Putting a squeeze on patent licences

Background

UCB licensed to Chugai rights to exploit patents relating to biological products, in return for a royalty for product sales. Chugai sold a product called tocilizumab, a humanised monoclonal antibody used in the treatment of rheumatoid arthritis. Chugai manufactures and sells tocilizumab in the US. Only one patent remained in force, US Patent 7,556,771 (the Patent). The patent also contained an exclusive jurisdiction clause in favour of the English courts. Chugai contended that its tocilizumab product fell outside of the scope of the claims of the Patent. Whether the Patent claims covered tocilizumab was a matter of construction. In reliance of its construction, Chugai submitted that if UCB would have adopted the construction it urged on the court in this case then the Patent would not have been granted.

UCB’s position was that this was effectively a challenge to the validity of the Patent, and therefore, the English courts had no jurisdiction over this matter. Only the courts in the state where a patent is granted are competent to determine the validity of the patent. The English courts have no jurisdiction to determine the invalidity of foreign intellectual property rights.

Chugai’s stance was that it was not challenging the validity of the Patent but the court was entitled to determine whether some claims would not have been granted based on UCB’s construction and relevant prior art. In effect, Chugai sought to set up a “squeeze” argument where UCB’s construction in relation to infringement was sufficiently wide so as to place the claim within the scope of a prior art document, which would thereby render the claim invalid. If on the other hand UCB maintained a narrow construction to avoid the prior art Chugai’s product would not fall within the scope of the claims.

Decision

The court decided that there was no impediment to it deciding on issues of infringement and the scope of the IP rights in issue and that this did not call into question the underlying validity of the Patent. The court acknowledged that often issues of infringement and validity become intertwined. In the current case, Chugai was clear in that it was not seeking to challenge validity of the Patent, but merely sought a declaration which hinged on the construction of the claims of the US patent. Chugai were entitled to pray in aid the prosecution history of the Patent, as an aid to claim construction to assert that the Patent would not have been granted if UCB would have maintained its current construction, and therefore, UCB’s current construction should be rejected.

The exclusive jurisdiction clause meant that the parties agreed that the English court could decide all matters relating to the licence, save with respect to matters such as validity of foreign patents which were effectively carved out of the jurisdiction clause. The court acknowledged that such exclusive jurisdiction clauses were often found in patent licences and it made sense for a single court to determine all the issues of infringement, if they arose. Indeed, if UCB’s contentions were accepted, they would entirely eviscerate the efficacy of jurisdiction clauses in IP licences

Comment

It is important to note that if Chugai’s construction were correct, and its product was not within the scope of the claims of the Patent, this would have no effect on the underlying validity of the Patent. The decision confirms that the UK courts will determine any issues regarding the scope of foreign IP rights where the parties have contracted to give the UK courts the jurisdiction to do so. When entering into an IP licence the parties should be aware that any issues relating to the scope of the IP rights will be encompassed by their agreement, but issues relating to the validity of the rights will still be subject to the exclusive jurisdiction of the courts of the country granting the rights. Parties should therefore draft the governing law clauses in IP licences with care.

For litigants it is clear that the court will be unwilling to accept jurisdictional challenges in IP litigation where validity is clearly not in issue, or where the alleged infringer apprehends such a course of action by undertaking not to put validity into issue.