The basics of patent law - assignment and licensing

The articles underpin Gowling WLG's contribution to Chambers' Global Practice Guide on Patent Litigation 2017, for which Gordon Harris and Ailsa Carter wrote the UK chapter.

Introduction

Any patent, patent application or any right in a patent or patent application may be assigned (Patents Act 1977 (also referred to as "PA") s.30(2)) and licences and sub-licences may be granted under any patent or any patent application (PA s.30(4)).

The key difference between an assignment and a licence is that an assignment is a transfer of ownership and title, whereas a licence is a contractual right to do something that would otherwise be an infringement of the relevant patent rights. Following an assignment, the assignor generally has no further rights in relation to the relevant patent rights. On the granting of a licence, the licensor retains ownership of the licensed rights and generally has some continuing obligations and rights in relation to them (as set out in the relevant licence).

Formalities

Assignment

Any assignment of a UK patent or application, or a UK designation of a European patent, must be in writing and signed by, or on behalf of, the assignor. For an assignment by a body corporate governed by the law of England and Wales, the signature or seal of the body corporate is required (PA s.30-31). With regards the assignment of a European patent application however, such assignment must be in writing and signed not just by the assignor but by both parties to the contract (Article 72 EPC).

Licence

There is no particular statutory provision regarding the form of a licence or sub-licence (exclusive or otherwise). However, in view of the advisability of registration (discussed below) and legal certainty, it is sensible that any licence be in writing. In addition, normal contractual formalities apply, such as intention to create legal relations, consideration and certainty of terms, etc.

Registration

Registration (with the UKIPO) of an assignment or licence is not mandatory. However, if the registered proprietor or licensor enters into a later, inconsistent transaction, the person claiming under the later transaction shall be entitled to the property if the earlier transaction was not registered (PA s.33). Registration is therefore advisable. Failure to register an assignment or an exclusive licence within six months will also impact the ability of a party to litigation to claim costs and expenses (PA s.68) and might, potentially, enable an infringer to defend a claim for monetary relief on the basis of innocent infringement (PA s.62).

The procedure for registration is governed by the Patents Rules 2007. The application should be made on the appropriate form, should include evidence establishing the transaction, instrument or event, and should be signed by or on behalf of the assignor or licensor. Documents containing an agreement should be complete and of such a nature that they could be enforced. A translation must be supplied for any documentary evidence not in English.

In practice (particularly in the context of a larger corporate transaction in which many different asset classes are being transferred, not just intellectual property), parties sometimes agree short form documents evidencing the transfer of the relevant patent rights and will submit these for registration. This can enable parties to save submitting full documents for the whole transaction, which may include sensitive commercial information that is not relevant to the transfer of the patent rights themselves.

Types of licence

A licensee may take a non-exclusive or exclusive licence from the licensor. The distinction between such licences is both legally and commercially significant.

On a basic level an exclusive licence means that no other person or company can exploit the rights under the patent and this means the licensor is also excluded from exploiting such rights. Exclusivity may be total or divided up by reference to, for example, territory, field of technology, channel, or product type. The extent of exclusivity generally goes to the value of the rights being licensed and will feed into the agreed financials. It is worth noting that the term "exclusive licence" does not have a statutory definition under English law, so it is very important to define the contractual scope of exclusivity in the relevant licence agreement.

In the event a licensor wants to retain the ability to exploit the rights in some way (for example an academic licensor may want the ability to continue research activities) then appropriate carve outs from the exclusivity should be expressly stated in the licence agreement.

A non-exclusive licensee has the right to exploit rights within the patent as determined by the licence agreement. However, the licensor may also exploit such rights as well as granting multiple other licences to third parties (which may include competitors of the original licensee).

Much less common is a sole licence, by which the patent proprietor agrees not to grant any other licences but gives the licensee the right to use the technology and may also still operate the licenced technology itself.

Compulsory licences

A compulsory licence provides for an individual or company to seek a licence to use another's patent rights without seeking the proprietor's consent. Compulsory licences under patents may be granted in circumstances where there has been an abuse of monopoly rights, but are very rarely granted in the UK.

An application for a compulsory licence can be made by any person (even a current licensee of the patent) to the Comptroller of Patents at any time after three years from the date of grant of the patent. In respect of a patent whose proprietor is a national of, or is domiciled in, or which has a real and effective industrial or commercial establishment in, a country which is a member of the World Trade Organisation, the applicant must establish one of the three specified grounds for relief. If satisfied, the Comptroller has discretion as to whether a licence is granted and if so upon what terms. The grounds are: