Manual of Patent Practice

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Section 44: Avoidance of certain restrictive conditions [repealed with savings]

Sections (44.01 - 44-12) last updated: April 2007.

44.01

s.130(1) and s.44(3) is also relevant

This section renders ineffective certain restrictive conditions or terms of contracts for the supply of a patented product or of licences to work a patented invention or of related contracts. (By patented invention is meant an invention for which a patent is granted. Patented product means a product which is a patented invention or, in relation to a patented process, a product obtained directly by means of the process or to which the process has been applied.) It also concerns use of the presence of such a condition or term as a defence in infringement proceedings.

44.01.1

This section ceased to have effect for new agreements when Section 70 of the Competition Act 1998 came into effect along with the main powers of that Act from 1 March 2000. The provisions of the Competition Act are therefore effective instead to prevent restrictive practices. However a saving in The Competition Act 1998 (Transitional, Consequential and Supplemental Provisions) Order 2000 means that section 44 will continue to apply to agreements entered into before 1 March 2000. Under Section 52 of the Competition Act, the Office of Fair Trading will publish guidelines about the application and enforcement of the prohibitions contained in that Act. See also 45.01.1.

44.02

The present s.44 is substantially a re-enactment of s.57 of the 1949 Act which in turn was based on s.38 of the 1907 Act. The mischief to which that s.38 was directed was to prevent a patentee from abusing his monopoly by placing restrictions on the acquisition and use of products other than the patented products (observed in the judgment of the Court of Appeal in Fichera v. Flogates Ltd [1984] RPC 257, see also 44.06, 44.07 44.10 and 44.12).

44.03

s.77(1) is also relevant

The provisions of s.44 apply in relation to not only patents granted under the 1977 Act, but also granted European patents (UK).

44.04

Restrictive conditions may also offend against the Treaty establishing the European Economic Community, particularly Article 81 (previously 85) thereof which prohibits agreements affecting trade between member states and preventing, restricting or distorting competition within the common market. The position with regard to provisions in patent licence agreements is also governed by EEC Regulation No. 240/96, see [1996] FSR 397.

 
Section 44(1)
Subject to the provisions of this section, any condition or term of a contract for the supply of a patented product or of a licence to work a patented invention, or of a contract relating to any such supply or licence, shall be void in so far as it purports -
(a) in the case of a contract for supply, to require the person supplied to acquire from the supplier, or his nominee, or prohibit him from acquiring from any specified person, or from acquiring except from the supplier or his nominee, anything other than the patented product;
(b) in the case of a licence to work a patented invention, to require the licensee to acquire from the licensor or his nominee, or prohibit him from acquiring from any specified person, or from acquiring except from the licensor or his nominee, anything other than the product which is the patented invention or (if it is a process) other than any product obtained directly by means of the process or to which the process has been applied;
(c) in either case, to prohibit the person supplied or licensee from using articles (whether patented products or not) which are not supplied by, or any patented process which does not belong to, the supplier or licensor, or his nominee, or to restrict the right of the person supplied or licensee to use any such articles or process.

44.05

Subject to the exceptions to which 44.08 and 44.11 and 44.12 refer, any condition or term of such a contract or licence (see 44.01) is void in so far as it purports to impose any of the requirements, prohibitions or restrictions set out in s.44(1)(a), (b) and (c). These relate to the acquisition of anything other than the patented product (as defined in 44.01) and the use of articles and patented processes.

44.06

Subsection (1) is of a highly penal nature since it not only renders the condition or term void but also (by virtue of s.44(3), see 44.09) affords a defence to an infringer. It should therefore be construed strictly (observed in the judgment of the Court of Appeal in Fichera v Flogates Ltd [1984] RPC 257).

44.07

It was also held in Fichera v Flogates Ltd that s.44 is concerned only with conditions and terms which are enforceable by action for damages for breach of contract.

 
Section 44(2)
Subsection (1) above applies to contracts and licences whether made or granted before or after the appointed day, but not to those made or granted before 1st January 1950.

44.08

Subsection (1) applies to contracts and licences made or granted on or since 1 January 1950 (the day on which the 1949 Act came into operation) but not those made or granted previously.

 
Section 44(3)
In proceedings against any person for infringement of a patent it shall be a defence to prove that at the time of the infringement there was in force a contract relating to the patent made by or with the consent of the plaintiff or pursuer or a licence under the patent granted by him or with his consent and containing in either case a condition or term void by virtue of this section.

44.09

The presence in a relevant contract or licence of a condition or term void by virtue of s.44 is, if proved by the infringer, a defence in infringement proceedings. The contract or licence must have been in force at the time of the infringement of the patent in question.

44.10

In Fichera v. Flogates Ltd see 44.02, it was held that none of the conditions or terms offended under s.44(1), the attempted defence under s.44(3) therefore failed and the plaintiffs were entitled to an enquiry as to damages in respect of the infringement. However, an infringement action in Chiron Corpn v Organon Teknika Ltd [1994] FSR 202 was successfully defended because an agreement required the defendant to buy raw materials from the proprietors whether it was patented or not. Earlier in Chiron Corpn v Organon Teknika Ltd [1993] FSR 324 and 567 the Court of Appeal held that it was immaterial to the operation of s.44(3) that the agreement in question was governed by a foreign law.

 
Section 44(4)
A condition or term of a contract or licence shall not be void by virtue of this section if -
(a) at the time of the making of the contract or granting of the licence the supplier or licensor was willing to supply the product, or grant a licence to work the invention, as the case may be, to the person supplied or licensee, on reasonable terms specified in the contract or licence and without any such condition or term as is mentioned in subsection (1) above; and
(b) the person supplied or licensee is entitled under the contract or licence to relieve himself of his liability to observe the condition or term on giving to the other party three months’ notice in writing and subject to payment to that other party of such compensation (being, in the case of a contract to supply, a lump sum or rent for the residue of the term of the contract and, in the case of a licence, a royalty for the residue of the term of the licence) as may be determined by an arbitrator or arbiter appointed by the Secretary of state.
 
Section 44(5)
If in any proceeding it is alleged that any condition or term of a contract or licence is void by virtue of this section it shall lie on the supplier or licensor to prove the matters set out in paragraph (a) of subsection (4) above.

44.11

s.44(4)(a) s.44(5) and s.44(4)(b) is also relevant

Subsection (1) does not operate to void a condition or term if (a) at the time the contract or licence was made, the supplier or licensor was willing to agree to different terms which were reasonable and excluded any offending under subsection (1) (the onus being on the supplier or licensor to prove these matters); and (b) the contract or licence entitles the person supplied or licensee to relieve himself of his liability to observe the offending condition or term, subject to three months notice and payment of compensation.

 
Section 44(6)
A condition or term of a contract or licence shall not be void by virtue of this section by reason only that it prohibits any person from selling goods other than those supplied by a specific person or, in the case of a contract for the hiring of or licence to use a patented product, that it reserves to the bailor (or, in Scotland, hirer) or licensor, or his nominee, the right to supply such new parts of the patented product as may be required to put or keep it in repair.

44.12

A condition or term is not made void by subsection (1) by reason only that
(a) it prohibits any person from selling goods other than those supplied by a specific person, or
(b) in the case of a contract for the hiring of or licence to use a patented product, it reserves the right to supply such new parts of the patented product as may be required to put or keep it in repair. The latter is wide enough to provide an exception for the replacement of worn as well as damaged parts (judgment of Court of Appeal in Fichera v. Flogates Ltd - see 44.02).