Issues with Patent License Terminations

S145 of the Patents Act is directed to limit the capacity of licensors from obtaining licenses that exceed to life of a patent. Despite any clause in a license agreement, s145 generally states that a license to exploit a patented invention may be terminated in 3 months notice once “the [licensed patent, or all patents by which the invention was protected” cease to be in force.

This section of the Patents Act was largely untested in Australia law. However, in recent decision of MPEG LA LLC v Regency Media Pty Ltd [2014] FCA 180, Justice Flick found that the right to terminate pursuant to s145 would only arise wherein all of the patents relating to the patent invention had ceased.

In this matter, MPEG was the licensor and Regency was the licensee. Regency argued in this case that the licensed patents related to three separate patent inventions and they should be treated separately. However, Justice Flick concluded that as a result of the drafting of the license agreement, all of the alleged patent inventions were grouped. He specifically cited that all of the inventions were listed under one single heading of “MPEG-2 Patent Portfolio Patents” and that the license agreement made no distinction between the patent families or separate inventions.

Justice Flick concluded that all of the alleged patented inventions were to be treated as a single patented invention and therefore the licence could not be terminated.

In summary, careful drafting of patent licenses must take into consideration Justice Flick’s comments and evaluate whether or not there are intended to be separate patented inventions within a single license agreement.