Patents: Oxford University Innovation Ltd v Oxford Nanoimaging Ltd
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Patents Count (Daniel Alexander KC) Oxford University Innovation Ltd v Oxford Nanoimaging Ltd [2022] EWHC 3200 (Pat) (23 Dec 2022)
This was an action by Oxford University Innovations Ltd, ("OUI") to recover the royalties due under a licence agreement that it had entered with Oxford Nanoimaging Ltd. ("ONI") on 26 April 2016. OUI is a wholly-owned subsidiary of Oxford University. Mr Daniel Alexander KC, who tried the action as a deputy judge of the High Court, described OUI as "the technology transfer arm of the University". OUI owns the patents and other intellectual property rights relating to a compact, super-resolution imaging device known as the "Nanoimager". The device was largely invented by one Bo Jing initially while he was employed as an intern and later while he was a DPhil student at the University. Mr Jing is now a director and secretary of ONI which was incorporated to commercialize the Nanoimager. ONI refused to pay the royalties on the ground that OUI was not entitled to the intellectual property rights.
Defence
According to para [14] of Mr Alexander's judgment in Oxford University Innovation Ltd v Oxford Nanoimaging Ltd [2022] EWHC 3200 (Pat) ONI's defence was that the licence agreement was void for common mistake. ONI contended that it was Mr Jing, and not OUI, who was entitled to the IP that OUI had licensed. In particular, ONI argued that Mr Jing was entitled to key patents described as the “First and Second Patent Families”. It was ONI's case that both parties had entered the licence agreement on the common assumption that OUI owned those IP rights rather than Mr Jing, OUI denied that there had been a common mistake but accepted that if there had been such a mistake then OUI would not be entitled to the disputed royalties.
Issues
The learned deputy judge said at para [19] of his judgment that the issues were narrowed before the trial to two broad areas, of which each involves substantial sub-aspects.
(1) whether s.39 of the Patents Act 1977 operated to vest the First and Second Patent Families in the University; and
(2) whether the Unfair Terms in Consumer Contracts Regulations 1999 (“UTCCRs”) vitiates the licence agreement.
Mr Alexander said at para [9] that this was the first time that such issues had ever come before an English court.
Whether s.39 vested the First and Second Patent Families in the University
OUI relied on s.39 (1) (a) of the Act because Mr Jing had entered the University early in February 2013 not as a student but as an employee. S.39 (1) (a) provides as follows:
Right to employees' inventions.
(a) it was made in the course of the normal duties of the employee or in the course of duties falling outside his normal duties, but specifically assigned to him, and the circumstances in either case were such that an invention might reasonably be expected to result from the carrying out of his duties.
Although his job title was that of "intern", Mr Alexander noted at para [130] that his work "was not in substance much different from a short-term contract for a (highly specialised) industrial designer engaged and expected to work as part of a team on an established design project."
The leading case on the meaning and effect of s.39 (1) ) is LIFFE Administration and Management v Pinkava and another [2007] ICR 1489, [2007] BusLR 1369, [2007] 4 All ER 981, [2007] Bus LR 1369, [2007] EWCA Civ 217. The Court of Appeal summarized the provision as follows:
"(1) 'Normal' and 'specifically assigned' duties are mutually exclusive. Unless the invention was made under a duty falling within one or other description, section 39 (1) (a) cannot apply and the invention will belong to the employee.
(2) The key question is what was it that the employee was employed to do? The section focuses on the employee's 'duties', i.e. obligations. The primary source of a duty is the contract of employment.
(3) However, the contract is not the sole arbiter of the duty. The contract and the general nature of the job call for examination. Contracts evolve and the actions of employer and employee over time can give rise to an expansion or contraction. In the end, one is asking whether an employee is employed to innovate and if so what general sort of area those innovation duties cover.
(4) Normal duties are not limited to 'day to day' or 'primary' duties.
(5) The relevant date is the date on which the invention was made.
(6) For the section to apply the 'reasonable expectation' test must also be satisfied. This is not concerned with whether the particular invention was foreseeable but is addressed to whether "an invention" in general terms might result from the work."
The learned deputy judge reminded himself in para [239] of his judgment that general EU case law on the interpretation of the UCTD continues to be relevant and binding. He added at [240] that the judgments of the Court of Justice of the European Union ("CJEU") constitute "retained EU case law" pursuant to s.6 (7) of the European Union (Withdrawal) Act 2018 and continue to bind lower courts by virtue of s.6 (3).
"The principles to be derived from this survey of the relevant case law seem to me to be as follows:
1. The expression "consumer" for the purposes of Council Directive 93/13/EEC [to which the UTCCR 1999 gave effect] should be given an autonomous, Community-wide, interpretation, rather than one anchored to the particular jurisprudence of any individual Member State.
2. At least where the language adopted in Community instruments is substantially the same and they have as their objective, at least in part, the protection of consumers, a similar approach to the construction and application of the expression should be adopted unless the context and purpose of the relevant instrument requires a different approach.
3. It is a question of fact for the court seised of the dispute to decide the purpose or purposes for which a person was acting when entering into a contract of a kind which might be covered by the Directive; and it is similarly a question of fact as to whether he was so acting for purposes outside his trade, business or profession.
4. The court must resolve these factual issues on the basis of all of the objective evidence placed before it by the parties; but that evidence is not confined to facts and matters which were or ought reasonably to have been known to both parties.
5. Though the words of the Directive must ultimately prevail, a party will normally be regarded as acting for purposes outside his trade, business or profession if, and only if, the purpose is to satisfy the individual's own needs in terms of private consumption.
6. Furthermore, where the individual in question is acting for more than one purpose, it is immaterial which is the predominant or primary purpose; and he will be entitled to the protection of the Directive if and only if the business purposes are negligible or insignificant.
7. However, even where the objective purpose or purposes for which the individual was acting were, in fact, wholly outside his trade, business or profession, he may be disentitled from relying upon the protection afforded to him by the Directive if, by his own words or conduct, he has given the other party the impression that he was acting for business purposes so that the other party was and could reasonably have been unaware of the private purpose or purposes."
The case that came closest to the point that Mr Alexander had to decide was Heriot-Watt University v. Schlamp [2021] SCLR 249, [2021] ScotSAC Civ 12 (22/02/2021). The university was seeking to recover unpaid fees in the Scottish courts from a research student who lived in Germany. The student challenged the sheriff's jurisdiction on the grounds that he was a consumer and that the university should sue in Germany. The university replied that the student was not a consumer in that he had been employed in the fields of tax, accounting and auditing before he started the course. The degree that he sought was a “professional qualification”, closely connected to his self-employment as a consultant in finance and business administration. It alleged that he had been working part-time while carrying out research for his degree. The sheriff found for the student and the university appealed to the Sheriff Appeal Court.
OUI denied that the IP Provisions were unfair. It contended that they did not create a significant imbalance to the detriment of Mr Jing and were not contrary to the requirement of good faith. The terms on their face and as they have operated were favourable to Mr Jing and were in line with those in other academic institutions. If anything, they were more favourable than those that would apply to employees engaged in research in industry.
“The requirement of significant imbalance is met if a term is so weighted in favour of the supplier as to tilt the parties' rights and obligations under the contract significantly in his favour. This may be by the granting to the supplier of a beneficial option or discretion or power, or by the imposing on the consumer of a disadvantageous burden or risk or duty. The illustrative terms set out in Schedule 3 to the regulations provide very good examples of terms which may be regarded as unfair; whether a given term is or is not to be so regarded depends on whether it causes a significant imbalance in the parties' rights and obligations under the contract. This involves looking at the contract as a whole.”
“The requirement of good faith in this context is one of fair and open dealing. Openness requires that the terms should be expressed fully, clearly and legibly, containing no concealed pitfalls or traps. Appropriate prominence should be given to terms which might operate disadvantageously to the customer. Fair dealing requires that a supplier should not, whether deliberately or unconsciously, take advantage of the consumer's necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position or any other factor listed in or analogous to those listed in Schedule 2 of the regulations. Good faith in this context is not an artificial or technical concept; nor, since Lord Mansfield was its champion, is it a concept wholly unfamiliar to British lawyers. It looks to good standards of commercial morality and practice. Regulation 4(1) lays down a composite test, covering both the making and the substance of the contract, and must be applied bearing clearly in mind the objective which the regulations are designed to promote.”
Mr Alexander observed at [457] that even if a term creates a significant imbalance it may nonetheless meet the requirements of good faith if it has not taken advantage of a consumer’s necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract or weak bargaining position and does not depart conspicuously from a reasonably attentive consumer’s legitimate expectations as to the content of the contract.
The deputy judge directed himself at para [468] that the following principles apply to contracts with research students:
"(1) The court must consider the effect of the IP terms as part of the contract for educational services as a whole. All of the terms relating to the subject matter in question must be considered.
(2) The impact of the terms must be examined broadly and from both sides.
(3) Account should be taken of whether provisions favouring the university assignee of IP rights may also indirectly serve the interest of the DPhil student assignor, for example by making more readily available student places for research as well as facilities - such as assistance with spin out formation - for exploitation of IP rights as well as significant benefits from their exploitation.
(4) In considering whether a term in a DPhil student’s contract causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the student, the court should have particular regard to what the position would be in the absence of the term. One factor is what rules of national law would apply in the absence of the terms but that is not the only relevant comparator in a case of this kind. In particular, it can be appropriate to consider what the position may be under the IP terms in contracts with individuals making contributions to research with similar characteristics (such as contracts of employment of post-doctoral students or other researchers and others in industry) in so far as they are regulated by national law and the position in other institutions of a similar kind.
(5) As to “good faith” the court must consider whether the IP terms deliberately or unconsciously take advantage of a DPhil student’s indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position and other similar circumstances.
(6) The test as a whole involves deciding whether the IP terms depart conspicuously from an average generally informed and reasonably attentive consumer's legitimate expectations as to the content of a DPhil contract of this kind, whether such contractual terms are common, or are surprising, whether there is an objective reason for the significant imbalance to the consumer’s detriment in the IP terms.
(7) One important factor is whether the university could reasonably assume that the DPhil student would have agreed such a term in individual contract negotiations. A relevant factor in this evaluation is the extent to which the terms in question have been regarded as significantly unfair or has operated to create unfairness by others who are also subject to them."
In response to OUI's contention that he should consider (1) whether para 5 of the IP Statutet which transfers ownership of IP to the University causes a significant imbalance between the University and Mr Jing to the detriment of Mr Jing and (2) whether that term is contrary to the requirement of good faith, Mr Alexander thought that it was more appropriate to consider the IP Provisions in the DPhil Contract as a whole rather than just the terms relating to the transfer of IP and also what the student was getting in return as para 5 had to be looked at in the context of the contract as a whole.
"(i) to be remunerated fairly and potentially very generously through royalties and, potentially, an equity stake in any spin-out company;
(ii) to receive significant assistance (financial, commercial and advisory assistance) in protecting and commercialising the IP; and
(iii) to be protected against product liability claims arising from the exploitation of the IP."
Mr Alexander found at [639] that clause 5 of the IP Provisions was overbroad in claiming rights in IP created by students in that it was capable of creating an imbalance to the detriment of a student but such imbalance was not significant and para 5 had been made and proffered in good faith. It followed that the clause was not unfair and that the assignment of Mr Jing's IP rights to the University had been valid. The deputy judge gave judgment to OUI for the outstanding royalties and ordered ONI to pay £700,000 on account to OUI by 5 Jan 2023.
"(1) 'Normal' and 'specifically assigned' duties are mutually exclusive. Unless the invention was made under a duty falling within one or other description, section 39 (1) (a) cannot apply and the invention will belong to the employee.
(2) The key question is what was it that the employee was employed to do? The section focuses on the employee's 'duties', i.e. obligations. The primary source of a duty is the contract of employment.
(3) However, the contract is not the sole arbiter of the duty. The contract and the general nature of the job call for examination. Contracts evolve and the actions of employer and employee over time can give rise to an expansion or contraction. In the end, one is asking whether an employee is employed to innovate and if so what general sort of area those innovation duties cover.
(4) Normal duties are not limited to 'day to day' or 'primary' duties.
(5) The relevant date is the date on which the invention was made.
(6) For the section to apply the 'reasonable expectation' test must also be satisfied. This is not concerned with whether the particular invention was foreseeable but is addressed to whether "an invention" in general terms might result from the work."
It was common ground that Mr Jing had been recruited to work on developing a microscope called the "Small Setup". The deputy judge found he was employed to innovate in the sense of being specifically asked to drive forward the development of a compact single molecule fluorescence microscope of a type that did not then exist. He also found that Mr Jing was engaged at least in part because of his attributes which made it particularly likely that he would invent something. It was therefore reasonable to expect an invention to result from his fulfilling his duties.
ONI denied that that was the case. It pointed to Mr Jing's low status in the University hierarchy, his youth and relative lack of qualifications and experience, his very modest pay, the fact that his invention did not relate to the work on which he was employed to carry out and the lack of direction and modest level of support provided to him. Mr Akexander would have none of that. Mr Jing's status was irrelevant for the purposes of s.39. It was also untrue. He was hired to work on a potentially exciting project pending the start of his doctoral research and was replacing a post-doctoral researcher. His pay may have been less but his responsibilities were very much the same. His youth and lack of experience were also irrelevant to s.39 but in any case, they were not true. He had a very strong academic record and years of practical experience in microscope design. His basic pay was yet another irrelevant consideration and it did not take into account the payments he might expect under the University's IP provisions. The work he was employed to do related to microscopy and he received full support both from his boss and immediate superior.
Mr Alexander concluded at para [219] of his judgment that Oxford University was properly entitled to any inventions created in the course of Mr Jing’s internship (and specifically the focus control system of the invention on which he worked during his internship) pursuant to s.39 (1) of the Act.
Whether the UTCCR vitiated the Licence
On 20 Feb 2013, the University offered to admit Mr Jing as a graduate student. The offer incorporated the 'University Statutes relating to intellectual property' and the 'Council Regulations for the Administration of the University's Intellectual Property Policy' which together made up the IP Provisions. Mr Jing accepted the offer without challenging or seeking to renegotiate any of the IP Provisions.
ONI contended at trial that the IP Provisions did not bind Mr Jing because they were contrary to the UTCCR.
In order to succeed in that defence, ONI had to prove that Mr Jing was a "consumer" within the meaning of the UTCCR when he was offered his place at the University and that the IP Provisions were unfair.
In order to succeed in that defence, ONI had to prove that Mr Jing was a "consumer" within the meaning of the UTCCR when he was offered his place at the University and that the IP Provisions were unfair.
- Whether Mr Jing was a "Consumer"
The UTCCR are derived from Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts OJ L 95, 21.4.1993, p. 29–34 ("The Unfair Contract Terms Directive" or "UCTD"). Art 2 (b) of the UCTD defines a "consumer" as "any natural person who, in contracts covered by this Directive, is acting for purposes which are outside his trade, business or profession". ONI argued that the University's offer was for Mr Jing's education and not for the purposes of his trade, business or profession and thus within the definition of "consumer". OUI contended that the research degree was the qualification for Mr Bing's intended profession and thus outside that definition.
- The Legislation
Mr Alexander began his enquiry as to whether Mr Jing had been a consumer by considering arts 1. 2 and 3 (1) and (2) of the UCTD and the 6th, 9th and 10th recitals. He also referred to the Commission Notice Guidance on the interpretation and application of Council Directive 93/13/EEC on unfair terms in consumer contracts…(2019/C 323/04) which stated that the directive had a double objective:
“— the effective protection of consumers as the typically weaker party against unfair contract terms which are used by sellers or suppliers and have not been individually negotiated, and
— contributing to the establishment of the Internal Market through the minimum harmonisation of the national rules aiming at this protection.”
“— the effective protection of consumers as the typically weaker party against unfair contract terms which are used by sellers or suppliers and have not been individually negotiated, and
— contributing to the establishment of the Internal Market through the minimum harmonisation of the national rules aiming at this protection.”
- Continued Applicability of EU Law
The learned deputy judge reminded himself in para [239] of his judgment that general EU case law on the interpretation of the UCTD continues to be relevant and binding. He added at [240] that the judgments of the Court of Justice of the European Union ("CJEU") constitute "retained EU case law" pursuant to s.6 (7) of the European Union (Withdrawal) Act 2018 and continue to bind lower courts by virtue of s.6 (3).
- The Brussels (Recast) Regulation
He noted that the question of whether or not a party is a consumer arises in other legislation such as Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (recast) OJ L 351, 20.12.2012, p. 1–32 ("the Brussels Regulation) and the Convention that preceded it. OUI referred to Case C-269/95 Benincasa v Dentalkit Srl [1998] All ER (EC) 135, [1997] ETMR 447, [1997] ECR I-3767, [1997] ILPr 559, [1997] EUECJ C-269/95 and Case C-464/01 Gruber v Bay Wa AG [2005] ECR I-439, [2005] EUECJ C-464/01, [2006] WLR 205, [2006] QB 204, [2006] 1 WLR 205, [2005] ILPr 12, [2006] 2 WLR 205 where the CJEU had held that an individual who had entered a contract for business or professional purposes was not to be regarded as a "consumer" in respect of the exception to the requirement that a claimant must sue in the courts in which the defendant is domiciled.
On the other hand, the CJEU held at para [41] of its judgment in Case C-498/16, Schrems v Facebook Ireland EU:C:2018:37, [2018] WLR 4343, [2018] 1 WLR 4343, [2018] ILPr 11, [2018] WLR(D) 47, [2018] EUECJ C-498/16, ECLI:EU:C:2018:37 that "publishing books, lecturing, operating websites, fundraising and being assigned the claims of numerous consumers for the purpose of their enforcement do not entail the loss of a private Facebook account user’s status as a ‘consumer.’"
The CJEU summarized the state of the law in relation to the Brussels (Recast) Regukatuib as follows in para [91] of its judgment in Case C‑630/17, Anica Milivojević v Raiffeisenbank St. Stefan-Jagerberg-Wolfsberg eGen EU:C:2019:123, [2019] EUECJ C-630/17, [2019] ILPr 28, ECLI:EU:C:2019:123, [2019] 2 CMLR 25:
"As regards, more particularly, a person who concludes a contract for a dual purpose, partly for use in his professional activity and partly for private matters, the Court has held that he could rely on those provisions only if the link between the contract and the trade or profession of the person concerned was so slight as to be marginal and, therefore, had only a negligible role in the context of the transaction in respect of which the contract was concluded, considered in its entirety."
- The English Case Law
Mr Alexander also considered the judgments of Mr Justice Popplewell in AMT Futures Limited v Marzillier [2014] CTLC 190, [2015] 1 All ER (Comm) 374, [2014] 2 Lloyd's Rep 349, [2015] ILPr 18, [2014] WLR(D) 182, [2014] EWHC 1085 (Comm), [2015] 2 WLR 187, [2014] 1 CLC 531 and Mr Justice Andrew Baker in Ramona Ang v Reliantco Investments Ltd [2019] WLR(D) 248, [2019] EWHC 879 (Comm), [2019] 3 WLR 161 on where to draw the line between consumers and non-consumers for the purpose of the Brussels (Recast) Regulation in the context of cases involving individual traders in financial services.
The deputy judge referred to para [169] of the judgment of His Honour Judge Hegarty QC in Overy v. Paypal (Europe) Limited [2013] Bus LR D1, [2012] EWHC 2659 (QB) where he expounded the following principles:
"The principles to be derived from this survey of the relevant case law seem to me to be as follows:
1. The expression "consumer" for the purposes of Council Directive 93/13/EEC [to which the UTCCR 1999 gave effect] should be given an autonomous, Community-wide, interpretation, rather than one anchored to the particular jurisprudence of any individual Member State.
2. At least where the language adopted in Community instruments is substantially the same and they have as their objective, at least in part, the protection of consumers, a similar approach to the construction and application of the expression should be adopted unless the context and purpose of the relevant instrument requires a different approach.
3. It is a question of fact for the court seised of the dispute to decide the purpose or purposes for which a person was acting when entering into a contract of a kind which might be covered by the Directive; and it is similarly a question of fact as to whether he was so acting for purposes outside his trade, business or profession.
4. The court must resolve these factual issues on the basis of all of the objective evidence placed before it by the parties; but that evidence is not confined to facts and matters which were or ought reasonably to have been known to both parties.
5. Though the words of the Directive must ultimately prevail, a party will normally be regarded as acting for purposes outside his trade, business or profession if, and only if, the purpose is to satisfy the individual's own needs in terms of private consumption.
6. Furthermore, where the individual in question is acting for more than one purpose, it is immaterial which is the predominant or primary purpose; and he will be entitled to the protection of the Directive if and only if the business purposes are negligible or insignificant.
7. However, even where the objective purpose or purposes for which the individual was acting were, in fact, wholly outside his trade, business or profession, he may be disentitled from relying upon the protection afforded to him by the Directive if, by his own words or conduct, he has given the other party the impression that he was acting for business purposes so that the other party was and could reasonably have been unaware of the private purpose or purposes."
- UCTD Cases
At para [288] of his judgment, Mr Alexander noted that there was now specific, relatively recent, guidance from the CJEU addressing the concept of a “consumer” under the UCTD. He added that the case law made comparatively little reference to the earlier case law under the Brussels Convention. In Case C‑147/16, Karel de Grote v Romy [2018] EUECJ C-147/16, EU:C:2018:320, ECLI:EU:C:2018:320, the CJEU explained that the system of protection introduced by Directive 93/13 was based on the idea that the consumer is in a weak position vis-à-vis a seller or supplier, as regards both his bargaining power and his level of knowledge. That leads to the consumer's agreeing to terms drawn up in advance by the seller or supplier without being able to influence their content. The approach in de Grote was followed in Case C‑590/17, Pouvin and another v Électricité de France CLI:EU:C:2019:232, EU:C:2019:232, [2019] EUECJ C-590/17, [2019] WLR(D) 181, [2019] Bus LR 1114, [2019] 3 CMLR 14.
- Parallel Development of the Brussels Regulation and UCTD Case Law
- Parallel Development of the Brussels Regulation and UCTD Case Law
Mr Alexander noted at para [309] of his judgment that the judgment in Pouvin was given just a few weeks after Milivojevic on the Brussels Regulation. There was no overlap in the case law referred to. In Pouvin the case law and principles cited related to the UCTD and its purposes, in Milivojevic, the case law related to the Brussels Regulation. The deputy judge concluded that the CJEU must have considered it appropriate for this jurisprudence to develop along parallel tracks. He found real merit in ONI’s submission that it is not appropriate for a court to treat the evaluation of “consumer” under the UCTD as straight-jacketed by the earlier jurisprudence on the Brussels Regulation such as dual purpose contracts, It followed that he could not accept OUI's submission that it is necessarily the right approach to this case under the UCTD to adopt the framework of analysis of dual-purpose contracts of the Brussels Regulation case law.
- Schlamp
The appeal court allowed the appeal. It considered the UCTD cases but decided that they were of limited relevance because:
"Consumer in the context of jurisdiction is strictly construed because it is a departure from what should be the norm, namely the domicile of the defender. The same constraints do not apply to the definition of consumer in the context of substantive law of which Costea is a good example."
"Consumer in the context of jurisdiction is strictly construed because it is a departure from what should be the norm, namely the domicile of the defender. The same constraints do not apply to the definition of consumer in the context of substantive law of which Costea is a good example."
In the view of the appeal judges, the sheriff had applied the wrong test. The authorities on the Brussels Regulation had shown that there is an onus on a party invoking the special jurisdiction as a consumer to establish that status. The case of de Grote was irrelevant because it involved the interpretation of a Directive not concerned with jurisdiction but a very different issue.
- Further Guidance
Between paras [320] and [327] the deputy judge considered the burden of proof in Brussels Regulation and UCTD cases. He contemplated circumstances where an individual might have greater knowledge or expertise than other consumers or even suppliers in [328] and [329]. He acknowledged at [330] that some courses for business and professional purposes might fall outside the UCTD. Others certainly would not.
- Contracts between Students and Universities
Between [333] and [337] he discussed where the line should be drawn between consumers and non-consumers in contracts with universities and other higher education institutions. He addressed the situation of post-doctoral researchers employed under a contract of employment between [338] and [340], undergraduates between [341] and [364], vocational students between [365] and [378] and DPhil students between [391] and [412]. He concluded at [410] that "a DPhil student is normally entitled to be treated as a consumer under the UCTD and that it does not matter for this purpose whether the student is undertaking that educational qualification with a view to her career, profession and/or professional advancement."
- Applying that Guidance
Since the cases that Mr Alexander had reviewed required him to consider all the circumstances of each case, he considered whether there were any circumstances that affected Mr Jing's status as a consumer for the purposes of the UCTD between [413] and [424]. The learned deputy judge held at [425] that OUI had failed to show anything of the kind. It followed that Mr Jing entered the DPhil contract with Oxford University as a consumer.
- Whether the IP Provisions were unfair
Mr Jing claimed at para [224] that the IP Provisions were unfair for the following reasons:
(1) They involve a blanket approach as regards the circumstances in which they will be claimed which is too broad.
(2) They are more favourable to the University than comparable provisions applied at other universities.
(3) They produce the same results, in terms of ownership and share, irrespective of the actual contributions by those responsible and apply an unfair “one size fits all” approach.
(4) They unfairly hinder a student’s right to take legal action or exercise any legal remedy in respect of issues of ownership of intellectual property.
- The Issues to be resolved
At para [437] the deputy judge directed himself that he had to consider the following in order to resolve the above issues:
"(1) The general approach required by the UCTD to determine whether a term in a consumer contract is unfair.
(2) How the approach should be applied to intellectual property rights provision in contracts between universities and DPhil students.
(3) Whether the IP Provisions were unfair to Mr Jing, having regard to the relevant principles?"
- Legislation on Unfaurness
"(1) The general approach required by the UCTD to determine whether a term in a consumer contract is unfair.
(2) How the approach should be applied to intellectual property rights provision in contracts between universities and DPhil students.
(3) Whether the IP Provisions were unfair to Mr Jing, having regard to the relevant principles?"
- Legislation on Unfaurness
Art 3 (1) of the UCTD provides:
“A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer.”
Reg 6 (1) of the UTCCR also requires the following to be taken into account:
“…the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it is dependent”.
“A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer.”
Reg 6 (1) of the UTCCR also requires the following to be taken into account:
“…the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of the contract and to all the other terms of the contract or of another contract on which it is dependent”.
- Duty to Consider all Terms
With regard to taking account of all the terms of a contract when assessing the unfairness of a contract term, the deputy judge quoted the following passage of the CJEU's judgment in Case C-511/17 Lintner v UniCredit Bank Hungary Zrt [2020] WLR(D) 158, [2020] 3 CMLR 21, [2021] CEC 68, [2020] Bus LR 1570, ECLI:EU:C:2020:188, EU:C:2020:188, [2020] EUECJ C-511/17:
“[46] In that regard the Court has noted that, in accordance with Article 4 (1) of Directive 93/13, the national court must, in order to determine whether the contractual term on which the claim brought before it is based may be unfair, take account of all of the other terms of the contract (judgment of 21 February 2013, Banif Plus Bank, C-472/11, EU:C:2013:88, paragraph 41).
[47] That obligation to take account of all the other terms of the contract concluded between a professional and a consumer can be explained by the fact that the examination of the contested term must take into account all the elements that may be relevant to understanding that term in its context, in so far as, depending on the content of that contract, it may be necessary, for the purpose of assessing whether that term is unfair, to assess the cumulative effect of all the terms of that contract (see, to that effect, a judgment of 21 April 2016, Radlinger and Radlingerová, C-377/14, EU:C:2016:283, paragraph 95).”
“[46] In that regard the Court has noted that, in accordance with Article 4 (1) of Directive 93/13, the national court must, in order to determine whether the contractual term on which the claim brought before it is based may be unfair, take account of all of the other terms of the contract (judgment of 21 February 2013, Banif Plus Bank, C-472/11, EU:C:2013:88, paragraph 41).
[47] That obligation to take account of all the other terms of the contract concluded between a professional and a consumer can be explained by the fact that the examination of the contested term must take into account all the elements that may be relevant to understanding that term in its context, in so far as, depending on the content of that contract, it may be necessary, for the purpose of assessing whether that term is unfair, to assess the cumulative effect of all the terms of that contract (see, to that effect, a judgment of 21 April 2016, Radlinger and Radlingerová, C-377/14, EU:C:2016:283, paragraph 95).”
The deputy judge noted at para [432] that those provisions do not require consideration of how a particular term with the same or similar wording has actually operated in practice. Nor is it necessary to say that merely because it is possible to think of situations in which a particular set of terms may be interpreted, operated or applied in an unfair way, it follows that the terms are unfair.
- "Significant Imbalance"
As to the circumstances in which a contract term may cause a serious imbalance in the parties' rights and obligations, Mr Alexander referred to para [17] of Lord Bingham's speech in Director General of Fair Trading v. First National Bank [2002] 1 All ER 97, [2002] 1 LLR 489, [2001] UKHL 52, [2002] ECC 22, [2002] 1 AC 481, [2002] AC 481, [2001] 2 All ER (Comm) 1000, [2001] 3 WLR 1297, [2002] 1 Lloyd's Rep 489:
“The requirement of significant imbalance is met if a term is so weighted in favour of the supplier as to tilt the parties' rights and obligations under the contract significantly in his favour. This may be by the granting to the supplier of a beneficial option or discretion or power, or by the imposing on the consumer of a disadvantageous burden or risk or duty. The illustrative terms set out in Schedule 3 to the regulations provide very good examples of terms which may be regarded as unfair; whether a given term is or is not to be so regarded depends on whether it causes a significant imbalance in the parties' rights and obligations under the contract. This involves looking at the contract as a whole.”
The deputy judge added at [437] that although the focus is on the term in question, Lord Bingham's formulation contemplates consideration of whether the contract as a whole tilts the balance significantly in favour of the supplier. He added that it is possible that one term may do so but that term may be counterbalanced by another term which tilts the balance the other way.
Referring to Mrs Justice Ellenbogen's judgment in Longley v PPB Entertainment Ltd and others [2022] EWHC 977 (QB), Mr Alexnder noted at [449] that for a term to be treated as unfair, it is not enough to create an imbalance in the parties’ rights to the detriment of the consumer, such imbalance must be significant.
Referring to Mrs Justice Ellenbogen's judgment in Longley v PPB Entertainment Ltd and others [2022] EWHC 977 (QB), Mr Alexnder noted at [449] that for a term to be treated as unfair, it is not enough to create an imbalance in the parties’ rights to the detriment of the consumer, such imbalance must be significant.
- Requirement of Good Faith
Mr Alexander quoted Lord Bingham again for guidance on the requirement of good faith. His lordship said at para [17] of his speech in First National Bank:
“The requirement of good faith in this context is one of fair and open dealing. Openness requires that the terms should be expressed fully, clearly and legibly, containing no concealed pitfalls or traps. Appropriate prominence should be given to terms which might operate disadvantageously to the customer. Fair dealing requires that a supplier should not, whether deliberately or unconsciously, take advantage of the consumer's necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position or any other factor listed in or analogous to those listed in Schedule 2 of the regulations. Good faith in this context is not an artificial or technical concept; nor, since Lord Mansfield was its champion, is it a concept wholly unfamiliar to British lawyers. It looks to good standards of commercial morality and practice. Regulation 4(1) lays down a composite test, covering both the making and the substance of the contract, and must be applied bearing clearly in mind the objective which the regulations are designed to promote.”
The Unfairness Test with Regard to assigning IP Rights in Contracts with DPhil Students
"(1) The court must consider the effect of the IP terms as part of the contract for educational services as a whole. All of the terms relating to the subject matter in question must be considered.
(2) The impact of the terms must be examined broadly and from both sides.
(3) Account should be taken of whether provisions favouring the university assignee of IP rights may also indirectly serve the interest of the DPhil student assignor, for example by making more readily available student places for research as well as facilities - such as assistance with spin out formation - for exploitation of IP rights as well as significant benefits from their exploitation.
(4) In considering whether a term in a DPhil student’s contract causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the student, the court should have particular regard to what the position would be in the absence of the term. One factor is what rules of national law would apply in the absence of the terms but that is not the only relevant comparator in a case of this kind. In particular, it can be appropriate to consider what the position may be under the IP terms in contracts with individuals making contributions to research with similar characteristics (such as contracts of employment of post-doctoral students or other researchers and others in industry) in so far as they are regulated by national law and the position in other institutions of a similar kind.
(5) As to “good faith” the court must consider whether the IP terms deliberately or unconsciously take advantage of a DPhil student’s indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position and other similar circumstances.
(6) The test as a whole involves deciding whether the IP terms depart conspicuously from an average generally informed and reasonably attentive consumer's legitimate expectations as to the content of a DPhil contract of this kind, whether such contractual terms are common, or are surprising, whether there is an objective reason for the significant imbalance to the consumer’s detriment in the IP terms.
(7) One important factor is whether the university could reasonably assume that the DPhil student would have agreed such a term in individual contract negotiations. A relevant factor in this evaluation is the extent to which the terms in question have been regarded as significantly unfair or has operated to create unfairness by others who are also subject to them."
- The Effect of the IP Provisions
The deputy judge analysed the IP Provisions that were in force when Mr Jing was offered a place at the University as a research student between para [471] and para [477]. He studied changes to those regulations between para [478] and para [484]. He discussed the reasons for those changes between [485] and [492].
He then considered the parties' arguments as to whether the IP Provisions caused a significant imbalance in the parties’ rights and obligations. OUI contended that they did not because they conferred significant benefits on Mr Jing such as entitlements
(ii) to receive significant assistance (financial, commercial and advisory assistance) in protecting and commercialising the IP; and
(iii) to be protected against product liability claims arising from the exploitation of the IP."
He would have required a commercial partner to apply for patents and other IP rights and develop and market his inventions. Such a partner would have required a quid pro quo for its investment which would have been no less onerous.
ONI replied that the IP Provisions applied to any intellectual assets whether created in the course of a student's academic work or otherwise and that they were less favourable to students than the terms of other universities.
Mr Alexander stated that he would resolve the issue by considering the position of a DPhil student
(1) in the absence of the terms in question;
(2) in post-doctoral research employment in the same laboratory working on the same or a similar project; and
(3) by reference to the IP policies of other universities.
- The Position of a DPhil Student in the Absence of the Terms in Question
The deputy judge found that the student would be entitled to apply for patents and other IP rights but he or she could not expect any help from the University in prosecuting those applications or exploiting or enforcing any IP rights that might be granted. Moreover, the University or his collaborators might have their own IP rights which could prevent the full exploitation of the student's rights.
- The Position of a Researcher employed in the same Laboratory on the same Project
The deputy judge observed that the University would be entitled to apply for patents and other IP rights arising from the researcher's work but the researcher could look to the University to exploit and enforce those patents and he might qualify for remuneration under s.40 of the Patents Act 1977.
- Oxford’s IP Provisions as compared with those of other institutions
Evidence was collected by ONI's solicitors on the IP policies of Cambridge, Imperial, UCL, LSE, Edinburgh, Kings, Manchester, Warwick and Bristol which the deputy judge considered between para [515] and para [591].
- Conclusion on whether the IP Provisions created an Imbalance for DPhil Students Generally
Mr Alexander held at para [592]:
"To the extent that the IP Provisions claimed rights in DPhil student generated IP made 'in the course of or incidentally to their studies', this did create a potential imbalance between the student and the University in some circumstances to the potential detriment of some."
"To the extent that the IP Provisions claimed rights in DPhil student generated IP made 'in the course of or incidentally to their studies', this did create a potential imbalance between the student and the University in some circumstances to the potential detriment of some."
He set out his reasons between paras [593] and [598]:
"[583] First, there are those recognised by the University itself in IPAG ........
[594] Second, this term is capable of applying in a way that would be unfair in that it would deprive a student of rights to his or her IP in some circumstances in which the contribution of the University to its creation was negligible.
[595] Third, unlike an employee, a student is not paid to invent. To the contrary, the student generally pays to receive education. So, to require a student to assign rights to the University in that blanket way is, in my view, capable of being unfair and creating an imbalance to the student’s detriment.
[596]Fourth, this provision goes beyond national law and further than the provisions applicable to employees.
[597] Fifth, it is out of line with that in other universities.
[598] Finally, I think that Oxford recognised this in abandoning it, for the good reasons given by IPAG."
"[583] First, there are those recognised by the University itself in IPAG ........
[594] Second, this term is capable of applying in a way that would be unfair in that it would deprive a student of rights to his or her IP in some circumstances in which the contribution of the University to its creation was negligible.
[595] Third, unlike an employee, a student is not paid to invent. To the contrary, the student generally pays to receive education. So, to require a student to assign rights to the University in that blanket way is, in my view, capable of being unfair and creating an imbalance to the student’s detriment.
[596]Fourth, this provision goes beyond national law and further than the provisions applicable to employees.
[597] Fifth, it is out of line with that in other universities.
[598] Finally, I think that Oxford recognised this in abandoning it, for the good reasons given by IPAG."
He added at [599] that it remained to be considered whether such imbalance was significant and whether the IP Provisions were imposed in good faith.
- Whether the Imbalance was "significant"
The judge did not consider that the IP Provisions created a significant imbalance to the detriment of Mr Jing.
- Good Faith
He thought that the IP Provisions had been made and put forward in good faith.
- Effect on Mr Jing
There was nothing in the IP Provisions that were more unfavourable to Mr Jing than they were to other DPhil Students.
- Finding
Comment
From Oxford University's point of view, this was a close-run thing. Mr Alexander had held that the University's students were "consumers" within the meaning of reg 3 (1) of the UTCCR, that clause 5 of its IP Regulations was capable of creating an imbalance to the detriment of a student, The clause was saved only because the imbalance was not significant and it had been made and offered in good faith. This decision has implications for all universities and not just in the area of IP policy.
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