Rights of exclusive patent licensees clarified

Out-Law News | 26 Jan 2023 | 4:23 pm | 2 min. read

The Supreme Court has refused to grant Mylan permission to appeal against an earlier Court of Appeal decision which confirmed that the right exclusive licensees enjoy under UK law to be parties to claims for patent infringement can be exercised in tandem with patent owners or independently.

The Court of Appeal’s ruling means that exclusive licensees can be a party to infringement proceedings and are therefore entitled to recover any losses even if their right to pursue infringers independently is not provided for specifically in their licensing agreement. 

The Court of Appeal considered the interpretation of the provisions of the Patents Act 1977 that specifically deal with the rights of exclusive licensees in the context of a dispute over pharmaceutical patents.

The patent at issue in the dispute was a European patent which has now been revoked. The patent covered a treatment for insomnia. Neurim Pharmaceuticals owned the patent. Neurim entered into an agreement with Flynn Pharma that provided Flynn with exclusive rights to exploit Neurim’s patents, including the one at issue in this case. Flynn exploits Neurim’s patents, under licence, to market and sell in the UK a product called Circadin.

Neurim and Flynn brought infringement proceedings before the High Court against Mylan in relation to Mylan’s generic melatonin product. In December 2020 the High Court ruled that Neurim’s patent was valid and infringed but that Flynn did not have standing to bring claims in the case on the basis that Flynn was not an exclusive licensee under the licence. The patent was subsequently revoked before the European Patent Office. The High Court reached that verdict after considering the terms of the licensing agreement between Neurim and Flynn and determining that Flynn did not qualify as an exclusive licensee, for the purposes of the Patents Act 1977, because Flynn did not have the right to bring infringement proceedings independently of Neurim under their agreement.

However, the Court of Appeal ruled that the Patents Act 1977 does not require exclusive licensees to be able to bring patent infringement proceedings independently of the patent holder. The relevant provision of the Patents Act 1977 considered by the Court of Appeal gives an exclusive licensee a right of action that it would not otherwise have to bring such infringement proceedings. In this case, the licence agreement regulated how the parties may proceed in the event of infringement proceedings, but this did not mean that the licence was not exclusive or that Flynn was not an exclusive licensee.

The Court of Appeal also said that the purpose of the relevant provision of the Patents Act 1977 is to enable an exclusive licensee to recover its own losses or share of the infringer’s profits in the event of an infringement. The High Court had conferred upon an exclusive licensee an additional requirement of an independent right to bring an action, which the Court of Appeal said was wrong.

Following the Court of Appeal’s decision, Mylan had sought permission to appeal to the UK Supreme Court. In December 2022, a panel of the UK Supreme Court refused Mylan’s application for permission to appeal on the basis that it did not raise an arguable point of law.

The Court of Appeal’s ruling is significant because it means Flynn can pursue patent infringement claims against Mylan in relation to other Neurim patents relevant to Circadin which are within the scope of the licensing agreement. It is also relevant to potential awards of damages that may be ordered should those infringement claims succeed.

This was the first time the Court of Appeal had considered the rights of exclusive licensees under the Patents Act 1977. The Supreme Court’s refusal to consider this issue confirms that the earlier decision provides clarity and helpful guidance for industry and the patent profession as to the scope of the statutory rights an exclusive licensee has by virtue of an exclusive licence.

Pinsent Masons acted for Flynn Pharma in the case.

Co-written by Anna Harley of Pinsent Masons.

We are processing your request. \n Thank you for your patience. An error occurred. This could be due to inactivity on the page - please try again.