Australia: Copyright and patents: When is an exclusive licensee not an exclusive licensee?

Various intellectual property legislation gives specific, commercially advantageous rights to exclusive licensees. Section 119 of the Copyright Act gives an exclusive licensee the same rights of action against infringement as the owner of copyright has, and, in effect, transfers to an exclusive licensee the copyright owner's rights of action against infringing copies of copyrighted material. Section 120 of the Patents Act allows an exclusive licensee to commence proceedings for infringement of the patent without the need to obtain permission from the patent's owner.

The main commercial feature of an exclusive licence to intellectual property is that it grants the relevant rights to the exclusive licensee even to the exclusion of the owner of the intellectual property itself. It might seem that a contract which creates a licence termed 'exclusive', which refers to the licensee as an 'exclusive licensee' and which purports to grant rights even to the exclusion of the owner of the property would be enough to bring the licensee within the relevant sections of the legislation. However, parties who have assumed they have created a valid exclusive licence, with its attendant commercial advantages, might be unpleasantly surprised to find that this is not in fact the case. In the context of patents, the area is unsettled, although parties might take heart from a recent Queensland decision.

In the context of copyright, the position is clearer. 'Copyright' confers a number of rights on the copyright owner—eg to reproduce a copyrighted work; or to make adaptations of it—and these rights can be split among licensees. So, a copyright owner might give one person the exclusive right to print copies of the work, and another person the exclusive right to make and publish translations of the work. Or the rights might be limited geographically, so that one person has the right to print works in one jurisdiction, and another person has the same rights in another jurisdiction. Each of these people will, if the licence is appropriately worded, be an exclusive licensee for the purposes of the Copyright Act.

Patents similarly confer a bundle of rights on the registered owner—such as to make the patented product, to import and to sell it—but in 1963, in the Ex parte British Nylon Spinners case, the High Court held that, to come within the 1952 Patents Act's definition of an exclusive licensee, the licensee had to be granted all of the relevant rights. A contract which had purported to split exclusive rights to a patented process among different licensees for different fields of use was held not to create an exclusive licence within the statutory meaning. So, even though the intent of the parties might have been to give the 'exclusive' licensee the status to sue for infringement, under the 1952 Act, only the registered owner could commence proceedings.

The recent decision in Grant v Australian Temporary Fencing Pty Ltd, however, seems to change this position (see our earlier article 'Road blocks in patent litigation' for more details). There, Justice Holmes of the Supreme Court of Queensland held that the 1990 Patents Act (which replaced the 1952 Act) uses slightly different language which allows the rights under a patent to be split among licensees in a way that permits those licensees to be 'exclusive licensees' for the purposes of section 120. It is still too soon to tell whether this decision will be followed, as it is debatable whether the wording of the 1990 Act is sufficiently different from the 1952 Act to allow the result. Although the Grant approach may lead to a more commercial interpretation of the law, parties who rely on it when drafting patent licences might be in difficulty if a court—perhaps the High Court—later overrules it and applies the older interpretation to the new Act.

For further information please contact Mr Adam Liberman, Partner. Email adam.liberman@freehills.com