.3 of the US guidelines places in the safety zone, among other agreements, licence agreements that meet both of the following criteria: (1) they are not “facially anticompetitive” – ie don’t include really bad terms; the equivalent expression in EU law is “hardcore clauses”; and (2) the collective market share of the parties does not exceed 20%. Where market shares cannot be determined, eg in some technology or R&D markets, an alternative to item (2) is that there are at least 4 competing technologies or 4 other parties that can engage in competing R&D.
  7. However, IP Draughts doubts whether this safety zone will be used much, given the more tolerant approach of the US guidelines to most IP licence agreements.

The differences between the US and EU approaches are sometimes found surprising by US clients and their US lawyers. Two points in particular may cause surprise: (1) the extent to which EU lawyers spend time looking at what is permissible under the relevant block exemption (there are other block exemptions for R&D agreements and for distribution agreements, among others), and (2) the difficulty of achieving legal certainty as to whether particular terms will be acceptable under EU antitrust laws. The unsatisfactory state of EU law may make it impossible for their lawyers to provide a quick, cheap and reliable answer to the antitrust questions that arise.

 

 

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The technology transfer profession: does it exist?

professionals1When IP Draughts started in practice, many of those who worked in research contracts and technology transfer at universities were drawn from the pool of administrators. Many were not graduates. Most would not have regarded themselves as belonging to a technology transfer profession.

Their skills lay in working with academics over many years, and dealing with all the issues that academics tend to dislike (while believing they could do them better than those responsible for them), and which are bundled together under that dismissive name, administration. Some became highly skilled at managing relationships with industry, and rose to senior positions within leading universities (in one notable case, receiving an honour for doing so); some others probably deserved the opprobrium that academics hurled in their direction.

The people who work in technology transfer nowadays (or, if we are being inclusive or fashionable, knowledge transfer) tend to have many paper qualifications. They may have several university degrees – a PhD and MBA are not unheard of – and many will have attended professional training courses such as those mentioned below. Some have law degrees or are qualified lawyers.

administratorsYet a significant part of their jobs has not changed from the early days. They are still required to work with academics, and liaise with industry. Their work is sometimes still referred to as administration, though there is greater recognition that it requires specialist skills. It is not a purely commercial role, though it requires many of the skills that business development managers in industry possess.

When a specialist work activity grows in scale, the people who perform that activity tend to come together for mutual support. IP Draughts has noticed a pattern to these activities across different disciplines. First, people come together and start to run national conferences and training courses. Next, they establish a professional qualification. At some point, this professional qualification becomes, de facto or de jure, a necessary condition of working in the sector. Finally, the body that oversees the qualification achieves recognition as a professional body. In the UK, this tends to be done by obtaining a Royal Charter.

IP Draughts has seen this happen in the UK investment community, which in the last 30 years has introduced professional exams and continuing education. In 2009, the Chartered Institute of Securities and Investment received its Royal Charter, thereby (according to the CISI website) “join[ing] the ranks of professional bodies such as accountants, lawyers and bankers.” In 2016, the Institute of Trade Mark Attorneys received its Royal Charter.

practitionerThe variety of roles within technology and knowledge transfer, and the variety of types of organisation that do these activities (eg a few research-intensive universities and a larger number of organisations that have a smaller throughput of TT or KT deals) may reduce the likelihood of reaching the final stage of this process soon. But progress is being made with some of the earlier stages.

Organisations such as PraxisUnico (in the UK) and ASTP/Proton (across Europe) have been running training courses and annual conferences for well over a decade. Disclosure: IP Draughts and his colleagues have taught on some of these training courses for many years, and IP Draughts’ partner Paul Maclennan is currently on the training committee of PraxisUnico.

In the last few years, membership organisations of technology transfer managers in different countries have come together to form the Alliance of Technology Transfer Professionals. ATTP has established a professional qualification, the Registered Technology Transfer Professional (RTTP).

Some technology transfer managers may also consider themselves licensing executives. A few years ago, the Licensing Executive Society (USA and Canada) formed an independent body to administer a new qualification, the Certified Licensing Professional (CLP).

A few weeks ago, a new qualification appeared. The European Knowledge and Technology Transfer Society appears to have grown with funding from the European Commission. It has established a certification for TT managers, at 3 levels.

expertA mixture of curiosity and professional pride led IP Draughts to apply for these qualifications (or should they be called certifications or registrations?). He is now entitled to put the letters CLP, RTTP and EuKTS (Expert) after his name. In reality, his qualification as an English solicitor (attorney) is the one from which he makes his living, but these other qualifications are nice to have.

TT practitioners are clearly travelling in the direction of professional status. But whether they want or need to reach that destination is far from clear. In IP Draughts’ view, a true profession has several attributes:

  1. A set of skills that are not easy to learn, and formal qualifications that must be obtained to demonstrate competence in those skills. Those skills should be maintained for as long as the individual remains actively involved in the profession.
  2. A shared understanding of what it means to be a member of the profession, and a shared set of professional values – an ethos. These professional values should be maintained in the face of pressures from employers, clients and others, and there should be a mechanism for ejecting people from the profession if they don’t adhere to these values.
  3. Protection for the public in the form of compulsory insurance and compensation schemes.

travelUsing this definition, TT practitioners are making good progress with item 1. Many will feel they have elements of item 2, but not the formal processes. As most TT practitioners are employed rather than self-employed, item 3 may be less relevant.

It will be interesting to see where TT practitioners go next on their professional journey.

 

 

 

 

 

 

 

 

 

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Issue spotting in IP agreements

ip manAnother year has gone by. Last week we had the fourth annual outing of the UCL 5-day course, IP Transactions: Law and Practice. This year’s students came from City and specialist law firms, well-known companies, government departments and public bodies, and universities in the UK and overseas.

Several students made favourable comments to IP Draughts on the high quality of the teachers and the practical content of the talks. Thanks are due to our volunteer speakers from Anderson Law, Ashurst, Baker & McKenzie, Bristows, Bird & Bird, Eversheds, Farrer, Hill Dickinson, Linklaters, Nabarro, Olswang, Pennington Manches, Pinsent Masons, Taylor Wessing, and other organisations. You are giving your time and expertise to help train the next generation of specialist IP lawyers, and your efforts are appreciated.

The course provides insights into legal and practice issues that are relevant to IP transactions across different market sectors, including M&A, life sciences, IT, media, universities, and finance transactions. As well as covering core topics such as the law affecting IP ownership, assignment and licensing, we explore some of the wider legal issues that IP lawyers need to be aware of, including competition law, tax, insolvency, charges and dispute resolution.

red flagNo-one can be expert in all of these areas, but you can be aware of when an issue needs to be explored further, and when specialist advice should be sought. When reviewing an IP agreement, you should be able to spot these issues. They should sound a warning bell, or raise a red flag, in your mind.

Does the draft agreement contain provisions about insolvency that may not be legally effective (eg a reversion of IP), or terms that breach EU competition laws (eg an assignment of licensee improvements), or payment terms that address tax issues in an unfavourable way to your client (eg grossing up of witholding tax), or terms that are unlikely to be acceptable to a university (eg an absolute ban on publications)? None of these examples concerns intellectual property law, but they are part of the larger category of commercial laws that affect IP transactions. Having at least a basic awareness of them is part of the legal toolkit of the transactional IP lawyer.

mastersHopefully, this course will continue for many years to come. In addition, IP Draughts is planning to create another course on IP transactions, this time for LLM students. This is a more difficult category of people to teach a subject of this kind, as LLM students tend to have very little experience of practice. The teaching style and content need to be tailored. If you are an IP practitioner and are interested in helping to design and teach on a future LLM module, to be run by UCL Faculty of Laws from 2017 or 2018, please let Mark know on msa@andlaw.eu or 01865 858 878.

 

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March-in to glory

marchesIn January this year, over 50 US Congressmen wrote to Sylvia Burwell, the US Secretary of Health and Human Services, asking her to consider using so-called government march-in rights as a way of reducing the price of pharmaceutical drugs. In February, Secretary Burwell is reported to have responded positively to this suggestion, or at least not dismissed it out of hand.

The rights in question arise under the Bayh-Dole Act 1980. Other aspects of this Act have been discussed on this blog here. The relevant sub-sections of the Act (35 USC 203) read as follows:

(a) With respect to any subject invention in which a small business firm or nonprofit organization has acquired title under this chapter, the Federal agency under whose funding agreement the subject invention was made shall have the right, in accordance with such procedures as are provided in regulations promulgated hereunder to require the contractor, an assignee or exclusive licensee of a subject invention to grant a nonexclusive, partially exclusive, or exclusive license in any field of use to a responsible applicant or applicants, upon terms that are reasonable under the circumstances, and if the contractor, assignee, or exclusive licensee refuses such request, to grant such a license itself, if the Federal agency determines that such—

(1) action is necessary because the contractor or assignee has not taken, or is not expected to take within a reasonable time, effective steps to achieve practical application of the subject invention in such field of use;
(2) action is necessary to alleviate health or safety needs which are not reasonably satisfied by the contractor, assignee, or their licensees;
(3) action is necessary to meet requirements for public use specified by Federal regulations and such requirements are not reasonably satisfied by the contractor, assignee, or licensees; or
(4) action is necessary because the agreement required by section 204 has not been obtained or waived or because a licensee of the exclusive right to use or sell any subject invention in the United States is in breach of its agreement obtained pursuant to section 204.
The Congressmen’s letter proposed that action should be taken under sub-section (a)(2), quoted above. It seems that these march-in rights are rarely used, and that the US government has previously refused to use them as a general means of applying pressure on drug prices, regarding this as a subject that would require primary legislation.
This is consistent with what IP Draughts has previously been told by US lawyers, eg when doing due diligence on a company that had entered into an IP licence agreement that included a clause that specifically referred to these march-in rights. In the past, he has been told that many companies consider the risk of a US government march-in to be theoretical rather than real. Whether this is still a common understanding in light of Secretary Burwell’s recent comments is less clear.
IP Draughts has noticed a rash of march-in rights recently. A kind-of-march-in-right features in national patent laws. For example, section 22 of the UK Patents Act 1977 allows the government to step in if a patent application contains information that might be prejudicial to the defence of the realm. The section enables compensation to be paid to the applicant in certain circumstances.
There is no direct equivalent to the Bayh-Dole provisions in UK law, but the standard contract terms of several UK government departments contain analogous provisions. IP Draughts sees these terms in research collaboration agreements to which a government department is a party, or where a government department has funded research done by others.
onionsFor example, such terms exist in certain research funding conditions of the UK Department of Health. An example sometimes used is that if there were a major outbreak of influenza, this might be a national emergency. If private companies were not able to meet the demand for drugs to treat the condition, the government might need to make very urgent arrangements to do so.
IP Draughts has also seen such terms in UK Department of Defence contracts. For example, Defcon 705, which is an often-used contract term on intellectual property rights, includes several provisions that could be viewed as march-in rights.
These and other provisions have the potential to devalue the IP assets of private companies and other organisations. If the government can march-in and license the IP to someone else, the rights of an IP owner or exclusive licensee may be prejudiced. But is this risk real, or are the government’s rights more honoured in the breach than the observance?
So far, it seems that march-in rights are rarely used. They probably fall into the category of very small risk of a major event. Plenty of other risks fall into that category. IP Draughts wonders whether it is possible to insure against this risk at a reasonable price; he hasn’t heard of any such insurance.

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