Category Archives: Licensing

IP Draughts’ table of tables 2018

It’s that time of the year again, when the nights are drawing in, and IP Draughts prepares his traditional table of UK IP transactional lawyers. As in previous years, this table simply identifies UK lawyers who appear on both the IAM Patent 1000 list of UK patent licensing lawyers and the Chambers Directory list of UK transactional life science lawyers (which was published earlier today).

This year, the following individuals make it on to the list:

Highly recommended in IAM Patent 1000, recommended in Chambers UK Life Sciences
Laura Anderson – Bristows LLP
Mark Anderson – Anderson Law LLP
Malcolm Bates – Taylor Wessing LLP
Patrick Duxbury – Gowling WLG
Daniel Pavin – Covington & Burling LLP
Chris Shelley – Penningtons Manches LLP
Sally Shorthose – Bird & Bird LLP
John Wilkinson – Cooley LLP

Recommended in IAM Patent 1000 and recommended in Chambers UK Life Sciences
Richard Binns – Simmons & Simmons LLP
Allistair Booth – Pinsent Masons
Alison Dennis – Fieldfisher LLP
Jim Ford – Allen & Overy LLP
Michael Gavey – Simmons & Simmons LLP
Mark A Lubbock – Ashurst
Nicola Maguire – Cooley LLP
Lucinda Osborne – Covington & Burling LLP

There are two new names compared with last year: Richard Binns and Allistair Booth (both of whom are leading practitioners and IP Draughts thinks they should be in this table). Stephen Reese of Clifford Chance has dropped off the IAM list so does not make it into the above table. Some other worthy licensing lawyers fail to make the table as they are not recognised life science specialists, including Matthew Warren of Bristows. And some, such as IP Draughts’ partner Lisa Allebone, have made the IAM list and are recommended as “up and coming” in the IP section of Chambers, but have not yet made the UK Life Science list.

Congratulations to all of you!

Leave a comment

Filed under Intellectual Property, Licensing, News

A few practice points on drafting licences

When you draft a detailed IP licence agreement, or review someone else’s draft, numerous points of detail will probably need to be considered. Here are some points that came up during recent discussion of a draft licence agreement. They are not the most important issues in a typical licence agreement, but they illustrate how much thought the experienced drafter is likely to put into the wording.

The examples below are all concerned with the wording of the grant clauses.

  1. In an exclusive licence agreement, do you need to say “exclusive (even as to the licensor)…“? The words in italics are intended to clarify that the licence is exclusive rather than sole, as those expressions are commonly understood. In IP Draughts’ view, these words are unlikely to be necessary in the vast majority of cases, but if a client asks for them he will probably put them in.
  2. Does licence grant wording need to refer to granting a “right and licence”? IP Draughts thinks it is sufficient simply to grant a licence, unless there are special circumstances (e.g. if a joint owner permits the other joint owner to exploit on an exclusive basis, there is an argument for calling this a right). But he probably wouldn’t cross out the extra words from someone else’s draft.
  3. If the licence agreement states that the licensee is permitted to sub-license, should the relevant wording refer to multiple layers of sub-licensing (eg allowing sub-sub-licensing), if this is intended? Probably yes, to avoid uncertainty.
  4. Is there any advantage in saying that a licence is “perpetual and irrevocable” if it goes on to state that is subject to clauses allowing termination for breach or insolvency, and the agreement has a clause stating that, on expiry of the royalty term, the licensee has a continuing non-exclusive licence to use the licensed know-how? Probably not, in IP Draughts’ view.

Multiply these points by the number of clauses in a typical, detailed licence agreement, and you end up with dozens of points of drafting detail. Some of these points have immediate commercial significance, some are points of interpretations that may lie undisturbed until the parties have a dispute, and some are just points of drafting style, which reflect the considered choices of the drafter. The experienced drafter will have a mental checklist of drafting issues for clauses that they commonly encounter.

4 Comments

Filed under Licensing

Negotiating fair and reasonable licence terms

The recent case of Unwired Planet International Ltd v Huawei Technologies Co Ltd & Anor continues to provide much food for thought. This blog has previously commented on the poor drafting of the licence terms that the parties settled, and which the court declared to be “fair, reasonable and non-discriminatory”, or FRAND.

The more that IP Draughts thinks about the case, the more he comes to realise that this is really a case about contract negotiations that have got stuck, and where the parties want to reach agreement. Because the patents to be licensed were “standards-essential patents”, or SEPs, the parties were able to ask the court to settle the terms of their licence agreement. A by-product of the case being about SEPs is that the court had to decide on questions of the rules of standards-setting bodies, and competition laws, and conduct in litigation. These aspects of the dispute took up a lot of time and money, and led to some ground-breaking judicial comments. But the heart of the case was about what terms were reasonable in a patent licence agreement.

IP Draughts is writing an article about the transactional aspects of the case, which has so far reached about 8,000 words. He hopes to get it published by a legal journal in the next few months.

Looking at the case in this way enables you to broaden its application beyond the arcane world of SEPs and FRAND, which many IP lawyers don’t get involved with, as it tends to be something that large corporations do, in specific industry sectors such as telecommunications.

In IP Draughts’ world, perhaps the most obvious analogy is the terms of “access rights” to IP that parties to a Horizon 2020 research consortium are supposed to grant one another. The grant terms of the European Commission for this and similar research programmes include a great deal of detail on the IP licences that the collaborating parties are required to grant one another and external parties.

Consider, for example, the following terms, taken from the Multi-Beneficiary General Model Grant Agreement (Version 4.0 27 February 2017):

25.3 Access rights for other beneficiaries, for exploiting their own results
The beneficiaries must give each other access — under fair and reasonable conditions — to background needed for exploiting their own results, unless the beneficiary that holds the background has — before acceding to the Agreement — informed the other beneficiaries that access to its background is subject to legal restrictions or limits, including those imposed by the rights of third parties (including personnel).

‘Fair and reasonable conditions’ means appropriate conditions, including possible financial terms or royalty-free conditions, taking into account the specific circumstances of the request for access, for example the actual or potential value of the results or background to which access is requested and/or the scope, duration or other characteristics of the exploitation envisaged.

26.2 Joint ownership by several beneficiaries
Two or more beneficiaries own results jointly if:
(a) they have jointly generated them and
(b) it is not possible to:
(i) establish the respective contribution of each beneficiary, or
(ii) separate them for the purpose of applying for, obtaining or maintaining their protection (see Article 27).
The joint owners must agree (in writing) on the allocation and terms of exercise of their joint ownership (‘joint ownership agreement’), to ensure compliance with their obligations under this Agreement.

Unless otherwise agreed in the joint ownership agreement, each joint owner may grant non-exclusive licences to third parties to exploit jointly-owned results (without any right to sub-license), if the other joint owners are given:
(a) at least 45 days advance notice and
(b) fair and reasonable compensation.

31.3 Access rights for other beneficiaries, for exploiting their own results
The beneficiaries must give each other — under fair and reasonable conditions (see Article 25.3) — access to results needed for exploiting their own results.

 31.4 Access rights of affiliated entities
Unless agreed otherwise in the consortium agreement, access to results must also be given — under fair and reasonable conditions (Article 25.3) — to affiliated entities established in an EU Member State or associated country, if this is needed for those entities to exploit the results generated by the beneficiaries to which they are affiliated.

[Emphasis added.]

These are not necessarily the only situations in which parties must grant licences to background or foreground IP, but they are the main ones that IP Draughts found on a quick search of the model terms linked above. Nowadays there are multiple versions of the model terms for different research programmes.

There is, as far as IP Draughts is aware, little or no jurisprudence on what amounts to fair and reasonable conditions, or fair and reasonable compensation, in the context of EU-funded research programmes (though he is happy to be corrected).

Of course, in most cases parties simply agree terms without the need for judicial guidance. This is true for SEPs and for IP arising from EU-funded research programmes. In both cases, licensing has been happening for decades. But in case the parties decide to go to court over whether they have been fair and reasonable, the Unwired Planet case provides useful guidance that could be applied by analogy to the above-quoted EU terms.

As part of the article that he is writing, IP Draughts has come up with a 10-point plan for drafting and negotiating fair and reasonable (and non-discriminatory) licence terms, based on Mr Justice Birss’s judgment in the Unwired Planet case. The points may not be particularly clear without the surrounding, detailed commentary, but they are reproduced here for what they are worth. In its current draft form, the 10 points are as follows:

  1. Work with technical and patent attorney colleagues to identify or define the patents that are to be licensed. This may not be an easy task, particularly in the case of SEPs, where the list of SEPs may change during the lifetime of the licence.
  2. Unless the parties agree otherwise, ensure that the terms of the licence agreement comply with the detailed rules of the standards-setting body, or the European Commission’s terms of funding, as applicable.
  3. When drafting and negotiating the licence agreement, always take a reasonable position that can withstand scrutiny by a court.
  4. When negotiating the licence, don’t assert that any term is a ‘deal breaker’ (i.e. that it must be included in the licence agreement) unless you are certain that a court would regard that term as fair and reasonable.
  5. During litigation, it may be in each party’s interests to come up with complex models and criteria to justify a particular set of royalty rates, and the judge may echo this complexity in his judgment. But when it comes to drafting a licence agreement, try to agree royalty terms that are as simple as possible, as this will reduce the likelihood of further dispute over their application.
  6. Try to agree as many of the licence terms as possible, and ask the court only to decide major issues of principle.
  7. Where you agree terms without needing the intervention of the court, it is likely, but not inevitable, that the court will agree with your assessment that the agreed terms are fair and reasonable (and non-discriminatory).
  8. Except for points that are likely to be considered by the court as raising FRAND issues, the parties should draft and negotiate the licence agreement in the same way as any other patent licence agreement.
  9. Start your licence negotiations with a template licence agreement that has been drafted (a) in a clear, modern style, and (b) to be suitable for use under the law and jurisdiction of the contract. Don’t use a US template for an English law agreement.
  10. Involve a contract drafting specialist in your negotiating team, preferably one who has experience of drafting patent licence agreements.

Leave a comment

Filed under Legal Updates, Licensing

How should a FRAND licence agreement be drafted?

The English High Court, in the form of the excellent and youthful Mr Justice Birss, has recently conducted multiple, linked trials in a patent dispute between Unwired Planet and Huawei Technologies. The dispute partly concerns the licensing of the patents on FRAND terms.

The most recent hearing in the case of Unwired Planet International Ltd v Huawei Technologies Co Ltd & Anor [2017] EWHC 1304 (Pat) (07 June 2017) was concerned with deciding remedies following the main, non-technical trial referred to below. Attached to the judgment (at the link above) was a copy of the licence agreement that the parties were to execute.

It is a detailed agreement and runs to over 9,000 words. This article takes a look at the agreement and considers whether its terms are well drafted.

First, some background. This huge case was divided up into 5 technical trials and 1 non-technical trial; the non-technical trial was reported earlier this year and addressed the FRAND issues in detail.  In the words of the judge at that trial:

This judgment arises from the non-technical trial and relates to the patents which are or are said to be Standards Essential Patents or SEPs.  Part of the process of standardisation involves holders of patents which are essential to an international telecommunications standard declaring them as essential to the relevant standards body.  In this case that body is the European Telecommunications Standards Institute (ETSI).  The ETSI IPR Policy requires that a patentee declaring patents as essential to a standard commits to licensing those patents on FRAND terms.  FRAND stands for Fair Reasonable And Non-Discriminatory.  The judgment mostly concerns FRAND.

In other words, Unwired Planet had declared certain of its patents to be essential to certain international telecoms standards. In making that declaration to the relevant standards body, ETSI, Unwired Planet had undertaken to license the patents to anyone who asked, on FRAND terms.

The case is of great interest to the patent community because it is the first time (or the first significant time?) that a court has considered in detail what FRAND terms are.

The latest hearing was to decide what remedies to award, including injunctions and damages. It seems that the parties had agreed the detailed terms of the licence agreement after the non-technical trial and that it was agreed by the parties that the terms reflected Mr Justice Birss’s decisions in that trial.

Thus, the drafting of the licence agreement (as distinct from the principles it should follow) was down to the litigating parties, and not the judge. But anyone who negotiates a future FRAND licence agreement is likely to look to this case, and to the terms of this agreement, when structuring, drafting and negotiating their agreement. It could set a precedent for years to come. So, how does it stack up as an example of patent licence drafting?

It is certainly not the worst example of drafting that IP Draughts has seen. By comparison with the Google licence agreement, it is a model of professionalism. But it shows some signs of being bolted together at speed, perhaps by patent litigators rather than contract drafting specialists. IP Draughts’ first impression is that most of it seems workmanlike but old-fashioned. Some of the drafting belongs in a museum. IP Draughts would not recommend that future drafters use it as a template licence agreement.

It is quite possible that its lack of polish will never matter in the deal for which it was drafted. There may not be a dispute in which the drafting is scrutinised closely. Many contract disputes concern the facts rather than the drafting. And there are big, potential issues on the horizon in this case, that may be more more likely to result in a dispute than whether the drafting is clear and accurate. For example, what happens in 3 years’ time, when the current term of the licence agreement expires? Will the parties be back in court re-running their patent dispute, or will they quietly agree a new licence agreement?

Much of the drafting looks like something IP Draughts saw in IP law firms 30 years ago. In other words, a fair amount of IP expertise has gone into the document, but not much contract drafting skill. This article will focus on some obvious drafting points that jumped out at him when he read through the document.

The document is almost certainly based on a conventionally-drafted US template, though the agreement is stated to be made under English law and subject to the non-exclusive jurisdiction of the English High Court. That is not a great start. There are plenty of English templates for patent licence agreements that would have provided a better starting point. The agreement also includes English-sounding drafting, no doubt introduced by the parties’ English solicitors during the negotiations. Generally, the document looks like it is the product of multiple drafters, with no-one taking overall drafting control to ensure consistency. Examples of inconsistency include:

  • Misspelling (some of the time) of “principal” as “principle” – a common error among IP lawyers in IP Draughts’ experience.
  • The definitions mostly start with “means” but part way through the list they morph into “shall mean”.
  • We mostly have “sections” but in a couple of places we have “clauses”.
  • Numbers are mostly given in the format “two (2)”, but in several places this convention is not followed.
  • Section 5 is almost a caricature of inconsistent drafting. Section 5.2 refers to a “Third Party independent auditor”. Section 5.3, referring to the same person, calls him “the auditor” (fair enough) but Section 5.4 calls him “the Third Party auditor” and Section 5.5 calls him “any independent auditor”. It would have been much better to use consistent names throughout.

Other drafting is consistent but bad.

  • In 2017 we shouldn’t need to use old-fashioned, lawyerly words like “herein” and “hereinafter” in contracts.
  • In Section 4.11 “Licensor acknowledges and agrees to provide its business registration certificate to Licensee as required by mandatory Chinese law.” The drafter would have benefitted here (as in so many other places) from following Ken Adams’ categories of contract language. Why is this drafted as an acknowledgement and not a simple obligation, introduced by the word “shall”?
  • Section 6.4 states “All licenses and rights granted hereunder shall be terminated” but fails to include any lead-in language to clarify that this provision is a consequence of termination of the agreement.
  • In Section 7.2 we have an obligation to exercise “commercially reasonable best efforts”. IP Draughts hopes, deep in his heart, that this phrase was not proposed by any English solicitor who worked on the negotiation of the agreement.

Some of the terms are well thought through. IP Draughts was pleased to see a definition of “Have Made” that clarified that the manufacturer had to sell the products to the licensee, rather than third parties. In other words the have-made right shouldn’t be used as a disguised form of sub-licence. IP Draughts may make use of that definition, or something similar, in future.

In fact, many of the IP-related terms show signs of thoughtful care on the principles, if not the drafting. For example, IP Draughts was interested to see Section 2.5, which reads:

There may be countries in which Licensee and/or its Affiliates may have, as a consequence of this Agreement, rights against infringers of the Licensed Patents. Licensee hereby waives, and shall procure the waiver from its Affiliates, of any such right Licensee or any Affiliate may have by reason of any Third Party’s infringement of any such Licensed Patents.

Other aspects of the agreement seem strange, but IP Draughts doesn’t feel he has enough information about the deal to know whether they are creative, binding solutions or mistakes. For example in several places the licences are stated to bind the “respective predecessors, successors and assigns” of a party. IP Draughts criticises the use of the archaic “assigns” rather than “assignees”, but the rest is merely puzzling – how can a party bind a predecessor in title?

Overall, IP Draughts is left with a sense of a missed opportunity. He is quite prepared to believe that the parties and their lawyers are skilled and astute as IP litigators and negotiators, and that they take pride in the quality of their work. It is such a shame that they don’t appear to have recognised the need for the drafting of the agreement to be managed with the same level of skill and care as they applied to their own disciplines.

 

 

4 Comments

Filed under Licensing