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IP licensing – transparency is now a virtue

Earlier this year, the Patents Court granted an order for pre-action disclosure of certain patent licences. This decision, in the case of Big Bus Company v Ticketogo Ltd, was unprecedented and has significant implications for IP licensing and litigation. The Court’s support for commercial transparency and its resulting willingness to permit pre-action disclosure of licence agreements should be noted with interest by those involved in licensing.

Ticketogo Limited (“Ticketogo”) is the owner of a UK patent relating to a method of issuing tickets containing a bar code which can be downloaded from the Internet and printed. The Big Bus Company (“Big Bus”) operates bus sightseeing tours.

In October 2012, Ticketogo wrote to Big Bus claiming that the Big Bus ticketing system infringed their patent and, at the same time, offering Big Bus a licence of this patent. Ticketogo indicated that other companies in similar businesses had agreed a licence with Ticketogo in order to operate their ticketing systems. Big Bus’ initial response was that it did not need a licence because its ticketing system did not infringe the patent. Ticketogo persisted with its allegation, reiterating that a significant number of licensees had signed patent licence agreements. The implication for Big Bus was that such companies had decided not to challenge the validity of Ticketogo’s patent.

In March 2015 Big Bus made an application for an order for pre-action disclosure of the licences previously granted under the Ticketogo patent. Big Bus’ argument was that it needed such disclosure in order to enable it properly to consider and quantify the claim against it. Without this information it could not make an informed decision as to whether or not to defend any action brought (in which case, even if successful, it would not recover all of its costs) or agree a reasonable royalty (which necessitated an understanding of what this would be).

Under rule 31.16 of the Civil Procedure Rules, the Court has the power to order disclosure before an action is commenced, provided certain requirements are fulfilled and is it desirable to do so in order to:-

  • Dispose fairly of the anticipated proceedings;
  • Assist the dispute to be resolved without proceedings; or
  • Save costs.

Big Bus’ application was supported by a witness statement from its solicitor which confirmed Big Bus’ position that its ticketing system did not infringe the Ticketogo patent and that it believed the patent was invalid. In the statement it was further argued that disclosure of the licences was required because Ticketogo had used the fact that other businesses had taken licences to try to persuade Big Bus to do the same.

Ticketogo made its case against any disclosure on the basis that this would have a serious negative impact on its freedom to negotiate licences under its patent and that it was up to Big Bus to determine the value of Ticketogo’s infringement claim without having information about what had been agreed with existing licensees.

The Court ruled in favour of Big Bus and allowed the application for disclosure of the licences. In IP cases, the quantum of a claim is regularly tried separately after the issue of liability has first been established. The significance of this case is in the fact that the judge was prepared to make an order for pre-action disclosure of the licences which related to the quantum issue before liability was established. The judge commented “…transparency is a virtue. Availability of price information is one of the key requirements for the proper functioning of any market, and I see no reason why the market for patent licences should be any different.”

Given that, to date, parties have been at pains to keep secret any negotiations over patent licences, this move to greater transparency marks a real shift in attitude. For IP licensors, this must now be factored into the way in which licences are negotiated.

Roy Crozier, partner in the Intellectual Property Group, comments “Broadly speaking, greater transparency should be welcomed. This decision of the Patents Court to approve pre-action disclosure is a helpful development. For businesses threatened with claims of IP infringement, such orders will assist in deciding whether to defend or settle the claim and, if so, on what terms the licence should be granted”.