Category Archives: Licensing

UCL IP Transactions course 2020 – bookings open

From 20-24 April 2020, we will be running the 8th annual outing of the popular, one-week course, Intellectual Property Transactions: Law and Practice, at University College London’s Faculty of Laws.

Several hundred people have attended the course in recent years – mostly junior IP lawyers but also patent and trade mark attorneys, licensing managers, and lawyers moving into a transactional IP role. Past attenders have been from many countries of the world, eg Japan and Colombia, as well as places closer to home. The course has a practitioner focus and combines formal teaching with practice-based sessions and workshops.

We are now getting a steady stream of applications for this year’s course. If you would like to attend, please complete the application form (which forms part of the course brochure – see link at foot of page here) together with a CV and personal statement to Lisa Penfold at UCL Laws.

While in sales mode, IP Draughts would like to remind you that the 4th edition of his book, Technology Transfer (Bloomsbury Publishing) will be published in the next 2-3 months. In the last few days we approved the final text, and just have to write the preface before the work is sent off the printers. The first edition was written two and a half decades ago.

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Dispute between licensees: who can sue and where?

The case of Ablynx NV & Anor v VHsquared Ltd & Ors [2019] EWCA Civ 2192 was published this week. It is a decision of the English Court of Appeal, and concerns a dispute over patent infringement between licensees of some university patents. The licensing aspects should be of interest to readers of this blog, but the facts and legal issues are a little complicated.

With some simplification, those facts are:

  1. The invention relates to immunoglobulins derived from camelid (camel family) antibodies. The Free University of Brussels (VUB) is the patent owner. The patents expired in 2013.
  2. In 1997, VUB granted a licence under these patents to Unilever NH (Unilever). The licence was exclusive in certain fields (defined as the Reserved Sector) including “packed food products”. It was non-exclusive in certain other fields.
  3. The licence agreement is subject to Belgian law and jurisdiction. But disputes over the definition of the Reserved Sector and the scope of the patents are to be decided by arbitration under the Rules of the International Chamber of Commerce.
  4. In 1998, VUB granted a licence under the patents to the Flanders Institute of Biotechnology (VIB). (Disclosure: many years ago, IP Draughts advised VIB, but not on this matter, as far as he can recall.)
  5. The licence to VIB was in all fields other than the Reserved Sector (using the same definition as in the Unilever licence).
  6. In 2001, VIB exclusively sub-licensed the patents to Ablynx. The field of the licence included products for diagnosing, preventing or treating disease in humans.
  7. The judge notes that the parties to the litigation agreed that Ablynx’s sub-licence could not be broader than the head licence, and therefore excluded the Reserved Sector. In the Ablynx sub-licence, Ablynx acknowledges that it has received a copy of the Unilever licence agreement.
  8. In 2005, Unilever novated the Unilever licence agreement to BAC, a Unilever group company. In the novation agreement (between VUB, Unilever and BAC), BAC granted a non-exclusive licence under the patents back to Unilever in the Reserved Sector.
  9. The novation agreement is made under Belgian law and subject to the non-exclusive jurisdiction of the Belgian courts.
  10. In 2010, Unilever granted VHsquared Limited (VH) a sub-licence under the patents in the Reserved Sector.

Pausing there, VH has a non-exclusive licence in the Reserved Sector including packed foods. Ablynx has an exclusive licence for certain medical uses that must fall outside the Reserved Sector.

So far, so good. Medicinal products and food products are completely different, aren’t they, so why would the licensees ever get into dispute? Well, maybe it’s not quite that simple.

The English Court of Appeal judgment notes that there have already been two rounds of litigation between the parties in the Netherlands. VH had argued that it was licensed to produce packaged foods, and these could include “functional foods” containing rotavirus antibodies. Meanwhile, Unilever had conducted research in Bangladesh and India into the use of antibodies directed against rotavirus in children. In the words of the UK National Health Service website:

Rotavirus is a highly infectious stomach bug that typically strikes babies and young children, causing an unpleasant bout of diarrhoea, sometimes with vomiting, tummy ache and fever.

In the English appeal, Ablynx narrowed their argument on the definition of Reserved Sector. They contended that the patents (and their rights as exclusive licensee) would be infringed by “products with a therapeutic or prophylactice effect with regard to specific pathogens, whatever the nature of those products.”

In IP Draughts’ words, they were arguing that they were licensed to food products containing antibodies for the prevention or treatment of ailments.

The Dutch court rejected VH’s argument that they were licensed to any kind of foodstuff. The Dutch court grappled with how to distinguish between foods and medicines. Ultimately, it was forced to go beyond the wording of the contract and determine the “common intent of the parties”. Oversimplifying, Unilever could have functional foods for general health promoting effects, but not products for curing ailments caused by pathogens. Unilever had gone over the line by researching foodstuffs to prevent or cure an ailment caused by a pathogen.

In passing, “the common intent of the parties” is a Belgian and more generally, civil law concept. A different method of interpretation would be applied to an English law contract, and might result in a different outcome.

In IP Draughts’ mind, the English court’s summary of the Dutch court’s judgment sounds a bit like the difference between the products you can buy in a health food store that are careful not to claim a physiological effect, and pharmaceutical drugs that generally require a licence.

In September 2018, Ablynx (drug licensee) started the present legal proceedings in the English High Court, alleging infringement by VH (food licensee). In the UK, an exclusive licensee can sue for infringement.

In January 2019, VH issued an application to contest the jurisdiction of the English courts, on the basis that the Unilever licence agreement provided for exclusive jurisdiction of the Belgian courts.

In March 2019, VH issued proceedings in the Brussels Enterprise Court. In those proceedings, it raised the issue of whether VH’s and Unilever’s activities are within the scope of the Unilever licence. The validity of the patents is not in issue in the Brussels court proceedings.

So, the issue before the English Court of Appeal is whether to postpone further consideration of the case until the Brussels court has reached a decision.

At this point, the English Court of Appeal’s judgment becomes highly technical, and of more interest to international patent litigators than to simple transactional lawyers such as IP Draughts. At one point, the judgment focuses on a short phrase in a witness statement by VH’s solicitor, the highly experienced Ian Karet of Linklaters, where he mentions “invalidity of the patents in suit”. Much is made of this phrase in the litigation. It is held against him by Ablynx, for reasons that need not concern us here.

The Court of Appeal discusses the effect of the EU Recast Regulation, which was designed to fix the problem of the “Italian torpedo” (starting a patent action in Italy in the expectation that it would take years to resolve, and meanwhile no actions could be brought in other European jurisdictions).

These and other technical points take up pages of the Court of Appeal’s judgment.

IP Draughts will draw a veil over these unseemly issues, which he wishes to remain blissfully ignorant of. He will jump to the conclusion, which in the words of Lewison LJ is:

Accordingly, in my judgment article 31 (2) requires this court to stay “the proceedings.” I take that to mean the whole of the proceedings. Since the scope of the licence is an integral part of the action as whole, it makes sense in case management terms to stay the whole of the action until such time as the Belgian court (a) decides whether it has jurisdiction and (b) if it decides that it has, rules on the scope of the licence.

Result

I would allow the appeal; and stay the action until the Belgian court has made its ruling.

In other words, VH is successful in its application to stay the English proceedings until the Belgian court has made its decision.

The issue that interests IP Draughts is the scope of the two licence agreements. It is not the first time he has come across disputes between two licensees of a patent, where one is claiming that the other’s activities are infringing its rights. Sometimes, the issue is that the drafter has been careless in defining the field of each licence, such that there is an overlap. The overlap may not be obvious at the time the licence agreements are signed, but future product developments create an unanticipated problem.

Here, the situation is slightly different, in that the drafting of the VIB/Ablynx licence clearly excludes the Reserved Sector. In theory, there can be no conflict. The circles in the Venn diagram don’t overlap. Usually, if this is achieved, IP Draughts is content that his licence agreements are sound and well drafted, at least on the field issue.

So, if the product in question is a food, VH is licensed and does not infringe Ablynx’s exclusive rights. Despite this, so far the Dutch court has interpreted “packed food products” as excluding drugs delivered in the form of food, and the Belgian court has yet to decide. Who knows whether this question of interpretation will come back before the English court.

Is the word “food” so ambiguous? Perhaps it is. IP Draughts is still processing the question, and hasn’t come to a conclusion. Can any reader help him with his mental struggle?

 

 

 

 

 

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Royalty-stacking, blog-stacking

IP Draughts first posted the article linked below four years ago, when he was in Australia, and he reblogged it two years ago. It is worth posting again, as the subject – royalty-stacking clauses in licence agreements – is evergreen.

https://ipdraughts.wordpress.com/2015/02/03/royalty-stacking-clauses/

If you are now ready for that lecture on the architecture of Melbourne bungalows, do let IP Draughts know…

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Implied terms in licensing: items 21-30

This is the third in a series of articles that proposes a set of standard terms for IP licensing as part of a commercial code. When IP Draughts started this exercise, he tried to track the sequence of clauses in the UK Sale of Goods Act 1979 (SGA).

Now that we are in the middle of the SGA, IP Draughts is finding it more difficult to follow the SGA’s sequence of provisions. Contracts for the sale of goods raise some significantly different issues to IP licensing.

Once the exercise is complete, he will review the entirety and may well restructure it. But for now, let’s see where we get to. As before, this is not a finely-honed set of proposed terms. It is just a rough first draft for discussion. Following a suggestion on an earlier list, it is assumed that somewhere else in the code is a general statement that the parties can agree different terms in their licence agreement.

  1. Improvements and new IP. There is no implied term in a licence agreement that the licensor will communicate to the licensee any improvements to the [subject-matter of the licence agreement] made after the date of the licence agreement. Nor is there any implied obligation to license any new IP created by the licensor in respect of such improvements.
  2. Dealing with infringers. (1) In an exclusive licence agreement, at the request and cost of the licensee, the licensor shall take, or permit the licensee to take, reasonable action against third party infringers of the licensed IP. Where the exclusive licence is limited by field, such action may only be taken in agreement with the licensor and its licensees outside the field. After deduction of all legal costs, any damages or monies paid in settlement of infringing activities in the licensee’s field will be for the licensee’s account and will be subject to any royalty or other obligations to the licensor as if the damages or settlement payment were the sales revenue of the licensee. (2) In a non-exclusive licence agreement, the licensor has no obligations to take action against infringers and has no responsibility for any losses suffered by the licensee as a result of such infringement.
  3. Activities by purchasers from licensee. (1) Where a licensee supplies to third parties (“purchasers”) goods or services under an IP licence, whether by way of sale, gift or other permitted transaction, the licensor may not bring action against purchasers or their successor in title (direct or indirect) of those goods or services for infringement of the licensed IP arising from the [legitimate] use of those goods or services. (2) Where any goods and services described in sub-section (1) are sold subject to an express contractual restriction on their use, the provisions of sub-section (1) do not prevent the licensor from bringing action for infringement against anyone who is bound by such a restriction in respect of use that breaches the restriction.
  4. Independence; third party claims. Where a licensee develops, markets, sells or supplies products or services under a licence, or conducts other activities under a licence, the licensee acts on his own account and not as an agent, representative or partner of the licensor. Accordingly, the licensee must indemnify the licensor in respect of any claims against the licensor by a customer or other person that concern the licensee’s use of the licensed IP, except to the extent (if any) that the claim arises from a breach by the licensor of a term (express or implied) of the licence, or arises from a contractual indemnity given by the licensor to the licensee.
  5. Good faith. The parties to a licence agreement are under a general duty to act honestly and in good faith in their dealings with one another. The duty of good faith does not imply any prohibition on a party developing or commercialising goods, services or intellectual property that compete with the licensed IP or with goods or services supplied under the IP licence.
  6. Assignment of licence agreement. (1) The licensor may not assign the licensed IP to a third party except on terms that the assignee agrees to be bound by the licence agreement and perform all of the obligations on the licensor under the licence agreement, including passing on these obligations to its successor in title to the licensed IP. (2) A licence agreement is personal to the licensee, and accordingly the licensee may not assign or transfer any of its rights or obligations under the licence agreement.
  7. Subcontracting. A party to a licence agreement may subcontract the performance of any or all of its obligations under the licence agreement, provided that such party remains liable to the other party for that performance. Subcontracting may not, however, be used as a disguised way of sublicensing or assigning a party’s rights or obligations in breach of any express or implied terms of the licence agreement.
  8. Sublicensing. A licensee does not have any implied right to grant sub-licences under the licensed IP. But this provision does not affect the rights of a purchaser as described in [section 23] of this code.
  9. Duration and termination of licence. There is an implied term in a licence agreement that, unless the licence agreement states when it will expire, an IP licence may be terminated [by the licensee] [by either party] on reasonable notice. This implied term does not affect any express rights of termination stated in the licence agreement such as for breach or insolvency.
  10. Consequences of termination. Upon termination of a licence agreement, all licences provided for in the licence agreement automatically terminate.

No doubt some of these terms will be thought controversial. IP Draughts is interested to hear readers’ thoughts.

More to follow…

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