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.