Licensing

19 Aug 2017

A licence is permission to do something that would otherwise be unlawful.  The word derives from the Latin licere, to be allowed.  Everyone with a car knows about driving licences and just about everyone else knows that you need a licence to watch any TV broadcast on any medium in this country.

Familiar examples of licensing are also to be found in property law.  Nobody may enter private land without the owner's permission but postal, milk and newspaper deliverers, as well as political parties at election time, are allowed to enter yards and gardens to make their deliveries. Another familiar example of a licence is where motorists can park their cars in designated spaces either gratuitously or in return for a modest fee.

In the context of intellectual property, a licence means permission to do something that would otherwise infringe an intellectual property right such as manufacturing and distributing a patented product or loading and running a computer program.

Licences in intellectual property law can be express or implied. An express licence is one that is given in words which may be written or oral.  Express licences may be contractual or gratuitous. An implied licence is one that is assumed to exist from the circumstances. An example is the right to replace a vehicle's exhaust pipe which was the subject of the appeal in British Leyland Motor Corp and Others v Armstrong Patents Company Ltd and Others [1986] UKHL 7, [1986] AC 577, [1986] 2 WLR 400, [1986] RPC 279, [1986] ECC 534, [1986] 1 All ER 850, [1986] FSR 221, (1986) 5 Tr LR 97.

Contractual licences may be exclusive, sole and non-exclusive.
  • An "exclusive licence" is almost tantamount to an assignment or outright transfer. The intellectual property rights owner ("the licensor") transfers to the person acquiring the licence ("the licensee") all his or her rights for the duration of the licence including the right to stop everyone else, including the licensor, from infringing those rights. Such licences have to be made in writing and signed by the licensor or his or her agent.
  • A licence where the licensor grants rights only to one person but retains identical rights for himself or herself is known as a "sole licence". The licensee has the right to do things that would otherwise be infringements and he or she can stop the licensor granting similar licences to any other person for the duration of the term, but he or she cannot bring infringement proceedings in his or her own name. 
  • A "non-exclusive licence" is one that is granted in similar terms to any number of licensees. The licensees are allowed to do things that would otherwise be infringements but they have no right to enforce the intellectual property right. A good example of a non-exclusive licence is an end user licence agreement ("EULA") which allows a computer user to load, run and make a reasonable number of fair copies of computer software.
It should be noted that there is no such thing as a "sole and exclusive licence" in this country though the term sometimes appears in foreign licence agreements.

As licence agreements often contain terms that fall within the scope of art 101 or art 102 and the Chapter I and Chapter II provisions of the Competition Act 1998, they may require exemption under EU and UK competition law. Many licences can be exempted automatically if they can be brought within the scope of Commission Regulation (EU) No 330/2010 of 20 April 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practicesCommission Regulation (EU) No 1217/2010 of 14 December 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of research and development agreements or Commission Regulation (EU) No 316/2014 of 21 March 2014 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements.

Another competition law issue arises often in rapidly developing technologies such as mobile telecommunications. Manufacturers using those technologies find themselves obliged to obtain licences under patents or other intellectual property rights in order to comply with a technical standard. As compliance with those standards is usually in the interests of the holders of those patents and other IP rights, IP owners offer licences on terms that are fair, reasonable and non-discriminatory ("FRAND"). Such agreements must, of course, comply with EU and English and Welsh, Scottish or Northern Irish competition law. As is to be expected, different parties have different views on what amounts to fairness, reasonableness and discrimination which issues fell to be decided by Mr Justice Birss in  Unwired Planet International Ltd v Huawei Technologies Co. Ltd and another [2017] EWHC 711 (Pat) (5 April 2017) and Unwired Planet International Ltd v Huawei Technologies Co Ltd and another (#2) [2017] EWHC 1304 (Pat) (7 June 2017).

Yet another competition issue is the regulation of agreements bodies representing authors and other copyright owners such as collecting societies and content users such as broadcasters and universities. Such agreements are known as "licensing schemes" and they are covered by Chapter VII of the Copyright, Designs and Patents Act 1988. Differences arising between copyright owners and content users can be referred to a body known as the Copyright Tribunal which is governed by Chapter VIII.

Finally, be aware that the noun "licence" is spelt with a "c" and the verb "to license" with an "s" in this country. There is no difference in the spelling of the verb and noun in the USA. In neither country is the verb spelt with a "c".

Contact Jane Lambert on 020 7404 5252 during office hours for further information on licensing.

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