We previously reported on the Patents Court's decision in Otsuka Pharmaceutical v GW Pharma where the Court decided it had jurisdiction to hear a dispute arising from a collaboration and licence agreement. GW Pharma, the licensee, had indicated that as part of the proceedings it would also challenge the validity of the licensed patents, which were granted in jurisdictions outside of the UK. The Court of Appeal has now agreed, holding that the judge did not make any errors in his assessment of the English Court's jurisdiction to hear the dispute.
Otsuka and GW Pharma entered into a collaboration agreement in 2007. The parties collaborated to develop novel treatments for central nervous system disorders and cancers using botanical extracts. GW Pharma agreed to pay Otsuka royalties on net sales of certain products covered by patents or knowhow arising from the collaboration. The agreement was subject to the laws of the State of New York but did not specify which courts should have jurisdiction to decide disputes relating to it.
The agreement came to an end in 2013. GW Pharma then developed and started selling Epidyolex, a drug for the treatment of seizures associated with various conditions or epileptic syndromes. Otsuka alleged that Epidyolex fell within the claims of the patents that resulted from the collaboration and brought proceedings before the Patents Court seeking royalties.
GW challenged the English Court's jurisdiction to hear the dispute. Following the Patents Court's decision that it did have jurisdiction to determine the dispute, GW Pharma appealed arguing the judge did not properly apply the legal tests under three grounds:
- the Moçambique rule
- that the grant of patent is an act of state (and cannot therefore be judged invalid by a court outside the jurisdiction in which the patent was granted)
- forum non conveniens (namely that the English Court was not a suitable forum for the case to be held in the best interests of the parties).
Court of Appeal Decision
The Court of Appeal rejected GW Pharma's appeal on each of the grounds relied upon.
The Moçambique principle
The Moçambique principle states that an English court has no jurisdiction to adjudicate a claim of title to foreign land.
The principle has been applied in relation to foreign IP rights, recently in Chugai Pharmaceutical v UCB (considered in more detail here), where the Patents Court said that the principle only prevents an English Court from adjudicating on infringement of a foreign patent where there is a direct challenge to the validity of that foreign patent.
In this case, the judge had held that many of GW Pharma's principal arguments did not concern validity of the US patent, and therefore the case was not "directly" concerned with patent validity.
Whilst expressed in slightly different terms (but with the same effect), the Court of Appeal concluded that the parties' dispute was not "principally concerned" with a challenge to validity of the US patent, so the Moçambique rule did not apply. GW Pharma's arguments on validity were conditional on other arguments unrelated to validity, and the judge had given appropriate weight to GW Pharma's different arguments.
Foreign act of state doctrine
The Court of Appeal held that the act of state doctrine is irrelevant to the grant of a patent (confirming the trial judge's decision) for two reasons.
First, the grant of a patent is not given by sovereign power (in the UK, the Patents Act 1977 obliges the Comptroller of the Patent Office to grant a patent if an application complies with the legal requirements for patentability). Second, any party can challenge a granted patent on grounds which are different from mechanisms and grounds used to challenge legislation or government acts.
Forum non conveniens
GW Pharma argued that the trial judge had failed to take proper account of, amongst other factors:
- the fact that the agreement was governed by New York law;
- New York law expert evidence was likely to be required; and
- potential witnesses were just as likely to be in the US as the UK.
GW Pharma also argued the speed with which a case might advance through different court systems should not determine which system was the appropriate one to hear the dispute.
The Court of Appeal however endorsed the first instance judge's approach, which was "an appropriately holistic evaluation" of relevant factors. The principal location of key witnesses was an important factor and, similarly, the judge was right to consider "minimising the need for parties to take proceedings on a country by country basis to resolve what is in truth a single dispute".
The case reinforces the lessons from the decision of the Patents Court (and the earlier decision in Chugai): an English Court is only likely to decline jurisdiction where the challenge to validity of a non-UK patent is a direct and centralfeature of the case.