Out-Law News 3 min. read

Patents Court decision has implications for university researchers and IP policies


Universities in England and Wales are advised to review their intellectual property (IP) policies and terms relating to IP ownership and revenue sharing in contracts with researchers and students, following a recent High Court decision.

Cerys Wyn Davies, an IP expert at Pinsent Masons, said the dispute between Oxford University Innovation (OUI) and spin-out company Oxford Nanoimaging has raised challenging questions about IP terms in contracts between universities and researchers and students relating to IP they create or contribute to, and the fairness of university IP policies under consumer protection legislation.

The university’s technology transfer company, OUI, licensed Oxford Nanoimaging to use its patented compact, super-resolution imaging device. Oxford Nanoimaging said that it did not owe OUI £700,000 in royalties under the licence because the licence was unfair.

OUI said it owned the patents because of a contract with one of its researchers, Bo Jing, who had undertaken much of the developmental work on the imaging device while a researcher at Oxford – first an intern, then a DPhil student. He later became chief executive of Oxford Nanoimaging.

Oxford Nanoimaging claimed that the IP provisions in Jing’s contract with the university were unfair under EU consumer protection legislation, meaning that Jing was entitled to the patents and that the licence was void.

The Court ruled that during his internship Jing was employed to develop a specific type of microscope. In his judgment Daniel Alexander KC, sitting as a Deputy High Court Judge, found that Oxford University was entitled to any inventions created during the course of Jing’s internship, when he was an employee rather than a student, in line with section 39(1) of the Patents Act 1977.

Sarah Taylor, patent law expert at Pinsent Masons, said that “The application of section 39(1) is straightforward and the court’s finding is unsurprising. However, more complex and perhaps more interesting issues were raised in respect of the IP created by Jing during his time as a DPhil student, because of the arguments concerning the application of consumer protection legislation.” 

Such cases rarely come before the courts, and the judge noted that “There have been no decisions in England and Wales which deal with the applicability or impact of consumer protection legislation on terms relating to intellectual property rights of students or even how employed academics should be treated”.

Oxford Nanoimaging argued that Oxford University’s IP policy was unfair and unlawful under the Unfair Terms in Consumer Contracts Regulations 1999 (Regulations) (which was the legislation in force at the time the contract was entered into), which are derived from the EU’s Unfair Contract Terms Directive (Directive), because Jing was a consumer rather than an employee while studying for his DPhil. Specifically, they argued that Jing’s contract was for the purpose of his personal and private education, and he was not operating in the course of a business or his trade, making it a consumer contract covered by the Regulations. They argued that the IP ownership provisions contained in the contract were unfair and were therefore not binding on Jing.

The court said that undergraduate students would definitely be consumers and that an employed post-doctoral researcher would not. DPhil students had some characteristics of both categories. The court ruled that DPhil students could be treated as a consumer because, like undergraduates, they are not university employees and are not entitled to the range of protections available to those with an employment contract.

In deciding whether or not the IP terms in Jing’s DPhil contract were unfair or not the court looked at whether the terms were “contrary to the requirement of good faith” and caused “significant imbalance” in the parties’ rights and obligations “to the detriment of the consumer”, which is how the Directive defines unfairness.

The judge found that: “Even if a term creates a significant imbalance, it may nonetheless meet the requirements of good faith if it has not taken advantage of a consumer’s necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract or weak bargaining position…and does not depart conspicuously from a reasonably attentive consumer’s legitimate expectations as to the content of a contract.”

He found that, with the exception of one term, OUI’s IP provisions did not create a significant imbalance to Jing’s detriment, and that they had been put forward in good faith. Therefore, the provisions were not contrary to the Regulation or Directive and were not void. As a result, OUI was entitled to ownership of all of the licensed patents and the £700,000 in unpaid royalties. He refused permission to appeal.

Wyn Davies said “Lawyers advising on transactions involving university spin-outs should give additional focus to the ownership of IP rights, and will need to have a clear understanding of the extent of any student contributions. Where such contributions have been made the fairness of any university IP contract provisions pursuant to which key IP has been created will need to be assessed and any specific risks identified.”

Taylor said that “while the parties may still apply to the Court of Appeal for permission to appeal, the judge strongly discouraged them from doing so, noting that in his view an appeal would be of no value and create pointless market uncertainty.”

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