It’s generally well understood that in a number of jurisdictions an exclusive licensee can initiate infringement proceedings.   However, the recent case of Bristol-Myers Squibb Company (BMS) v Apotex Pty Ltd [2015] in Australia confirms the exact scope of an exclusive licensee. Given the recent law changes made to the New Zealand Patents Act, this case could have implications in New Zealand.

Otsuka Pharmaceuticals owned patents for the antipsychotic aripiprazole and licensed the rights to sell, advertise, market, promote and distribute aripiprazole in Australia to BMS, while reserving the right to manufacture the compound.  Apotex, a generic manufacturer, began to sell a generic version of aripiprazole in Australia.  As an exclusive licensee, BMS initiated infringement proceedings against Apotex.  Amongst other things, Apotex argued that BMS did not have standing because they were not the exclusive licensee according to the Australian Patents Act because BMS did not have full rights including the right to manufacture, and counterclaimed for revocation.

The Australian Patents Act 1990 provides a patentee with the exclusive rights, during the term of the patent, to exploit the invention and to authorise another person to exploit the invention. 

In order for a licensee to be an exclusive licensee they must have a licence granted by the patentee and conferring on the licensee or 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.  Exploit in relation to an invention is defined as meaning:

  1. Where the invention is a product - 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; or
  2. Where the invention is a method or process - use the method or process or do any act mentioned in paragraph (i) in respect of the product resulting from such use

Justice Yates considered the above meanings and focussed his analysis in the interpretation the terms .  Unfortunately for BMS, it was held that the Australian Patents Act only recognises two rights conferred by a patent: the right to exploit the invention and the right to authorise others to exploit the invention; and that the definitions did not create separate rights with respect to the activities that fell within the scope of the granted right. 

So, for a licence to be exclusive, all other persons, including the patentee, need to be excluded from exercising the right to exploit the patent. 

The licence granted to BMS excluded the right to manufacture aripiprazole, but included the right to sell.  Therefore BMS was not an exclusive licensee – despite the sub-right of exclusively selling - they did not have standing to sue for patent infringement. Otsuka joined BMS in the proceeding and they were ultimately successful in preventing Apotex in continuing to sell.   However, BMS had to bear their own costs.

BMS appealed the decision to the Full Federal Court. On appeal, BMS alleged that Justice Yates erred in holding that it was not an exclusive licensee and lacked standing to bring patent infringement proceedings. BMS referred to the use of the term 'or' in the definition of 'exploit' and submitted that, because it had an exclusive licence for some (but not all) of the activities it was still an exclusive licensee for those acts.

The Full Court agreed with Justice Yates’ reasoning in the earlier decision and stated that “the definition of the word “exploit” describes the content of a right and is not intended to create separate rights in relation to each of the identified activities”. So the decision stands that to be an exclusive licensee, you must have a licence to fully exploit all aspects of the invention.

So how does this compare with New Zealand (NZ)? 

Under the New Zealand Patents Act 2013, a patent gives the patentee exactly the same exclusive rights as the Australian Act does: the right to exploit the invention and to authorise another person to exploit the invention.  However, the definitions of exploit and exclusive licensee differ:

Click here to view the table.

The question arises whether the NZ act only provides the right to exploit or whether exploit can be subdivided into rights.  Arguably, the wording of the NZ Act could be interpreted to as providing sub rights of exploitation.  However, until a case arises in NZ, the exact scope of an exclusive licensee will remain uncertain. 

Given the similarity of wording between the two acts, and the NZ-Australia Trans-Tasman harmonisation, and Single Economic market policies, it may be prudent to follow the Australian approach to ensure that any licence agreement states whether or not the licensee is permitted to take legal action.