A recent decision of the Full Federal Court of Australia (Bristol Myers Squibb Company v Apotex Pty Ltd  FCAFC 2) has resolved uncertainty about the requirements for an exclusive licence of a patented invention.
The Patents Act 1990 (Cth) provides that an exclusive licensee holds a licence from the patentee to exploit the patented invention, in the patent area, to the exclusion of the patentee and all others. The Act defines “licence” as a licence to exploit, or to authorise the exploitation of, a patented invention.
The Act also provides that an exclusive licensee has standing to commence patent infringement proceedings, in addition to the patentee.
The definition of “exploit” under the Act is inclusive, rather than exhaustive. It has been argued that a licence can be regarded as exclusive where the licensee has been granted some, but not all, of a patentee’s rights under a patent.
Aripiprazole is a drug used in the treatment of schizophrenia. Otsuka patented methods of producing Aripiprazole in a waterless form which gives the drug an extended shelf life and, among other benefits, provides commercial advantages in packaging and distribution.
Otsuka and Bristol-Myers entered into an agreement whereby Bristol-Myers was granted an “exclusive licence”. The exclusive licence conferred upon Bristol-Myers the right to “advertise, market, promote, sell and distribute” Aripiprazole worldwide including in Australia. However, Otsuka reserved a right to manufacture Aripiprazole worldwide, including in Australia.
Generics manufacturer Apotex developed various products for sale in Australia containing Aripiprazole.
Bristol-Myers as exclusive licensee, and Otsuka as patentee, sued Apotex for infringement of Otsuka’s patent and obtained an interlocutory injunction preventing Apotex from distributing its products. Apotex counter-sued for revocation of the patent on various grounds.
The primary judge upheld Otsuka’s infringement claims, and dismissed the revocation case, but found that Bristol-Myers did not hold an exclusive licence of Otsuka’s patent and therefore had no standing to sue for infringement of Otsuka’s patent. His Honour considered that it would be “incongruous” to award Bristol Myers all of its costs of the action against Apotex.
Although the issue of standing was resolved by Otsuka’s joinder, the question of whether or not Bristol-Myers had standing to sue as exclusive licensee was relevant to the Court’s orders for costs.
On appeal, Bristol-Myers argued that it was an exclusive licensee because it held the exclusive right to undertake some of the activities within the definition of “exploit”.
However the Court held that an exclusive licence is only obtained when the licensee obtains the right to exploit the patented invention to the exclusion of all others. A patentee cannot grant multiple exclusive licences or grant an exclusive licence and reserve any rights to exploit the patent as against an exclusive licensee. The right to exploit is a single indivisible right.
If licensees of Australian patents wish to have the right to sue infringers in their own name, they should ensure that they take an exclusive licence of all of the patentee’s rights in the patent area. Contractual provisions alone cannot assure standing if the licensee is not in fact an exclusive licensee.