BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
INTELLECTUAL PROPERTY (ChD)
London, EC4A 1NL
B e f o r e :
(sitting as a Deputy High Court Judge)
| (1) OXFORD NANOPORE TECHNOLOGIES LIMITED (2) PRESIDENT AND FELLOWS OF HARVARD COLLEGE
|(1) PACIFIC BIOSCIENCES OF CALIFORNIA, INC (2) PACIFIC BIOSCIENCES UK, LIMITED
Mr Richard Meade QC and Stuart Baran (instructed by Carpmaels & Ransford LLP) for the Respondents
Hearing date: 13 November 2017
Crown Copyright ©
David Stone (sitting as Deputy High Court Judge) :
"Subject to the provisions of this section, the holder of an exclusive licence under a patent shall have the same right as the proprietor of the patent to bring proceedings in respect of any infringement of the patent committed after the date of the licence; and references to the proprietor of the patent in the provisions of this Act relating to infringement shall be construed accordingly."
"'exclusive licence' means a licence from the proprietor of or applicant for a patent conferring on the licensee, or on him and persons authorised by him, to the exclusion of all other persons (including the proprietor or applicant), any right in respect of the invention to which the patent or application relates, and 'exclusive licensee' and 'non-exclusive licence' shall be construed accordingly."
How the question arises
"WHEREAS, Harvard and [ONT] entered into the Original Agreement, pursuant to which Harvard granted [ONT] an exclusive license under the Patent Rights, all in accordance with the terms and conditions of the Original Agreement; and
WHEREAS, after the execution of the Original Agreement, it came to Harvard's attention that the Original Agreement did not account for certain rights under the Patent Rights granted [X] under a pre-existing collaboration agreement; and
WHEREAS, the parties accounted for these pre-existing rights by reforming, restating and replacing the Original Agreement with the Amended and Restated License Agreement;"
"Exclusively Licensed Patent Rights. Subject to the terms and conditions set forth in this Agreement, Harvard hereby grants to [ONT] an exclusive, worldwide license under the Exclusively Licensed Patent Rights, solely (a) to develop, make, have made, market, offer for sale, sell, have sold, import and export Licensed Products (which, for clarity, shall include the right to license end users to use the Licensed Products sold under this Agreement) and (b) to perform Licensed Services; provided, however, that the exclusivity of the license granted under this Section 2.1.1 shall be subject to the following limitations:"
Pursuant to a collaboration agreement between Harvard and [X] ("X Collaboration Agreement"), Harvard agreed to grant X upon request by X nonexclusive, transferable, royalty-bearing license(s) under the Encumbered Exclusively Licensed Patent Rights, to make, have made, use, offer for sale, sell, and import products that comprise or that incorporate any inventions covered by the Encumbered Exclusively Licensed Patent Rights, and to practice any methods that comprise or that incorporate any inventions covered by any Encumbered Exclusively Licensed Patent Rights (each, "[X] License"). The licenses granted to [ONT] under this Agreement are subject to any [X] Licenses that may be granted to [X] (or its permitted assignee) upon [X's] (or its permitted assignee's] request in accordance with the terms of the [X] Collaboration Agreement ."
The Parties' Arguments
"Section 67 gives the holder of an exclusive licence the same power as the proprietor of the patent to sue for infringement occurring after the date of the licence, and the word "proprietor" throughout the [Patents] Act is to be construed (in relation to infringement) accordingly (subs.(1)). The exclusive licensee may then be awarded damages (or an account of profits) for infringement of his rights as exclusive licensee (subs.(2)). The proprietor is to be made a party to the proceedings, at least as a nominal defendant; he is not, however, liable for costs (expenses in Scotland) if he does not put in an appearance (subs.(3)). The section applies to infringement of rights arising from a pending application; see s.69(1). This power is an important one as the exclusive licensee may have suffered loss not suffered by the proprietor as such who cannot therefore claim for that loss.
"Exclusive licence" is defined in s.130(1) and means a licence to the exclusion of all others, including the proprietor of the patent (or the applicant where the licence is granted under a pending application) of "any right" in respect of the invention to which that patent or application relates. The words "any right" appear to be very wide.
So long as a licensee can establish that his licence is "exclusive", even of the proprietor, in respect of some right under the patent, that is sufficient to entitle him to sue in his own right for patent infringement; and, once a claimant (and subject to registration of the licence), he can probably recover damages for any loss suffered according to the usual remoteness of damage principles."
"A number of preliminary observations may be made in relation to this definition. The first is that the licence need not be a sole licence. The words "or on him and persons authorised by him" seem to me to contemplate a licence which confers upon the exclusive licensee a power to sub-licence. The essential element of the transaction appears to be the exclusion of all other persons including the patentee or applicant. Second, in my judgment the section cannot be contemplating a once and for all assessment. Take, for example, a licence that confers upon the licensee a straightforward exclusive licence to make use and sell objects falling within a claim. An exclusive licensee can expect to have to pay a higher royalty than a non-exclusive licensee, and his licence may well include a "best endeavours" clause or clause to a similar effect. Such licences not infrequently confer upon the patentee a power to convert the licence into a non-exclusive licence if minimum royalty provisions are not satisfied. If the patentee exercises such a power by notice, then of course the erstwhile exclusive licensee loses that status, and, it seems to me, must lose his power to bring proceedings."
"Is the power to call for such a document sufficient to meet the requirement of the section so as to constitute the holder of the power a holder of a licence? In my judgment, the language of the section is consistent only with the execution of an actual licence as a pre-requisite for consideration of any loss or damage, and this the applicants admittedly fail to establish."
He dismissed Courtauld's appeal.
"242. Premaitha and TDL/Ariosa challenged Illumina's title to sue as exclusive licensee in respect of Lo 1. Although the proprietor of Lo 1 is a claimant, this issue could be of relevance to quantum of damages.
243. Lo 1, and the other [p]atents, are subject to a Pooled Patents Agreement dated 2 December 2014 between Illumina and Sequenom ("the PPA"), which concerns intellectual property relating to NIPD. Illumina alleged that an exclusive licence under the Lo 1 [p]atent was granted by Sequenom to Illumina under Section 2.3 of the PPA. The Defendants submitted that this does not amount to an exclusive licence within the meaning of the Patents Act 1977 on the basis that the exclusive licence was granted to Illumina "and its affiliates". The Defendants alleged that the inclusion of "affiliates" means that the licence is not exclusive.
244. Section 130 of the Patents Act 1977 defines an exclusive licensee as:
"a licence from the proprietor or applicant for a patent conferring on the licensee, or on him and persons authorised by him, to the exclusion of all other persons (including the proprietor or applicant), any right in respect of the invention to which the patent or application relates."
245. Section 1.1 of the PPA contains the following, amongst other, definitions:
"Affiliate" means, with respect to a Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person at any time during the period for which the determination of affiliation is being made. For purposes of this definition, the term "control" means, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of management policies of such Person, whether through the ownership of voting securities or by contract or otherwise."
"Illumina Parties" means, collectively, Illumina and its Affiliates"
246. Section 2.1 of the PPA does not grant any licence, but rather indicates the overall purpose of the grant. Clause 2.1(a) provides that the Illumina Parties will have:
"The exclusive (even as to the Sequenom Parties), worldwide, sub-licensable right under the Pooled Patents to exploit NIPD IVD Products in the NIPD IVD Field."
247. The material part of Clause 2.3(a) of the PPA provides:
"On the terms and conditions of this Agreement, Sequenom, on behalf of itself and its Affiliates, hereby grants to Illumina and its Affiliates an exclusive, irrevocable and perpetual (subject to Section 2.3(b)), non-transferable and non-assignable license (except as permitted under Section 9.1) worldwide license, with the exclusive right to grant sublicenses, under the Sequenom Owned Patents and Isis Patents, to Exploit NIPD LDT Tests in the NIPD LDT Field and to Exploit NIPD IVD Products in the NIPD IVD Field "
248. Section 2.3(b) provides:
"The license rights set forth in Section 2.3(a) granted to any Affiliate of Illumina shall automatically terminate with respect to such Person when it ceases to be an Affiliate of Illumina. Persons that become Affiliates of Illumina after the Effective Date shall be licensed under the license rights set forth in Section 2.3(a) only for those licensed acts that occur on or after the date it becomes an Affiliate"
249. Illumina submitted that, in practice, because Illumina exercises effective control over its affiliates, none of them can operate the licence without its authority. It submitted that the relevant affiliates were persons authorised by Illumina within the meaning of section 130(1). Illumina relied on the first witness statement of Mr Welland, commercial and IP counsel of Illumina. He explained that Illumina has no 'Persons' within the definition of 'Affiliate' over which it does not exercise control, and therefore no Affiliate may operate the licence without its authority. He further explained that there is no Person who exercises control over Illumina, since it is a publicly quoted company with no shareholder who has a controlling interest. Therefore, Illumina argued that there is no Person over whom Illumina might not exercise control, or who might themselves exercise control over Illumina, who could claim to be an Affiliate under the agreement.
250. By his second witness statement, Mr Welland dealt with the relationship between Illumina and its wholly-owned subsidiary, Illumina Cambridge Ltd, through which it exploits third party intellectual property rights in the NIPD IVD field in the United Kingdom. Mr Welland stated that Illumina Inc has substantive control over the business decisions of Illumina Cambridge Ltd. Illumina submitted that, to the extent that Illumina Cambridge can and does use the method of the Lo 1 [p]atent, it does so under the authority and direction of Illumina Inc. In spite of a challenge to Mr Welland's evidence based on the articles of association of Illumina Cambridge, I accept that Illumina Inc exercises de facto control over the activities of Illumina Cambridge.
251. Illumina argued that in the circumstances, the PPA is a licence conferring rights on Illumina Inc, and persons authorised by Illumina Inc, (to the exclusion of all other persons), as required by section 130(1). It argued that it makes no difference under the section whether an exclusive licence is granted to a parent company which can then sublicense to subsidiaries authorised by it, or whether the exclusive license agreement itself makes clear that the licence extends to those authorised subsidiaries.
252. I do not accept Illumina's submissions on this issue, for the following reasons. First, the PPA expressly confers a licence on Illumina and its Affiliates. Pursuant to the PPA, Affiliates of Illumina do not need authorisation from Illumina to operate the licence in respect of the Lo 1 [p]atent, because they are licensees in their own right. This appears clear from the wording of section 2.3(a). It is confirmed by section 2.1(a), which provides that the Illumina Parties, which means Illumina and its Affiliates, are to have an exclusive licence under the Pooled Patents. It is further confirmed by section 2.3(b) that the PPA is not a grant of an exclusive licence to Illumina alone, with a power to sub-license its Affiliates. Illumina and each of its Affiliates, from time to time, are licensees. Therefore, Affiliates do not require an authorisation from Illumina Inc to exploit the Lo 1 [p]atent. Affiliates licensed by the PPA include not only Illumina Cambridge, but all other Affiliates of Illumina Inc, from time to time.
253. Secondly, in Dendron v University of California  FSR 43 at  Pumfrey J (as he then was) considered the definition of exclusive licence in section 130(1). He said:
"The words 'or on him and persons authorised by him' seem to me to contemplate a licence which confers upon the exclusive licensee a power to sub-licence. The essential element of the transaction appears to be the exclusion of all other persons including the patentee or applicant."
254. Accordingly, a licence is only exclusive under section 130(1) if it is granted to a single person, although he may grant sub-licences to "persons authorised by him". The PPA does not comply with this definition, as it is a licence granted by the proprietor to a number of persons, even though one of them is in de facto control of the others. "
"472. Illumina claimed that its rights as exclusive licensee under Lo 2 are recorded in the Pooled Patents Agreement and derive from the amended CUHK 2008 Licence and Novation Agreements. Lo 2 is listed in Annex IV to the Pooled Patents Agreement as a 'Sequenom In-Licensed Patent', defined as 'all Patents in-licensed by Sequenom or its Affiliates immediately prior to the Effective Date under, and as set forth in, the CUHK Licenses (2008/2011)'.
473. The 'Sequenom In-Licensed Patents' are owned by the Chinese University of Hong Kong and were licensed to Sequenom under the CUHK Licences (2008/2011). The CUHK Licences (2008/2011) were amended and Sequenom assigned and novated these licences to Illumina.
474. Premaitha's argument focused upon clause 2.4 of the CHUK licence which states that:
"2.4 University reserves the right to:
2.4.1 use and develop any of the Inventions and the Prospective Patent solely for academic research and publication purposes at all times provided that University provides a copy of any manuscript to Licensee, at the time of submission, for any publications submitted to a journal indexed by the Institute of Scientific Information; and to extend the academic research and publication rights, set forth above, to other collaborating academic organisations in whatever countries.
2.4.2 forthwith upon the request of the Hong Kong SAR Government (the "Government") unconditionally grant to the Government an irrevocable, non-exclusive, perpetual world-wide, freely transferable, sub-licensable and royalty free license to use the Invention in such manner and for such purposes as may be decided by the Government. Such request will be made by the Government when in the opinion of the Government:
(a) the public mission of the Commissioner for Innovation and Technology of the Government or any person authorized to act on his behalf needs to be fulfilled; or
(b) it is in the public interest to do so."
475. Premaitha argued that since CUHK had reserved rights to use and develop Lo 2 and Lo 3 for academic research and publication at all times, the licence was not exclusive to Illumina. My conclusion on this issue is the same as in relation to the Quake Patents. The reservation does not extend to authorisation of any third party for commercial purposes. The licence [is] an exclusive licence of the right to exploit for commercial purposes and, according to section 130(7) [I think this was a reference for section 130(1)] an exclusive licence may be in respect of any right.
476. Premaitha also relied on the reservation by CUHK of the right to grant to the Hong Kong Government a non-exclusive licence. However, the right to grant a licence to the Hong Kong Government is conditional and contingent on a request being made, which has not happened. The licence to Illumina remains exclusive since no other party has a licence nor is CUHK contractually able to grant a licence to any other party."
i) Whether or not a licence is an exclusive licence for the purposes of section 67(1) of the Patents Act is a matter for English law: Dendron, paragraph 9;
ii) A licence which purports to be an exclusive licence may not necessarily be so. Identifying an exclusive licence depends on a proper construction of the document or documents: Dendron, paragraph 9. An exclusive licence will be expressly so: circumstances in which an exclusive licence will be implied will be rare, if they exist at all;
iii) It is for the party asserting that it is an exclusive licensee to demonstrate that it is: Dendron, paragraph 9;
iv) The assessment of whether or not a licence is exclusive is not a "once and for all assessment": Dendron, paragraph 11. An exclusive licence may confer upon the patentee a power to convert the licence into a non-exclusive licence: Dendron, paragraph 11;
v) The "essential element" of an exclusive licence is that is it a licence to the exclusion of all other persons, including the patentee or applicant: Dendron, paragraph 11;
vi) It is possible to have a plurality of exclusive licences in respect of any one patent: Courtauld's, page 210; Illumina, paragraph 475;
vii) But each exclusive licence may only be granted to one person a licence will not be exclusive if granted to a number of entities, even if they are under the same control: Illumina, paragraph 254;
viii) An exclusive licensee may grant sub-licences to "persons authorised by him": Dendron, paragraph 11; Illumina, paragraph 254;
ix) There is a distinction to be drawn between a licence and an equitable right to call for a licence: Courtauld's, page 210; and
x) Where an equitable right to call for a licence is conditional (as it was in Illumina the Hong Kong Government had to satisfy itself that the public mission of the Commissioner needs to be fulfilled, or that it is in the public interest to request the licence), the otherwise exclusive licence will remain exclusive unless and until the contractual conditions are fulfilled that enable the grant of the licence: Illumina, paragraph 476.