Patents: meaning of exclusive licence

By Audrey Horton

02-2018

The High Court has ruled on the meaning of exclusive licence in relation to the right of the licensee to bring an action under section 67(1) of the Patents Act 1977 (1977 Act) (section 67(1)).

Background

Section 67(1) provides that an exclusive licensee may bring patent infringement proceedings in its own name.

Section 130(1) of the 1977 Act (section 130(1)) defines "exclusive licence" as a licence from the proprietor of or applicant for a patent conferring on the licensee, or on him and persons authorised by him, to the exclusion of all other persons (including the proprietor or applicant), any right in respect of the invention to which the patent or application relates.

The High Court has held that the grant of a licence to a company "and its affiliates" was not exclusive even though the affiliates were under the company's control, but a licence subject to reserved rights including to grant a non-exclusive licence to the Hong Kong government in certain circumstances was exclusive (Illumina v Premaitha [2017] EWHC 2930). 

Facts

A patent was owned by H and licensed to O (the licence). The licence was stated to be an exclusive worldwide licence, but subject to a provision in a collaboration agreement between H and a third party which gave that third party the right to request a non-exclusive licence. No such request had been made.

O sued P for patent infringement. P counterclaimed for revocation of the patent. 

P applied to strike out O's claim on the grounds that, under the terms of the licence, O was not an exclusive licensee within the meaning of the 1977 Act so could not sue. 

Decision

The court held that, unless and until there had been a request from the third party, the licence was exclusive to O, so O was entitled to bring the claim against P. 

The question here was whether a licence was an "exclusive licence" within the meaning of section 130(1) if a third party had an option to take a licence under the patent, but had not yet done so. This exact question had never previously been decided by a UK court. No assistance was to be gained from other areas of intellectual property law, where the statutory regimes were different.

P argued that, as the Hong Kong government in Illumina had to satisfy certain conditions in order to request a licence, this differed from the licence where the third party had no conditions to satisfy in order to make the request. However, the Illumina criteria were not onerous, and so it was not appropriate to distinguish between that very low hurdle, and the similarly low hurdle of having to ask for a licence, which was the position here.

Whether or not a licence was an exclusive licence for the purposes of section 67(1) was a matter for English law. A licence which purported to be an exclusive licence might not necessarily be so. Identifying an exclusive licence depended on a proper construction of the document or documents. An exclusive licence would be expressly so; circumstances in which an exclusive licence would be implied would at best be rare. It was for the party asserting that it was an exclusive licensee to demonstrate this.

The assessment of whether or not a licence was exclusive was not fixed. An exclusive licence might confer on the patentee a power to convert the licence into a non-exclusive licence.

The essential element of an exclusive licence was that it was a licence to the exclusion of all other persons, including the patentee or applicant. It was possible to have a plurality of exclusive licences in respect of any one patent, but each exclusive licence could only be granted to one person: a licence would not be exclusive if granted to a number of entities, even if they were under the same control. An exclusive licensee could grant sub-licences to persons authorised by them.

There was a distinction to be drawn between a licence and an equitable right to call for a licence. Where an equitable right to call for a licence was conditional, the otherwise exclusive licence would remain exclusive unless and until those contractual conditions were fulfilled.

Comment

This is the first time a UK court has decided that a patent licence can still be exclusive when a third party also has an option to take a licence but has not done so. This decision sets out principles from case law which give clear guidance to those intending to draft exclusive patent licences. Provisions in collaboration agreements giving third parties the right to request a non-exclusive licence are not uncommon where the patent proprietor is an academic institution, and this decision, subject to any appeal, is helpful to those engaged in patent licensing for these institutions.

Case: Oxford Nanopore Technologies Ltd and another v Pacific Biosciences of California, Inc and another [2017] EWHC 3190 (Pat). 

First published in the January/February issue of PLC Magazine and reproduced with the kind permission of the publishers.  Subscription enquiries 020 7202 1200.

 

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