Licence To Litigate
The recent case of Oxonica Energy v.
Neuftec1 is a telling example of how expensive
litigation can ensue from drafting an intellectual property licence
that is not fit for purpose.
Neuftec, who had a background in the motor industry, wanted to
develop a fuel additive that would reduce fuel consumption and
engine emissions. Neuftec wanted to use lanthanide oxides as active
ingredients but these were known to clog filters and damage
engines. They saw that the solution would be to make use of
extremely small particles of cerium oxide coated with a lipophilic
(oil-loving) substance to aid disbursement of the particles in the
fuel. Neuftec approached Oxonica to manufacture the particles, who
were a young nanotechnology company spun out from Oxford
University.
The parties incorporated a joint venture company to develop the
additive which combined Neuftec's know how of the motor
industry and general commercial acumen with Oxonica's expertise
in nanoparticles. The additive was developed successfully and
Neuftec made an international patent application under the Patent
Cooperation Treaty (PCT Application).
The parties then decided to structure the business relationship
in a different way to allow Oxonica to take advantage of certain
financial benefits. It was agreed that Neuftec would license its
intellectual property to Oxonica who would exploit the technology
and pay licence fees back to Neuftec. This arrangement was put into
effect by two documents: a main agreement covering the operation of
the business and an exclusive licence (the Licence Deed) giving
Oxonica the right to use Neuftec's technology and know how in
relation to lanthanide oxide fuel additives and the motor
industry.
The Licence Deed stated that licence fees would be payable on
the sale of Licensed Products and included the following
definitions:
"Licensed Application: "the
application appended in the Schedule hereto [i.e. the PCT
Application] and any continuation, continuation-in-part or
divisional applications thereof as well as foreign counterparts and
re-issues thereof";
Licensed Patent: "any patent issuing
from the Licensed Application thereof as well as foreign
counterparts and re-issues thereof";
Licensed Products: "any product,
process or use falling within the scope of claims in the Licensed
Application or Licensed Patent".
Oxonica used the licensed technology and know how to develop a
commercial fuel additive called "Envirox". The company
began to sell this product and...
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