Exclusive patent licences under English law: Five pitfalls the licensee must avoid
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Katharine Stephens looks at four cases decided in the last few years and draws out of them five "rules" which exclusive licensees must follow if they want to retain the rights to sue infringers.
The patentee has given you exclusive rights under the patent, so when someone infringes that patent, you can sue them, right? The answer may not be straightforward. Although, under the UK's Patents Act 1977, an exclusive licensee has the same right as the patentee to bring proceedings for infringements committed after the date of the licence, the purported exclusive licence may not actually give the licensee the standing to sue.
According to the recent case law, licensees must follow the five "rules" set out below to ensure that the licence retains its exclusive character.
1. Don't allow the exclusive licence to be granted to anyone but you
It sounds easy to follow the requirement that exclusivity is only granted if the licence excludes all others, including the patentee. But in Illumina v Premaitha [1], the "exclusive" licence over one of the patents in suit (called 'Lo 1') was granted to "Illumina and its Affiliates". Illumina claimed that, because it exercised control over its affiliates, none of them could operate the licence without its authority. Hence, the licence was exclusive. The judge did not accept this submission. Under the licence terms, the affiliates did not need authorisation from Illumina to operate the licence because they were licensees in their own right. Therefore, the licence could not be characterised as an exclusive licence.
2. Don't grant an exclusive licence to another party
As an exclusive licensee, you can grant non-exclusive licences without undermining your status as an exclusive licensee. This is because you, as the exclusive licensee, still have the right to exclude all other persons, including the patentee, from working the invention. That position contrasts with the position that Illumina was in, because the licence to Illumina did not give it the right to exclude its affiliates from working the invention.
However, if you grant an exclusive licence of your rights to a third party, you will be supplanted as the exclusive licensee. This is what happened to the second claimant in Liqwd & Olaplex v L’Oreal [2]. For a six-week period, during which the claim form was issued, Olaplex…
