Orion Corporation v Actavis Pty Limited No 3 [2015] FCA 1373

Summary

This case provides some further interesting consideration of exclusive licenses and the position of an exclusive sublicensee of a patent.

Section 120 of the Patents Act 1990 provides that:

… infringement proceedings may be started in a prescribed court … by the patentee or an exclusive licensee

In patent infringement cases, it is often the licensee or sublicensee that suffers direct loss as a result of lost sales, rather than the Patentee, whose loss may instead be in the form of lost royalty payments (and such royalty payments may be linked to more than just the licensed patent or to other intellectual property rights).

The requirements of an exclusive licence were settled earlier this year in Bristol-Myers Squibb Company v Apotex Pty Ltd [2015] FCAFC 2, namely that an exclusive licence for the purpose of s 120 of the Patents Act confers a right to exercise any of the rights to exploit the patent to the exclusion of all others. In this case, some further guidance concerning the terms of an exclusive licence was provided.

In this decision, Justice Rares also considered the position of an exclusive sublicensee, finding that in this case, the sublicensee did have standing to sue under s 120. Although the decision may be subject to appeal, if pursued and the decision is upheld, this decision will allow companies in the position of the exclusive sublicensee to be certain of their rights to enforce their licensed patent.

Background

The patent infringement proceedings were commenced at the end of 2013, and at that time there was conflicting Federal Court case law as to the requirements of an exclusive licence (since resolved as noted above by Bristol-Myers Squibb Company v Apotex Pty Ltd). Actavis, the respondent, challenged the standing of Novartis Pharma and Novartis Australia to bring infringement proceedings.

The licence between Orion Corporation and Novartis Pharma at the end of 2013 did not include the right to manufacture, and following the commencement of the proceeding, Orion granted Novartis:

“…an exclusive licence under the Patent from the date of the grant thereof to exploit (as that term is defined in Schedule 1 to the Patents Act 1990) the patented invention claimed in the Patent throughout the patent area (as that term is defined in Schedule 1 to the Patents Act 1990) to the exclusion of all other persons.”

(generally, the 2014 licence)

Clause 6 provided that Novartis Pharma had:

“the right to sub-licence to its related bodies corporate its rights under this agreement but shall otherwise not assign, transfer, mortgage, charge or part with any of its rights, duties or obligations under this agreement or grant any sub-licence without the prior written consent of Orion.”

That licence was granted on 7 March 2014. On 11 March 2014, Novartis Pharma granted Novartis Australia a sublicence on correspondingly similar terms.

Decision

Exclusive licensee – standing of Novartis Pharma

Justice Rares first considered whether the 2014 licence was an exclusive licence, noting that the background facts were relevant to that consideration. Finding that the licence was exclusive, Justice Rares considered the following facts to be relevant:

  • a. that the parties had chosen the terminology of the Patents Act 1990 to define the scope of the licence;
  • b. the sublicensing clause reflected the definition of exclusive licensee under the Patents Act 1990;
  • c. the 2014 licence contemplated that it would be registered under s 187 of the Patents Act 1990;
  • d. the 2014 licence was registered under s 187 of the Patents Act 1990; and
  • e. the parties clearly intended that Novartis Pharma would be in fact an exclusive licensee so that it would have standing under s 120.

The fact that the 2014 licence also included provisions concerning the purchase of the product from the Patentee did not derogate from the exclusive licence as the relevant clauses operated as “independent promises”.

Accordingly, Novartis Pharma was an exclusive licensee and had standing to sue for patent infringement on and from 7 March 2014.

Exclusive sublicensee – standing of Novartis Australia

Justice Rares then considered the position of Novartis Australia as an exclusive sublicensee. As a “party claiming an interest in the patent as exclusive licensee or otherwise” (s 139(1)), Novartis Australia was a party to the revocation proceedings.

Turning to infringement, Justice Rares held that s 120 did not preclude a person other than the patentee and/ or exclusive licensee from bringing infringement proceedings as the terms of s 120 were “permissive in providing that ‘infringement proceedings may be started ... by the patentee or an exclusive licensee.’

Justice Rares held that an exclusive sublicensee must be able to exercise the rights of the exclusive licensee, including the right to enforce the patent, relying on Ashby v White [1790] EngR 55; (1703) 2 Ld Raym 938 at 953:

“If the plaintiff has a right, he must of necessity have a means to vindicate and maintain it, and a remedy if he is injured in the exercise or enjoyment of it; and indeed it is a vain thing to imagine a right without a remedy; for want of right and want of remedy are reciprocal. (emphasis added)”

The result was that Novartis Australia, as with Novartis Pharma and the Patentee, was entitled to sue for patent infringement.

Justice Rares also observed that s 120(2) of the act was a general reflection of the general law principle that an assignor of a legal right may be joined to proceedings to enforce that right if it refuses to assist the assignee. The provisions of s 22 of the Federal Court Act 1976 also assist in joining necessary parties to proceedings.