The Full Federal Court of Australia (Court) has held that an ‘exclusive licensee’ within the definition of the Patents Act 1990 (Cth) (Patents Act), must be granted the exclusive right to undertake ALL of the activities falling within the meaning of “exploit”. Accordingly, a grant of a licence to advertise, market, promote, sell and distribute, but not manufacture, does not create an “exclusive licensee”, as defined in the Patents Act. There can only be one exclusive licensee and the patentee cannot reserve any of the exclusive rights to exploit to itself.
Ensuring the grant of an exclusive licence is important, because only a patentee and an exclusive licensee have standing to sue for patent infringement. As it will invariably be the licensee who is responsible for the commercial activity from which profits are generated (and, therefore, damages suffered), if only the patentee has standing to sue, the damages claim is limited to the damage suffered by the patentee (eg lost royalty income on sales made by the licensee).
Otsuka Pharmaceutical Co Ltd (Otsuka) is the registered owner of a patent relating to an improved form of the drug Aripiprazole (a third generation antipsychotic). Otsuka granted Bristol-Myers Squibb Company (BMS) a purported ‘exclusive licence’ to advertise, market, promote, sell and distribute the aripiprazole product. However, Otsuka reserved to itself the worldwide right to manufacture the relevant aripiprazole product. The drug is marketed by BMS as Abilify®.
BMS successfully sought an injunction against Apotex Pty Ltd (Apotex) and commenced infringement proceedings in October 2009. Otsuka was not joined as an applicant until December 2009. The primary judge held that BMS was not an exclusive licensee and not entitled to commence proceedings for infringement of the patent. BMS appealed this decision.
In the appeal proceedings, BMS submitted that to be an ‘exclusive licensee’, the licensee only requires an exclusive entitlement to one or more, but not all, of the activities listed in the definition of “exploit” to be exclusively licensed to it. In other words, the non-exhaustive definition of “exploit” allows a patent holder to grant multiple exclusive licensees within Australia.
The Court rejected BMS’s submissions and agreed with the reasoning of the primary judge. The Court held that an exclusive licence must also exclude the patentee from exercising the exclusive right under section 13(1) of the Patents Act to authorise another person to exploit the invention. Accordingly, there cannot be an ‘exclusive licensee’ where there is any reservation of any right with respect to the exploitation of the invention.
Importantly, the Court opined that the definition of “exploit” describes the content of a right, and does not create separate rights in relation of each of the non-exhaustive lists of activities (relevantly, to “make, hire, sell or otherwise dispose of the product, offer to make, sell, hire or otherwise dispose of it, use or import it, or keep it for the purpose of doing any of those things” (Schedule 1, Patents Act)).
Otsuka’s reservation of the right to manufacture meant that BMS was not granted the right to exploit the patented invention throughout the patent area to the exclusion of the patentee and all other persons. Accordingly, the Court dismissed the appeal and upheld the primary judge’s finding that BMS is not an ‘exclusive licensee’ within the definition of the Patents Act.