Skip to main content
Insight

Chugai gets relief from the pain of its licence agreement

David Knight
30/08/2018
In this blog we look at the very recent decision of the Patents Court in favour of Chugai in the long-running patent and licensing dispute with the patentee, UCB. The judgment is interesting in looking at how an English judge applies US law of patent construction, and for helpful guidance on patent drafting.

In a recent trial concerning the construction of a patent claim, one party (Chugai Pharmaceutical) argued for a construction that would mean that its product "Actemra" for the treatment of swelling and pain arising from rheumatoid arthritis did not fall within the scope of the patent claim; the other party, the patentee (UCB), argued for a construction that would mean that Chugai's product did fall within the scope of the claims, but they accepted that on such a construction so too would an item of prior art.   Against such a background one might at first glance conclude that Chugai were in the clear and query why the parties spent six days in court, with four expert witnesses and generating a judgment that ran to nearly 50 pages.

Quick recap of the dispute

As we reported previously in our blogs (here and here), the background to this case is that since December 2007 Chugai has been a patent licensee of UCB.   The licence agreement is governed by English law and there is an exclusive jurisdiction in favour of the English court.   The relevant royalty provision reads:-

“Royalties shall be payable only upon Net Sales in countries where, but for the licence granted by UCB to CHUGAI … CHUGAI or a Permitted Sublicensee would infringe a Valid Claim of the relevant patent …”

For the reasons discussed below, all patent rights of the licensed patent family had expired, save for the US patent.   Chugai applied to the English court for a declaration that its product did not fall within the scope of the US patent and therefore its obligation to pay royalties on sales in the US should cease.

Analysis of Birss J

The question of whether "Actemra" did fall within the scope of the relevant claim (claim 2) of the US patent is a matter of US law.  Accordingly for the UK court to decide this question, which came down to two alternative constructions of the claim, expert evidence of US law on patent construction was required.   In his judgment, the judge (Birss J.) gives a very readable summary of US law on patent construction.   In summary, one considers first the intrinsic evidence, then the extrinsic evidence and if it still is not possible to decide between alternative claim constructions the so-called tie-breaker comes into effect. 

  1. Under the intrinsic analysis one first considers the patent claims themselves: if they are clear then there is no requirement for further consider construction.   Where, as in this case, Birss J. concluded that they are unclear, one next considers whether when read in conjunction with the patent specification the claims are clear.   Still Birss J. could not reach a conclusion on how the patent claim should be construed.   Unlike the general position in the UK, the patent prosecution file in the US also can used to aid construction.  However, this too did not help; as Birss J. records:-

"The prosecution file contains material which supports each party’s case.  There are clear examples of statements consistent with both sides’ constructions being made by the patentee."

  1. Having not been able to reach a conclusion on claim construction on the basis of the intrinsic evidence, Birss J. went on to consider the extrinsic evidence, that is to say:-

"to determine what a person of ordinary skill in the art would understand the claim terms to mean or to establish that a particular term in the patent or the prior art has a particular meaning in the relevant field."

  1. If the extrinsic evidence fails to show a clear construction, the so-called tie-breaker comes into play.   Under the tie-breaker if one construction results in the patent being invalid, but the other does not then the latter construction which preserves validity is preferred.   Given UCB's acceptance (for these proceedings only) that its construction would cover an item of prior art, the tie-breaker would play in Chugai's favour.

Birrs J's conclusion

In summarising his findings, Birss J. writes:-

"The claims alone could be read either way.  The specification, which is the single best guide and primary basis for construing the claims, is hard to interpret and contains some material which positively supports one side and some material which positively supports the other side.  The prosecution file is similar, containing statements which support each side’s case.  The extrinsic evidence, albeit the least powerful source of evidence, is different.  It firmly supports Chugai."

He goes on to say:-

"I am satisfied that approached purely as a matter of construction, I should not find in favour of UCB’s construction.  That is because overall, the case in support of UCB is not better than the case for Chugai’s construction.  Accordingly, looking ahead, it is tempting to say that the validity tie break is looming and on that basis claim 2 must be construed in the manner contended for by Chugai.

However, he concludes that it is not necessary to deploy the tie-breaker because:-

"Taking the extrinsic evidence into account, the patent can be construed in a reasonably coherent way using Chugai’s approach provided one accepts that many of the statements which do support UCB are just not talking about the claims.  They are talking about the wider work undertaken by the inventors.

Thus he concluded that Chugai's claim construction prevailed, and therefore no royalties are due.

Comment

One might wonder why UCB fought the action if their position was that if their construction was correct then the patent would cover and be invalidated by a piece of prior art.   The answer is that even if Birss J. reached a conclusion in favour of UCB's claim construction and inherently therefore that the US patent is invalid, he is not empowered to revoke it as the power of revocation is exclusively a US jurisdiction matter.   Thus, pending a successful revocation action by Chugai in the US, the patent would remain valid and royalties due.

Further, UCB's concession that on their construction the patent claim would cover the prior art, was made only for the purposes of the English proceedings, leaving them free to run validity arguments in the US had Chugai needed to bring a US revocation action.

The judgment again demonstrates the flexibility and ability of the English court as a forum for resolving technical patent disputes with multi-jurisdictional dimensions. Of interest in this case is how an English judge applies US law of patent construction. 

It is particularly notable that the licensed US patent does not expire until 2026, some 10 years after all other equivalent licensed patents expired.  This quirk arose because at the time the patent was being applied for, the term of a US patent was 17 years from the date of grant, and prosecution having taken 13 years resulted in an expiry date 30 years after the date of application.  Since then the US law has changed, and now follows the international norm with the expiry date fixed by reference to the application date.   Thus for patent applications now being made it will not be possible for the US patent in a patent family to expire so much later than other patents in the same family.

One might question why Chugai did not simply seek revocation of the US patent in the US instead of having the English court adjudicate on US law of patent construction. The judgment does not record the reason, but we speculate two possible reasons.  First, the cost and duration of US proceedings.  Secondly, and perhaps more likely, is if the licence agreement, like many licence agreements, had a provision that if the licensee challenges the validity of a licensed patent the licensor is entitled to terminate the licence agreement; even if Chugai were confident of their position, should the licence have been withdrawn following a revocation challenge by Chugai it would be a bold step to continue selling on the US market and risk infringing a valid patent.

 

Sign up to our email digest

Click to subscribe or manage your email preferences.

SUBSCRIBE