Licensing in United Kingdom 2024

Licensing in United Kingdom 2024

LICENSING 2024

UNITED KINGDOM

Callum O’Regan, Megan McCulloch, Ross Urquhart, Chloe O’Hara, Michael Horowitz

(Burness Paull LLP)

OVERVIEW

Restrictions

1. Are there any restrictions on the establishment of a business entity by a foreign licensor or a joint venture involving a foreign licensor and are there any restrictions against a foreign licensor entering into a license agreement without establishing a subsidiary or branch office? Whether or not any such restrictions exist, is there any filing or regulatory review process required before a foreign licensor can establish a business entity or joint venture in your jurisdiction?

The United Kingdom does not have restrictions on foreign persons or entities being shareholders in UK corporate entities, or participating in joint ventures, subject to any international sanctions that may be in place. Foreign entities will often license into, or take part in a joint venture in, the United Kingdom without establishing a branch office or subsidiary in the United Kingdom. This may be subject to some limitations depending upon the industry and other places of business of that foreign entity. Foreign licensors may establish their own subsidiary entities governed by UK legislation, such as private limited companies, using the standard UK processes.

Alternatively, a foreign entity may establish business operations in the United Kingdom in its own right, provided that it registers as an overseas company with Companies House (the UK body responsible for administering companies) within one month of opening for business. This registration is done by completing form OS IN01 and paying a fee of £20. Certain businesses may also require operating licenses, depending upon their field of industry.

KINDS OF LICENSES

Forms of license arrangement

2. Identify the different forms of license arrangements that exist in your jurisdiction.

The United Kingdom does not have a specific piece of licensing legislation; however, various intellectual property statutes (the Patents Act 1977 (PA 1977), Copyright, Designs and Patents Act 1988 (CDPA 1988) and Trade Marks Act 1994 (TMA 1994)) contain rules governing at least part of the licensing of those rights. The scope and complexity of licensing under English law often exceeds the simpler bounds contemplated by this legislation, and there is a substantial body of English common law clarifying these rights.

Common license types include the following:

• Technology transfer licensing and its sub-types: patent and know-how licensing. Such licenses are highly fact-specific and can perform multiple functions, such as governing intra-group know-how transfers in a tax-efficient manner, governing the input and outcomes of joint research and development projects or direct licensing of intellectual property for development, manufacturing or sales purposes within a jurisdiction.
• Software licenses are prevalent given the strength of the UK IT services economy. The scope and purpose varies considerably on the matter at hand. licenses to a generic software tool are often granted by developers in perpetuity for a fixed fee, although these licenses will often not govern future software upgrades by the developer or warrant as to coverage. licenses for bespoke software tools or software development will often be considerably more complex and contain carefully delineated intellectual property right (IPR) transfers or exchanges. In addition, software is often now provided as a service and software-as-a-service/platform-as-a-service agreements are increasingly common.
• Trademark licensing is a major industry in its own right. Brand owners may license their trademarks to specialist product developers and manufacturers across multiple product and service categories under brand extension license Increasingly, brands will collaborate with each other and cross-license their trademarks to market and distribute a co-branded product or service. Trademark licenses are material aspects of character merchandising and endorsement contracts, which will often involve copyright licensing and, potentially, the licensing of a celebrity’s personality rights and goodwill. Trademarks are often licensed as, and an ancillary aspect of, patent and technology license agreements. Trademark and brand licensing are also a significant intra-group tool for value transfers. Where the licensor and licensee are not part of a group, royalty and quality control provisions will typically be exacting.
• Franchise agreements. These are ‘hybrid’ agreements involving a mix of intellectual property licensing (typically, trademarks, know-how and copyright) as well as equipment supply and business support from the franchisor, designed to ensure uniformity of a franchise network.

The United Kingdom also has limited compulsory licensing and licenses of right, for example, to prevent the abuse of monopolies of functional designs, section 237(1) of CDPA 1988 provides for any person to obtain a license to do any act that would infringe an unregistered design right in the last five years of that design right’s term. If the parties cannot agree to the terms of such a license then the terms will be settled by the Comptroller of Patents, Designs and Trade Marks, although CDPA 1988 contains no guidance for the Comptroller. Sections 48 to 54 of the Patents Act 1977 allow, in certain limited circumstances, applications for the granting of compulsory licenses for patents to address anti-competitive uses. The above paragraphs are not exhaustive and there is a wide variety of possible licensing arrangements under English law, these include, for example, licenses for domain names, plant varieties, registered and unregistered designs and other IPRs.

LAW AFFECTING INTERNATIONAL LICENSING

Creation of international licensing relationship

3. Does legislation directly govern the creation, or otherwise regulate the terms, of an international licensing relationship? Describe any such requirements.

Depending upon the parties and rights involved in the license, the legislation most likely to impact an international licensing relationship will be UK and EU competition laws, more particularly, article 101 of the Treaty on the Functioning of the European Union (TFEU), Chapter 1 of the Competition Act 1998 (UK legislation, which is mirrored on article 101) and, in the context of patent, know-how and software licensing, the Technology Transfer Block Exemption Regulation (TTBER) and its accompanying guidelines. The TTBER restricts the use of certain licensing terms, notably passive sales restrictions and automatic assignments or exclusive licenses of improvements developed by a licensee to the licensor. The TFEU is concerned with anti-competitive behavior more generally, and seeks to regulate the relationship between competitors, suppliers and customers. These laws can be used to prevent dominant parties forcing others into perpetual licenses or manipulating markets by contracting with anti-competitive royalty rates or minimum supply requirements from a given supplier. The United Kingdom has no legislation requiring that products must be purchased locally, or any equivalent provisions.

Notwithstanding Brexit, the TTBER will continue to apply until 30 April 2026. In addition, EU competition law (articles 101 and 102, TFEU) will continue to be relevant post-Brexit to agreements or conduct of UK businesses that have an effect within the EU, in much the same way as agreements or conduct of US and Asian businesses are currently subject to EU competition law where their agreements or conduct affect EU markets.

The National Security and Investment Act 2021 (the NS&I Act) came into force on 4 January 2022, introducing new governmental powers to review and prevent mergers, acquisitions, and other transactions with connections to the United Kingdom on national security grounds. Individuals and businesses are required to notify the relevant Secretary of State where an acquisition of certain entities operates within one of the 17 ‘high risk’ sectors. These include artificial intelligence, computing hardware, data infrastructure, synthetic biology and energy. Although the UK government has released various pieces of guidance seeking to provide clarity in this area, the legislation is complex and poses interpretation difficulties. As the government has both the power to fine parties and the right to prohibit transactions, legal advice should be sought at an early stage where notification is mandatory.

As at the time of preparing this version of the report, the UK government has issued 18 ‘Final Orders’ under the NS&I Act in respect of mergers, acquisitions and other transactions that triggered either mandatory or voluntary notification – with 11 of these being approved subject to remedies or conditions being implemented; three of these being prohibited ahead of implementation; two of these being retroactively prohibited or unwound post-transaction; one of these requiring no further action; and one of these being revoked (as the acquirer opted not to proceed with the transaction having had sight of the conditions and remedies it would be subject to).

In addition to mergers, acquisitions and other investments, the legislation also introduces the possibility of the government preventing intellectual property (IP) licensing arrangements between UK and foreign entities – of those 18 ‘Final Orders’ previously mentioned, two were issued in concerned IP licensing transactions. July 2022 saw the government’s first exercise of these prevention powers in an IP context, by prohibiting the University of Manchester from licensing its vision sensing technology to the Chinese technology company, Beijing Infinite Vision Technology. Justifications for the refusal were published in a notice by the Department for Business, Energy and Industrial Strategy, stating that the technology had dual-use applications (meaning that it was capable of being used for military purposes), and that it could have been used ‘to build defense or technological capabilities which may present national security risk to the United Kingdom’. More recently (in June 2023), the University of Southampton received conditional approval from the government to grant a license of an unnamed asset to the Canadian manufacturing company, Voyis Imaging Incorporated (Voyis), provided that Voyis is obligated to (1) carry out due diligence checks on all new customers that wish to purchase the asset and (2) report to the government details of all new customers of the asset on an annual basis. This condition was implemented to mitigate the risk to national security that the government identified (as foreign states could gain access to the asset and use this to uplift their potential military might).

Pre-contractual disclosure

4. What pre-contractual disclosure must a licensor make to prospective licensees?

There are no formal requirements for pre-contractual disclosure in the United Kingdom. Subject to the transaction and resources at hand, parties may wish to agree upon a due-diligence process similar to that for a corporate acquisition; however, for many small-scale licenses (such as generic software licenses), this is neither feasible nor necessary. Licensors should be aware of the impact of inducing a licensee to enter into an agreement by misrepresentation, which can lead to rescission of the contract, or a payment in damages to the licensee. Silence may constitute misrepresentation in some circumstances and, accordingly, a licensor may wish to make some limited disclosure, or include some level of warranty in any license. Certain UK organizations, such as the British Franchise Association, require its members to agree to a Code of Ethics, which requires full and accurate written disclosure of all information material to the franchise in advance of a binding contract being executed.

Registration

5. Are there any requirements to register a grant of international licensing rights with authorities in your jurisdiction?

There are no requirements to register licenses to confirm their validity; however, it is advisable to register exclusive patent licenses and any trademark license with the UK Intellectual Property Office (IPO), European Patent Office (only European patent applications may be registered; licenses to granted European patents can be registered in the national patent offices) or Trade Marks Registry, as applicable.

Licensees are only granted certain rights in the event of prompt registration – for example, an exclusive patent licensee must register the grant of the license within six months if it wishes to claim costs of an infringement action that are attributable to infringements pre-dating the registration of its interest. For patent and trademark licenses, registration is important to give notice to third parties.

Without registration, the license will be ineffective against a party acquiring a subsequent interest in the patent or trademark without actual knowledge of the license.

Where a failure to meet a time period has resulted in a loss of rights, the IPO says that those rights may be reinstated or restored in certain circumstances – based on UK government guidance, legal provisions will depend on the nature of the late response and the circumstances of the delay.

In March 2020, the IPO designated dates from 24 March 2020 to 29 July 2020 as ‘interrupted days’, meaning that any deadlines for patents, supplementary protection certificates, trademarks and designs, and applications for those rights that fell on an interrupted day were extended. Normal operation of deadlines for patents was resumed on 30 July 2020.

Online applications, wherever possible, are encouraged. The IPO is currently undergoing its ‘One IPO’ transformation process, which will completely digitalize and streamline its services. The first of the One IPO services – the patents search service – was set to launch in September 2023, but this appears to still be awaiting wider roll-out to the public (as the existing Ipsum search service still seems to be in effect). The IPO anticipates that additional patent services shall be added to the IPO One system in spring 2024 (this patent service is currently only available to a small group of customers as part of an early-access pilot scheme for testing and troubleshooting), with both the trade marks and designs services and the digital hearings and tribunals services set to follow in autumn and winter 2025.

INTELLECTUAL PROPERTY ISSUES

Paris Convention

6. Is your jurisdiction party to the Paris Convention for the Protection of Industrial Property? The Patent Cooperation Treaty (PCT)? The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs)?

The United Kingdom is a party to the Paris Convention (in force since 1884), the PCT (in force since 1978) and TRIPs (in force since 1995).

On a pan-European point, Europe’s long-awaited unitary patent package came into force on 1 June 2023. As of the date of publication, the EU regulations establishing the Unitary Patent system (No 1257/2012 and No 1260/2012) has made it possible to get patent protection in 17 member states by submitting a single request to the European Patent Office (EPO), with a further eight member states expected to ratify the agreement in the coming years. The package has introduced a Unified Patent Court, which deals with the infringement and validity of both unitary patents and European patents, removing costly parallel litigation and enhancing legal certainty. However, due to Brexit, the United Kingdom is not part of this new regime.

UK businesses wanting to protect their inventions will still be able to make use of both the unitary patent legislation and the Unified Patents Court within EU countries that sign up to the new system. However, in the United Kingdom itself, options will be restricted to the UK courts and obtaining national domestic patents in the United Kingdom.

Contesting validity

7. Can the licensee be contractually prohibited from contesting the validity of a foreign licensor’s intellectual property rights or registrations in your jurisdiction?

There is no outright prohibition on no-challenge (as to validity or ownership) clauses; however, licensors should be wary of being seen to restrict competition or restrict trade under article 101 of the Treaty on the Functioning of the European Union (TFEU). The Technology Transfer Block Exemption Regulation (TTBER) and its Guidelines provide a competition framework for patent, know-how and software copyright agreements by way of a block exemption to article 101. Under article 5(1)(b) of the TTBER, no-challenge clauses (as to validity) relating to EU-held intellectual property rights in non-exclusive license agreements will not benefit from the block exemption, and will thus require individual examination for compliance with article 101.

Insofar as a no-challenge clause is contained within an exclusive license agreement, while a blanket no-challenge as to validity clause is not exempted either under the TTBER a provision that provides a right of termination of the technology transfer agreement in the event of such a challenge is permitted.

The EU Commission views no-challenge clauses (to validity) as typically acceptable in the context of settlement agreements, under which a license is granted of the subject intellectual property (IP) that has been in dispute.

Generally, the EU Commission does not regard a clause obliging a licensee not to challenge the ownership, as opposed to validity, of the licensed intellectual property or technology rights as being restrictive of competition under article 101.

Notwithstanding Brexit, EU competition law (articles 101 and 102 TFEU) will continue to be relevant post-Brexit and will apply to agreements or the conduct of UK businesses that have an effect within the European Union, in much the same way as agreements or conduct of US and Asian businesses are currently subject to EU competition law where their agreements or conduct affect EU markets. A UK participant in a global cartel will, therefore, continue to face investigation and fines by the European Commission.

Invalidity or expiry

8. What is the effect of the invalidity or expiry of registration of an intellectual property right on a related license agreement in your jurisdiction? If the license remains in effect, can royalties continue to be levied? If the license does not remain in effect, can the licensee freely compete?

The invalidity or expiry of an IP right does not automatically terminate the license itself. licenses will often make specific reference to termination in line with the expiry or invalidity of the intellectual property right in question. Where the license provides a trigger for termination upon invalidity or expiry of the registered IP right, the licensee should not exercise such right before the final decision is granted. However, there are some nuances depending upon the IPR in question. Patent licensors should be aware of the impact of EU competition law since agreements that restrict the right of a licensee to compete after the expiry of the patent will be in breach of this legislation and as a result the provision will be deemed to be unenforceable. However, this does not mean that the entire agreement is void and unenforceable, and that will depend on how material the provision was for the purposes of the agreement.

Similarly, licenses requiring indefinite payment of royalties or fees are likely to be in breach of competition law, although an ongoing obligation for payment exceeding the term of the patent may be permissible where it pertains to either fair reward for the patent holder (e.g, in research patents, which may not ultimately bear fruit during their term, although their exploitation may be instrumental to any eventual commercial outcome), or is in relation to know-how associated with the patent. Note that licenses that fall under the TTBER lose the benefit of the ‘safe harbor’ provided by the block exemption on the date that the last intellectual property right granted under the license expires or becomes invalid (or, in the case of know-how, enters the public domain) and the terms of the license will have to be assessed under relevant competition law on an individual basis. The TTBER will continue in force in the United Kingdom until 30 April 2026.

Unregistered rights

9. Can unregistered trademarks, or other intellectual property rights that are not registered, be licensed in your jurisdiction?

An unregistered right may be licensed, or assigned, to the extent that it can be defined in such a way as to grant sufficient certainty as to the scope of that property right. Unregistered trademarks are not uncommon in the United Kingdom and are often licensed, as they are easily delineated and can be protected under the common law tort of passing off, thereby giving a licensee comfort as to the value of its license. Any such agreement should have provisions covering exclusivity, assignability, the term of the license and its scope. Similarly, licenses of registered trademarks will typically incorporate reference to the attendant unregistered rights associated with that trademark, such as any goodwill accrued to it and copyright in logos. Future or potential rights can be licensed prospectively.

Security interests

10. Are there particular requirements in your jurisdiction to take a security interest in intellectual property?

IPRs are property rights and are, therefore, capable of being subject to the usual security interests under English law. There are no requirements unique to the grant of security over IP, which may be mortgaged or subject to fixed or floating charges in the usual manner.

Proceedings against third parties

11. Can a foreign owner or licensor of intellectual property institute proceedings against a third party for infringement in your jurisdiction without joining the licensee from your jurisdiction as a party to the proceedings? Can an intellectual property licensee in your jurisdiction institute proceedings against an infringer of the licensed intellectual property without the consent of the owner or licensor? Can the licensee be contractually prohibited from doing so?

Subject to the provisions of any licensing agreement, there is nothing in UK legislation to restrict a foreign owner or licensor from commencing proceedings without joining the UK licensee. There is also nothing to prevent a licensee from initiating proceedings without the consent of the owner or licensor, subject to the licensee having standing to issue the proceedings. The position in respect of patents is prescribed by legislation. Under section 67 of the Patents Act 1977 (PA 1977), a licensee may only bring proceedings in respect of a patent to which it is the exclusive licensee, and in the event that it does so the patentee must either be joined as a claimant, or if it is unwilling to do so, as a defendant (provided that, if the patentee does not enter an appearance as defendant, it shall have no liability in costs). An exclusive licensee under section 67 of PA 1977 may be awarded damages or other relief. Recent case law has clarified that an exclusive license that is subject to the right of a third party to request a non-exclusive license remains an exclusive license for the purposes of section 67 of PA 1977 until the third party exercises its right. Conversely, care should be taken in the case of a grant of a ‘co-exclusive’ license to closed group of licensees (e.g, a corporate group). Such licenses may represent a grant of a group of non-exclusive licenses only.

Section 46 of PA 1977 provides that a licensee under a ‘license of right’ may require a patentee to issue proceedings to prevent infringement, and if the patentee does not do so within two months, may commence proceedings itself, joining the patentee as a defendant (although without cost liabilities unless entering an appearance). A licensee may be prohibited from exercising the above rights by agreement with the licensor.

The Trade Marks Act 1994 (TMA 1994) sets out similar provisions in respect of trademarks. Section 31 of TMA 1994 provides that where an exclusive trademark license states that the licensee has the same rights as if the license had been an assignment, the licensee shall be able to bring proceedings in its own name. Where the exclusive licensee and proprietor of the trademark have a concurrent right to bring infringement proceedings, they can both sue, but must both be made parties to protect a defendant from being sued twice for the same infringement. Where the proprietor is joined as a defendant to proceedings, they will not be liable for costs unless they take part in the proceedings. The obligation to join the proprietor/exclusive licensee and the proprietor’s ability to avoid liability for costs can be contracted out of by the proprietor and the exclusive licensee. For non-exclusive trademark licensees and exclusive licensees where the license does not grant a right to bring an action in the licensee’s name, section 30 of TMA 1994 entitles the licensee to call on the proprietor to take infringement proceedings in respect of any matter that affects the licensee’s interests, unless the license excludes this right. If the proprietor refuses to bring proceedings or fails to do so within two months of being requested, the licensee may bring proceedings in its own name. Once again, the proprietor must be joined as a party to the proceedings, and if added as a defendant, is not liable for costs unless they take part in the proceedings.

Sub-licensing

12. Can a trademark or service mark licensee in your jurisdiction sub-license use of the mark to a third party? If so, does the right to sub-license exist statutorily or must it be granted contractually? If it exists statutorily, can the licensee validly waive its right to sub-license?

There is no statutory right to sub-license in UK legislation, and both section 30(4) PA 1977 and section 28(4) of TMA 1994 refer to sub-licenses being grantable only insofar as is provided for in the relevant head license. The Copyright, Design and Patents Act 1988 (CDPA 1988) is silent on rules for sub-licensing copyright but, in light of the above, it is likely that no such right will be implied unless specifically contemplated within the head license. There is no other right to sub-license implied by law. licenses should in any event deal expressly with sub-licensing rights to avoid later dispute or inference, for instance, where a license is to ‘all the rights under the patent’.

Jointly owned intellectual property

13. If intellectual property in your jurisdiction is jointly owned, is each co-owner free to deal with that intellectual property as it wishes without the consent of the other co-owners? Are co-owners of intellectual property rights able to change this position in a contract?

In contrast to many other jurisdictions, such as the United States, in the United Kingdom, co-owners of IP are significantly restricted in the way they can deal with and exploit co-owned IP without the consent of the other co-owner or owners.

In relation to copyright, the general rule is that the author of a work is automatically the first owner of copyright in it (section 11(1), CDPA 1988). Pursuant to section 16(2) and 173(2) of CDPA 1988, in the United Kingdom, a joint owner of copyright cannot license or exploit a copyright work without the consent of the other joint owner. Where a jointly owned right has been licensed by one owner, the other ‘non-licensing’ owner would be free to sue its co-owner for infringement (Cala Homes South Ltd v Alfred McAlpine Homes East Ltd) CDPA 1988 does not expressly deal with the right of a co-owner to assign its share of jointly owned copyright, although it has been asserted academically that it is possible for a co-owner to assign its interest. This uncertainty regarding assignment can be dealt with expressly between the parties by contract.

In respect of patents, PA 1977 provides that patents may be jointly owned, and each patent owner will be free to work the patent for him or herself. However, section 36(3) PA 1977 provides that a joint owner of a patent may not without the consent of all other joint owners:

• grant a license under the patent;
• assign his or her share of the patent;
• mortgage his or her share in the patent; or
• amend the patent specification or apply for an amendment.

The ability for a co-owner to exploit the patent is, therefore, significantly limited. Again, this may be varied by contractual agreement between the parties. A similar position exists in respect of trademarks under the TMA 1994. Co-owners of trademarks may exploit the mark themselves without the consent of the other co-owners but may not license, assign or charge the mark without consent. These points illustrate the shortcomings of joint ownership without further agreement.

Broadly speaking, the above statutory positions can be varied by express agreement between the parties in a contract; however, practical and drafting difficulties may often arise in trying to foresee, and provide for, any possible permutation of future exploitation by each of the parties.

First to file

14. Is your jurisdiction a ‘first to file’ or ‘first to invent’ jurisdiction? Can a foreign licensor license the use of an invention subject to a patent application but in respect of which the patent has not been issued in your jurisdiction?

The United Kingdom is a ‘first to file’ jurisdiction. Patent applications are considered personal property under section 30 of the PA 1977 and, accordingly, grants of rights may be made out of them.

Scope of patent protection

15. Can the following be protected by patents in your jurisdiction: software; business processes or methods; living organisms?

Software

While software is an excluded and non-patentable category under section 1(2)(c) of PA 1977, UK case law is pulling away from the certainty of this, since the courts have considered whether the software creates a meaningful technical effect. The UK Intellectual Property Office (IPO) has issued guidance based primarily upon the judgments in Aerotel Limited v Telco Holdings Ltd and ors [2006], Symbian Limited v The Controller of Patents [2008] and HTC Europe Co Ltd v Apple Inc [2013], indicating that where software meets certain signposted criteria around technical effect, it will be patentable, subject to the other usual requirements.

Additionally, computer code as well as the images, text, video and sound present in any user interface of the software may be protected by copyright, and databases within software may be protected by database rights.

Business methods

Business methods are similarly excluded from patent protection under section 1(2)(c) of PA 1977. However, they are subject to the same IPO guidance as software, and in the wake of Aerotel, business methods have been found to be patentable where they have a demonstrable technical effect above and beyond their methodology.

Living organisms

Directive 98/44/EC (the Biotechnology Directive) as implemented in Schedule A2 of PA 1977 states that a biological product or a process relating to biological material may be patented, subject to several exceptions within the field. These include any inventions pertaining to the human body, cloning, any industrial or commercial use of human embryos and essentially biological processes (used to create plant or animal varieties).

Trade secrets and know-how

16. Is there specific legislation in your jurisdiction that governs trade secrets or know-how? If so, is there a legal definition of trade secrets or know-how? In either case, how are trade secrets and know-how treated by the courts?

On 9 June 2018, the United Kingdom implemented the EU Trade Secrets Directive (Directive (EU) 2016/943) that harmonizes trade secret protection throughout the European Union. Information is a trade secret if it:

• is secret;
• has commercial value because it is secret; and
• has been subject to reasonable steps to keep it secret.

The meaning of ‘reasonable steps’ will be developed as the courts apply this law. Labeling something a trade secret is unlikely to be enough of itself. Post Brexit, the EU Trade Secrets Directive remains part of UK law via The Trade Secrets (Enforcement, etc.) Regulations 2018.

Trade secrets and know-how can also be effectively protected under the United Kingdom’s ‘law of confidence’, a common-law doctrine. It is generally accepted that for information (including trade secrets) to be protected under the common law of confidentiality, three requirements must be met, as set out in Coco v AN Clark (Engineers) Ltd [1968] FSR 415, which are:

• the information itself must have the necessary quality of confidence;
• the information must have been imparted in circumstances importing an obligation of confidence; and
• there must be an unauthorized use of that information to the detriment of the rights holder.

It is not a requirement that a given recipient enter into a non-disclosure agreement, although it is indicative of a relationship of confidence. If a recipient then discloses that information in breach of that confidence, legal action can be taken by the owner. Trade secret owners may bring claims under the common law for breach of confidence or misuse of confidential information in addition to or as an alternative to a claim under the implementation of the Trade Secrets Directive.

Parties will often enter into agreements when transferring trade secrets or know-how between each other for any purpose expressly protecting the use and handling of the information and setting out the indemnities in respect of their loss or misuse. It is also common in such agreements to include an express reference granting the right to seek an injunction as first recourse if the information is lost or misused. The courts have been willing to grant injunctions in recognition of the importance of trade secrets. Under English law, trade secrets, know-how and confidential information are not classed as ‘property’ as such. Accordingly, rights in the same are enforced under the laws of tort rather than property.

17. Does the law allow a licensor to restrict disclosure or use of trade secrets and know-how by the licensee or third parties in your jurisdiction, both during and after the term of the license agreement? Is there any distinction to be made with respect to improvements to which the licensee may have contributed?

Parties are free to contract so as to restrict the disclosure of trade secrets to third parties, and will ordinarily do so. Confidentiality provisions will typically be drafted to survive the agreement and be severable, as disclosing parties will wish to protect their trade secrets indefinitely, rather than just for the term of a given license; any loss of confidentiality in the future will limit the capacity of the disclosing party to monetize that information going forward.

Parties are similarly free to contract with respect to the confidentiality (and other rights) associated with any follow-on work or improvements that a licensee might make, but should be aware of competition law restrictions on exclusive grant-backs of IPRs.

Copyright

18. What constitutes copyright in your jurisdiction and how can it be protected?

UK copyright law is set out in CDPA 1988, although works published before that date will be subject to the law in place at the time of their creation (the Copyright Act 1956 and the Copyright Act 1911). Although there is some nuance in the application, generally a work that is original and permanent (i.e, has been recorded in some way) will be automatically protected by copyright provided that it falls within one of the following categories:

• literary, dramatic, musical or artistic works;
• sound recordings, films, broadcasts or cable programs;
• typographical arrangements of published editions; and
• databases.

It remains arguable, based on retained EU case law that has become assimilated EU law as of 1 January 2024 under the Retained EU Law (Revocation and Reform) Act 2023, that the approach of the CDPA to confine copyright to works within a closed list, is incorrect. Copyright protection lasts for 70 years from the end of the year in which the last creator of the work dies, although for some of the above categories the period is shorter. Although there are no publication or registration requirements for UK copyright, it is advisable to maintain a record of a work’s creation, should ownership disputes arise.

SOFTWARE LICENSING

Perpetual software licenses

19. Does the law in your jurisdiction recognize the validity of ‘perpetual’ software licenses? If not, or if it is not advisable for other reasons, are there other means of addressing concerns relating to ‘perpetual’ licenses?

Parties to agreements in the United Kingdom are free to contract for any term that they wish, subject to competition rules. There is, therefore, no bar to a perpetual license, but to ensure the functioning of the license in practice, parties should contract clearly that the license is in perpetuity and also directly address termination. In BMS Computer Solutions v AB Agri Ltd [2010], the courts held a perpetual license to be terminable on its true construction (including by reference to its construction in relation to other related agreements between the parties). Ultimately, as a matter of construction, the term ‘perpetual’ referred not to the fact that it was incapable of being brought to an end, but to the fact that it had an unlimited term so long as neither party chose to terminate it.

Practically speaking, software has a limited lifespan relative to the copyright protection it is entitled to and, accordingly, parties are unlikely to come upon issues of enforceability owing to duration and competition requirements.

Legal requirements

20. Are there any legal requirements to be complied with prior to granting software licenses, including import or export restrictions?

Since software can be protected by copyright, an exclusive license to a piece of software should be in writing and signed by or on behalf of the copyright owner. This is typically the licensing entity, but copyright ownership should be checked and evidenced by the licensing entity in advance of entering into any license agreement. Beyond this, there are no bespoke requirements pertaining to software licensing.

The United Kingdom has some export restrictions, primarily in relation to military goods. The list of restricted goods (which can include software) is published as the UK Strategic Export Control List and is periodically updated, often on a biannual basis. The new National Security & Investment Act 2021 prohibits certain transactions that operate in several mandatory sectors, including defense, energy, military and space technologies. This means that certain transactions relating to intellectual property can be prevented by the UK government if this prevents a risk to national security.

Software is unlikely to be restricted at import; however, importers should be aware that imported goods infringing intellectual property rights in the United Kingdom may be detained.

Restrictions on users

21. Are there legal restrictions in your jurisdiction with respect to the restrictions a licensor can put on users of its software in a license agreement?

The Copyright, Designs and Patents Act 1988 confers certain rights on software licensees, which a licensor is not permitted to restrict or exclude:

• the right to decompile (or effectively reverse engineer) software if necessary for it to interoperate with another program;
• the right to make a backup copy of the software if necessary for its lawful use; and
• the right to observe, study and test the functioning of the software to determine the principles and ideas that underlie it.

Standard terms for software licensing will commonly expressly restrict the licensee from copying, adapting, reverse engineering, decompiling, disassembling, or modifying the licensed software, except where permitted by law.

In relation to business-to-consumer transactions, a software supplier would also need to comply with more stringent rules around matters concerning exclusion and limitation of liability.

ROYALTIES AND OTHER PAYMENTS, CURRENCY CONVERSION AND TAXES

Relevant legislation

22. Is there any legislation that governs the nature, amount or manner or frequency of payments of royalties or other fees or costs (including interest on late payments) in an international licensing relationship, or require regulatory approval of the royalty rate or other fees or costs (including interest on late payments) payable by a licensee in your jurisdiction?

There is no specific legislation in the United Kingdom that places restrictions on or requires approvals for payments in international licensing relationships. Payment terms are set out in the contract between the parties. However, if a contract is silent on particular matters relating to payment, case law or statute will imply terms. For example:

• where no time for payment is stated, the buyer must pay on delivery (section 28, Sale of Goods Act 1979);
• unless a different intention appears from the terms of a contract for the sale of goods, stipulations as to time of payment are not of the essence of the contract (section10(1), Sale of Goods Act 1979); or
• where no place of payment is agreed, the buyer must make payment at the seller’s place of business (Canyon Offshore Ltd v GDF Suez E&P Nederland BV [2014] EWHC 3810).

The parties can negotiate the interest rate and details of how debts will be recovered, provided that such provisions are reasonable. If the agreement is silent, the Late Payment of Commercial Debts (Interest) Act 1998 adds an implied term in business-to-business contracts that a creditor can claim interest at a rate of 8 per cent a year above the Bank of England base rate on the price of goods or services, plus a fixed sum and reasonable costs of recovering the debt. Whether the Act applies to international agreements depends on the choice of law and whether there is a significant connection to the United Kingdom.

Specialist tax advice should always be taken with respect to royalty and other payment provisions in a license agreement. In some cases, payment of royalties may be subject to deduction at source of withholding taxes. Moreover, cross-border royalty arrangements in intra-group licenses may be subject to control under transfer pricing legislation.

Restrictions

23. Are there any restrictions on transfer and remittance of currency in your jurisdiction? Are there any associated regulatory reporting requirements?

There are no legal restrictions on capital flows to and from the United Kingdom, although persons carrying more than £10,000 (or equivalent) in cash, cheque or bankers draft into or out of the United Kingdom must complete a cash declaration form, with fines of up to £5,000 and seizure of the cash for a false or non-declaration.

Additionally, the Proceeds of Crime Act 2002 places reporting obligations on those who suspect money laundering and imposes liability on those involved in the handling of assets obtained from criminal conduct.

Taxation of foreign licensor

24. In what circumstances may a foreign licensor be taxed on its income in your jurisdiction?

In general, non-resident licensors are only subject to tax in the United Kingdom on income that is attributable to a permanent establishment in the United Kingdom of that licensor; or to the extent that tax is required to be withheld by the licensee.

In the United Kingdom, certain expenditure can be deducted when calculating tax liabilities. There are a variety of exemptions and specific regimes available in relation to intellectual property-related areas including the Patent Box and R&D tax reliefs.

While these provisions are in force as at January 2024, they are complex and are regularly updated. It is crucial that they are checked carefully and specific tax advice taken for individual circumstances, including where an overseas company is setting up a subsidiary or branch in the United Kingdom and wishes to avail itself of these reliefs.

Withholding tax is imposed on payments of royalties for several different types of intellectual property including patent royalties, copyrights, trademarks and design rights. There are certain reliefs from the duty to deduct tax, the most common being where a double tax treaty (DTT) concluded between the United Kingdom and the jurisdiction in which the licensor is resident provides that the rate of withholding is to be reduced (sometimes to as low as zero).

Where no reduction in the rate of withholding tax is possible, the rate of deduction is 20 per cent of the royalty. If a licensor has suffered a withholding, it may be able to claim credit for the UK tax withheld in its home jurisdiction, either under local law or under the provisions of any applicable DTT.

Previously, tax treatment for the paying entity was typically determined by the EU’s Parent-Subsidiary Directive and the EU’s Interest and Royalty Directive. Where the relevant conditions were met, payments of interest, royalties and dividends were historically able to be made to related parties without deduction of tax at source by the paying company (i.e, a withholding tax). For UK companies, these directives ceased to apply from 1 June 2021. The tax treatment of the payments will revert to the domestic law of the paying company and the position set out in the relevant DTT with the United Kingdom. As such, UK domestic law requires a UK payer to withhold income tax of 20 per cent on the payment of interest and royalties to non-resident parties. There is no withholding requirement for dividend payments. Ultimately, the treatment from 1 January 2021 is determined primarily by domestic law, with potential mitigation of tax under each territory DTT with the United Kingdom.

COMPETITION LAW ISSUES

Restrictions on trade

25. Are practices that potentially restrict trade prohibited or otherwise regulated in your jurisdiction?

Practices which restrict trade are subject to regulation in the United Kingdom under the Competition Act 1998 (the Act). The Act prohibits any agreements that restrict competition to an appreciable extent and the consequences are that those restrictions will be void and unenforceable. In the case of serious restrictions, parties may be fined by the Competition and Markets Authority (CMA) up to a total of 10 per cent of group worldwide turnover. Serious restrictions include resale price maintenance, any attempts to restrict parallel imports into the relevant territory, restrictions on exports or sharing of customers between competitors. Other less serious restrictions may benefit from exemption, such as exclusivity, minimum sales targets or non- compete obligations. They are regarded as commercially justifiable in certain circumstances and therefore exempt.

These practices are also subject to separate provisions in the Act that prohibit the abuse of market power. The Act prohibits the abuse of a dominant position by an undertaking in the United Kingdom or a part of the United Kingdom. Examples of abuse of a dominant position would include predatory pricing; discriminating in favor of certain licensees to the detriment of other licensees; refusal to supply or enter into a contract with a customer; and any kind of tied selling, such as bundling. An abuse of a dominant position is regarded as a serious breach of competition law and undertakings run the risk of being fined by the CMA. However, to be caught, the undertaking must be ‘dominant’ – there is no market share test as to what constitutes dominance, but it is determined by the extent to which the undertaking can act independently of its competitors without having concern as to the consequences. Any market share over 40 per cent is generally regarded as starting to give rise to concerns over dominance.

Legal restrictions

26. Are there any legal restrictions in respect of the following provisions in license agreements: duration, exclusivity, internet sales prohibitions, non-competition restrictions and grant-back provisions?

Licensors should be wary of being seen to restrict competition or restrict trade in the United Kingdom under the Act. As stated in question 7.1, the Act prohibits any agreements which restrict competition to an appreciable extent. However even if a license agreement contains legal restrictions that fall within the prohibition, if the benefits of the agreement outweigh any restrictions on competition and do not contain any serious restrictions, then the agreement can benefit from exemption from the prohibition under the Act. The Technology Transfer Block Exemption Regulation (TTBER) and its guidelines provide a competition framework for patent, know-how and software copyright agreements by way of a block or automatic exemption from the EU competition rules. Following Brexit, the TTBER was retained in the United Kingdom but was amended so that it functioned as an exemption from UK competition law. This is in force until 2026, but will be replaced before then by a separate UK block exemption order for technology transfer agreements which will be based on and similar to the TTBER. The CMA has started a consultation process for the introduction of a new order that may come into force during 2024.

The TTBER states that, provided the license agreement is drafted in a certain way, meets certain market share thresholds and does not contain any so-called ‘hard core’ restrictions (such as resale price maintenance; allocation of markets or sharing of customers; export bans; or prohibition of passive sales), then a license will benefit from automatic exemption from the prohibition against anti- competitive agreements. Permitted restrictions include non-compete obligations; exclusivity provisions; prohibitions on active marketing of products outside the allocated territory; and internet sales prohibitions. Some of these restrictions are only permissible for certain periods of time (eg, five years from signature of the agreement).

A grant back of ownership or the grant of an exclusive license to the licensor of improvements made by a licensee is generally not permissible. However, an obligation on the licensee to grant a non- exclusive license back to the licensor of any improvements to the licensed technology is generally regarded as permitted and exempt.

IP-related court rulings

27. Have courts in your jurisdiction held that certain uses (or abuses) of intellectual property rights have been anti-competitive?

The CMA has held in Paroxetine (Case CE-9531/11), that patent settlement agreements that delay entry of a generic drug in return for value transfers (a ‘pay for delay’ deal) breached the prohibition against anti-competitive agreements and amounted to an abuse of the patentee’s dominant position. GSK appealed the decision to the Competition Appeals Tribunal, which referred several questions to the Court of Justice of the European Union (CJEU) in March 2018. Following the CJEU ruling, the Competition Appeals Tribunal gave a supplementary judgment, confirming the CMA’s position but reducing fines (in particular, the fine for abuse of a dominant position, given the novelty of the case).

Similar decisions have been reached by the European Commission and the General Court of the European Union; these are currently binding on UK courts. In Hoffmann-La Roche Ltd, Roche (Case 85/76), the CJEU warned that entering into a license agreement that complies with competition law does not justify later anti-competitive conduct connected to that license.

Certain patent life-cycle management strategies in the pharmaceutical sector have also been held to be anti-competitive. ‘Product hopping’, which encourages a switch from a product for which a patent is about to expire to a newly patented product with no generic alternatives, has been held anti-competitive where the company recommending the switch intends to limit generic competition (see Reckitt Benckiser (Decision No. CA98/02/2011)).

In Huawei v ZTE (Case C-170/13), the CJEU held that in certain circumstances it may be anti-competitive for holders of standard essential patents that have committed to license those patents on fair, reasonable, and non-discriminatory (FRAND) terms to seek injunctions against potential licensees. In Unwired Planet v Huawei ([2017] EWHC 711 (Pat)) the English High Court was willing to set a global FRAND rate and license terms and impose an injunction for failure to accept those terms. Conversely, a licensor who failed to grant a license on terms established by the Court to be FRAND would be refused an injunction. The English Court of Appeal upheld this decision in October 2018 ([2018] EWCA Civ 2344). The Supreme Court heard the appeal of this judgment, with the appeal of a similar dispute between Huawei and Conversant, in October 2019 and agreed with the decision of the lower courts.

INDEMNIFICATION, DISCLAIMERS OF LIABILITY, DAMAGES AND LIMITATION OF DAMAGES

Indemnification provisions

28. Are indemnification provisions commonly used in your jurisdiction and, if so, are they generally enforceable? Is insurance coverage for the protection of a foreign licensor available in support of an indemnification provision?

Indemnities are generally enforceable and are commonly found in license agreements as a way of mitigating losses without resorting to other principles of contract and tort, which may be more difficult to prove, such as causation. Insurance coverage is available for those providing indemnities and will be subject to the terms and conditions of the insurer.

Waivers and limitations

29. Can the parties contractually agree to waive or limit certain types of damages? Are disclaimers and limitations of liability generally enforceable? What are the exceptions, if any?

Parties to business-to-business transactions are entitled to waive or limit their liability, or exclude certain damages, in the contract. However, this is limited by statute, such as the Unfair Contract Terms Act 1977 (UCTA 1977) and common law. UCTA 1977 controls contractual limitations of liability by (1) setting out liabilities that cannot be excluded or limited (such as liability for injury or death caused by negligence); and (2) applying the ‘fairness and reasonableness’ test under UCTA 1977 on all other limitations or exclusions of liability. The test for fairness and reasonableness takes into account all the circumstances that were or that ought reasonably to have been known or in the contemplation of the parties when the contract was made. Schedule 2 of UCTA 1977 provides guidelines as to the application of the test, and lists various factors that need to be taken into account when assessing ‘fairness and reasonableness’ of a contract term, such as bargaining position and trade customs.

Under common law, parties to a contract cannot under any circumstances limit or exclude their liabilities for their own fraud. Where parties intend to limit or exclude a particular liability, they should take care to be explicit in the language used.

Exclusion or limitation of liability by disclaimers are, subject to what is outlined above, enforceable under English law, provided that they (1) are clearly expressed and brought to the attention of the other party; (2) are relevant to, and specifically cover, the circumstances of the parties; and (3) are not undermined by any misrepresentation made by the party.

TERMINATION

Right to terminate

30. Does the law impose conditions on, or otherwise limit, the right to terminate or not to renew an international licensing relationship; or require the payment of an indemnity or other form of compensation upon termination or non-renewal? More specifically, have courts in your jurisdiction extended to licensing relationships the application of commercial agency laws that contain such rights or remedies or provide such indemnities?

In England and Wales, the principle of freedom of contract means that parties are free, subject only to the terms of the contract itself and any statutory controls that may apply, to limit or exclude a contractual right, or to agree a framework for the termination and renewal (or non-renewal) of a license agreement. Wrongful termination may result in courts awarding damages for breach of contract, and licensing relationships are not treated any differently in this respect.

Commercial agency is governed by the Commercial Agents (Council Directive) Regulations 1993 (the 1993 Regulations). Under the 1993 Regulations, a commercial agent has the right to compensation (or, if the parties so choose in the agreement or if certain conditions apply, an indemnity) if the agency agreement is terminated by the principal. Consequently, many international licensing contracts will be structured to avoid the licensee coming under the definition of ‘commercial agent’.

While the 1993 Regulations do not apply to the provision of services, particular care should be taken in the context of software distribution or reseller agreements and associated software licensing. The recent case in that respect, The Software Incubator Ltd v Computer Associates UK Ltd, was referred by the UK Supreme Court to the Court of Justice of the European Union, and the ECJ has ruled that supply (licensing) of software should be treated as the supply of goods and therefore software licenses might potentially fall within the scope of the 1993 Regulations. Although the ECJ has delivered its ruling on this matter, it is unclear whether and to what extent the UK courts will follow the ECJ’s findings for contracts entered into after the United Kingdom’s exit from the European Union.

Impact of termination

31. What is the impact of the termination or expiration of a license agreement on any sub-license granted by the licensee, in the absence of any contractual provision addressing this issue? Would a contractual provision addressing this issue be enforceable, in either case?

Without an agency relationship, a sub-license will only be as good as the head license. The case of VLM Holdings Limited v Ravensworth Digital Services Limited [2013] confirms such position by stating that ‘a license is a permission to do something that would otherwise be unlawful’ and that survival of the sub-license would depend on the scope of authority given to the sub-licensor by the principal licensor. Particular care needs to be exercised in cases where circumstances suggest a principal-agent relationship between the original licensor and licensee – in such cases, the licensee may grant a sub-license as an agent of the principal even in the absence of written agreement between the parties.

To protect the parties’ positions, intellectual property owners should ensure that the effect of termination of a head license is clearly addressed and stated with respect to any sub-licenses.

BANKRUPTCY

Impact of licensee bankruptcy

32. What is the impact of the bankruptcy of the licensee on the legal relationship with its licensor; and any sub-license that the licensee may have granted? Can the licensor structure its international license agreement to terminate it prior to the bankruptcy and remove the licensee’s rights?

The insolvency or bankruptcy of the licensee does not automatically terminate a license. Upon a licensee becoming insolvent, an insolvency practitioner (either an administrator or liquidator, depending on the circumstances and insolvency process) will be appointed to take control of the licensee’s assets. The insolvency practitioner will then decide how the licensee’s assets (including licensed intellectual property rights) should be distributed to ascertain as much value as possible for the creditors.

It has been common for licensors to structure licenses to provide for express termination of the license if certain insolvency-related events occur – for example, when equivalent insolvency procedures take place in other jurisdictions, or when the licensee becomes unable to pay its debts.

Insofar as a licensing transaction includes provision of (non-financial) services or goods, section 233B of the Insolvency Act 1986 (which came into force on 26 June 2020) prevents a supplier from ceasing to supply a customer merely owing to the fact the customer has gone into insolvency proceedings. As such, a contract term that allows for the supplier to terminate upon the customer going into insolvency becomes inoperable. Section 233B also renders inoperable any other contractual consequence that is triggered by the customer entering insolvency proceedings.

This may give rise to considerable uncertainty as to whether these provisions may impact the right of a licensor to terminate a license, particularly in cases of a franchise agreement that typically requires the franchisor to supply a range of support services in addition to licenses to use brands and other intellectual property (IP).

Impact of licensor bankruptcy

33. What is the impact of the bankruptcy of the licensor on the legal relationship with its licensee; and any sub-license the licensee has granted? Are there any steps a licensee can take to protect its interest if the licensor becomes bankrupt?

Where a licensor becomes insolvent, the Insolvency Act 1986 (IA 1986) does not trigger an automatic termination of the license, unless the license expressly provides for it. It is also unlikely that a licensee would have (or indeed want) a contractual right to terminate in these circumstances.

IA 1986 provides a right for a liquidator or trustee in bankruptcy of an insolvent licensor to disclaim (i.e, to end) the rights, interests and liabilities of the licensor under the license agreement, but only where that license is ‘unprofitable’ or may give rise to a liability to pay more money or perform any other onerous act. This does not, except to the extent necessary to release the licensor from its liability, affect the rights or liabilities of the licensee and will not preclude the licensee from continuing to exercise its rights under the disclaimed license provided it complies with its obligations. If a licensee suffers loss as a result of any disclaimer by the liquidator or trustee in bankruptcy, it could try and claim that loss from the licensor, but will likely rank as an unsecured creditor, which significantly reduces its prospects of being repaid in full.

Additionally, the IA 1986 provides an option for the licensee to apply to the court for an order to rescind the license. However, in practice, it is unlikely that the licensee would want to rescind the contract it has been benefiting from.

The licensee can put in place contractual provisions in the license to protect itself from the effects of the licensor’s insolvency, including:

• inserting a contractual right to buy the licensed IP on arm’s-length terms upon a triggering event pre the licensor’s insolvency; or
• providing that the license will become perpetual and royalty-free in the event of the licensor’s insolvency.

Any attempts in the contract to mitigate the effects of the insolvency must be carefully considered to avoid the transaction being voided on the basis of it (1) being at an undervalue under UK insolvency laws; or (2) falling under the ‘anti-deprivation principle’. Under the anti-deprivation principle, arrangements that remove assets from an insolvent business with the commercial objective of depriving creditors of the benefit of the assets in question may be invalidated. It is also advisable for a licensee of registered IP to record its license at the UK IP Office, since this will protect its interest against a third party who may subsequently purchase the IP via a liquidator or other insolvency practitioner.

GOVERNING LAW AND DISPUTE RESOLUTION

Restrictions on governing law

34. Are there any restrictions on an international licensing arrangement being governed by the laws of another jurisdiction chosen by the parties?

It is common in international licensing agreements for the parties to choose a governing law of a jurisdiction other than their own. There are no specific restrictions in this regard in relation to the United Kingdom. When drafting the governing law provisions, the parties should take into account conflict of laws principles and mandatory laws.

Contractual agreement to arbitration

35. Can the parties contractually agree to arbitration of their disputes instead of resorting to the courts of your jurisdiction? If so, must the arbitration proceedings be conducted in your jurisdiction or can they be held in another?

Parties are free to agree to submit their disputes to arbitration. Alternative dispute resolution mechanisms are encouraged by the Civil Procedure Rules (which govern civil litigation in England and Wales) and Sheriff Court/Court of Session Rules (which apply in relation to civil litigation in Scotland).

The parties may also agree to have the hearing conducted in a jurisdiction of their choosing. When agreeing to arbitration of intellectual property disputes, the parties should carefully consider the varying forms of dispute that may occur to ensure that such a clause does not fall foul of public policy restrictions on the arbitrability of disputes. Although most commercial disputes and licenses can be arbitrated, case law has determined that the following claims may not be dealt with by way of arbitration:

• if the relief or remedy sought requires an order that only a court can make;
• if the relief sought engages third-party interests in a relevant sense; and
• if the claim represents an attempt to delegate to the arbitrators a matter of public interest that cannot be determined within the limitations of a private contractual process.

In the United Kingdom, the validity of an intellectual property right itself is arbitrable, although any resulting award will only bind the parties to the arbitration. This may be seen as a benefit to owners of intellectual property rights, as there is no danger that an unfavorable award may affect their registered rights in the rest of the world. As the position on this varies from jurisdiction to jurisdiction, the parties should ensure that this is taken into account in their governing law and jurisdiction clauses.

Enforceability

36. Would a court judgment or arbitral award from another jurisdiction be enforceable in your jurisdiction? Is your jurisdiction party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards?

Foreign judgments are generally enforceable in the United Kingdom but are subject to different rules depending on the origin of the foreign judgment.

In relation to international contracts, with effect from 1 January 2021, the Hague Convention on Choice of Court Agreements (the Hague Convention) provides that judgments made in any of the EU member states, as well as judgments from Mexico, Singapore and Montenegro, are enforceable in the United Kingdom. As such, if one of these foreign courts was designated by the parties as an exclusive choice of law, the judgment of that court may be enforceable under the Hague Convention before the UK courts. This is subject to certain limitations, as the Hague Convention does not apply where parties to litigation and the subject matter of the contract in question are connected to the same state.

Additionally, the United Kingdom will continue to honor judgments:

• in proceedings instituted before 31 December 2020 in one of the EU states under Council Regulation (EU) 1215/2012(the Recast Brussels Regulation); and
• from Iceland, Norway and Switzerland, under the Lugano Convention.

Judgments from most commonwealth (and a few other) countries may be enforced under either the Administration of Justice Act 1920 or the Foreign Judgments (Reciprocal Enforcement) Act 1933 (FJA 1933). From 1 January 2020, the FJA 1933 applies to judgments from Norway under the terms of a bilateral treaty.

It is also considered that most EU or European Free Trade Association court judgments will likely be enforceable before the courts of England and Wales under common law.

The United Kingdom is also a party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, known as the New York Arbitration Convention, which governs the international recognition and enforcement of arbitral awards. Accordingly, foreign arbitral awards are ordinarily enforceable in the United Kingdom.

Injunctive relief

37. Is injunctive relief available in your jurisdiction? May it be waived contractually? If so, what conditions must be met for a contractual waiver to be enforceable? May the parties waive their entitlement to claim specific categories of damages in an arbitration clause?

Injunctions (both interim and final) are available and represent a frequent feature in intellectual property and licensing disputes. An injunction is not available as a remedy of right and is only granted at the discretion of the court if it is ‘just and convenient’ to grant such relief.

Parties to a commercial agreement could agree to waive the right to injunctive relief. However, it is far more common to see a clause stating that the licensor is entitled to seek an injunction, specific performance or another equitable remedy should damages be inadequate.

In an arbitration clause, a party may waive its entitlement to claim specific heads of damages such as loss of profits or indirect losses and the parties can agree to exclude the court’s statutory powers to grant injunctive relief under section 44 of the Arbitration Act 1996.

UPDATES & TRENDS IN LICENSING IN UNITED KINGDOM

Key developments of the past year

38. Please identify any recent developments in laws or regulations, or any landmark cases, that have (or are expected to have) a notable impact on licensing agreements in your jurisdiction (including any significant proposals for new legislation or regulations, even if not yet adopted). Explain briefly how licensing agreements might be affected.

As regards the National Security and Investment Act 2021, we are reminded (following the publication of the first annual report in the summer of 2023) that this new legislation not only applies to conventional mergers and acquisitions, but can impact intellectual property licenses. Particular care needs to be taken to follow the necessary procedures under the Act prior to finalizing and executing intellectual property (IP) licenses – especially where the technology involved may have national security implications.

The year has also seen some notable litigation in the English High Court concerning the financial terms of patent licenses concerning the life science sector. With this uptake in litigation in the English Courts it is suggested that particular care should be taken in drafting the financial terms of patent licenses and in particular ensuring clarity as to the basis on which royalties will be calculated. Two cases to note are Eteboxagu AB v Cycle Pharmaceuticals Ltd [2023] EWHC 462 (Comm) and AstraZeneca UK Ltd v Tesaro, Inc [2023] EWHC 803 (Ch). Both, despite being governed by English law, also saw the judges consulting US laws and doctrines of patent misuse in order to draw their conclusions. It is worth noting here that if an IP license involves sales in other jurisdictions (e.g, the United States), even if drafted under English law, a licensor needs to be sure that they are well informed as to the impact of local laws on the license and payment structures. For example, the US doctrine of patent misuse can impact royalty structures, and there may be complex local arrangements or distribution structures (or both) to put in place. This may involve unavoidable payments by way of rebates or to distributors, which means that there needs to be careful drafting as to the gross sum on which royalties should be calculated.

Looking forward into the coming year, the United Kingdom will see the Retained EU Law (Revocation and Reform) Act 2023 come into force in January 2024. While 600 pieces of EU-related legislation are set to be repealed (only seven of which relate to IP – none of which are significant) the special status of EU Law in the United Kingdom will be abolished. From 1 January 2024, retained EU laws (including those relating to IP) will be interpreted and applied consistently with domestic laws. The UK government may also now make significant changes and reforms to retained EU law via secondary legislation. It remains to be seen how quickly or slowly judges depart from EU case law in their judgements. A possible bellwether may be the outcome of the seven year-long case of Sky v SkyKick, which has involved consideration of whether applying for a registered trade-mark in ‘bad faith’ can invalidate an IP registration.

Lastly, the UK Intellectual Property Office (IPO) is currently undergoing its ‘One IPO’ transformation process, which will completely digitalize and streamline its services. The IPO anticipates that additional patent services shall be added to the One IPO system in spring 2024 (this patent service is currently only available to a small group of customers as part of an early-access pilot scheme for testing and troubleshooting), with both the trade marks and designs services and the digital hearings and tribunals services set to follow in autumn and winter 2025.

* The information in this chapter was accurate as of January 2024.

If you need more consulting, please Contact Us at TNHH NT International Law Firm (ntpartnerlawfirm.com)

You can also download the .docx version here.

“The article’s content refers to the regulations that were applicable at the time of its creation and is intended solely for reference purposes. To obtain accurate information, it is advisable to seek the guidance of a consulting lawyer.”

LEGAL CONSULTING SERVICES

090.252.4567

HÃY CLICK ĐỂ LẠI SĐT CHÚNG TÔI SẼ GỌI NGAY CHO BẠN MIỄN PHÍ

NT INTERNATIONAL LAW FIRM

• Email: info@ntpartnerlawfirm.com – luatsu.toannguyen@gmail.com
• Phone: 090 252 4567
• Address: B23 Nam Long Residential Area, Phu Thuan Ward, District 7, Ho Chi Minh City, Vietnam