Revisiting exclusivity: Is your patent licence up to scratch?

On 9 September 2016 the Full Federal Court of Australia delivered judgment in Actavis Pty Ltd v Orion Corporation [2016] FCAFC 121. The Full Court has now given further guidance as to what will constitute an effective exclusive licence of a patent. The Court also confirmed that where a feature of an invention is identified as preferable, it should not be construed as an essential integer of the invention.

The proceedings related to infringement/revocation of a patent for a 3-in-1 Parkinson's disease drug, Stalevo.

The Full Court, comprising the bench of Chief Justice Allsop, Justice Nicholas and Justice Yates, unanimously upheld the primary judge's findings that:

1. the licence granted by Orion Corporation (First Respondent) to Novartis Pharma AG (Second Respondent) was an exclusive licence and Novartis Pharma AG therefore had standing to sue Actavis Pty Ltd and Medis Pharma Pty Ltd (Actavis Parties) for patent infringement;
2. the invention the subject of Australian Patent No. 765932 (932 Patent) was, as asserted by Orion and Novartis (Orion Parties), a "new, oral solid fixed dose composition comprising pharmacologically effective amounts of entacapone, levodopa and carbidopa with at least one pharmaceutically effective excipient". The preferable features of bioavailability, stability of the composition and a tablet that could easily be swallowed, which were outlined in the specification and independently claimed in the various claims, were not essential integers of the invention;
3. the relevant claims of the 932 Patent the subject of the appeal were fairly based; and
4. the relevant claims of the 932 Patent the subject of the appeal did not lack definition and were not unclear.

Whilst the Full Court held that claims 17 and 18 (insofar as dependent on claim 17) were not infringed by the Actavis Parties, contrary to the finding made by the primary judge, given the Full Court's view as to the invention the subject of the 932 Patent, the infringement of claims 19, 20, 21 and 22 (insofar as dependent on claims 19-21) was upheld. All of the claims of the 932 Patent asserted by the Orion Parties were held to be valid by the primary judge and this was not disturbed on appeal.

The Full Court provided some useful pointers regarding what will constitute an exclusive patent licence under Australian law. In particular, a party who has been granted all of the rights to "exploit" a patent in Australia may agree with another party (including the patentee) how they will exercise their rights. This may involve agreeing to procure the product or active pharmaceutical ingredients from the patentee. In light of this judgment, patentees and licensees should take the opportunity to review their licensing arrangements for Australia to ensure that a licence which purports to be an "exclusive licence" in fact meets the relevant requirements under Australian law.