WS 9 – EXPLOITING IP

LICENCES AND ASSIGNMENTS IN IP

• means of exploiting an intellectual property right when e.g. a supplier isn't in a position to exploit
PURPOSE them directly itself, or
• Ancillary to another arrangement, e.g. a distribution agreement e.g. allows distributor to use
suppliers trade marks, not strictly necessary but maybe beneficial if supplier wanting to sue for
infringement.

- NB. On assignment supplier will not realise ↑ in goodwill = adv of licence

FORMALITIES AND
CONSEQUENCES

Don’t have to
register BUT
SHOULD – in the
interest of L’ee

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COMMON TERMS Scope of licence
IN A TRADEMARK - describe exactly what licensee able to do i.e. services and for how long, may restrict licence to
LICENCE territory and state whether exclusive.
- What is licensee allowed to do?
IF GOING
- TM- specify goods on which TM can be used – otherwise licence is very wide preventing him
THROUGH
licensing other products (income stream)
AGREEMENT
MAKE SURE
Financial
THESE TERMS
- licensee paid by royalties, quantify sales (no.) allow licensor to check a/c provisions.
ARE INCLUDED
- Royalty % based most common
- Need system of recording sales and provision for reporting to L’or and auditing

Quality control
- v important, may → loss of goodwill or lose TM e.g. if product becomes generic/ mislead
public may→ revoke TM. State e.g. how mark is to be used/ minimum royalty to prevent non-
use of TM and it being revoked.
- Eg approve raw materials
- Avoids poor quality goods being associated with TM and damaging goodwill
- S.46(1)(d) misleading quality – BUT only partial revocation of product

Infringement by third parties

- licensor to control litigation (retain rights of control to avoid TM being revoked)
- L’or will want L’ee to cooperate and notify of any 3rd party infringement
- L’or should retain control over proceedings

Termination
- provide for ex-licensee from using TM after termination
- Make possible to terminate through breach / insolvency/ cease of trade/ change of control of
L’ee

Post-termination provisions
- Get L’ee to return all products so they are not dumped on the market damaging goodwill
- Get them to remove all images and not use them again

Registration
- e.g. licensee obliged to assist licensor if licensor registers and on removal at end of licence.

Territory
- May want to limit where L’ee can sell
- Possible selective distribution but this will restrict sales

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COPYRIGHT
LICENCES v. TM a) Generally simpler than TM licences, except software licences
LICENCES
b) Copyright protection not limited to UK unlike TM licence, therefore may have to limit licence to
certain countries

c) Quality control less important, copyright cannot be revoked.

d) Copyright cannot be registered

e) Copyright may require moral rights, if so, provide for in licence that author's name must be
mentioned on reproduction.

- Copyright assignments more common than TM assignments (only usually done if business
being sold)
May assign only part of the copyright
May be limited in time → assignement reverts back to assignor at end of licence
Copyright limited to territory treated more like exclusive licence rather than
assignment

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LICENCES AND IP STRUCTURE - SEE IP NOTES

1. LIST TERMS OF CONTRACT THAT ARE IN BREACH

- E.g. trademark used by Licensee beyond that granted to Licensor

2. CAUSES OF ACTION

- Breach of contract

- Copyright action
- Any defences: no moral rights for author if assigned REMEDIES =
SAME

- Trademark 1. damages
- E.g. s.10(3) - unfairly trading off reputation (similar marks, different goods) 2. injunctive relief
(order for
- Defences = different class (use); non-use; should never have been reg'd. delivery up
and/ or order
- Passing Off for account of
- Available even if being legitimacy of trademark being challenged profits on
infringement)
- → burden of proof
a) on goodwill
b) confusion (of public)

Answering a Breach of Licence Qu.

- What does L’or claim to own?

list the IPRs according to the facts

- What are the alleged breaches of agreement?

Say what and find the clause in the agreement

- Has the L’ee infringed those rights?

Say what they have done – refer to appropriate IP checklist

- Any Defences?

Refer to appropriate IP checklist

- What are the Remedies?

Refer to appropriate IP checklist

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IP RIGHTS AND THE FREE MOVEMENT OF GOODS (EC LAW)

GENERAL Some IP rights put owner in v powerful position e.g. it may:

Prevent competition (Art. 81) (see below)
Market Abuse (Art.82
Prevent goods being imported into a territory (Art. 28 & 30 free movement of goods)

ARTICLE 28 and Article 28

Article 30
- Prohibits quantitative restrictions (QR) or measures having an equivalent effect to a
quantitative restriction (MEQR)
- Art.28 only applies to restrictions imposed by MS (covers MS as they are laws created by MS
and can be enforced by MS courts)
- Applies because IP rights may restrict imports therefore interfere with common market

Article 30

- Permits MS derogating from Art 28 in certain circs, e.g. where measure is necessary for ‘ the
protection of industrial or commercial property rights’, covers IP rights such as patents.
- the national measure (ie, the law on patents) may be justified if it protects something about
the patent which needs protection.

- IP licence agreements can implement restrictions similar to distribution agreements

ARTICLE 81 - e.g. prohibiting research by licensee in same scientific field as patent
- e.g. field of use restriction

- IP rights can put their owners in dominant position and therefore the way owner uses the IP
ARTICLE 82 may lead to abuse of dominant position.

Doctrine of Doctrine of exhaustion, is a concept in intellectual property law whereby an intellectual property
Exhaustion of rights owner will lose or "exhaust" certain rights after the first use of the subject matter which is the subject
of intellectual property rights. For example, the ability of a trademark owner to control further sales of
a product bearing its mark are generally "exhausted" following the sale of that product.

The concept typically arises in the context of parallel imports, and may therefore be relevant
nationally, regionally or internationally, such that if a right becomes "exhausted" in one area or
jurisdiction, an intellectual property owner may not be able to enforce its rights in another area or
jurisdiction.

From class:

- Owner has a right to block but only to a certain extent

- IPR – the owner has a core rights given to each rights (eg patent = exclsuive right to use) this
specific subject matter can only be used once. Once it is exhausted there has to be free
movement of goods.

- Once you’ve had your one shot with your right then Art 28 / 81 overrides

BALANCING ART EC Treaty Article 295:

295 WITH THE - ‘This Treaty shall in no way prejudice the rules in Member States governing the system of
ABOVE property ownership.’ i.e. national laws re. Property ownership (inc. IP) prevail.

- → need to balance with competition and free movement of goods.

Art. 30 and 295 applied narrowly, ECJ says granting and existence of rights =
matter for MS, but exercise of the rights = matter for EC law therefore Art 28
applies
Specific subject matter

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 - I.e. What's granted when a right comes into existence, and EC law cannot interfere with it.
SPECIFIC
SUBJECT MATTER - Varies between rights:
patents: ‘ … the exclusive right to use an invention with a view to manufacturing
industrial products and putting them into circulation for the first time’ – Centrafarm
BV and Adrian de Pijper v Sterling Drug Inc Case 15/74.
- Therefore once owner has put patented product on mrkt, owner can no longer
use the patent to control what happens to product e.g. prevent importation.
- The rights are exhausted.

Trademarks… Centrafarm BV and Adrian de Pijper v Winthrop BV

- Similar effect to patents specific subject matter.
- Once owner has put TM on market, → rights exhausted and owner can no
longer control how distributor uses TM

Copyright…position less clear as national laws vary so much

IP RIGHTS AND COMPETITION (EC LAW)

ARTICLE 81 - Won't interfere with the core right themselves, but will do in terms of how they are exercised
(how the owner uses them).

- Art 81 applies to agreements, especially licensing agreements containing restrictions

- E.g. export bans, exclusive rights, field restricitions, research restrictions.

Possible exemption: Article 81(3):

• If owner of IP rights grants licence may encourage distribution of goods to consumer,
however distributor will want a form of licence before it takes on any obligations unless
it has protection from competition
• → restrictions maybe ok
• not much certainty

Vertical Restraints block exemption: Regulation 2790/99 Article 2.3:

- Exempts restrictions in licences of intellectual property rights if licences
ancillary to vertical agreement
- e.g. restrictions re. TM licence or copyright licence forming part of a
distribution licence.
- More certainty than Art.81(3)

Technology Transfer block exemption: Regulation 772/04:

- Similar to vertical restraints block exemption
- Patent licences, know-how licences and software copyright licences
- Know-how = technical info protected by law of confidentiality rather than by
patent.
- Same aim as last night, tries to exempt those restrictions which promote
distribution of tech.

ARTICLE 82 - I.e. abuse of a dominant position created by owner of IP rights

- E.g. Magill Case - where national court enforcement of IP rights (copyrights) = breach of Art.
82 (refusing to release copyrighted info where public demand)
- Microsoft - refused to give competitors access to certain info re, source code.

Compulsory licences
- Solution to the problem of the owner who refuses to let others use their IP
- Owners of some rights can be compelled to grant licences to businesses to
use the right
- Applicability varies from right to right.
- E.g. where owner not using right but using restriction to prevent others from
using it
- Where CL granted, licencee has to pay royalty and rules prescribe how
royalty is to be fixed.
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