When is an IP agreement between a university and a student inventor unfair?

In its last judgment of 2022, the Patents Court issued a decision in the case of Oxford University Innovation Ltd v Oxford Nanoimaging Ltd [2022] EWHC 3200 (Pat)). In this 650-paragraph judgement, the court ruled that students can in certain situations be “consumers” vis a vis the university under the Unfair Terms in Consumer Contracts Regulation 1999/2083) (UTCCR). In the case before it, however, the court ruled that the terms of the contract between the student and the university regarding the transfer of IP rights were not unfair and thus did not run afoul of the UTCCR.

Background

In early 2013, Mr. Jing was hired into a Laboratory at the University of Oxford as a research intern, and contributed to the development of a microscope (the Nanoimager). Thereafter, the Laboratory engaged Oxford University Innovation, the technology transfer office wholly owned by the University, to obtain patent protection for the Nanoimager.

In Oct 2013, Mr. Jing commenced his DPhil studies (PhD equivalent), signing a contract which included the University’s IP Provisions. As well, he contributed to the further development of the Nanoimager. In 2015, Mr. Jing co-founded Oxford Nanoimaging Ltd (ONI). In 2016, ONI licensed the Nanoimager from the University, whereby the University received royalties on ONI’s sales of the Nanoimager based on the terms of the IP Provisions.

The Nanoimager, from ONI's website

The claim made by the University was for the payment of royalties due since Feb 2019, which stood at over £700,000. ONI’s first defence was that there was a mutual mistake in the licence agreement that rendered it void; Mr. Jing, not the University, was entitled to the patent for the Nanoimager. Oxford responded that s.39 of the Patents Act 1977 applied such that the patent belonged to the University by operation of law.

ONI’s second defence was that if the University owned the patent, then the University’s IP Provisions were unfair under the UTCCR. Their argument here was that it would be unfair to pay the full £700,000. The Court was called upon to address whether students were “consumers”, and thus covered by the UTCCR.

Who owned the patent?

S.39(1)(a) provides that inventions made by employees shall be deemed to belong to their employer if they were made in the course of the normal duties or specifically assigned duties, and the circumstances were such that an invention might reasonably be expected to result from the duties.

The Court found that the Nanoimager was developed in the course of Mr. Jing’s normal duties. The Court noted that Mr. Jing had experience in setting up microscopes of a similar type at the time that he applied for the research intern position, and that he was hired at the Laboratory for the task of improving microscopes.

On whether it was “reasonable” to expect invention to be made by Mr. Jing as part of his duties, the Court rejected as irrelevant ONI’s submissions that Mr. Jing was young, inexperienced, had a small salary, and had low status in the University as a research intern. The Court found that Mr. Jing was hired as a research intern “at least in part because of his attributes”, which “made it particularly likely that he would make inventions”.

Therefore, the Court ruled that the University was properly entitled to any inventions created in the course of Mr. Jing’s internship under s.39(1).

Are DPhil students consumers?

The Court noted that UTCCR was based on the European Unfair Consumer Terms Directive 93/13/EEC, which states at Article 2: ‘consumer’ means any natural person who, in contracts covered by this Directive, is acting for purposes which are outside his trade, business or profession.

The Court adopted the CJEU’s approach in Costea to use “all the circumstances of the case, particularly the nature of the goods or service covered by the contract in question, capable of showing the purpose for which those goods or that service is being acquired” to determine whether a DPhil student can be a consumer.

The Court first considered two types of students – one whom was likely a consumer, and one of whom was not.

This InternKat may be a consumer

On the one hand, undergraduate students would be considered consumers. Reasons included that:

• Undergraduate degrees can be considered an “essential purchase” in order to enter into certain professions;
• Undertaking the course often requires significant expenditure, which leaves undergraduates financially vulnerable; and
• Undergraduates are often young and commercially inexperienced, often leading to an imbalance of negotiating power between them and universities.

On the other hand, post-doctoral research students are employed under a contract of employment. As such, they are employees, not consumers, and employment law would protect them.

The Court then focused on DPhil candidates, who are at an academic stage between undergraduates and post-doctoral researchers, and held that DPhil students are normally entitled to be treated as a consumer. This is because DPhils shared more traits in common with undergraduates than post-doctorate researchers, e.g., being focused on their field of study, DPhils may not devote sufficient attention to the detailed commercial terms of their contract when signing. Also, DPhils are not protected by employment law, unlike post-doctoral researchers.

Against this background, the Court rejected the University’s arguments that Mr. Jing should not be treated as a consumer, namely his experience working on microscopes and that he undertook the DPhil for later potential professional opportunities. The Court found these arguments unpersuasive, concluding that Mr. Jing was a consumer.

But unfair?

Though this part of the judgement was heavily focused on contract law, some significant points regarding student inventors were determined.

• In assessing unfairness, 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, e.g., by funding legal teams to help students with IP registration.
• Unfairness in a DPhil contract can be assessed in reference to the intellectual property rights terms in other higher-education institutions.
• Claiming ownership of all intellectual property devised made or created by student members “in the course of or incidentally to their studies” would be considered an overbroad term.
• An IP provision adopting a standardised approach to royalties or equity can operate either to the detriment of a student or a university, depending upon the respective contributions, and thus is not inherently unfair.

The Court concluded that the IP Provisions were not contrary to the UTCCR, and thus were not void.

Comment

The basic approach appears to be that the further along one is in their academic career, the less likely they are to be treated as a consumer. This leads this Kat to ponder: who is not a consumer - only a post-doctoral student?