Patents: whether royalties payable under patent licence

Summary
The High Court has construed a patent using US legal rules and held that, since the licensed product did not infringe the patent, no royalties were payable.

Facts
C sought a declaration that royalties were no longer payable under a licensing agreement for a US patent concerning humanised antibodies.

The patent was part of a patent portfolio licensed to C under a worldwide patent licence agreement between C and U. Royalties were due on sales of a relevant product in a territory if that product fell within the scope of a patent valid in that territory, unless and until that patent expired or was finally held invalid. The agreement was governed by English law and had an exclusive jurisdiction clause in favour of the English court. C sold a pharmaceutical product, a drug used in the treatment of rheumatoid arthritis. The patent was the last valid patent left in the licensed portfolio and was not due to expire until 2026.

C argued that since the product did not fall within the scope of the patent, its manufacture after January 2016 did not attract royalties under the licence agreement, and that it was entitled to a declaration to that effect. U submitted that a royalty was still due because the patent fell within the scope of the patent. The parties agreed that the issue of the proper construction of the relevant patent claim should be determined under US law. 

U had earlier unsuccessfully applied to strike out parts of C's claim on the ground that the English court had no power to determine the validity of a foreign patent.The High Court dismissed U's application for strike-out and held that it had jurisdiction to construe the patent claim (www.practicallaw.com/w-008-7946). It held that exclusive jurisdiction clauses providing for the determination of disputes relating to the infringement of foreign intellectual property rights, or to determine the scope of those rights for example under a patent licence, will in principle be enforceable in the English courts, provided that there is no direct challenge to the validity of the right in question. The court distinguished between disputes relating to construction of patent claims and disputes seeking to challenge the patent's validity, which should be decided by the courts where they were granted.

C's claim proceeded to trial.

Decision
The court construed the patent using US legal rules for patent claim construction and held that C's product did not infringe the patent. As this US patent was the last remaining patent covered by the licence, no royalties were payable under the licence since the expiry of the last of the other covered patents.

The words of a claim 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 on the effective filing date of the patent application. Claim construction was an objective exercise. The skilled person was deemed to…