Further Hearing - Oxford University Innovation Ltd v Oxford Nanoimaging Ltd

Author John Speed   Source Wikimedia Commons

 

Jane Lambert

Patents Count (Daniel Alexander KC) Oxford University Innovation Ltd v Oxford Nanoimaging Ltd [2023] EWHC 138 (Pat) (25 Jan 2023)

On 23 Dec 2022, Mr Daniel Alexander KC delivered a remarkable judgment in Oxford University Innovation Ltd v Oxford Nanoimaging Ltd [2022] EWHC 3200 which I discussed in Patents: Oxford University Innovation Ltd v Oxford Nanoimaging Ltd on 23 Jan 2023 and in Student Inventors and their Universities - Ownership of IP in Inventions resulting from Students' Research on 26 Jan 2023.

Mr Alexander upheld a claim for royalties by Oxford University Innovation Ltd ("OUI") the technology transfer arm of Oxford University against Oxford Nanoimaging Ltd ("ONI").  The royalties were for a licence to work patents for inventions that had been invented by one of the University's research students while he had been working at Oxford as an intern and later on his doctorate.  The defence to the claim was that the University had not been entitled to those patents because the term that transferred the IP in his inventions to the University in his contract to study at Oxford was void under the provisions of the  Unfair Terms in Consumer Contract Regulations 1999.

The defence very nearly succeeded.  The deputy judge held that the student was indeed a consumer within the meaning of reg 3 (1) and that aspects of his contract with the University were capable of creating an imbalance to his detriment.  The only reason why he rejected the defence was that the detriment was offset by the benefits of working with the University.  OUI had paid for the patents and the development and marketing of the product that the student had invented.  It had subscribed to the share capital of ONI and had agreed to pay the student a portion of the royalties.

A further hearing took place on 25 Jan 2023 to determine the order that Mr Alexander should make as a result of his judgment and whether he should give ONI permission to appeal.  The issues before the learned deputy were:

• What further royalty payment should ONI make to OUI;
• What costs should be awarded to OUI;
• Whether certain documents should remain confidential even though they had been referred to by the court; and
• Whether ONI should have permission to appeal.

Mr Alexander delivered his judgment on those issues in Oxford University Innovation Ltd v Oxford Nanoimaging Ltd (Re Consequentials) [2023] EWHC 138 (Pat) on 26 Jan 2023.

Further Royalty Payments

ONI had paid the £700,000 that Mr Alexander ordered it to pay on 23 Dec 2022 plus a further sum that he did not quantify in the transcript of his 26 Jan judgment.  According to the deputy judge, moneys were still outstanding. The learned deputy ordered the outstanding sum less the further payment that had been made to be paid to OUI.

Costs

At para [3] of his second judgment, Mr Alexander said that there were five issues on costs:

"a. Should a percentage deduction be made to reflect ONI prevailing on the issue of whether Mr Jing was a consumer?
b. Should ONI be ordered to pay costs from 13 June 2020 on the indemnity basis?
c. Should the costs be the subject of summary assessment?
d. If not, what interim payment should be ordered?
e. Interest."

- Percentage Deduction

ONI submitted that it was entitled to a 25% reduction of the costs due to OUI on the grounds that the court had decided that the student had been a consumer and that the IP term created a significant imbalance to his detriment. OUI argued that it was the overall winner and that there are no suitably circumscribed issues justifying depriving it of any of its costs. The judge agreed with OUI. In his view, the issue of whether the inventor had been a consumer was not suitably circumscribed to justify such a reduction.  The evidence would have been the same even if the unfair terms point had not been taken.

- Indemnity Costs

OUI sought an order for its costs from 12 June 2020 to be assessed on an indemnity basis on the grounds that ONI had not engaged sincerely in settlement negotiations and ADR, it had not accepted OUI's Calderbank offer, it had delayed in delivering documents and making the payments that had been ordered by the deputy judge and it was seeking permission to appeal.  Mr Alexander held that none of those reasons justified indemnity costs.  There had been party-to-party negotiations as well as a mediation and early neutral evaluation in which ONI had participated.  A Calderbank was not to be treated as a Part 36 offer, especially if it contained no incentive, The alleged delays had taken place over the last month.

- Assessment of Costs

OUI sought a summary assessment of its costs while ONI argued for a detailed assessment in accordance with the usual practice.   Mr Alexander held that justice was best done by ordering an interim payment that aimed to be a realistic estimate of what would be awarded on a detailed assessment without shutting the parties out from pursuing such an assessment if they so wished. 

- Interim Payment
ONI had offered £850,000 by way of interim payment which the judge considered to be in the right ballpark but somewhat too low.  He ordered it to pay £925,000.

- Interest

ONI conceded that OUI was entitled to interest on its costs

Confidentiality

ONI did not oppose OUI'sapplication.  Mr Alexander said that an order of that kind was conventional but should not be a rubber-stamping exercise. The material referred to internal discussions and documentation of the Intellectual Property Advisory Group of the University and OUI which remained genuinely commercially confidential.  OUI sought the order because the contents of the documents could prejudice the company, the university or a third party.  The deputy judge held that the fairest way to balance the interests of open justice with commercial confidentiality was to make the order sought but to provide that the parties and any other person should have permission to apply to vary that part of the order upon adequate notice.

Permission to Appeal

The grounds of appeal were not disclosed in the transcript but it appears that permission was sought for the following reasons:

• The judge had failed to take the inventor's low salary and status into account when determining whether s.39 of the Patents Act applied; and
• He had applied the wrong test in determining that the impugned contract term was unfair.

As to the first point, he said that there is no arguable basis for contending that the court had applied the wrong legal approach when assessing whether an invention might reasonably be expected from Mr Jing carrying out his duties.  The issue was one of fact and not of law.  Salary and status were irrelevant to the question of whether an invention might reasonably be expected from employing an inventor. Similarly, the questions of fairness and good faith were issues of fact. No rational approach to the directive that the regulations implemented could lead to a different result.

Mr Alexander also observed at para [42] of his further judgment that if his previous judgment were overturned the following additional issues would have to be decided:

"a. Whether a term of a university student IP agreement which was held to be unfair under the UCTD because it was in theory capable of being interpreted and applied unfairly but which was in fact fairly interpreted and applied generally (and in the circumstances of the case) should nonetheless be treated as rendering the whole of the agreement (or a licence agreement founded on the basis of its allocation of proprietary rights) void – and, if so, on what basis.
b. Whether OUI was entitled to some rights in the patents or other rights licensed under the Licence, including on the basis that the inventors including two other University employees may remain properly named and were actual devisers or were otherwise entitled under whatever law was applicable.
c. Whether or to what extent there was an impact on the Licence if some of the rights licensed under the Licence or other rights remained validly vested (or arguably validly vested) in OUI.
d. Whether any issues of estoppel or similar may arise to protect the position of both ONI and Oxford (or others) who had operated on the basis that OUI was entitled to the rights.
e. How benefits obtained by those taking under the various agreements were to be re-allocated by way of restitution or other doctrines from and to parties and third parties if the Licence was void or the UCTD rendered the DPhil Contract void. "

He added that some of those issues were complex and could easily affect the rights of other investors and third parties.  The costs of the proceedings before him had already exceeded the royalties at stake.  It was expedient as well as just to bring the dispute to an end.

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