Licences are out and automatic rights are in: a new way to allow exploitation following temporary patent ceasing is proposed

Automatic rights to exploit inventions are proposed to replace third party licences to exploit inventions. This proposal follows only months after an initial Patent Office decision on the licence provisions (for further details on that decision, see here).

Current provisions

Subsection 223(9) of the Patents Act 1990 provides:

(9) Where the Commissioner grants:

(a) an extension of more than 3 months from doing a relevant act; or

(b) an extension of time for doing a prescribed relevant act in prescribed circumstances;

the prescribed provisions have effect for the protection or compensation of persons who, before the day on which the application for extension of time is advertised under subsection (4), exploited (or took definite steps by way of contract or otherwise to exploit) the invention concerned because of the failure to do the relevant act within the time allowed, the lapsing of the patent application or the ceasing of the patent, as the case may be. (Emphasis added)

This subsection requires a party seeking a licence to apply to the Patent Office for that licence. The Patent Office is tasked with considering the application for licences and there is no mechanism for transfer of the assessment of the licence to a court1. The provision also requires a causal nexus between the ‘failure to do the relevant act, the lapsing of the patent application or the ceasing of the patent’. This appears to prevent the grant of licences to those who commence exploitation of an invention during the relevant period inadvertently, that is, without knowledge of the patentee’s failure, the patent application lapsing or the patent ceasing.

The proposed automatically acquired and transferable right to exploit

The proposal is to remove the requirement to obtain a licence to continue to exploit an invention when a patent is restored. Instead, a party will automatically receive a “right to exploit” an invention in specific circumstances, in particular:

• where an extension of time of more than 3 months is granted resulting in restoration of a patent that was lapsed or ceased; and

• the party started or took definite steps to exploit the patent after the lapsing or ceasing but before publication of the application for the extension of time.

If a party acquires a “right to exploit”, they can continue to exploit the invention after restoration of the patent.

The proposed provisions are more generous than the current provisions because no causal nexus is required between the exploitation and patentee’s failure, the patent application lapsing or the patent ceasing. Also, the “right to exploit” is proposed to be a transferable right2. This means that a single right to exploit an invention can be sold, however, the legislation excludes licensing of the “right to exploit” presumably to prevent multiplying the right so that more than one party can use it.

Transfer of licences granted under the current provisions

A Patent Office licence under the current provisions is granted with the terms the Patent Office considers appropriate. The licence could potentially include a right to transfer or a right to sublicense. However, as the licence provisions have been considered so infrequently, there is significant uncertainty regarding the terms the Patent Office would consider appropriate. The proposed provisions provide greater clarity on this point and at least one other issue, that is, the issue of royalties. It is arguable that the payment of royalties to the patentee could be a term of a Patent Office licence to exploit an invention. In contrast, it does not appear likely the patentee will be entitled to payment from a party with an automatic “right to exploit” an invention.

Solution to the difficulties arising from parallel Patent Office licence applications and Federal Court infringement proceedings

As discussed in our related article here, one difficulty with the current provisions is that they can result in parallel licence applications before the Patent Office and infringement proceeding before the Federal Court with no mechanism for combining both in the same forum. The proposed provisions avoid the need to apply to the Patent Office for a licence and, depending on the regulations prepared, could operate as a defence to infringement that can be addressed before court at the same time as infringement proceedings. Therefore, under the proposed law, the current difficulties with parallel proceedings may not arise.