University Intellectual Property Policies for Student Led Research

The case of Oxford University Innovation Ltd v Oxford Nanoimaging Ltd [2022] EWHC 3200 (Pat) has clarified some interesting points around universities IP policies and how they impact upon PhD students and interns when creating work that may be commercially valuable.

The case was brought by Oxford University Innovation Ltd (Oxford), Oxford’s technology transfer company, against Oxford Nanoimaging Ltd (ONI), its spin-out company. Oxford claimed for £700,000 in unpaid royalties due to it under a licence agreement. The licence related to an imaging device which was developed at Oxford University and commercialised by the spin-out company. ONI claimed in its defence that the IP did not belong to Oxford and belonged to ONI’s CEO, Mr Jing. Mr Jing was employed by Oxford as a research intern and then became a DPhil student. He completed much of the detailed development work on the imaging device, before he left to become the CEO of the licensee. ONI further claimed that the university’s IP policy was unlawful as the terms were unfair under consumer protection legislation.

Who owned the IP created during Mr Jing’s internship?

It is important to note that Oxford was happy to have the case decided on the basis that Mr Jing alone devised the licenced IP.

As briefly outlined above, Mr Jing was contracted to work as an intern for a 7-month period for a single payment of £6000. Section 39 (1) of the Patents Act 1977 states the following in relation to rights to employees’ inventions:

Notwithstanding anything in any rule of law, an invention made by an employee shall, as between him and his employer, be taken to belong to his employer for the purposes of this Act and all other purposes if:

(a) it was made in the course of the normal duties of the employee or in the course of duties falling outside his normal duties, but specifically assigned to him, and the circumstances in either case were such that an invention might reasonably be expected to result from the carrying out of his duties; or
(b) the invention was made in the course of the duties of the employee and, at the time of making the invention, because of the nature of his duties and the particular responsibilities arising from the nature of his duties he had a special obligation to further the interests of the employer’s undertaking.

ONI argued that due to a variety of reasons including Mr Jing’s low status in the university hierarchy; youth and lack of qualification and experience and very modest pay the university was not properly entitled to the inventions created in the course of his internship as the inventions could not be reasonably expected of him. This argument was unsuccessful and the judge concluded that Mr Jing was employed to invent and Oxford was entitled to the inventions created.

Was Mr Jing a consumer?

One of the fundamental questions of the case was whether a DPhil contract, which transferred title to a student’s inventions, breached the Unfair Terms in Consumer Contracts Regulations 1999.

The Unfair Terms in Consumer Contracts Regulations 1999 in section 3(1) defines a consumer as, “any natural person who, in contracts covered by these Regulations, is acting for purposes which are outside his trade, business or profession”.

ONI argued the DPhil contract was for the purpose of Mr Jing’s personal and private education and therefore he was not acting in the course of his trade, business or profession when making the contract. OUI argued the opposite.

The judgment discusses two advice documents by the United Kingdom Competition and Markets Authority (CMA) which gives guidance on contracts with students.

The advice document to students states, “consumer law will generally apply to the relationship between universities and undergraduate students, as undergraduate students will generally be studying for purposes which are outside their trade, business or profession.”

The judge recognised that the guidance had no formal legal status however, due to its reasoning and approach, treated it as persuasive and discussed the similarities between DPhil students and undergraduate students, some of which included:

1. A DPhil, or its equivalent, is for a significant number of jobs an absolute requirement.
2. A significant number of DPhil students are likely to have debt given the cost of a university degree. Foreign students may be less likely to feel as though they could challenge contractual provisions required by UK universities.
3. Postgraduates may not be well experienced with commercial matters.

The judge concluded that DPhil students are normally entitled to be treated as consumers and that Oxford failed to show it would be wrong to treat Mr Jing as a consumer.

Were the terms vesting the IP unfair?

ONI claimed that:

1. The university’s IP provisions stating that the university could claim patent rights in respect of inventions made by a DPhil “in the course of or incidentally to” their studies was a blanket claim and too broad to be fair;
2. Even if it could be justified, the terms of compensation are unfairly weighted towards the University and against the DPhil students;
3. The terms are more favourable to Oxford than comparable provisions applied at other universities;
4. Produce the same ownership and share results regardless of the actual contributions of those responsible and apply an unfair “one size fits all” approach; and
5. Unfairly hinder a student’s right to take legal action in respect of issues of ownership of intellectual property.

Oxford stated that their terms were not unfair as they do not create a significant imbalance to the detriment of Mr Jing and are not contrary to the requirement of good faith. They further stated the terms have operated to the benefit of Mr Jing and were in fact more favourable than those that would apply to employees in the research industry.

The Test

The unfairness test was summarised as follows:

1. The court must consider the effect of the IP terms as part of the contract for educational services as a whole. All of the terms relating to the subject matter in question must be considered.
2. The impact of the terms must be examined broadly and from both sides.
3. 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.
4. In considering whether a term in a DPhil student’s contract causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the student, the court should have particular regard to what the position would be in the absence of the term.
5. Regarding “good faith” the court must consider whether the IP terms deliberately or unconsciously take advantage of a DPhil student’s indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position and other similar circumstances.
6. The test as a whole involves deciding whether the IP terms depart conspicuously from an average generally informed and reasonably attentive consumer’s legitimate expectations as to the content of a DPhil contract of this kind, whether such contractual terms are common, or are surprising, whether there is an objective reason for the significant imbalance to the consumer’s detriment in the IP terms.
7. One important factor is whether the university could reasonably assume that the DPhil student would have agreed such a term in individual contract negotiations.

The judge expressed concern over the wording of “in the course of or incidentally to their studies”, that it did have the potential to be unfair and was out of line with typical university policies. It is important to note that Oxford later deleted this wording and instead listed five scenarios in which the university claims ownership of IP (the policy showing the original wording and revisals is annexed to the judgment). The judge also recognised that whilst the original wording was potentially too broad, in reality Oxford did not apply the wording as broadly as permitted and ultimately it did not make Mr Jing’s treatment by Oxford unfair.

For context, Oxford supported DPhil students in their research, assisted in paying for IP protection, formed a spin-out company to share profits from inventions, allocated equity in that company and assisted in obtaining further rounds of investment helping to increase the value of the shareholdings and provided a platform for a senior management role.

Oxford argued that without the term that transferred the IP, Mr Jing would have owned the IP, but would not have been in a position to exploit the IP without the assistance of another commercial partner. A different commercial partner would have asked for a transfer of rights in exchange for an equity stake and Mr Jing’s position would have been no different.

Decision

The judge concluded that, with the exception of the over broad term discussed above, the IP provisions were in line with the law, other institutions and were not unfair. None of the IP provisions created an imbalance to the disadvantage of a student and the imbalance created by the over broad term was not significant. Moreover, Oxford reasonably believed that Mr Jing was being offered a good deal when it came to IP rights. Oxford pointed to the fact Mr Jing had become a significant shareholder and CEO of a potentially successful multi-million pound turnover start-up who is also entitled to benefit from ongoing royalties. The judge concluded that Oxford operated in good faith.

Oxford was entitled to claim all of the patent rights licensed. The licence was not void and the royalties due should be paid.

Impact upon universities

This decision serves as a reminder that universities should take care to regularly review and update their IP policies. Blanket policies that are applicable to research interns, PhD students, undergraduates and employees are at risk from being challenged due to potential unfairness. Universities should make sure that their IP policies are in line with how they are applied in practice, having a policy which has an unnecessary reach over multiple categories of researchers whilst in reality not applying it to all individuals is likely to confuse students. Additionally, universities should give consideration to why they seek to hold IP rights created by students and do they have good reason to do so?

Factors which could be taken into account include:

1. Which categories of employee and/or student is involved?
2. If a student is involved, how is that student and their research funded?
3. Are there any third party terms and conditions applicable?
4. How much resource is the university providing i.e. through their facilities?
5. What benefit is being removed unfairly from the student? Can you justify on a case-by-case basis the application of your IP policy?
6. Does it benefit the student to have the university manage the IP?

Taking into consideration the specific details of this case, and despite the fact that “they got it wrong in the drafting and they were over broad”, the judge concluded that Oxford’s IP policy was fair. Without a well thought out IP policy, fair sharing of revenue, and contributions by Oxford itself, there could be a strong argument that Oxford’s IP policy was unfair.

If you are a university or education institute involved in research, particularly student led research, and would like assistance with reviewing your IP policy our team of experts will guide you through the process, providing you with a bespoke service tailored to your business’s needs. Please do not hesitate to contact us on 03330 430350 to discuss your needs further.