The Federal Court of Australia recently considered in MPEG LA, L.L.C. v Regency Media Pty Ltd [2014] FCA 180 (6 March 2014) the statutory right to terminate a contract where certain patents identified in the contract are no longer in force. It was found that the expiration of certain patents of a patent pool is not alone sufficient ground to terminate a contract licensing patents of the patent pool. A copy of the decision can be found here.
MPEG LA Patent Pool
MPEG LA licenses patents covering essential patents required for, among others the MPEG-2 video compression standard, commonly used in DVDs and digital television, and the more modern AVC/H.264 video compression standard, commonly used in BluRay and high-definition digital television. MPEG LA enables a large number of patents (in some cases over 1000) to be licensed from various patent owners in the form of a patent pool.
The MPEG-2 video compression standard is a relatively old standard, and as such, some patents essential to implementation of the standard have expired in Australia and elsewhere.
Section 145 of the Patents Act
Section 145 of the patents act provides for termination of a contract relating to licence of a patented invention 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. Section 145 can be used to prevent a patentee from holding the licensee to an agreement to continue paying royalties after the relevant patents have expired.
Decision
The issue that ultimately divided the parties was the identification of the patented invention(s). Regency Media contended that each of the patents identified in the agreement constituted a separate “patented invention” and that the agreement could be terminated once any one of those patents have ceased to be in force. MPEG LA, on the other hand, contended that there were three patented inventions, namely the MPEG-2 Decoding Products; the MPEG-2 Encoding Products; and the MPEG-2 Packaged Medium, and made reference to these in the contract.
The Federal Court accepted the case of MPEG LA, and stated that Section 145 of the Act makes clear that the “patented invention” may be one that is protected by more than one patent. Furthermore, it was found that each of the three patented inventions presented by MPEG LA was a “manner of new manufacture” for the purposes of the definition of an “invention” as defined in the Patents Act.
In conclusion, it was found that Section 145 should be construed in this case as only permitting a party to terminate the contract where all of the patents in respect to each of the three “patented inventions” have ceased to be in force.