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JUDGMENT: Chugai Pharmaceutical Co v UCB Pharma SA

Justiciability and Act of State Revisited

In its interesting judgment in Chugai v UCB, the Patents Court has resolved a number of questions relating to the application of the doctrines of non-justiciability and act of state.

The claim concerns a declaration as to non-liability for royalties under a licence. The commercial question is whether Chugai is liable for royalties in respect of its tocilizumab anti-arthritic drug.

Due to the terms of the licence, this requires consideration of the interpretation of the breadth of a US patent, which itself may require assessment of whether the US patent would be invalid under US law on validity if a broader construction was given to it. The licence contained an English exclusive jurisdiction clause.

The Defendant, UCB, argued that the fact that parts of the claim put in play questions relating to validity of a foreign patent in this way meant that the relevant parts were non-justiciable under the doctrine derived from British South Africa v Moçambique [1893] AC 602, or because it infringed the possible rule against consideration of the validity of a foreign act of state, recently examined by the Supreme Court in Belhaj v Straw [2017] UKSC 3.

Henry Carr J said, obiter, that his provisional view was that if the claim had been a direct challenge to the validity of a foreign patent, he would have considered that it should not be justiciable in the English courts, by extension of the Moçambique rule.

The Judge analysed the Moçambique rule, which had been considered in the context of intellectual property rights by the Supreme Court in Lucasfilm v Ainsworth [2011] UKSC 39, and observed that when it came to patents there was a basis for drawing a distinction between claims for infringement and claims for invalidity.

But he concluded that the case before him was not such a direct challenge to validity. He accepted Chugai’s submissions that its claim was contractual and merely required the court to ask itself what would be the hypothetical consequences for validity of the rival interpretations, and that the disputed parts of its case were incidental to the essential nature of its claim, which was a claim for determination of its royalty obligations. In his view, this claim fell within the exclusive jurisdiction clause.

He therefore held that the claim fell outside the Moçambique rule because the issues pertaining to validity were incidental to the claim which was not principally concerned with validity; and because the claim fell within the longstanding contractual exception to the Moçambique rule. Further, it would not be an affront to comity to give effect to the parties’ agreement on jurisdiction.

In relation to the act of state doctrine, Henry Carr J concluded that he should accept the statements on Lucasfim v Ainsworth in which Lords Walker and Collins had said that “the foreign act of state doctrine has not been applied to any acts other than foreign legislation or governmental acts of officials such as requisition, and it should not today be regarded as an impediment to an action for infringement of foreign intellectual property rights, even if validity of a grant is in issue.”  Although he viewed these statements as obiter he concluded that they could not be ignored and he regarded them as having been followed by the Supreme Court in Belhaj v Straw. So he held that the grant of a patent was not an act of state, and the act of state doctrine would not have applied even if validity was directly in issue. Consequently, act of state should not prevent the Court considering the claim here. It was not a breach of comity for the court to exercise jurisdiction.

As a result, the Court concluded that it had jurisdiction over Chugai’s claims and dismissed UCB’s applications to strike out the disputed parts of the claim.

Chugai was represented by Thomas Raphael QC from 20 Essex Street, leading Mark Chacksfield from 8 New Square, instructed by Marks & Clerk.

UCB was represented by Alexander Layton QC from 20 Essex Street, together with Michael Tappin QC from 8 New Square, leading Oliver Caplin of 20 Essex Street, instructed by Powell Gilbert.

Chugai Pharm -v-UCB final 26 05 17.pdf126.68 KB