Celltech R&D Ltd. v Medimmune Inc

A contractual jurisdiction clause covering the validity, construction and performance of a patent licence may confer jurisdiction on the chosen English court to decide whether a product falls within the scope of a foreign patent claim for royalty purposes. The word “performance” includes the obligation to pay royalties. Applying foreign patent law does not prevent the English court from determining that issue. Where parties have agreed a forum, a stay requires strong reasons, and appellate intervention in the discretionary decision requires an error of principle or an outcome outside the reasonable range. Parallel foreign validity proceedings and the risk of inconsistent constructions do not automatically supply strong reasons. The contractual allocation, the nature of the issues, the practical risk and timing must be evaluated. The appeal was dismissed.

Celltech sued MedImmune under a 1998 patent licence for royalties on US sales of Synagis, relying on a second US patent, Adair 2. MedImmune sought declarations in the United States that the patent was invalid and that Synagis did not infringe it, and applied for a stay of the English royalty proceedings. Laddie J refused the stay and directed a streamlined trial. The appeal concerned whether the agreement gave the English courts jurisdiction to decide whether Synagis fell within the scope of Adair 2, and, if so, whether the court should nevertheless stay the claim because validity would be determined in the United States.

Appeal dismissed unanimously. Jacob LJ gave the judgment, with Buxton and Potter LJJ agreeing.

1. Construction of the royalty provision. In patent terminology, “infringe” may refer either to falling within the scope of protection assuming validity or to wrongful infringement of a valid patent. The context determines the meaning. Because “Valid Claim” meant a claim not finally held invalid or unenforceable, “infringe” in clause 3.3 bore the first meaning. Royalties were therefore payable for products falling within the scope of an issued claim unless and until a final decision held the claim invalid or unenforceable.
2. Scope of the jurisdiction clause. The word “performance” in clauses 13.1 and 13.2 included the basic obligation to pay royalties. A dispute about whether royalties were payable was therefore a dispute about performance within the English jurisdiction clause. The English court could apply the appropriate foreign law to determine the scope of a foreign patent. Reading “performance” more narrowly would deprive the clause of much of its effect and was commercially improbable in a global licence agreement. These conclusions were supported by the practical advantages of having one specialist court determine scope issues. [11]–[21]
3. The court expressly left undecided whether clause 13.2 was exclusive. That issue did not need to be resolved for the stay application. [22]
4. Stay and appellate review. A stay in the face of a contractual jurisdiction bargain required “strong reasons”. On appeal, the challenge had to show that the judge relied on irrelevant matters, omitted relevant matters, or exercised the discretion outside the range open to a reasonable tribunal. [23]–[24]
5. The asserted risk of inconsistent US and English decisions did not meet that threshold. The parties had expressly contemplated foreign validity litigation while allocating disputes about scope and performance to England. The dispute involved only the contracting parties, was largely document-based, and presented a remote risk of materially different constructions. The English trial was also due substantially earlier, and a finding that Synagis fell outside the claims would probably end the dispute. The reasoning in Donohue v Armco [2002] 1 Lloyds Rep. 425 concerned materially different, fraud-based litigation involving several parties. The appeal therefore disclosed no error in Laddie J’s exercise of discretion. [28]–[33]

Appeal dismissed. Appeal costs were summarily assessed at £45,000.

1. Court of Appeal (Civil Division): [2004] EWCA Civ 1331. Appeal dismissed, with appeal costs summarily assessed at £45,000.
2. High Court of Justice, Chancery Division (Patents Court): Laddie J, 18 June 2004. MedImmune’s application for a stay was refused and directions were given for a streamlined trial.