What rights do patent licensees need to have standing to sue for patent infringement?

Nov 10, 2023·

2 min read

The Federal Court's ruling in Bristol-Myers Squibb Company v Apotex Pty Ltd (No 5) clarifies what constitutes an “exclusive licensee” in patent infringement litigation under the Patents Act 1990. This case underscores the importance of comprehensive contractual drafting to ensure licensees are legally equipped to enforce patents.

In this case, Bristol-Myers Squibb (BMS), despite holding an exclusive license to market and sell the drug aripiprazole, lacked the right to manufacture it, which was retained by the patent holder, Otsuka. When BMS sued Apotex for alleged infringement, Justice Yates ruled that BMS didn’t qualify as an exclusive licensee as it didn’t hold all the rights to exploit the patent, notably the manufacturing rights.

This judgment highlights that to be considered an exclusive licensee with standing to sue for infringement; a licensee must hold all the exploitation rights of the patent, including the rights to make, sell, use, and import the patented product or process. This comprehensive rights transfer places the licensee in the patent holder's shoes.

The decision serves as a strategic reminder for businesses involved in patent licensing. It’s crucial to ensure that all exploitation rights are clearly and fully transferred if the licensee is to have the authority to initiate infringement proceedings. This ruling also implies that having multiple exclusive licensees in different fields of application of the licensed invention is problematic.

For existing licenses that don’t confer all exploitation rights, licensees and licensors may need to renegotiate to align with the court's interpretation of an exclusive licensee. Also, patent holders can legally limit a licensee’s right to bring infringement proceedings.

As BMS has appealed Justice Yates’ findings, further developments are anticipated, and businesses should stay informed to align their patent strategies accordingly. This case reaffirms the importance of meticulous drafting and strategic planning in patent licensing agreements.