Patent License Termination

The Full Bench of the Federal Court has recently considered Section 145 of the Patents Act. 

Section 145 reads as follows:

Termination of contract after patent ceases to be in force

             (1)  A contract relating to the lease of, or a licence to exploit, a patented invention may be terminated by either party, on giving 3 months' notice in writing to the other party, at any time after the patent, or all the patents, by which the invention was protected at the time the contract was made, have ceased to be in force.

             (2)  Subsection (1) applies despite anything to the contrary in that contract or in any other contract.

Regency Media Pty Ltd had entered into an agreement to license several patents from MPEG LA LLC (‘MPEG’).  Regency Media Pty Ltd contended that Section 145 of the Patents Act allowed them to terminate the agreement when one of the patents lapsed.  In the appeal the Court held that Section 145 did not allow the agreement to be terminated.

In arriving at the decision the Court considered the commercial reality of licensing multiple patents and the intention of section 145.  The Court also considered the unfairness in relation to the case at hand.  Notably, nowhere in the agreement were the inventions referred to separately. Rather reference was made to the ‘MPEG-2 Decoding Products’, the ‘MPEG-2 Encoding Products’, and the ‘MPEG-2 Packaged Medium’.   Various interpretations were applied to the wording of Section 145.

The case serves as a warning when preparing and entering into patent licensing agreements.