Neurim Pharmaceuticals (1991) Limited & Anor. v Generics (UK) Limited & Anor.

A patent licence is exclusive under Patents Act 1977 where it gives the licensee an exclusive contractual right to work any commercially meaningful part of the patented invention. It need not be coextensive with a patent claim, and an agreement regulating joint enforcement does not prevent exclusivity merely because the licensee cannot sue independently of the proprietor.

Where a patent is revoked before a final order is sealed, revocation can make the patentee unsuccessful for costs purposes. That result is only the starting point. The court must consider all the circumstances, including whether both parties caused costs to be wasted by failing to alert the court to a material development in parallel EPO proceedings.

Neurim, the proprietor of a second medical use patent for a prolonged-release 2 mg melatonin product, and its distributor, Flynn, brought infringement proceedings against Mylan. The patent was subsequently revoked in EPO opposition proceedings with retrospective effect.

In the Patents Court, Marcus Smith J held that the patent was valid and infringed but that Flynn was not an exclusive licensee: [2020] EWHC 3270 (Pat). After the EPO revocation, he reversed his provisional costs outcome and ordered the claimants to pay Mylan’s costs: [2021] EWHC 530 (Pat).

The appeal concerned whether Flynn’s distribution licence was exclusive within sections 67 and 130 of the Patents Act 1977, and the proper costs order after the parallel EPO proceedings had rendered the English trial substantively ineffective.

1. Appeals allowed. Flynn was an exclusive licensee. Clause 3.1 gave it the contractual right to work the patented invention within the licensed Circadin market to Neurim’s exclusion. Clause 17 regulated the conduct of litigation but did not remove that exclusivity. Section 67(1) of the Patents Act 1977 confers the infringement right on an exclusive licensee; it does not require the licensee to have a contractual right to sue independently. Section 67(3), which requires the proprietor to be joined, confirms that reading.

2. Mylan’s respondent’s notice was rejected. The phrase “any right in respect of the invention” in section 130(1) permits an exclusive licence for a part of the field covered by a claim. It does not require the licensed right to be coextensive with the claim. The court applied the reasoning in Spring Form Inc v Toy Brokers Ltd [2002] FSR 17. It distinguished the tentative observations in Peadouce SA v Kimberly-Clark Ltd [1996] FSR 680. While there may be a limit to subdivision of a claim monopoly, this licence covered a commercially valuable market and was nowhere near it.

3. The EPO revocation before any final English order was sealed was a material change of circumstances. It meant that the claimants could obtain none of the substantive relief sought, so Mylan were the successful parties and the first-instance judge could reconsider costs. However, success was not dispositive under CPR rule 44.2. The judge erred by treating it as such.

   The costs incurred after the EPO appeal was expedited had been wasted because neither party brought that material development back to the Patents Court. Both were equally at fault. The appropriate order was therefore that Mylan pay the claimants’ costs of the exclusive-licence issue, which remained useful in later divisional proceedings, and otherwise that there be no order as to costs below. Written submissions were invited on assessment if those costs could not be agreed.

• Court of Appeal (Civil Division). Allowed the appeal on the exclusive-licence issue and varied the costs order: [2022] EWCA Civ 359.
• High Court, Patents Court (Marcus Smith J). In [2021] EWHC 530 (Pat), following EPO revocation of the patent, declared that Flynn was not an exclusive licensee and ordered the claimants to pay Mylan’s costs. The Court of Appeal reversed both conclusions.
• High Court, Patents Court (Marcus Smith J). In [2020] EWHC 3270 (Pat), held the patent valid and infringed but held that Flynn lacked exclusive-licensee status.