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Getting The Deal Through

Global overview

Fiona Nicolson and Claire Smith

Bristows LLP

Friday 04 January 2019


Introduction

Be in no doubt that licensing is an increasingly significant commercialisation vehicle. This guide, therefore, fulfils a very important role in providing perspectives from around the world.

Licensing can take many forms. It is used widely in many industries and particularly extensively in the life sciences and technology sectors. It also performs an important role in settling disputes and avoiding litigation. However, many licensing activities are carried out completely confidentially and it can be very difficult to obtain information about the ‘deal terms’, in particular the financial aspects. There have been calls recently both from the United States and elsewhere for more transparency in licensing, which would certainly be helpful for negotiating deal terms.

There have been a number of fascinating developments in licensing around the world in 2018, including in the United Kingdom where the Court of Appeal upheld the Unwired Planet decision, which was handed down by the first instance judge in the English High Court in 2017 (see below). With appeals expected on significant cases from 2018, including the possibility that Huawei may bring an appeal to the UK Supreme Court in Unwired Planet, and possible further litigation expected in other jurisdictions on FRAND in 2019, this remains an exciting time for businesses involved in licensing, as well as for their legal counsel.

Technology licensing

In Unwired Planet v Huawei ([2017] EWHC 711 (Pat)) the English High Court was willing to set a global fair, reasonable, and non-discriminatory (FRAND) rate and licence terms, and impose an injunction for failure to accept those terms. Conversely, a licensor who failed to grant a licence on terms established by the Court to be FRAND would be refused an injunction. The Court determined that there is and will only be one FRAND rate and set of licence terms between the given parties in a given situation. The Court of Appeal affirmed the decision in 2018 ([2018] EWCA Civ 2344).

The long-awaited decision followed the commencement of litigation between the parties back in March 2014, when Unwired Planet (UP) sued Huawei, Samsung and Google for the infringement of six of its UK patents. Five of these were standard essential patents (SEPs) that UP had acquired from Ericsson. These patents related to various telecommunications standards (2G GSM, 3G UMTS and 4G LTE) for mobile phone technology.

Despite continual disputes between the major players in the technology, media and telecommunications field over the past decade or so, in the vast majority of cases they have been able to agree licences without resorting to litigation. Where proceedings have been initiated, the parties usually settle, particularly given the time and expense required to take a FRAND case all the way to trial. This is why the upheld decision in Unwired Planet has made 2018 such an exciting and monumental year to those in the field, as the infrequency of a judicial opinion in this area means this was a rare opportunity to see how respected UK judges would approach a number of the unresolved questions regarding FRAND licensing.

2017 saw the European Commission release a roadmap towards a ‘Communication on Standard Essential Patents for a European digitalised economy’ and then the promised Communication itself. 2018 has seen other jurisdictions address standard essential patents licensing, including Japan’s Patent Office publishing its own ‘Guide to Licensing Negotiations involving Standard Essential Patents’. With the advent of 5G and the internet of things, including connected and autonomous vehicles (which will result in a greater use of standardised technology), inevitably there will be some exciting and interesting debates and developments ahead in this area. It appears that debate, and litigation, may well continue on a global scale for the foreseeable future.

Unified Patent Court

The new unitary patent and Unified Patent Court (UPC), is, as at the date of writing, still to come into existence. The UPC has now been ratified in the United Kingdom but has been delayed because it is facing a German constitutional challenge. Despite Brexit, the European Union (Withdrawal) Act 2018 has seen the United Kingdom show willingness to remain a part of the UPC when it (finally) arrives, although whether that will be possible remains to be seen. It is clear though that if and when the UPC does come into being, it will impact on licensing quite significantly; for example, only the proprietor of an existing European patent can opt out (or in) of the new system. Also, unitary patents have not been anticipated in most existing licences and will require some careful thought as to how such patents should be managed from an exploitation perspective, particularly where licensing a bundle of national patents on a country-by-country basis may have been the norm. With all of this in mind, if the UPC does finally go ahead in 2019, the majority of existing licences involving European patents may well need to be revisited to make sure they are fit for purpose.

Brexit

Brexit will also have an impact on licensing when the United Kingdom leaves the European Union at the end of March 2019 (or perhaps a later date depending on any agreed transitional arrangements). Where a licence has been granted for the whole of the European Union (such terminology is widely used in licensing) after Brexit, on a contractual interpretation this is likely to not include the United Kingdom.

International trends

Legislation

There have been a number of legislative changes in various countries across the world that will affect licensing in those territories. What is notable is the increased attention that competition law is receiving in a number of jurisdictions, with Vietnam passing a new law on competition in June 2018 (which is due to come into force on 1 July 2019) and the Australian Competition and Consumer Commission taking an increasing interest in settlement agreements in the pharmaceutical industry in Australia. This increased interest has also seen the Australian government accepting a recommendation that there should be reporting and monitoring obligations on companies to identify ‘pay for delay’ agreements.

In Europe, 2018 has also seen jurisdictions implement the EU Trade Secrets Directive (2016/943/EU), which was introduced to harmonise the protection of trade secrets throughout the European Union. A number of countries have also seen a change to, or a proposed re-drafting of, their trademarks legislation. In South Africa, proposals are being made to amend existing laws to take account of the fact that South Africa will implement the Madrid system for the international registration of trademarks, most likely in 2020. Elsewhere, Spain is in discussions over proposed new draft trade mark legislation and Finland will see a replacement to its 1964 Trade Mark Act at the beginning of 2019.

Other developments

It is reassuring to see that there is ongoing work on a global scale aimed at encouraging and supporting the growth of innovation and developments in a variety of technological fields. For example, on 8 February 2018, Brazil published a decree to enable its public administration to provide incentives in order to stimulate companies and institutions to cooperate and collaborate in the creation of innovative products, processes and services and to encourage technology transfers. Meanwhile, the Patent Office in South Africa is in the process of implementing substantive search and examination procedures for patent applications in the pharmaceutical and other chemistry-based fields (with plans to do the same for other technological fields in due course). In June 2018, Japan’s Ministry of Economy, Trade and Industry published its ‘Contract Guidance on Utilization of AI and Data’ to assist generally in the drafting of contracts in these areas. These topics are likely to remain globally significant in 2019, attracting increasing attention as developments in cutting edge and disruptive technologies progress.

Conclusion

2018 has seen some thought-provoking developments in the world of licensing, with further interesting developments expected in 2019, especially because technologies such as the internet of things and artificial intelligence are developing with remarkable speed. With the increasing importance of licensing across many industries and sectors, there is a real need for both lawyers and business people to understand and be familiar with both the commercial and legal aspects of licensing.

It is vital for all of us involved in licensing on a regular basis to keep up to date with the position internationally, not just in our own countries, on a wide range of topics ranging from intellectual property legislation to contract and competition law developments, and also recent court cases.

This guide is extremely useful in providing a comprehensive guide to licensing in more than 20 countries spanning Europe, the United States and Asia and has the authority of having been contributed to by many leading national and international firms.


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