#19706 - 18. Modes Of Exploitation - Intellectual Property Law

WEEK 18

MODES OF EXPLOITATION

Pg. 688-694;

1. the ways patents are exploited

2. common forms of voluntary uses—namely, assignment and licence.

Exploitation by owner

• manufacture or use the patented invention themselves – presents few legal problems.

• nevertheless, difficulties may arise when the patent is owned by a number of different parties.

  • Where one co-owner is able to practise the invention without the consent of the other co-owners.

    • Dealt with contractually? ideally such a contract should also specify the obligations that the parties have to each other

    • No contract - the Patents Act 1977 declares that each of the co-owners is entitled to work the invention; they are permitted to use and benefit from their undivided share of the patent.

    • However, a joint owner cannot license others to use the patent without the permission of the other co-owners (to avoid opportunistic behaviour)

Assignment

• assign their interests to another party! (PA 1977, s. 30(2); s. 31(2) (Scotland)).

• assignment = a transfer of ownership of the patent (or application). As a result of an assignment, an assignee stands in the shoes of the assignor and is entitled to deal with the patent as they see fit.

once a patentee has assigned the patent, they remove their interest / responsibility to maintain, the patent

assignment must be in writing / signed by or on behalf of the assignor PA 1977, s. 30(6)

• In respect of a European patent application, it is necessary for the transaction to be signed by all parties: EPC, Art. 72.

• PA 1977, s. 36(3), (7) – where patent is owned by more than one party, all of the co-owners must consent to the assignment

Assignments need not be registered to be valid, nevertheless, certain advantages flow from registration…

Voluntary licenses

provides a party with permission to do an act that would otherwise be prohibited - no proprietary interest is passed under a licence (Allen & Hanbury v. Generics [1986] RPC 203, 246).

• A licence itself can be dealt with: PA 1977, s. 30(4)(a).

orally or in writing, express or implied (Crossley v. Dixon (1863) 10 HLC 293)

all of the co-owners must provide their consent for the licence to be valid – where jointly owned.

Diff forms of licensing

1. one-off permission

2. exclusive licence

   1. Promises that they will not grant any other licences, nor exploit the technology themselves.

   2. Consequence - exclusion of all others, including the licensor PA 1977, s 130(1);

Exclusive license

Very similar to an assignment but an exclusive licence does not need to be made in writing (Cf. the position in relation to copyright: CDPA 1988, s. 92)

• Something which says it is an exclusive licence might not actually be so: see Oxford Nanopore v. Pacific Biosciences of California [2017] EWHC 3190 (Pat), [2018] FSR (19) 586, [44(ii)] and Dendron v. University of California [2004] EWHC 1163 (Pat), [2004] FSR (43) 861, [9].

• It is possible for a licence to become or cease to be exclusive over its lifetime (Oxford Nanopore v. Pacific Biosciences of California [2017] EWHC 3190 (Pat), [2018] FSR (19) 586, [44(iv)])

Also possible to have more than one exclusive licence for a patent (whereas a ‘whole’ patent can only be assigned)

an exclusive licence confers powers on the licensee that are equivalent to those of the proprietor. They can sue infringers in their own right - they do not need to persuade the proprietor to take action on their behalf (PA 1977, s. 67.)

common license conditions

field of use restriction

• A licence may only grant a person a right to use the patented invention in relation to a particular type of product.

• This may be seen as anticompetitive for dividing the market: see Windsurfing International v. Commission, Case C-193/83 [1986] ECR 611.

Territorial restrictions

• Licensed for the whole or part of the United Kingdom.

• territorial restrictions on the disposal (sale) of products made under such a licence are at risk of being anticompetitive and so contrary to Pt 1 of the Competition Act 1998.

Best endeavours / reasonable endeavours clauses

• Licences may include an obligation on the licensee to use the licensee’s best endeavours (or reasonable endeavours) to do certain things, such as maximize sales of licensed products

• It is a requirement to work an invention; it provides important protection for patentees

• It is the only way the licensor can ensure that it makes money where a royalty is dependent on profits being made, turnover of product, or units being sold

• IBM United Kingdom v. Rockware Glass – “[Best endeavours mean a person is] bound to take all those steps in their power which are capable of producing the desired results … being steps which a prudent, determined and reasonable owner, acting in his own interests and desiring to achieve that result, would take.”

Most favoured licensee clauses

• A term which requires a licensor to offer an existing licensee the same (favourable) terms as a new licensee can be important, but a mechanism for the existing licensee to be notified and a procedure for those terms to be incorporated may be needed to make such a term effective.

Duty to account / allowing auditing of records

• require the licensee to produce accounts and to allow the licensee to inspect them // common term

• may also allow a licensor to query whether the books offered for inspection are the only relevant ones and he or she may demand that other books be produced where there is reason to believe they contain relevant information.

• the failure to provide the accounts will usually lead to the termination of the licence because it is auxiliary to the covenant to pay a royalty (Bower v. Hodges (1853) 13 CB 765, 75–6, 138 ER 1402, 1407)

Requirement to bring or defend proceedings for infringement

• requires a licensor to take reasonable steps to prevent infringement

• the licensor must take the steps a reasonably energetic patentee would take to protect what he or she thought was a valuable patent (Splendor Gloeilampen Fabrieken NV v. Omega Lampworks Ltd (1933) 50 RPC 393, 404)

no challenge clauses

• include a condition in the licence that the licensee will not challenge the validity of the patent

• usually a matter for competition law but where they do not offend competition law they are enforceable (Apple Corp. Ltd v. Apple Computer Inc. [1992] FSR 431).

Standard essential patents (non-exclusive license)

• Standard-setting arrangement – eg. the mobile telephone standards established by the European Telecommunication Standardization Institute

Mortgages

• patents may be mortgaged (or assigned as security for a debt) as a useful technique to enable patentees to raise the funds necessary to exploit the patented invention.

• a mortgage is achieved by way of an assignment of the patent by the patentee-mortgagor to the mortgagee-lender.

• This is subject to a condition that the patent will be reassigned to the mortgagor when the debt is repaid (or, as the law says, ‘on redemption’)

• Common practice - the reservation of an exclusive licence.

• Alternatively, a patent can be used as security by way of a legal charge, in which case there is no assignment

• a mortgage must be in writing and signed by the parties - PA 1977, s. 30(6). For joint proprietors, all of them must consent to the mortgage.

• need not be registered at the Intellectual Property Office to be valid, but there are advantages to registration,

  • where the mortgage or security relates to a patent owned by a company it is necessary to register it at Companies House

Limits on Exploitation- anti-competitive behaviour

Pg. 696-705.

When a patent owner exploits an invention, they must comply with the general laws and regulations.

• Patent owners are required to respect the rights of other patentees, and to comply with health and safety, environmental regulation, product liability, and criminal laws (Biotech. Dir. (98/44/EC), Recital 14).

the potentially anticompetitive effects of patent exploitation.

• Patent law has used various techniques to minimize the potential for abuse that a patent monopoly confers.

  • includes rules prohibiting the use of certain terms in patent licences

  • includes provisions permitting the use of patented inventions by third parties where the patent was being underused or misused by the patentee.

• It was more appropriate for the potential abuse of patents to be regulated by competition law than by patent law

  • Sections 44 and 45 of the Patents Act 1977 were repealed by section 70 of the Competition Act 1998.

The introduction of the Competition Act 1998 - chapter I prohibition (Competition Act 1998) – mirrors TFEU, Art. 101

• All agreements that affect trade within the United Kingdom and have as their the object or effect the prevention, restriction, or distortion of competition within the United Kingdom shall be void. (Competition Act 1998, s. 2)

• Nevertheless, certain types of agreement are exempt where they contribute to improving production or distribution or promoting technical or economic progress while allowing consumers a fair share of the resulting benefit are excluded from the prohibition (Competition Act 1998, s. 9)

• Exemptions depend on an individual assessment (now made by the tribunal ex post) or on whether the transaction falls within the scope of the block exemption

Limits on Non-exploitation: COMPULSORY LICENSES

Misuse of a patent - if the owner uses the patent to prevent the product from being manufactured or if demand for the product is being met from some other source.

In contrast to Trade mark law – there no obligation on a patentee to work, or to intend to exploit, the invention.

• Nevertheless,...