Know how – can a licensee sell its rights? (Neobev Case Jan 2014)
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Without the know-how licensor’s consent, assignments of know-how licenses may not be possible: Neobev Case 2014.
![Know-how – can a licensee sell its rights?
Without the know-how licensor’s consent, assignments of know-how licenses may not
be possible: Neobev Case 2014.
Bacchus was part owner of a patent with Neobev.
Bacchus was the licensee under certain intellectual
property licenses from Neobev:
• Neobev’s patent co-ownership;
• copyright in a number works describing
recipes, process instructions, standard
operating procedures, testing specifications
and laboratory procedures relating to cream
liqueur beverages; and
• confidential information/know-how relating to
the subject of those copyright works.
Bacchus went into liquidation. The liquidator of
Bacchus proposed to assign Bacchus’ licensed rights.
The terms of Bacchus’ licenses were unclear, and in
any event did not expressly provide for either the
termination of the licenses on insolvency, or their
continuity post-cessation of Bacchus’ business.
The Federal Court of Australia decided on January 16,
2014 that at least insofar as the know-how rights were
concerned, Bacchus’ licenses were not assignable.
The case is Neobev Pty Ltd v Bacchus Distillery Pty
Ltd (Administrators Appointed) (No 3) [2014] FCA 4.
The following points were made in the reasons for
judgment.
A trust of a patent
Regardless of what is recorded on the patents register
as to the inventors and as to the owners, a trust may
be declared in circumstances where that is the
intention of the relevant parties, determined
objectively. Such a trust need not be in writing and
may be declared over future property (in this case, a
patent to be granted in the future).
Registration of equitable interests in a patent
An equitable interest in a trust may be registered on
the patents register. This is so despite s 188 of the
Patents Act 1990 (Cth), which provides that “notice of
any kind of trust relating to a patent or license is not
receivable by the [Patents Office] and must not be
registered”. The Court endorsed previous case law
authority holding that this section is to be read
narrowly.
Could Neobev say “no”?
Neobev was entitled, as co-owner, to withhold its
consent to any license or assignment of the co-owned
patent by Bacchus (Patents Act s 16(1)(c)).
Termination on insolvency?
The Court referred (without endorsement) to cases
suggesting that an insolvency administration of an
intellectual property licensee does not necessarily
bring a license to an end.
Assignment of confidentiality obligations?
This being a case where the rights owner had not
consented, and was not prepared to consent, to the
licensee’s assignment of its know-how rights, the
assignment of the rights by the liquidator to a
purchaser of Bacchus’ business was not legally
possible. The reason concerned the inextricable link
between rights and obligations and the rule that
contractual burdens/obligations are not assignable.
The court stated:
(At para 141):
“Bacchus emphasises the right to use the information, but
one of the features of the confidential information is that it
was received by Bacchus in such circumstances as to
import a duty of confidence . . . It seems fundamentally
inconsistent with that feature to allow assignment by the
person who owes the obligation of confidence. That might
be possible where there is an express provision allowing
assignment . . . but there is no express provision allowing
assignment in this case. There is no basis upon which to
imply such a provision. One cannot transfer the right to use
without the obligation and the obligation is incapable of
assignment..” [para 141]
This case sounds a note of caution to those drafting
nondisclosure agreements and licenses of confidential
information, particularly in circumstances where a sale
by the licensee of its rights can be envisaged.
The parties will need to make express provision for
that in a way which is not seen as assigning obligations
without the licensor’s consent.
Last update: March 13, 2014
Anna Sharpe | Sharpe Ivo
(AU & Int’l) +61 [0]409 809 963 | asharpe@sharpeivo.com | www.sharpeivo.com](https://image.slidesharecdn.com/know-howcanalicenseesellitsrightsneobevcasejan2014-140312200722-phpapp01/85/Know-how-can-a-licensee-sell-its-rights-Neobev-Case-Jan-2014-1-320.jpg)
Know how – can a licensee sell its rights? (Neobev Case Jan 2014)
- 1. Know-how – can a licensee sell its rights? Without the know-how licensor’s consent, assignments of know-how licenses may not be possible: Neobev Case 2014. Bacchus was part owner of a patent with Neobev. Bacchus was the licensee under certain intellectual property licenses from Neobev: • Neobev’s patent co-ownership; • copyright in a number works describing recipes, process instructions, standard operating procedures, testing specifications and laboratory procedures relating to cream liqueur beverages; and • confidential information/know-how relating to the subject of those copyright works. Bacchus went into liquidation. The liquidator of Bacchus proposed to assign Bacchus’ licensed rights. The terms of Bacchus’ licenses were unclear, and in any event did not expressly provide for either the termination of the licenses on insolvency, or their continuity post-cessation of Bacchus’ business. The Federal Court of Australia decided on January 16, 2014 that at least insofar as the know-how rights were concerned, Bacchus’ licenses were not assignable. The case is Neobev Pty Ltd v Bacchus Distillery Pty Ltd (Administrators Appointed) (No 3) [2014] FCA 4. The following points were made in the reasons for judgment. A trust of a patent Regardless of what is recorded on the patents register as to the inventors and as to the owners, a trust may be declared in circumstances where that is the intention of the relevant parties, determined objectively. Such a trust need not be in writing and may be declared over future property (in this case, a patent to be granted in the future). Registration of equitable interests in a patent An equitable interest in a trust may be registered on the patents register. This is so despite s 188 of the Patents Act 1990 (Cth), which provides that “notice of any kind of trust relating to a patent or license is not receivable by the [Patents Office] and must not be registered”. The Court endorsed previous case law authority holding that this section is to be read narrowly. Could Neobev say “no”? Neobev was entitled, as co-owner, to withhold its consent to any license or assignment of the co-owned patent by Bacchus (Patents Act s 16(1)(c)). Termination on insolvency? The Court referred (without endorsement) to cases suggesting that an insolvency administration of an intellectual property licensee does not necessarily bring a license to an end. Assignment of confidentiality obligations? This being a case where the rights owner had not consented, and was not prepared to consent, to the licensee’s assignment of its know-how rights, the assignment of the rights by the liquidator to a purchaser of Bacchus’ business was not legally possible. The reason concerned the inextricable link between rights and obligations and the rule that contractual burdens/obligations are not assignable. The court stated: (At para 141): “Bacchus emphasises the right to use the information, but one of the features of the confidential information is that it was received by Bacchus in such circumstances as to import a duty of confidence . . . It seems fundamentally inconsistent with that feature to allow assignment by the person who owes the obligation of confidence. That might be possible where there is an express provision allowing assignment . . . but there is no express provision allowing assignment in this case. There is no basis upon which to imply such a provision. One cannot transfer the right to use without the obligation and the obligation is incapable of assignment..” [para 141] This case sounds a note of caution to those drafting nondisclosure agreements and licenses of confidential information, particularly in circumstances where a sale by the licensee of its rights can be envisaged. The parties will need to make express provision for that in a way which is not seen as assigning obligations without the licensor’s consent. Last update: March 13, 2014 Anna Sharpe | Sharpe Ivo (AU & Int’l) +61 [0]409 809 963 | asharpe@sharpeivo.com | www.sharpeivo.com