When is an exclusive patent licence not so exclusive?

Peter Heerey AM, QC, Tom Cordiner & Alan Nash
Correspondents for South Australia, Victoria and Western Australia

Note: Where any of the barristers were involved in a case reported below and the matter is still running, or potentially so, the other correspondents have taken the role of reporting that case.

Damorgold Pty Ltd v JAI Products Pty Ltd (No 3) [2014] FCA 651 (20 June 2014)

The first applicant, Damorgold, successfully established that JAI Products had infringed the patent in suit.  A residual issue left for later determination was whether the second applicant, Vertilux, was an exclusive licensee of the patent and therefore also entitled to have initiated proceedings pursuant to section 120 of the Patents Act 1990.

A written licence was in place between Damorgold and Vertilux that imparted on Vertilux an exclusive licence to exploit the patent, and also purported to record the terms of an oral licence between the parties said to have been in place at least since the start of 2006.  Under the licence, Vertilux was entitled to grant sublicences, with Damorgold’s written consent (although Damorgold could waive that requirement).

JAI contended that the licence was not “exclusive” in the requisite sense due to a pre-exsiting licence granted to a third party, Acmeda.  JAI’s argument was based on the evidence under cross-examination of Mr Lava, the CEO and a director of both applicants, to the effect that Acmeda had been authorised to sell products overseas incorporating the patented invention a few years before the commencement date of Vertilux’s written licence.  Initially that authority was limited to overseas sales, and later (but still before 2006) expanded to include Australia.

The applicants argued that Acmeda’s authority was that of a sublicensee of Vertilux, not a licensee of Damorgold.  Justice Middleton accepted that argument.  Mr Lava was the controlling mind of both applicants, and his evidence was consistent with Vertilux having granted a sublicence to Acmeda, with the concurrence of Damorgold.  Further, the relevant cross-examination by JAI was relatively brief and did not directly seek to impugn Mr Lava’s evidence in chief as to the nature and circumstances of Vertilux’s licence.

Peter Heerey QC – CommBar profile

Alan Nash – CommBar profile

Tom Cordiner – CommBar profile

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