Australia: AUSFTA: Time to Reconsider Australian And US Law Regarding Exclusive Licences of Copyright And Patents?

Last Updated: 24 May 2004
Article by Adam Liberman and Ben Kremer

The Free Trade Agreement (FTA) that was recently negotiated between Australia and the United States (US) has a number of far-reaching consequences for Australian and US intellectual property law. One, of considerable importance to commercial practice, is the possibility that alterations will be required to the legislation of both countries regarding 'exclusive licensees' of copyright and patents.


The FTA will take effect as a treaty between Australia and the US. It has yet to be ratified by either country, and its language is still in 'draft' status. 1 Nevertheless, it is expected that the wording of the final treaty will not differ too greatly from the current draft.

Article 17 of the FTA sets out standards concerning intellectual property with which both Australia and the US must comply. Of particular interest is the language in article 17.11.5, which requires both countries to make available to rights-holders 'civil judicial procedures concerning the enforcement of any intellectual property right'. A footnote to that provision states that "the term 'right holder' shall include exclusive licensees", and that 'the term "exclusive licensee" shall include the exclusive licensee of "any one or more of the exclusive intellectual property rights" encompassed in a given intellectual property'.2

At first sight, this provision seems relatively straightforward: each of the kinds of intellectual property dealt with in the FTA—ie, copyright, trade marks, designs and patents—gives to their owner a number of exclusive rights. In general, each exclusive right deals with an act done in respect of the intellectual property (such as to reproduce a copyright work), and consists of the ability to exclude all other people from doing that act, plus the right to authorise any person or persons to do the act.

As a matter of commercial practice, those rights are often licensed exclusively by the owner of the intellectual property. Sometimes, all rights are licensed exclusively to one licensee. Other times, the rights are apportioned exclusively between more than one licensee. A matter of critical commercial importance is whether the 'exclusive' licensee of a piece of intellectual property may bring proceedings against infringers of the right or rights licensed to them. Currently, the answer to this question—both in Australia and the US—depends on the type of intellectual property being licensed.

However, the FTA's definition of 'exclusive licensee' expressly envisages that there may be multiple exclusive licensees of each form of intellectual property, and requires that each of them must be able to sue to enforce their exclusive rights. In essence, article 17.11.5 will require harmonisation in both Australia and the US of the exclusive licensee provisions among different types of intellectual property that govern the right to bring infringement proceedings.

As a result, it is necessary to examine how well current Australian and US intellectual property law fits with the approach required in article 17.11.5, as well as the practical consequences of the harmonisation that the article imposes.

Exclusive licences to copyright

Current Australian and US copyright law probably conforms with the requirements of the FTA.

Australian position

Under Australian copyright law, an 'exclusive licence' is a licence from the copyright owner authorising the licensee 'to the exclusion of all other persons, to do an act that, by virtue of this Act, the owner of the copyright would, but for the licence, have the exclusive right to do'. 3 An 'exclusive licensee' of copyright has the power to commence proceedings for infringement, subject to various conditions regarding joinder of the owner in appropriate cases.4

The concept of 'exclusion' is straightforward: it requires that the act be within the monopoly granted by copyright, and that it be granted to the licensee to the exclusion of everyone else including the owner of the copyright.

The concept of 'an act' is a little more difficult. It appears that the Copyright Act should be read so that the word 'an act' means any activity or activities that are within the scope of the copyright owner's exclusive rights. For example, the owner of copyright in a work has the exclusive rights to (among other things) make 'reproductions' of that work (eg, exact copies of that work), to make 'adaptations' of the work (such as making translations), and also to authorise other people to do either of these acts.

Thus, a copyright owner can grant a licence to reproduce the work in printed form to one person to the exclusion of everyone else, and a licence to reproduce the work in digital form to another person, also to the exclusion of everyone else; or they may grant a licence to one person to translate the work into Russian to the exclusion of everyone else, and a licence to another person to translate the work into Spanish also to the exclusion of everyone else. Each of those licence holders would appear to come within the Act's definition of 'exclusive licensee'.5

The use of the word 'act' therefore appears to make it clear that the bundle of exclusive rights contained in copyright are divisible, and can be split among one or more people.

US position

Similarly, in the US, copyright consists of a number of exclusive rights, such as the right to reproduce the copyrighted work, or to prepare derivative works. Not only may each of these rights be granted to a different exclusive licensee, but it also appears that each exclusive right may be subdivided indefinitely, and each subdivision apportioned among different licensees. Provided each licensee is granted the relevant part of the exclusive right to the exclusion of all others, the licence will be an exclusive licence.6

An exclusive licence to any exclusive right comprised in copyright is considered to be a 'transfer of copyright ownership' in that right (whether or not it is limited in time or place of effect) and the exclusive licensee, as owner of that particular exclusive right, 'is entitled, to extent of that right, to all of the protection and remedies accorded to the copyright owner'. 7 This includes the right to bring proceedings for infringement.

Exclusive licences to patents

It is with respect to exclusive licences to patents that the FTA appears to require a change in the law. The FTA's requirement that any person who holds 'one or more' of the exclusive rights in a piece of intellectual property must have a right to sue to enforce that right is inconsistent with US, and possibly also Australian, patent law.

Australian position

In Australia, the term 'exclusive licensee' is defined in the Patents Act to mean 'a licensee under a licence granted by the patentee and conferring on the licensee, or on the licensee and persons authorised by the licensee, the right to exploit the patented invention throughout the patent area to the exclusion of the patentee and all other persons'.8

The notion of 'exploiting' a patent is also defined: where the invention is a product, 'exploit' includes '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'; and where the invention is a method or process, it includes 'use the method or process', or to do any of the above acts 'in respect of a product resulting from such use'.

Slightly different language was used in the previous Australian Patents Act, and the High Court held that under that Act there could only be one exclusive licensee of a patent, and that to be an exclusive licensee, the licensee had to be granted all of the relevant rights under the patent. 9 So, a licensee who only had the exclusive right to make a patented product, or to import a product made by a patented process, was not an 'exclusive licensee' for the purposes of the previous Act. In such a case, despite the intention of the parties, only the patent owner could commence proceedings for infringement of the patent.

It is unclear whether this approach will be adopted for the current Patents Act, which is worded slightly differently10 So far, the proposition has been examined in only one case, which suggests that under the new Act a licence of only some of the patent rights may be an exclusive licence under the Act.11 The decision is of a single judge, sitting at first instance, and it is unclear whether the basis of the decision will ultimately be accepted by higher courts. If it is, then Australian patent law will be consistent with article 17.11.5 of the FTA. If not, then legislative change will be required.

US position

It seems clear that the position in the US is virtually identical to the position under the previous Australian Patents Act. The US Patent Act grants a 'remedy by civil action for infringement of [a] patent' only to the 'patentee', 12 and to 'successors in title to the patentee'. 13 Subsequent case law has confirmed that an exclusive licensee of a patent can also sue for infringement (provided additionally that they join the patentee), because such a licensee has 'all substantial rights' to the patent, and so is effectively an assignee of the patent (ie, a successor in title to the patentee).14

However, such a licensee must actually have all substantial rights; a licensee of a patent who does not have 'all substantial rights' under the patent is not an exclusive licensee (but a mere licensee), and does not have standing to sue in the US for infringement of the patent.

Contrast: United Kingdom copyright and patent law

The above should be contrasted with the position in, for example, the United Kingdom, where multiple exclusive licences can be granted to both copyright and patent. An exclusive licence to copyright consists of an exclusive grant by the copyright owner to another 'to exercise a right which would otherwise be exercisable exclusively by the copyright owner'15 while an exclusive licence to a patent involves the exclusive grant (ie, to the exclusion of all other persons, including the proprietor or applicant) of 'any right in respect of the invention to which the patent or application relates'.16

A licensor's ability to control its exclusive licensees' lawsuits

If Australian and/or US patent law is changed to allow there to be multiple exclusive licensees of a patent, an important commercial issue arises: can a licensor remove the ability of an exclusive licensee to bring infringement proceedings, and if so, how? The identical issue arises in the copyright context, even though no change in the law is required.

In a commercial context, a licensor may wish to prevent the possibility that one exclusive licensee can take action against another exclusive licensee, or against a third party. This might be the case, for example, where the licensor has commercial relationships with a potential defendant that it wishes to protect. Alternatively it might wish to reduce the chance that the validity of the patent will be challenged by a defendant to a patent infringement suit, which is a common defence tactic in such suits.

At least two issues arise. One involves the ability of private parties to contract out of rights granted in public statutes. The issue is illustrated in its diametrically opposed forms in the Australian Trade Marks Act, which specifically provides that the rights of an authorised user—whether exclusive or not—are subject to contract between the licensor and authorised user, and the Trade Practices Act, which specifically provides that certain rights granted by that Act cannot be contracted out of.17

Current Australian copyright and patent law, however, are silent as to whether the rights of an exclusive licensee to bring infringement proceedings can be contracted out of. Given the review process brought about by the FTA, it would seem an opportune time for this issue to be resolved.

A second issue is whether any limitation on the exclusive licensee's right to sue might in fact make the licence non exclusive. Currently, given the definition in US patent law, there is a good argument that any licence granted to a licensee that does not give the licensee unfettered power to sue for infringement is not a grant of 'all substantial rights' under the patent, and hence not an 'exclusive licence'.18 The preferable course here would seem to be to adopt language similar to the Australian Trade Marks Act, in which a person may be an authorised user—whether exclusive or otherwise—notwithstanding that their rights under the Act are subject to modification by the parties. Therefore, absent any cogent policy reason, the principle of freedom of contract should prevail.


It appears that neither Australian nor US copyright law regarding exclusive licensees will require amendment as a consequence of article 17.11.5 of the FTA. It is doubtful, however, that the same can be said of Australian and US patent law in that area. In both cases, however, there would be merit in amending the copyright and patent legislation of both countries to expressly deal with whether exclusive licensees' rights to bring infringement proceedings may be modified by contract.


1 The text is 'subject to legal review for accuracy, clarity and consistency'.

2 Emphasis added.

3 Copyright Act 1968 (Cth), section 10.

4 Copyright Act 1968 (Cth), section 119.

5 PM Sulcs & Associates Pty Ltd v Detroit Diesel-Allison Australia Pty Ltd (1997) 39 IPR 328 at 334–5; Sega Enterprises Ltd v Galaxy Electronics Pty Ltd (1998) 39 IPR 577.

6 Silvers v Sony Pictures Entertainment, Inc., 330 F.3d 1204 (9th Cir. 2003). See 17 U.S.C. § 201(d)(2): '[a]ny of the exclusive rights comprised in a copyright, including any subdivision of any of the rights specified by section 106, may be transferred as provided by clause (1) and owned separately'.

7 17 U.S.C. § 101 and § 201(d)(2).

8 Patents Act 1990 (Cth), Schedule 1.

9 Ex parte British Nylon Spinners Ltd; Re Imperial Chemical Industries Ltd (1963) 109 CLR 336.

10 Although the list of actions constituting 'exploiting' an invention now reads disjunctively, in contrast to the previous Act, the current Act still refers to 'the right' to exploit the patented invention. Such a reference in the previous Act was one of the factors that led the High Court to insist that there could be only one exclusive licensee of a patent. Arguably, unless the licence contains all the rights listed in the definition of 'exploit', it might not be a 'licence to exploit' the patent at all, and hence cannot be an 'exclusive licence'.

11 Grant v Australian Temporary Fencing Pty Ltd (2003) AIPC 91-899.

12 35 U.S.C. § 281.

13 35 U.S.C. § 100(d).

14 Vaupel Textilmaschinen KG v. Meccanica Euro Italia S.P.A., 944 F.2d 870 (Fed. Cir. 1991); Textile Prods., Inc. v. Mead Corp., 134 F.3d 1481 (Fed. Cir. 1998).

15 Copyright, Designs and Patents Act 1988 (UK), section 92(1).

16 Patents Act 1977 (UK), section 130(1).

17 Trade Marks Act 1995 (Cth), section 26; Trade Practices Act 1974 (Cth), section 68.

18 See also the position under copyright law: Althin CD Medical, Inc. v. West Suburban Kidney Center, S.C., 874 F.Supp. 837 (N.D.Ill.,1994).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.