FEDERAL COURT OF AUSTRALIA

PATENTS – application for revocation of patent – joinder of parties claiming to be exclusive licensee and sub-licensee – whether parties improperly or unnecessarily joined – meaning of subs 139 (1) of the Patents Act 1990 (Cth) providing that all persons with an interest in the patent “are parties” to revocation proceedings – subsequent discovery that named respondents not licensees – whether respondents should be removed as parties - subsequent discovery of licensee – whether licensee should be joined as a respondent.

PRACTICE AND PROCEDURE – addition and removal of parties – whether licensee of a patent is a proper or necessary party to proceedings for revocation.

Patents Act 1990 (Cth) s 139

Federal Court Rules O 6 rr 8 and 9, O 8, O 58 r 14

Yong Jun Qin v Minister for Immigration and Ethnic Affairs (1997) 75 FCR 155 referred to

Pegang Mining Co Ltd v Choong Sam [1969] 2 MLJ 52 applied

News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 applied

CBS United Kingdom Limited v Charmdale Record Distributors Limited [1980] FSR 289 considered

Nomad Films International Pty Ltd v Export Development Grants Board (1986) 6 IPR 321 considered

EMORY UNIVERSITY v BIOCHEM PHARMA INC & Ors

NG 819 of 1997

LINDGREN J

SYDNEY

31 JULY 1998

THE COURT ORDERS THAT:

1.                  Service on the Second Respondent pursuant to the orders made on 2 October 1997 be set aside.

2.                  The Second and Third Respondents cease to be parties to the proceeding.

3.                  Glaxo Group Limited be added as a respondent to the proceeding.

4.                  The Applicant be granted leave to amend its application and statement of claim in conformity with the foregoing orders and with the Reasons for Judgment of Lindgren J delivered on 31 July 1998.

5.                  The Applicant be granted leave to serve on Glaxo Group Limited outside the Commonwealth, and in the United Kingdom:

(a)        the Application;

(b)        the Amended Statement of Claim; and

(c)        the Particulars of Invalidity.

6.                  The First Respondent be granted leave to amend its defence in conformity with the foregoing orders and with the Reasons for Judgment of Lindgren J delivered on 31 July 1998.

7.                  The proceeding be stood over to 7 August 1998 at 9.30 am for the making of orders as to costs.

8.                  The parties, by 5.00 pm on 5 August 1998 exchange and supply to the Associate to Lindgren J, written submissions as to costs.

Note:                Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

(motions as to parties)

INTRODUCTION

The applicant (“Emory”) applies for an order revoking Australian Letters Patent No 630913 in respect of an invention entitled “Substituted 1, 3-Oxathiolanes with Antiviral Properties” (“the Patent”) or, alternatively, certain specified claims of the Patent. The Patent relates to various compounds said to be effective in inhibiting replication of the Human Immunodeficiency Virus (“HIV”).

The particulars of invalidity on which Emory relies are that the specification fails to describe the invention fully; that certain identified claims are not fairly based on the matter described in the specification; that the alleged invention as claimed in those claims is not a method of manufacture within the meaning of s 6 of the Statute of Monopolies; and that the alleged invention as claimed in those claims is not an invention as defined in Schedule 1 to the Patents Act 1952.

The first respondent (“BioChem”) is a Canadian company and is the registered proprietor of the Patent.  The second respondent (“Glaxo Wellcome”) is a United Kingdom company and is alleged in the statement of claim to be “the exclusive worldwide licensee of the Patent”. The third respondent (“Glaxo Australia”) is an Australian company which is alleged in the statement of claim to be “the licensee of the Patent in Australia”.

On 2 October 1997, Burchett J granted Emory leave to serve Glaxo Wellcome outside Australia. Pursuant to that order, Glaxo Wellcome was served in the United Kingdom. Glaxo Australia, being a local company, was served as of right in Melbourne. Neither company appeared or filed a defence, but by notice of motion filed 18 December 1997 they moved for orders pursuant to O 9 r 7 of the Federal Court Rules (“the Rules”), that service on Glaxo Wellcome pursuant to Burchett J’s orders be set aside, and pursuant to O 6 r 9, that they both cease to be parties. The motion was supported by an affidavit by their solicitor simply stating that his firm had received instructions from Glaxo Wellcome and Glaxo Australia that neither “wishes to participate in this proceeding”. The motion by Glaxo Wellcome and Glaxo Australia is one of three with which these Reasons for Judgment are concerned.

In its defence filed on 17 February 1998, BioChem admitted the allegation in the statement of claim that Glaxo Wellcome was “the exclusive licensee of the Patent in Australia” and did not admit the allegation that Glaxo Australia was the licensee of the Patent in Australia. Subsequently, by a letter dated 4 March 1998 from the solicitors for Glaxo Wellcome and Glaxo Australia, Davies Collison Cave, to Emory’s solicitors, Andersen Legal, Glaxo Wellcome and Glaxo Australia admitted that “Glaxo Wellcome plc is BioChem Pharma’s exclusive licensee in Australia under the patent and that Glaxo Wellcome Australia is Glaxo Wellcome plc’s sub-licensee in Australia under that patent”.

The motion of Glaxo Wellcome and Glaxo Australia was fixed for hearing on 17 March. On that day, Glaxo Wellcome and Glaxo Australia indicated that they had reason to doubt the correctness of their admission that Glaxo Wellcome was BioChem’s exclusive licensee, and that Glaxo Australia was Glaxo Wellcome’s sub-licensee in Australia. Rather than adjourn the hearing and lose the time set aside for it, I embarked on the hearing of the motion and directed Glaxo Wellcome to notify the other parties and the Court by 5.00 pm on 24 March, whether it claimed to be the exclusive licensee under the Patent either in Australia or world-wide. On 24 March, Davies Collison Cave wrote to the Court as follows (and sent a copy of the letter to the other parties):

“We have now been instructed by our clients as follows.

(1)               Glaxo Wellcome plc is neither the exclusive licensee, nor a licensee, in Australia under the first Respondent’s Patent.

(2)               The relevant agreement is a Master Licence Agreement. This is a product licence agreement which does not cover all compounds the subject of the Patent but rather only what is defined as Modified Licensed Product. That is, the Master Licence Agreement is narrower in scope than a licence under the Patent as such.

(3)               Glaxo Group Limited is a party to the Master Licence Agreement and is the Australian Licensee under that Agreement.

(4)               Whilst Glaxo Group Limited is given exclusive rights in Australia under the Master Licence Agreement, and can exercise those rights either by itself or through certain other affiliate companies in the Glaxo Wellcome Group, those rights relate only to Modified Licensed Product and, accordingly, for the reason set out in paragraph (2) above, it would seem that Glaxo Group Limited does not fall within the definition of ‘exclusive licensee’ in the Patents Act 1990.

(5)               Moreover, although the rights given to Glaxo Group Limited by the Modified [sic - Master] Licence Agreement are capable of being exercised by Glaxo Wellcome plc, in practice, Glaxo Wellcome plc does not do so.

(6)               Glaxo Group Limited does not itself exercise the rights under the Modified [sic - Master] Licence Agreement in Australia. Those rights are exercised by Glaxo Wellcome Australia Ltd.

Our clients have asked us to apologise for the confusion caused by the incorrect instructions which were originally given to us, and on which the admissions contained in our 4 March 1998 letter to Emory’s solicitors were predicated. We are not sure precisely how the incorrect instructions came about; we can only speculate that they may have been a product of the complexity of both the licensing situation and the Glaxo Wellcome Group corporate structure together with the fact that, at least in theory, Glaxo Wellcome plc could exercise the rights given to Glaxo Group Limited.”

On 1 May I gave certain directions and the motion was stood over to 19 May.

In the meanwhile, two further notices of motion were filed. By a notice of motion filed on 5 May, BioChem sought leave to amend its defence to deny that Glaxo Wellcome was the exclusive licensee of the Patent in Australia. By a notice of motion filed 19 May 1998, Emory sought leave to add as fourth respondent, Glaxo Group Limited (“Glaxo Group”), a company incorporated in the United Kingdom, leave to serve it outside Australia and in the United Kingdom, and leave to amend its statement of claim by adding two alternative allegations to its existing allegation that Glaxo Wellcome is the exclusive world-wide licensee of the Patent. One alternative is that Glaxo Wellcome and Glaxo Group are “together the exclusive world-wide licensee of the Patent”. The other is that Glaxo Group alone is the exclusive world-wide licensee of the Patent. Emory also proposed to amend the statement of claim by adding an allegation that Glaxo Wellcome, Glaxo Australia and Glaxo Group have an “interest in the Patent” within the meaning of s 139 of the Patents Act 1990 (Cth) (“the Act”). (I will refer to Glaxo Wellcome, Glaxo Australia and Glaxo Group as “the Glaxo companies”, and, sometimes, to Glaxo Wellcome and Glaxo Australia as “the Glaxo respondents”.)

Not being yet a party, Glaxo Group did not make submissions on Emory’s motion for leave to join it as fourth respondent or to amend the statement of claim. However, the interests of Glaxo Wellcome and Glaxo Australia are at one with those of Glaxo Group, and the question whether Glaxo Group should be added involves similar considerations to those that touch the question whether Glaxo Wellcome and Glaxo Australia should cease to be parties.  Accordingly, the submissions of Glaxo Wellcome and Glaxo Australia on the latter question are directly relevant to the former question.

RELEVANT PROVISIONS OF THE ACT AND OF THE FEDERAL COURT RULES

Glaxo Wellcome and Glaxo Australia move under O 6 r 9 of the Rules which is as follows:

“9        Where a party –

(a)   has been improperly or unnecessarily joined; or

(b)   has ceased to be a proper or necessary party,

the Court, on application by any party or of its own motion, may order that he cease to be a party and make orders for the further conduct of the proceeding.”

Clearly, the rule speaks as at the time when the Court is called upon to exercise the power given by the rule.  Accordingly, par (a) addresses an improper or unnecessary joinder when the proceeding was commenced, while par (b) addresses a situation in which the initial joinder was proper or necessary, but in which, in the intervening period, the continued joinder of the party has become improper or unnecessary.  Glaxo Wellcome and Glaxo Australia rely on par (b); they accept that they were properly joined initially but submit that their continued joinder as respondents is improper and unnecessary because they have made it clear that they do not wish to participate in the proceedings.  BioChem, however, submits that even the initial joinder of the Glaxo respondents was unnecessary and improper.

Emory relies on subs 139 (1) of the Act.  Section 139 is as follows:

“139      (1)        The patentee, and any person claiming an interest in the patent as exclusive licensee or otherwise, are parties to any proceedings under section 133, 134 or 138.

(2)               In any proceedings under section 133, 134 or 138:

(a)          the applicant must serve a copy of the application on the Commissioner; and

(b)          the Commissioner may appear and be heard in the proceedings.”

The present proceeding is one under s 138 which provides, in subs (1), that any person may apply to a prescribed court for an order revoking a patent.

Three expressions in subs 139 (1) are defined in the Act’s dictionary.  They are “patent”, “patentee” and “exclusive licensee”.  The definitions are as follows:

“‘patent’ means a standard patent or petty patent;

‘patentee’ means the person for the time being entered in the Register as the grantee or proprietor of a patent;

‘exclusive licensee’ means a licensee under a licence granted by the patentee and conferring on the licensee, or on the licensee and persons authorised by the licensee, the right to exploit the patented invention throughout the patent area to the exclusion of the patentee and all other persons;”

Emory submits that subs 139 (1) has the effect itself making any person who claims to have an interest in the Patent a party, with the results that Emory was required to name such persons as respondents and that the Court may not order that they cease to be parties under O 6 r 9.  BioChem submits that the expression “claiming an interest” in subs 139 (1) has a meaning akin to “claiming an interest [before the Court and for the purpose of seeking joinder]”.  According to BioChem’s submission, the subsection makes joinder mandatory only where, in effect, a person seeking to be joined claims an interest in the patent before the Court.

Glaxo Wellcome and Glaxo Australia submit that subs 139 (1) was not intended to change the previous law and practice relating to petitions for revocation, and must be understood in the light of them and of the general objectives of the legislature in enacting the Act.  They point out that under the former petition procedure for revocation, there was no respondent, but the Court would direct the giving of notice then deal with applications for joinder by persons notified.  They submit that the expression “are parties” in subs 139 (1) has a meaning akin to “are parties [if and so long as they wish to be so]”.  In relation to the legislature’s objectives, they point out that the Act was intended to simplify and to express in “plain English” the general law relating to patents, leaving the detail to the regulations to be made under the Act.  The important point, according to the submission, is that the legislature’s objective was not to change the law’s substance.

I turn next to Emory’s motion to add Glaxo Group as fourth respondent.  Order 6 r 8 (1) of the Rules is as follows:

“8 (1)  Where a person who is a not a party-

(a)      ought to have been joined as a party; or

(b)      is a person whose joinder as a party is necessary to ensure that all matters in dispute in the proceeding may be effectually and completely determined and adjudicated upon,

the Court, on application by him or by any party or of its own motion, may order that he be added as a party and make orders for the further conduct of the proceeding.”

Emory’s application to join Glaxo Group must be considered in the context of this provision, subs 139 (1) of the Act, and, as well, the provisions of the Rules relating to service outside the Commonwealth.  The provisions of those Rules are also relevant to the motion of Glaxo Wellcome and Glaxo Australia, insofar as it seeks an order setting aside the service in the United Kingdom on Glaxo Wellcome.

It may be noted that O 58 r 14 (1) of the Rules provides as follows:

“14 (1)             Notwithstanding Order 4 rule 11, an application under subsection … 138 (1) of the Patents Act and an affidavit or statement of claim must be served, not later than 14 days before the date appointed for the directions hearing:

(a)     on the patentee; and

(b)     as a further respondent – on any person who claims an interest in the patent as exclusive licensee; and

(c)      on the Commissioner.”

The words “or otherwise” which immediately follow the words “as exclusive licensee” in subs 139 (1) do not appear immediately following those words in sub r 14 (1), apparently through oversight.  No party submits that O 58 r 14 (1) affects the construction of subs 139 (1) of the Act or of O 6 r 8 or 9.

Order 8 of the Rules deals with service outside the jurisdiction.  It is clear that the present proceeding under s 138 of the Act for revocation of the Patent satisfies the “connection with the Commonwealth” requirement of O 8 r 1.  Order 8 sub r 2 (1) provides that service outside the Commonwealth of originating process is not valid under O 8 unless, relevantly, the service is in accordance with the prior leave of the Court given under sub r 2 (2).  Sub-rule 2 (2) empowers the Court to grant such leave where it is satisfied, inter alia, that the applicant “has a prima facie case for the relief which he seeks”.  On the hearing, the respondents did not dispute that Emory had made out a prima facie case for revocation, and the parties proceeded on the basis that the requirement of sub r 2 (2) as regards Glaxo Wellcome and Glaxo Group respectively was not satisfied if they were not proper parties.  Accordingly, the two Glaxo respondents’ motion for an order under O 9 r 7 setting aside service on Glaxo Wellcome, and the respondents’ opposition to Emory’s motion for leave to serve Glaxo Group outside the Commonwealth, depend, alike, on the question of whether Glaxo Wellcome and Glaxo Group, respectively, are proper parties.

OUTLINE OF PARTIES’ SUBMISSIONS

Although BioChem and the two Glaxo respondents made separate submissions, I find it convenient to deal with their submissions without distinguishing between them.  The respondents’ submissions proceeded along the following general lines.

Subsection 139 (1) has not changed the law as to the proper parties to an application for revocation.  Revocation has traditionally been sought by petition.  This was the case under s 99 of the Patents Act 1952 (Cth) (“the 1952 Act”), the predecessor of s 138 of the Act, and is maintained in the United Kingdom (see RSC O 104, r 4 and O 9 r 2 (2)).  The petition was (and is) served on the patentee and on any other person appearing to have an interest in the patent.  The purpose was to give them an opportunity to be heard.  Subsection 139 (1) does not displace the general principles governing the joinder of parties.  The purpose of the provision is merely to make it clear that if a person claiming an interest in the patent wishes to be a respondent, that person is entitled to be a respondent. 

In the present proceeding, the patentee, BioChem, is a respondent, appears and is able to defend the Patent’s claims.  Whether the Patent is valid raises no special questions as between Emory and two Glaxo respondents.

It is not enough to support joinder that the two Glaxo respondents’ commercial interests would be affected by revocation.  Emory does not plead a cause of action against the Glaxo respondents.  The construction of subs 139 (1) suggested by Emory could lead to absurdity.  The range of persons claiming an interest in a patent is potentially vast.  That construction “would enable, for example, competitors to be joined (…), or a person claiming inventorship, or a party working the patent.”  The provision “cannot mean that such persons must be joined or that an applicant must make enquiries to ensure that all such persons (obviously an indeterminate class) are parties”.  The Glaxo companies are not in a “special position” to assist the Court, and even if they were, this is not a proper basis for joinder (reference is made to Australian Competition and Consumer Commission v News Corporation Ltd (1997) ATPR ¶41-596 at 44,251).

Emory’s submissions proceeded along the following general lines.

The plain meaning of subs 139 (1) is that it operates to make all persons claiming an interest in a patent parties to an application under s 138 for its revocation.  An analogous provision is s 480 of the Migration Act 1958 which provides, relevantly, that “[t]he parties to the review of a judicially-reviewable decision are the Minister and;….”, and a Full Court of this Court held in Yong Jun Qin v Minister for Immigration and Multicultural Affairs (1997) 75 FCR 155 (“Yong”), that the provision did more than remove any doubts as to the identity of proper parties and was declaratory of the identity of parties to a particular kind of proceeding before the Court.  Subsection 139 (1) of the Act is similar in purpose and effect.

Subsection 139 (1) recognises that an exclusive licensee or other person claiming an interest in a patent is a proper party to a revocation proceeding and that an applicant is entitled to join and retain such a person as a respondent.  The desire of the two Glaxo respondents not to remain respondents and of Glaxo Group not to be joined as a respondent is irrelevant to the question of whether such a company is a proper or necessary party.

Subsection 139 (1) deprives the Court of any discretion; Emory was and remains entitled to have all persons claiming an interest in the Patent as respondents.  But if, contrary to this submission, the Court retains a discretion, that discretion should be exercised in favour of Emory, because the Glaxo companies are, on the evidence, in a special position to assist the Court.

The submissions of the respondents and of Emory outlined in general terms above were supplemented with a fresh round of submissions in the light of a “confidential exhibit”, namely, a “Revised and Restated Master Licence Agreement” dated 20 November 1995 between, relevantly, BioChem and Glaxo Group.  Those submissions addressed the nature of the “interest”, if any, of the respective Glaxo companies.  I will take up this issue below.

REASONING

I find it useful to state some general propositions at the outset. 

(1)        With respect, I am content to apply as the test under O 6 rr 8 and 9 of whether a person ought properly to have been joined or ought properly now to be joined, the following passage from the Privy Council’s opinion delivered by Lord Diplock in Pegang Mining Co Ltd v Choong Sam [1969] 2 MLJ 52 (at 56);

“...will his rights against or liabilities to any party to the action in respect of the subject matter of the action  be directly affected by any order which may be made in the action?”

This passage was noted with apparent approval by a Full Court of this Court in News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 (referred to later) at 524.

(2)               In my opinion, the claiming of an interest in a patent to which subs 139 (1) refers is, contrary to BioChem’s submission, not limited to the claiming of an interest before the Court for the purpose of contesting the revocation as a party.  I think that the “claiming” of an interest in the patent as exclusive licensee or otherwise, like “being” the patentee, is a circumstance antecedent to the commencement of the proceedings referred to in the subsection.  (The drafter of O 58 r 14 (1) of the Rules seems to have taken a similar view).

(3)               Whatever may be the correct meaning of the expression “… are parties to any proceedings under section ... 138”, it is clear that subs 139 (1) is limited by reference to persons claiming “an interest in the patent”.  A patent is personal property (see s 152 (1) of the 1952 Act and s 13 of the Act) and gives the patentee the exclusive right, during the term of the patent, to “exploit” the invention throughout the patent area (see ss 69 and 70 of the 1952 Act and s 13 of the Act).  The word “exploit” is defined in the Act’s dictionary as follows:

“‘exploit’, in relation to an invention, includes:

(a)   where the invention is a product – make, hire, sell or otherwise dispose of the product, offer to make, sell, hire or otherwise dispose of it, use or import it, or keep it for the purpose of doing any of those things; or

(b)   where the invention is a method or process – use the method or process or do any act mentioned in paragraph (a) in respect of a product resulting from such use;…”

(The 1952 Act did not define “exploit” but defined “exclusive licensee” in terms which incorporated a reference to “the right to make, use, exercise and vend the patented invention”.)

Accordingly, as a matter of language, subs 139 (1) encompasses a person who claims an interest in the exclusive right to do the things referred to in the definition of “exploit” in respect of the product in question in the patent area, not being the patentee (who is mentioned expressly) and not being necessarily an exclusive licensee.

(4)               It is not open to a person who is a proper party to cease to be such by unilateral disclaimer.  According to general principle, an applicant is entitled to name and retain all proper parties as respondents.  The position may be tested, perhaps, by reference to the position of the patentee itself.  Assume a foreign patentee which knows that documents in its possession will assist an applicant for revocation of the patent.  Is the foreign patentee entitled, by indicating that it does not wish to be made a respondent to an imminent revocation proceeding, to escape the obligation to give discovery in the proceeding?  I think not.  It follows that if Glaxo Wellcome and Glaxo Australia were proper parties when the proceeding was commenced on 2 October 1997, they did not cease to be such by the only presently relevant event which occurred subsequently, that is, their advising Emory that they did not wish to be parties.

It is convenient to begin by considering the application of the general criteria for joinder of parties without reference to subs 139 (1) of the Act.  I will do so with respect to the positions of the original grantee of a patent, an assignee, an exclusive licensee and a licensee who has a licence less extensive than “the right to exploit the patented invention throughout the patent area to the exclusion of the patentee and all other persons” of an “exclusive licensee” (a “lesser licensee”).  Since revocation of a patent extinguishes the right to do the acts of exploitation to the exclusion of others in the patent area, it extinguishes that right, and it follows that the owners of that right are proper parties.  Accordingly, the original grantee and any assignee is a proper party.

The positions of an exclusive licensee and a lesser licensee are less clear.  This is not because their rights, unlike those of the original grantee, arise from contract: so do the rights of an assignee.  The difference is that an assignment (or devolution by law for that matter) is of all the exclusive rights of which the patent consists and is therefore of those rights which the Act declares to be personal property (subs 13 (2)), even, in my opinion, where the assignment is only for a place in, or part of, the patent area (subs 14 (2)).  A licence, even an exclusive one, necessarily leaves the patentee with a proprietary interest, whereas an assignment does not (even an assignment for a place in, or for part of, the patent area, exhausts the grant in respect of that place or part).

Does an exclusive licensee or a lesser licensee own a proprietary interest which revocation of the patent would extinguish?  The answer is not clear.  Although I was not referred to, and my own researches have not revealed, a case in which this question has been discussed in relation to patents, in CBS United Kingdom Ltd v Charmdale Record Distributors Ltd [1980] FSR 289, Browne–Wilkinson J held that an exclusive licensee of copyright does not have a propriety interest in the copyright.  He said (at 295):

“Under the general law a licensee is a person who enjoys contractual rights as against the property owner.  I can find nothing in the Act [the Copyright Act 1956 (UK)] which conflicts with the principle that the licensee’s rights rest in contract and are not proprietary.  Under section 19 of the Act an exclusive licensee is given a procedural right of action to sue for infringement.  But the section is purely procedural, and, save in the case of interlocutory injunctions, requires the owner of the copyright to be joined as a party.”

Similarly, pursuant to s 120 of the Act, an exclusive licensee is given a right of action to sue for infringement of a patent.  However, the exclusive licensee must join the patentee to such proceedings as a defendant unless the patentee is joined as a plaintiff: subs 120 (2).  If an exclusive licensee has a proprietary interest in the patent, it has a cause of action for infringement as of right, and s 120 would be otiose: see CBS United Kingdom Ltd v Charmdale Record Distributors Ltd at 295.  It is arguable, therefore, that at least the drafter of the legislation did not conceive of an exclusive licensee, a fortiori a lesser licensee, as having a proprietary interest.

In Nomad Films International Pty Ltd v Export Development Grants Board (1986) 6 IPR 321, a Full Court of this Court was called upon to construe the definition of the expression “eligible industrial property rights” in subs 3 (1) of the Export Market Development Grants Act 1974 (Cth) (“the Grants Act”).  The Court held, by majority (Smithers and Northrop JJ, Sweeney J dissenting), that in the circumstances of the case, an exclusive licensee in respect of certain rights only comprised in a copyright was an “owner” of copyright for the purposes of the definition.  Smithers J thought that the grant of the exclusive licence in respect of some of the very rights which constituted the copyright “should be interpreted as effectuating an assignment” (at 336).  Northrop J also considered that, for the purposes of the Grants Act, the exclusive licensee had, except as against the copyright owner, the same rights of action as if the exclusive licence had been an assignment, and was an owner of copyright for the purpose of the Grants Act (at 357).  Sweeney J dissented, being of the view that a licensee, even an exclusive licensee, as distinct from an assignee, had only contractual rights against the copyright owner, and did not have proprietary rights in the copyright itself (at 349-350).

It is unnecessary for me to decide whether an exclusive licensee or a lesser licensee has an interest in a patented invention which is appropriately called “proprietary”, because I do not think that the effect of the application of the general principles as to proper joinder of parties is to be resolved only according to the answer to be given to that question.  In my view it would suffice, for example, that a person has been granted by the patentee by contract the exclusive right to exercise, in the patent area, even some of the exclusive rights of exploitation of which the patent consists, even if the exclusive right so granted be not properly conceived of as “property”.

In the News Ltd case, it was held that professional footballers who had contracted to play in the competition run by the appellants (shortly, “News”) should have been joined as parties to the cross claim by the cross respondents (shortly, “ARL” and “NSWRL”), as the orders made by the trial Judge directly affected their interests.  Their contracts with News provided that they would play for a particular club as directed by News.  The trial Judge ordered that News held the players’ contracts upon trust for the NSWRL; that News direct the players to play for the clubs specified by the NSWRL; and that News not pay any player who failed to comply.  The Full Court held that the players had been necessary parties and that the orders must be discharged on account of the failure of the ARL and NSWRL to join them as cross respondents.  A prior giving of notice to the players and the affording to them of an opportunity to make submissions as to the form of orders to be made did not overcome the problem.  The Full Court’s judgment contains the following passage:

“There are some classes of case where the ascertainment of the necessary parties who ‘ought to have been joined’ is not difficult.  Where the orders sought establish or recognise a proprietary or security interest in land, chattels or a monetary fund, all persons who should have or claim an interest in the subject matter are necessary parties.  This is because an order in favour of the claimant will, to a corresponding extent, be detrimental to all others who have or claim an interest.  Grovenor v Permanent Trustee Co of New South Wales Ltd [(1966) 40 ALJR 329] is an example of this class of case.  Where the subject matter of the proceedings is not of this kind, the ascertainment of necessary parties who ought to have been joined may be more difficult.

In our opinion, the question should be decided according to the test proposed by Lord Diplock [a reference to test formulated in Pegang Mining Co Ltd v Choong Sam [1969] 2 MLJ 52 at 56 set out earlier].  The test involves matters of degree, and ultimately judgment, having regard to the practical realities of the case, and the nature and value of the rights and liabilities of the third party which might be directly affected.  The requirement that a third party’s rights against, or liability to, any party to the proceedings be directly affected is an important qualification that recognises that many orders of a court are likely to affect other people to a greater or lesser extent.  This is particularly so with remedies in the nature of an injunction: see Silktone Pty Ltd v Devreal Capital Pty Ltd (1990) 21 NSWLR 317 at 322 per Kirby P.  The requirement of a direct effect on rights or liabilities differentiates the case where a person ought to be joined, from other cases where the effect of the order on non-parties can be characterised as only indirect or consequential.

Where, before trial, a question arises whether a necessary party has been joined, attention should be directed to the orders sought in the proceedings.  It is the effect of the orders upon the third party that must be determined.  The test is not whether the conduct of the third party is raised in the pleadings between the existing parties, or whether the third party is a party to a contract, the meaning or effect of which is pleaded as a matter relevant to the ascertainment of the rights between those parties.  Where the question arises after final orders have been made in the proceedings, the inquiry must be directed to the orders actually made, or which, on appeal it is contended should be made: cf Associated Grocers Co-operative Ltd v Hubbard Properties Pty Ltd (1986) 42 SASR 321 at 341.” (at 524-525, emphasis supplied)

Revocation of a patent leaves licence granted by the patentee contractually enforceable but deprives the licensee of the possibility of specific performance, assigning it to its remedy in damages.  This is enough, in my view, to make such a licensee a party who, if already joined by the applicant for revocation, was properly joined, and who, if not yet joined by the applicant, ought properly to have been joined.  It is, after all, important that a licensee have specific relief available in view of the difficulty which may be encountered in the assessment of damages.

It is necessary now to turn to subs 139 (1) of the Act.  In my view, at least a person claiming a contractual right to do throughout the patent area to the exclusion of all others some of the things comprised in the exclusive right of exploitation of the patented invention of which the patent consists, and a fortiori if claiming to be entitled to do them to the exclusion of the patentee, is a person “claiming an interest in the patent” for the purposes of subs 139 (1).  Such a person’s rights may fall little short of those of an “exclusive licensee” as defined.  The provision shows conclusively that a person claiming an interest in the patent, and therefore such a person, at least, is someone whom an applicant for revocation ought to join as a respondent.  I need not decide whether, as Emory contends, the provision itself has the effect of making all such interest-claimants respondents.

The respondents submit that the construction contended for by Emory would lead to absurd results.  I accept that a construction that all persons having a commercial or financial interest in the patent’s being held valid are parties even if not named as such, would do so.  Even a construction to the effect that all claimants to proprietary or contractual “interests in the patent” are parties, even if not so named by the applicant, might do so.  In the present respect, I acknowledge that there is a difference between subs 139 (1), on the one hand, and s 480 of the Migration Act 1958 which was in issue in Yong, on the other: the expression “the Minister” refers to one person about whose identity there is complete certainty.

But the construction of subs 139 (1) which I have outlined above does not give rise to absurd results.  In any event, the Register of Patents kept under Chapter 19 of the Act goes some way to overcome the difficulty.  Section 187 of the Act provides:

“Particulars of patents in force, and other prescribed particulars relating to patents (if any) must be registered.”

The “other prescribed particulars relating to patents” are found in Patents Regulation 19.1, which prescribes particulars of, inter alia,

“an entitlement as mortgagee, licensee, or otherwise to an interest in a patent.” (emphasis supplied)

If s 187 is being observed, an applicant for revocation of a patent will be able to identify, without difficulty, all persons claiming an interest in the patent.  A belated discovery of a “person claiming an interest in the patent”, particulars of whose entitlement had not appeared in the Register of Patents, presents no special problem different from that of a belated discovery of any person who ought properly to have been joined as a party to a proceeding.

My conclusion above leads to the question whether the three Glaxo companies or some of them (and if so, which) claim an interest in the Patent.  The evidence on this matter is now quite different from that which was before the Court initially.  It is found in the “Revised and Restated Master Licence Agreement” dated 20 November 1995 (“RRMLA”). 

It is not necessary for me to give a detailed account of the RRMLA.  The central provision for present purposes is clause 2(A).  By that clause, BioChem granted to Glaxo Group,

“… for all purposes, in the Territory:

(i)                 the exclusive right under the Licensed Patents to develop, register, manufacture, have manufactured, use and sell Modified Licensed Product; and

(ii)               ……………………….

[Glaxo] Group may exercise the said rights through its Affiliates and Independent Third Party consultants, contract manufacturers and distributors: PROVIDED THAT [Glaxo] Group shall remain responsible for their performance by such Affiliates, consultants, contract manufacturers and distributors of any obligations imposed on [Glaxo] Group by this Agreement”.

Clause 1(P) defines “Territory” to mean all countries of the world except Canada and the United States of America.  Clause 1(I) defines “Licensed Patents” in a manner to include the Patent.  Clause 1(J) defines the expression “Modified Licensed Product”.   I need not set out the definition.  An affidavit of John Arthur Hannebery, a solicitor employed by the solicitors for the two Glaxo respondents dated 27 May 1998, shows that the Patent claims a group of novel compounds, processes for their preparation and pharmaceutical formulations containing them; that claim 1 of the Patent relates to a group of compounds represented by a general formula having two identified variables and that subsequent claims relate to sub-groups of compounds and specific compounds; that the expression “Modified Licensed Product” corresponds to the compound of claim 1 which is only one product falling within the scope of the claims and therefore is not co-extensive with “the patented invention”; and, finally, that the RRMLA confers no right to manufacture, use or sell any compound falling within the scope of the claims of the Patent other than the compound of claim 1.

Clause 1(A) defines “Affiliate” to mean any corporation or other legal entity owning, directly or indirectly, 50% or more of the voting capital shares or similar voting rights of, relevantly, Glaxo Group; and any corporation or other legal entity, 50% or more of the voting capital shares or similar voting rights of which is owned, directly or indirectly, by, relevantly, Glaxo Group.

It has been said from the bar table that Glaxo Wellcome is the parent of Glaxo Group and is the ultimate parent of Glaxo Australia.  It has accordingly been submitted that Glaxo Wellcome and Glaxo Australia are Affiliates of Glaxo Group.  There is no evidence supporting the latter submission.  However, even assuming they are both Affiliates of Glaxo Group, I would reach the same conclusion which I express below, that is, that unlike Glaxo Group itself, Glaxo Wellcome and Glaxo Australia are not proper parties.

Clause 1(G) defines the expression “Independent Third Party” to mean any person or entity other than BioChem or Glaxo Group or any Affiliate or sublicensee of BioChem or Glaxo Group.

In submissions, Emory sought to emphasise the magnitude of rights granted to Glaxo Group while the Glaxo respondents sought to emphasise those rights of exploitation comprised within the Patent which were not granted by BioChem to Glaxo Group under the RRMLA.  As it transpires, I do not find it necessary to address all the detail of these submissions.  However, I should note a particular submission in relation to Clause 2(E) of the RRMLA and the notion of “Residual Product”.  Briefly, by that clause, Glaxo Group granted back to BioChem the rights to the “Residual Products” which Glaxo Group held under an earlier Master License Agreement dated 31 January 1990 as amended by an Addendum also dated 31 January 1990, between, inter alia, BioChem and Glaxo Group.  According to recital (A) of the RRMLA, the parties to the RRMLA wished to replace and supersede that “Original Agreement” and restate the terms of their agreement with effect from 20 November 1995.  The expression “Residual Product” is defined in Clause 1(O) of the RRMLA to mean any compound falling within the general formula set out in Schedule 1 to the RRMLA, but excluding those products covered by the definition of “Modified Licensed Product” and also excluding “FTC”.  The expression “FTC” is defined in Clause 1(F) by a formula which I need not discuss.  There are several provisos attached to the “grant back” contained in Clause 2(E).  One is that BioChem is not to exploit commercially any Residual Product outside the “Field” as defined in Sub-clause 2(E)(v) between 20 November 1995 and 19 November 1999.  Another is that BioChem is not to exploit commercially any Residual Product within the Field until the patent for such Residual Product expires.

As I indicated earlier, Glaxo Wellcome and Glaxo Australia suggest the “principal” grant of rights by BioChem to Glaxo Group in Clause 1(A) is to be understood as reduced by the “subtraction” effected by Clause 2(E), while Emory points to features of the “grant back” which minimise its effect, such as the provisos and the fact that “Residual Product” does not include “FTC”.

It cannot be said that the RRMLA contains a licence conferring upon Glaxo Group or on Glaxo Group and persons authorised by it, “the right to exploit [the Patent] throughout the patent area to the exclusion of [BioChem] and all other persons”.  However, it does contain a licence to exploit the Patent throughout the patent area to the exclusion of BioChem and all other persons in the respects identified in the RRMLA.

It is true:

a)                  that the right, “to develop, register, manufacture, have manufactured, use and sell” does not cover the whole field covered by the word “exploit”; and

b)                  that the “Modified Licensed Product” the subject of the grant does not cover the field of products encompassed within the patented invention.

Nonetheless, it follows from my conclusions expressed earlier, that it transpires that Glaxo Group claims an interest in the Patent for the purpose of subs 139 (1) of the Act and ought properly to have been joined as a party for the purposes of O 6 r 8 (1) (a).

Glaxo Wellcome and Glaxo Australia, however, are in a different position.  The fact that Glaxo Group is authorised by the terms of the RRMLA to exercise its own rights through its Affiliates does not give the Affiliates, or even those through which it in fact exercises those rights, an interest in the Patent.  They are third parties to the contract and acquire no rights against BioChem, and incur no obligations to BioChem, pursuant to the contract.

Emory led evidence showing that there has been, over a lengthy period, a close working relationship between BioChem and Glaxo Wellcome.  For example, by a news release dated 10 April 1997, published in the United Kingdom and Canada and emanating from BioChem, Glaxo Wellcome and BioChem announced that results from a Phase III clinical study of the investigational drug, Lamivudine, in hepatitis B were to be presented that day in London at the annual meeting of the European Association for the Study of the Liver.  The news release contained the following:

“Lamivudine was discovered by BioChem Pharma of Laval, Quebec, Canada and licensed to Glaxo (now Glaxo Wellcome) in 1990.”

Numerous documents annexed to an affidavit of Kim Anne O’Connell, a solicitor employed by Andersen Legal, Emory’s solicitors, sworn 15 May 1998, show the close relationship between BioChem and Glaxo Wellcome.  They refer to Glaxo Wellcome as an exclusive licensee and as paying royalties to BioChem.  There is no mention of Glaxo Group, or, perhaps understandably, of  Glaxo Australia.

Notwithstanding this evidence, it now transpires that Glaxo Group alone is the licensee under the RRMLA and has an interest in the Patent.  It has therefore now become clear that, notwithstanding the other evidence to which I have referred, Glaxo Wellcome and Glaxo Australia were improperly and unnecessarily joined as respondents.

Although the Rules do not provide for “submitting appearances” (cf Pt 11 r 4 (3) of the Rules of the Supreme Court of New South Wales and Trust Co of Australia Ltd v Perpetual Trustees WA Ltd (1995) 36 NSWLR 654 (Young J)), a proper party who consented to, or did not oppose, the making of an order for revocation could protect its position as to costs by clearly so informing the applicant for revocation at the earliest stage.  Accordingly, Glaxo Group could, if so advised, inform Emory that it wishes to take no active part in the present proceeding and that it will submit to an order for revocation but not to any order as to costs.

CONCLUSION

There will be orders that service on Glaxo Wellcome be set aside; that Glaxo Wellcome and Glaxo Australia cease to be parties; that Glaxo Group be added as a respondent; that Emory have leave to amend its application and statement of claim in conformity with these reasons for judgment; that Emory have leave to serve Glaxo Group outside the Commonwealth; and that BioChem have leave to amend its defence.

I will entertain submissions on costs.

Associate:

Dated:              31 July 1998