1. APRIL 2015 T h e L i c e n s i n g J o u r n a l 1
APRIL 2015
DEVOTED TO
LEADERS IN THE
INTELLECTUAL
PROPERTY AND
ENTERTAINMENT
COMMUNITY
V O L U M E 3 5 N U M B E R 4
LicensingTHE
JournalEdited by Gregory J. Battersby and Charles W. Grimes

2. APRIL 2015 T h e L i c e n s i n g J o u r n a l 1
Licensing Lessons from Recent
Australian Cases
Catherine Boxhall and Sophie Barrow
Catherine Boxhall specializes in technology
commercialization and has 15 years’
experience drafting and negotiating licensing
contracts for research organizations, start-up
companies, and established businesses.
Ms. Boxhall is one of only a handful of
private practice lawyers in Australia who
are Certified Licensing Professionals. Sophie
Barrow is a lawyer specializing in the licensing
of intellectual property, including patents,
trademarks, copyright, and other related rights.
DibbsBarker is an Australian law firm with
offices in Sydney, Brisbane and Canberra and
established relationships with firms in all
major jurisdictions. DibbsBarker has particular
expertise in the life sciences, healthcare, and
agribusiness sectors, among others. For further
information please email catherine.boxhall@
dibbsbarker.com.
patentee and conferring on the licensee…the right to
exploit the patented invention throughout [Australia]
to the exclusion of the patentee and all other persons.”1
Three recent cases considered whether purport-
edly exclusive licensees were in fact exclusive, under
the terms of the relevant license, for the purposes
of determining their standing to commence patent
infringement proceedings.
Bristol-Myers Squibb Company v.
Apotex Pty Ltd2
Otsuka was the owner of a patent claiming an
improved form of aripiprazole, an antipsychotic drug
used in treating schizophrenia. Under a Development
& Commercialization Collaboration Agreement
(Agreement), Otsuka granted Bristol-Myers Squibb
(BMS) a (purportedly) exclusive worldwide license
to develop and commercialize aripiprazole, includ-
ing the right to advertise, market, promote, sell and
distribute aripirazole and engage in related activities.
Crucially, Otsuka had reserved to itself the worldwide
right to manufacture aripirazole.
The question of whether BMS was Otsuka’s exclusive
licensee arose in the context of a patent infringement
claim commenced by BMS against Apotex. BMS’s
standing to sue Apotex for patent infringement turned
on whether it was an exclusive licensee, in accordance
with Section 120 of the Patents Act. In determining
whether BMS was Otsuka’s exclusive licensee, the
Federal Court determined that because Otsuka had
reserved the right to manufacture aripirazole, the
Agreement did not confer exclusive rights on BMS.3
BMS appealed the decision, arguing that although
it did not have the right to undertake all activities
identified in the definition of “exploit” under the
Patents Act, this was not fatal to the finding that it
was an exclusive licensee.
On appeal, the Full Court of the Federal Court
agreed with the primary judge’s reasoning, that “an
exclusive licence cannot be one that reserved to the
patentee, or any other person, any residual right with
respect to the exploitation of the invention”4 (empha-
sis added), and that as a result there could only be one
exclusive licensee.
A number of significant judgments have been
handed down by Australian courts over the last year
relating to intellectual property license agreements.
These decisions serve as useful reminders for licens-
ing professionals when drafting licenses in respect of
Australian intellectual property rights, in particular,
patents. The ability of exclusive licensees to enforce
licensed patents against infringers, the sharing of
enforcement costs between licensor and licensee, and
the duration of royalty obligations featured as key
issues in these decisions.
Standing of Exclusive
Licensees to Commence Patent
Infringement Proceedings
Under Section 120 of the Patents Act 1990 (Cth)
(the Patents Act), proceedings for patent infringement
may be commenced by the patentee, or its exclusive
licensee. An exclusive licensee is defined in the Patents
Act as “a licensee under a licence granted by the

3. 2 T h e L i c e n s i n g J o u r n a l APRIL 2015
The decision has provided clear guidance that
for an exclusive licensee to have standing to sue
infringers of an Australian patent, its license must
not reserve to the patentee, or any other person, any
residual right with respect to the invention’s exploita-
tion. If a licensor wishes to retain some rights to the
invention, consider seeking a sublicense back from
the licensee instead.
When a licensee does not have an absolutely exclu-
sive license of patent rights (e.g., only exclusivity in a
certain field), it will need to ensure it has contractual
rights either requiring the patent owner to enforce
the patent against infringers or to join the patentee in
proceedings taken by the licensee.
Blue Gentian LLC v. Product
Management Group Pty Ltd5
Brand Developers was joined as an applicant to
infringement proceedings brought by Blue Gentian
against Product Management Group (PMG) in respect
of two innovation patents Blue Gentian owned for
expandable garden hoses (the Patents).
Blue Gentian had granted an exclusive license
to National Express Inc. (NEI), including the right
to sublicense, under the Patents, to make (or have
made), use, sell, offer for sale, import, market, and
promote licensed products in certain jurisdictions.
NEI then granted a sublicense of the Patents to a third
company, E Mishan & Sons, Inc. on substantially the
same terms. Finally, E Mishan & Sons, Inc. licensed
its rights to exploit the Patents to Brand Developers,
excluding the right to manufacture licensed prod-
ucts (the sub-sublicense). On the same date as the
sub-sublicense, Blue Gentian granted an exclusive,
royalty-free license directly to Brand Developers to
exploit the patents within Australia and New Zealand.
No explanation was given in the judgment as to why
this direct license was granted by Blue Gentian.
The Federal Court held that Brand Developers did
not have standing to bring infringement proceedings
against PMG. Blue Gentian had purportedly granted
two exclusive licenses (to NEI, through E Mishan to
Brand Developers, and to Brand Developers directly).
Furthermore, both licenses did not confer all of Blue
Gentian’s rights to “exploit” the patent (as that term
is defined in the Patents Act), to the exclusion of all
others.6
Damorgold Pty Ltd v. JAI Products
Pty Ltd (No 3)7
Damorgold v. JAI Products also concerned an exclu-
sive licensee’s right to commence patent infringe-
ment proceedings in respect of the licensed patent.
Darmorgold was an intellectual property holding
company that owned a patent for a component used
in window blinds. Vertilux Corporation Pty Ltd was
a related trading entity, and the two companies
shared a common director. Vertilux was granted
an oral license from Darmorgold from at least
January 1, 2006, and the parties entered into a writ-
ten license agreement on July 9, 2010, under which
Darmorgold granted Vertilux “a royalty-free exclusive
licence to Exploit the Patented Invention throughout
Australia to the exclusion of Darmorgold and all
other persons”.8
Damorgold alleged that JAI Products Pty Ltd
had infringed its patent by offering to sell, and
selling, components for a blind system. Vertilux
sought to be joined as an applicant to the proceed-
ings, as Damorgold’s exclusive licensee. However JAI
Products argued that Vertilux was not an exclusive
licensee, by virtue of an alleged pre-existing license
Vertilux had granted to a third party, Acmeda, around
2004. The issue of whether the Vertilux-Acmeda
license destroyed the exclusivity of Damorgold’s
license turned on the evidence, in particular the fol-
lowing oral evidence given by the director of both
companies during cross-examination, in relation to
the arrangements with Acmeda: “We really haven’t
given [Acmeda] a licence. We gave them the authority
to sell it. And ‘we’ being?—Vertilux and Damorgold”.9
The court favored Damorgold’s interpretation of
the evidence, that Acmeda was given the author-
ity to sell the products in Australia by Vertilux, as
Damorgold’s sublicensee. The fact the companies
shared a common director meant that the lack of
written evidence demonstrating Damorgold’s consent
to the sublicense granted by Vertilux was not fatal to
Damorgold’s interpretation.10
Although the outcome of this decision was strongly
influenced by the available evidence, it does demon-
strate the importance of appropriately documenting
intra-group licenses when patents and other intellec-
tual property assets are held separately from operat-
ing entities.
Liability of Exclusive Licensee
to Contribute to Costs of
Infringement Proceedings
Austral Masonry (NSW) Pty Ltd v. Cementech Pty
Limited11 concerned an exclusive licensee’s obligation
to contribute equally to the costs of legal proceedings
against an alleged infringer, under the terms of the
license agreement. Cementech had granted Austral
an exclusive license to exploit Cementech’s patent

4. APRIL 2015 T h e L i c e n s i n g J o u r n a l 3
for masonry products. The term of the agreement
was only four years, with an option to extend, which
Austral had declined to exercise. Before the expiry of
the term, Cementech commenced infringement pro-
ceedings against a third party, Adbri. Cementech also
sought orders against Austral, claiming that Austral
was liable to pay half the costs of the Adbri pro-
ceedings. The license agreement contained a clause
stating that if Cementech elected to initiate proceed-
ings with respect to the licensed patent, all expenses
incurred would be borne equally by the parties.
Austral argued that its obligations under this
clause expired at the end of the term, as the clause
was not expressed to survive expiry of the license.
Further, Austral submitted that it would be “com-
mercially untenable” for it to have to fund litigation
after expiry, as Austral would no longer have an inter-
est in the licensed patent, and also would be entitled
to challenge the validity of the licensed intellectual
property after the expiry of term.12
The court considered the wording of the relevant
clause, which according to Cementech constituted a
code relating to litigation commenced, rather than
conducted, during the term.13 As the particular sub-
clause dealing with the distribution of proceeds of
settlement expressly referred to proceedings “com-
menced” during the term (rather than proceedings
“completed” in the term), the court interpreted the
clause such that it survived the expiry of the term
of the license. Cementech could therefore recover
Austral’s contribution to proceedings commenced
during the term, even after the term had expired.
Contrary to Austral’s argument that it no longer had
an interest in the licensed patent, the court held that
Austral had a continuing interest as Austral was enti-
tled to a distribution of the proceeds of any litigation
commenced during the term.
While this decision turned on the interpretation of
a particular clause, it is a salient reminder that when
parties agree to contribute to enforcement costs, they
should ensure express provisions are included clarify-
ing whether the obligation continues after termina-
tion or expiry of the license agreement.
Payment of Royalties Once
Patent Rights Expire
Regency Media Pty Ltd v. MPEG LA,
L.L.C.14
This case involved a Patent Pool License Agreement
(the Agreement) between MPEG LA, a patent pool
license administrator, and its licensee Regency Media.
Under the Agreement, Regency Media was granted a
license (or sublicense) under a pool of patents from
different patentees, all essential to implementing the
MPEG-2 Standard for video and audio data compres-
sion, storage and transport (the MPEG-2 Essential
Patents).
The license was granted in respect of three catego-
ries of products:
1. MPEG-2 Decoding Products (e.g., set-top boxes,
DVD players, TVS, PCs, gaming machines);
2. MPEG-2 Encoding Products (e.g., DVR devices,
cameras); and
3. MPEG-2 Packaged Medium (e.g., DVD discs).
The royalty rates payable under the Agreement
were expressed to represent the value of making
or selling a product incorporating the MPEG-2
Standard, not the value of any particular individual
patent. A subsequent amendment to the Agreement
provided for decreasing royalty rates over specified
periods of time, as each of the MPEG-2 Essential
Patents approached expiry.
The Agreement provided that Regency Media could
not terminate prior to December 31, 2015. However,
Regency Media purported to terminate the agree-
ment on July 5, 2012, invoking Section 145 of the
Patents Act. Until now, the application of Section 145
had never before been the subject of a judgment by
an Australian court.
Section 145(1) of the Patents Act provides that “a
contract relating to the lease of, or a licence to exploit,
a patented invention may be terminated by either
party, on giving three months’ notice in writing to the
other party, at any time after the patent, or all the pat-
ents, by which the invention was protected at the time
the contract was made, have ceased to be in force”.
Section 145(2) confirms that the section applies
despite any provision to the contrary in the contract.
At the time of Regency Media’s purported termina-
tion, seven of the twenty licensed patents had expired.
The decision at first instance turned on the inter-
pretation of “patented invention,” a term which is not
defined in the Patents Act. Regency Media contended
that each patent the subject of the Agreement con-
stituted a separate “patented invention.” MPEG LA
argued that the Agreement involved three “patented
inventions,” being the MPEG-2 Decoding Products,
MPEG-2 Encoding Products, and MPEG-2 Packaged
Medium.
The Federal Court held that Regency Media was
not entitled to terminate the Agreement under Section
145 until each of the patents covering the three cate-
gories of products ceased to be in force.15 Section 145

5. 4 T h e L i c e n s i n g J o u r n a l APRIL 2015
could not be used to terminate the license after the
expiry of only one of the granted patents forming the
subject of the license granted under the Agreement.
The decision was not solely determined by the inter-
pretation of “patented invention”—the court also con-
sidered the object and purpose of Section 145, which
was clearly to prevent patentees from taking unfair
advantage of their statutory monopoly after expiry of
the patent rights.16
On appeal, Regency Media submitted that the pri-
mary judge erred in looking to the license agreement,
rather than the Patents Act, to determine the meaning
of “patented invention.” The Full Court of the Federal
Court agreed on this point, and determined that a
“patented invention” means an invention that is the
subject of a patent that has been granted under the
Patents Act, not as determined by the description in
the license agreement.17 The application of Section
145 did not necessitate an enquiry as to whether or
not the claimed invention meets the patentability cri-
teria under the Patents Act.
However, Regency Media’s appeal was dismissed
overall. The court considered the Acts Interpretation
Act 1901 (Cth), which establishes rules for the inter-
pretation of all Australian Federal legislation, and
provides that words in the singular include the plu-
ral, unless the contrary intention appears. Applied to
Section 145, this meant that the license could not be
terminated until all the patents protecting the inven-
tions specified in the contract had ceased to be in
force.18
It is clear from this decision that the right to termi-
nate a patent license under Section 145 of the Patents
Act will only arise in limited circumstances, where
each and every licensed patent has expired. This does
provide some comfort to licensees—as licensors are
also entitled to terminate under Section 145, licensees
could otherwise find themselves faced with renegoti-
ating license terms or risking an infringement claim.
If a license agreement grants a license over mul-
tiple Australian patent rights covering a range of
products or processes, careful consideration should
be given by the licensee as to the duration of royalty
obligations, if these are not defined by reference to
individual patent rights. For example, a tiered royalty
payment structure may be appropriate if certain pat-
ents are likely to expire during the term of the patent.
ARB Corporation Limited v.
Patricia Roberts and Ors19
While not a licensing case, the decision in ARB v.
Roberts concerned running royalties payable follow-
ing the assignment of intellectual property rights. The
vendors (Mr. and Mrs. Roberts, and their associated
company) entered into an agreement with ARB in
1987 for the sale of the “Roberts Differential Lock
technology”, which comprised patent applications,
know-how, and trade secrets (the Sale Agreement).
The purchase price payable by ARB included both an
upfront payment and trailing royalties. The royalties
were to be calculated by reference to sales of units of
“Products,” defined as “differentials as manufactured
pursuant to the patents” specified in a schedule to
the Sale Agreement. The issue in the proceedings was
whether royalties remained payable under the Sale
Agreement once all patent rights had expired.
ARB argued that its obligation was to pay royal-
ties, limited to the life of the patents, on the sale of
products covered by any one of the patents. Further,
it argued that if the royalty obligations were not term-
limited, the effect would be that royalties would be
payable forever. A “businesslike” construction of the
agreement therefore involved linking the payment of
royalties to the coverage and duration of the patents,
meaning that royalties would no longer be payable
after their expiry. The vendors argued that it was
the parties’ intention that royalties would be payable
for so long as ARB manufactured products using
the licensed technology, which was not confined to
or limited by the duration of the patent rights. The
definition of “Products” as products manufactured
“pursuant to the patents” meant they were made
in accordance with the invention described in the
licensed patents.
The Victorian Supreme Court restated the accepted
laws of interpretation and contractual construction
in Australia, including that commercial agreements
should be construed so as to accord with “business
commonsense” or “commercial reality,” and should
be considered as a whole.20 The court noted that
at the time of the Sale Agreement, the rights being
licensed were patent applications that may have
not proceeded to grant. It was also possible that the
licensed technology would be protected by different
applications than those described in the schedule,
as the definition of “patent rights” also extended
to divisional and reissued applications. The court
preferred the vendors’ interpretation of the contract
that Products “manufactured pursuant to the pat-
ents” meant Products manufactured pursuant to the
inventions described in the patent applications, not
claimed.21 This conclusion was supported by the fact
that royalties were not just payable on the patent
rights but also copyright, trade secrets and trade-
marks, with varying durations.
In determining a businesslike construction of the
contract, the court considered the implications of fol-
lowing the purchaser’s argument. If the purchaser’s

6. interpretation was adopted, no royalties would be
payable on sales of the Products unless and until
the patents proceeded to grant. The obligation to
pay royalties was in effect from the execution of the
agreement—there was no provision that the pay-
ment of royalties were conditional on grant of the
patents, or for royalties to be repaid if patents were
never granted on the application. Contrary to ARB’s
submission that its liability to pay ongoing royalties
was an “un-businesslike,” “absurdly onerous finan-
cial burden,” the court pointed out that ARB always
had the option to cease the manufacture and sales
of Products if it became unprofitable for it to con-
tinue.22 ARB controlled the volume of Products it
manufactured, the sale price, and thus, its level of
profit. If ARB’s manufacture and sale of the Products
remained profitable, it would continue to pay royal-
ties on those sales.
This decision demonstrates that when drafting an
assignment agreement that contains running royal-
ties as part of the purchase price, the royalties pay-
able should take into account the relative value and
duration of patented and non-patented intellectual
property rights.
Section 145 of the Patents Act (discussed above)
only applies to licenses of patent rights. In some
circumstances it is possible that Australia’s competi-
tion laws could be used to prevent a patentee from
claiming post-assignment royalties once patent rights
have expired.
Conclusion
An understanding of the legislative regimes gov-
erning the licensed intellectual property rights is
essential for licensing professionals. In contrast to the
need for absolute exclusivity for licensees to enforce
Australian patent rights, a licensee need only have
exclusivity with respect to one of the exclusive rights
subsisting in Australian copyright (such as reproduc-
tion) in order to commence proceedings against an
infringer of that right.23 A licensee who is an “autho-
rized user” of an Australian trademark also is entitled
to take action against infringers of that trademark,
subject to certain conditions.24
All of the above cases are a timely reminder that the
wording of license agreements can have a significant
financial impact on the parties. In “black letter law”
jurisdictions such as Australia, courts will interpret
contracts on their face. Extrinsic evidence of the par-
ties’ intentions usually only will be considered if the
contract is ambiguous. Accordingly, those involved in
negotiating and drafting license agreements need to
ensure these important documents clearly describe
the parties’ intentions.
1. Patents Act 1990 (Cth), Schedule 1.
2. Bristol-Myers Squibb Company v. Apotex Pty Ltd [2015] FCAFC 2.
3. Bristol-Myers Squibb Company v. Apotex Pty Ltd (No 5) [2013] FCA 1114.
4. Bristol-Myers, FCAFC 2 at [103].
5. Blue Gentian LLC v. Product Mgmt Group Pty Ltd [2014] FCA 1331. We
note that an appeal of this decision was lodged on January 27, 2015. At
the date of writing, the Full Court of the Federal Court of Australia was
due to hear the appeal on May 5, 2015.
6. Id. at [229]-[238].
7. Damorgold Pty Ltd v. JAI Products Pty Ltd (No 3) [2014] FCA 651.
8. Id. at [15].
9. Id. at [25].
10. Id. at [35].
11. Austral Masonry (NSW) Pty Ltd v. Cementech Pty Limited [2014]
FCAFC 72.
12. Id. at [16].
13. Id. at [19].
14. MPEG LA, L.L.C. v. Regency Media Pty Ltd [2014] FCA 180; Regency
Media Pty Ltd v. MPEG LA, L.L.C. [2014] FCAFC 183.
15. MPEG LA, FCA 180 at [47].
16. Id. at [15], [42].
17. Regency Media Pty Ltd, FCAFC 183 at [17].
18. Id. at [35].
19. ARB Corporation Limited v. Patricia Roberts and Ors [2014]
VSC 495.
20. Id. at [36].
21. Id. at [96].
22. Id. at [112]-[113].
23. Copyright Act 1968 (Cth), Section 119.
24. Trade Marks Act 1995 (Cth), Section 26.
Copyright © 2015 CCH Incorporated. All Rights Reserved.
Reprinted from The Licensing Journal, April 2015, Volume 35, Number 4, pages 1–5,
with permission from Wolters Kluwer, New York, NY,
1-800-638-8437, www.wklawbusiness.com