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4 May 2022Big Pharma

English High Court denies Jazz units’ jurisdictional challenge

Two subsidiaries of Ireland-based Jazz Pharmaceuticals have failed in their bid to challenge the jurisdiction of the English High Court in a dispute with Tokyo-headquartered Otsuka Pharmaceutical over a cannabis sativa collaboration.

Yesterday, May 3, Deputy High Court Judge Ian Karet ruled that the English High Court would be able to hear the dispute, and was a more suitable forum than New York.

The dispute centres on a collaboration and licence agreement entered into by Otsuka and Jazz’s subsidiaries GW Pharma and GW Pharmaceutical (GW) in 2007. The agreement is governed by New York law.

The parties were engaged in research and development of pharmaceutical preparations based on botanical extracts from chemovars (chemical products derived from plants) of Cannabis sativa for the treatment of central nervous systems and cancer indications.

Otsuka, which commenced UK proceedings in October last year, claims declarations as to the interpretation or application of the agreement and payment of royalties. GW commenced proceedings in New York in January 2022, claiming that patents.

Under the agreement, Otsuka had the choice between taking forward the clinical development of any candidate medicinal product identified as a result of the collaboration or giving up its right to do so.

At the end of the research period in 2013, Otsuka decided not to pursue clinical development of any product candidate. GW did proceed with development, but in these proceedings, the companies argued that there was no connection between the collaboration with Otsuka and their current product Epidyolex.

The active ingredient in Epidyolex is cannabidiol and, since June 2018,  GW or their affiliates have obtained marketing authorisations and commenced sales in the US, the EU, the UK, Australia, Switzerland and Israel for Epidyolex for the treatment of seizures associated with various conditions or epileptic syndromes.

Otsuka, on the other hand, claimed that Epidyolex falls within the scope of at least two jointly-owned patent families which arise from the collaboration so that under the terms of the agreement GW should pay royalties on sales of the product.

GW then contested jurisdiction, leading the court to consider it has the jurisdiction to hear a dispute about a patent licence in circumstances where the licensee has indicated it will challenge the validity of licensed patents granted outside the UK.

he vast majority of the sales are made in the US; the Agreement is governed by New York law; and in any arbitration the parties are entitled to discovery as if the arbitration were a civil suit in the New York Supreme Court.

Karet said that, in the High Court, GW will claim a series of declarations including that its product doesn’t fall within the scope of the licensed patents and, in the alternative, that the claims of the patents are invalid because if the licensed patents cover the product then they must be invalid.

"The declarations go to all of the relevant jointly-owned patents in Europe, Israel and Australia as well as the US patent,” said Karet.

He added: “There is no indication that GW intend in any event to challenge the validity of the relevant patents in the national courts of their grant, whether by an action for revocation or by seeking to surrender the patents because they believe that they are invalid … GW's position on invalidity is thus conditional and depends on them failing to establish their proposed application of the agreement to their product.”

According to the judge, the UK Supreme Court’s decisions in Lucasfilm and Unwired Planet demonstrate that the UK courts have “moved significantly towards the enforcement of foreign intellectual property rights”, but that questions on the validity and infringement of a national patent remain within the exclusive jurisdiction of the courts of the state which has granted the patent.

Karet went on to say that patent validity was not the principal issue in the case and that a court may be able to decide the dispute before having to consider a validity argument.

He added: “I conclude that the conditional nature of GW's validity defence indicates that for the purposes of jurisdiction the claim is not directly concerned with patent validity. This dispute is thus not as formulated by GW principally about the validity of patents granted outside the UK.

“The action might be concluded without the question of validity of a foreign patent having to be determined, either because that issue does not fall to be decided or through case management.”

GW’s application contesting jurisdiction failed and its attempt to have the claim stayed were rejected.

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16 November 2021   Jazz Pharmaceuticals has claimed that Avadel Pharmaceuticals’ proposed narcolepsy drug infringes a patent related to Jazz’s blockbuster treatment Xyrem.
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4 February 2021   Jazz Pharmaceuticals has acquired UK medicinal cannabis company GW Pharmaceuticals in a takeover worth $7.2 billion.
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