Celltech R & D Ltd v Medimmune Inc

There are before the court two applications in proceedings in which the claimant is Celltech R&D Limited (“Celltech”), and the defendant is MedImmune Inc (“MedImmune”). Underlying the current dispute is a patent licence agreement entered into on 19 January 1998, pursuant to which Celltech licensed MedImmune under a family of patents relating to the manufacture of antibodies for therapeutic uses. MedImmune manufactures and sells a therapeutic antibody under the mark SYNAGIS. It is said by Celltech to fall within the claims of various of Celltech’s patents covered by the licence agreement.

MedImmune has declined to pay royalties saying it is not obliged to do so and that has given rise to the current proceedings. In fact this is the third in a family of proceedings brought by Celltech against MedImmune. The first came before Jacob J. (as he then was) under a patent referred to then as US Adair 1. The Celltech claim failed both at first instance and on appeal on the basis of the application of the US law of file wrapper estoppel. That is to say, both Jacob J. and the Court of Appeal applied the relevant US patent law relating to this type of estoppel and held that SYNAGIS could not fall within the scope of US Adair 1.

The second action came before me and it related to another Celltech patent, referred to as the German Adair patent. That action also failed. Essentially the reason for that was that I held that a particular amino acid residue at position 23 in the antibody molecule contained in the SYNAGIS product was not the residue required at that position by all the claims of the German Adair patent.

The current proceedings are brought under another one of the Celltech patents, referred to as US Adair 2. For present purposes the most important difference between US Adair 2 on the one hand and the claims in US Adair 1 and the German patent on the other is that the claims in the former do not mandate that the residue at position 23 should come from a donor. In substance this means that the claim does not require that the residue at that position should be the same as in the equivalent mouse antibody. It therefore does not contain the structural requirement of the antibody, the absence of which in the second action was the basis for finding non-infringement by the SYNAGIS product.

On the day before royalties were due under US Adair 2, (assuming, of course, SYNAGIS is covered by that patent) MedImmune commenced proceedings for a declaration of non-infringement and to invalidate US Adair 2 in a United States District Court. The current proceedings in the Patent Court were commenced by Celltech on 18 February 2004. The existence of the proceedings on either side of the Atlantic has led to the two applications before me.

Celltech applied for the adoption of a streamlined procedure of the type referred to in paragraph 10 of the Patents Court Guide. On the other hand, MedImmune applied for a stay of the English proceedings pending determination of the issue of infringement by the United States Court.

Both Mr. Meade, who appears for MedImmune, and Mr. Alexander QC, who appears for Celltech, agree that MedImmune’s application should be considered first not least because, if it is successful, no question of a streamlined or any other procedure will arise. Accordingly I will consider first the question of an application for a stay and only go to the question of a streamlined procedure if Mr. Meade’s clients’ application fails.

I think it is convenient to start by setting the contractual background against which this application is made. The licence agreement includes definitions. For present purposes only three of these need be referred to. They are in Clause 1 and provide as follows:

“ ‘Adair Patent Rights’ shall mean the Patent Rights, short particulars of which are set out in Schedule 1 hereto and sometimes referred to collectively or individually as ‘the Adair Patent.’

‘Territory’ shall mean worldwide

‘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.”

Clause 2.1 of the agreement grants MedImmume a non-exclusive licence under the patent rights “to develop, make, have made, use and sell products in the territory”, and Clause 3 provides for royalty payments. Clause 3.3, provides as follows:

“In further consideration of the licences granted in Clause 2 the Licensee shall pay to Celltech a royalty at the rate of … % of Net Receipts from all Products sold where manufacture or sale of a Product in a country of the Territory would, but for the licence granted hereunder, infringe a Valid Claim.”

Clause 13.1 and 2 are of particular significance for the purpose of MedImmune’s application. They provide respectively as follows:

“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 only other part of the agreement to which I should refer is Schedule 1. It will be recalled that the Adair patent rights are defined as the patent rights set out in Schedule 1, and Schedule 1 includes a list of patent applications and patents which the agreement covers. Those are patents in 24 countries, including the United Kingdom and the USA.

Mr. Meade advances two broad arguments in support of a stay. First, he says that even if Clause 13 amounts to an agreement to submit determination of issues of infringement to the jurisdiction of the English High Court, nevertheless it is proper in this case to stay such proceedings to allow the American action and, in particular, the issue of infringement before the US courts to follow its course. Second, he says that in any event clause 13 does not constitute an agreement. This point, which was not taken but could have been taken in either of the actions before Jacob J. or before me, is, it seems to me, something of a back-up point. I will consider it in due course.

First, I will consider Mr. Meade’s major point. He argues that there are good and compelling reasons why a stay should be granted in this case. This part of the case has generated an argument covering a wide field, but perhaps the most important consideration advanced by Mr. Meade is that the issue of infringement was likely to give rise to difficult issues of United States law on construction and that the US court would be far better placed than the English courts to determine those issues. Second, he says that there was a “squeeze” argument in the sense that issues which relate to infringement would also impinge upon validity and that, in particular, construction of the claims of US Adair 2 were crucial to both issues and should properly be determined by a single court and the only single court that could do so would be one in the United States. It would be unfortunate if a court here were to determine construction in one way on the issue of infringement and for a US court to determine it differently, inter alia, in relation to questions of validity.

Mr. Alexander’s has a number of responses to these points. Among other things, he says that there is no real squeeze at all. The issue of construction is not difficult. He also draws attention to the fact that part of MedImmune’s complaint before the District Court in the United States was that US Adair 2 had been deliberately drafted so as to read directly on to SYNAGIS. He says that this gives some flavour of the ease with which any court, including courts here, should be able to resolve the issue of infringement.

It seems to me it is not necessary to resolve questions of whether or not there is a viable squeeze argument nor to resolve the question of how complex or otherwise the points of law on construction are. I will assume for the present purposes that the arguments on infringement may be less straightforward than Mr. Alexander suggests they are and I will also assume that there are good squeeze arguments, that is to say arguments on validity which may affect questions of construction in a way which will also have impact on infringement and vice-versa.

Mr. Meade says that if the English proceedings continue side by side with the United States proceedings, there is a risk of inconsistent decisions. At its worst, he says, the English court may come to a conclusion on construction for the purpose of determining infringement which would lead to an inevitable conclusion of invalidity in the United States and yet the United States courts might come to an entirely different view of construction with the result that the patent may be held valid there. This, he says, would be most undesirable. He also argues that this is not a case where it is possible to suggest that the defendant in these proceedings has commenced proceedings abroad as a strategic ploy. He says that his clients’ commencement of the proceedings in the United States was bona fide and, although Mr. Alexander hints strongly that he does not entirely accept the latter submission, I do. There is no evidence that MedImmune’s commencement of the United States proceedings was entirely or primarily for tactical purposes, that is to say for the purpose of depriving this court of jurisdiction or to support an application for a stay.

Mr. Meade also says that the subject matter in dispute, that is to say the scope of the claims of the US patents, is of particular territorial significance. It is just the sort of issue which is most naturally located within the United States. He points to the fact that there is no aspect of English law which arises for determination in this action. In addition he argues that there will be procedural problems caused by the existence of two sets of proceedings. This is not just a matter of the possibility of there being inconsistent decisions, but he says that as the two sets of proceedings progress, there will be a to-ing and fro-ing across the Atlantic with each party trying to transfer the benefit of successes in one jurisdiction to the other. Mr Meade also points to the fact that if there are two sets of proceedings there will be more lawyers involved and that will, of course, be an additional burden on the parties. As I have indicated already, he refers to the fact that the US courts will be much better qualified to determine issues of patent infringement under US patent law.

Taken together these are matters which, in my view, might well lead a court to leave a dispute about the validity and infringement of a US patent to be determined by the US courts. It would be the forum conveniens. It is also not necessary for me to repeat the considerations which are set out in Coin Controls Ltd v. Suzo International (UK) Limited [1997] FSR 660 as to the advantages of having issues of infringement and validity determined by a single court. The latter view is consistent with the fact that in the overwhelming majority of countries courts have tended to adopt the stance that it is desirable that these two issues should be determined by the same court at the same time. Perhaps the most notable exception to that approach is Germany where, for historic and constitutional reasons, issues of infringement and validity are determined in separate courts.

It seems to me that the starting point for consideration of Mr. Meade’s application is the effect of a clause in an agreement by which parties to a contract with multinational features have agreed to bestow jurisdiction on a single court and, in particular, the court’s attitude to the parties’ choice.

The approach of courts to jurisdiction clauses has recently be considered by Patten J. in Breams Trustees Ltd. v Upstream Downstream Simulation Services Inc. ([2004] EWHC 211 (Ch) – 16 February 2004, unreported). Both parties rely upon this judgment as being a useful summary of the law as it is at the moment. For present purposes it seems to me sufficient if I referred to just one paragraph of Patten J.’s judgment. It reads as follows:

“27. So far as the Court of Appeal in The El Amria purported to lay down a test relating to the stay of English proceedings on grounds of forum non conveniens, their judgments must now be read subject to the speech of Lord Goff in Spiliada. The importance of The El Amria in the application with which I am concerned is that it involved the balancing of factors relating to the appropriateness of the rival jurisdictions with the existence of a choice of jurisdiction clause. The Court of Appeal’s decision is relied on by Mr. McGrath as establishing that, although the existence of a choice of jurisdiction clause will normally justify a stay in favour of the chosen jurisdiction unless a strong case to the contrary is made out, such a case can and usually will be made out if the consequence of enforcing the clause will be to create parallel proceedings, with the disadvantages which Brandon L.J. has emphasised. I do not accept that submission. It is clear from the authorities I have referred to that even a non-exclusive jurisdiction clause such as clause 12 of the Deed of Agreement binds the Defendants to accept England as the appropriate forum. Although it is strictly correct to say that the Defendants are free to litigate in Florida, that is only half the picture. When (as in this case) the Claimant invokes its rights to begin proceedings in the chosen jurisdiction, the Defendant is bound to accept that. The Court will not relieve him of that obligation by granting a stay of the English proceedings or by setting aside service out of the jurisdiction unless there are strong reasons for doing so. What the first instance decisions, culminating in Import Export, show is that strong reasons do not include the mere existence of lis alibi pendens between the parties in a foreign court. If that were so, a party to a non-exclusive jurisdiction clause could avoid its agreement at will by commencing proceedings in another jurisdiction of its choice. Something more is needed. That much is made clear by the judgment of Brandon L.J. in The El Amria itself, where he speaks of the need to show a strong a case for not enforcing the jurisdiction clause. The El Amria was, on any view, just such a case. There was in existence an action against the Mersey Docks and Harbour Company which needed to be tried together with the cargo owners’ claim against the shipowners and which would proceed to trial in England in any event. Nor had the shipowners commenced any proceedings of their own in Egypt. Whether the particular exercise of the discretion was correct or would be repeated now does not matter. It is clear that judicial attitudes in favour of the enforcing jurisdiction clauses have hardened. What does matter is that the discretion was not exercised on the basis that the existence of parallel proceedings between the same parties ought as a matter of principle to justify departure from the terms of the jurisdiction clause. The existence of earlier foreign proceedings between the same parties is simply a factor to be taken into account in the manner indicated in Lord Goff in De Dampierre.”

I would add to that only one other reference. Mr. Alexander has drawn my attention in his skeleton argument to the following extract from the judgment of Rix J. (as he then was) in Sinochem v. Mobil Sales [2000] 1 Lloyds Rep 670.

“....it is in my judgment a principle of the Court’s residual discretion to stay even proceedings commenced in the consensual forum of an exclusive jurisdiction clause that the strong cause which needs to be shown if that discretion is to be exercised must go beyond matters of mere convenience and must enter into the interests of justice itself. After all, when parties agree to an exclusive forum for their disputes, they are or must be treated as being mindful both that they have chosen for themselves where such considerations of convenience take them and also that their choice may override pure matters of convenience....”

Parties are taken to consider what, in all the circumstances, are the judicial arrangements which meet their particular commercial needs and, if the parties have done so, the court needs strong grounds before it will impose its will over and against the express intention of the parties. That has particular importance in patent licence cases. It is common to have in such licence provisions that patents may only be declared invalid in the countries in which they are registered, but infringement is to be determined by the court of a single state. In many cases, of which this is one, one does not need to struggle to find the commercial justification for such a clause. Most patentees and licensees recognise that issues of construction arise both in relation to infringement and validity, hence squeeze arguments are common (c.f. Coin Controls). However, in reality attacks on validity have to be conducted in the country where the patent is registered. It is only the courts of the country of registration which have jurisdiction to revoke. Therefore the very nature of a patent licence agreement covering a number of countries involves the potentiality for proceedings to be generated in more than one jurisdiction. It follows that where a patent licence covers a number of territories, the contracting parties really have two choices. They could on the one hand decide that issues of infringement and validity should be dealt with on a country by country basis or they could determine that validity has to be dealt with on a country by country basis thereby acknowledging the reality that only national courts can revoke, but that all issues of infringement should be determined by one court.

In many cases, from a commercial point of view, the latter course makes good sense. To have all issues of infringement determined by one court gives rise to a greater chance of consistency. It will in many cases reduce the amount of litigation involved and it will mean that only one court, and perhaps in some cases only one judge, need be educated so as to understand the patented technology involved.

It appears to me that those considerations apply here. Although it is not strictly necessary to do so, one can see that it makes good commercial sense for the parties to have agreed that rather than have the issue of infringement determined in up to 24 different countries where MedImmune may sell its products, all the issues of infringement should be determined in one court which could effectively become a specialist in determining that issue.

It appears to me that none of the points raised by Mr. Meade are special. Indeed, it seems to me they are just the sort of points which inevitably arise when there is a choice of jurisdiction agreement in a patent case. These are the sort of factors which it is reasonable to assume that parties took into account in deciding to have such a clause. It is reasonable to assume that the parties chose not to leave issues of validity and infringement to be decided together on a country by country basis.

In my view, there is no suggestion that an English court is incapable, with the aid of expert evidence, of deciding the issues which would need to be put before it to determine whether or not there has been infringement of Adair 2. Indeed, it must be borne in mind that there seemed to be no difficulty in asking Jacob J. and then the Court of Appeal to understand the American law of file wrapper estoppel or asking me to understand German law of infringement, including its very own specialist Formstein defence. Courts and tribunals can and do decide issues of infringement separately from issues of validity. The German courts do so all the time, so do patent offices. The courts here in the previous two proceedings between these parties did so. Where issues of validity and infringement are live, although, all other things being equal, we may prefer to try them together, this does not mean that they cannot be determined separately.

I have come to the conclusion that there are no strong reasons why the court should impose its decision on where this dispute should be litigated so as to over-ride the parties’ agreement to assign all disputes on infringement for determination by the English courts. It therefore follows it is necessary to consider Mr. Meade’s second argument; that is as to the construction of clauses 13.1 and 13.2.

Mr Meade expresses this argument succinctly in his skeleton argument as follows.

“Both clauses 13.1 and 13.2 refer to ‘performance’. Since the present substantive dispute is not about validity or construction of the Agreement, ‘performance’ is the only heading under which it can come, if it is covered by clause 13 at all.

However, since the question of whether SYNAGIS falls within the claims of US Adair 2 can only be resolved by the application of US law, not English law, as stipulated by clause 13.1, it cannot be a question of ‘performance’. One cannot determine the scope of a US patent by applying English law.

‘Performance’ must mean the same in clause 13.2 and in clause 13.1, and therefore clause 13.2 does not cover the present dispute either.

This is a reasonable construction: clause 13 would still cover all aspects of ‘performance’ such as payment dates, accounting and so on, which could sensibly be resolved by English law and English courts. But it would not cover matters such as the scope of foreign patents, which ought much more sensibly to be decided by the courts of those countries.”

What the court has got to do is to determine, from the terminology used by the parties in the context of the agreement as a whole, what the parties intended. In my view, Mr. Meade’s construction is not the correct one. Although it is not perfectly drafted, clause 13 and, in particular, clause 13.2, contemplates that all litigation relating to enforcing the agreement should be determined by the English courts. The only exception contemplated by that Clause to the jurisdiction of the English courts over the enforcement of the terms of the contract are those set out at the end of clause 13.2, that is to say either party can take proceedings in other jurisdictions, but only for the purposes of enforcing a judgment or order or claim from a court in England.

When the contract talks of the issue of performance being subject to the jurisdiction of the laws of England, it means that the English law of construction will apply and English law will apply to the issue of whether or not a product falls within the scope of a valid claim. For that purpose, English courts will no doubt have to take on board, as a matter of fact, evidence as to what the relevant US law is. But determining what the US law is constitutes part of the determination of the performance issue in accordance with English law. It seems to me that the intention of the parties was to have the question of the liability for payment of royalties to be determined by the English courts.

The only other exception to the jurisdiction of the English courts is that inherent in the definition of “Valid Claim” in clause 1.10. Inherent within that is the acceptance that the relevant national courts which have jurisdiction over the validity of a patent shall determine validity. In the case of a non-UK patent that must mean the relevant non-UK court will have jurisdiction to determine that issue.

This view of the effect of clause 13, of course, is consistent with MedImmune’s attitude to the earlier two sets of proceedings which have been dealt with in England between these parties. That does not create any form of estoppel, but it does seem to me that the consistency is not something which is a surprise, but matches up with what appears to me to be the obvious intention of the parties.

It follows that an application for a stay must fail and the parties should be kept to their agreement that issues of infringement should be determined by the English courts.

This then leads me to Mr. Alexander’s application for the imposition of a streamlined procedure. Mr. Alexander has explained to me that things have moved on somewhat since his clients’ original application for such an order and that the procedure, which had been set out in his clients’ application notice, would need to be modified. Even though Mr. Meade did not accept the need for a streamlined procedure, it appears there was a certain amount of common ground between the parties as to ways in which this action should proceed.

In principle it seems to me that this is a case where a streamlined procedure is appropriate. One of the advantages inherent in a choice of jurisdiction clause is that one court should deal with issues of infringement relating to potentially a number of different countries. It provides at least the opportunity for one court to be able to deal more easily with the technology. Having learnt it in one case, it can be expected to be able to make use of its knowledge of the technology and the major factual issues involved in other disputes as to infringement.

It seems to me, for example, in this case there are reasons for preferring this action to be heard by me (if the timetable allows it so to be arranged) because I have already heard a great deal about the technology involved and I believe I have some understanding how the patented invention is claimed to work. It also appears to me that there are good reasons for exploring the possibility of limiting the ability of the parties to call additional technical evidence. Most of the points in issue between the parties appear to me to be points of construction and US law and it may well be that the appropriate directions in this case will involve a direction that the factual evidence provided by the parties in the last action, that is the German Adair patent, should be used for these proceedings as well. I can also see very good reasons for there to be a limitation on the duration of the trial and it may well be that even if there is to be further technical evidence that there should be a strict limit placed on the amount of cross-examination which would be appropriate.

I think the court should take whatever steps are open to it to allow the parties to gain the maximum advantage from the choice of jurisdiction clause, and that will include taking the advantage of the fact that the court has already had a deep immersion in the technology in the earlier proceedings. Nevertheless, it was apparent during the course of Mr. Alexander’s submissions that he needed to reformulate the directions which he sought and Mr. Meade took the reasonable stance that, if a streamlined procedure was to be ordered, he ought to know what directions are being sought by Celltech so that he and his clients could make reasoned responses, agreeing no doubt wherever that was possible, and trying to resolve areas where there was disagreement.

For these reasons, I will in principle direct that there should be a streamlined procedure in this case, but I will give the parties a short period within which to try to come to an agreement on the terms of that streamlined procedure, failing which the matter must be brought before me so that I can resolve any differences.