A recent English patents court ruling (Chugai v UCB) has two unusual features:
- a US patent filing claiming priority from documents filed as early as 1989 does not expire until 28 July 2026, and
- the English courts giving a ruling on whether Chugai’s product falls within the claims of a US patent.
The first is easier to explain – US law used to grant patents lasting for 17 years from the date of issue, rather than 20 years from the date of filing as is common elsewhere (and the prosecution took 13 years). The second is a little more complicated and concerns both jurisdiction and claim construction. It provides some useful lessons on how to draft IP licences.
The Adair ’771 patent
UCB acquired a portfolio of humanised antibody technology patents with its acquisition of Celltech in 2004. The Adair ’771 patent was included in a worldwide licence agreement to Chugai dated December 2007. This required Chugai to pay royalties in relation to the sale of tocilizumab, an immunosuppressive drug mainly used in the treatment of rheumatoid arthritis. Under the licence, royalties were due as follows:
“Royalties shall be payable only upon Net Sales in countries where, but for the licence granted by UCB to CHUGAI pursuant to Article 2, CHUGAI or a Permitted Sublicensee would infringe a Valid Claim of the relevant patent …”
The meaning of this clause was not disputed as an equivalent clause had been considered in an earlier case (Celltech v Medimmune): royalties are due if a product falls within the scope of one of the claims of the patent, regardless of its validity, unless and until the patent is declared invalid. This means royalties can be due under an invalid patent, until the point at which it expires or is finally declared invalid.
However, Chugai did not apply for a declaration of non-infringement or invalidity of the patent. Instead, it applied for a declaration from the courts in England that it was not obliged to pay royalties, using the argument that its drug did not fall within the scope of the patent. So this was a contractual dispute, not a question of validity of the US patent.
Note that the rest of the patents under the licence expired in 2016 so infringement of this one remaining patent was key.
Analysing a US claim
The licence was governed by English law and had an exclusive jurisdiction clause in favour of the English courts. This meant that all disputes were to be submitted to the English courts, unless the terms of the licence indicated otherwise. The definition of “Valid Claim” contained an exception, with the effect that only the US courts could determine the validity of the patent.
That meant that the English court was the right one to determine the scope of the licensed patent, and whether Chugai’s product fell within its claims. But the judge did allow himself to stray towards the validity question:
“considerations about validity, to the extent they are relevant under the applicable law, may be taken into account in this court in resolving the question of claim scope and the fact those considerations arise does not undermine the jurisdiction of this court to decide the issue in this case.”
Essentially there was only one question to answer: does tocilizumab fall within the scope of claim 2 of the patent?
The judge heard evidence from two US law experts on claim construction under US law. The leading case is Phillips v AWH Corp - words are generally given their ordinary and customary meaning, which is the meaning that the term would have to a person of “ordinary skill in the art” (i.e. an objective test). The court can consider “intrinsic” evidence (such as the specification and prosecution file) and “extrinsic” evidence (such as expert evidence and dictionaries). If, having applied all the available tools of claim construction, the claim is still ambiguous, US law has a principle known as “tie-breaker”. In other words, the claim should be construed to preserve validity.
Whose claim construction was correct?
The difficulty with claim 2 of Adair ’771 was that it required certain positions within the humanised antibody to be “non-human donor” – or derived from the mouse source material. Most of the relevant amino acid residues were conserved (the same in the human and mouse sequences). So should these be considered as human or mouse? Applying the US law on construction the judge concluded that while the intrinsic evidence could go either way, the extrinsic evidence firmly supported Chugai’s analysis. The conserved residues should be classed as human and so tocilizumab did not infringe. Chugai won the case and no further royalties were due.
Where does this leave us?
The case serves as a reminder that English courts are keen to give effect to the commercial agreement made between the parties, and are willing to accept jurisdiction to consider the scope of a non-UK patent provided it is not a disguised attack on validity. Parties should therefore carefully consider where they want contractual claims to be heard and use appropriate jurisdiction clauses.
Parties to a licence must also be careful to define the scope of a licence appropriately. Depending on the position the parties hope to achieve, the definition of a term like “Valid Claim” could be pivotal; small changes to these definitions can lead to very different outcomes. Although a licensee and a licensor are likely to negotiate for differing definitions (a licensor is likely to try to include pending applications for example), it is worth thinking through the potential consequences of clauses like these before agreeing the drafting.