Summary

The High Court has held that it had jurisdiction to construe the claims of a US patent in a dispute involving a patent licence with an English law and jurisdiction clause.

Background

EU member states have exclusive jurisdiction, regardless of the domicile of the parties, in proceedings concerned with the registration or validity of patents, including any European patent granted for that member state (Article 24, recast Brussels Regulation (1215/2012/EU)) (Article 24)).

Where a court of a member state is seised of a claim which is principally concerned with a matter over which the court of another member state has exclusive jurisdiction under Article 24, it must decline jurisdiction (Article 27, recast Brussel Regulation) (Article 27).

In Anan Kasei Co Ltd v Molycorp Chemicals & Oxides (Europe) Ltd, the High Court had no jurisdiction over a claim for infringement of a German patent, or to order disclosure for German action, as the substance of the dispute involved issues of validity (www.practicallaw.com/5-632-9121).

In a case where validity was not, and could not, be raised, the court could still consider the construction of foreign patents in determining infringement issues (Actavis UK Ltd v Eli Lilly & Co, www.practicallaw.com/4-572-1394).

The English court has no jurisdiction over an action to determine the title to, or the right to possession of, foreign land, or the recovery of damages for trespass to that land (British South Africa Co v Companhia de Moçambique [1893] AC 602 HL) (the Moçambique rule).

Exceptions to the Moçambique rule include the contractual exception. For example, the Supreme Court has held that foreign intellectual property rights (IPR) could be enforced in the English court, where validity was not challenged, and there was no policy issue preventing enforcement of foreign copyrights (Lucasfilm Ltd v Ainsworth [2011] UKSC 39).

Facts

C applied for a declaration against U that it was not obliged to continue to pay royalties under a patent licence granted by U for patents relating to C’s products. The only patent to which the licence applied was a US patent (the patent). C claimed that its products, manufactured and sold in the USA, fell outside the scope of the claims of the patent.

U applied to strike out those parts of C's pleading which raised issues of invalidity, on the ground that the English court had no power to determine the validity of a foreign patent.

Decision

The court dismissed U's application. It held that it had jurisdiction to deal with the issues raised in C's complaint.

As in Actavis, C did not claim that the patent was invalid, merely that its claim construction was correct. C argued if its construction was correct, this would lead to a finding that its product fell outside the scope of the claims of the patent, and therefore no royalties were payable under the licence. It was not asking the English court to conclude that the patent was invalid, merely that U's construction ought to be rejected.

Under the licence, U and C agreed to submit generally to the exclusive jurisdiction of the English courts. This meant that they had submitted to the jurisdiction of the English courts all disputes under or in connection with the licence, unless the licence terms indicated to the contrary. Exclusive jurisdiction clauses are to be interpreted widely, as commercial parties were likely to have intended their disputes to be resolved in a single forum.

The parties had agreed that revocation or similar claims for invalidity must be determined by the courts of the state of protection, but the licence did not otherwise limit the broad scope of the jurisdiction clause, which included disputes as to scope of claims.

The court rejected U’s argument that issues of infringement and validity were inseparable, and that since validity of a foreign patent was not justiciable in the UK, clauses in patent licences which gave exclusive jurisdiction over infringement of foreign patents to the English court would generally be unenforceable. Given the importance of such clauses in patent licences, the terms agreed by the parties in the licence were important.

Following Lucasfilm and Actavis, the Moçambique rule did not apply here. C's case was limited to a dispute about the scope of the claims of the patent, and only referred to validity in support of its construction of those claims. So the dispute was not principally concerned with the question of validity. C's case was a contractual claim for a declaration that no royalties were due under the licence because its product was not one that fell within the scope of a claim of the patent, irrespective of its validity. Since the parties had agreed that the scope of the licensed patents ought to be determined by the English court, it was not an affront to comity to give effect to that agreement, and it fell within the contractual exception to the Moçambique rule.

The UK courts must respect the sovereignty of other states but this did not prevent an action for infringement of foreign IPR, even if the validity of a grant was in issue. Any party might challenge the validity of the patent in court proceedings, which was different from an attempt to challenge legislation or government acts.

Comment

This decision confirms that exclusive jurisdiction clauses providing for the determination of disputes relating to the infringement of foreign IPR, or, as here, to determine the scope of those rights for example under a patent licence, will in principle be enforceable in the English courts, provided that there is no direct challenge to the validity of the right in question. The court also drew a clear distinction between disputes relating to construction of patent claims and disputes seeking to challenge the patent’s validity. If the court had held that C was seeking to invalidate the patent in the English court that would have been contrary to the licence under which the parties agreed that the validity of patents should be decided by the courts where they were granted. In any event a declaration or finding of invalidity would not affect the obligation to pay royalties, which would remain until the US courts held that the patent was invalid.

The court's obiter comments that direct challenges to the validity of foreign patents would not be justiciable could indicate that the courts are likely to apply the same rules to non-EU patents as currently apply to EU patents under the Brussels I regulation, which may become more relevant depending on the outcome of the Brexit negotiations.

Case: Chugai Pharmaceutical Co Ltd v UCB Pharma SA [2017] EWHC 1216 (Pat).