IP Rights of Research Students at UK Universities

For universities, difficulty can arise in determining whether consultants, academics, visitors, students, and secondees are employees of the university for the purposes of relying on ownership of an employee invention. This requires looking to any agreement between the inventor and the university that would be indicative of an employment contract. Even if an employment relationship could be established, the scope of the employee’s duties and whether an invention can be expected to result from those duties must be assessed to ascertain whether the criteria are met for the employer to be entitled to its employee’s invention.

To the extent the inventor is not an employee of the university, the university could still rely on its agreement with the inventor to evidence a legal or beneficial right to the invention, such as through an express or implied assignment.

An interesting decision in the area of patent ownership occurred at the end of 2022 in Oxford University Innovation Ltd. v. Oxford Nanoimaging Ltd., a case concerning the patent rights in an Oxford University PhD student’s invention. The student, Bo Jing, was employed by the university as an intern before commencing his PhD studies. He created inventions during his employment as well as his studies. As Jing’s relationship with the university changed during the course of his inventorship, this case engaged with both of the situations mentioned above where ownership of an invention would shift from the inventor to a third party. Further, because Jing was a student during his PhD studies, he was potentially subject to consumer protection laws applicable to contracts entered into between consumers and suppliers.

The UK courts therefore had to deal with a new question of law when it came to the PhD period of Jing’s relationship with the university: Are consumer protection laws relevant to contract terms relating to the IP rights of students? If so, were the terms of this contract “unfair” and therefore unenforceable?

In addition to finding that the university was entitled to Jing’s invention made during the course of his employment and by virtue of his PhD contract, in concluding that consumer protection laws do apply to PhD students’ contracts, the court’s decision is of significance even though, on the facts, the terms of this contract were not found to be “unfair” and were therefore enforceable in the university’s favor.

Case Background

The relevant invention is a specialized microscope that is commercialized by Oxford Nanoimaging Limited (ONI) as the “Nanoimager.”

Jing was initially employed by Oxford University (Oxford) as a research intern from February 2013 until October 2013 and then became a PhD researcher at the university from October 2013 until May 2016. During his employment and research studies, he did the bulk of the detailed development work that resulted in the patents in issue in this case. When the technology was spun out of Oxford to be commercialized by ONI, Jing left the university, without completing his PhD, to become the chief technology officer of ONI. Oxford University Innovation Limited (OUI), the technology transfer arm of Oxford, was the registered proprietor of the relevant patents and licensed the patent rights relating to the Nanoimager to ONI for commercialization.

The suit began as a claim for royalties due since 2019 under the license. ONI contended that it was not liable for past royalties because the license with OUI was void, having been entered into by the parties on the common mistake that OUI owned the licensed patent rights when Jing owned them.

Who Owned the IP Developed during the Employment Period?

In accordance with section 39 of the UK Patents Act 1997, an invention made by an employee belongs to an employer if:

(a) it was made in the course of the normal duties of the employee or in the course of duties falling outside his normal duties, but specifically assigned to him, and the circumstances in either case were such that an invention might reasonably be expected to result from the carrying out of his duties; or

(b) the invention was made in the course of the duties of the employee and, at the time of making the invention, because of the nature of his duties and the particular responsibilities arising from the nature of his duties he had a special obligation to further the interests of the employer’s undertaking.

It was generally undisputed between the parties that the application of section 39 involves looking to the employment contract and the general nature of the job to determine:

• what the employee was employed to do (in the course of their normal duties or specifically assigned duties); and
• whether an invention was reasonably expected to result from the work.

The court concluded that an invention of this kind was reasonably expected from Jing during his period of employment, as:

• he was employed to progress the development of a type of microscope that did not exist (as part of his normal duties);
• the decision to employ him was at least in part due to his specialized education in microscopes and emphasis on his design and build capabilities during the internship application, attributes which “made it particularly likely that he would make inventions”; and
• factors such as Jing’s low status within the Oxford hierarchy as an intern, his youth, modest salary, and the like did not displace his status as an employee for whom invention was reasonably expected.

Therefore, Oxford was entitled to the inventions created during Jing’s employment.

Who Owned the IP Developed during the PhD?

Jing’s PhD contract with Oxford unsurprisingly incorporated IP terms from the university’s statutes and IP policy document. These expressly provided for the transfer of IP including inventions from Jing to Oxford.

The UK’s Unfair Terms in Consumer Contracts Regulations 1999 (Regulations) applied to the PhD contract if Jing as a student was a “consumer.” The Regulations define a consumer as “any natural person who . . . is acting for purposes which are outside his trade, business or profession.” If the Regulations applied, any contract term that had not been individually negotiated would be considered “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.” Any “unfair” terms would not be binding on Jing.

ONI’s position was:

1. Jing’s PhD contract was for the purpose of his personal and private education, meaning he was not acting in the course of his trade, business, or profession in making the contract. He was a “consumer,” and the contract is governed by the Regulations.
2. The IP terms in the contract were “unfair” within the meaning of the Regulations because, among other reasons, it involved a blanket approach that was too broad, was more favorable to Oxford than comparable provisions applied at other universities, applied a “one size fits all” approach irrespective of the actual contributions made by those involved, and interfered with a student’s right to take legal action or seek legal remedy where IP ownership issues are concerned.

Oxford’s position was:

1. Jing’s PhD contract, although an education contract in the general sense, was for the purpose of his career and professional development, so he was not a “consumer.”
2. The IP terms were not unfair because they were not contrary to the requirement of good faith and did not create a significant imbalance to Jing’s detriment. The terms were actually favorable to Jing in many respects, were consistent with the approach of other academic institutions, and were more favorable than IP terms that would apply to research employees in the industry.

Was the PhD Student a Consumer?

As the Regulations are based on the European Unfair Consumer Terms Directive, the court closely considered previous decisions of the Court of Justice of the European Union (CJEU) and adopted the CJEU’s approach in Costea: “[The court must] take into account all the circumstances of the case, particularly the nature of the goods or service covered by the contract in question, capable of showing the purpose for which those goods or that service is being acquired.”

After concluding that undergraduate students would be consumers and post-doctoral researchers would be employees, the court concluded that Jing as a PhD student (between an undergraduate and a post-doctoral researcher) was prima facie a “consumer,” as PhD students have more similarities with undergraduates. The judgment referred to a PhD being akin to an essential purchase for certain kinds of students, like professional qualifications, and determined that PhD students are entitled to consumer protection as much as undergraduate students. It does not matter whether the student is obtaining an educational qualification with a view to their career, profession, and/or professional advancement. Further, Oxford did not successfully prove that Jing’s circumstances were such that it would be wrong to treat him as a consumer.

Were the IP Terms Unfair?

The court ultimately concluded that the IP terms were made by Oxford University in good faith and were not unfair. In coming to this conclusion, the court considered:

• the IP terms as part of the contract for educational services as a whole;
• the impact of the terms to both parties;
• whether provisions favoring the university may also indirectly serve the interest of the PhD student assigning their IP rights;
• what the position would be in the absence of the terms;
• whether the terms deliberately or unconsciously take advantage of the PhD student (e.g., their indigence, lack of experience, weak bargaining position, etc.);
• whether the IP terms depart conspicuously from an average generally informed and reasonably attentive consumer’s legitimate expectations as to the content of a PhD contract of this kind; and
• whether the university could reasonably assume that the PhD student would have agreed to such a term in individual contract negotiations.

Importantly, the court highlighted that without a term vesting patent rights in Oxford University, a student may have been “better off” in terms of raw entitlement to the patent rights but worse off in several other respects, such as the ability to seek assistance from the university in obtaining patent protection and funding for commercialization of the invention; i.e., although the student may have more control over the rights, those rights may be hard to obtain, enforce, and monetize.

Further, the court acknowledged that it should respect the policy choices of a university with respect to its allocation of benefits (such as through royalties and equity), and whether to incentivize researchers (with maximum benefits) to undertake commercial research or to concentrate more on fundamental research. The policies of Oxford were considered reasonable, properly thought out, and not materially out of line with other institutions. A standardized approach does not necessarily result in unfairness and makes “good practical sense” in reducing administrative burden and potential disputes.

Although there may be limited choice of research institutions specializing in certain projects, any prospective PhD student could apply to undertake a PhD at another university or research institution with different IP terms as a matter of “balance and choice.” The court did not think that the IP terms markedly departed from what would normally be expected by an average generally informed and reasonably attentive PhD student’s legitimate expectations of a PhD contract, nor were they intended to take advantage of Jing.

The judgment states:

Taken as a whole, nothing in ONI’s arguments persuade me that the University should have thought they were offering a poor deal. To the contrary the University reasonably thought that they were offering Mr Jing a very good deal when it came to IP rights and benefit sharing and doing so in good faith.

Therefore, although the PhD contract was held to be covered by the Regulations, none of its terms were considered unfair. Consequently, Oxford owns the invention developed during the PhD.

Takeaways

In addition to acknowledging the increasing importance of IP ownership in the university context due to the greater focus on commercialization of research work, this case reminds us more generally that IP ownership issues are fundamental to the exploitation and enforcement of IP rights. In the UK, institutions should protect their IP by:

• dealing expressly with IP ownership in contracts, whether with employees or nonemployees (such as research students or independent contractors);
• clearly stating which entity and jurisdiction the inventor’s duties are attached to, as different jurisdictions have different approaches to the ownership of inventions;
• considering whether in reaching agreements with research students, the students are acting in their capacity as “consumers” under the Regulations and are therefore protected by consumer laws; and
• reviewing internal policies and guidelines to ensure they are fair, reasonable, materially thought out, and not out of line with other similar institutions.

It is also important that, when evaluating the IP assets of a potential target, collaborator, or licensor, organizations consider how those entities have dealt with the above issues to minimize the risk of transacting with an entity that has insufficient IP rights.