Recent Australian cases have highlighted that a company licensing its intellectual property (IP) may be exposed to risks of infringing third party’s IP rights from a licensee’s actions.

Some recent Australian patent cases (including Bayer Pharma Aktiengesellschaft v Genentech Inc [2012] FCS 1467 (interlocutory); Apotex Pty Ltd v Les Laboratoires Servier (No 4) [2010] FCA 1202; Apotex Pty Ltd v Les Laboratoires Servier (No 2) [2012] FCA 748) focus on whether the licensor and licensee have shared in a “common design”. The cases show that the risk will be higher for licensors where:

• the licensor is aware of the third party patent;
• the licensor is involved in the supply chain; 
• there is joint development of product, or co-ordination of business plans with the licensee; 
• the licensor is related to the licensee; 
• the licensor is involved in seeking regulatory approval or otherwise in how the licensed product/process is promoted; or
• the licensor receives a financial benefit from licensee sales.

There are a number of steps which may help mitigate the risk.

• Consider your own searches as licensor and address any risks identified (e.g. develop a workaround or modify the product). 
• Seek contractual protection from the licensee, including an appropriate indemnity, and an obligation to obtain relevant professional indemnity insurance. 
• Require the licensee to be solely responsible for bringing the relevant product to market. This may not be commercially appropriate, depending on the nature of the licensor/licensee relationship.

For further information, please contact:

Kristin Stammer, Partner, Herbert Smith Freehills
[email protected]

Amalia Stone, Herbert Smith Freehills
[email protected]

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