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Monday, February 16, 2015

Regency Media: won the battle, but lost the war

By Adrian Chang, Lawyer

Regular readers will recall that in April last year we wrote about an interesting case, the appeal to which (Regency Media Pty Ltd v MPEG LA, LLC [2014] FCAFC 183) was handed down just before the Christmas break.

As explained in the judgment, MPEG licensed a suite of patents relating to video encoding technology to Regency. All of the patents under the agreement formed part of a pool of standard essential patents that underpinned MPEG audio-visual encoding technology.

Regency, relying on section 145(1) of the Patents Act 1990 (Cth), purported to terminate the agreement after one of the subsisting patents expired.

Section 145(1) entitles either party to terminate a licence to exploit 'a patented invention' 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'.

Regency lost that case – Justice Flick held that the 'patented invention' the subject of the licence could be determined by reference to how it was described in the contract. Because the contract in question described the invention as a set of products which were underpinned by a series of patents, and not all of those underlying patents had yet expired, Regency could not rely on section 145(1) to terminate the licence.

Regency appealed to the Full Court of the Federal Court.

Justices Bennett and Pagone (Justice Nicholas ultimately came to the same conclusions) held that the meaning of 'patented invention' in section 145(1) does not depend on a description of the 'invention' in the licence agreement, but instead means an invention in respect of which a patent has been granted under the Patents Act.

Accordingly, the Full Court accepted one of Regency's key arguments on appeal.

Unfortunately for Regency, that wasn't the end of the story.

The court went on to consider MPEG's contention that the phrase 'a patented invention' should be read to include the plural as well as the singular. In support of its argument, MPEG referred to the Acts Interpretation Act 1901 (Cth) sections 2 and 23(b).

Section 2 provides that the Acts Interpretation Act applies to all Acts, while section 23(b) provides that words in the singular include the plural and vice versa.

Justices Bennett, Pagone and Nicholas considered that there was no reason that those provisions should not apply to section 145(1) of the Patents Act.

The Full Court therefore held that the licence could not be terminated under section 145(1) until all of the patents licensed under it had expired.

Accordingly, even though Regency was successful in its ground for appeal, the appeal was ultimately dismissed.

Lessons learned

The Full Court's decision was heavily influenced by a concern about the commercial effect of Regency's interpretation of s145(1). It does not mandate an enquiry into patentability – that is, it does not require a test of the validity of the patents the subject of the agreement.

It does provide a clear answer as to when section 145(1) will give rise to a right to terminate a licence agreement – when all of the patents subject to the licence agreement have expired.

This makes life a bit simpler in some ways, though perhaps Regency would disagree.

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