Mr Justice Henry Carr:
Introduction
- In these proceedings, the Claimant ("Chugai") seeks a declaration against the Defendants (collectively "UCB") that it is not obliged to continue to pay royalties under a patent licence ("the Licence") granted by the First Defendant ("UCB Pharma"). Although the claim is advanced in two separate actions against different companies in the UCB group, as far as the applications before me are concerned, the facts relied upon and the relief sought are identical.
- UCB Pharma is a Belgian company with an English branch which entered into the Licence with Chugai in respect of a portfolio of patents relating to products containing a humanised anti-IL-6 receptor antibody known as tocilizumab. Since 12 January 2016, the only patent still in force to which the Licence applies is US Patent 7,556,771 ("the 771 Patent"). The Second Defendant in the first action ("Celltech") is the registered proprietor of the 771 Patent and is a member of the UCB group. The Defendant in the second action ("UCB Biopharma") is also a member of the UCB group and is alleged by UCB to be the current proprietor of the 771 Patent.
- Tocilizumab is an immunosuppressive drug principally used in the treatment of rheumatoid arthritis. It is a humanised antibody made by grafting elements of the complementary determining regions of the donor murine anti-human IL-6 receptor antibody PM-1 into human heavy and light chain antibody sequences and by further modifying the human heavy chain residues with murine residues from PM-1 at certain specified positions. Chugai's tocilizumab product is sold under the brand name Actemra in the USA and RoActemra in Europe.
- Chugai claims that its tocilizumab products, which are, in part, manufactured and sold in the USA, fall outside the scope of the claims of the 771 Patent. Accordingly, Chugai seeks a declaration that it owes no royalties for the manufacture and sale of tocilizumab products manufactured after 12 January 2016.
- UCB alleges that, although framed as a claim for a declaration relating to a contract, a part of these proceedings, in substance, concerns not only the scope but also the validity of the 771 Patent. UCB submits that the validity of a US patent is non-justiciable, since the English court has no power to determine the validity of a foreign patent. Accordingly, it submits that those parts of Chugai's pleading which are said to raise issues of invalidity fall outside the subject matter jurisdiction of the English court.
- UCB originally claimed that the English court had no personal jurisdiction over the entire claim, and that the whole claim was non-justiciable. For this reason, it argued that the trial should not be listed within a year of issue of the claim, as is now generally the case for actions in the Patents Court. UCB claimed that the listing should be delayed pending resolution of its jurisdiction challenge. Rose J did not accept this submission, for the reasons given in her judgment of 28 February 2017; [2017] EWHC 444 (Pat). Pursuant to her order made on the same date, the trial is now listed for February 2018.
- After that judgment and order, by a letter dated 30 March 2017, UCB conceded personal jurisdiction and limited its challenge to justiciability to certain specified paragraphs of Chugai's Statement of Case, namely paragraphs [2(h)] and [25] - [35] ("the Disputed Paragraphs"). Powell Gilbert on behalf of UCB indicated that UCB would apply to strike out the Disputed Paragraphs, or for summary judgment in respect of them, and UCB put its application in this manner.
- In its skeleton argument on this application, UCB states that:
"For present purposes UCB's application is limited to arguing that issues concerning the validity of a foreign patent are non-justiciable. Should this case proceed further, UCB reserves its right to argue that any issue relating to the scope of a foreign patent is equally non-justiciable."
I do not accept that UCB is entitled to make this reservation. It commenced this application with a general challenge to jurisdiction. It then abandoned its application, save in respect of the Disputed Paragraphs. No reservation in relation to a further jurisdiction challenge was made by Powell Gilbert in its letter of 30 March, sensibly in my view. Against this background, UCB is not entitled to have a third bite at the cherry, by resurrecting jurisdictional issues at some future date.
- Given that these applications raise points of law and the facts are not in dispute, the parties are agreed, insofar as possible and appropriate, that I should decide them, rather than merely considering whether the issues raised by the Disputed Paragraphs are arguable. The parties are also agreed that I am not concerned with the technical aspects of this case, and it has not been necessary for me to consider the description of the 771 Patent or the prior art.
Chugai's Pleading
- In its Particulars of Claim, Chugai asserts that tocilizumab is not a substance the manufacture and/or sale of which would (but for the licence granted under the Licence) infringe any claim of the 771 Patent, properly construed. It claims, as is common ground, that the proper construction of the claims of the 771 Patent is governed by the laws of the United States, and it sets out its position on US law in a separate Statement of Case. Chugai pleads its primary contention at paragraph [3]:
"When properly construed in accordance with these principles [of US law], the requirement in the claims of the Patent that residues at particular positions in the framework regions of the humanised antibody molecule be "non-human donor" is not satisfied by residues at the relevant position(s) that are identical in both the human acceptor antibody and non-human donor antibody sequences. "Non-human donor" residues must be residues at the relevant positions that are not identical in both the human acceptor antibody and non-human donor antibody sequences and which must therefore be changed to the residue present in the donor sequence at that position."
- This is denied by UCB at paragraph [3] of its Statement of Case. It states that:
"UCB disagrees with Chugai's conclusion in paragraphs 3 and 25 that the term "non-human donor" in the claims of the 771 Patent excludes "residues at the relevant positions that are identical in both the human acceptor antibody and the non-human donor antibody sequences." When properly construed in accordance with the principles described above, the term "non-human donor" in the claims of the 771 Patent means a residue in the humanised antibody that is present in the non-human donor antibody sequence at the relevant position, whether or not the same residue is present in the human acceptor antibody at the same position."
- It will be seen that the dispute between the parties identified by these paragraphs concerns the scope of the relevant claims of the 771 Patent, and in particular, the correct interpretation of the term "non-human donor" in those claims, having regard to the relevant principles of US claim construction
- However, Chugai has two additional arguments which it alleges should lead to the same conclusion concerning the scope of the claims of the 771 Patent. First, it relies on the prosecution history of the 771 Patent. In particular, it relies upon statements made to the examiner in connection with US Patent No. 5,530,101; and Queen et al. Proc. Nat Acad. Sci. USA 1989; 86: 10029-10033 (collectively "the Queen Prior Art"). At paragraph [23] of its Statement of Case, Chugai pleads that the Queen Prior Art documents were "the key pieces of prior art cited during prosecution and were considered at length by the examiner. The USPTO would not have granted the patent based on a construction that would be invalidated by Queen." Chugai pleads at paragraph [24] of its Statement of Case that, based on the prosecution history, it would have been clear to a skilled person that the 771 Patent should be construed in such a way as to exclude tocizilumab.
- Even though this plea will involve consideration by the English court of the Queen Prior Art to evaluate whether, on UCB's construction, the US Patent Office would have refused to grant the 771 Patent, UCB does not seek to strike out this part of Chugai's pleading. This makes sense, because Chugai is contending that UCB's construction is wrong, and relies on the prosecution history in support of its construction. It is not suggested in Chugai's Statement of Case that the USPTO would not have granted the 771 Patent in the light of the Queen Prior Art based on Chugai's construction.
- Secondly, Chugai relies upon United States principles of construction in relation to ambiguous claims. It pleads at paragraph [2(h)] of its Statement of Case that:
"Where the court concludes, after applying all the available tools of claim construction, that the claim is still ambiguous and that more than one proposed claim construction is practicable, the claims should be so construed, if possible, as to sustain their validity (Phillips, 415 F.3d at 1327 (quoting Liebel-Flarsheim Co. v. Medrad, Inc., 358 F.3d 898, 911 (Fed. Cir. 2004)); see also Kaputsa v. Gale Corp., 155 Fed.Appx. 518, 522-23 (Fed. Cir. 2005) (reciting same but declining to apply where claim unambiguous)). However, if the court concludes that the claim is susceptible of only one reasonable construction it cannot be construed differently from its plain meaning in order to preserve validity."
- Chugai sets out at paragraph [25] of its Statement of Case how, in its submission, the United States approach to ambiguous claims supports its construction of the claims of the 771 Patent:
"If, contrary to the Claimant's submissions the Court should come to the view that the meaning of "non-human-donor" in the claims remains ambiguous, and that an alternative construction which treats framework residues which are common to the donor and acceptor antibodies as "donor" in the humanised antibody is also practicable, consistent with sound claim construction principles and is not contrary to the explicit language of the claims, the Claimant submits that such ambiguity must nevertheless be concluded in favour of the construction advanced herein in order to preserve the validity of at least claims 2, 3, 4 and 6 of the Patent for lack of novelty over [the Queen Prior Art]."
- Chugai's Statement of Case then amplifies its case as to why, if the claims are found to be ambiguous, the 771 Patent would be invalid over the Queen Prior Art on UCB's construction. For this purpose, the pleading sets out US principles of law in respect of novelty; cites aspects of the Queen Prior Art; claims that each document qualifies as prior art for the purpose of US law; and alleges that each of claims 2, 3, 4 and 6 of the 771 Patent would, on UCB's construction, lack novelty over the Queen Prior Art.
- The only parts of Chugai's Statement of Case that UCB now seeks to strike out are those passages concerning the US principles of construction of ambiguous claims, and how they support Chugai's construction of the claims of the 771 Patent.
The terms of the Licence and the relief sought by Chugai
- The Licence is a worldwide non-exclusive licence granted by UCB to Chugai. Pursuant to article 3.1 of the Licence, royalties are only payable by Chugai to UCB:
"in countries where, but for the license granted by UCB to CHUGAI pursuant to Article 2, Chugai or a Permitted Sublicensee would infringe a Valid Claim of the relevant Patent."
- "Valid Claim" is defined in article 1.1 as follows:
""Valid Claim" means a claim of an issued, unexpired Patent which has not been held invalid or unenforceable in an appealed or unappealable decision of a court of competent authority having jurisdiction over such Patent."
- Article 18 contains a governing law and jurisdiction clause which provides that:
"This Agreement is governed by, and shall be construed in accordance with the laws of England and the Parties hereby submit to the exclusive jurisdiction of the English courts."
- The relief sought by Chugai in these proceedings has been drafted to reflect the terms of the Licence. Chugai seeks:
"A declaration that Chugai's tocilizumab product, Actemra®, is not a product the manufacture and/or sale (and/or any other act) of which would (but for the licence granted under the Licence) infringe any claim of the 771 Patent, and hence that no royalties are or shall be payable under the Licence for the manufacture and sale (and/or any other act or acts) of Actemra® manufactured anywhere in the world on or after 13 January 2016, alternatively such further or other declaratory relief the Court shall consider fit."
The submissions of the parties in summary
- UCB alleges that Chugai's Statement of Case attempts to raise in these proceedings the issue of validity of the 771 Patent, namely that on a construction under which tocizilumab infringes the claims of the 771 Patent, the 771 Patent would be invalid for lack of novelty over the Queen Prior Art. It claims that Chugai is in substance advancing a classic "squeeze" between infringement and validity, albeit dressed up as a claim for a declaration about royalties. It submits that Chugai cannot avoid the jurisdictional consequences of calling into question the 771 Patent's validity by formulating its claim as a contractual one for a declaration concerning royalties, or by characterising it as one concerned with infringement of the 771 Patent.
- UCB submits that the English court cannot hear or determine a dispute concerning the validity of a foreign patent. Such a claim is said to be non-justiciable since its consideration would infringe the territorial limits of the court's jurisdictional powers and constitute an affront to comity, contrary to the Moçambique principle set out in British South Africa Co v Compania de Moçambique [1893] AC 602 and/or the foreign act of state doctrine, which militates against this court determining issues that relate to the sovereign acts of a foreign state, which include the grant of a patent.
- Chugai's response to this challenge, in summary, is as follows: Chugai's claims, including those advanced in the Disputed Paragraphs, raise a contractual question which is plainly justiciable and which the parties have agreed pursuant to article 18 of the Licence that the English court has jurisdiction to determine. It is no part of Chugai's contentions that the 771 Patent is invalid, nor does Chugai seek any relief as to invalidity. The effect of US validity law is incidental to the determination of the contractual question; and even insofar as it incidentally arises, it is only relied on to support Chugai's construction.
Discussion
Is this an attack on validity?
- UCB does not attempt to strike out the declaration on the basis that, in substance, it amounts to a declaration of non-infringement of a foreign patent. Even if I strike out the Disputed Paragraphs, the English court will still be required to determine the scope of the claim of the 771 Patent, and whether they are infringed by Chugai's tocilizumab product, to decide whether such products are royalty bearing. It will also need to consider the prosecution history and, in that context, the Queen Prior Art. At the heart of UCB's case is the proposition that issues of infringement and validity are inseparable, a fact which, according to UCB, is apparent from Chugai's reliance on the United States doctrine of ambiguity, which is alleged to set up a "squeeze" between infringement and validity. UCB relies, by way of analogy, on the decision of Arnold J in Anan Kasei Co Ltd v Molycorp Chemicals & Oxides (Europe) Ltd [2016] EWHC 1722 (Pat); [2017] FSR 13.
- In the Anan case the claimant sought to carve out issues of validity by seeking a declaration that the defendant's acts infringed a German patent "if the German designation is invalid (which is to be determined by the German courts)". By this means, it sought to avoid the application of articles 24(4) and 27 of EU Regulation 1215/2012 of 12 December 2012 ("the Brussels I Regulation"). These articles provide, amongst other things, that the courts of each Member State shall have exclusive jurisdiction in proceedings concerned, or principally concerned, with the registration or validity of any European patent granted for that Member State. They have no direct application in the present case because the 771 Patent is a United States patent.
- In Anan, having cited several authorities of relevance to articles 24 and 27, including Gesellschaft für Antriebstechnik mbH & Co KG (GAT) v Lamellen und Kupplungsbau Beteiligungs KG (LuK) (Case C-4/03) [2006] ECR I-6509, Arnold J held that the dispute was, or was principally, concerned with the validity of the German designation of the patent. Because the issue between the parties was the single issue of whether the defendant had infringed a valid claim of the German designation, this was an attempt artificially to split them into sub-issues, when, as a matter of substance, they were inseparable. He explained this at [24]:
"[24] […] the issue between the parties with respect to the German designation is the single issue of whether Molycorp has infringed a valid claim of that patent. Rhodia's formulation of its claim attempts by procedural means to split that single issue into two sub-issues, namely infringement and validity; but as a matter of substance those sub-issues are inseparable. Rhodia's claim implicitly asserts that the German designation is valid, since if all the claims were invalid there could be no question of infringement. But, as Rhodia's claim itself acknowledges, the validity of the German designation has been challenged by Molycorp and must be determined by the German courts."
- In my judgment, this decision illustrates that the court should carefully examine the substance of the dispute in the context of challenges to jurisdiction under articles 24 and 27 of the Brussels I Regulation. However, not every infringement dispute is concerned with, or principally concerned with, a challenge to validity of the patent in suit. For example, if a party has undertaken not to challenge validity, and only to pursue a case of non-infringement.
- One such case is Actavis UK Ltd v Eli Lilly & Co [2014] EWHC 1511 (Pat); [2015] RPC 6, in which the claimant sought declarations of non-infringement in relation to the UK, French, Spanish and Italian designations of a European Patent. In order to avoid a challenge to jurisdiction under articles 24 and 27 of the Brussels I Regulation, the claimant undertook not to challenge the validity of the patent. However, it advanced the contention, in aid of its construction, that if the defendant's construction of the claims was correct, then the patent would have been rejected by the European Patent Office on the basis of invalidity for added subject matter. Arnold J accepted this argument when considering direct infringement of the UK designation of the patent. He also held that there was no direct infringement of the Spanish designation, for the same reasons as the UK designation; [187]. His decision was upheld by the Court of Appeal in relation to direct infringement. He said at [148]:
"[148] Lilly is correct that validity is not in issue in these proceedings, but it does not follow that the court cannot consider what the consequences of Lilly's construction would be for the validity of the Patent: see e.g. AHP v Novartis […]. If Lilly could not have obtained claims which explicitly referred to pemetrexed or any pharmaceutically acceptable and sufficiently soluble salt thereof because such claims would have been invalid, I cannot see how it can be right to construe "pemetrexed disodium" in claims 1 and 12 as granted as having that meaning for the purposes of infringement."
- So even though validity was not, and could not be raised, Arnold J held that it was appropriate to consider the consequences of Lilly's construction for the validity of the patent. Actavis did not claim that the patent was invalid. It proceeded on the basis that the patent was valid, and contended that this supported its construction of the claims. This was permissible.
- It was not contended before me that Arnold J was wrong in his approach, even though validity was not in issue. In my view, he was plainly right. The Protocol on Interpretation of Article 69 of the European Patent Convention requires, inter alia, that the extent of protection of a European Patent is to be interpreted in a manner which combines a fair protection for the patent proprietor with a reasonable degree of legal certainty for third parties. This may require the court, when considering scope of protection, to address the consequences of rival constructions for the validity of a patent, as a construction which would lead to invalidity may be unfair to the patentee.
- In its claim for a declaration in these proceedings, Chugai does not claim that the 771 Patent is invalid. Obviously, it does not seek a declaration of invalidity, but this is not merely a question of form, it is one of substance. Chugai contends that its construction is correct and does not contend, on this construction, that the 771 Patent is invalid. As a subsidiary argument, it points to the consequences for validity if UCB's construction is correct. If Chugai succeeds on its subsidiary argument, this would lead to a finding that its tocilizumab product falls outside the scope of the claims of the 771 Patent, and therefore no royalties are payable under the Licence. It is not asking the English court to conclude that the 771 Patent is invalid, as it contends that UCB's construction should be rejected.
- In the circumstances, I reject UCB's submission that Chugai is challenging the 771 Patent's validity by formulating its claim as a contractual one for a declaration concerning royalties, or by characterising it as one concerned with infringement of the 771 Patent. I accept Chugai's submission that it does not claim that the 771 Patent is invalid, but merely requires the court to ask itself, as a guide to construction, what would be the hypothetical consequences for validity of the rival interpretations. Furthermore, the arguments advanced in the Disputed Paragraphs are incidental to the essential nature of Chugai's claim, which is a claim for determination of its royalty obligations under the Licence.
Interpretation of the Licence
- As set out above, pursuant to article 18 of the Licence, the parties have agreed to submit generally "to the exclusive jurisdiction of the English courts". In my judgment, this means that they have submitted to the jurisdiction of the English courts all disputes under or in connection with the Licence, unless the Licence terms indicate to the contrary. This is consistent with the general principle that jurisdiction clauses are to be interpreted "widely and generously", as commercial parties who agree to an exclusive forum clause are likely to have intended their disputes to be resolved in a single forum: Fiona Trust v Privalov [2008] 1 Lloyds Rep 254 (HL), [13]; UBS v Nordbank [2009] 2 Lloyds Rep 272 (CA), [82].
- The Licence contains an exception or qualification to the scope of article 18. The definition in article 1.1 of "Valid Claim" means that a claim is to be treated as valid if it has not been held to be invalid or unenforceable in an appealed or unappealable decision of a court of competent authority having jurisdiction over such patent. Accordingly, for the purposes of the Licence, only the US courts can determine that the 771 Patent is invalid, and a claim of the patent will not be treated as invalid until the appeal process has been completed. Were the English court to reach a determination of invalidity, it would make no difference to the royalty obligations under the Licence, which are payable where a "Valid Claim" of a relevant patent is infringed.
- In summary, the parties have agreed that revocation or similar claims for invalidity should be determined by the courts of the state of protection. Otherwise, the Licence indicates no relevant limitation on the broad scope of the jurisdiction clause, which includes disputes as to scope of claims.
- In my judgment, the contentions advanced by Chugai in these proceedings, including in the Disputed Paragraphs, are in accordance with the agreement reached between the parties. Chugai's pleading raises a dispute about the scope of the claims of the 771 Patent before the English court, and does not seek to invalidate the Patent.
- A very similar licence agreement was considered in Celltech v Medimmune [2004] EWHC 1522; [2004] EWCA Civ 1331, where the licence agreement (granted by the registered proprietor of the 771 Patent) contained the same definition of "Valid Claim". The courts arrived at the same interpretation as I have reached in the present case. Jacob LJ summarised this at [32](a)-(b), when approving the judgment of Laddie J:
"(a) The parties bargained to give jurisdiction to the English court concerning the scope of the licensed patents;
(b) That bargain expressly recognised that the issue of validity of the licensed patents could only be tried by the court(s) of the relevant country(ies) — that is what the definition of Valid Claim is about. What was agreed was not only foreseeable but foreseen by the very terms of the agreement. That is a highly material factor in deciding whether the court should permit a party from departing from his bargain, see e.g. per Waller J in British Aerospace v Dee Howard [1993] 1 Lloyd's Rep. 405"
- Both parties relied on [11] – [12] of the judgment of Jacob LJ in Celltech, where he said:
"[11] Before going any further I observe that in the jargon of the patent world, whether or not a product "infringes" can have two distinct meanings. It can mean merely "fall within the scope of protection assuming the patent is valid" or "fall within the scope of a valid patent." Only in the latter case is making or selling the product wrongful. Which meaning it has will normally be apparent from context. Thus in the expressions "you cannot infringe an invalid patent" (per Laddie J. in Coin Controls Ltd v Suzo International (UK) Ltd [1997] F.S.R. 660 at p.669) and "no man can infringe an invalid patent" (per Aldous J in Plastus Kreativ AB v Minnesota Mining and Manufacturing Co [1995] R.P.C. 438 at p.447) the second meaning is apparent. On the other hand MedImmune's application to the US court for a declaration that Synagis "does not infringe any valid claim" of US Adair 2 really means a declaration that Synagis does not fall within a valid claim—if it does fall within such a claim it cannot infringe in the sense of being wrongful because it will be licensed.
[12] Returning to the Agreement, royalties are due on products "where the manufacture or sale … would, but for the licence granted hereby, infringe a Valid Claim" (3.3). The definition of "Valid Claim" means that a claim is regarded as valid unless and until it is finally decided to be invalid (1.10). Thus I think it is clear that "infringe" in clause 3.3 has the first meaning. Royalties are payable under all products falling within granted Adair patents if the product falls within the scope of a claim of such a patent, irrespective of its validity, unless and until it is finally declared invalid."
- Mr Raphael QC, on behalf of Chugai, submitted that the position is the same in the case before me. Chugai's claim seeks to establish that it is no longer liable for royalties because its products do not fall within the scope of the claims of the 771 Patent. It does not seek to invalidate any claim of the 771 Patent, which is a matter for the US Courts. Mr Tappin QC, on behalf of UCB, referred to the first meaning of infringement, which is whether a product falls within the scope of protection assuming the patent is valid. He said that Chugai was not prepared to assume that the 771 Patent is valid, but seeks, on UCB's construction, to challenge its validity.
- I accept Chugai's submission on this issue and I reject the submission of UCB. When read in context, Jacob LJ was explaining that the agreement before him contained an exclusive jurisdiction clause the effect of which was to confer jurisdiction on the English court in disputes concerning scope of claims, whether or not such claims were valid. The question of validity was a matter for the US courts.
- I should mention that in Celltech, Laddie J rejected an application for a stay of the UK proceedings by MedImmune pending determination of infringement and validity by the US Courts, even though he was prepared to assume that there might be a "squeeze" between infringement and validity in the UK proceedings. His judgment was affirmed on appeal. Laddie J explained at [23] - [24] the commercial importance of exclusive jurisdiction clauses in patent licences, and of requiring parties to stick to their agreements. His reasoning may be summarised as follows:
i) Parties are taken to consider what, in all the circumstances, are the judicial arrangements which meet their commercial needs and, if the parties have done so, the court needs strong grounds before it will impose its will over and against the express intention of the parties.
ii) That has particular importance in patent licence cases. Patent licences commonly provide that patents may only be declared invalid in the countries in which they are registered, but infringement is to be determined by the court of a single state.
iii) Most patentees and licensees recognise that issues of construction arise both in relation to infringement and validity, hence "squeeze" arguments are common. However, attacks on validity have to be conducted in the country where the patent is registered. It is only the courts of the country of registration which have jurisdiction to revoke. Therefore, the very nature of a patent licence agreement covering a number of countries involves the potentiality for proceedings to be generated in more than one jurisdiction.
iv) Therefore, one option for the parties is to agree that validity has to be dealt with on a country by country basis, thereby acknowledging the reality that only national courts can revoke, but that all issues of infringement should be determined by one court.
v) From a commercial point of view, the latter course makes good sense. To have all issues of infringement determined by one court gives rise to a greater chance of consistency. It will in many cases reduce the amount of litigation involved and it will mean that only one court, and perhaps in some cases only one judge, need be educated so as to understand the patented technology involved.
- I respectfully agree with Laddie J, and I consider that his analysis is apt to describe the commercial purpose of the division (in respect of jurisdiction) between scope of claim and validity issues in the Licence in the present case. I also note that Laddie J regarded "squeezes" between infringement and validity as a matter over which the English court had jurisdiction pursuant to the licence agreement, as distinct from applications for revocation, which were a matter for the court where the patent was granted.
- Mr Layton QC, who presented the jurisdictional aspects of this application on behalf of UCB, argued that the provisions of the Licence, and the bargain between the parties, make no difference, as subject matter jurisdiction cannot be conferred by agreement between the parties. He recognised that since, on his case, issues of infringement and validity were inseparable, and validity of a foreign patent was not justiciable in the UK, clauses in patent licences which gave exclusive jurisdiction in respect of infringement of foreign patents to the English court would generally be unenforceable. This is a conclusion that I would be most reluctant to reach, given the importance of such clauses in patent licences.
- I do not accept that the terms of the Licence are immaterial. UCB's arguments depend on the proposition that it would be a breach of the principle of comity for the English court to adjudicate on the issues raised by the Disputed Paragraphs. Where the parties have agreed that the scope of patents which are the subject of a licence agreement should be determined by the English court, it is not an affront to comity to give effect to that agreement.
- This issue was considered by Peter Prescott QC sitting as a Deputy High Court Judge in Griggs v Evans [2005] Ch 153. He held that there is no breach of the principle of comity for the English court to exercise jurisdiction where the parties have chosen, by agreement, to submit their dispute to its adjudication. He said at [133]:
"[133] … in one sense it has always been possible to call into question both the validity and the scope of a foreign intellectual property right. For instance, where the defendant has agreed to pay royalties to the claimant on any product covered by a valid claim of a foreign patent and the agreement is governed by English law and confers jurisdiction upon the English courts. A recent instance is Celltech (Adair's) US Patent [2004] FSR 35: indeed at first instance Jacob J said [2003] FSR 433, para 8: "…I found myself receiving submissions on US case law just as if I were a US District Judge". When this happens our courts are not considered to act in breach of comity. Even though they might appear to be enquiring into the validity or scope of an intellectual property right granted by a foreign sovereign. But in truth, they are not purporting to tell the American public, say, that one of their patents is invalid or that the scope of its claims is not what it might appear to be. They are merely settling the rights of two private litigants who have chosen to submit their dispute to the adjudication of our courts."
The Rule in Moçambique
- The Supreme Court in Lucasfilm Ltd v Ainsworth [2011] UKSC 39; [2012] 1 AC 20 considered, amongst other issues, the application of the rule in Moçambique to a claim for infringement of copyright in the USA. The defendants, operating from England, produced replicas of storm-trooper helmets featured in the Star Wars films for public sale, without the consent of the claimants. Some of the replica helmets were sold to buyers in the USA. The claimants sought enforcement of their United States copyright in the UK proceedings. The Court of Appeal held that the English court did not have jurisdiction to decide a claim concerning infringement of a foreign copyright. The essential reasoning of the Court of Appeal, and the jurisdiction issue before the Supreme Court, were summarised in [51] – [52] of the combined judgment of Lord Walker and Lord Collins, with whom Lord Phillips and Lady Hale agreed:
"[51] The Court of Appeal decided that the claim for breach of the United States copyright was non-justiciable. It held that the rule in British South Africa Co v Companhia de Moçambique [1893] AC 602 that the English court has no jurisdiction to entertain an action for the determination of the title to, or the right to possession of, foreign land, or the recovery of damages for trespass to such land, was an example of a general principle which applied not only to foreign land, but also to claims for infringement of foreign intellectual property rights, including copyright, irrespective of whether issues of title or validity were involved; and irrespective of whether the rights required registration (such as trade marks or registered designs) or not. It also held that article 2 of the Brussels I Regulation did not require the English court to exercise jurisdiction.
[52] The substantial question on this aspect of the appeal is whether, as Lucasfilm contends, the Court of Appeal was wrong, as a matter of law and policy, to extend to foreign copyrights the common law rule in the Moçambique case that actions for damages for infringement or invasion of property rights in foreign land are not justiciable."
- The Supreme Court explained the rule in Moçambique, in its original form, at [54]:
"[54] The decision in the Moçambique case is the authoritative foundation for the rule that the English court "has no jurisdiction to entertain an action for (1) the determination of the title to, or the right to the possession of, any immovable situate out of England … or (2) the recovery of damages for trespass to such immovable" (Dicey, Conflict of Laws, 1st ed (1896), pp 214-215, Rule 39). The rule has for long been subject to an exception where there is a contract, or an equity, between the parties, which the courts of equity will enforce: ibid, p 216; Penn v Lord Baltimore (1750) 1 Ves Sen 444."
- The Supreme Court held that it was necessary to understand the context from which the rule in Moçambique had originated. It explained at [59] that:
"The leading cases all involved unusual factual situations in which the claim had major political ramifications, and in which, therefore, issues of international law and comity were engaged."
- The Supreme Court then considered the Australian decision in Potter v Broken Hill Pty Co Ltd [1905] VLR 612; affd. (1906) 3 CLR 479, which had been widely cited in case law as extending the Moçambique rule to foreign patents. It held that its reasoning in relation to the Moçambique rule had been fatally undermined by the enactment of section 30(1) of the Civil Jurisdiction and Judgments Act 1982, which abolished the rule insofar as it extended to trespass; [71] – [72]. The Supreme Court stated that:
"[76] The consequence is that in the United Kingdom the trespass aspect of the Moçambique rule has no application as regards land in other member states, and (subject to the controversial question of the applicability of article 2) can only apply to land outside the member states where a question of title is involved: see Dicey, Morris & Collins, Conflict of Laws, 14th ed (2006), vol 2, paras 23–025–23–027."
- For this reason, it was held at [105] that:
"It is clear that much of the underpinning of the Moçambique rule and the decision in Potter v Brokenhill Pty Co. Ltd has been eroded. All that is left of the Moçambique rule (except to the extent that it is modified by the Brussels I Regulation) is that there is no jurisdiction in proceedings for infringement of rights in foreign land where the proceedings are "principally concerned with a question of the title to, or the right to possession of, that property.""
- The Supreme Court also made clear at [108] – [109] that the modern trend is in favour of the enforcement of foreign intellectual property rights in the English court, where validity is not challenged and there is no issue of policy which would militate against enforcement of foreign copyrights. It follows that the rule in Moçambique, in its attenuated form, does not affect the jurisdiction of the English court in respect of claims for infringement of foreign copyrights. Indeed, the reasoning of the Supreme Court applies generally to infringement of intellectual property rights and this is how the effect of its reasoning has been understood. In Actavis v Lilly [2012] EWHC 3316 (Pat) [29], [86] – [94] Arnold J rejected a forum non conveniens challenge to a claim for a declaration of non-infringement of foreign patents, where validity was not in issue. The rejection of non-justiciability challenges in such cases of infringement of intellectual property rights is also supported by Dicey, Morris and Collins on the Conflict of Laws (15th Edition) ("Dicey") at [34.027].
- Mr Layton submits, and I accept, that the Supreme Court in Lucasfilm did not decide that the issue of the validity of foreign patents which were outside the scope of the Brussels I Regulation was justiciable in the English Courts. Lords Walker and Collins said at [106] that:
"It is possible to see how the rationale of the Moçambique rule can be applied to patents, at any rate where questions of validity are involved. For example the claims might touch on the validity of patents in sensitive areas, such as armaments, and that no doubt is part of the rationale for article 22(4) of the Brussels I Regulation."
This is supported by Dicey (supra) which states at [34.027] that it remains open to be decided whether questions as to the validity of a foreign patent are matters which are non-justiciable before an English court.
- There are certain longstanding exceptions to the rule in Moçambique. I have already mentioned the contractual exception, which was referred to in Griggs v Evans and Lucasfilm. This exception was discussed by the Court of Appeal in Hamed v Stevens [2013] EWCA Civ 911; [2013] I.L.Pr. 37. Lloyd-Jones LJ said at [19] – [20] that:
"…it has long been accepted in England that an English court may, as between parties before it, give an in personam judgment to enforce contractual or equitable rights in respect of immovable property situated in a foreign country…."
This exception has its origin in the practice of Court of Chancery which was willing to exercise jurisdiction over a defendant within its jurisdiction so as to compel him to give effect to obligations he had incurred in relation to land situated abroad. (See e.g. Penn v Baltimore [1750] 1 Ves. Sen. 444.) In Deschamps v Miller [1908] 1 Ch 856 Parker J. stated, with regard to the obligations which the court will enforce in this way:
"They all depend upon the existence between the parties to the suit of some personal obligation arising out of contract or implied contract, fiduciary relationship or fraud, or other conduct which, in the view of the Court of Equity in this country, would be unconscionable, and do not depend for their existence on the law of the locus of the immovable property." (at p. 863)
- In addition, I have referred to [105] of Lucasfilm, where it was held that he Moçambique rule, in its attenuated form, can only apply to proceedings which are principally concerned with a question of the title to, or the right to possession of foreign land. A similar exception was referred to in the judgment of Lloyd Jones LJ in Hamed v Stevens at [14]. For the rule to apply, the proceedings must raise directly, as opposed to incidentally, the issue of title to foreign land:
"It is quite true that in the exercise of the undoubted jurisdiction of the Courts it may become necessary incidentally to investigate and determine the title to foreign lands; but it does not seem to me to follow that because such a question may incidentally arise and fall to be adjudicated upon, the Courts possess, or that it is expedient that they should exercise, jurisdiction to try an action founded on a disputed claim of title to foreign lands. (at p. 626)
In St. Pierre v. South American Stores (Gath & Chaves Ld.) [1936] 1 K.B. 382 , Scott L.J. referred to this passage and continued:
"By these words I understand him to have meant that it is the action founded on a disputed claim of title to foreign lands over which an English Court has no jurisdiction, and that where no question of title arises, or only arises as a collateral incident of the trial of other issues, there is nothing to exclude the jurisdiction." (at p. 397)"
Application of the rule in Moçambique to the present case
- I do not consider that this court should decline jurisdiction in respect of the Disputed Paragraphs, for the following reasons. First, Chugai does not contend that the 771 Patent is invalid, nor does Chugai seek any relief as to invalidity. Its case is limited to a dispute about the scope of the claims of the 771 Patent, and insofar as it refers to validity, it is to support its construction of those claims.
- Secondly, there is no direct challenge to validity by Chugai and, insofar as the issue arises at all, it will only do so incidentally, in support of Chugai's case that its construction should be accepted. This dispute is clearly not principally concerned with the question of validity.
- Thirdly, Chugai's case is correctly characterised as a contractual claim for a declaration that no royalties are due under the Licence because Chugai's product is not one that falls within the scope of a claim of the 771 Patent, irrespective of its validity. However, even if it were framed as a declaration for non-infringement, this would make no difference, and UCB does not, and could not, seek to strike it out on that basis; see Lucasfilm and Actavis v Lilly (supra).
- Fourthly, the parties have agreed that the scope of the patents which are the subject of the Licence should be determined by the English court; it is not an affront to comity to give effect to that agreement. This case falls within the longstanding contractual exception to the Moçambique rule.
Act of State
- UCB relies upon the decision of the Supreme Court in Belhaj v Straw [2017] UKSC 3; [2017] 2 WLR 456 at [121] – [123] and in particular the discussion of the doctrine of foreign act of state by reference to the following three rules (although there was some doubt about the scope of at least the second rule):
i) An English court will recognise, and will not question, the effect of a foreign state's legislation or other laws in relation to any acts which take place or take effect within the territory of that state.
ii) An English court will recognise, and will not question, the effect of an act of a foreign state's executive in relation to any acts which take place or take effect within the territory of that state.
iii) An English court will refrain from adjudicating upon certain issues because they involve a challenge to the lawfulness of the act of a foreign state which is of such a nature that a municipal judge cannot or ought not rule upon it.
- UCB relies upon the analysis of the policy underlying the doctrine by Lord Sumption at [225] – [227], and in particular that the doctrine is based upon the principle of comity, which Lord Sumption preferred to call "an awareness that the courts of the United Kingdom are an organ of the United Kingdom". He explained that "Like any other organ of the United Kingdom, the courts must respect the sovereignty and autonomy of other states." He also held that "the act of state doctrine is influenced by the constitutional separation of powers, which assigns the conduct of foreign affairs to the executive."
- The question before me is whether an adjudication by this court in relation to the Disputed Paragraphs would contravene the act of state doctrine. The act of state doctrine, in the context of intellectual property claims, was considered by the Supreme Court in Lucasfilm at [81] – [86]. In summary, Lords Walker and Collins said:
i) In the United States the act of state doctrine has been used as a basis for non-justiciability of the validity of foreign trade mark and patent rights.
ii) The act of state doctrine was also invoked more recently in the United States as a ground for refusing to allow the addition of claims for infringement of parallel foreign patents to claims for infringement of United States patents, in litigation in which validity was in issue: Voda v Cordis Corp (2007) 476 F 3d 887 (Fed Cir).
iii) On the other hand, the act of state doctrine was held not to apply where, in a dispute arising out of a patent licence, the issue was one of interpretation of the patent, and not of validity: Fairchild Semiconductor Corpn v Third Dimension (3D) Semiconductor, Inc (2008) 589 F Supp 2d 84 , 98 (D Me).
iv) In the case of copyright infringement, it has been held that the act of state doctrine has no application because there is no need to pass on the validity of acts of foreign government officials.
- They also held that Potter v Broken Hill Pty Co Ltd [1905] VLR 612 stood alone in using the act of state doctrine as an impediment to actions for infringement of foreign intellectual property rights. The Supreme Court agreed with the dissenting Judgment of Circuit Judge Newman in Voda v Cordis Corpn 476 F 3d 887, that "not every governmental action and not every ministerial activity is an act of state" and with the Court of Appeals for the Third Circuit in Mannington Mills, Inc v Congoleum Corpn (1979) 595 F 2d 1287, 1293–1294 (3d Cir) which was "unable to accept the proposition that the mere issuance of patents by a foreign power constitutes … an act of state"
- At [86] Lords Walker and Collins said:
"[86] It has been said that the grant of a national patent is "an exercise of national sovereignty" (Jenard Report on the Brussels Convention (OJ 1979 C59, pp 1, 36)), and the European court has emphasised that the issue of patents necessitates the involvement of the national administrative authorities (Case C-4/03 Gesellschaft für Antriebstechnik mbH & Co KG (GAT) v Lamellen und Kupplungsbau Beteiligungs KG (LuK) [2006] ECR I-6509, para [23]). But in England the foreign act of state doctrine has not been applied to any acts other than foreign legislation or governmental acts of officials such as requisition, and it should not today be regarded as an impediment to an action for infringement of foreign intellectual property rights, even if validity of a grant is in issue, simply because the action calls into question the decision of a foreign official. (emphasis added)."
- Lord Mance made clear at [115] that he was expressing no view about the application or scope of the doctrine of act of state in relation to issues of validity of foreign intellectual property rights which (unlike copyright) could depend upon state grant. However, the other members of the Supreme Court expressed no such reservation and agreed with the combined judgment of Lords Walker and Collins.
- Mr Layton argues that paragraph [86] is obiter, since the question of infringement and validity of foreign patents was not in issue. I agree. However, the reasoning of the Supreme Court, which led it to allow the appeal from the judgment of the Court of Appeal, cannot and should not be ignored. Mr Layton has very fairly drawn my attention to certain passages in the Belhaj case, where the Supreme Court specifically referred to Lucasfilm. Lord Mance stated at [73] that:
"(iv) Acts of officials granting or registering intellectual property rights have been held to be outside any doctrine of foreign act of state: Lucasfilm Ltd v Ainsworth [2011] UKSC 39; [2012] 1 AC 208."
Lord Neuberger stated at [162] that:
"[161] Further, such recent authority as there is in this jurisdiction tends to support a limited interpretation of the second rule. In Lucasfilm Ltd v Ainsworth [2012] 1 AC 208, para 86, Lord Walker and Lord Collins said that "in England the foreign act of state doctrine has not been applied to any acts other than foreign legislation or governmental acts of officials such as requisition", and so refused to apply it to the grant of a patent."
- Mr Layton submits that these statements are an inaccurate paraphrase of obiter dicta in Lucasfilm. I do not agree. The decision of a patent examiner to grant a patent is not an act of state. Any party may challenge the validity of the patent in court proceedings, which is quite different from an attempt to challenge legislation or government acts such as requisition. Therefore, the act of state doctrine is not an impediment to an action for infringement of foreign intellectual property rights, even if the validity of a grant is in issue.
Application of the Act of State doctrine to the present case
- I do not consider that this court should decline jurisdiction in respect of the disputed paragraphs of Chugai's Statement of Case on the basis that its adjudication would be contrary to the doctrine of act of state, for the reasons set out above in relation to the rule in Moçambique. It is not a breach of the principle of comity to exercise jurisdiction where the parties have chosen, by agreement, to submit their dispute to the adjudication of the English courts. Furthermore, the act of state doctrine does not present an impediment to an action for infringement of a foreign patent, even if validity is in issue (although in this case, Chugai does not seek to invalidate the 771 Patent).
Direct challenges to validity of foreign patents
- In case this application goes further, it may be helpful for me to indicate the course that I would have taken, if I had considered that Chugai was seeking to invalidate the 771 Patent in the English court. That, in my judgment, would have been contrary to the Licence, whereby the parties have agreed that the validity of patents within its scope should be adjudicated on by the courts where they were granted. Furthermore, a declaration or finding of invalidity would not affect the obligation to pay royalties, which would remain unless and until the US courts held that the 771 Patent was invalid. Therefore, I would not have allowed the claim to proceed.
- That leaves the wider question of whether, in the absence of agreement, direct challenges to the validity of foreign patents which are outside the scope of article 22(4) of the Brussels I Regulation (for example claims for revocation or declarations of invalidity) are justiciable here. Professor Briggs in Civil Jurisdiction and Judgments (6th Ed, 2016) states at [4.09]:
"The grant of a patent is closer to an act of sovereign power than many; if a court considers that a patent should be held to be invalid and cancelled as a result, it is hard to see how this can be done and made effective by a court other than at the place where the patent was granted and must now be cancelled. Moreover, as the Brussels 1 Regulation reserves proceedings which have as their object the validity of a patent to the courts of the Member State under which it was granted, it would be difficult to attack a rule of the common law which was built on the same foundation."
- Mr Raphael, who recognised that his case would be considerably more difficult if Chugai was mounting a direct challenge to validity in the English court, did not dissent from this reasoning, apart from the suggestion that the act of state doctrine might preclude challenges to validity. He suggested that such challenges might be precluded by the rule in Moçambique or by the use of the public policy exception which applies at common law; the latter possibility is referred to in Dicey at [34-027].
- In my view, there are powerful arguments that such direct challenges, where validity is the principal issue, are not justiciable. In particular:
i) There is basis for drawing a distinction between claims for infringement and invalidity of patents. A claim of infringement is an action in personam, which affects the parties to the action. A patent is a monopoly right in rem, which applies to the entire population of the territory in which it is granted.
ii) This distinction is reflected in the allocation of jurisdiction in the Brussels I Regulation. Article 24(4) compulsorily allocates jurisdiction over a dispute concerning the validity of a patent to the courts of the Member State in which (or for which) that patent is registered; the article does not apply to claims for infringement.
iii) The rule in Moçambique no longer applies to claims for damages for trespass. However, it continues to apply to actions for the determination of the title to, or the right to possession of, foreign land. Infringement of patent is analogous to trespass, whereas validity is analogous to a challenge to the title to or right to possession of land.
iv) As well as comity, the Moçambique rule is founded on the principle of territoriality. Lord Neuberger stated in Shergill v Khaira [2014] UKSC 33; [2015] AC 359 at [41] that the rule was "probably best regarded as depending on the territorial limits of the competence of the English courts or of the competence which they will recognise in foreign states".
v) Patents are local monopolies which involve local policies and local public interest. Their effect is territorially limited. Their validity should be matters for the local judges of the country in which the patent right was first created: see Lucasfilm [2009] EWCA Civ 1328; [2010] Ch 503 at [175] per Jacob LJ.
- So, whilst my provisional view is that direct challenges to the validity of foreign patents should not be justiciable in the English courts, it is not necessary for me to reach a conclusion on this important question, which should be decided in circumstances where it matters to the result.
Conclusion
- For the reasons set out above, I dismiss UCB's applications to strike out the Disputed Paragraphs and for summary judgment in respect thereof. In my judgment, the English court has jurisdiction in respect of the issues raised by the Disputed Paragraphs.
