The consumer status of PhD students

Ever since the Competition and Markets Authority issued its consumer protection guidance for the higher education sector in 2015, there has been debate over whether or not PhD students are consumers.

The recent case of Oxford University Innovation Ltd v Oxford Nanoimaging Ltd ([2022] EWHC 3200 (Pat)) was a landmark ruling, in that it was the first case which dealt with intellectual property (IP) provisions in a student contract under consumer legislation. It established that PhD students will typically be regarded as consumers for the purposes of the Unfair Terms in Consumer Contracts Regulations 1999 (the Regulations). Those regulations afforded protection to a consumer against unfair terms within contracts between a consumer and a seller or supplier, which included contracts made between universities and their students for the provision of education. The regulations have since been subsumed into the Consumer Rights Act 2015, but the same principles remain highly relevant to institutions today.

As the decision was that of the Patent Court, the case is not legally binding on future courts considering the same issues. Institutions should, however, proceed on the basis that most PhD students are likely to be regarded as consumers throughout their studies.

A consumer or not a consumer?

The case concerned outstanding royalties of over £700,000 payable by Oxford Nanoimaging Limited, a spin out company of the University of Oxford, and the terms of the university’s IP policy. Before the court could consider if the terms of the IP policy were fair under the regulations, it had to first consider if a PhD student could be classed as a consumer.

Prior to this case, it was generally accepted that undergraduate and taught postgraduate students were consumers for the purpose of the regulations. However, the position in respect of postgraduate research students was less clear, and guidance issued by the Competition and Markets Authority suggested that the regulations might not apply to those students.

Why are PhD students consumers?

The court drew the following similarities between undergraduate and PhD students which demonstrate the imbalance between students and institutions in negotiating knowledge, experience and ability:

• For many jobs and professions, a PhD or its equivalent is essential or an absolute requirement, especially for scientific academia.
• The overall numbers of PhD students in the UK is significant, so the grounds for ensuring they are protected apply equally as for undergraduates.
• Given the cost of undergraduate courses, a typical student is likely to enter a PhD programme with some debts.
• Government policy encourages international postgraduate students to study in the UK. Such students are less likely to feel able to challenge any contractual provisions for many reasons, such as a cultural propensity to respect or even fear such institutions.
• Despite being more experienced than undergraduate students, PhD students may not be particularly experienced in commercial matters. Many are likely to be inherently motivated by a love of their subject and a wish to make a contribution to it, and so the detail of the contractual terms may not be a priority. The court did acknowledge the fact that PhD students may be more familiar with IP matters, but did not believe that a clear awareness of such terms creates a real ability to influence them. Overall, PhD students are sufficiently similar to undergraduate students here.
• PhD contracts require payment of tuition and other fees. Although they may be lower than undergraduate fees for UK students, they can be significant for international students, especially for certain sciences. Despite the existence of funding support, the overall costs across a 3-4 year PhD can be significant and are not always fully covered by the support.
• Changing universities once a student has started their PhD course is not always straightforward.
• It is not clear that students are likely to be well equipped with information about their programme, although PhD students may be expected to find this information more easily.
• Universities are major commercial enterprises and may receive external guidance on matters such as IP rights, whereas a PhD contract is likely to be a ‘one off’ for a student.
• As PhD students are not employees, they are not entitled to the range of employment protections available in respect of their contractual terms. Without the regulations, there are no other provisions that will readily protect them from unfair terms.
• Making institutions subject to the regulations is not unfairly burdensome as they must already treat undergraduates as consumers.

The court also made the following comments about PhD students generally:

• Whether a student receives funding for their study is not relevant, nor is the source of that funding, so self-funded students and those who receive funding from a research council should be treated in the same way. In some cases, funded students may have greater need of a right to challenge the institution in respect of IP rights as the funding could further motivate them to make inventive contributions to their work.
• However, those students who are funded by their employer need to be considered separately, as different legal considerations may apply.
• It may provide a reputational boost for institutions to be subject to the regulations as it will indicate that they endeavour to treat PhD students fairly.
• The content of UK Research and Innovation’s consultation for a New Deal for postgraduate research supports the value of affording consumer protection rights to PhD students.

Mr Jing, the PhD student in the Oxford case, previously worked in the lab of the professor with whom he then studied his PhD under some months later. The judgment addressed the nuances of Mr Jing’s position and institutions should be aware that the following will not impact on a student’s consumer status:

• The fact that a student has previously worked at a university or elsewhere.
• Although Mr Jing proactively contacted his professor to enquire about working in his lab as a PhD student, the court held that the nature of pre-contractual correspondence, irrespective of which party instigated it, is not a determining factor for a student’s consumer status.
• Mr Jing began working in the lab several months before beginning his PhD, through a paid internship, the work for which was very similar to his PhD work. The status of an employee is different in many respects to that of a student, but the fact that Mr Jing would not have been able to complain about the contractual terms as an employee in the same way did not affect his consumer status.
• It does not matter whether the student is undertaking the course with a view to their career, profession and/or professional advancement.
• Mr Jing’s PhD was fully funded by the university itself and he received a monthly stipend of £1,300. As stated above, the source of a student’s funds does not impact on their consumer status, similar to undergraduates receiving scholarships and grants.

Does it matter if a student is pursuing studies to further their profession or trade?

In the Oxford case, a key argument against a consumer contract was that Mr Jing entered into the PhD contract for “the progression of his career and to continue his professional development”, and that his professional interest was not “so minor as to be negligible”. This test was based on EU case law. Benincasa v Dentalkit ([1997] I.L.Pr. 559) established that even if a business activity is planned for the future, its trade or professional character will not be removed. Gruber v Bay Wa AG ([2006] QB 204) established that in dual purpose contracts, consumer protection is only applicable where the trade or profession of the person concerned was so slight as to be marginal and had only a negligible role.

The court considered the dual purpose cases not to be relevant and indeed problematic in the context of education for the following reasons:

• The more vocational a course is, the more it could be argued that it is selected by a student for a future trade or profession, so that it falls outside consumer protection.
• It could place a heavier evidential burden on students to show that the purpose of their course was not for a professional interest.
• An undergraduate medical student could struggle to establish they are a consumer, as a medical degree is partially vocational and is directed to a specific profession in practice, teaching or research. Some students are attracted by the potential future salary premium which also gives it a commercial purpose.
• It would be easier for certain students, such as a classical literature student who may have no particular profession in mind, to argue that their contract had a negligible professional purpose.
• The regulations should not be applied to the detriment of students from a less relatively well-off background who may be more likely to study courses with a real prospect of related employment.
• More recent EU case law acknowledges that some of the principles in older case law may not be as relevant for cases under the Regulations and there is a stronger focus on the relative negotiating position of parties, even in dual purpose contracts.

Despite the professional element of Mr Jing’s interest in the PhD, therefore, the contract was held to be a consumer one.

What does this mean for institutions?

Although not legally binding, the judgment – all 174 pages – considered all of the issues and case law in great detail and so is likely to be considered strongly persuasive by judges in future cases.

Institutions should therefore be proceed on the basis that most PhD students are likely to be regarded as consumers throughout their studies. Any contracts between the institution and their PhD students should therefore comply with the requirements of consumer law in the same way that their undergraduate contracts do, and institutions should ensure that the terms of the contract are applied fairly and reasonably in practice.