The Patent Office's decision in McCann as Liquidator of ACN 137 233 919 v Molnar  APO 30 explores interesting territory for liquidators and insolvency professionals – the intersection of insolvency and intellectual property.
On 2 October 2015, a company which had gone into liquidation, Sax, filed a request to amend the ownership of a patent application from itself to its sole director, Ms Molnar, pursuant to a sale agreement by which Sax had sold all of its intellectual property to Ms Molnar for $55,000. The Patent Office recorded the amendment on 16 October 2015.
Just three days later, Mr McCann and Mr McKinnon were appointed as liquidators to Sax. McCann made a request pursuant to section 36 of the Patents Act 1995 (Cth) (Patents Act) to have the patent application amended and reinstate Sax as the beneficial owner, asserting that the transaction was voidable as an unreasonable director-related transaction. Since the concept of "beneficial ownership" does not exist under the Patents Act, the Patent Office considered the application as a request for change of ownership.
The liquidator had sought to establish that first, the transaction was a disposition by Sax of its property; secondly, the disposition was to a director; and thirdly, that a reasonable person in the company's circumstances would not have entered into the transaction given its unreasonableness. The hearing officer was satisfied that the first two elements were met. As to the transaction's reasonableness, the liquidator gave evidence that only $22,000 had been paid, but the director's evidence was that she had paid either $41,898 or $55,000. However, there was no evidence of what was considered a reasonable price for the patent application. The hearing officer concluded that there was insufficient evidence to make a finding as to whether the transaction was unreasonable.
More importantly, the hearing officer considered that:
- he did not have jurisdiction to make an order under section 588FF of the Corporations Act, as such an order could only be made by a court; and
- given that it was not in dispute that consideration had been paid, the transfer back of the patent application, without more, was not an appropriate remedy. In that regard, section 588FF(1) only empowers the court make an order for the recovery of 'the difference between the total value of the benefits provided by the company under the transaction and the value (if any) that it may be expected that a reasonable person in the company’s circumstances would have provided'. In other words, the only available remedy to an unreasonable director-related transaction is for the liquidator to recover the difference between the total value of the benefits provided and the value expected to be received.
Although this liquidator's strategy didn't hold up in the Patent Office, there are other options that may be available on the facts.
First, liquidators may be able to rely upon the void dispositions provisions to establish that the recipient of the IP they want to recover is not an "eligible person" under the Patents Act. One scenario where a disposition of a patent application would be void is if it occurred after a liquidator had already been appointed (see section 468 of the Corporations Act).
If the disposition of a patent is void, then the director or other recipient is not an eligible person under the Patents Act, as they are no longer entitled to have the patent assigned to them. In those circumstances, the liquidator can lodge a section 36 request to have the ownership details amended, without needing to approach a court.
In considering whether a remedy is available, important questions include the nature of the disposition, its timing, and the parties involved. While the answer will depend on the facts of each case, a disposition of property takes place if either the legal or beneficial interest in the property has passed. Therefore, a patent can have been disposed of even before the Patent Office records a request to amend ownership: the beneficial interest would have transferred to the buyer as soon as they have paid in full under the sale contract, even if they are still waiting for the seller to file a request to amend ownership.
In Ms Molnar's case, it is unclear if she had paid the full $55,000 required under the contract. It appears to us that the liquidator's prospects in this matter would have been better had they argued that:
- because Ms Molnar had not paid in full, the beneficial interest in the patent application had not passed; and
- the disposition had not occurred before the liquidator was appointed, it was void under section 468 of the Corporations Act,
and, as a consequence, Ms Molnar was not an eligible person under the Patents Act.
If there are circumstances to indicate that the transfer of a patent was void, then the Patent Office may be an important first avenue of recourse for a liquidator to recover that property. Given the low level of formality and minimal cost risk of the jurisdiction, liquidators could use this to their advantage when patents have been transferred in what appear to be inappropriate circumstances.