High Court looks at student related consumer law issues

The judgment in Oxford University Innovation Ltd v. Oxford Nanoimaging Ltd [2022] EWHC 3200 (Pat) is understood to be the first example of the Court looking at IP provisions in a student contract from a consumer law perspective.

The Court confirmed that undergraduates and postgraduate doctoral students will be treated as “consumers” for the purposes of the Unfair Terms in Consumer Contracts Regulations 1999 (“the Regulations”). This means contracts made between Higher Education Institutions and their students have to be fair, and as we note below, also gives rise to a number of additional considerations for Institutions to think about.

We consider the judgment and what it means for Institutions:

Background

This case concerned a claim for royalties alleged to be due to the Claimant, Oxford University Innovations Ltd (“OUI”), pursuant to a licence agreement. OUI was incorporated by the University of Oxford (“the University”) as its technology transfer arm. The licence relates to IP rights in an imaging device (“the Nanoimager”) developed at the University, and now marketed commercially by the Defendant, a spin-out company.

The development of the Nanoimager had been largely carried out by Mr Jing, who had first joined the University as an employed research assistant, and then became a doctoral student. He then left the University and become CEO of the Defendant.

The Defendant’s argument was that the relevant licence agreement was void for common mistake. The Defendant said that the mistake was that matters had proceeded on the basis that OUI owned certain IP, when in fact the relevant IP was owned by Mr Jing.

The key issue was which entity could validly claim rights to inventions made by Mr Jing. The Court looked at the position, both when Mr Jing had been an employee of the University, and subsequently, when he became a doctoral student.

The Court considered the IP provisions set out in the University’s statute, and incorporated into the University’s student contract with Mr Jing, which provided that inventions discovered by him “in the course of or incidentally to” his studies transferred to the University. The Court considered whether this contractual term was fair.

Judgment

Judgment was given in favour of OUI. It was held that:

Inventions created in the course of employment

• The University was entitled to any inventions created in the course of Mr Jing’s internship (i.e. when he was an employee) and the Nanoimager was an invention that was reasonably to be expected from him as an employee. This meant that the relevant inventions were taken as belonging to the University pursuant to s. 39 of the Patents Act 1977.

Was Mr Jing a “consumer” and was the student contract “fair”?

• A typical undergraduate would in general be a consumer, regardless of whether their course is undertaken with a professional aim in mind. A typical post-doctoral researcher, with a contract of employment, would not.
• The Court decided that doctoral students shared enough similarities with undergraduates to be treated as “consumers” within the meaning of the Regulations. For example, the Court noted the numbers of doctoral students in the UK is significant; that when prospective post-graduate students enter into contracts with Institutions for education, they may well not be very experienced with commercial matters; and relevant contracts may require at least some students to make significant payments to Institutions by way of tuition and other fees.
• The Court said that it did not think it would be right to draw the line (i.e. as to which students are “consumers”) at whether or how any funding for a doctoral student is provided. The Court said that if only unfunded doctoral students were to be treated as consumers, funded students would be unable to challenge any of the university's terms under this legislation. However, the Court considered that funded students as a class may stand in greater need of mounting such challenges to things like IP policies since the fact that they are funded may mean that they are as a class more likely to make inventive contributions in the course of their work.
• The Regulations 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.
• In reaching a view as to fairness in this context, the Court said that an important factor was whether the University could reasonably assume that the student would have agreed such a term in individual contract negotiations. A relevant factor in this evaluation is the extent to which the terms in question have been regarded as significantly unfair or have operated to create unfairness by others who are also subject to them.
• The Court found that the IP terms of the relevant student contract were not The terms were considered in the context of the contract for educational services as a whole. It was considered that there was no significant imbalance to the detriment of Mr Jing.
• The terms set out in the University’s benefit sharing policies were as favourable to Mr Jing as they would have been had he been a post-doctoral employee, and more favourable than they would have been had he been employed as a designer in a commercial undertaking.
• The terms were also held to have been agreed in good faith, in that for example they were clear and were not intended to take advantage of a student’s weaker bargaining position.
• The result of the above findings was that OUI was entitled to the relevant IP rights and the associated royalties claimed for.

Points of Importance

• Institutions must be aware that doctoral students will likely be treated as consumers and therefore any contracts between the Institution and their doctoral students must be fair. These considerations apply to all contractual terms, not just those relating to IP rights.
• This case serves as an important reminder that students are generally regarded as benefitting from consumer law protection. These consumer law obligations extend more widely than the Regulations considered in this case, and means that Institutions need to carefully consider provisions from other consumer law legislation which govern for example the provision of information to students and making changes to student contracts. It is also of note that the Court referred to the CMA’s guidance for Institutions and students on consumer law.
• Institutions should ensure that contracts with doctoral students are:
  • Sufficiently clear
  • Not intended to take advantage of a student’s weaker bargaining position
  • Do not depart from legitimate expectations
  • Not applied unfairly
• This is of growing importance as universities focus more on the commercialisation of research work.

This article was co-written by Virginia Cooper, Partner and Amy Tschobotko, Partner.

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