TickeToGo decision opens the door to transparency in patent licensing negotiations
1 May 2015
In an unprecedented decision Mr Justice Arnold has ordered disclosure by a patent proprietor, TickeToGo Limited, to an alleged infringer, The Big Bus Company Limited, of patent licences issued by the patent proprietor, prior to commencement of any patent infringement proceedings between the two parties. This decision may break down the walls of secrecy that surround patent licensing negotiations, particularly where the patent proprietor’s only business is in licensing patents to others.
TickeToGo Limited (“TickeToGo”) is the proprietor of UK patent no. GB2391101, entitled “Ticketing System”, relating to a method of issuing tickets containing a barcode in an image file format to a user of a communication interface (e.g. a computer) for communicating with a data server over a publicly accessible communication network (e.g. the internet). This patent has been extensively licensed by TickeToGo, to companies operating in various different sectors, including transport and entertainment. The UK Register of Patents indicates that 38 companies have taken licences under the patent, although TickeToGo suggests that the true number of licences issued is over 60.
The Big Bus Company Limited (“Big Bus”) is an operator of open top bus sightseeing tours. In October 2012 TickeToGo approached Big Bus to notify Big Bus of the existence of the patent, with an offer to license the patent to Big Bus, further indicating that a major coach travel operator had recently taken a licence under the patent.
Big Bus replied stating that it did not require a licence because it did not infringe the patent, and set out its reasons as to why this was so. TickeToGo, however, maintained that Big Bus did infringe, and suggested that the process of challenging the validity of a patent is “a complicated and expensive exercise”. TickeToGo also drew attention to further new licensees, suggesting that “…these companies are substantial organisations who presumably decided after due consideration not to attempt to challenge the validity of the patent, but to take a licence instead”.
Following further correspondence from TickeToGo in early 2015, in which TickeToGo repeated its assertion that Big Bus required a licence, and provided a further list of licensees, Big Bus asked TickeToGo to disclose to Big Bus the licences previously granted under the patent, presumably to permit Big Bus to assess the value of TickeToGo’s claim and come to a conclusion as to what would be a reasonable royalty. TickeToGo declined to disclose the requested information.
Big Bus’ Application
On 30 March 2015 Big Bus applied to the High Court for disclosure and inspection of all licences granted under the TickeToGo patent, in particular 44 licences referred to in TickeToGo’s correspondence of early 2015.
Big Bus’ application was supported by a witness statement made by Big Bus’ solicitor, in which he pointed out that TickeToGo had repeatedly relied on the fact that others had taken licences under the patent in its efforts to persuade Big Bus to take a licence. The witness statement further indicated that Big Bus believed that its system does not fall within the scope of the patent, and that Big Bus believed that there was a strong case that the TickeToGo patent is invalid.
However, Big Bus was concerned that it would incur significant unrecoverable costs even if it were to succeed in patent infringement proceedings, and so was conscious of the desirability of reaching a commercial resolution to the dispute with TickeToGo. Big Bus felt that if it knew the terms of the licences already granted then it would be in a position to assess the true value of TickeToGo’s claim, which would help in reaching an informed settlement.
TickeToGo resisted the application, arguing that it should not have to disclose any licences, and that even if it did, it should not have to disclose all of the licences, but only those that relate to a per-ticket licensing model (perhaps because TickeToGo felt that such licences were more favourable to TickeToGo than other types of licence, and so were less unhappy about the possibility of having to disclose them). TickeToGo further argued, in response to Big Bus’ reason for requesting disclosure of the licences, that:
i) Big Bus could form its own assessment of the value of the claim (without seeing earlier licences); and
ii) TickeToGo should be free to negotiate licences with potential licensees without those potential licensees being in possession of information about what other licensees have agreed to pay.
The judge was not persuaded by either of these points, indicating that Big Bus did not have access to the key information that the court would consider in determining damages to be paid to TickeToGo in the event that it was successful in a patent infringement action, namely the terms of comparable licences granted by TickeToGo to others. The judge asked the question “Why should Big Bus have to fight and lose on infringement and validity in order to find out what it would have to pay by way of damages?”
On the second point the judge was equally strident, indicating that “the point being made by TickeToGo’s solicitor is that, for a party in the position of TickeToGo, it is desirable to be able to negotiate licences individually without each licensee knowing what other licensees have agreed to pay. This will enable such a party to maximise the licence income it obtains from each licensee”.
The judge went on to say that “I consider that, here as in other contexts, 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”.
In allowing Big Bus’ application for disclosure of a subset of the requested licences (those relating to the transport sector), the judge said: “Why should Big Bus be obliged, if it does not wish to litigate, to accept whatever royalty rate TickeToGo now sees fit to offer it, if a court would award less by way of damages”.
This unprecedented decision potentially sheds light on the often secretive world of patent licensing. Patent licensing organisations should be aware that greater transparency will be required in future in negotiating licensing agreements, and that they will have to consider carefully the royalty rates and other licensing terms that they demand from licensees.
If you require further information on anything covered in this briefing, please contact Matthew Howell (email@example.com; +44 1179 253 030) or your usual contact at the firm.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Withers & Rogers LLP, May 2015