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European IP Bulletin, Issue 17, November - Patents
Patents
7. Celltech v MedImmune: Interpreting jurisdiction clause in ip licencing agreements
On 21 October 2004, the Court of Appeal gave its judgment in the matter of Celltech R & D Ltd. v MedImmune Inc. [2004] EWCA Civ 1331.
In this case, Celltech claimed royalties from MedImmune under the patent licence dated 19 January 1998 relating to “Adair patent rights”. In accordance with the terms of the licence, MedImmune was obliged to pay royalties on products made or sold which, but for the licence, would infringe a ‘valid claim’ of the licensed patents. Based on this clause, Celltech contended that MedImmune was liable to pay royalties in respect of their manufacture and sales of their product “Synagis” in US as it fell within Celltech’s US patent “Adair 2”. MedImmune on the other hand had launched the proceedings in the US District Court of Columbia for declaration that US Adair 2 was invalid and that Synagis did not infringe it. Simultaneously, it filed an application for staying the present claim of Celltech in the English Courts based on the jurisdiction clause in the agreement.
The two clauses included in the license agreement that had important bearing on the case were:
- Clause 13.1: The validity, construction and performance of this Agreement shall be governed by English law; and
- Clause 13.2: All disputes, claims or proceedings between the parties relating to the validity, construction or performance of this Agreement shall be subject to the jurisdiction of the laws of England to the jurisdiction of whose courts the parties hereto submit.
The application for a stay was rejected at first instance by Justice Laddie. Hence, MedImmune instituted the present appeal. MedImmune contended that the jurisdiction clause did not confer jurisdiction to English Courts over the scope of the claims but only over the administration of royalties as the word ‘performance’ used in the agreement had a restricted meaning in that sense. Against this background, Court of Appeal had to decide:
- Whether the agreement conferred jurisdiction on the English Courts to decide whether Synagis was covered by the claims of US Adair 2?
- If so, whether the Court should exercise its discretion and decline jurisdiction?
The Court of Appeal in answering the first question in affirmative, and the second in negative, held that:
- As per the construction of the licensing agreement, royalties are payable for all products falling within the scope of the Adair patents, unless the patents are declared invalid. Such an agreement is based on commercial sense for MedImmune who can freely develop and market products around the globe under the shelter of patents, whether valid or invalid.
- Under this background, performance of the agreement includes payment of royalties. Refusal to pay MedImmune would result in a dispute relating to the performance of the agreement, which is governed by English law and subject to jurisdiction of the English Courts. Thus, the first question will be answered in affirmative as parties could not have contemplated to exclude scope of claims from the jurisdiction of English Courts; and if they had intended so, they should have expressly excluded it from the ‘performance’ of the agreement.
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The scope of claim will be decided by foreign law to be applied by English Courts, as a matter of renvoi. A construction contrary to this is improbable in an agreement intended to have global effect.
In relation to the second question, the court answered in negative emphasising the test which MedImmune failed to satisfy: that the party claiming stay of English proceedings must show “strong reason” for granting stay where there is a contract giving jurisdiction to the court. The parties having struck their bargain expressly for scope of patent to be decided by English court and validity by the court of a relevant country could not be allowed to derogate from their contractual obligations especially when the English proceedings would have significant time advantages over the US case.
8. Pharmacia Italia v German Patent Office: Better Treating People Before Animals
On the 19 October 2004, the European Court of Justice gave its judgment in relation to an opposition proceeding against Pharmacia Italia Spa in the German Patent Office, on which further guidance was requested by the Bundesgerichtshof, in case C-31/03.
This judgment addressed the way the duration of a Supplementary Protection Certificate (SPC) should be calculated within the Community. More specifically, the meaning of the term ‘medicinal product’ in determining the first marketing authorisation. The question was whether medicinal product was referring only to human use or whether veterinary purpose was included.
Pharmacia was the holder of a German Patent lodged on the 31 March 1981 that covered a compound named ‘Cabergoline’. A first marketing authorisation was granted in Italy for a veterinary use, while a second was granted in 1992 in the Netherlands for medicinal use on humans. Under article 19(1) of Regulation 1768/92, relating to the creation of a SPC, a first marketing authorisation has to be obtained after 1 January 1985, with an exception for Germany and Denmark where it was postponed to 1 January 1988. Pharmacia applied before the German Patent Office for a SPC, which was refused on the basis that the first marketing authorisation to be considered was the one that occurred in Italy. Pharmacia brought the issue before the Bundesgerichtshof arguing that the first marketing authorisation should relate to medicinal product for human uses. The proceedings were stayed and the following question was referred to the ECJ:
“Is the grant of a SPC for a medicinal product for human use precluded by a first marketing authorisation for veterinary use that occurred before the date specified in article 19(1), or should the first marketing authorisation be specifically determined accordingly to a human use?”
The ECJ found that the regulation, while defining the term medicinal product, does not draw any distinction between human or animal use, and the requirement for and the scope of a SPC does not distinguish either. Therefore, the Court ruled that a first marketing authorisation for veterinary use obtained before the date specified in article 19(1) precluded the grant of a SPC.
It can therefore be seen that the term medicinal product, as defined under regulation 1768/92, relating to the creation of a SPC applies irrespective of whether the use is for human or animal. This decision will be of particular interest to Pharmaceutical companies who will need to be careful in evaluating the benefits of putting a product for veterinary use on the market which may have potential for human use and for which the length of protection might be increased by a SPC.
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