Australia: Being litigation ready: Getting Australian patent ownership and licensing right

Last Updated: 21 November 2016
Article by Duncan Longstaff and Katrina Crooks

Ownership and licensing arrangements relating to an Australian patent can have significant implications in infringement and revocation proceedings. Recent decisions delivered by the Federal Court of Australia have highlighted the need for patentees to consider carefully and formalise their chain of title and exclusive licensing arrangements, or else risk losing their patents and/or the markets they protect.

There are many commercial, legal and regulatory factors which inform and influence patent ownership and licensing arrangements. Often an Australian patent will be owned by a foreign company which does not itself exploit the invention in Australia, and instead licenses a related company or a third party to do so. The foreign patentee may be the parent company, or a related IP holding company which licenses the patent family globally, for administrative efficiency and/or for tax or other financial reasons. The foreign patentee may also be the company which developed the invention and then granted licences to a larger commercialisation partner with global distribution capabilities. In any of these situations, the ownership and licensing arrangements relating to an Australian patent are often part of global agreements which are not crafted or implemented with the idiosyncrasies of Australian patent or contract law in mind. Recent statutory amendments provide Australian patentees with a greater opportunity to correct the formal ownership of a patent post-grant. However recent cases have emphasised the importance of correcting ownership and licensing issues before infringement proceedings are commenced.

Standing to sue for infringement

An Australian patent can be enforced against an alleged infringer by either "the patentee" or "an exclusive licensee", as recorded on the Register of Patents.1 The Register will record the first owner of a patent as the person named in the Notice of Entitlement, and will only record new patentees and any exclusive licensees, non-exclusive licensees and other interests (eg, mortgagors) upon provision of proof to the satisfaction of the Commissioner2 – typically an agreement or deed.

Patentees and Unregistered owners

An Australian patent is personal property which can be assigned.3 An employer will automatically be entitled to apply for and be granted an Australian patent where the invention was created by its employee during the course of employment.4 Otherwise, patent assignments are only legally effective if they are in writing. Patent assignments also will not provide standing to sue unless they are recorded on the Register.

Accordingly, a person who has provided good consideration to "own" an Australian patent will have no standing to sue for infringement if the assignment was not in writing or if it has not been recorded on the Register as the patentee. Such an "owner" will instead be limited to applying to the Commissioner to be entered on the Register as patentee and/or applying to a court for equitable orders requiring the registered patentee to pass through proceeds of infringement proceedings or take other steps. Where parties take steps to rectify the formal ownership of an Australian patent, causes of action for past infringements must be explicitly assigned in addition to the patent itself. However even if the right to take action for such past infringements is properly assigned, the associated damages will be assessed by reference to the loss suffered by the person who was the legal owner and registered patentee at time of infringement – even though the subsequent owner may have been the one commercially exploiting the invention.5

A registered patentee who commences infringement proceedings, but is found by the Court to lack entitlement, can also face serious consequences. An Australian patent can be revoked by a court on the ground that the patentee is not entitled to the patent.6 Prior to 15 April 2013, where a patent was granted to a person who was not at the time of grant entitled to it, the patent was incurably invalid.7 It is now possible for the chain of title to be corrected and updated at any time before or after the grant of the patent,8 including after infringement or revocation proceedings have commenced.9 However if done during infringement/revocation proceedings, the Court may still exercise its discretion to revoke the patent. Revocation of an asserted patent not only defeats all infringement claims but can have significant financial impacts such as paying the litigation costs of the alleged infringer and potential liability for claims under any "usual undertaking"10 given by the patentee as a condition of obtaining an interlocutory injunction earlier in the proceeding.

Exclusive licensees

The recent decision of the Full Court of the Federal Court of Australia in Bristol-Myers Squibb Company v Apotex Pty Ltd [2015] FCAFC 2 (23 January 2015) confirmed that, to qualify as an exclusive licensee, a licensee must be conferred a licence to all forms of "exploitation" of the claimed invention throughout Australia, to the exclusion of the patentee and all other persons. The statutory definition of "exploit" includes making, hiring, selling or otherwise disposing of a patented product or product of a patented process or method, or using a patented process or method.11 A licence will not be exclusive if the patentee reserves any aspect of "exploitation" to itself, such as the right to manufacture the claimed product, or if the scope of the licence is somehow qualified in a way that permits the patentee to continue some form of exploitation. In the Bristol-Myers Squibb case, the reservation by the patentee of the right to manufacture the patented products rendered the licence non-exclusive, notwithstanding its recordal on the Register as exclusive licensee. The licensee was held not to have any standing to sue for infringement.

By contrast, in the subsequent decision of the Full Court of the Federal Court of Australia in Actavis Pty Ltd v Orion Corporation [2016] FCAFC 121 (9 September 2016), a licence was upheld as satisfying the requirements of exclusivity notwithstanding an undertaking by the exclusive licensee only to procure the patented products from the patentee or a party authorised by the patentee. The licence itself contained no reservation of rights to the patentee, and the undertaking to purchase patented product exclusively from the patentee or a party authorised by the patentee was deemed a separate promise (within the same agreement). Crucially, this procurement promise did not restrict the exclusive licensee's rights to manufacture the patented products itself and did not positively require the exclusive licensee to procure the patented products from the patentee or a party authorised by it. It is also important to note that, even though the exclusive licence agreement included a recital with an apparent qualification that the exclusive licence was "in relation to the Products", the Full Court did not consider it appropriate to read down the operative licence clause which did not expressly have that qualification.


The Full Court of the Federal Court of Australia commented (without having to decide) in the Actavis case that the exclusive licensee took the proper course in not arguing that its Australian subsidiary, which it granted an exclusive sub-licence, was an exclusive licensee. The statutory definition of "exclusive licensee" is worded ambiguously and in our view it is arguable that an exclusive sub-licensee could be considered the relevant exclusive licensee of an Australian patent. Nevertheless, at present any exclusive sub-licensee risks having its standing to sue for infringement successfully challenged by the respondent.

Prospects of obtaining an interlocutory injunction

Where a patentee and/or its exclusive licensee commence infringement proceedings, often they will at an early stage seek an interlocutory injunction to restrain the allegedly infringing conduct until final determination of the matter at trial. The court will conduct a preliminary assessment of competing cases of infringement and validity, and will also assess the "balance of convenience" with particular reference to the likely irreparable harm which each party might suffer if injunctive orders are made or not.12 A loss of standing for either a patentee or an exclusive licensee will mean that its potential harm will no longer be a major factor in assessing the balance of convenience. This can be critical where the party losing standing is the exclusive licensee which conducts the business through which the invention is commercially exploited in Australia, while the patentee has no operations of its own in Australia.

Having an exclusive licence document which unequivocally proves the Australian company commercially exploiting the invention is the exclusive licensee of the relevant Australian patents, via a direct agreement with the registered patentee, will assist in recording the exclusive licence on the Register of Patents and quelling arguments as to the standing of the company likely to suffer the most substantial and irreparable harm from the infringing conduct.

Implications for damages and permanent injunctions

Loss of standing of a patentee or an exclusive licensee can also have significant consequences for the form and assessment of final relief where an Australian patent is upheld as valid and infringed. If a patentee loses standing, its exclusive licensee necessarily does too, rendering its entire case incompetent and likely exposing both parties to costs consequences. Loss of standing for an exclusive licensee which commercially exploits the patented invention in Australia can also drastically reduce the infringer's exposure, particularly where the patentee has no Australian business and has played no active part in the litigation. Damages may be nominal where the exclusive licensee's losses are no longer in issue and the patentee cannot establish that it suffers losses as a result of the exclusive licensee's losses. An infringer may also be in a better position to resist the imposition of a permanent injunction where only the business of a non-party licensee will be affected by the infringing conduct continuing during the remainder of the patent term.


1 Patents Act 1990 (Cth), section 120(1).

2 Patents Act 1990 (Cth), section 187; Patents Regulations 1991 (Cth), regulation 19.1.

3 Patents Act 1990 (Cth), sections 13(1) and 14(2).

4 University of Western Australia v Gray (No 20) (includes corrigendum dated 29 April 2008 and 22 April 2008) [2008] FCA 498 (17 April 2008); Patents Act 1990 (Cth), section 15(1).

5 Insight SRC IP Holdings Pty Ltd v The Australian Council for Educational Research Limited [2012] FCA 779 (24 July 2012); affirmed in Insight SRC IP Holdings Pty Ltd v Australian Council for Educational Research Ltd [2013] FCAFC 62 (14 June 2013).

6 Patents Act 1990 (Cth), section 138(4).

7 Stack and Another v Davies Shephard Pty Ltd and Another (2001) 108 FCR 422 at 435 [34] per Whitlam, Sundberg and Dowsett JJ; University of British Columbia v Conor Medsystems, Inc (2006) 155 FCR 391; Patents Act 1990 (Cth), sections 15 and 138(3)(a).

8 Patents Act 1990 (Cth), sections 22A and 138(4), introduced by the Raising the Bar Act 2012 (Cth).

9 Patents Act 1990 (Cth), sections 34 and 192.

10 Federal Court of Australia, Practice Note CM 14 – Usual Undertaking as to damages, available at

11 Patents Act 1990 (Cth), Schedule 1 – Dictionary.

12 Samsung Electronics Co. Limited v Apple Inc. [2011] FCAFC 156 (30 November 2011), applying Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199.

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.

Shelston IP ranked one of Australia's leading Intellectual Property firms in 2015.

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Duncan Longstaff
Katrina Crooks
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