Questions of jurisdiction have come before the Court several times so far this year. We have already reported on those relating to the Court's jurisdiction to determine questions of FRAND in Nokia v Oppo. In an earlier decision (Otsuka v GW Pharma) from the Easter term, the Patents Court also had to consider whether it had jurisdiction to hear a dispute arising from a collaboration and licence agreement in circumstances where the licensee had indicated that as part of the proceedings it would also challenge the validity of the licensed patents, being patents granted in jurisdictions outside of the UK.
In a decision following the earlier judgment in Chugai Pharmaceutical v UCB, the Court concluded that it did have jurisdiction to determine the dispute because, amongst other factors, the Defendant's arguments concerning validity of the non-UK patents would not need to be raised if their other arguments concerning interpretation of the licence itself were ultimately successful.
Otsuka (a Japanese pharmaceutical company) and GW Pharma (an English company), entered into a collaboration agreement in 2007. The parties collaborated to develop novel treatments for central nervous system disorders and cancers using botanical extracts. Under the terms of the agreement each party had the option to obtain or retain (as appropriate) ownership of a candidate medicinal product identified as a result of the collaboration, with each agreeing to pay the other royalties should they exercise that option. In the case of GW Pharma, it agreed to pay to Otsuka royalties on net sales of any "GW Pharma Product" 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 from GW.
GW challenged the Court's jurisdiction to hear the dispute on 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); and
- forum non conveniens; an argument that the English court is not a suitable forum for the case to be heard in the best interests of the parties.
The Moçambique rule
In short, this rule states that an English court has no jurisdiction to adjudicate a claim of title to foreign land. The principle arises where "the facts relied on as the foundation of a plaintiff's case have [a] necessary connection to a particular locality." In this case GW argued that the licensed patents were necessarily connected with the country in which they are granted, and not the UK.
It is not the first time the English Courts have had to consider the application of the Moçambique rule to intellectual property rights. In 2012 the Supreme Court considered its application to the infringement of foreign copyright (Lucasfilm v Ainsworth). More recently in the 2017 decision in Chugai Pharmaceutical Co Ltd v UCB Pharma SA (referenced above), the Patents Court addressed the application of the rule to a case concerning a patent licence which included a US patent.
In that case Chugai sought a declaration that it was not obliged to pay royalties under a licence. UCB alleged that the proceedings, although framed as a declaration relating to the licence, in substance concerned consideration of both the scope and the validity of the licensed US patent. Henry Carr J rejected the argument and held that, where validity was not challenged, the Moçambique rule did not affect the jurisdiction of the English court in respect of claims for infringement of a foreign patent. In his judgment, the validity argument was incidental to the essential nature of the claim, which concerned Chugai's obligations under the licence. In obiter comments, Henry Carr J considered what the position would have been had there been a direct challenge to the validity of the US patent and concluded that "in [his] view, there are powerful arguments that such direct challenges, where validity is the principal issue, are not justiciable".
Giving judgment in Otsuka v GW Pharma, Ian Karet (sitting as a Deputy Judge) found that, much like the situation in Chugai, the Moçambique rule did not apply here, or, at least, that it did not apply yet. The Deputy Judge highlighted that, although GW had not provided its full defence pending the outcome of its challenge to jurisdiction, it had indicated that its defence would have several layers. GW's main arguments would centre on interpretation of the licence and the scope of the relevant patents. GW contend that Epidyolex does not fall within the claims of the relevant patents and, even if it does, a key definition in the agreement means that it does not owe royalties in respect of Epidyolex. Its argument that the relevant patents were invalid would only kick in if these primary arguments failed.
Accordingly, and drawing upon the obiter dicta of Henry Carr J, this meant this case was not 'directly' concerned with patent validity as, depending on the success of GW's primary arguments, it could be decided without a judge needing to consider the validity of the patents at all. The judge also noted that, if a consideration of validity did become necessary at a later date, then English proceedings could be stayed while a local court considered validity.
Act of State Doctrine & Forum Non Conveniens
The remaining arguments around the Act of State doctrine and forum non conveniens were dealt with comparatively swiftly. Applying Chugai, the Deputy Judge held that the grant of a patent is not an act of state which would require an English court to decline jurisdiction. On a review of the facts, he also found that GW had failed to show that a New York court would be a more suitable forum than an English one to hear the dispute and, on that basis, the challenge to jurisdiction on the basis of forum non conveniens should also fail.
The case provides a useful reminder of the grounds on which jurisdiction may be challenged, while at the same time making it clear that an English Court is likely to decline jurisdiction only where the challenge to the validity of a non-UK patent is a direct feature of the case, as properly construed. In determining questions of jurisdiction, the court must consider what the real issues in the case are. If a dispute principally concerns construction of contractual terms and not validity of non-UK patents then English Courts are ready and willing to adjudicate.