Commercialization of Intellectual Property

QUESTION 1 – ANSWER BOTH PARTS OF THIS QUESTION

(A) Jane has developed some very successful software products for her employer, a building design company, but does not think she has been rewarded sufficiently. She has decided to set up her own company to create and develop similar bespoke computer software to deal with building design. To assist her, Jane wishes to employ an old friend Peter, and also to engage a software consultant (who is based in Switzerland and who will work remotely) on a freelance basis. What IP ownership issues should Jane be aware of and what contractual provisions should Jane include in: (i) Peter’s contract of employment; (ii) the consultant’s contract; and (iii) the software development contracts with her company’s customers.

(B) Is it true to say that the most effective way to deal with a contractual dispute where the contract focus is on intellectual property rights is by arbitration rather than litigation?

QUESTION 2 – ANSWER BOTH PARTS OF THIS QUESTION

(A) Does the statement “No Contract, No Income. No Copyright, No Contract.” apply equally to other intellectual property rights? Use specific examples to illustrate your answer.

(B) Is a non-exclusive software licence more like the sale of a product or service than a licence of intellectual property rights?

QUESTION 3 – ANSWER BOTH PARTS OF THIS QUESTION

(A) If themajority of assets owned by businesses are intangibles such as intellectual property rights, why is it so difficult to use those assets as security against loans from banks or other lenders?

(B)Pol Engineering Limited wants to develop some technology and has approached a professor experienced in this field at a local university to assist. Pol has never previously done any research-based work with a university and wants to understand the implications of a decision to enter a Research and Development Agreement with the University for the production of some intellectual property-based results. Write a concise memorandum identifying the problems associated with a research based agreement of this sort and how those problems may be dealt with.

QUESTION 4

Wear-Tec Limited is a “Spin-Out” company from the University of Wessex. It’s shareholders are the University (20% of shares); Professor Smith and Professor Jones (30% each) and Dr Martin (20%). Wear-Tec was formed to commercialise two inventions devised at the University by Smith and Jones. Y

our client Abbie Ltd proposes to buy the shares in Wear-Tec. The inventions relate to magnetic fibres which can be woven into clothing and be used to monitor bodily functions such as temperature, heart rate and blood sugar to assist athletes in their training and to provide early warning signs for diabetes patients.

The University has obtained limited patent protection for the inventions in the UK, Germany, France and the USA. The patents are licensed to Wear-Tec by the University on an exclusive, permanent, Worldwide basis with a reservation allowing the University to use the patents for research purposes. The licence obliges Wear-Tec to use its best endeavours to commercialise the patented technology and, in five years time, Wear-Tec is obliged to pay the University an annual royalty of £100,000 per year.

Wear-Tec, as exclusive licensee, is taking action in the US against an alleged infringer, but the infringer has counterclaimed for invalidity on the grounds of lack of novelty. The case is due to be heard next year and Wear-Tec’s US patent attorneys have given an opinion of a 65% chance success in enforcing its patent and defeating the counterclaim. Wear-Tec is also the licensee of some patented technology owned by a Sri Lankan clothing manufacturer which it uses to fuse clothing seams together, an essential feature which maintains the quality of the magnetic fibres. The licence contains a provision entitling the licensor to terminate the licence at its sole option if there is a change in control of Wear-Tec.

Dr Martin is an ex-colleague of the Professors but is now in dispute with them. His initial investment in Wear-Tec was in a secret know-how process relating to strengthening the magnetic fibres. He created this process in his own time when he was a University of Wessex employee. Wear-Tec uses this know how in manufacturing the magnetic fibres. The only documentation relating to this is a letter from Martin to Wear-Tec which says that “…in exchange for me agreeing to assign my process technology to Wear-Tec, you will issue 20% of the shareholding to me”. He has his 20% shareholding but there is no other documentation relating to the assignment of his know how. Wear-Tec used two PhD students at the University – Lucy and Ben – to devise some software to enable fabric testing to take place.

Wear-Tec paid Lucy and Ben’s PhD fees. Lucy and Ben incorporated some Open-Source software in the software program they produced for Wear-Tec. Wear-Tec claims it owns the software and has licensed it to two other companies.

Wear-Tec employs four highly-skilled process technicians who use Dr Martin’s know how to strengthen the magnetic fibres before their incorporation into various types of fabric.

Wear-Tec has documented this process which it regards as a valuable trade secret. The engineers are unhappy at the sale of the company because they fear losing their jobs and are known to be in advanced discussions to move as a team to Wear-Tec’s main competitor. They have signed Non-Disclosure Agreements with Wear-Tec but otherwise have no restrictions in their contracts of employment. Wear-Tec uses two trade marks. The first “Wear-Tec” is registered as an EU trade mark and separately as a UK trade mark. The UK mark is being challenged by an existing trade mark owner who owns the mark “War-Tech”, a military clothing brand.

The second mark is a “WT” logo which Wear-Tec uses extensively, but is not registered. Wear-Tec has recently received a letter before action from lawyers acting for Warren Taylor, a famous footballer who is popularly known by his initials “WT”. The letter alleges that Wear-Tec” is engaging in unauthorised character merchandising by marketing a prototype range of athletic clothing incorporating its patented technology prominently bearing a “WT” symbol with the words “Wear-Tec” appearing underneath the letters.

Abbie asks you to act for it in relation to its proposed purchase of the Wear-Tec shares.

• Identify the main problem issues for Abbie in buying the shares in WearTec.

• How might these problems be overcome?

• Should Abbie structure the deal as an asset purchase rather than a share purchase and if so why?