Welcome to the new version of the Patents Manual. Please note there are changes to the numbering and sequence of the chapters and pages in the manual. You are encouraged to take the time to explore and familiarise yourself with this new structure. Bankruptcy

Date Published

Key Legislation:

Patents Act:

  • s187 Registration of particulars of patents etc.  
  • s188 Trusts not registrable  

Patents Regulations:

In the case of a bankrupt, the rights which are the personal property of the bankrupt pass absolutely to their registered trustee or the Official Trustee (section 58 of the Bankruptcy Act) - but such vesting of patent rights are conditional upon the interest being registered in the Register of Patents. Where the Commissioner receives a request to record a trustee in bankruptcy in the Register, the trustee is to be recorded provided there is relevant proof - such as a sequestration notice or other document or order declaring the current holder of patent rights bankrupt.  As there will be no deed of assignment, the entry should refer to the sequestration order or other document as giving rise to the trustee's entitlement.

When dealing with a request by a trustee in bankruptcy to be recorded on the Register, the following points should be noted:

  1. Before recording a transfer to a trustee, the Commissioner must check that the patent is the property of the bankrupt (is the bankrupt recorded as the patentee, is there joint ownership of the patent).
  2. Recording the fact that the person is a trustee is inappropriate, as this is recording notice of a trust.
  3. Information extracted from the National Personal Insolvency Index is prima facie evidence of the facts listed (Bankruptcy Regulations 1996, reg 13.10).

Note 1: The assignment of a bankrupt’s property to his trustees in bankruptcy (or whoever is the representative of his creditors) under the law of a country which has jurisdiction over his person operates as an assignment of the movables of the bankrupt wherever locally situate, but only to the extent where the assignment is made in accordance with the laws of the situ of the movables (Radich v Bank of New Zealand (1993) 45 FCR 101).

Note 2:  The effect of bankruptcy on the ownership of a patent was discussed by the Administrative Appeals Tribunal in the matter of Reilly v Commissioner of Patents 36 IPR 314.  In that case, the patentee became bankrupt after the patent was granted.  The patent ceased through non-payment of the renewal fee.  Issues arising were who was responsible for paying the fee, whether the patent belonged to Reilly or his trustee in bankruptcy, and whether the trustee in bankruptcy can be entered on the Register.  The following is the portion of that decision that dealt with the bankruptcy issues:

“29.  Mr Hanson has submitted that the property in the patent has passed to the trustee.  That would amount to an assignment by law rather than a voluntary assignment by Mr Reilly.  Whether or not that has occurred depends on the operation of the Bankruptcy Act.

30.  Sub-section 116(1) of the Bankruptcy Act provides, in so far as it is applicable to this case, that

“(1)  Subject to this Act:

(a)  all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him, or has devolved or devolves on him, after the commencement of the bankruptcy and before his discharge;

is property divisible amongst the creditors of the bankrupt.”

Sub-sections 116(2)-(8) qualify the general provision of sub-section 116(1) but they are not relevant to the circumstances of this case.

31.  The word `property' is defined in sub-section 5(1) to mean

"... real or personal property of every description, whether situated in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal estate."

As a patent is personal property (see paragraph 20 above), it is among the property which is divisible among the creditors of a bankrupt person.

32.  Section 138 of the Bankruptcy Act limits the trustee's power in respect of certain industrial property. It applies to the situation in which the bankrupt person is liable to pay royalties or a share of the profits to a person in respect of those rights. While it underlines the fact that a patent is amongst the property which passes to the trustee, section 138 does not apply to a situation in which the bankrupt person is the grantee of the patent as was Mr Reilly.

33.  Section 116 identifies the property which is available for distribution among the creditors but it is left to other provisions of the Bankruptcy Act to deal with the manner in which the trustee takes possession of the property and realises it. Subsection 129(1), for example, provides that the trustee shall forthwith take possession of all property capable of manual delivery. Possession is different from proprietary rights. Those rights are the subject of section 132. Subsection 132(1) provides that, where a trustee is appointed by the creditors, the property of the bankrupt passes to and vests in the trustee.

34.  Sub-sections 132(2) provides generally that

"Subject to this section, the property of the bankrupt passes from trustee to trustee and vests in the trustee for the time being during his continuance in office or, if the Official Trustee becomes the trustee, in the Official Trustee, without any conveyance, assignment or transfer."

35.  Sub-section 132(3) provides for an exception to the general position. It provides that:

"Where a law of the Commonwealth or of a State or Territory of the Commonwealth requires the transmission of property to be registered, and enables the trustee to be registered as the owner of any such property that is part of the property of the bankrupt, that property, notwithstanding that it vests in equity in the trustees by virtue of this section, does not vest in the trustee at law until the requirements of that law have been complied with."

36.  It is clear from the provisions of section 187 of the Patents Act and regulation 19.1 of the Patents Regulations that I have already set out (see paragraphs 22-24 above), that particulars of a transfer of an entitlement to a patent must be registered. From the provisions of section 188 of the Patents Act it is equally clear that notice of "any kind of trust" is not registrable.

37.  Section 187 and regulation 19.1 are provisions which require the transmission of the patent to be registered within the meaning of sub-section 132(3) of the Bankruptcy Act. The transmission of the patent to the trustee in bankruptcy would, therefore, have to be registered before it vests in him at law. This is not altered by section 188 for that does not prevent the trustee from being registered as the owner. It simply states that notice of a trust may not be registered. It follows that the patent vested in equity in the trustee in bankruptcy but did not vest in him at law as I am satisfied on the evidence that the trustee was not entered on the Register of Patents in any capacity at all.

38.  So long as the trustee did not have his name entered on the Register of Patents as the proprietor of the patent, this patent vested in him in equity but he could not be regarded as the 'patentee'.  As is clear from the definition of 'Patentee' (see paragraph 19 above), a finding that a person is a patentee is not dependent upon his legal or equitable interest in the patent but upon his being entered in the Register of Patents as either the grantee or as the proprietor.  As the trustee is not entered as the proprietor (even though he would be entitled to be entered), the patentee must continue to be Mr Reilly.  It must be Mr Reilly, therefore, who as the patentee, could pay the renewal fee.”

Amended Reasons

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