Is student-created IP fair game?

Posted: 26/04/2023

Is it fair for a university to own intellectual property (IP) created by a student? In the recent ruling of OUI v ONI, Judge Daniel Alexander clarified a key legal issue in relation to postgraduate students as consumers, and its impact on university IP policies.

The case arose against a background of debate amongst higher educational institutions about the approach they should take towards sharing in the benefits derived from student-created IP, which is becoming more relevant as their focus on commercialising research increases. 

This is the first case involving these kinds of issues in universities to come before the UK courts, and there is little prior case law from the EU. The 70,000-word judgment reflects its complexity and importance. This article focuses on just two of the legal issues considered: whether students are consumers, and whether Oxford University’s IP policy was fair. 

Background

The case concerned a claim by Oxford University Innovation Ltd (OUI) for £700,000 in unpaid patent royalties, arising from the invention and commercialisation of a compact super-resolution imaging device (a type of specialised microscope). The device was developed at Oxford University and commercialised by Oxford Nanoimaging Ltd (ONI), as part of a university spin-out. 

The device was designed and developed by a small team at the university, with Mr Jing, who was initially an intern, and later a DPhil student, playing a key role. He went on to become one of the founders of ONI Ltd and was also its CEO. However, the university’s IP policy meant that the IP in devices developed in this way was owned by the university, and then licensed to the spin-out company.

ONI did not dispute that the royalties were unpaid. However, part of its defence for not paying the royalties was that the terms of the university's IP policy were unfair and unlawful under consumer protection legislation. It argued that this meant ownership of the relevant IP had not passed to the university, and so the licence was void.

The legal issues

Are students consumers?
ONI’s defence centred on whether Mr Jing, as a DPhil student, was a consumer within the meaning of the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs) which implemented an EU directive (in force at the time). The legislation 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’. 

OUI argued that Mr Jing was not a consumer on the basis that for some of the relevant time, he had been working as an intern – ie as an employee rather than a student – and also that his research was related to a device with commercial potential.

The judge did conclude that post-doctoral researchers, such as Mr Jing as an intern, are employees, not consumers. 

However, it was determined by the judge that both undergraduate and postgraduate students were considered to be consumers, even if their course is vocational or taken with a professional aim in mind, and even in the event that the student receives funding from the institution. 

Here the judge referred to the UK Competitions and Markets Authority’s (CMA) advice on contracts with students published in 2015, which states at paragraph 1.6 that: ‘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 determined that doctoral students (as were considered in particular here) will normally be treated as a consumer under the legislation.

Mr Jing’s particular circumstances, therefore, did not exclude him from being deemed a consumer. In this case, therefore, consumer protection law applied and provided that it was necessary for the university’s IP policy to be fair in order for the patent licence to be valid and royalties due.

On the facts of another case, however, it may still be possible to argue that a student is not a consumer, where the line between student and employee is less clear.

What does acting fairly to a student consumer mean?
This issue then required the court to consider whether the university’s IP policy was ‘unfair’ within the meaning of the UTCCRs, which provide that ‘a contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer.’

ONI argued that the university’s IP policy was unfair in a number of ways, including the broad circumstances in which royalties could be claimed; having terms that were more favourable to Oxford University than provisions at other institutions; not taking into account the actual contributions made by individual inventors; and unfairly hindering a student’s right to take legal action in relation to issues of intellectual property ownership.

Decision

It was decided that the IP provisions were made in good faith, and overall did not create an imbalance. There was one clause in the policy which was considered to be too broad in the way the university could claim ownership of the IP, which was later replaced with a more restricted set of circumstances. However, the court ruled that although the original wording was capable of being unfair, the university did not actually apply it as broadly as was permitted. 

As a result, it did not cause the treatment of Mr Jing to be unfair. The IP provisions satisfied the requirements of good faith, meaning the licence was not void and the patent royalties due should be paid.

Key take aways

• Both undergraduates and (in most cases) postgraduate students will be treated as consumers under the law, and will be protected by consumer rights legislation.
• University IP policies must be fair and made in good faith in order to be valid.
• University policy makers would be wise to make good use of experts with specialist drafting skills and knowledge of consumer and IP law.

This article was co-written with Alison Ross, trainee solicitor in the IP, IT and commercial team.

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