Standing on the Edge – What Type of “Exclusive Licensees” Should be Able to Initiate Patent Infringement Actions?
Standing on the Edge - What Type of ''Exclusive Licensees'' Should be Able to Initiate Patent Infringement Actions?
Johnathon Liddicoat 0
0 J. Liddicoat (&) PhD , BSc (Hons), LLB (Hons) , Philomathia Post-Doctoral Research Associate in Law, Faculty of Law, Centre for Law, Medicine and Life Science, University of Cambridge; Adjunct Research Fellow, Centre for Law and Genetics, University of Tasmania (Hobart, Australia) , Cambridge , UK
In patent laws around the world, exclusive licensees often have standing to initiate infringement actions if the relevant patentee(s) is also added to the suit. Australian patent legislation specifies that exclusive licensees have this power and, correspondingly, the definition of ''exclusive licensee'' clearly permits licensees to initiate infringement actions if they exclusively control the full complement of rights conferred by a patent. However, an important question remains: Does the definition of exclusive licensee include licensees that exclusively control only a portion of the rights conferred by a patent (e.g. to import and sell an invention but not make it)? The Full Court of the Federal Court of Australia has, through legislative interpretation, recently answered this question in the negative. Arguably, this interpretation is correct as a matter of statutory construction, but is it correct as a matter of patent policy? This article examines this final question via two approaches: (i) by extending the orthodox economic rationale for patents to the issue at hand, in particular by examining the role of exclusive licensing in market economies; and (ii) by evaluating the role of standing for exclusive licensees in the context of world patent harmonisation and the corresponding approaches in the UK and US.
Patent law; Legal standing patent law; Patent law harmonisation; Exclusive licences; Justifications for
Standing is a requirement of many legal actions. Essentially, a party has to show
that it has a certain threshold of interest in a case before it will be eligible to litigate.
Standing is often associated with constitutional and administrative law actions;
however, a recent series of judicial decisions addressing the issue have now arisen
in Australian patent law, raising questions about whether the current operation of
the law is desirable. Like patent legislation around the world, the Australian
legislation, the Patents Act 1990 (‘‘the Patents Act’’), specifies various standing
requirements for different actions. Standing to revoke a patent is open to any party,1
as is opposition.2 In contrast, applications for relief from unjustified threats of
infringement and to rectify the Register of Patents via a court are limited to
‘‘aggrieved’’ persons.3 The focus of this article is on standing to initiate
infringement actions by exclusive licensees under Sec. 120(1) of the Patents Act,
which is also known in patent law as co-plaintiff standing.
Section 120(1) of the Patents Act states, ‘‘infringement proceedings may be
started in a prescribed court … by the patentee or an exclusive licensee’’.4
Relevantly, ‘‘patentee’’ is defined as ‘‘the person for the time being entered in the
Register as the grantee or proprietor of a patent’’5 and ‘‘exclusive licensee’’ means
‘‘a licensee under a licence granted by the patentee and conferring on the licensee,
or on 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
The Australian decisions alluded to above have highlighted issues with the
definition of an exclusive licensee. More specifically, controversy surrounds
whether an exclusive licensee is constituted only by a party who controls the full
complement of rights conferred in a patent – hereafter, this type of exclusive licence
will be referred to as a ‘‘panoplied exclusive licence’’, in reliance on the
etymological root of ‘‘panoply’’ as a complete suit of armour.7 Or, in the alternative,
the definition of an exclusive licensee also includes a licensee who receives
exclusivity to a partitioned sphere of rights in a patent (a ‘‘partitioned exclusive
licence’’).8 Three variations of partitioned exclusive licences have been litigated in
Australia. The first, and most litigated type, arises when a licensee exclusively
controls less than the full list of ‘‘activities’’ specified in the definition of ‘‘exploit’’.
1 Sec. 138(1) Patents Act 1990 (Cth).
2 Id., Sec. 59.
3 Id., Secs. 128(1), 192.
4 Id., Sec. 120(1). Other non-statutory mechanisms to obtain standing have been outlined in theory, see
Emory University v. Biochem Pharma Inc (1998) 86 FCR pp. 1, 10 (Lindgren J); Uprising Dragon Ltd v.
Benedict Trading & Shipping Pty Ltd (1987) 16 FCR pp. 93, 102 (French J).
5 Sch. 1 (definition of ‘‘patentee’’) Patents Act 1990 (Cth).
6 Id., Sch. 1 (definition of ‘‘exclusive licensee’’) (emphasis added).
Macquarie Concise Dictionary Online (2016
) (6th ed., Macquarie Dictionary Publishers, 2013).
8 For the remainder of this article, unless otherwise indicated, the term ‘‘standing’’ will be used solely to
refer to the ability to initiate patent infringement actions.
The definition of exploit is dealt with in more detail below; however, in short, the
term is used in the Patents Act to describe the exclusive ability of rights holders to
buy, sell, import, etc., the invention.9 Accordingly, this type of licence arises, for
example, when a licensee has the exclusive ability to import and sell an invention
but not to make it. The second type arises when a licensee has the exclusive right to
exploit a patent in a geographic area smaller than the ‘‘patent area’’,10 and the third
occurs when a licensee has the exclusive right to exploit a patent in a specific field
of use. These three types of licences will be referred to as ‘‘activity-based exclusive
licences’’, ‘‘geographic exclusive licences’’, and ‘‘field-of-use exclusive licences’’,
respectively (see Fig. 1).11
The primary aim of this article is to evaluate whether the standing requirements
for exclusive licensees under the Patents Act are coherent with its underpinnings
and, if not, to recommend reform. There is sparse commentary on standing in
Australian patent law, and none that engages with its justifications or jurisprudential
underpinnings.12 Extrinsic material to the Patents Act has not addressed the issue
either and, until a spate of cases in the last ten years, there had been little case law.13
In 2015, the Intellectual Property Committee of the Business Law Section of the
Law Council of Australia wrote a submission to IP Australia (the Australian
Government agency that administers intellectual property rights) addressing
standing for exclusive licensees.14 This submission focussed on the adverse
commercial ramifications of the extant law and compliance with Australia’s
obligations under the Australia–United States Free Trade Agreement;15 it did not
touch upon the justifications for patent law. As described in greater detail below,
judicial decisions and commentaries from other jurisdictions have made inroads into
the question addressed in this article, but none have dealt with it comprehensively.
As a result, it is difficult to judge whether Australian standing requirements meet
legislative aims or are consistent with patent jurisprudence.
This article develops an economic-based theory for exclusive licensees to initiate
patent infringement actions based on orthodox justifications for patent law.
Furthermore, to put the Australian position in a global context and consider the role
9 These actions are often referred to as individual exclusive rights, for example the ‘‘exclusive right to
make’’; however, the Full Court of the Federal Court of Australia has recently specified that these are not
rights in themselves but rather ‘‘activities’’ that fall under the right to exploit, see Bristol-Myers Squi
Company v. Apotex Pty Ltd (2015
) 228 FCR pp. 1, 33; Sec. 13(1), Sch. 1 (definition of ‘‘exploit’’) Patents
Act 1990 (Cth).
10 Sec. 13(3), Sch. 1 (definition of ‘‘patent area’’) Patents Act 1990 (Cth).
–2013) uses a similar nomenclature, pp. 6–9.
12 For example, see
Meltzer et al. (2005)
, p. 40; Aarons (2005);
, pp. 45–46.
13 See Commonwealth, Parliamentary Debates, Senate, 29 May 1990, p. 1271 (Robert Ray);
Commonwealth, Parliamentary Debates, House of Representatives, 10 October 1990, p. 2565 (Simon
Crean); Industrial Property Advisory Committee, Patents, Innovation and Competition in Australia
(Australian Government Publishing Service, Canberra 1984);
; Explanatory Memorandum,
Patents Bill 1990 (Cth);
Statement of the Minister for Science (1986
14 Intellectual Property Committee of the Business Law Section of the Law Council of Australia (2015).
15 Id., p. 1.
of world patent harmonisation, this article evaluates the standing requirements in
two other major common-law countries.
This article is divided into three substantive parts: part 2 canvasses relevant
Australian case law and demonstrates that, in the absence of a High Court decision
to the contrary, only panoplied exclusive licensees have standing; part 3 develops an
economic-based theory for standing that emphasises the role of patents as economic
assets in market economies and the role of division of labour in bringing inventions
to market; and part 4 explores standing requirements for exclusive licensees in the
US and UK. This article concludes by observing that, consistent with patent
jurisprudence and harmonisation efforts, standing should be broadened in Australia
to include partitioned exclusive licensees.
2 Australian Law
2.1 Preliminary Aspects to Standing in Australian Patent Law
To put the issues addressed in this article in context, it is first necessary to outline
related aspects of standing in Australian patent law. Patent licences, at their most
basic, are a type of contract that operates as a mechanism for patentees to electively
permit others to practise their inventions. Within the broad confines of laws relevant
to licences, such as competition and contract law, patentees have freedom to
contract. Thus, they may include a variety of terms including those directed to
panoplied or partitioned exclusive licences. Section 120(2) of the Patents Act
specifies that, although a patentee may begin infringement proceedings alone, when
an exclusive licensee initiates an action, the patentee must be ‘‘joined as a defendant
unless joined as a plaintiff’’.16 The Australian Law Reform Commission, in its
report on gene patents and human health, stated that, in effect, an exclusive licensee
‘‘stands in the shoes of the patent holder, subject to any additional terms relating to
enforcement of patent rights in the licence agreement (for example, allocation of
any damages awards, liability for the costs of any infringement proceedings, or the
right to control proceedings)’’.17 It is also relevant to note that Sec. 120(3) of the
16 Sec. 120(1) Patents Act 1990 (Cth).
17 Australian Law Reform Commission (2004), Vol. 1, p. 230, n. 62.
Patents Act states that ‘‘[a] patentee joined as a defendant is not liable for costs
unless the patentee enters an appearance and takes part in the proceedings’’.18
There are various reasons why it is appropriate for patentees to be joined in
actions initiated by their exclusive licensees, including that it makes them bound
by the judgment, avoids res judicata issues, gives them an opportunity to be heard,
and allows discovery of documents that may affect validity, infringement, or the
licensee’s standing.19 Due to circumstance, however, a patentee may not want to
enter a plea because it may have no interest in the case that is being pursued by
the licensee. Such a situation could arise, for example, if a patentee licenses a
patent in return for lump sum payments not linked to the success of the product
protected by the patent. In this scenario, it will receive payments regardless of any
Section 187 of the Patents Act requires that licences, assignments and other
particulars of patents must be registered.20 In Stack v. Brisbane City Council (No
2),21 Drummond J held that the combined interpretation of Secs. 120 and 187 meant
that an unregistered assignee could not ordinarily bring an infringement action in its
own name.22 However, the position is different for exclusive licensees: in Grant v.
Australian Temporary Fencing Pty Ltd,23 Holmes J held that because the definition
of an exclusive licensee does not include a reference to registration, it is not
necessary for an exclusive licensee to be registered for it to initiate infringement
Three further ancillary aspects of licences should be noted. First, parties to a
licence cannot retrospectively change the rights and obligations between them.25
This means that a contract written as a non-exclusive licence and which operates as
one cannot be amended to state that at any time in the past it operated as an
exclusive licence. Second, whether a licence is sole, exclusive, non-exclusive, or
actually an assignment, will be determined by a court regardless of its title.26
Generally speaking, this assessment will be based on the rights conferred, the
18 Sec. 120(3) Patents Act 1990 (Cth).
19 Rule 20.13 Federal Court Rules 2011 (Cth); the application of joinder rules, Rules 9.02–9.05 Federal
Court Rules 2011 (Cth) are considered in more detail below.
20 Sec. 187(1) Patents Act 1990 (Cth); Reg. 19.1(1) Patent Regulations 1991 (Cth).
21 Stack v. Brisbane City Council (No 2) (1996) 67 FCR p. 510.
22 Stack v. Brisbane City Council (No 2) (1996) 67 FCR pp. 510, 513; see also Townsend Controls Pty
Ltd v. Gilead (1989) 16 IPR pp. 469, 471–472 (van Doussa J).
23 Grant v. Australian Temporary Fencing Pty Ltd (2003) 59 IPR p. 170.
24 Grant v. Australian Temporary Fencing Pty Ltd (2003) 59 IPR pp. 170, 179–180. It is also relevant to
note that Sec. 195 of the Patents Act states that ‘‘[t]he Register is prima facie evidence of any particular
registered in it’’. Thus, registration of an exclusive licence may make it easier for an exclusive licensee to
initiate an infringement action, particularly if an alleged infringer is likely to contest its ability to bring
the infringement action.
25 Black & Decker Inc v. GMCA Pty Ltd (No 2) (2008) 76 IPR pp. 99, 125 (Heerey J).
26 For example, see Reid v. Moreland Timber Company Pty Ltd (1946) 73 CLR p. 1; Re An Application
by the Preformed Line Products Company for an Extension of Letters Patent No 160999  ALJR
pp. 6, 8.
wording of the contract and the objective intention of the parties.27 Third, eligibility
for financial relief is limited to time periods in which parties have standing.28
2.2 Standing to Initiate Patent Infringement Suits Under the Patents Act 1990
The first federal Australian patent legislation, the Patents Act 1903, contained no
statutory standing provision for exclusive licensees. Statutory standing for exclusive
licensees was introduced into the Patents Act 1952, and the contemporary standing
interpretation issues in Australia begin under it. Section 114(1) of the Patents Act
1952 specified that an ‘‘exclusive licensee may bring an action or proceeding for the
infringement of a patent’’.29 ‘‘Exclusive licensee’’ was defined to mean ‘‘a licensee
under a licence granted by the patentee which confers on the licensee, or on the
licensee and persons authorised by him, the right to make, use, exercise and vend
the patented invention, throughout Australia, to the exclusion of all other persons,
including the patentee’’.30 For reasons that will become apparent below, it is
convenient to note that the exclusive rights conferred under Sec. 69 of the Patents
Act 1952 were to ‘‘make, use, exercise and vend the invention’’.31
In the 1963 case, Ex parte British Nylon Spinners (‘‘British Nylon Spinners’’),32
the High Court of Australia33 was asked to determine whether either of the two
licensee applicants qualified as exclusive licensees for the purpose of patent term
extension.34 Under Sec. 95 of the Patents Act 1952, only exclusive licensees and
patentees could apply for an extension, and the definition of exclusive licensee was
the same for patent term extension as it was for standing.35 The patent in question
related to an ‘‘improved process for melt-spinning nylon yarn’’.36 The contract with
the first licensee exclusively allowed the licensee to ‘‘make, use, exercise and vend’’
the invention when the filament of yarn was .09 mm or less37 – a field-of-use
exclusive licence. The second licensee was permitted to control all the rights in the
27 See generally Reid v. Moreland Timber Company Pty Ltd (1946) 73 CLR p. 1; Re An Application by
the Preformed Line Products Company for an Extension of Letters Patent No 160999  ALJR pp. 6,
8; KD Kanopy Australasia Pty Ltd v. Insta Image Pty Ltd (2007) 71 IPR pp. 615, 637–638.
28 Black & Decker Inc v. GMCA Pty Ltd (No 2) (2008) 76 IPR pp. 99, 127 (Heerey J) discussing Colbeam
Palmer Ltd v. Stock Affiliates Pty Ltd (1968) 112 CLR pp. 25, 36, 41 (Windeyer J).
29 Sec. 114(1) Patents Act 1952 (Cth).
30 Id., Sec. 6 (definition of ‘‘exclusive licensee’’).
31 Id., Sec. 69.
32 Ex parte British Nylon Spinners Ltd; Re Imperial Chemical Industries Ltd’s Patent (1963) 109 CLR
33 The High Court of Australia is the highest court in the Australian judicial system.
34 Ex parte British Nylon Spinners Ltd; Re Imperial Chemical Industries Ltd’s Patent (1963) 109 CLR
pp. 336, 338–339.
35 Ibid.; Sec. 95 Patents Act 1952 (Cth).
36 Ex parte British Nylon Spinners Ltd; Re Imperial Chemical Industries Ltd’s Patent (1963) 109 CLR
pp. 336, 336.
patent subject to the first licensee’s rights.38 The Court found that since neither of
the licensees could enforce the patent to the ‘‘exclusion of all other persons’’, neither
were ‘‘exclusive licensees’’ for the purpose of the Act and therefore neither had the
ability to make the extension of term application.39
Field-of-use licences have not been specifically addressed in recent case law.
However, in addressing the questions of whether activity-based exclusive licensees
or geographic exclusive licensees have standing under the Patents Act, recent cases
have revisited British Nylon Spinners and emphasised its importance. These cases
begin with Grant v. Australian Temporary Fencing Pty Ltd. Before analysing the
case law though, it is first necessary to note the definition of ‘‘exploit’’ under the
in relation to an invention it includes:
(a) 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
(b) where the invention is a method or process – use the method or process or
do any act mentioned in paragraph (a) in respect of a product resulting from
In Grant v. Australian Temporary Fencing Pty Ltd, the defendant sought
summary judgment on its counter-claim to infringement and defence.41 Amongst
the defendant’s arguments was that the licensee did not satisfy the definition of
‘‘exclusive licensee’’ under the Patents Act because the licence did not confer all the
activities in the definition of ‘‘exploit’’. More precisely, the licence did not confer
the ability to import products.42 In her Honour’s decision, Holmes J noted that the
rights conferred by a patent had changed between the Patents Act 1952 and the
Patents Act; more specifically, patent rights were exhaustively listed in the Patents
Act 1952, whereas they are inclusively defined in the Patents Act.43 In light of these
differences, her Honour raised the possibility that the Patents Act could be read to
convey standing on a ‘‘plurality’’ of exclusive licensees.44 However, Holmes J did
not decide the case on this point; rather, her Honour found that the licence in
question was actually a panoplied exclusive licence. Holmes J reasoned that because
the definition of exploit under the Patents Act is not exhaustive, for a licence to be
exclusive, it need not exhaustively list all of the activities under the definition of
exploit and, therefore, that the failure to include a right to import in the licence,
38 Ex parte British Nylon Spinners Ltd; Re Imperial Chemical Industries Ltd’s Patent (1963) 109 CLR
pp. 336, 337.
39 Ex parte British Nylon Spinners Ltd; Re Imperial Chemical Industries Ltd’s Patent (1963) 109 CLR
pp. 336, 340.
40 Sch. 1 (definition of ‘‘exploit’’) Patents Act 1990 (Cth).
41 Grant v. Australian Temporary Fencing Pty Ltd (2003) 59 IPR pp. 170, 171–172.
42 Grant v. Australian Temporary Fencing Pty Ltd (2003) 59 IPR pp. 170, 180.
43 Grant v. Australian Temporary Fencing Pty Ltd (2003) 59 IPR pp. 170, 182.
which neither of the parties may have contemplated, was not necessarily fatal to its
being exclusive.45 Moreover, in assessing the licence itself, Holmes J found that
because it left no residual rights to the licensor, referred to it as being exclusive, and
included a provision to reduce the licence to a non-exclusive one,46 for the purposes
of summary judgment, the licence was a panoplied exclusive licence and therefore
the plaintiff had standing.47
In Pharmacia Italia SpA v. Interpharma Pty Ltd,48 a licensee sought an
interlocutory injunction against the respondent for importing an anti-tumour drug.49
The respondent argued that the applicant lacked standing to bring the action because
it failed to satisfy the definition of an exclusive licensee. Prior to the applicant
obtaining its licence, which was purported to be exclusive, the patentee granted a
licence to another party, which remained on foot.50 Sundberg J engaged with Holmes
J’s idea of multiple exclusive licences under Sec. 120, and held that, based on this,
the licensee had ‘‘an arguable case’’ that it had standing to initiate proceedings.51
In Bristol-Myers Squibb Co v. Apotex Pty Ltd (No 5),52 the first applicant was the
commercialising company in Australia for the drug aripiprazole, and the second
applicant was the patentee and global manufacturer of the drug.53 The licence
agreement between the applicants specified that the first applicant was the exclusive
licensee, but it also reserved the right to manufacture aripiprazole to the second
applicant.54 The respondent, who was contesting an infringement claim,55 argued
that the first applicant was not an exclusive licensee because it could not exclusively
exercise the full range of activities under the definition of exploit.56 Being the first
full hearing to decide the issue, Yates J reviewed the authorities, in particular,
British Nylon Spinners, Pharmacia Italia SpA v. Interpharma Pty Ltd and Grant v.
Australian Temporary Fencing Pty Ltd, and rejected Holmes J’s idea of multiple
exclusive licensees.57 Yates J stated that Sec. 13(1) of the Patents Act provides the
‘‘twin rights’’58 of exploitation and authorisation and that the definition of an
exclusive licensee operates in harmony with the rights conferred by the Act on the
patentee.59 Consistent with this, his Honour stated that the Patents Act ‘‘speaks of
45 Grant v. Australian Temporary Fencing Pty Ltd (2003) 59 IPR pp. 170, 182–183.
48 Pharmacia Italia SpA v. Interpharma Pty Ltd (2005) 67 IPR p. 397.
49 Pharmacia Italia SpA v. Interpharma Pty Ltd (2005) 67 IPR pp. 397, 398–399.
50 Pharmacia Italia SpA v. Interpharma Pty Ltd (2005) 67 IPR pp. 397, 400.
51 Pharmacia Italia SpA v. Interpharma Pty Ltd (2005) 67 IPR pp. 397, 402.
52 Bristol-Myers Squibb Co v. Apotex Pty Ltd (No 5) (2013) 104 IPR p. 23.
53 Bristol-Myers Squibb Co v. Apotex Pty Ltd (No 5) (2013) 104 IPR pp. 23, 103.
54 Bristol-Myers Squibb Co v. Apotex Pty Ltd (No 5) (2013) 104 IPR pp. 23, 102–103.
55 Bristol-Myers Squibb Co v. Apotex Pty Ltd (No 5) (2013) 104 IPR pp. 23, 26.
56 Bristol-Myers Squibb Co v. Apotex Pty Ltd (No 5) (2013) 104 IPR pp. 23, 101.
57 Bristol-Myers Squibb Co v. Apotex Pty Ltd (No 5) (2013) 104 IPR pp. 23, 101, 105.
58 Bristol-Myers Squibb Co v. Apotex Pty Ltd (No 5) (2013) 104 IPR pp. 23, 105.
‘the right to exploit’ the invention as a single, indivisible right, and that the word
‘exploit’ is used in the Act as a hypernym to cover a range of activities’’.60
Expanding further on this reasoning, Yates J continued that:
[the] use of disjunctive language in the definition of ‘‘exploit’’ to identify
particular activities falling within the scope of the term does not create
separate rights with respect to those activities. It merely recognises that the
right to exploit covers a range of activities, any one of which, if undertaken,
would amount to the exercise of the right to exploit.61
Yates J also found that this reasoning was consistent with the High Court of
Australia’s finding in British Nylon Spinners. On this point his Honour stated that ‘‘the
essential reasoning of the High Court in British Nylon Spinners with respect to the
meaning of ‘exclusive licensee’ in s 6 of the 1952 Act: [was that] the patentee has
conferred on the licensee, exclusively, the exercise of the rights that the patentee itself
has been granted under the patent’’.62 Further, regardless of the replacement of ‘‘make,
use, exercise and vend’’ with ‘‘exploit’’ between the 1952 and 1990 Acts, his Honour
concluded that this does not change the fact that ‘‘the definition of ‘exclusive licensee’
in each Act refers to the conferral by the patentee of a single licence that precludes the
patentee, and any person deriving authority from the patentee, from exercising the
rights granted by the patent’’.63 Accordingly, his Honour found that because the first
applicant did not have the right to manufacture aripiprazole, it did not have standing.64
On appeal to the Full Court of the Federal Court of Australia in Bristol-Myers Squibb
Co v. Apotex Pty Ltd,65 Besanko, Jagot and Nicolas JJs unanimously found no error in
Yates J’s reasoning, and quoted his Honour’s judgment at length.66
From the Full Court’s reasoning in Bristol-Myers Squibb Co v. Apotex Pty Ltd, it
is reasonable to infer that exclusive geographic licences are unlikely to confer
standing because the ‘‘indivisible right to exploit’’ would be divided. The case of
KD Kanopy Australasia Pty Ltd v. Insta Image Pty Ltd (‘‘KD Kanopy’’),67 which
was decided before Bristol-Myers Squibb Co v. Apotex Pty Ltd (No 5), is consistent
with this reasoning. The case, however, warrants further scrutiny because it raises an
aspect of the law not yet detailed. In this case, the licence in question conferred
exclusive control of the patent in issue to everywhere in Australia except the state of
New South Wales – a geographic exclusive licence.68 Since the Patents Act defines
60 Bristol-Myers Squibb Co v. Apotex Pty Ltd (No 5) (2013) 104 IPR pp. 23, 106.
64 Bristol-Myers Squibb Co v. Apotex Pty Ltd (No 5) (2013) 104 IPR pp. 23, 106–107; see also Blue
Gentian LLC v. Product Management Group Pty Ltd (2014) 110 IPR pp. 453, 486–488.
65 Bristol-Myers Squi
bb Co v. Apotex Pty Ltd (2015
) 228 FCR p. 1.
66 Bristol-Myers Squi
bb Co v. Apotex Pty Ltd (2015
) 228 FCR pp. 1, 28–33. For other decisions
consistent with this rationale, see also GlaxoSmithKline Consumer Healthcare Investments (Ireland (No
2) Ltd v. Apotex Pty Ltd  FCA p. 608 (31 May 2016) –; Actavis Pty Ltd v. Orion
Corporation  FCAFC p. 12 (9 September 2016) –.
67 KD Kanopy Australasia Pty Ltd v. Insta Image Pty Ltd (2007) 71 IPR p. 615.
68 KD Kanopy Australasia Pty Ltd v. Insta Image Pty Ltd (2007) 71 IPR pp. 615, 636–637.
an exclusive licensee to be one that has ‘‘the right to exploit the patented invention
throughout the patent area to the exclusion of the patentee and all other persons’’,
and ‘‘patent area’’ is defined to include Australia and the Australian continental
shelf,69 the respondent argued that the licensee did not have standing.70 On a close
reading of this case it appears that Kiefel J would have ordinarily found that the
applicant did not have standing; however, evidence presented to the Court
persuaded her Honour to find that an oral amendment had conferred exclusive rights
on the licensee across the entire patent area. Accordingly, Kiefel J found that the
licensee had standing from the date of the amendment.71
In all, the effect of the decisions discussed in this part is that, in the absence of a
High Court decision to the contrary, only licensees with a panoplied exclusive
licence have standing under Sec. 120(1).
3 Jurisprudence and Justifications
This part is divided into four sections: the first addresses economic-based
justifications for patent law as applied to standing to initiate infringement suits;
the second considers other related legal aspects of standing; the third analyses
arguments against standing for partitioned exclusive licensees; and the fourth
summarises the discussion in this section.72
3.1 Economic Reasoning
In an article by Professors Roger Blair and Thomas Cotter, the authors outline
economic justifications for standing in intellectual property law but do not
comprehensively address standing for partitioned exclusive licensees.73 This article
extends their reasoning. At the beginning of Blair and Cotter’s analysis, the authors
outline three assumptions that are also adopted here.74 First, the main contemporary
justification underpinning patent law is that the conferral of exclusive rights in
inventions incentivises innovation and is welfare-enhancing.75 Blair and Cotter note
that this justification is open to some doubt.76 They also acknowledge, however, that
whether patent regimes have a net positive effect is a complex question without a
definitive answer.77 As the aim of this article is to evaluate whether standing for
69 Sch. 1 (definition of ‘‘patent area’’) Patents Act 1990 (Cth).
70 KD Kanopy Australasia Pty Ltd v. Insta Image Pty Ltd (2007) 71 IPR pp. 615, 636.
71 KD Kanopy Australasia Pty Ltd v. Insta Image Pty Ltd (2007) 71 IPR pp. 615, 638–639.
72 While this paper was in press an article addressing this issue from the point of view of private
autonomy was published, see,
de Werra (2017
a), pp. 201–203.
73 Blair and Cotter (1999–2000), p. 1323.
74 Id., pp. 1330–1336.
75 Id., pp. 1330–1335.
76 Id., pp. 1332–1335.
77 Id., pp. 1333–1335.
exclusive licensees is consistent with orthodox justifications for patents, it will
proceed under this assumption too.
Blair and Cotter’s second assumption is that the ability to transfer exclusive
patent rights is also generally welfare-enhancing. The authors note that this
assumption is ‘‘not immune from criticism’’,78 and that the validity of this second
assumption is difficult to measure in practice, but the evidence of transferring patent
rights being problematic is limited.79 They also argue that even if it was a genuine
issue, it would be confined to certain industries in certain time periods and therefore
would probably be better addressed elsewhere than in standing law.80
Beyond Blair and Cotter’s analysis of this second assumption, further support can
be found for it in application of fundamental economic principles. In the
background of patent law is the broad structure of a free market economy, which
is based upon the assumption that, in the absence of market failure, it will efficiently
allocate resources.81 Key features of market economies, relevant to the analysis
here, include division of labour, decentralised decision-making, and Adam Smith’s
‘‘invisible hand’’. ‘‘Division of labour’’ refers to the development of specialised skill
sets for efficient production of goods. As Adam Smith, the father of modern
economics, observed, ‘‘the greatest improvement in the productive powers of
labour, and the greater part of the skill, dexterity, and judgment with which it is
anywhere directed, or applied, seem to have been the effects of the division of
labour’’.82 ‘‘Decentralised decision-making’’, as it is used here, refers to the ability
of individual actors to decide on how to manage property. It is critical to Adam
Smith’s ‘‘invisible hand’’, which, as it is commonly understood, is the idea that
social benefits arise from self-motivated individual actions and trade.83 Thus, it
makes sense for patentees to have the benefit of electing between, or using a mix of,
commercialising themselves, assigning their rights, and licensing parties to exploit
their inventions to enable them to participate in the broader market economy and
realise efficient utilisation of their inventions.
The utility of transferring patent rights has also been empirically observed.
Statistics from a recent survey of Australian inventors show that of 2689
respondents who had a pending or granted patent, over 43% reported that attempts
were made to license or sell their inventions.84 There is no doubt that some
technology is licensed or sold because patentees want to move on to other projects.
In general, however, the reality is that quite often patentees do not have the
expertise to take an invention from concept to market. This is not a new revelation.
In industries, such as biotechnology and pharmaceuticals, few companies have the
78 See id., p. 1335 and references therein.
80 Id., pp. 1335–1336.
Merges et al. (2012)
, pp. 11–13;
Industrial Property Advisory Committee (1984
), pp. 11–18;
Planning Advisory Council (1989
), pp. 5–6;
, pp. 13–16;
, pp. 21–22.
, Vol. 1, p. 8, more generally, see chs. 1–3.
83 Id., Vol. IV, p. 349;
Gans et al. (2003)
, pp. 9–10;
Pol and Carroll (2005)
, ch. 2.
Nicol et al. (2014)
, p. 48; see also
Jensen et al. (2011)
ability to conceive an invention, reduce it to practice, create a prototype, receive
funding, create appropriate business structures, and then market and distribute a
product.85 These areas of expertise, of which others also exist, provide an
illustration of the division of labour that exists in modern innovation. Accordingly,
without compelling evidence to the contrary, it is relatively easy to subscribe to
Blair and Cotter’s second assumption.
The first two assumptions lead naturally to the third, that patent rights should not
have their value diminished based on the way they are transferred.86 Two key
considerations underpinning this assumption are that although exclusive patent
rights are an exception to a free market economy, upon their creation, patentees
must choose how they are to be exploited, and patented products often directly
compete with other substitutable products.87 If patents are welfare-enhancing
because of the exclusive rights they offer then, consistent with the operation of
market economies,88 parties holding exclusive rights should be able to choose how
to enforce them. In short, if exclusive rights are to operate as incentives, the
exclusive nature of the rights must be enforceable; otherwise the value of them is
reduced.89 On this basis, Blair and Cotter conclude that panoplied exclusive
licensees and patentees should, by default, have standing so that they can protect
their interests in any exclusive rights.90 For patentees in a licence agreement, the
interest protected is any reversionary interest and any royalty stream that may
accrue through continuing royalty payments. For panoplied exclusive licensees, the
interested protected is the exclusivity for which they bargained.91
As explored in part 2 of this article, current Australian standing law for patentees
and panoplied exclusive licensees aligns with Blair and Cotter’s rationale by
conferring standing on them. Although Australian law does not currently confer
standing on partitioned exclusive licensees, whether or not this position is consistent
with justifications for patent law is more complex than simply applying Blair and
Cotter’s rationale. There are significant differences between panoplied exclusive
licences and partitioned exclusive licences, and these differences must be explored
to assess whether Blair and Cotter’s assumptions hold.
To begin with, it is helpful to consider whether non-exclusive licensees should
have standing. Patent rights, by their definition, are negative exclusionary rights,
carrying no right to exploit the invention, only to exclude others from exploiting
it.92 When a non-exclusive licence is granted, the patentee agrees not to exercise
patent rights against the licensee, and the patentee retains the option to license or
85 For an exploration in the Australian drug discovery and development sector, see
Nicol et al. (2014)
pp. 48, 49–50, 57–65, 76–80, 84–86, 87–89.
Blair and Cotter (1999
–2000), p. 1336.
, pp. 28–34.
Gans et al. (2004)
, pp. 437–438.
89 Id., pp. 437–439.
Blair and Cotter (1999
–2000), pp. 1392–1396.
91 Id., pp. 1394–1397.
92 Sec. 13(1), Sch. 1 (definition of ‘‘exploit’’) Patents Act 1990 (Cth); JTI International SA v.
Commonwealth of Australia (2012) 250 CLR pp. 1, 30–32 (French CJ).
commercialise the invention in any other applicable manner. Thus, if a
nonexclusive licensee had standing to initiate infringement, this would derogate from
the patentee’s ability to choose how to exploit its invention, and therefore the rights
it has been granted. Furthermore, a non-exclusive licensee has not been promised
any exclusivity to exercise an invention, and to obtain this it would, usually, have
had to pay more. Thus, although a non-exclusive licensee may suffer economic
harm resulting from infringement of the patent rights that it has paid to practise, the
law does not confer it standing.
This reasoning resonates with the viewpoint of Learned Hand J in A L Smith Iron
Co v. Dickson93:
The ordinary case of a suit by a licensee against an infringer is in no sense the
same [as an infringement suit by an exclusive licensee]. It is indeed true that a
mere licensee may have an interest at stake in such a suit; his license may be
worth much more to him than the royalties which he has agreed to pay, and its
value will ordinarily depend on his ability to suppress the competition of his
rivals. The reason why he is not permitted to sue is not because he has nothing
to protect. But against that interest is the interest of the infringer to be immune
from a second suit by the owner of the patent…. Indeed, the owner may have
granted a number of licenses, and it would be exceedingly oppressive to
subject him to the will of all his licensees. These two interests in combination
have been held to overweigh any interest of the licensee.94
The definition of an exclusive licence for the purposes of patent law, as
demonstrated in part 4 below, differs between jurisdictions. However, exclusive
licences also have universal, uncontentious aspects. As with non-exclusive licences,
an exclusive licensor agrees not to exercise patent rights against the licensee, but the
pivotal difference between exclusive and non-exclusive licences is that, in an
exclusive licence, the patentee agrees not to exploit the invention itself, nor to
permit another party to exploit it. A corollary of this is that a patentee to a panoplied
exclusive licence, has, at least for a period of time, chosen how the entirety of its
patent rights will be exercised. Similarly, in a partitioned exclusive licence, the
patentee has chosen how the partitioned elements of its rights will be exercised.
Bearing these differences in mind, it is useful to analyse partitioned exclusive
licences in the context of Hand J’s reasoning that patent standing law protects ‘‘two
interests’’. The first interest his Honour described is an infringer’s immunity from
multiple suits regarding the same potentially infringing conduct. However, this
interest is accounted for under Sec. 120(2) of the Patents Act and Rule 9.03 of the
Federal Court Rules 2011: Sec. 120(2) requires that exclusive licensees and
patentees are added to infringement actions; and Rule 9.03, in a somewhat
overlapping way, specifies that ‘‘[i]f an applicant claims relief to which any other
person is entitled jointly with the applicant … every person so entitled must be
joined as a party to the proceeding’’.95 Thus, between Sec. 120(2) and Rule 9.03, if
93 A L Smith Iron Co v. Dickson, 141 F.2d p. 3 (2nd Cir. 1944).
94 A L Smith Iron Co v. Dickson, 141 F.2d pp. 3, 6 (2nd Cir. 1944).
95 Rule 9.03(a) Federal Court Rules 2011 (Cth).
an alleged infringer’s activities encroach upon rights in a patent, then all the
relevant licensees must also be added, and there is no chance of multiple suits. The
second interest described by Hand J is that licensee standing should not derogate
from a patentee’s ability to license other parties. Whilst this is clearly a vital issue
for patentees, in the context of partitioned exclusive rights in an exclusive licence,
the ability to license the partitioned element to other parties is voluntarily foregone
by the patentee when the licence is struck. Thus, this interest is accounted for too.
This analysis of interests protected by standing law, by itself, suggests that
partitioned exclusive licensees should be able to initiate patent infringement actions,
but it does not necessarily conclude the issue. This is especially so when it is
considered that patentees control remaining patent rights, have an interest in
reversionary rights, have standing, and could enforce patent rights on behalf of
licensees. However, there are other reasons, legal, economic, and practical, that
support partitioned exclusive licensee standing.
The patent system is in part justified by its ability to allocate prospective
resources.96 In practice, this means that by being awarded patent rights, a patentee is
allocated the exclusive ability to exploit the invention (these exclusive rights are
designed to help the inventor recoup costs expended in its development and
commercialisation).97 The ability to enforce these rights is also bestowed on
patentees because without them the value of the allocated resource would be
significantly diminished.98 The significance of this reasoning surrounding the
orthodox justifications for patent law flows through to partitioned exclusive
licensees in two ways. First, if a partitioned exclusive licensee cannot enforce rights
it has bargained for, then the value of the right is reduced and the licensee will pay
less for the right. Second, it is logical that a party who is exclusively permitted to
practise a partitioned element of a patented invention can choose how and when to
enforce it because it is the party actually capitalising on the invention. It is helpful to
illustrate this reasoning with a practical example.
Division of labour in exploiting patent rights means that, in some instances, for a
patentee to realise its greatest advantage from a patent, it will need to create
exclusive licences. For example, a party may have well-established distribution
channels in a geographic area, or a party may have developed goodwill in a specific
field, and it is more efficient for a party in those positions to practise the invention.
Indeed, in Australia, geographic exclusive licences are often suited to purpose, as
the layout of the country includes economically valuable areas separated by
geographic boundaries (e.g., deserts, bodies of water or large distances).99 If
infringement occurs within the geographic area of a partitioned exclusive licensee, it
will be in the best position to judge whether to ignore the infringing act, or choose to
Gans et al. (2004)
, pp. 437–438;
Landes and Posner (2003)
, pp. 13, 20, 294–299;
Merges et al. (2012)
, p. 266.
Gans et al. (2004)
, pp. 437–438;
Landes and Posner (2003)
, pp. 294–297, cf. 326–32;
Merges et al.
, pp. 11–13.
Gans et al. (2004)
, pp. 437–439;
Merges et al. (2012)
, pp. 11–13.
99 It is interesting to note here that current Australian patent law specifically allows assignments in
geographic areas, see Sec. 14(2) Patents Act 1990 (Cth).
take other action, including threatening litigation. In contrast to the patentee, the
licensee will normally have a much better understanding of the market, its players,
and, quite often, the extent to which the threat of litigation will operate as a
bargaining chip in negotiation. However, if a geographic exclusive licensee must
co-ordinate infringement concerns through the patentee, it incurs additional
transaction costs and risks a situation where it may not be able to enforce the
exclusive rights for which it bargained.
3.2 Related Legal Aspects
Although enabling efficient exploitation of partitioned patent rights is one element
of standing, there are two further legal aspects. The first concerns applications for
relief from unjustified threats of infringement proceedings. These applications allow
parties who are unjustifiably threatened with infringement proceedings to recover
any damages that the threats cause.100 This aspect of patent law is relevant because
obiter statements from the High Court of Australia suggest that a threat of litigation
by a licensee without standing would constitute an unjustified threat.101 It follows
then, that if the threat of litigation is to operate as a bargaining chip in negotiations
between partitioned exclusive licensees and infringers, or potential infringers, this
end will only be achieved if they are legally allowed to make such threats.
Otherwise, partitioned exclusive licensees will expose themselves to compensating
for any damage their threat causes.102
The second legal ramification of current standing law is that it can unfairly curtail
damages awards. To explain how this curtailment occurs, it is necessary to outline
how licensees can use patentees’ names to litigate patents. In the UK government
report leading to the Patents Act 1949,103 the ‘‘Swan Report’’,104 the Board of Trade
noted that exclusive licences commonly include clauses to enable licensees to
conduct infringement actions in the name of the patentee (at the time the Act only
permitted patentees to initiate infringement actions).105 If litigation is conducted via
this mechanism and patent infringement is proved, the successful litigants have a
choice between an account of profits and damages.106 While an account of profits’
calculation is the same regardless of whose name the litigation is conducted under, a
damages’ calculation is not; it is based on the harm done to the successful, named
litigant.107 This means that, depending on the licence agreement, a damages award
might be relatively low, even though the actual damage to the exclusive licensee is
100 Sec. 128 Patents Act 1990 (Cth).
101 Avel Pty Ltd v. Multicoin Amusements Pty Ltd (1990) 171 CLR pp. 88, 94 (Mason CJ, Deane and
Gaudron JJ), p. 105 (Dawson J).
102 Sec. 128(3) Patents Act 1990 (Cth).
103 Patents Act 1949, 12, 13 & 14 Geo 6, c 87.
Board of Trade (1947
105 Id., p. 29.
106 Sec. 122(1) Patents Act 1990 (Cth).
107 Colbeam Palmer Ltd v. Stock Affiliates Pty Ltd (1968) 122 CLR pp. 25, 32.
much higher.108 This could arise, for example, under a scenario where the exclusive
licensee makes lump sum payments to the patentee that are not connected to sales of
the invention, or when a patentee company creates a partitioned exclusive licence
with a subsidiary company in exchange for nominal consideration.
3.3 Arguments Against Standing for Partitioned Exclusive Licensees
An argument against standing for partitioned exclusive licensees is that, in theory, it
allows more than two parties to initiate infringement actions. This could be
problematic for a number of reasons, including what happens if one or more parties
do not want to initiate a suit, or, if the infringement action is successful, how relief
is distributed. However, while these issues may be more complex because more than
two parties are involved, they are no different from when a panoplied exclusive
licence is established. Whether there is only one exclusive licensee and a patentee,
or multiple exclusive licensees and a patentee, forethought is required on how
litigation may be conducted and how financial relief should be distributed.
Related to the negotiation of licences are also various practical business
considerations that operate against large numbers of partitioned exclusive licensees.
From the point of view of a patentee, dividing patent rights increases negotiation
and other transaction costs and, for many licensees, efficient and efficacious
exploitation will often overlap with the ability to utilise a significant proportion of
rights conferred in a patent. For example, manufacturers will often be sellers, and
will want to distribute across the entire patent area and in all fields of use. Notably,
as explored further below, partitioned exclusive licensees can initiate infringement
proceedings in the US and UK, and no commentary has specifically attributed
problems to them doing so.109
A more general concern with patent law is that patent rights may be enforced in
ways which undermine its aim as a welfare-enhancing tool. Here, the conduct of
various patent assertion entities, or to use the pejorative term, ‘‘trolls’’, is a relevant
issue.110 Arguably, by limiting enforcement of patents to panoplied exclusive
licensees, some undesirable conduct may be avoided. However, limiting behaviour
by confining enforcement to certain types of exclusive licensees is a blunt means to
achieve such ends, especially when such activity has not been linked to partitioned
The analysis so far has not distinguished between different types of partitioned
exclusive licences and, generally speaking, most reasoning concerning partitioned
exclusive licences applies equally to all three. However, a semantic difference
Board of Trade (1947
), p. 29; see also Intellectual Property Committee of the Business Law
Section of the Law Council of Australia, (2015), pp. 4–5.
109 As explored in part 4.1 below, in the US there is currently a level of confusion associated with
standing in patent law. However, this concerns when exclusive licensees can initiate infringement
proceedings without the patentee – this is something that is not permitted under the Patents Act and not
investigated in this article. Despite this, as a general rule, in the US partitioned exclusive licensees can
initiate infringement proceedings with patentees named as co-plaintiffs, and no problems have been
specifically attributed to it.
110 See, e.g.,
Bessen and Meurer (2012)
, pp. 24–25.
between activity-based exclusive licences and the other two partitioned exclusive
licences is that activity-based exclusive licences wholly allocate separate activities
under the definition of ‘‘exploit’’, whereas the other two subdivide the activities.
What is meant by this is that, if a geographic exclusive licence is established in each
state of Australia, six parties have the ability to sell, import, offer for sale, etc., the
patented invention. With multiple activity-based exclusive licences, only one party
has the ability to make or import, etc., the invention. It follows that there is legal
simplicity to prohibiting geographic or field-of-use exclusive licensees from having
standing because they ‘‘share’’ an activity, or prohibiting activity-based exclusive
licensees from having standing because they cannot perform all the activities under
the definition of exploit. However, there are three arguments that run against both of
First, patent rights have always been able to be split. Like other forms of personal
property,111 patents can be granted to more than one party and they can be assigned
in moieties, either as tenants-in-common or in joint tenancy.112 Unless there is a
reason to distinguish between the rights of owners and partitioned exclusive
licensees on standing, this distinction is unwarranted.
Second, from the economic justification described above, the incentive rationale
for patents is based on exclusivity. In Australia, the activities described in the
definition of exploit are only ‘‘examples’’ of what the word means – they are not
rights.113 Thus, focusing on whether a party or parties control an activity that is not
a right in itself, just an example of what ‘‘exploit’’ means, is artificial and has a
limited logical connection to the justifications for patent rights.
Third, in relation to field-of-use exclusive licences, a single patent often consists
of different applications for the same invention. For example, a single patent to
nonnaturally occurring DNA could include claims for use of the DNA in human
diagnostics, scientific equipment, and human therapeutics. Under the current
operation of Australian patent law, partitioned exclusive licences to each specific
field listed would not carry standing. However, as separate claims must each satisfy
the requirements for grant, when applying for patent protection the applicant could
have separated the different claims into three separate applications. The benefit to a
patentee in these circumstances would be that it could create panoplied exclusive
licences to each patent. Thus, preventing patentees from creating multiple
partitioned exclusive licences that carry standing is somewhat artificial. The three
partitioned exclusive licences could, in theory, be panoplied exclusive licences to
three separate patents. Indeed, the single patent scenario is preferable because it
reduces work for examiners, saves the patentee money and does not require
patentees to make significant commercialisation decisions before commencing the
111 Sec. 13(2) Patents Act 1990 (Cth).
112 Sec. 16 Patents Act 1990 (Cth); Walton v. Lavater (1860) 141 ER pp. 1127, 1132–1133 (Erle CJ).
113 Bristol-Myers Squibb Co v. Apotex Pty Ltd (No 5) (2013) 104 IPR pp. 23, 106; Bristol-Myers Squi
Co v. Apotex Pty Ltd (2015
) 228 FCR pp. 1, 33.
3.4 Summary on Jurisprudence and Justifications
A related issue with any type of purported exclusive licence is that it may not
actually be exclusive. By this, it is meant that the licensee cannot exclude all third
parties from practising the invention because some third parties have separate
permission from the patentee to practise the invention. In circumstances of
multiple field-of-use exclusive licences that emanate from the same patent, this
issue may be particularly problematic. This can be demonstrated using the
simplistic example of commercialising a non-naturally occurring DNA patent
described above. When purportedly exclusive field-of-use licences are drafted for
each area, that is, human diagnostics, scientific equipment, and human therapy, it
is quite possible that they could be interpreted to have overlapping interests. For
example, a genetic diagnostic test may also be useful to optimise human therapy.
It is beyond the scope of this article to canvas drafting techniques to ensure
exclusivity or critique contractual interpretation in this area, but the broader issue
of exclusivity is a problem. To this extent, following the conclusions reached
above, the test that should be applied to determine whether a licensee has standing
is whether it has an interest amounting to an exclusive sphere within the concept
The examination of partitioned exclusive licences in this part suggests that there
are no aspects of them that undermine Blair and Cotter’s three assumptions. Of
particular note, no economic, legal or business-related rationale undermines the
third assumption that patent rights should not have their value diminished based on
the way they are transferred. The foregoing analysis also suggests that where a
licensee is exclusively permitted to exercise an invention but is not permitted to
enforce it in its own name, the exclusivity it has bargained for is devalued, thereby
also devaluing the patent itself. Permitting partitioned exclusive licensees to enforce
patents gives them the opportunity to choose how to exploit resources in a market
economy. At its core, this type of explanation supports the resource allocation
justifications underpinning patent law. Unnecessary restrictions on the ability to
enforce patent rights create additional transaction costs and unnecessary hurdles for
licensees, and may prevent licensees and patentees from capturing the benefits the
patent system is designed to confer.
From this economic point of view, this inquiry also reveals that focusing on how
a given statute defines ‘‘exclusive licensee’’ or ‘‘patent area’’ is irrelevant when
determining standing, and distracts from the real question of what is the correct
level of legal interest that should confer standing. The real and substantial question
is whether a licensee exclusively exercises a sphere of patent rights. By corollary
this analysis also suggests that standing to initiate infringement actions in Australian
patent law is currently flawed. The next part of this article examines whether this
flaw is common to other jurisdictions or unique to Australia.
4 Foreign Comparisons
Standing to initiate patent infringement suits in the US is dictated by what is known
as ‘‘prudential standing’’.114 In a way, prudential standing is more dynamic than
standing law in Australian patent law because it can permit exclusive licensees to
begin litigation without the patentee being added to the action if they control ‘‘all
substantial rights’’ in a patent and are found to be equivalent to an assignee.115 It
also confers standing on exclusive licensees when they control less than all
substantial rights, provided the remaining substantial rights are represented in the
suit, which is usually achieved by adding the patentee.116 Despite its apparent
simplicity, prudential standing has recently been described by a number of
commentators as ‘‘contradictory’’, ‘‘confusing’’, ‘‘discretionary’’, and
‘‘incoherent’’.117 These descriptors, however, are specifically targeted towards the use of
prudential standing in circumstances where licensees can sue by themselves.118
Related to this issue, in Alfred E Mann Foundation for Scientific Research v.
Cochlear Corp,119 the Federal Circuit non-exhaustively listed nine different
elements of a licence that need to be considered when evaluating whether the
licensee has all the substantial rights.120 It is not the point of this article to offer a
perspective on this issue, although it is noted that commentators have suggested
reform is needed.121 Rather, on point with the inquiry in this article, it can be
observed from the morass of case law that partitioned exclusive licensees do have
standing if the patentee is joined in the suit.
The statutory basis in the US for standing to initiate infringement proceedings is
that a ‘‘patentee shall have remedy by civil action for infringement of his patent’’.122
‘‘Patentee’’ is defined to include the patentee as well as the successors in title to the
patentee, but no reference is made to exclusive licensees.123 With regard to
114 Cf. ‘‘Constitutional standing’’, see Intellectual Property Developers Inc v. TCI Cablevision of
California Inc, 248 F.3d pp. 1333, 1348 (Fed Cir. 2001); Totes-Isotoner Corp v. United States, 594 F.3d
pp. 1346, 1352 (Fed Cir. 2010); Lujan v. Defenders of Wildlife, 504 US pp. 555, 560–561 (1992).
115 Prima Tek II LLC v. A-Roo Co, 222 F.3d pp. 1372, 1377 (Fed Cir. 2000); Alfred E Mann Foundation
for Scientific Research v. Cochlear Corp, 604 F.3d pp. 1354, 1358–1359 (Fed Cir. 2010).
116 Prima Tek II LLC v. A-Roo Co, 222 F.3d pp. 1372, 1377 (Fed Cir. 2000); Alfred E Mann Foundation
for Scientific Research v. Cochlear Corp, 604 F.3d pp. 1354, 1359 (Fed Cir. 2010); Intellectual Property
Developers Inc v. TCI Cablevision of California Inc, 248 F.3d pp. 1333, 1346–1347 (Fed Cir. 2001).
–2013), pp. 1–5;
–2014), pp. 20–21, 28–29.
119 Alfred E Mann Foundation for Scientific Research v. Cochlear Corp, 604 F.3d p. 1354 (Fed Cir.
120 Alfred E Mann Foundation for Scientific Research v. Cochlear Corp, 604 F.3d pp. 1354, 1360–1361
(Fed Cir. 2010).
121 See generally
122 35 USC § 281.
123 35 USC § 100(d). For conditions on assignments, see 35 USC § 261.
exclusive rights, US patent law confers the ability to make, use, sell (or offer to
sell), and import the invention in the US.124
In the 1926 Supreme Court case Independent Wireless Telegraph Co v. Radio
Corp of America,125 the unanimous Court found that a partitioned exclusive licensee
had standing to initiate an infringement action.126 Yet, the analysis that led to this
outcome is quite different from analysis in Australian law. The patent in question
was to ‘‘devices for amplifying feeble electric currents and certain new and useful
improvements in space telegraphy’’.127 The licensee was granted the exclusive right
to use and sell the invention but not make it.128 Moreover, the licensee was only
granted these rights for ‘‘radio purposes’’,129 when the invention itself could be put
to a range of other uses, including telephony.130 At the time of the decision, it was
not clear how and when exclusive licensees could initiate infringement actions.
Accordingly, much of the reasoning in Independent Wireless Telegraph Co v. Radio
Corp of America concerned how and when exclusive licensees could use a
patentee’s name to enforce a patent and when they could use their own. This last
point was of particular importance because the patentee in this case was not
available.131 Interestingly, the approach adopted by the Supreme Court was in part
based on the law of trusts.132 Relevantly, their Honours stated that:
It seems clear then on principle and authority that the owner of a patent who
grants to another the exclusive right to make, use or vend the invention, which
does not constitute a statutory assignment, holds the title to the patent in trust
for such a licensee, to the extent that he must allow the use of his name as
plaintiff in any action brought at the instance of the licensee in law or in equity
to obtain damages for the injury to this exclusive right by an infringer or to
enjoin infringement of it.133
Continuing this reasoning, the Court found that in absence of the patentee, equity
allowed the exclusive licensee to use its own name and join the patentee without its
In the intervening time, relatively well-articulated rules for exclusive licensee
standing have developed.134 In Amgen Inc v. Chugai Pharmaceutical Co Ltd,135
after reviewing case law Young J stated, ‘‘[a] licensee can be deemed exclusive …
where the licensee has obtained only the exclusive right to sell the patented
124 35 USC § 154(a)(1).
125 Independent Wireless Telegraph Co v. Radio Corp of America, 269 US pp. 459, 461–464 (1926).
126 Independent Wireless Telegraph Co v. Radio Corp of America, 269 US pp. 459, 475 (1926).
127 Independent Wireless Telegraph Co v. Radio Corp of America, 269 US pp. 459, 461 (1926).
130 US Patent 841,387.
131 Independent Wireless Telegraph Co v. Radio Corp of America, 269 US pp. 459, 472 (1926).
132 See generally ibid.
133 Independent Wireless Telegraph Co v. Radio Corp of America, 269 US pp. 459, 469 (1926).
Blair and Cotter (1999
–2000), pp. 1347–1350.
135 Amgen Inc v. Chugai Pharmaceutical Co Ltd, 808 F. Supp. p. 894 (D Mass. 1992).
invention’’ and more generally that, ‘‘an exclusive license can be created by a grant
of exclusivity based solely on geographic, time or field-of-use limitations’’.136 This
reasoning was reviewed on appeal in Ortho Pharmaceutical Corp v. Genetics
Institute137 where it was unanimously affirmed.138 Nies J, writing for the Court,
expanded on the rationale first expounded by Hand J in A L Smith Iron Co v.
Dickson (extracted above), stating:
To have co-plaintiff standing in an infringement suit, a licensee must hold some
of the proprietary sticks from the bundle of patent rights, albeit a lesser share of
rights in the patent than for an assignment and standing to sue alone.…
The proprietary rights granted by any patent are the rights to exclude others from
making, using or selling the invention in the United States. A patent license may
have the effect between the parties to the license of transferring some of those
proprietary rights from the patentee to its licensee. Such license then does more
than provide a covenant not to sue, i.e., a ‘‘bare’’ license. In addition, the license
makes the licensee a beneficial owner of some identifiable part of the patentee’s
bundle of rights to exclude others. Thus, a licensee with proprietary rights in the
patent is generally called an ‘‘exclusive’’ licensee. But it is the licensee’s
beneficial ownership of a right to prevent others from making, using or selling
the patented technology that provides the foundation for co-plaintiff standing.139
From this commentary, it is relatively clear that US patent law recognises
standing for partitioned exclusive licensees.140 It is also interesting to note that the
reasoning of the Federal Circuit in Ortho Pharmaceutical Corp v. Genetics Institute
resonates with the economic justifications for standing elucidated above, albeit, as
the extracts indicate, more from a property and trust law point of view.
To properly understand UK standing law, one must first have reference to litigation
under the now repealed Patents Act 1949. In the 1956 case, Re Courtaulds Ltd’s
Application for Extension of the Term of Letters Patent No 511,160 (‘‘Courtaulds
Application’’),141 Lloyd-Jacob J commented that the definition of exclusive licensee
in the Patents Act 1949 ‘‘would permit a plurality of exclusive licensees to be
created in respect of any one patent monopoly’’.142 Since the Act specified that
136 Amgen Inc v. Chugai Pharmaceutical Co Ltd, 808 F. Supp. pp. 894, 900 (D Mass. 1992).
137 Ortho Pharmaceutical Corp v. Genetics Institute Inc, 52 F.3d pp. 1026, 1033–1034 (Fed Cir. 1995).
139 Ortho Pharmaceutical Corp v. Genetics Institute Inc, 52 F.3d pp. 1026, 1031–1032 (Fed Cir. 1995);
an appeal to the Supreme Court was denied, see Ortho Pharmaceutical Corp v. Genetics Institute Inc, 516
US p. 907 (1995); see also WiAV Solutions LLC v. Motorola Inc, 631 F.3d pp. 1257, 1266 (2010).
140 See also
Blair and Cotter (1999
–2000), p. 1347.
141 Re Courtaulds Ltd’s Application for Extension of the Term of the Letters Patent No 511,160 
RPC p. 208.
142 Re Courtaulds Ltd’s Application for Extension of the Term of the Letters Patent No 511,160 
RPC pp. 208, 210.
exclusive licensees could initiate infringement suits,143 this suggests that partitioned
exclusive licensees had standing to initiate infringement proceedings. However,
Courtaulds Application was not decided on whether a partitioned exclusive licensee
had standing but whether the applicants were actually in possession of a licence.144
Since Lloyd-Jacob J found the applicants were not in possession of a licence,145 his
Honour’s comments are therefore obiter.
Nevertheless, there are two additional elements that make Lloyd-Jacob J’s
interpretation uncontroversial. First, the Board of Trade in the Swan Report
specifically stated that the definition of an exclusive licensee is to include ‘‘any
person who has the sole and exclusive right to work the invention in any particular
field of its application or in any particular geographical area’’.146 Further, the report
stated that, ‘‘an exclusive licensee … has been promised immunity from …
[otherwise] legitimate competition as would spring from the grant of additional
licences. He is plainly entitled, therefore, to demand protection against illegitimate
competition of infringers.’’147 Second, the Patents Act 1949 defined exclusive
licensee to mean, ‘‘a licence from a patentee which confers on the licensee, or on the
licensee and persons authorised by him, to the exclusion of all other persons
(including the patentee), any right in respect of the patented invention, and
‘exclusive licensee’ shall be construed accordingly’’.148 In this passage, the phrase
‘‘any right in respect of the patented invention’’ suggests multiplicity.
Under current UK patent legislation, the Patents Act 1977,149 standing to initiate
patent infringement proceedings is now specified in Secs. 61(1) and 67(1).
Section 61(1) specifies that ‘‘civil proceedings may be brought in the court by the
proprietor of a patent’’150 and Sec. 67(1) specifies that ‘‘the holder of an exclusive
licence under a patent shall have the same right as the proprietor of the patent to
bring proceedings in respect of any infringement of the patent committed after the
date of the licence’’.151 ‘‘Exclusive licensee’’ is defined to mean:
a licence from the proprietor of or applicant for a patent conferring on the
licensee, or on him and persons authorised by him, to the exclusion of all other
persons (including the proprietor or applicant), any right in respect of the
invention to which the patent or application relates, and ‘‘exclusive licensee’’
and ‘‘non-exclusive licence’’ shall be construed accordingly.152
143 Sec. 63(1) Patents Act 1949, 12, 13 & 14 Geo 6, c 87.
Board of Trade (1947
), p. 30.
148 Sec. 101 (definition of ‘‘exclusive licensee’’) (emphasis added) Patents Act 1949, 12, 13 & 14 Geo 6,
149 Patents Act 1977 (UK) c 37.
150 Id., Sec. 61(1).
151 Id., Sec. 67(1).
152 Id., Sec. 130.
The passage, ‘‘any right in respect of the invention to which the patent or
application relates’’, echoes the earlier definition.
In cases under the new Act, none have cited the Swan Report or Courtaulds
Application. Nevertheless, the law appears to operate in the same way. In Dendron
GmbH v. University of California (No 3),153 the claimant applied to have a party
added to an infringement/revocation action on the basis that it was an exclusive
licensee.154 The claimant wanted to add the party for the purpose of obtaining
discovery from it.155 In the course of his Honour’s decision, Pumfrey J stated that
‘‘separate exclusive licences can, to all appearances, be granted in respect of distinct
rights under a patent. Thus, for example it seems clear that separate exclusive
licences may be granted to manufacture and to import a patented product.’’156
However, this case was not decided on whether the third party was a type of
exclusive licensee and should therefore be added to the action; rather, it was on
whether the party exclusively controlled any patent rights.157 Since Pumfrey J found
the party in question did not exercise any exclusive rights,158 his Honour’s
comments on partitioned licensee standing are obiter too. Nevertheless, from the
analysis presented here, a consistent line of reasoning indicating that partitioned
exclusive licensees do have standing under the UK Act does exist.159
4.3 Summary of US and UK Standing Law
The examination of US and UK standing law provided in this part demonstrates that
both patent regimes confer, or are likely to confer, standing on partitioned exclusive
licensees. This outcome weighs in favour of broadening Australian standing law to
include partitioned exclusive licensees; however, it also has more specific outcomes
for patent harmonisation. A central goal of harmonisation is to reduce patent-related
costs by making consistent laws between countries.160 In this context, there are a
number of costs associated with partitioned exclusive licensees not having standing,
which can be demonstrated in the example of a company that manufactures a
patented product in one jurisdiction and uses activity-based exclusive licensees to
import and sell the product in others. In jurisdictions that do not grant standing to
partitioned exclusive licensees, the licensees may encounter additional transaction
costs associated with enforcement in the patentee’s name, including a reduced
amount of damages, or prohibition from enforcing the patent. In addition, costs in
153 Dendron GmbH v. University of California (No 3)  FSR p. 43.
154 Dendron GmbH v. University of California (No 3)  FSR p. 43 .
156 Dendron GmbH v. University of California (No 3)  FSR p. 43 .
157 Dendron GmbH v. University of California (No 3)  FSR p. 43 –.
159 See also Bondax Carpets Ltd v. Advance Carpet Tiles  FSR p. 162; SDL Hair Ltd v. Next Row
Ltd  EWPCC p. 31 (14 June 2013); PCUK v. Diamond Shamrock Industrial Chemical Ltd 
FSR p. 427.
B ? Sub-Group (2015
), p. 2;
the global exploitation of patents will be increased by requiring legal advice on an
issue that, as demonstrated above, has no compelling reason for its existence.161
The legal and economic reasoning presented in this article provides significant
support for patent law providing standing to partitioned exclusive licensees. In
particular, the ability for partitioned exclusive licensees to choose how and when
infringement is initiated aligns with the patent regime’s role in incentivising
innovation and complements the role of patents in a market economy. This
conclusion aligns with the recommendation from the Intellectual Property
Committee of the Business Law Section of the Law Council of Australia, which
emphasised the adverse commercial ramifications of the current law.162 Conferring
standing on partitioned exclusive licensees would also harmonise Australian law
with key trading partners. This position, however, is the diametric opposite of
Australia’s current patent standing law. It is possible that a future High Court of
Australia decision could establish that partitioned exclusive licensees do have
standing under the current wording of the Patents Act. However, this seems to be a
rather ineffective method to change the law: it is speculative, would take years and
would involve litigants risking much. Law reform by legislative means seems much
more logical – the next round of amendments to the Patents Act should include
reform of standing law.
Acknowledgements My thanks go to all those who provided comments and criticisms, including Dianne
Nicol, Peter Heerey, Don Chalmers and Ben Mawby. Thanks also to Arlie McCarthy for research
assistance. This article was presented at the International Association for the Advancement of Teaching
and Research in Intellectual Property Congress in Cape Town, 2015.
Open Access This article is distributed under the terms of the Creative Commons Attribution 4.0
International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use,
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de Werra (2017
de Werra (2017
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