GSK gets appeal go-ahead in licensing clash with AZ
Appeals court sides with GSK unit in licensing dispute over ovarian cancer drug | Judges find fault with previous decision ordering the pharma firm to pay royalties on all sales of an ovarian cancer treatment.
GSK-owned Tesaro has been allowed to challenge an earlier ruling by the High Court of England and Wales in a licensing dispute with AstraZeneca (AZ) over cancer treatment drug Zejula (niraparib).
On Friday, February 9, the England and Wales Court of Appeal held that Tesaro’s interpretation of its licence agreement with AstraZeneca was, in fact, correct.
In doing so, Lord Justice Richard Arnold permitted the firm to appeal the High Court’s decision that found in favour of AZ in April 2023 and had ordered Tesaro to pay royalties on its total sales of the ovarian cancer drug.
Tesaro—-which was acquired by GSK in 2018 for $5.1 billion— argued that it was only obliged to pay royalties for sales of Zejula that fell within the scope of patents licensed to AstraZeneca by the University of Sheffield and the Institute of Cancer Research.
‘No licence needed for non-infringing acts’
The contested licence agreement consisted of two patent sub-licences dating from October 2012 between AstraZeneca and Tesaro, which gave Tesaro the rights to certain methods of treating patients with Zejula.
AstraZeneca sued Tesaro in 2021, alleging that it was owed a bigger share of sales from the drug. Tesaro claimed that only a minority of Zejula sales were for uses or treatments falling within the scope of the claims of the licensed patents.
In Friday’s judgment, Lord Justice Arnold emphasised that “a licensee of a patent only ever needs a licence to do acts which would otherwise infringe the patent. No licence is needed to do acts which would not infringe anyway”.
He found that through the licence agreement, the parties aligned the scope of the royalty obligation with the scope of the licence, and linked both to the scope of the claims of the licensed patents.
Prospective language causes problem
The parties sparred over the phrase related to the definition of Tesaro’s ‘compound’ in the agreement, which read: “the use of which may be claimed or covered by, or the exploitation of which may be claimed or covered by, one or more of the licensed patents”.
In particular, they strongly disagreed over how the words “may be” should be understood, with AstraZeneca arguing that it implied some probability that niraparib, as sold by Tesaro, would be used in a manner that might be covered by a claim of a licensed patent.
However, Lord Justice Arnold agreed with Tesaro that “may be” could be, and should be, interpreted as “connoting futurity”. The use of prospective language was understandable because some of the licensed patents had not been granted, he said, and “exploitation” by Tesaro was some way off and depended on the successful development of niraparib, he added.
However, Justice Colin Birss took a differing stance, holding that Justice Richards of the High Court—who found in favour of AstraZeneca—had interpreted “may be” to refer to the existence, at the time of the contract, of a possibility that the use could or might be claimed or covered by the patents.
However, he agreed with Lord Justice Arnold that overall, Tesaro’s construction was preferable, and also allowed the appeal.
The case is AstraZeneca v Tesaro. Tesaro was represented by Linklaters and AstraZeneca by Freshfields Bruckhaus Deringer.
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