Astrazeneca UK Ltd v Tesaro, Inc.

JurisdictionEngland & Wales
JudgeMr Justice Richards
Judgment Date05 April 2023
Neutral Citation[2023] EWHC 803 (Ch)
CourtChancery Division
Docket NumberCase No: BL-2021-002193
Between:
Astrazeneca UK Limited
Claimant
and
Tesaro, Inc.
Defendant

[2023] EWHC 803 (Ch)

Before:

Mr Justice Richards

Case No: BL-2021-002193

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS

OF ENGLAND AND WALES

CHANCERY DIVISION

Rolls Building

Fetter Lane

London, EC4A 1NL

Alan Maclean KC and Katherine Moggridge (instructed by Freshfields Bruckhaus Deringer LLP) for the Claimant

Tom Mitcheson KC, Conall Patton KC and Georgina Messenger (instructed by Linklaters LLP) for the Defendant

Hearing dates: 3 (reading), 6 to 8 and 10 March 2023

Approved Judgment

I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

This judgment was handed down remotely at 10am on 5 April 2023 by circulation to the parties or their representatives by email and by release to the National Archives.

Mr Justice Richards
1

The Claimant (“AZ”) is the head licensee of certain patents (the “Licensed Patents”) under agreements (the “Head Licence Agreements”) with the holders of the Licensed Patents, namely the Institute of Cancer Research (“ICR”) and the University of Sheffield.

2

AZ has entered into sub-licence agreements (the “Licence Agreements”) of the Licensed Patents with the Defendant (“Tesaro”). These proceedings concern the interpretation of the royalty provisions of the Licence Agreements. By way of very broad overview, AZ contends that the Licence Agreements require Tesaro to pay a royalty calculated by reference to total sales of relevant products for use as cancer treatments (i.e. that there is a “total sales royalty”). Tesaro argues that the royalty is payable only on sales that are for uses claimed or covered by the Licensed Patents.

3

The parties have helpfully agreed a list of issues. I will not set out that list in full not least because, by order of Deputy Master Arkush of 26 May 2022, only Issue 1, which concerns the proper construction of the royalty provisions of the Licence Agreements, falls to be determined in the proceedings before me. However, that question of construction involves the determination of seven questions of fact (described as Issues 1.1 to 1.7 on the parties' list) and I will address those issues throughout this judgment.

EVIDENCE

4

AZ relied on no evidence from witnesses of fact, but relied on expert evidence from:

i) Mr Thomas Hoxie, an attorney, a patent attorney and an English-qualified solicitor. Mr Hoxie's evidence was relied on largely as regards the scope of the claims made in the Licensed Patents granted in the US and matters of US patent law.

ii) Mr Glen Belvis, a practising attorney and patent attorney. Mr Belvis's evidence was relied on largely as regards the US law concept of “patent misuse”.

5

Tesaro relied on factual evidence from Mr Leon Moulder, who was Tesaro's chief executive from the time of its formation in 2010 until after the execution of the Licence Agreements in 2012.

6

Tesaro also relied on expert evidence from the following:

i) Judge Kathleen O'Malley, a retired judge of the US Court of Appeals for the Federal Circuit. Judge O'Malley's evidence was relied on as regards various matters of US patent law, including the doctrine of patent misuse.

ii) Dr Jonathan Krell, an oncologist and consultant and senior clinical lecturer at Imperial College London. Dr Krell's evidence was directed mainly at oncological matters including conclusions that an oncologist might draw from reading the specification and claims of the Licensed Patents in 2012.

7

Mr Moulder was quite clearly an honest and reliable witness and it was not suggested otherwise. I have accepted the evidence that he gave.

8

Both sides made criticisms of each other's experts. However, I have concluded that, even though they had very different ways of giving their oral evidence, all experts were conscious of their duties to the court and sought to assist the court with their expert evidence.

9

I have, however, concluded some parts of the expert reports of both Mr Hoxie and Mr Belvis were inadmissible. That does not involve any criticism of either Mr Belvis or Mr Hoxie since the problem was not that they strayed outside their expertise in the relevant passages, but rather they strayed outside the scope of the permission to rely on expert evidence that Deputy Master Arkush had granted. I will explain which aspects of their respective expert reports were inadmissible later in this judgment and for the time being I simply note that I have put those passages out of my mind.

THE RELEVANT LAW

The interpretation of contracts

10

There was no substantial dispute between the parties as to the principles that I should apply when construing the Licence Agreements which are governed by English law.

11

The parties agree that no special rules of English law apply to a patent licence. Therefore, the general principles summarised below apply to patent licences just as to any other contract.

12

Given the absence of a dispute on the applicable principles between the parties, there is no need for me to engage in a detailed analysis of authorities such as Rainy Sky S.A. v Kookmin Bank [2011] UKSC 50, Wood v Capita Insurance Services Ltd [2017] AC 1173 and Arnold v Britton [2015] UKSC 3, although I have borne well in mind the principles set out in those authorities. Nor do I need unnecessarily to lengthen this judgment with unnecessary quotes from authorities whose principles are not in dispute.

13

For present purposes, the simple distillation of the applicable principles given by Carr LJ in ABC Electrification Ltd v Network Rail Infrastructure Ltd [2020] EWCA Civ 1645 provides a neat introduction:

When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean. It does so by focussing on the meaning of the relevant words in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the contract, (iii) the overall purpose of the clause and the contract, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions;

14

In the present dispute, Tesaro places more reliance on factual background than does AZ. Tesaro therefore asks the court to draw certain inferences from relevant factual background as to the correct interpretation of the Licence Agreements which AZ considers either should not be drawn or are displaced by other indications to be found in the words of the Licence Agreements themselves. Given the dispute of that kind, I will supplement Carr LJ's summary with just a few more points drawn from other authorities.

15

Carr LJ's summary of the scope of the “factual matrix” represents the distillation of a more general principle contained in a frequently cited passage of Lord Hoffmann's speech in ICS v West Bromwich BS [1998] 1 WLR 896 (HL) in which he explained that the factual matrix includes all “the background knowledge which would reasonably have been available to the parties and the situation in which they were at the time of the contract”. In an internet age in which a large quantity of information is readily available to almost everyone, that has the potential to be a considerable amount of factual information indeed. At [279] of his judgment in Challinor and others v Bellis and Egan [2013] EWHC 347 (Ch) Hildyard J set out the following approach to refining the information assumed to be available to the parties and, since it was not suggested that I should apply any different formulation, I gratefully adopt it:

(1) At least where there is no direct evidence as to what the parties knew and did not know, and as a corollary of the objective approach to the interpretation of contracts, the question is what knowledge a reasonable observer would have expected and believed both contracting parties to have had, and each to have assumed the other to have had, at the time of their contract: see per Vos J in Spencer v Secretary of State for Defence [2012] EWHC 120 (Ch) at paragraphs 65 to 74;

(2) that includes specialist or unusual knowledge which only parties entering into a contractual engagement of the sort in question might reasonably be assumed to have; and it also includes knowledge which it is to be inferred, from the nature of the actions they have in fact undertaken, that they had or must have had;

(3) however, it does not include information that a reasonable observer would think that the parties merely might have known: that would open the gate too far to subjective or idiosyncratic speculation;

(4) the fact that material is readily available or notorious may support an inference as to what the parties actually knew;

(5) but (subject to (6) below) where it is demonstrated that one or more of the parties did not in fact have knowledge of the matter in question such knowledge is not to be imputed; nor is the test what reasonable diligence would or might have revealed: in either case, that would be inappropriately to introduce impermissible concepts of constructive notice or a duty (actionable or otherwise) to make inquiries or investigations: and see per Mann J in Toth v Emirates and Another [2012] EWHC 517 (Ch) at paragraph 44, agreeing with the analysis in the decision of MacFarlan J in the Supreme Court of New South Wales in The Movie Network Channel case [2010] NSWCA 111 (at paragraph 97);

(6) the exception is that a reasonable person cannot be assumed to be in ignorance of clear and well known legal...

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1 firm's commentaries
  • Case Analysis: AstraZeneca UK Ltd V Tesaro Inc.
    • United Kingdom
    • Mondaq UK
    • 1 May 2023
    ...for only the patented use. Written by David Pountney, Senior Associate, Litigation, at Dehns. AstraZeneca UK Limited v Tesaro Inc. [2023] EWHC 803 (Ch) Case AstraZeneca is the exclusive head licensee of several second medical use patents, including U.S. patents, directed to the treatment of......

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