An oral exclusive licence can provide standing in Australian Infringement Proceedings

Dr. Victoria Longshaw and David Franklin

In Damorgold Pty Ltd v JAI Products Pty Ltd (No 3) [2014], the Court considered whether one of the Applicants in earlier patent infringement proceedings had standing to sue in terms of an oral exclusive licence.

The standing of an exclusive licencee to sue in Australia

In Australia, both patentees and exclusive licensees may start patent infringement proceedings in terms of Section 120 of the Patents Act 1990 (Cth). An exclusive licensee is defined as “one who has the right to exploit the patented invention throughout [Australia] to the exclusion of the patentee and all other persons.”

While the Patents Act 1990 and Patent Regulations 1991 specify that any interest, including a licence is “prescribed information” and must be registered on the Patent Register, there are no penalties for failing to register a licence. It is the licence instrument that creates the right and not the act of registration. However, the registration of a licence provides prima facie proof of an exclusive licensee’s standing in Court if it wishes to enforce the patent against infringers.

However, as the legislative definition of an exclusive licensee does not require the licence to be in writing, an exclusive licence may include an oral agreement which, due to its undocumented nature, cannot be registered on the Patent Register. In the event of there being an oral licence only, the exclusive licensee will have to provide evidence of that oral licence to an Australian Court in support of their ability to sue in patent infringement proceedings.

The issue between the parties

On 28 February 2014, Justice Middleton of the Australian Federal Court handed down the Decision in Damorgold Pty Ltd v JAI Products Pty Ltd [2014] that JAI Products Pty Ltd (“JAI Products”) had infringed valid Claims 23 and 27 of Australian Patent No. 760547, owned by Damorgold Pty Ltd (“Damorgold”) and allegedly exclusively licenced by Vertilux Corporation Pty Ltd (“Vertilux”).

Damorgold and Vertilux, (“the Applicants”) contended that Vertilux was an exclusive licensee in terms of a written Licence Agreement dated 9 July 2010, which recorded and confirmed the terms of an oral licence granted to Vertilux since at least 1 January 2006. The recordal of Vertilux as an exclusive licencee on the Patent Register provided prima facie proof of its standing to sue in terms of Section 120 of the Patents Act.

JAI Products argued that Vertilux was not an exclusive licencee because a pre-existing licence had been given to another entity called “Acmeda” in or about the years 2000 to 2004, which continued to that day.

Mr Lava, the CEO of Damorgold and Vertilux, had given evidence of the existence of an exclusive licence arrangement between the two Applicants. His evidence was that he had executed the Licence Agreement in his capacity as a Director of both Damorgold and Vertilux, and that the terms of the oral arrangements were identical to the written agreement. The evidence was that the arrangement had existed since at least 1 January 2006 and that the relevant business structure had been in place since 1996. Mr Lava also gave evidence indicating that Acmeda’s permission to sell in Australia was nothing more than a sub-licence granted by the exclusive licensee, Vertilux.

The Court favoured his evidence and the submissions of Damorgold and Vertilux and found that Vertilux was the exclusive licensee of the Patent, and had the ability to start the proceedings. As far as the Court was concerned, the fact that there was no written consent given to Vertilux to sub-license to Acmeda as envisaged by the terms of the Licence Agreement did not detract from this finding, having regard to the position and involvement of Mr Lava as a Director of both Damorgold and Vertilux.

Take Home Message

Oral patent licence agreements remain recognised in Australia. However, in the event that the relevant Patent requires enforcement, it is worth remembering that if the exclusive licensee wishes to start patent infringement proceedings in Australia, it may be required to prove that they have standing. As such, a written exclusive licence agreement is preferable.

Furthermore, while there are no penalties for failing to register a licence on the Patent Register, it is recommended to do so given it has the advantage of providing prima facie proof of an exclusive licensee’s standing to sue for patent infringement. To avoid disclosure of any confidential commercial information, it is common practice in Australia to either submit a reacted copy of an exclusive Licence Agreement to IP Australia, or to submit a separate, short form Agreement which confirms the existence of the exclusive Licence Agreement. This is because the information contained in any documents submitted to IP Australia is subject to the Freedom of Information Act 1982 (Cth) and may ultimately become available to third parties.

Finally it is important to note that the exclusivity of any recorded Licence Agreement may still be challenged during patent infringement proceedings and the patentee and/or exclusive licensee put to the proof. As such, it is generally preferable to record a separate, confirmation of license agreement which clearly sets out the rights of the licensee, including its exclusivity, and the date on which the licence commenced.

Stem cell patentability: the European and Australian positions compared

Dr. Victoria Longshaw, Dr. Jim Onishi and Dr. Nigel Parker

The challenges of patenting inventions in various biotechnological fields have drastically increased around the world over the past year. However, the recent changes to patentable subject matter have not been uniformly applied in all patenting jurisdictions. For example, while the permissive approach to patenting isolated DNA is similar in both Europe and Australia, the approach to patenting inventions using stem cells, or inventions that are derived from stem cell material or the use of stem cells, is very different.

In Europe, the approach to patenting of inventions involving stem cells is governed by the exclusion under Directive 98/44/EC Article 6 of inventions where their commercial exploitation would be contrary to ordre public or morality. This includes any uses of human embryos for industrial or commercial purposes where implementation requires the prior destruction of human embryos or their prior use as starting material.

In contrast, the Australian approach to patentability of inventions involving stem cells is governed by the exclusion in terms of Section 18(2) of the Patents Act 1990, which states that human beings, and the biological processes for their generation, are not patentable inventions in Australia.

Thus, subject matter involving the generation of a human embryo cannot be patented in Europe or Australia. However, while actions resulting in the destruction of a human embryo will preclude patentability in Europe, such actions will not necessarily preclude patentability of inventions involving stem cells in Australia.

The European position

Following the Decision in Oliver Brüstle v Greenpeace eV [2012], the Court of Justice of the European Union (CJEU) ruled that, in terms of Article 6(2)(c) of Directive 98/44/EC, an invention is not patentable in Europe if its implementation requires the prior destruction of human embryos or their prior use as starting material.

In International Stem Cell Corporation v Comptroller General of Patents [2013], the United Kingdom Patents Court was asked to consider whether this exclusion to patentability encompassed parthenogentically-activated oocytes which are incapable of developing into a human being (“parthenotes”). Following a request for a preliminary ruling from the High Court of Justice of England and Wales, Chancery Division, the Court of Justice delivered its opinion of Advocate General Cruz Villalón on 17 July 2014.

The patentability of inventions using parthenotes has been clarified in the opinion of Advocate General as not being included in the term “human embryos” as defined in Article 6(2)(c) of Directive 98/44/EC on the legal protection of biotechnological inventions. Therefore, unfertilised human ova whose division and further development have been stimulated by parthenogenesis, that are not capable of developing into a human being and that have not been genetically manipulated to acquire such a capacity are not considered by the Advocate General to be included in the term “human embryos.

The High Court of Justice of England and Wales has yet to hand down its Decision in the matter. If this Court follows the opinion of Advocate General, an invention may be considered patentable in Europe even if its implementation involves the use of parthenogentically-derived stem cells or their prior use as starting material.

The Australian position

In terms of Section 18(2) of the Patents Act 1990, human beings, and the biological processes for their generation, are not patentable inventions in Australia. Furthermore, in terms of Section 18(3), an innovation patent cannot be obtained which claims plants or animals, or the biological processes for the generation of plants and animals.

In Fertilitescentrum AB and Luminis Pty Ltd [2004], a Decision by the Deputy Commissioner of Patents considered that the prohibition of “human beings” is a prohibition of patenting of any entity that might reasonably claim the status of a human being, and that a fertilised ovum and all its subsequent manifestations are covered by this exclusion. The prohibition of “biological processes for (the generation of human beings)” was considered to cover all biological processes applied from fertilisation to birth only insofar as the process is one that directly relates to the generation of the human being.

The Australian Patent Office, IP Australia, accepts the meaning of “human being” as set forth in Fertilitescentrum AB and Luminis Pty Ltd [2004], and considers that human stem cells and human stem cell lines per se are patentable because these cells are not considered to be human beings or potential human beings within the meaning of Section 18(2).

Human embryos, however, are considered to be human beings within the meaning of Section 18(2). Accordingly, human embryos and processes for generating or culturing human embryos for any purpose, including the harvesting of stem cells, are not patentable in Australia. This exclusion therefore extends to all means of generating human embryos such as the generation of embryos by nuclear transfer, altered nuclear transfer, activation of gametes and parthenogenesis.

As yet, there has been no challenge made to this exclusion with regards to the generation of human embryos by parthenogenesis. However, while not binding in Australia, the opinion of Advocate General of the High Court of Justice of England and Wales may persuade an Australian Court in the event that this aspect of the patentability exclusion of Section 18(2) is challenged in Australia.

Take Home Message

The approach to patenting inventions using stem cells, or derived from stem cells, is very different in Europe and Australia.

In Europe, inventions involving the use of parthenogentically-derived stem cells or their prior use as starting material, may yet be considered patentable. However, any invention which requires the prior destruction of human embryos or their prior use as starting material remains unpatentable.

In Australia, while human stem cells and human stem cell lines per se are patentable, claims that are directed to human embryos and processes for generating or culturing human embryos for any purpose, including the harvesting of stem cells, remain unpatentable.

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