GW Pharma v Otsuka. Moçambique rule confirmed as not being engaged in mere contractual dispute. Court of Appeal ia distinguishes direct intellectual property rights validity challenges, and proceedings “principally concerned with” validity.

In GW Pharma Ltd & Anor v Otsuka Pharmaceutical Co. Ltd [2022] EWCA Civ 1462, the Court of Appeal confirmed jurisdiction for the courts of England and Wales, confirming the first instance judgment which I reviewed here.

The first instance judgment dismissing GW Pharma’s application decided three issues: jurisdiction under the Moçambique principle, foreign act of state and a distinct application for a stay on forum non conveniens grounds.

Arguments on appeal are listed [20] ff:

GW Pharma’s grounds 1 and 2 address the Moçambique principle and its application. GW Pharma contend that the judge erred in applying an overly restrictive test for the purposes of the Moçambique principle and further erred in his application of that test to the facts.

Ground 3 addresses the foreign act of state doctrine, and the common law public policy exception. The submission is that the judge erred in law in holding that the act of state doctrine (or common law public policy) did not require the court to decline jurisdiction.

Ground 4 relates to forum non conveniens, contending that the judge erred in declining a stay on those grounds.

Otsuka’s case is that the judge was right for the reasons he gave but Otsuka also advances two additional points in support of the judge’s overall conclusion. The first point is that as well as the exception to the Moçambique rule based on whether a validity challenge is direct or not which the judge applied, there is a second exception – for claims which relate to a contract. This case would also fall within that exception. The second point is a submission that GW Pharma’s case would necessarily involve a country-by-country approach, contrary to the approach adopted by the English courts in related contexts (citing the Supreme Court in Unwired Planet v Huawei [2020] UKSC 37). The relevant principles ought not to be applied so as to prevent Otsuka from bringing its contractual royalty claim against GW Pharma in a single set of proceedings in GW Pharma’s home jurisdiction.

Birss LJ [26] notes, with common sense, that Brussels Ia authority still has relevance, despite the Regulation no longer applying

the fact the Regulation does not apply is a different thing from the question whether aspects of the thinking behind the Brussels Regulation may illuminate questions which do arise.

[29] the main point of UKSC Lucasfilm is summarised as the

modern trend [being] in favour of the enforcement of foreign intellectual property rights, particularly where there is no issue as to validity.

That modern trend of course provokes discussion as to when a claim engages validity as opposed to mere infringement, with Chugai a classic illustration. The judge here sometimes necessarily skates on thin ice for creative counsel may direct the end-result by claim formulation. Here Birss LJ offers a relevant distinction between direct challenges to the validity of a patent, as opposed to proceedings being ‘principally concerned with’ such challenges:

In Chugai there is reference to both the idea of whether a validity challenge is a direct one and also to whether proceedings are “principally concerned with” validity. These two expressions are performing different tasks and it is worth keeping them distinct. A claim consisting of nothing other than a claim for infringement, in which the defendant does not claim that the patent is invalid, but merely requires the court to ask itself, as a guide to construction, what would be the hypothetical consequences for validity if there was infringement, does not involve a direct challenge to validity. Such a claim is also not principally concerned with validity. On the other hand a claim consisting of nothing other than a request for revocation on the ground of invalidity or a declaration of invalidity would be a direct challenge to validity, and would be principally concerned with validity. However a claim raising multiple issues might well properly be said not to be principally concerned with validity, even if one of the subsidiary issues was a direct challenge to validity; but in such a case the court’s response would depend on the circumstances. The court might not decline jurisdiction over the dispute as a whole but might address individual issues separately. If the direct challenge only arises on a contingent basis then the right response might involve case management. Unlike the judge below, I would not describe this latter situation as one in which what was really a direct validity challenge was rendered not a direct challenge owing to its subsidiary nature in the action as a whole. The nature of the challenge is a direct one, but its status in the proceedings as a whole means that they are not principally concerned with it.

This is a discussion which to my mind is also useful for the A24(4) discussion in Brussels Ia, sub judice in BSH Hausgeräte v Electrolux.

[38] ff discusses the long standing exception to the Moçambique rule concerning contracts and equitable obligations. [40] There are said to be two questions in the present case about the contract exception. One is whether it depends on the existence of an exclusive jurisdiction clause in the contract  (answered [42] in the negative] and the other is about the extent of the exception itself. Would it, for example, allow the court to entertain a direct challenge to the validity of a foreign patent which the court would not have had jurisdiction to determine in the absence of the relevant contract (or equitable obligation)? : [43]:

In a way the question is whether the exception really is an exception to a rule that the court has no jurisdiction to determine a claim principally concerned with title (etc.) to foreign land or whether it is really just a manifestation of the proper application of the test for what it does or does not mean to say that a claim is principally concerned with title (etc.). Or putting it another way, can the court, when considering a contract claim, decide on title to foreign land, and by extension the validity of a foreign patent?

[46] that question is answered with reference to the classic in rem v in personam discussion that is part of the original Moçambique rule (and A24(1)BIa)

The contract exception does not allow the court to make a decision about the validity of a foreign patent in rem but it would allow the court to address the validity of a foreign patent in the course of making a decision concerning contractual rights in personam, assuming (such as if the Lear point does work in the way I have described) such a question was relevant to the contract decision.

[48] ff Lord Justice Birss summarises:

Bearing all this in mind, I would state the Moçambique rule as explained and formulated in Lucasfilm, and as it applies to patents in the following way:

First, in a case in which the courts of England and Wales have in personam jurisdiction over a defendant, then the courts have jurisdiction in proceedings for infringement of a foreign patent save where those proceedings are principally concerned with a question of the validity of that patent. The proceedings will not be principally concerned with validity only because the defendant, who does not claim that the patent is invalid, requires the court to ask itself as a guide to construction, what would be the hypothetical consequences for validity if there was infringement. However what the rule does not permit is a direct challenge to the validity of a foreign patent, and (subject to the exception below) the court has no jurisdiction to determine a claim that the foreign patent is invalid.

Second, this Moçambique principle is also subject to a contractual exception. If the case is one in which the court is asked to enforce a contract between the parties then in addition to questions of patent scope/infringement, if and only to the extent that questions of the validity of foreign patents need to be addressed in order to decide on the true nature and scope of the parties’ contractual obligations to one another, then the court can do so.

Applying this summary to the first instance judgment, that judgment is confirmed [60].

The third ground of appeal then invokes the foreign act of State doctrine, in that is is said that (certain) intellectual property rights may be said to depend on the grant or registration by the state. Birss LJ dismisses the argument [73] essentially by suggesting it harks back to bygone notions of intellectual property rights:

even absent the authorities I would hold that as a matter of principle the modern grant of a patent for an invention does not fit within the act of state doctrine as it stands today for two reasons. The first reason relates to the exercise of grant itself. The very word “grant” harks back to a past time, before the Statute of Monopolies 1623, when letters patent were granted on the whim of the Stuart monarchs (and similarly I suspect the Danish monarchy in Blad v Bamfield). Today there is no such condescension by the sovereign power in the grant of a patent by the Comptroller of the Patent Office. Once a properly constituted patent application has been examined and found to comply with the requirements of the law, the Comptroller is required by statute to grant the patent. The relevant words are in s18(4) of the Patents Act 1977 which provide essentially that if the applicant’s application is all in order then ‘the comptroller shall … grant him a patent.’ The second reason follows on from this and was given by Henry Carr J in Chugai at paragraph 68. He observed that once the patent had been granted, any party can challenge the validity of the patent and then can do so in a manner and on grounds which are quite different from an attempt to challenge legislation or government acts such as requisition.

Conclusion on this ground [75]

on grounds of authority and principle, I agree with the judge below that the act of state doctrine is not relevant to the analysis of the court’s jurisdiction in this case.

The first instance judge’s finding on forum non is also confirmed and the appeal therefore dismissed.

I do not know whether, if sought, permission to appeal to the Supreme Court will be granted, but it seems unlikely. The appeal judgment in my view includes important instruction in particular on the ‘principally concerned with’ issue however it largely applies existing UKSC authority.

Geert.

EU Private International Law, 3rd ed. 2021, 2.196 ff.

IRnova v FLIR. CJEU would seem casually to reject reflexivity, and confirms narrow interpretation of A24(4) BIa’s exclusive jurisdictional rule for (in casu non-EU) patents.

Update 2 January 2023 Maxence Rivoir has an excellent note on the case in the CLJ here.

Lydia Lundstedt has prior review of the judgment in CJEU C-399/21 IRnova AB v FLIR Systems AB (who had been business partners in the past) here. Swedish courts are clearly busy referring the private international law elements of patent cases to the CJEU.

Of particular note is that a 3 judge chamber would seem to have ruled out reflexive effect as casually as if it were swatting a fly.

On 13 December 2019, IRnova brought an action before the Patent and Market Court seeking, inter alia, a declaration that it had a better right to the inventions covered by international patent applications, subsequently supplemented by European, US and Chinese patent applications deposited by FLIR in 2015 and 2016, and by US patents granted to FLIR on the basis of those latter applications. In support of that action, IRnova had stated, in essence, that those inventions had been made by one of its employees, meaning that that employee had to be regarded as their inventor or, at the very least, as their co-inventor. IRnova therefore argued that, as the inventor’s employer and thus successor in title, it had to be regarded as the owner of the inventions. However, FLIR, without having acquired those inventions or otherwise being entitled to do so, deposited the applications in its own name.

The court had dismissed jurisdiction viz the Chinese and US patent applications, and the US patents, on the ground, in essence, that it regarded the action concerning the determination of the inventor as being linked to the registration and validity of the patents, and it applied A24(4) BIa reflexively. The Appeals Court referred the issue on reflexive effect to the CJEU, in the following terms:

‘Is an action seeking a declaration of better entitlement to an invention, based on a claim of inventorship or co-inventorship according to national patent applications and patents registered in a non-Member State, covered by exclusive jurisdiction for the purposes of Article 24(4) of [the Brussels Ia Regulation]?’

however the CJEU reformulated [22-24] the case as not concerning reflexive effect at all, rather, enquiring about the scope of the A24(4) gateway.

The Court first of all [25] ff makes a point of confirming its broad reading of the ‘international’ element required to trigger European private international law, referring to CJEU Owusu.

It then [35] would seem to rule out reflexivity in a very matter of factly way (and as Lydia also noted, without AG Opinion) and despite as noted having earlier reformulated the question away from reflexivity:

as has already been pointed out in paragraph 26 of the present judgment, the patent applications at issue in the main proceedings were deposited and the patents concerned were granted not in a Member State, but in third countries, namely the United States and China. As Article 24(4) of the Brussels Ia Regulation does not envisage that situation, however, that provision cannot be regarded as applicable to the main proceedings.

This may have already answered a core question in  BSH Hausgeräte v Aktiebolaget Electrolux.

[36] ff it adds (‘in any event’) reference ia to CJEU Hanssen and to the exceptional nature of A24 [39]. It holds that [42]

the main proceedings relate not to the existence of the deposit of a patent application or the grant of a patent, the validity or lapse of a patent, or indeed an alleged right of priority by reason of an earlier deposit, but to whether FLIR must be regarded as being the proprietor of the right to the inventions concerned or to a portion of them.

[47] it refers ia to the fact that fact that

an examination of the claims of the patent or patent application at issue may have to be carried out in the light of the substantive patent law of the country in which that application was deposited or that patent was granted [however it ] does not require the application of the rule of exclusive jurisdiction laid down in Article 24(4) of the Brussels Ia Regulation

The operative part of the judgment refers both to the A24(4) restrictive interpretation element and to the third countries element hence once cannot simply regard the reflexivity issue as obiter.

Much relevant and surprisingly succinct on the reflexivity issue.

Geert.

EU Private International Law, 3rd ed. 2021, 2.208 and 2.548.

Heslop v Heslop. A reminder of the constraints of the Moçambique rule for rights in rem, and (obiter) on joining a pre-Brexit with a post-Brexit claim under the Withdrawal Agreement.

Heslop v Heslop & Anor [2021] EWHC 2957 (Ch) essentially queries whether Deceased testator actually had any estate or interest in Jamaican Property which she could pass by will.

Under the Moçambique rule (after British South Africa Co v Companhia de Moçambique [1893] AC 602) an English court will not, as a matter of its own limits to jurisdiction, by and large determine matters of title to foreign land. The purpose of the rule is the maintenance of comity and the avoidance of conflict with foreign jurisdictions. The rule has been discussed on the blog before and it finds its EU equivalent of course in Article 24  Brussels Ia.

After considering the rule and the facts of the case, Dray DM holds it is not triggered here for [51-52]

the relief sought (across the two claims) is relief of an in personam nature in a dispute between the two central protagonists, the Second Defendant (the asserted trustee) and the Claimant (the asserted beneficiary) under the asserted trust. The fact that the land in question is situated in Jamaica does not preclude this court from having jurisdiction to hear the claim. The proceedings do not involve any determination of rights in rem. They do not assert a property right which is by its nature enforceable against third parties and they do not purport to bind strangers/third parties. For instance, no possession order, effective against the world at large, is sought (and none could be granted by this court). Neither is any order directed to the Jamaican Land Registry claimed (ditto). The court is only asked to resolve a dispute between those before it, the proceedings being based on an alleged personal (trust) relationship between the Claimant and the Defendants.

Obiter he then [57ff] considers forum non conveniens (argued in fact by neither parties), with the complication [63] that the two claims before the court have not been consolidated and are thus separate claims, albeit proceeding together, and that the first claim was commenced before the end of the Brexit transition period whereas the second claim was commenced afterwards. The judge holds (again: obiter) [68] (seeing also that no consolidation has been sought) that the former claim needs to be assessed viz BIa and the latter viz the post-Brexit rules, [74 ff] that under BIa A24 is not engaged for the same reason as the Moçambique rule, and [72] that if it had been, he would have been minded to follow (with all the necessary caveats  Kennedy v National Trust for Scotland‘s reflexive application.

Geert.

EU Private International Law, 3rd ed. 2021, para 2.208.

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