Otsuka Pharmaceutical Co., Ltd v GW Pharma Limited & Anor.

An English court may determine a contractual dispute concerning a licence of foreign patents where the dispute is principally about contractual rights and obligations. A conditional validity argument will not necessarily engage the Moçambique rule. The court must assess the substance of the pleaded case and whether validity is the principal issue. Direct adjudication of the validity or infringement of a foreign patent remains for the courts of the state granting the patent, but appropriate case management may avoid that issue or address it after other issues. The foreign act of state doctrine does not itself prevent determination of the contractual dispute. A stay for forum non conveniens requires proof of another available forum which is clearly or distinctly more appropriate.

Otsuka sought declarations concerning the interpretation and application of a Research Collaboration and Licence Agreement with GW Pharma and payment of royalties relating to Epidyolex. The agreement was governed by New York law and contained an arbitration clause excluding disputes about patent scope, validity and infringement.

GW challenged the English court’s jurisdiction under the Moçambique rule and the foreign act of state doctrine, contending that its proposed defence included challenges to the validity of patents granted in several jurisdictions. GW also sought a stay on forum non conveniens grounds in favour of New York, where it had commenced related proceedings.

The court considered whether the dispute was principally concerned with foreign patent validity, whether the act of state doctrine applied, whether New York was a clearly more appropriate forum, and whether the proceedings should be stayed for alleged non-compliance with the contractual dispute-resolution procedure.

1. Jurisdiction challenge dismissed. On an application under CPR Part 11, the court approached the issues by reference to the pleaded or indicated defence and the requirement for proportionality. It avoided resolving disputed evidence or US law unnecessarily.
2. The Moçambique rule excludes adjudication of title to foreign land and, by analogy, direct adjudication of the validity of foreign patent monopolies. It does not generally prevent determination of personal contractual obligations. The relevant question is the substance of the dispute, not merely whether patent validity or infringement is mentioned.
3. GW’s validity case was conditional and alternative. Its principal case was that Epidyolex fell outside the collaboration and therefore generated no royalties. The proceedings might be resolved without determining foreign patent validity, including through the contractual issues, estoppel, or case management. The claim was therefore not directly concerned with patent validity and the Moçambique rule was not engaged.
4. The court followed the distinction reflected in Lucasfilm Ltd v Ainsworth and Unwired Planet International Ltd v Huawei Technologies (UK) Co Ltd: foreign patent validity and infringement are ordinarily matters for the courts of grant, while English courts may determine the terms of a licence involving foreign patents. If validity later became necessary, the court could manage the sequence of issues or stay the relevant part.
5. Following Chugai Pharmaceutical Co Ltd v UCB Pharma SA, the foreign act of state doctrine did not require the court to decline jurisdiction over this contractual dispute.
6. GW failed to establish that New York was a clearly or distinctly more appropriate forum under Spiliada Maritime Corporation v Consulex. Relevant factors included the UK location of much of the collaboration, the progress of the English proceedings, and uncertainty whether the New York court had jurisdiction. The US sales and New York governing law did not outweigh those matters.
7. No case-management stay was justified. GW knew the nature of the dispute and had refused to arbitrate it. The claim was not a new dispute requiring further contractual discussions.