Q: I have been talking to a company about taking on my invention.  They seemed very keen and we entered into correspondence.  Now they say I have agreed to license it to them, but I have not signed anything.  What is the legal position?

 

A: It is remarkably easy to form a contract under English law.  Even oral or verbal contracts are enforceable through the courts.  If you want to ensure it is not legally binding you should mark all your correspondence "subject to contract" or state clearly that it is not legally binding and must be followed up with a formal written contract which both parties sign before you will proceed.  In addition do not obviously hand over your invention without having them sign a confidentiality agreement in advance.  The legal position here depends on what was agreed.  If they wrote to you saying "Will you license us with XYZ for a royalty of 10% payable on each sale of the licensed product?" and you said "Yes" it is possible the courts may construe that as a legally binding agreement provided the terms were sufficiently certain and it can be shown that there was an intention to create legal relations.  If instead you said "Yes in principle, but subject to a written agreement" then there would be no binding agreement at that stage.

Inventors Legal Problems

Related further reading by Susan Singleton...

Further Reading:

Editors Note: These articles first appeared as Susan Singleton's very popular column in Inventors World magazine.

 

Due to the changing nature of the law, Susan has fully updated them for 2015.

Part #8

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Q: Can I patent my computer program in the UK?

 

A: You should seek advice from a patent attorney on this. The Patents Act 1977 provides that you cannot patent software "as such".  In one decision arising from Fujitsu Ltd's application for a patent (No. 9204959.2) the provisions of the Patents Act 1977 and patents for software were examined.  Fujitsu had developed some software which helps a chemist to design new chemical compounds.  It enables the operator to depict on a computer screen pictures of the crystal structure of known chemicals.  The images on the screen can then be rotated under the control of the operator and their scale altered relative to each other enabling the face of one crystal structure to be aligned with a complimentary face of another, creating on the screen the structure of a hybrid "designer" chemical.  The operator can then choose whether or not to use the depicted structure as a blueprint for a new chemical.  The invention is the software which enables the computer to be used as a tool in this manner to assist in the designing of new chemicals.

 

The Judge in this case said that it would be possible to obtain a patent for a faster chip, or a more effective storage medium, or a computer containing such a chip or medium.  So could protection be obtained for a modification of a computer to achieve the same speed or storage increase by means of software.  The fact the advance is achieved in software rather than hardware should not affect patentability.  Similarly if a new process achieved by mechanical means would be patentable, there is no reason why the same process achieved by computer means would be any less patentable.

 

Fujitsu's application left the operator to decide what data to work on, how to assess the results and which, if any, results to use.  What is produced, it was held, is abstract and not an inevitable result of taking a number of defined steps.  As such it consists of a scheme or method of performing a mental act and was unpatentable.  The appeal was dismissed and Fujitsu did not obtain its patent.

 

This is a highly technical area so seek advice - from your patent attorney.  Remember though that software is in any event protected by copyright without the need for registration.

Q: Why should I register a patent when it so expensive and I have no money to sue infringers?

 

A: Registering patents gives you a 20 year monopoly over the invention and you can stop others using the same invention whether they have notice of your patent or not.  Many companies' financial worth is built on their patent rights.  However you may choose instead to keep your invention as secret confidential knowhow so that there is no publication.  Patenting involves publication and it is true that many small inventors do not have the funds to litigate the patent.  You need to consider these issues carefully with a patent agent who is a member of the Chartered Institute of Patent Attorneys.

Q: Can I reverse engineer a competitive product?  Basically I want to copy an industrial invention.  I have checked and it does not seem to be patented.

 

A: The short answer is "no". The three dimensional article you want to reverse engineer is highly likely to be protected by unregistered design right under the Copyright, Designs and Patents Act 1988.  If you copy its features of shape or configuration you may be sued.  In addition aesthetic features of the design may also be protected by registered design rights.  You can check on this by doing a Designs Registry Search.  If the design was made before 1.8.89 different rules apply (usually copyright protection applies).  In addition you may copy trade marks or if you make your copy too like the original people may be confused and you may be sued for "passing off".  You may usually make spare parts where they must fit or must match other parts like car body panels or exhaust pipes, but again you may not copy aesthetic elements of the design.  If your product is software special rules apply.  Reverse engineering of software is allowed in very limited circumstances under the EU software directive

Q: I have an invention I wish to exploit.  Should I do this through a limited company or as a sole trader?

 

A: You should seek legal advice on this. You may wish to retain ownership of the intellectual property rights in your own name and simply license the company with the rights.  That way you may be able to sell-off the company later and yet keep the ownership of the IPRs.  Alternatively it may be neater if the company has the ownership of the rights.  You should also take legal and tax advice.  Companies have limited liability so you protect your personal assets from law suits, however your bank and possibly licensees may want personal guarantees anyway.  Some licensees may be more impressed by a limited company than a sole trader and there is no doubt that most successful businesses are limited companies.

Q: I license my technology in the UK through an exclusive patent licensee.  He has been complaining about my French licensee importing the licensed products into the UK.  What can I do to stop the French licensee doing so?

 

A: Under EU law once the goods are put on the market anywhere in the EU you are not allowed to stop their free circulation, even by suing for breach of intellectual property rights.  If you do so you could be fined up to 10% of your annual turnover for breach of Article 101 of the EU Treaty. If you include an export ban in your licence contracts that will usually be void.  You are allowed to stop your licensee advertising outside his territory under the 2014 EU technology transfer block exemption regulation.  However you may not stop him responding to requests for product from outside his area within the EU/EEA under EU competition law. The same rules apply to distributors under the EU vertical block exemption regulation. Both regulations are accompanied by detailed EU guidance - the Intellectual Property Guidelines and the Vertical Guidelines. If in doubt read the regulations and their guidelines or consult a competition/IT solicitor such as the writer.

Q: How do you value technology?

 

A: Valuation of intellectual property is obtained on a number of different bases, including net present value, the going rate and past court decisions.  Whatever the buyer will pay is, of course, the true value.  For a detailed description of these methods there is a chapter on this topic in Mark Anderson's book Technology - The Law of Exploitation and Transfer, Butterworths.

"How do you value technology?