GW Pharma Limited & Anor v Otsuka Pharmaceutical Co, Limited

The English court may hear a contractual royalty claim involving foreign patents where it has in personam jurisdiction. The Moçambique principle excludes a direct challenge to the validity of a foreign patent, but does not apply merely because hypothetical validity consequences are considered when construing patent claims. A contractual exception permits validity issues to be addressed only so far as necessary to determine the parties’ personal contractual obligations. It does not permit revocation or other in rem relief, and it does not require an exclusive jurisdiction clause. The modern grant of a patent is not an act of state for this purpose. A stay for forum non conveniens requires a holistic assessment, and the alternative forum must be clearly or distinctly more appropriate.

Otsuka claimed royalties from GW Pharma under a research collaboration and licence agreement governed by New York law. The agreement concerned products covered by patents in several countries and contained an arbitration clause excluding patent scope, validity and infringement issues.

GW Pharma challenged the English court’s jurisdiction under CPR Part 11, relying on the Moçambique principle, the foreign act of state doctrine and forum non conveniens. The Patents Court dismissed the application: [2022] EWHC 1012 (Pat). GW Pharma appealed, raising the scope of the jurisdictional rules and whether New York was clearly and distinctly the more appropriate forum.

1. Moçambique principle. The appeal on grounds 1 and 2 was dismissed. The court adopted the modern approach in Lucasfilm and agreed with the relevant reasoning in Chugai. Where the English court has jurisdiction over the defendant personally, it may hear a foreign-patent infringement dispute unless the proceedings are principally concerned with validity. A claim-construction argument which considers hypothetical consequences for validity is not a direct validity challenge where invalidity is not asserted.
2. The substance, logical sequence and relative significance of the issues must be examined. GW Pharma’s independent-development defence was the principal centre of gravity. Squeeze arguments concerned patent coverage rather than validity. The separate invalidity defence was conditional and might never arise. If it did arise, case management could address it, subject to the contractual exception.
3. The contractual exception provides an independent basis for jurisdiction. Where the court is asked to enforce a contract between parties amenable to its jurisdiction, it may address foreign-patent validity if, and only to the extent that, this is necessary to determine the true nature and scope of the parties’ contractual obligations. The court may not grant in rem relief, such as revocation of the foreign patent. The exception does not depend on an exclusive jurisdiction clause.
4. Foreign act of state. Ground 3 was dismissed. Paragraph 86 of Lucasfilm was authoritative and, if necessary, formed part of that decision’s ratio. The modern grant of a patent does not fall within the foreign act of state doctrine. Under section 18(4) of the Patents Act 1977, the Comptroller must grant a patent when the application is in order. Patent validity may subsequently be challenged through legal mechanisms, which is inconsistent with treating the grant as an unreviewable sovereign act.
5. Forum non conveniens. Ground 4 was dismissed. The judge had conducted the required holistic assessment under Spiliada. The location of witnesses concerning the collaboration, the uncertainty whether the New York court could determine the whole dispute, and the desirability of resolving the international licence dispute in one forum supported England. Relative timing was a weak factor, and the need for evidence of foreign law did not make New York clearly or distinctly more appropriate.

The appeal was dismissed.

1. Court of Appeal (Civil Division): Appeal dismissed on all four grounds, with the contractual exception providing an independent jurisdictional basis. [2022] EWCA Civ 1462.
2. High Court, Patents Court: The Deputy Judge dismissed GW Pharma’s CPR Part 11 jurisdiction challenge and application for a stay. [2022] EWHC 1012 (Pat).