Using divisional applications in Australia to fix your licensing woes

Date: 2015-10-20

The Australian Patents Act provides that only the patentee or exclusive licensee has standing to commence infringement proceedings. For a licence to be exclusive, it must transfer all rights from the patentee to the licensee. If the patentee retains any residual rights, then the licence is not an exclusive licence.

An issue arises where a patentee desires to:

(i).“exclusively” license aspects of their invention to a third party while retaining certain rights for themselves, or

(ii).“exclusively” license aspects of their patent to multiple parties.

In both cases the licensees lack standing to commence infringement proceedings as was found by Otsuka Pharmaceuticals Co Ltd (Otsuka) and Bristol-Myers Squibb Company (BMS) [see Bristol-Myers Squibb Company v Apotex Pty Ltd [2015] FCAFC 2]. A more detailed discussion of this case can be found on the Herbert Smith Freehills website: “There can be only one: the single indivisible right to exploit a patented invention” and “No gaps: the key to exclusivity”.

What this means is that in Australia it is not possible to license various aspects of a patent to multiple parties in such a way that each of those parties can enforce their rights. That is, you cannot divide a single patent by technical field, geography, or exploitation of rights, and offer an “exclusive” licence in respect of those divisions as in some other jurisdictions.

This provision therefore can be unduly restrictive for companies that follow a world-wide licensing strategy. However, in some instances, this issue may be overcome through the strategic use of divisional applications.

Australia has very liberal divisional application filing practices. While in some jurisdictions, divisional applications can only be filed for “further” inventions (e.g. where the claims of the divisional and parent applications are of different scope or are non-unified), this is not the case in Australia.

In Australia, a divisional application can be filed for any invention disclosed in the parent application regardless of whether the claims of the divisional fall wholly within the scope of the claims of the parent (or vice versa). Notwithstanding this, the claims of the divisional and the parent cannot be the same.

Thus, it is possible to file divisional applications to individually cover products, methods, or processes and then license patents granted on those applications to various parties of interest, allowing each of those parties to enforce their rights.

By way of example multiple divisional applications may be filed to cover a composition and its use in different technical areas, i.e. various divisional applications may be directed to (i) a pharmaceutical composition comprising the compound, (ii) a veterinary composition comprising the compound, (iii) a method of manufacturing the compound, or (iv) a method of treatment etc.

In this way each divisional application may be independently licensed and enforced by an exclusive licensee without being encumbered by the rights held by other parties.

Crafting the claims for an appropriate divisional filing strategy may not be straightforward. However, it may help give effect to an agreement between a patentee and a licensee where traditional licensing approaches may not be effective under Australian law.