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Patents Court reviews criteria for an exclusive licence

Posted on 9 March 2021

Following an expedited trial (held as a 'hybrid trial), the Patents Court has found that Neurim's European Patent (UK) 1 441 702, a second medical use patent relating to the prolonged release melatonin product Circadin was valid, rejecting attacks based on lack of novelty, obviousness, insufficiency and lack of plausibility. Mylan accepted that, if the patent was valid, it would be infringing. A key feature of the Court's decision was the Judge's response to the parties' respective expert witnesses, which demonstrates the central importance of such evidence and the challenges for parties. 

The decision follows the Patents Court's decision last year (upheld on appeal) refusing an Neurim/Flynn's application for an interim injunction on the basis that damages would be an adequate remedy, in what was described by the Court of Appeal as an 'intensely fact sensitive' assessment. Mylan had obtained a marketing authorisation for melatonin 2g prolonged release products for commercialisation in the UK.

Of particular interest in the decision was Flynn's status as the purported exclusive licensee of the patent in the UK, under various agreements between Neurim and Flynn. Under section 67(1) of the Patents Act, an exclusive licensee is entitled to bring patent infringement proceedings in its own right. However, having reviewed the totality of the agreements in place, the Court decided that the arrangements did not confer exclusivity on Flynn.

On their face, the arrangements between Neurim and Flynn purported to confer an exclusive licence on Flynn. However, this exclusivity was taken away by the provision relating to litigation concerning the patent. Flynn was not entitled under the agreements in place to initiate UK infringement proceedings without Neurim. Instead, Neurim and Flynn were to take the appropriate steps jointly, with Neurim taking the lead and Flynn "playing an essentially supporting role", acting as little more than a "cypher" in the prosecution of proceedings. Whilst the right to bring proceedings for infringement is not expressed in s.67 or s.130(1) of the Patents Act as a necessary condition for exclusivity (but as a consequence of the grant of an exclusive licence), the Court interpreted section 67 as requiring the conferment on the licensee of an additional right to claim for infringement, which in this case had been taken away. Flynn had no rights independent of Neurim, and accordingly it had no standing to sue as an exclusive licensee.

The Court however rejected Mylan's argument that Neurim was entitled to work the residual part of the claim of the invention and was free to exploit and/or license other third parties to work that part of the claim (so-called 'salami-slicing' of the property rights in the patent).

Subject to any appeal, the Court's decision may require licensors and licensees to revisit the terms of their agreements to ensure that they have not undermined any claim to exclusivity.

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