The invalidity of the patent and the amount paid as royalties during a licensing contract

During a licensing contract, the licensee is the person obtaining the licence in exchange for the payment of a compensation.

The compensation for a licence could be a sum of money or a rent (known as royalties) which amount is connected to the percentage of some variables such as the quantity of items sold by the licensee (the proprietor of the patent) or the income.

In the case at hand, there was a patent licensing contract in regard to a “pomace/olive seed separator” machine. After having paid royalties for years, the licensee of the patent brought an action to pronounce it null and, as a consequence, to ask for the dissolution of the licensing contract and the sentence of the licensor to reimburse the amount paid.

At a first stage the Board of Appeal of Rome accepted the requests of the licensee with judgement no. 6688/2014.

Against this provision, the licensor turns to the Cassation complaining about the wrong acknowledgement by the Judge of second instance of the licensee’s right to be reimbursed for the amount already paid as royalties.

The licensor stated that the restitution of the amount could not be consented – being the money collected for the spontaneous execution of the contract – and it could not be given back since the licensee had benefitted from it independently of the statement of nullity of the patent.

The Court of Cassation with the ordinance no. 6373 of March 5, 2019 accepted this exception and annulled the judgement of the Board of Appeal of Rome in light of the regulation at Art. 77 of the CPI (ex art. 59-bis of law no. 1127/1939).

This law, registered effects of the nullity, provides the declaration of invalidity of the patent to be retroactive, but it does not compromise:

  • The acts of enforcement of judgements for infringement that have acquired the force of res judicata already made;
  • The contracts having as object the invention and that were already terminated when the judgement declaring the nullity of the patent acquired the force of res judicata, but only in the measure of the current execution. Nevertheless, in this case the Judge, taking account of the circumstances, may grant a fair reimbursement of the amount already paid during the enforcement of the contract;
  • The payments already made in accordance to articles 64 and 65, as fair compensation, rent or price.

Therefore, the above order states on the one hand the retroactivity of the declaration of nullity but on the other hand that the latter does not interfere with the part already enforced of the licence contract having as object the invention.

This utterance moves from the premise that before the declaration of nullity, the licensee has benefited from the exclusive right conferred to him.

On the contrary, the Board of Appeal of Rome in arranging, by its judgement, the restitution of the payment previously and spontaneously made by the licensee did neither take into account this special disposition nor did it explained the reasons why it decided not to apply them.