Celltech R&D Ltd and MedImmune Inc.
| Jurisdiction | England & Wales |
| Judge | Lord Justice Buxton,Lord Justice Potter |
| Judgment Date | 21 October 2004 |
| Neutral Citation | [2004] EWCA Civ 1331 |
| Docket Number | Case No: A3/2004/1435 |
| Court | Court of Appeal (Civil Division) |
| Date | 21 October 2004 |
[2004] EWCA Civ 1331
Lord Justice Potter
Lord Justice Buxton and
Lord Justice Jacob
Case No: A3/2004/1435
HC 04 C00999
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION (PATENTS COURT)
Mr Justice Laddie
Royal Courts of Justice
Strand, London, WC2A 2LL
Christopher Floyd QC and Richard Meade (instructed by Messrs Marks & Clerk) for the Appellant
David Kitchin QC and Michael Tappin (instructed by Messrs Bird & Bird) for the Respondent
Jacob LJ:
This appeal is from a judgment of Laddie J of 18 th June 2004 refusing an application by MedImmune for a stay of Celltech's claim against them. Having refused that application, Laddie J then gave directions for a streamlined trial. It is due to be heard in March 2005.
Although Laddie J refused permission to appeal, I granted it on the basis that a point of some general importance to intellectual property licensing appeared to be involved.
Celltech's claim is based on a patent licence dated 19 th January 1998. They say in this action that MedImmune are liable to pay royalties in respect of their US manufacture and sales of their product "Synagis." MedImmune deny any such liability. As will be seen below liability depends on whether a "Valid Claim" as defined in the agreement covers the product.
There have been two previous actions concerning claims for royalties in respect of Synagis sales. In these, Celltech alleged that Synagis was covered respectively by the US and German versions of one of the licensed patents called "Adair 1." This Court held ( 2003 EWCA Civ 108) that the US version of Adair 1 did not cover Synagis. Laddie J has held (2004 HC 1124 (Patents)) that the German version of Adair 1 does not either. An appeal from that decision is pending.
The present claim is for royalties said to be due for use of a second US patent called "Adair 2" granted to Celltech on 14 th October 2003. It does not have the same limitation (about the residue at position 23), which caused the earlier claims to fail. On 30 th January 2004 MedImmune commenced proceedings in the US District Court for the District of Columbia for declarations that US Adair 2 is invalid and that Synagis does not infringe it.
Celltech's response to this was twofold – to ask the US court to decline jurisdiction over the claim for a declaration of non-infringement and to bring the present proceedings in the courts of England and Wales ("the English courts") . The basis of each of these claims is Celltech's contention that the licence agreement confers jurisdiction over a question of whether or not a product is covered by a licensed patent upon the courts of England and Wales. In each of the earlier proceedings MedImmune were content that the question should be adjudicated here and did not take the point now taken. It is not, however, suggested that they are now debarred because they did not raise the point in the earlier proceedings.
Thus two points arise:
(1) Does the agreement confer jurisdiction on the English courts to decide whether Synagis is covered by the claims of US Adair 2?
(2) If so, should the court nonetheless in its discretion decline jurisdiction.
Laddie J rejected both points. Mr Floyd QC for MedImmune reasserts both. Mr Kitchin QC for Celltech accepts that if the agreement does not confer jurisdiction over the scope of the claims, then a stay is appropriate.
The scope of the jurisdiction clause
I accordingly turn to the first issue: The relevant provisions of the agreement read:
1.10 "Valid Claim" shall mean a claim of an issued, unexpired patent included within the Adair patent Rights which has not been held invalid or unenforceable in an unappealed or unappealable decision of a court or competent body having jurisdiction thereof.
3.3 In further consideration of the licences granted in Clause 2 the Licensee shall pay to Celltech a royalty at the rate of two percent (2%) of Net Receipts from all Products sold where the manufacture or sale of the Product in a country of the Territory would, but for the licence granted hereby, infringe a Valid Claim.
13.1 The validity, construction and performance of this Agreement shall be governed by English law.
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. Each of the parties consents to the award or grant of any relief in any such proceedings before the High Court of Justice in England. Either party shall have the right to take proceedings in any other jurisdiction for the purposes of enforcing a judgment or order obtained from a Court of Justice in England.
The licensed patent rights – the Adair patent Rights – include US Adair 2. It may be noted that there are many countries in which licensed rights subsist. They are set out in a Schedule to the agreement and include the US, Japan and most of the (and all commercially important) countries of the European Patent Union as it stood in 1998 and many others. Those drafting the agreement would have been well aware that in many of the countries concerned there are non-expert patent courts of variable quality and speed of decision.
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 v Suzo [1997] FSR 660 at p.669) and "no man can infringe an invalid patent" (per Aldous J in Plastus Kreativ v 3M [1995] RPC 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.
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.
To those unfamiliar with the world of patents this might sound irrational – why should royalties be payable (and apparently be unrecoverable) for a licence under a patent claim ultimately held invalid? There is a rational answer to this. Everyone knows that patent law can, at least at its edges, be uncertain – and that different results can arise in parallel litigation in different countries. By taking such a licence MedImmune have achieved a number of clear desirable commercial objectives: (1) they know they are free to develop and market products irrespective of the question of validity; (2) they are free so to do across the globe; and (3) their competitors may have to face litigation from Celltech in a variety of jurisdictions whereas they, MedImmune, stand in the shelter of the patents, valid or invalid. It is not irrational that they should pay for such benefits.
It is against that background that clause 13 falls to be considered. The key words – "validity", "construction" and "performance" of the Agreement are to be found in both clauses 13.1 and 13.2. Mr Floyd argues as follows:
i) It is common ground that the question of jurisdiction does not depend on the validity or construction of the agreement. The question is whether its "performance" is involved;
ii) The clause is unusual in that it lacks a catch-all phrase such as "any claim arising out of or concerning this agreement" or the like;
iii) "Performance" must have the same meaning in each clause;
iv) So far as cl. 13.1 is concerned it is a nonsense to say that the scope of foreign patents is to be determined by English law;
v) It follows that "performance" has a restricted meaning – covering things like the administration of royalties but not the underlying question of the scope of the licensed patents which are governed by various foreign laws;
vi) This is confirmed by the consideration that is most unlikely that the parties would have wanted to allow for adjudication of a dispute about the scope of the foreign patent to take place in the UK while an adjudication on validity takes place in the country of the patent concerned – and all the more so since often questions of validity and scope are intertwined.
I would reject that argument. Firstly as a matter of plain language "performance" must include the basic obligation to pay royalties due under the agreement. Celltech say MedImmune are not performing their obligation, MedImmune deny that. There is a dispute about the performance of the Agreement and that is to be governed by English law and subject to the jurisdiction of the English courts.
I see no difficulty in the fact that in...
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