Factual and Procedural Background
This action concerns a claim for unpaid royalties due to the Plaintiff pursuant to a licence agreement dated 29 April 2016 relating to intellectual property rights in a compact, super-resolution imaging device commercialised by the Defendant. The dispute centers on the entitlement to patents licensed under the Licence, specifically whether the Plaintiff validly owns rights to inventions made by an individual ("Mr Jing") who was initially a research intern and later a doctoral student at the University. The Defendant challenges the Plaintiff's entitlement to these patents, contending that the inventions were owned by Mr Jing rather than the Plaintiff.
The Plaintiff is the technology transfer arm of the University and the registered proprietor of the relevant patents. The Defendant was spun out from the University to commercialise the device and holds an equity stake in the Defendant. The individual inventor subsequently became chief technology officer and then CEO of the Defendant.
The Defendant admits non-payment of royalties since February 2019 but argues that the Licence is void for common mistake on the basis that the Plaintiff was not the rightful owner of the intellectual property rights licensed. The Defendant asserts the Licence contained no warranty as to ownership and that the mistaken assumption as to ownership was fundamental.
The legal issues were narrowed before trial to two main areas: (i) the application of section 39 of the Patents Act 1977 concerning ownership of employee inventions during Mr Jing's internship; and (ii) the effect of consumer protection legislation on the University's intellectual property regime as it affects Mr Jing as a doctoral student, particularly whether Mr Jing was a "consumer" under the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs) and whether the University's IP provisions were unfair under that legislation.
The case involved detailed factual findings about the development of the imaging device, the roles of the key individuals including Mr Jing and Professor Kapanidis, the commercialisation process, the structure of the Licence and the University's intellectual property policies. The court also examined the background and qualifications of Mr Jing, the nature of his internship and doctoral studies, and the extent to which he contributed to the inventions in question.
The Plaintiff sought payment of outstanding royalties and the Defendant argued for the Licence to be void. Attempts at resolution including mediation and expert determination had failed.
Legal Issues Presented
- Whether section 39 of the Patents Act 1977 operated to vest ownership of the relevant patent families in the University in respect of inventions made by Mr Jing during his internship.
- Whether Mr Jing was a "consumer" within the meaning of the UTCCRs when entering into his doctoral contract with the University.
- Whether the University's intellectual property provisions incorporated into the doctoral contract were unfair under the UTCCRs and therefore not binding on Mr Jing.
- Whether the Licence agreement is void for common mistake on the basis of mistaken ownership of the licensed intellectual property rights.
Arguments of the Parties
Defendant's Arguments
- The Licence is void for common mistake because the intellectual property rights licensed were owned by Mr Jing, not the Plaintiff.
- During Mr Jing's internship, there was no reasonable expectation that inventions would result from his duties, so ownership did not vest in the University under section 39 of the Patents Act.
- Mr Jing was a consumer under the UTCCRs when entering into the doctoral contract, and the University's IP provisions were unfair and therefore not binding.
- The University's IP policies are unfairly broad, blanket claims that vest rights in the University regardless of contribution, and provide inadequate compensation mechanisms.
- The equity and royalty sharing arrangements are unfairly weighted in favor of the University and senior academics at the expense of junior researchers like Mr Jing.
Plaintiff's Arguments
- Mr Jing was employed as an intern with duties that reasonably could be expected to result in inventions, so ownership vested in the University under section 39 of the Patents Act.
- Mr Jing was not a consumer under the UTCCRs because the doctoral contract was for the purpose of his profession or future profession.
- The University's IP provisions are not unfair; they provide a reasonable and balanced allocation of rights and benefits between the University and researchers.
- Mr Jing has received substantial benefits including significant royalty streams and equity stakes, which are comparable or better than those available to employees or researchers in other institutions.
- The Licence agreement is valid and royalties are properly due.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| LIFFE v Pinkava [2007] EWCA Civ 217; [2007] R.P.C. 30 |
Interpretation of section 39 of the Patents Act 1977 regarding ownership of employee inventions and the "reasonable expectation" test. |
The court applied the principles to determine that Mr Jing's inventions during his internship vested in the University because there was a reasonable expectation that inventions would result from his duties. |
| Benincasa v Dentalkit (Case C-269/95) |
Definition of "consumer" under the Brussels Convention for jurisdictional purposes, especially in dual-purpose contracts. |
The court distinguished contracts for private consumption from those for trade or professional purposes, holding that contracts concluded for future professional activities are not consumer contracts. |
| Gruber v Bay Wa AG (Case C-464/01) |
Further development of the consumer concept in dual-purpose contracts under the Brussels Convention. |
The court held that contracts with a non-negligible professional purpose are not consumer contracts, even if there is also a private purpose. |
| Schrems v Facebook Ireland (Case C-498/16) |
Interpretation of "consumer" status under the Brussels Regulation in the context of digital services. |
The court allowed a user to retain consumer status despite some professional use, emphasizing effective consumer protection. |
| Costea v Amurta (Case C-110/14) |
Definition of consumer under the UCTD and the requirement to assess objectively the purpose of the contract. |
The court held that even professionals may be consumers if the contract is not related to their professional activity. |
| Karel de Grote - Hogeschool Katholieke Hogeschool Antwerpen (Case C-147/16) |
Application of the UCTD to contracts with educational establishments and the obligation of courts to assess unfair terms of their own motion. |
The court held that educational establishments providing ancillary services act as suppliers under the UCTD and that courts must ensure consumer protection. |
| Pouvin and Dijoux (Case C-590/17) |
Clarification of the consumer concept under the UCTD, especially regarding contracts ancillary to employment. |
The court held that employees may be consumers under the UCTD for contracts other than employment contracts. |
| Aziz v Caixa d'Estalvis de Catalunya (Case C-415/11) |
Assessment of "significant imbalance" and "good faith" in unfair terms under the UCTD. |
The court emphasized comparing contract terms with national law and the need for terms not to depart conspicuously from legitimate expectations. |
| ParkingEye Ltd v Beavis [2016] AC 1172 |
Application of the unfair terms test and good faith in consumer contracts. |
The Supreme Court found a contractual term imposing a parking charge was not unfair, considering the context and consumer expectations. |
| Longley v PPB Entertainment Ltd & Ors [2022] EWHC 977 (QB) |
Significance of imbalance in unfair terms and practical operation of contract clauses. |
The court held that a clause was not unfair because its operation was limited and did not significantly imbalance the parties' rights. |
| Heriot-Watt University v Schlamp [2021] SCLR 249 |
Consideration of consumer status of doctoral students under the Brussels Convention/Regulation regime. |
The court held that the burden is on the individual to prove consumer status and that contracts for professional qualifications may not be consumer contracts. |
Court's Reasoning and Analysis
The court undertook a detailed factual and legal analysis of the issues concerning ownership of intellectual property rights and the application of consumer protection legislation to the contractual terms between the parties.
Regarding ownership during Mr Jing's internship, the court applied section 39 of the Patents Act 1977, concluding that Mr Jing's duties included development of the relevant inventions and that it was reasonable to expect inventions to result from his work. The Defendant's arguments based on Mr Jing's low status, youth, salary, and lack of direction were rejected as irrelevant or unfounded. The court held that the University properly owned the inventions made during the internship.
On the consumer protection issue, the court examined extensive EU and UK case law, distinguishing between the interpretation of "consumer" under the Brussels Convention/Regulation and under the Unfair Terms in Consumer Contracts Directive (UCTD) and Regulations (UTCCRs). It found that the UCTD concept of consumer is broader and less restrictive than under the Brussels jurisdictional rules.
The court considered the position of undergraduate students as consumers, supported by guidance from the UK Competition and Markets Authority and the regulatory framework, and reasoned that DPhil students share many relevant characteristics with undergraduates, including vulnerability and limited bargaining power, despite some differences such as greater experience and funding.
Applying this reasoning, the court held that DPhil students are normally consumers under the UCTD and that Mr Jing was not shown to be an exception. Factors such as Mr Jing’s prior experience, funding, and the similarity of his internship and doctoral work did not disqualify him from consumer status.
On the fairness of the University's intellectual property provisions, the court applied the statutory test for unfair terms, considering whether the terms caused a significant imbalance and were contrary to good faith. It found that, except for a provision claiming rights to IP created "in the course of or incidentally to" studies which was broader than other universities' policies, the provisions were reasonable and provided significant benefits to students, including royalty and equity shares, commercialisation support, and dispute resolution mechanisms.
The court found that the allegedly broad provision did not create a significant imbalance as it had not been applied unfairly in practice and was subsequently amended. The overall package of rights and benefits was comparable or better than those offered to employees or researchers in other institutions and commercial settings.
The court also emphasized the wide discretion universities have in setting IP policies within their charitable and public interest remit, and cautioned against judicial interference in policy choices where the policies are reasonable, thought out, and aligned with practices at comparable institutions.
Accordingly, the court concluded that the University's IP provisions were not unfair under the UTCCRs and that the Licence was valid and enforceable.
Holding and Implications
The court held that the University was properly entitled to the patent rights licensed under the Licence and that the Licence is not void for common mistake.
The Defendant's defence based on mistaken ownership failed, and the Plaintiff is entitled to payment of outstanding royalties. The court ordered an interim payment of £700,000 by the Defendant to the Plaintiff on account of accrued royalties, with further matters including final quantification and any appeal adjourned to a subsequent hearing.
The decision confirms that intellectual property provisions in doctoral student contracts may be subject to consumer protection legislation and that such provisions will be scrutinised for fairness, but that reasonable university policies, including those vesting IP rights in the university with benefit sharing arrangements, will be upheld if not unfairly applied.
No new precedent was set beyond the considered application of existing law to a novel fact pattern involving university spin-outs and student inventors. The judgment encourages the parties to resolve outstanding disputes and focus on the future commercial prospects of the technology.