Otsuka Pharmaceutical Company, Ltd (a company incorporated under the laws of Japan) v GW Pharma Ltd
| Jurisdiction | England & Wales |
| Judge | Ian Karet |
| Judgment Date | 03 May 2022 |
| Neutral Citation | [2022] EWHC 1012 (Pat) |
| Docket Number | Case No: HP-2021-000039 |
| Court | Chancery Division (Patents Court) |
[2022] EWHC 1012 (Pat)
Ian Karet (sitting as a Deputy High Court Judge)
Case No: HP-2021-000039
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INTELLECTUAL PROPERTY LIST (ChD)
PATENTS COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
James Segan QC and Ravi Mehta (instructed by Powell Gilbert LLP) for the Claimant
Tom Sprange QC, Ruth Byrne QC (elect) and Kabir Bhalla (instructed by King & Spalding International LLP) for the Defendants
Hearing date: 4 March 2022
Introduction
This is an application by the Defendants under CPR Part 11 contesting jurisdiction. It raises the question whether this court has jurisdiction to hear a dispute about a patent licence in circumstances where the licensee has indicated it will challenge the validity of licensed patents granted outside the UK.
The Claimant (“Otsuka”) is a Japanese pharmaceutical company involved in the research and development of healthcare products. The Defendants (“GW Pharma” and “GW Pharmaceuticals”, together “GW”) are two English companies which undertake research, development and manufacture in the UK of pharmaceutical preparations including cannabinoids.
Otsuka commenced these proceedings on 29 October 2021 and served them on GW in the jurisdiction as of right. Otsuka's claim relates to a Research Collaboration and Licence Agreement with GW made on 9 July 2007 and amended on 14 March 2008 and 29 June 2010 (the “Agreement”). Otsuka claim (i) declarations as to the interpretation or application of the Agreement and (ii) payment of royalties.
GW object to this Court's jurisdiction on the principle in British South Africa Co v Companhia de Moçambique [1893] AC 602 and because the grant of a patent is an act of a sovereign state with which this court should not interfere. GW also say this court should decline to exercise jurisdiction on the ground of forum non conveniens.
The Agreement is governed by New York law and GW have commenced competing proceedings in New York. Both sides submitted significant evidence on relevant US law and practice.
Tom Sprange QC, Ruth Byrne QC (elect) and Kabir Bhalla appeared for GW. James Segan QC and Ravi Mehta appeared for Otsuka.
The Agreement
The Agreement provided for a collaboration between Otsuka and GW Pharma in the research and development of pharmaceutical preparations based on botanical extracts from chemovars (chemical products derived from plants) of Cannabis sativa for the treatment of central nervous systems and cancer indications. GW Pharmaceuticals is party to the Agreement to guarantee the obligations of GW Pharma.
Under the Agreement Otsuka contributed financial and technical resources to the collaboration. Part of that occurred in the UK and included a grant of over £1 million to a team at the University of Reading to conduct research into the anti-seizure properties of cannabinoids. The inventors of the patents relevant to this dispute include scientists at the University of Reading.
Otsuka had the choice between taking forward the clinical development of any candidate medicinal product identified as a result of the collaboration or giving up its right to do so. If Otsuka retained ownership of a candidate and developed it, then Otsuka would pay royalties to GW.
The Agreement also provides that GW might obtain ownership of a candidate drug. GW agreed to pay to Otsuka royalties on net sales of any “GW Pharma Product” which is “Covered” by patents or know-how arising from the collaboration. Broadly, a product is Covered if its exploitation without a licence would infringe the relevant rights. Where that right is a patent, the product must be Covered by a Valid Claim; broadly, that is one that has not been held invalid by a court of competent jurisdiction.
The Agreement is governed by the law of the State of New York. It does not provide that any court will have jurisdiction.
There is a mechanism for good faith dispute resolution through discussions between senior office holders for a period of 30 days. If good faith discussions are not successful then the issue should be resolved by arbitration.
The arbitration agreement provides for arbitration of disputes under the International Arbitration Rules of the International Centre for Dispute Resolution. That agreement excludes disputes about “patent scope, validity or infringement”. Arbitration proceedings are to be held in New York if commenced by GW and in London if commenced by Otsuka. Discovery in any arbitration is agreed to be as if the arbitration were a civil suit in the New York Supreme Court.
At the conclusion of the research period in 2013 Otsuka elected not to pursue clinical development of any product candidate.
GW did proceed with development, but they dispute in these proceedings the connection between the collaboration under the Agreement and their current product.
Since June 2018 GW or their affiliates have obtained marketing authorisations and commenced sales in the US, the European Union, the UK, Australia, Switzerland and Israel for Epidyolex (in the US and Israel, Epidiolex) a drug for the treatment of seizures associated with various conditions or epileptic syndromes. The active ingredient in Epidyolex is cannabidiol (“CBD”).
Net sales of the product were US$296 million in 2019 and around US$510.5 million in 2020. Otsuka say that GW have indicated an intention to sell the product more widely.
Otsuka say that Epidyolex falls within the scope of at least two jointly-owned patent families which arise from the collaboration so that under the terms of the Agreement GW should pay royalties on sales of the product. GW disagree.
In May 2019 the parties held negotiations about one jointly owned patent family, but those were not successful.
In June 2021 Otsuka commenced an arbitration under the Agreement in London claiming royalties under patents from the first patent family. This includes the patents US 9,066,920 (“US 920”) and EP 2 448 637 (“EP 637”). Otsuka's claim was on the basis that these patent claims cover the Epidyolex product, and that GW are estopped from denying that by reason of various public statements they have made (including to the US Securities and Exchange Commission) that the patents would cover the product and that royalties would be payable.
In August 2021 GW filed a reply in the arbitration challenging jurisdiction on the basis that Otsuka's claim raised questions of patent scope and infringement and so was outside the scope of the parties' agreement to arbitrate.
In August 2021 Otsuka wrote to GW to allege that the claims of a second European patent arising under the Agreement also covered Epidyolex.
GW complain that Otsuka refused to provide details about the second patent family. Otsuka say that GW were unwilling to engage in further negotiations. As a result, Otsuka commenced this claim and served on GW in the UK. GW have responded by challenging jurisdiction. The claim includes further UK and foreign patents from the two patent families.
GW say that Otsuka failed to observe the good faith dispute resolution provision of the Agreement. Their skeleton argument on this application (but not their Application Notice or draft order) sought a stay of these proceedings as a consequence of Otsuka's breach.
The prosecution and defence of the jointly-owned patents have been conducted by GW Pharma and funded by Otsuka. GW Pharma has successfully defended claims of US 920 against third-party Inter Partes Review proceedings before the US Patent and Trademark Office. GW Pharma was also successful in defending opposition proceedings against EP 637 before the European Patent Office.
In July 2021 GW Pharma assigned a security interest in US 920 and EP 637 (together with other patents relied upon by Otsuka in these proceedings) to a US bank as collateral for a security/financing arrangement.
Much of the collaboration under the Agreement took place in the UK and Epidyolex is now manufactured here.
As this is a challenge to jurisdiction made at an early stage, GW have not yet pleaded a defence to Otsuka's claim. However, GW's solicitors indicated in a letter dated 1 March 2022, written shortly before this hearing, that GW's intended defence to the claim would be as follows:
i) Epidyolex did not result from the collaboration under the Agreement; it was the result of work by GW (and third parties working together with GW) carried out independently.
ii) GW applied for and obtained “Orphan Drug” designations from the US Food & Drug Administration for CBD for the treatment of particular conditions (Dravet syndrome and Lennox-Gastaut syndrome). GW worked with another researcher to devise a dosage regime of CBD that was surprisingly effective in treating children with intractable seizures from these conditions. Following clinical trials the product is now licensed. The vast majority of sales are in the US.
iii) The collaboration under the Agreement did not lead or contribute to GW's development of the product as a treatment for rare, treatment-resistant childhood-onset epilepsies. The collaboration encompassed a range of compounds and conditions, and to the extent the parties sponsored and oversaw or conducted research related to epilepsy under the Agreement, that research was not focused on the use of CBD specifically to treat epilepsy. Rather, it encompassed pre-clinical (i.e., non-human) research of various cannabinoids using animal models and experimental techniques that were well-known to researchers in the field.
iv) It was known generally before the collaboration that CBD had anti-epileptic activity in...
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GW Pharma v Otsuka
...mirror the US Complaint. The jurisdiction application was heard by the judge in March 2022, with judgment handed down on 3 May ( [2022] EWHC 1012 (Pat)). After that GW Pharma filed their Defence in these proceedings in May, adopting points from the earlier letter, and in June 2022 Otsuka f......