Court of Appeal rules on effect of exclusive licensee’s failure to register patent licence

August 2011

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Introduction

The Court of Appeal has given judgment on recovery of costs where a patent owner or exclusive licensee has not registered with the Intellectual Property Office the assignment or licence under which it acquired rights to the patent within the 6 month time period required by section 68 of the Patents Act 1977.

The decision

Section 68 was amended as of 26 April 2006 to provide that “…the court…shall not award [the claimant] costs or expense unless - (a) the transaction, instrument or event is registered within the period of six months beginning with its date…”. This section replaced previous, more onerous, provisions in the Patents Act that precluded an assignee or exclusive licensee from claiming damages during the period that the instrument should have been registered but had not been registered. This was the first case in which the court was asked to determine how these new provisions should operate.

In this case, the defendant in the claim for infringement argued that the claimant was entitled to no costs award whatsoever as the claimant’s patent licence was granted in 1994 but only registered in 2008. As it had fallen foul of section 68 by registering long after the 6 month period expired with no valid reason, it should be prevented from claiming any costs even those incurred in the period after it had registered. The claimant sought costs it had incurred both prior to and for the period after it had registered its licence.

The Court of Appeal agreed with the claimant and held that it was only in so far as a claim covered compensation for a period in which the transaction was not registered when it should have been that costs relating to that period would not be recoverable. All other costs were recoverable in the usual way, including of course for the period following the date that the instrument had been registered (albeit that the registration was late). The Court of Appeal’s reasoning behind this included there was nothing unfair about awarding a successful party its costs after it had put its house in order by registering the relevant transaction, even though this registration was late.

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Impact

As recognised by the Court of Appeal, this judgment renders section 68 largely ineffective, as discovery of infringement usually triggers registration before an action is commenced. Most costs would therefore get incurred after registration and so be recoverable in the normal course.

What the judgment does not change is the importance to an assignee or licensee of a patent or other registered right to properly and promptly register its interest with the Intellectual Property Office. This ensures that third parties are put on notice of that interest and protects against the risk of a subsequent bona fide purchaser of the registered right potentially taking it free of that interest.

Case: Schutz (UK) Ltd v Werit UK Ltd and another [2011] EWCA Civ 927, 2011

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