As we embrace 2023, it is worth reflecting on a UK decision handed down over the Christmas period, last year, which raises some interesting points on IP ownership .
The judgment runs to over 600 paragraphs. To save people time, we have covered two key issues coming out of the judgment in two separate articles. (Part 1 looks at the enforceability of university IP policies under consumer law. Part 2 looks at the statutory presumptions relating to IP generated by employees.)
In short, the judge held that PhD students are normally consumers. However, he dismissed arguments that the University's IP policy was unfair and therefore unenforceable against an ex-student's spin-off company.
Nevertheless, the judgement is noteworthy because it is the first time the UK courts have ever considered the fundamental principles of consumer protection law and their application to the respective roles of contributors to IP rights and the justice of distributions allocated to such contributors.
A profitable University of Oxford spin-off company (ONI) challenged Oxford University Innovation Ltd's (OUI) entitlement to various patents on consumer law grounds. The patents related to an invention created by ONI's CEO Mr Jing during his time at University of Oxford completing his DPhil (the equivalent of a PhD). OUI had licensed these patents to ONI and were demanding £700,000 of unpaid royalties.
The Patents Court found itself in the strange position of having to decide the following questions of consumer law:
- Did consumer protection legislation apply to Mr Jing as a DPhil student i.e. could he be said to be a “consumer”; and
- Was the University of Oxford's IP Policy unfair within the meaning of the Unfair Terms in Consumer Contracts Regulations 1999/2083?
The judge embarked on a lengthy analysis of the concept of "consumer" in academia, discussing not only PhD students, but undergraduates, postdoctoral researchers, and students on vocational or professional courses.
On one end of the spectrum he highlighted the vulnerabilities of sixth-formers applying for oversubscribed undergraduate degrees; few are likely to be confident and well-informed enough to contemplate challenging their prospective university's IP policies. As such, undergraduates usually fall on the “consumer” side of the line (but noting that the relationship between students and universities is not the same everywhere and can differ across member states). On the other end, he acknowledged that post-doctoral researchers and some students studying as part of their job will have protections and benefits due to their status as employees. In such cases it would not be appropriate to apply consumer law because the institution is buying the employee’s services not the other way round.
The judge concluded that DPhil and PhD students should normally be regarded as consumers, due to the lack of any employment relationship and their weak negotiating position relative to well-funded universities with access to experienced legal teams. Mr Jing was no exception.
Most of the debate around fairness focused on a clause in the University's IP Policy which asserted ownership of any IP created "by student members in the course of or incidentally to their studies."
The judge agreed that the clause may be unfair if referring to any invention created by students during their time at university. Such an interpretation would be out of line with policies at other universities; would go beyond IP provisions in national law (including those applicable to employees) and could deprive students of IP rights even where the University made a negligible contribution to the project.
When reading the University's IP Policy as a whole, the judge accepted that the University had intended an alternative, narrower meaning, limited to inventions arising directly from specific studies. The University had never tried to rely on the broader interpretation, and quickly altered the relevant clause once alerted to the issue.
The judge considered that the University's IP Policy was designed to deal with a wide range of students and researchers in varying circumstances. The fact that one interpretation of a blanket policy, never relied on in practice, could technically be viewed as unfair did not justify an overall finding of unfairness.
The claimant had failed to identify an unfair term in the University's IP Policy. The patent licence between OUI and ONI was valid and enforceable.
Guidance on consumer law in a higher education context has historically focused on undergraduates. This decision clarifies that postgraduate and vocational students will often also be classed as consumers.
Thought should be given to IP policies applicable to postgraduate, vocational students and interns from a consumer law perspective.
Universities and their commercial partners should be wary of:
- including and relying on an approach that causes a significant imbalance of rights e.g. overly broad provisions around IP ownership such as blanket wording that IP created that is “incidental to” the project/studies/their role is owned by the institution;
- wording that could be said to be contrary to “good faith” e.g. taking advantage of lack of experience or a weak bargaining position; or
- wording that would not have been agreed in individual contract negotiation.
More broadly, where a party is seeking to buy or invest in IP created by such students, it is worth considering the applicable IP policy that governed the relationship to assess whether there is a risk of it being held to be unfair and the possible impact of such a finding. One advantage of a judgment of this length is that it not only considers the applicable University IP policy, but it looks at comparator policies of various other academic institutions too. This case is likely to be a useful starting point in similar scenarios with a range of institutions.