Rocep-Lusol v Lindal Dispenser: Post-Expiry Patent Royalties and the Modern Approach to Contractual Construction

1. Introduction

Citation: Rocep-Lusol Holdings Ltd v Lindal Dispenser GmbH (First Division, Inner House, Court of Session) [2025] CSIH 20.

The decision concerns a licence agreement for aerosol dispenser technology. Two sets of patents expired in 2018 and 2020 respectively, yet the contract purported to continue royalty, reporting and record-keeping obligations until 31 December 2023. The defender (licensee) refused to pay post-2020 royalties, arguing that:

once all patents had expired there could be no “Products…falling under the scope of protection” of a patent and therefore no royalties;
the licensor was in breach of its obligation to grant an “exclusive licence” after the final patent expired, entitling the licensee to withhold performance;
(initially) the post-expiry royalties were anti-competitive, though this argument was abandoned on appeal.

The commercial judge found for the licensor and ordered an accounting and payment of €273,891.84. The Inner House (Lord President, Lord Doherty delivering the opinion, and Lord Ericht) dismissed the appeal, thereby affirming that contractually agreed royalties can remain enforceable after patent expiry where the parties’ language—properly construed—supports that outcome.

2. Summary of the Judgment

Key holdings:

Construction of “Products” and royalty clause. The expressions “falling under the scope of protection of one or more of the Licensed Patents” and “falling under one or more of the Licensed Patents” mean technically falling within the claims of those patents, irrespective of whether the patents are still in force. Accordingly, the royalty obligation in §3(2) (Jan 2021 – Dec 2023) remains operative.
Exclusive licence obligation. §2(1) obliged the licensor to confer exclusivity only for as long as the patents subsisted. The parties could not sensibly have intended the licensor to grant impossible rights after expiry. Therefore, no breach arose and the licensee could not suspend performance.
Competition law defences. No breach of either UK or EU competition rules was made out; these grounds were not pursued on appeal.
Appeal dismissed. Both grounds of appeal failed; the decrees for accounting and payment stand.

3. Analysis

3.1 Precedents Cited and Their Influence

Wood v Capita Insurance Services Ltd [2017] UKSC 24 – Set out the modern “unitary, iterative” approach to contractual interpretation blending textual and contextual tools. The Inner House expressly quoted Lord Hodge’s guidance.
Arnold v Britton [2015] UKSC 36; Chartbrook v Persimmon [2009] UKHL 38; Rainy Sky – Cited for the principle of objective interpretation through the eyes of a reasonable businessperson.
Lagan Construction Group v Scot Roads Partnership [2023] CSIH 28 and FES Ltd v HFD Construction Group 2025 SC 51 – Emphasised that sophisticated contracts drafted by professionals are usually resolved by textual analysis unless ambiguity arises.
Bristol Repetition v Fomento (Sterling Area) (No 2) [1961] RPC 222 – Demonstrates enforceability of royalties post-patent expiry where so agreed; relied upon to show commercial orthodoxy of the arrangement.
Bondax Carpets v Advance Carpet Tiles [1993] FSR 162; Hansen v Magnavox [1977] RPC 301 – Additional illustrations of licences involving multiple patents and differing expiry dates.
Further references to Oxford Nanopore v Pacific Biosciences [2018] Bus LR 353 (exclusive licence not lost where third-party option unexercised) supported the court’s reading of “exclusive”.

3.2 Legal Reasoning

Textual coherence. The court examined the agreement’s structure: seven-year term (§9(3)); explicit two-tier royalty scheme (§3(1) and §3(2)); and broad, continuing obligations (e.g., §2(4) non-compete; §7 improvements). These clauses would be nonsensical if royalties ceased in 2020.
“Falling under the scope of protection”. Two rival constructions existed:
(a) “protected by an in-force patent”; or
(b) “within the claims of the patent, whether or not expired”.
Context—particularly the parties’ fore-knowledge of the 2018 and 2020 expiries—favoured (b). Otherwise §3(2) would be commercially pointless from the outset, contrary to the principle against rendering contractual language otiose.
Exclusive licence post-expiry. The court treated §2(1) as a grant limited to the life of the patents. Imposing an obligation to licence a non-existent right “would be absurd”. Thus, no “material breach” occurred to justify the licensee’s non-performance.
Iterative contextual check. After adopting the purposive meaning, the judges re-read the whole instrument to ensure harmony with reporting obligations (§4, §5) and the defined term “Year”, confirming consistency.
Business common sense. Though the court reached its view without relying on commercial common sense, it observed that continued royalties are common in multi-patent licences and reflect the lasting competitive advantage a licensee enjoys after expiry.

3.3 Impact of the Judgment

The decision is likely to resonate across three domains:

IP Licensing Practice. Scottish—and by extension UK—courts will enforce post-expiry royalty clauses where clearly drafted, aligning with US precedent (Brulotte v Thys restrictions do not apply in the UK). Licensors may now negotiate longer royalty tails with reinforced confidence.
Contract Drafting. Drafters must specify whether royalty triggers depend on patents being in force or merely on technology being within the patent claims. Ambiguity will be resolved contextually, potentially against the party seeking to avoid payment.
Litigation Strategy. Parties resisting post-expiry payments must address contractual wording head-on; arguments based on competition law will meet a high hurdle absent market-power abuse. The case also illustrates the Inner House’s willingness to salvage commercial efficacy over literalism.

4. Complex Concepts Simplified

Royalty “Tail”. Payments continuing after a patent expires or after other contractual milestones; often negotiated to spread consideration and reflect know-how or competitive restraints.
“Exclusive Licence”. A grant giving one licensee (to the exclusion of all others, including the licensor) the right to exploit a patent while it is in force. Post-expiry, the subject matter enters the public domain, so “exclusivity” ceases to be meaningful.
“Falling under the scope of protection”. Legal shorthand for “embodying, practising or otherwise using an invention as claimed in a patent”. The Court held that this phrase focuses on the technical overlap, not on the patent’s legal status.
Reclaiming Motion. Scottish term for an appeal from the Outer House (first-instance) to the Inner House of the Court of Session.
Iterative Interpretation. A method where the court oscillates between individual clauses and the contract as a whole, testing rival meanings for consistency and commercial coherence.

5. Conclusion

The Inner House has cemented a pragmatic, text-led approach to patent licence interpretation. Where sophisticated parties knowingly fix royalties extending beyond patent life, courts will uphold the bargain, provided the wording supports such an inference. The decision underscores four practical lessons:

Do not assume royalties end with patents; the contract speaks louder than assumptions.
Define critical expressions—“Products”, “Licensed Technology”, “royalty base”—with precision.
Expect courts to reconcile clauses to preserve commercial purpose rather than strike them down as meaningless.
Competition law is unlikely to void post-expiry royalties absent demonstrable market foreclosure or abuse.

Rocep-Lusol therefore stands as persuasive authority that, in Scots (and likely English) law, post-expiry patent royalties remain enforceable when they form part of an integrated commercial exchange, expressly bargained for, and untainted by competition concerns.