Trends for Commercializing IP. AUSTRALIA Clayton Utz

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1 Trends for Commercializing IP AUSTRALIA Clayton Utz CONTACT INFORMATION Clayton Utz Level 34, No. 1 O'Connell Street Sydney, Australia PROTECTION OF INTELLECTUAL PROPERTY RIGHTS 1 Joint IP Each of the statutory based intellectual property rights deal with the issue of co-ownership slightly differently. Copyright The joint authors of a copyright work hold their rights as tenants in. common, in equal shares or as otherwise may be agreed between them It is permissible for one joint author of a copyright work to bring an action for infringement of copyright in that work, in which case damages awarded will be apportioned accordingly. In absence of contrary agreement, co-owners of a copyright work cannot exercise their copyright, or authorize others to do so, without the consent of the other co-owner(s). Trade Marks Generally, in absence of contrary agreement, joint owners of a trade mark hold as joint tenants i.e. the shares are undivided. As a consequence, the likely position in Australia is that one joint owner of a trade mark may not sue for infringement of that trade mark without joining the other co-owner as a party. A registered trade mark can only be used jointly by all co-owners in respect of the goods of services with which all of the co-owners are connected in the course of trade. Logically, the same applies in respect of unregistered or common law marks. Registered designs 1

2 Each co-owner of a registered design is entitled (subject to any contrary agreement between them) to an equal, undivided share in the design monopoly (Designs Act, s25a(1)). Subject to contrary agreement, each co-owner is entitled to make use of the registered design for his or her own benefit without accounting to the other co-owners (Designs Act, s25a(2)); however, one co-owner cannot license the design without the consent of the other co-owners (Designs Act, s25a(3)). One co-owner of a registered design may not sue for infringement without joining the other co-owners(s) as a party. Patents Each co-owner of a patent, (subject to agreement between them), is entitled to an equal, undivided share in the patent (Patents Act 1990, s16). Each co-owner may exercise the patent without accounting to the co-owners, but may not grant a license of the patent without the consent of all other co-owners. A co-owner may not sue separately for infringement without joining the other co-owner(s). Circuit Layouts Under the Circuit Layouts Act an infringement action can be brought by the owners of an eligible layout. An eligible layout is one which was made by an eligible person and was first commercially exploited in Australia or an eligible foreign country. An eligible person means an Australian citizen or resident or a body incorporated in Australia. If one of the co-owners of an eligible layout is not an eligible person that person has no right to commence infringement action. Otherwise, each joint owner of an eligible layout may separately issue proceedings for infringement but, as in the case of copyright, any damages are likely to be apportioned according to the co-owners' respective interests. As in the case of registered designs, subject to contrary agreement to the contrary, each co-owner is entitled to exploit the circuit layout for its own benefit without accounting to the other co-owner(s). Plant Breeder's Rights (PBR) PBRs may be owned jointly. An action for infringement of a PBR in a plant variety may only be commenced by the grantee of the right. A 'grantee' is defined as the person entered on the Register of Plant Varieties as the holder of the right in that variety. If there is more than one grantee each may sue for infringement separately, but any monetary remedy is likely to be apportioned according to the respective interests of the co-owners. A co-owner of a PBR may exploit the right for its own benefit without accounting to the co-owner(s). 2 Know how (a) Yes, know how licenses are permitted. Although there are no specific restrictions, licenses of this kind must comply with the provisions of the Trade Practices Act 1974 which proscribe certain types of anti competitive 2

3 contracts and conditions. Where a licensor requires to enter into a confidentiality arrangement the period of restraint will be critical. A restraint which purports to impose a perpetual obligation will be closely scrutinized. It is important that obligations to maintain confidence do not extend beyond the time when the confidential information sought to be protected lawfully enters the public domain. PAYMENT STRUCTURE 3 Royalty Payments The structure of royalty payments depends on the parties and the particular circumstances concerned. In many IP licenses royalties will be payable as a percentage of gross or net sales. There are no set rules as to percentage rates. Minimum royalty requirements are sometimes required, particularly, in the case of exclusive IP licenses but, again, this depends on the circumstances and the bargaining strength of the parties. 4 Remittance of License Fees There are no restrictions on the remittance of License Fees. However, withholding tax may be payable on payments made by Australian taxpayers to overseas recipients. Withholding tax must be collected by the Australian taxpayer at the rate of thirty per cent (unless reduced by double taxation agreements in which event the rate is ten per cent). Where Australian withholding tax is paid the overseas payee is entitled to a credit against any tax payable in the overseas country for part or the entire amount withheld. APPROVALS/REGISTRATION 5 Government Approvals/ Registration There is no Government approvals/registration required, however, stamp duty is payable in respect of all IP licenses although, in the majority of cases, the amount of such duty is nominal. It is preferable that exclusive licenses of a trade mark or patent are registered on the relevant Register. 6 Registration (a) There is no fixed time period. LICENCES 7 Registration of Licenses Trade Marks The assignee will have no standing to sue for infringement. No registration is required. Patents It is customary and prudent to register an exclusive license. Section 196 of the Patents Act provides that a document is not admissible in legal proceedings, without leave of the court or tribunal, unless particulars of it have been entered in the Patents Register. In the case of a licensee only an exclusive license holder has a right to sue for infringement so there is no necessity to register a non-exclusive interest. Registered Designs An interest as licensee may be recorded on the Register of Designs, but registration is not compulsory. The received view is that a licensee of a registered design (even an exclusive licensee) has no standing to sue for infringement and there seems to be little to be gained from 3

4 registration of a license interest. Plant Breeder s Rights Only the registered holder of the right has standing to sue. Further, there is no provision in the Plant Breeder's Rights Act permitting the registration of a license interest. 8 Implied Terms Terms may be implied into a contract if it is necessary to do so in order to give business efficacy to the contract if not inconsistent with the express terms of the contract. In patent licenses (especially those involving the sale of a patented product) there is an implied license to repair the product, but not to make a new product. In the case of a license to use copyright material, in absence of contrary agreement, the licensee has an implied license to copy the copyright material for the licensed purpose. In the case of a non-exclusive license of an IPR, in absence of contrary agreement, the license is impliedly terminable on reasonable notice. However, where there is the grant of a license of an IPR together with an 'interest' in the IP, the general rule is that (in absence of contrary agreement) the license cannot be terminated other than for breach. Further, Australian law may in some circumstances imply into commercial contracts, including license agreements, a term requiring the parties to act in good faith in performing the contract and exercising rights under it. 9 Prohibited Terms Patent, design, copyright and electronic layout licenses currently have the benefit of limited exemption from most of the anti-competitive conduct provisions in the Trade Practices Act Trade mark licenses are also exempted provided the licensee is registered as a user of the mark. However, all IP license agreements remain subject to the provisions of the Trade Practices Act which proscribe abuses of market power and minimum resale price maintenance. ENFORCEMENT 10 Dispute Resolution With respect to patents, a condition in a patent licence is deemed to be void if the effect of the condition would be to prohibit a licensee from using a product or process supplied or owned by a third party or to require the licensee to acquire a product not protected by the licensed patent from the licensor or a nominee of the licensor. (a) Resort first to a form of mediation or arbitration to resolve their issues. Many IP/technology licenses contain an alternative dispute resolution clause. 11 Courts (a) Yes, provided the selection of law is bona fide and not contrary to public policy. Although each case will turn on its own facts where an IP license is formed and to be performed in Australia prima facie, the most appropriate governing law of the contract is Australian law, particularly where Australian law has the 4

5 closest and most real connection with the contract. 12 Non Compete A restraint of trade is unenforceable unless, having regard to all the circumstances at the time it was entered into, the restraint was reasonably necessary to protect the legitimate interests of the party seeking to rely upon it. This principle applies throughout Australia, although the State of New South Wales has specific legislation it which allows courts applying New South Wales law discretion to read down a restraint of trade clause to make it reasonable. The reasonableness of a restraint is measured by reference to three factors: the particular activities restrained; the area of the restraint; and the duration of the restraint. To be regarded as reasonable, the activity restrained should relate to the field of activity which was the subject of the licence. The area of restraint should be no wider than the area in which the licensee was permitted to operate. In general, the duration of the restraint should be no longer than the period of the special advantage which would otherwise be enjoyed by the entity being restrained. The most common way in which to draft a restraint provision in a licence is to use a 'waterfall' or cascading provision which provides alternative combinations of area and duration of restraint (from maximum to minimum). However, such clauses need to be very carefully drafted to ensure that they are clear and enforceable. 5