AARLEG-#21382259-v1-Intellectual Property and …• Patents Act 1990 allows registration of: • Standard patents(20 year protection) - higher degree of inventiveness; relatively

Allens is an independent partnership operating in alliance with Linklaters LLP.

Intellectual Property and InsolvencyAndrew Wiseman, PartnerJonathan Adamopoulos, Lawyer

• Forms of Intellectual Property

• Assignments and Licensing

• Intellectual Property and the Personal Property Securities Act

• Case Study: Larkden v Lloyd Energy Systems

• Case Study: In re Qimonda AG

Overview

Forms of Intellectual Property

Registered UnregisteredPatents

an inventive idea

Copyright

an original expression

Trade Marks

a distinctive brand

Unregistered Trade Marks

reputation and goodwill

Designs

a distinctive appearance

Confidential Information

information of a confidential nature

Plant Breeder’s Rights

a new and distinctive plant variety

Circuit Layouts

original layout of an integrated circuit

• Right to protect original works from unauthorised reproduction. • Copyright Act 1968 provides protection for:

• literary, dramatic, musical and artistic works;• sound recordings, cinematograph films, television

broadcasts, sound broadcasts, published editions of works.

• Literary works: includes books, letters, documents, fliers, databases, computer programs.

• Artistic works: includes drawings, logos, photographs, technical diagrams, buildings.

Copyright

• Registration not required (protection automatic).• Copyright protects expression of ideas in a certain form, not the

underlying idea (‘idea/expression dichotomy’).• ‘Originality’ test:

• not require any literary or artistic merit;• work must originate from author and some skill and

labour must be involved in making the work (eg. White Pages).

• Copyright generally subsists until end of 70th year after death of author or relevant performance / publication (some exceptions).

Copyright

• A trade mark is:• A distinctive sign• Used, or intended to be used, in the course of trade • To distinguish goods/services of one person from

goods/services of another• A trade mark may be:

• registered ® under Trade Marks Act 1995 or internationally

• unregistered ™ based on reputation or goodwill

Trade Marks (registered)

• Shapes, aspects of packaging, colours, sounds and scents, in addition to more traditional signs such as letters, words, names, signatures and logos.

• Capable of distinguishing applicant’s goods/services in respect of which seek to register trade mark.

• Cannot be registered (and may be deregistered) if:• Descriptive or generic;• Offensive or illegal; or• Applicant does not intend to use the mark.


• Registered for particular goods/services (45 classes). • Initial registration 10 years from application, renewable for

further periods of 10 years. • Indefinite registration so long as renewal fees paid and

mark remains valid. • Madrid Protocol - single application covering all countries

which are parties to Protocol (examined country by country).

• Registration not essential but strongly recommended.


• Common law action for 'passing off‘ protects:• unregistered trade marks with reputation and goodwill;• get-up and names which are not trade marks.

• Elements of passing off include:• reputation or goodwill relating to name, mark or get-up;• use by defendant of the same or a deceptively similar

name, mark or get-up so as to confuse or deceive; and• damage or likely damage to business reputation or

goodwill of plaintiff as a result of conduct. • Misleading / deceptive conduct (s18 Australian Consumer

Law)

Trade Marks (unregistered)

• Exclusive right to exploit an invention comprising a product or a process that provides a new way of doing something.

• Patents Act 1990 allows registration of: • Standard patents (20 year protection) - higher degree of

inventiveness; relatively expensive and longer to secure. • Innovation patents (8 year protection) – lower threshold of

inventiveness; cheaper, quicker. • Patent will only be granted to person entitled to it (inventor),

person entitled to have it assigned to them, successor in title. • Can file single international patent application designating over

120 countries and regions (PCT) - examined and granted on country-per-country basis.

Patents

• Invention that is (as at filing date):• Manner of manufacture - product or process that is useful in

a practical sense and consists of a vendible product;• Novel compared to prior art (prior public acts or written

publications anywhere in the world);• Not obvious in light of publicly available information:

• 'inventive step' for a standard patent;• 'innovative step' for an innovation patent.

• Useful - invention must attain the results promised in patent;

• Not secretly used in commercial context in Australia by or with authority of patentee.

Patents

• Overall appearance of a product resulting from one or more of its visual features (which may serve a functional purpose). • 2D (patterns, ornamentation) or 3D (shape, configuration).• wide variety of industrial and handicraft products - medical

instruments, watches, electrical appliances, textile designs. • Registration of ‘product’ under Designs Act 2003 = thing that is

manufactured or handmade (or component part of complex product) > registration for 10 years.

• To be registrable, design must be new and distinctive (not identical, or substantially similar in overall impression, to a design in the prior art base (designs publicly used in Australia or published anywhere in world).

Designs

• Generally, intellectual property owned by creator: • Trade mark: brand owner• Patents: inventor• Copyright: author• Designs: designer

• Following presumptions apply, subject to contract:• Employer owns intellectual created by employee in

course of employment. • Independent contractor generally owns intellectual it

creates for client (irrespective of payment).• Intellectual property created by more than one person

jointly owned.

Assignments and Licensing

• As personal property, intellectual property can be assigned.

• Generally, an assignment must be in writing in order to be effective.

• Intellectual property can also be licensed:• Express / Implied Licence• Revocable / Non-revocable Licence• Exclusive / Non-Exclusive Licence

• During a liquidation, intellectual property is treated as any other asset in the company.

Assignments and Licensing

• Personal Property Securities are interests in property (other than land) that in substance secure payment or performance of an obligation.

• Personal Property includes intellectual property and intellectual property licences.

Intellectual Property and the PPSA

• Intellectual Property means “any of the following rights (including the right to be a party to proceedings in relation to such a right)”:(a) designs(b) patents(c) trade marks(d) plant breeder’s rights(e) circuit layout rights(f) copyright(g) a right under a foreign law in respect of the above

• Intellectual Property Licence means “an authority or licence (within the ordinary meaning of that term) to exercise rights comprising intellectual property.”

• Intellectual Property Licences are not personal property securities per se.



Section 105(1): Deemed References to IP Rights

The PPSA applies to IP rights (including rights under IP licences) in relation to goods, in the same way that it applies to the goods if:• the exercise of the lender’s rights in those goods would

necessarily involve the exercise of IP rights; and• the payment or obligation secured by the security interest

is (in addition) secured by a security interest that is attached to the IP.


Section 105(1): Deemed References to IP Rights.

If s105(1) applies, then the following descriptions are deemed to include a description to the relevant IP or IP licence:• a description of the goods in the security agreement; and• the registered description of the goodsunless there is a contrary intention in the security agreement.


Company A

Robot Intellectual Property

Effect of Section 105


Company ALOAN

Agreement take security

over robot

Robot

Bank




Although the security agreement only refers to a security interest in the robot, the court determines that the security interest extends to the patent, to the extent required to permit the robots to operate.


Company ALOAN

Section 38: Bank has security over

Robot and IP

Bank


+


Company ADefault on Loan

Bank enforces security and takes

Robot and IP

Bank


+

X



Section 105(2) deems an interest in IP to be recorded on the PPS register (even though it is not specifically listed) ... so searching the PPS register may not be enough

• Implications for purchasers/investors• Due diligence and warranty protection will be important


• Section 44 provides:A buyer … takes free of a security interest if … searching the register, immediately before the time of the sale … by reference only to the serial number of the property, would not disclose a registration that perfected the security interest

• How does this interact with s105?


Section 106: IP Licences and Transfers

• If an IP licence the subject of a security interest is transferred, the security interest binds successors-in-title to the same extent the assignor was bound.

• What if an IP licence prohibits the granting of security?

Case Study: Larkden v Lloyd Energy Systems

• Larkden Pty Limited is the owner of certain patents relating to solar energy (the Technologies).

• Larkden entered into a licensing agreement with Lloyd Energy Systems.

• Under the agreement, Larkden owned improvements to the Technologies developed by Lloyd.

• In 2010, a dispute arose between the parties regarding the ownership of a number of improvements to the Technologies.

Solfast Pty Limited


Larkden Pty Limited Lloyd Energy Systems Pty LimitedLicence Agreement

Patented Technologies

Patent Application Family

to content

Graphite Energy Pty Limited

Charge in Solfast Shares

Graphite Energy NVAssignment

of Charge

Patents Office

• 7 September 2011: Arbitrator releases draft Report

• 8 September 2011: Graphite Energy NV gives notice of default

• 13 September 2011: Lloyd enters into Voluntary Administration

• 20 September 2011: Arbitrator issues arbitral award


Arbitral Award included the following orders:• a declaration that Larkden is entitled to be made owner of, and

have assigned to it, all the rights, title and interest in the inventions embodied in the Patent Application Family

• a declaration that Lloyd holds all its rights, title and interests in Solfast on constructive trust for Larkden

• a decree of specific performance requiring Lloyd to procure Solfast to assign its interests in the Patent Application Family to Larkden

• an order requiring Lloyd to furnish assistance to Larkden in respect of related claims against third parties in the Patents Office.


Statutory Moratorium against ProceedingsLloyd

• Leave should be refused.

• The proceedings would distract the administrator from his duties and will incur costs.

• Generally, leave is only rarely granted and the issue should be approached with caution.

Larkden

• The proceedings concerned the enforcement of an award.

• The substantive hearing had already taken place.


Statutory Moratorium against ProceedingsHammerschlag J• To take a “cautious approach” would be an “unwarranted

confinement” of the court’s discretion.• Court must take a case-by-case approach to this issue.• Circumstances justifying the stay being lifted:

• the arbitration had concluded• His Honour granted the administrator an extension for the

convening period for the second creditor’s meeting• the orders were largely proprietary in nature and there would

be minimal prejudice to other unsecured creditors• the objections to the enforcement were of a legal (rather than

factual) nature.


Enforcement of AwardLloyd’s Objections

• The orders relating to Lloyd’s proprietary interests in Solfastwere beyond the scope of the arbitrated dispute.

• The orders regarding the declaration of trust and assistance to be rendered by Lloyd to Larkden were futile or vague and therefore contrary to public policy.


Enforcement of AwardHammerschlag JConnection with Agreement• Under the Agreement, all ‘disputes connected with the Licence’ were

to be referred to arbitration.• The Arbitrator found that Lloyd used Solfast as a vehicle for

improvements to the Technologies – this was connected to the Licence Agreement.

Public Policy• Usually reserved for cases that pertain to the state’s basic

notions of morality and justice.• If an arbitral order is “empty” due to subsequent events, it does

not render it void on public policy grounds.


• Qimonda (a German company) was the manufacturer of semi-conductor memory chips (mainly DRAM).

• It had an international portfolio of 10,000 patents in respect of its technology, 4,000 of which were US patents.

• To avoid patent infringement, it had royalty-free cross-licensing agreements with other semi-conduct chip manufacturers.

• Licensees of Qimonda’s patents included Samsung, IBM, Intel and Hynix.

Case Study: In re Qimonda AG

• In January 2009, Qimonda filed an application in the Munich Insolvency Court – Dr Jaffe appointed as insolvency administrator.

• In June 2009, Dr Jaffe applied to the US Bankruptcy Court to recognise the German proceedings as the foreign main proceedings.

• The order was granted.• Dr Jaffe then applied to have the effect of s365 of the US

Bankruptcy Code modified so that s365(n) would not apply.• Under the German Insolvency Code, executory contracts are

automatically unenforceable unless the administrator elects to perform them.


• The Chapter 15 of the US Bankruptcy incorporates the UNCITRAL Model Law on Cross-Border Insolvency with some modifications.

• Section 365 of the Code allows a trustee to assume or reject an executory contract of the debtor, subject to an order of the court.

• Under s365(n), if the trustee terminates a contract which grants an intellectual property licence, the licensee may:• treat the contract as terminated; or• retain its rights (including any exclusivity provision) under

the contract for the remaining duration of the contract (including a right of extension).


• Section 1506 of the Code provides that nothing in the cross-border insolvency provisions prevents a Court from refusing to take action if the action would be manifestly contrary to public policy of the United States.

• A similar provision applies in Australia under Article 6 of the Model Law (under the statutory force of the Cross-Border Insolvency Act 2008 (Cth)).


• At first instance, Dr Jaffe’s application was successful. The licensees appealed.

• The evidence established that semi-conductor industry operates in a “patent thicket” – one device may incorporate multiple patents.

• Judge Mitchell held (refusing the sought relief):• “That the right of a non-bankrupt licensee to continue using a

patent license was deemed by Congress to be of great public importance can scarcely be doubted”

• The burdens on US society:• discouraging research and development• discouraging the construction of semiconductor

manufacturing facilities


For more information…

Visit our website, www.allens.com.au, for:• the Corporate Insolvency & Restructuring blog;• electronic, fully-searchable versions of today’s presentation materials;• past papers presented at our Insurance & Reinsurance and Corporate

Insolvency & Restructuring forums;• the 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007,

2008 and 2009 Annual Reviews of Insurance & Reinsurance Law; and• the 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007 and 2008

Annual Reviews of Insolvency & Restructuring Law.Also, the second edition of Allens’ “Directors Duties During Insolvency” is available now from Thomson Law Book Co.

Allens is an independent partnership operating in alliance with Linklaters LLP.

Intellectual Property and InsolvencyAndrew Wiseman, PartnerJonathan Adamopoulos, Lawyer

Documents

AARLEG-#21382259-v1-Intellectual Property and …• Patents Act 1990 allows registration of: • Standard patents(20 year protection) - higher degree of inventiveness; relatively