In its recent decision in Ablynx v VHsquared regarding the interpretation of EU Regulation 1215/2012 (or Brussels I Recast, as it is generally known), the Court of Appeal has clarified the correct approach to be taken when determining which court should decide who has jurisdiction in circumstances where parallel actions are ongoing. Whilst much will turn on the specific facts of each case, the judgment also serves to highlight the continuing relevance of exclusive jurisdiction clauses in patent licence agreements.
The dispute related to three European patents (each of which had a UK designation) concerning immunoglobulins derived from camelid (being an animal family including camels and llamas) antibodies (the “Patents”). The Patents had been subject to various licences and a dispute arose between two of the licensees, Ablynx NV (“Ablynx”) and VHsquared Limited (“VHsquared”).
The Patents were owned by the Belgian university, Vrije Universiteit Brussel (“VUB”). In 1997, VUB granted a worldwide licence under the Patents to Unilever NH (the “Unilever Licence”) for certain applications of the licensed inventions. In particular, the Unilever Licence comprised an exclusive licence to exploit the Patents in certain named sectors including “packed food products” and “cosmetics with a non-medical orientation” and a nonexclusive licence to exploit the Patents in a few further named fields (together, the “Reserved Sector”).
Crucially, the Unilever Licence included a Belgian governing law clause and a choice of jurisdiction clause conferring exclusive jurisdiction on the Belgian court. In 2010, Unilever granted VHsquared a non-exclusive sub-licence to exploit the inventions in the Reserved Sector (the “VHsquared Licence”).
Meanwhile, in 1998, VUB granted an exclusive worldwide licence under the Patents to an institute (known as VIB) which allowed for the exploitation of the inventions in all fields except the Reserved Sector. In 2001, VIB granted an exclusive sub-licence to Ablynx (the “Ablynx Licence”) which necessarily also excluded the Reserved Sector. Accordingly, by 2011, VHsquared had a non-exclusive licence to exploit the inventions in the Reserved Sector (being, broadly speaking, non-medicinal fields) and Ablynx had an exclusive licence to exploit the inventions in all fields except the Reserved Sector.
In proceedings before the Courts of England & Wales (the “UK Court”), Ablynx alleged that VHsquared had infringed the UK designations of the Patents by carrying out certain activities which fell within the scope of Ablynx’ licence including, inter alia, conducting research into the use of camelid derived proteins for the treatment of gastrointestinal pathogens. In response, VHsquared contested the jurisdiction of the UK Court to hear the claim and subsequently issued proceedings in Belgium regarding Ablynx’ standing to sue in respect of VHsquared’s activities and whether those activities fell within the scope of the Unilever Licence. Although VHsquared did not enter an appearance before the UK Court, except to contest jurisdiction, it indicated that it intended to raise a number of defences to the action including limitation, experimental use, acting within the scope of the licence and invalidity of the Patents. Although the UK Court was the court first seised, proceedings were also ongoing in Belgium and a question therefore arose regarding which court had jurisdiction over the substantive dispute.
Brussels I Recast
Whilst it is not necessary to delve into Brussels I Recast in any great detail in this short report, a few particular provisions should be borne in mind. First, Article 24(4) provides that, in proceedings concerned with the validity of a patent, the courts of the Member State in which the patent is registered shall have exclusive jurisdiction. Second, Article 25(1) allows parties to grant jurisdiction to the courts of a selected Member State, including by way of exclusive jurisdiction, albeit that Article 25(4) provides that agreements conferring jurisdiction shall have no legal force if the courts whose jurisdiction they purport to exclude have exclusive jurisdiction by virtue of Article 24. Third, Article 31(2) provides that, where a court of a Member State on which an agreement as referred to in Article 25 confers exclusive jurisdiction is seised, any court of another Member State shall stay proceedings until such time as the court seised according to the exclusive jurisdiction provision declares it has no jurisdiction.
The first instance decision
At first instance, His Honour Judge Hacon found the UK Court had exclusive jurisdiction and refused to stay the proceedings in the UK. Applying Article 25(4), the judge found that the exclusive jurisdiction clause in the Unilever Licence had no legal force in circumstances where it purported to exclude the UK Court’s jurisdiction under Article 24(4) as the action was likely to be concerned (even if not exclusively) with the validity of the UK designation of European patents. In reaching this conclusion, HHJ Hacon first considered whether Article 24(4) was engaged (he found that it was based on the indication from VHsquared as to its intended defences), next whether Article 25(4) was engaged (again, he found that it was), and, finally, whether Article 31(2) was engaged (he found that it was not).
The main thrust of VHsquared’s appeal was that, in accordance Article 31(2), it was for the Belgian court (rather than the UK Court) to decide which court had jurisdiction. In other words, in addition to the question of which court had jurisdiction over the substantive dispute, there was a preliminary question regarding which court should decide who had jurisdiction over the substantive dispute.
Having considered the philosophy underlying various articles of Brussels I Recast, the Court of Appeal agreed with VHsquared’s characterisation of Articles 24(4) and 25(4) as “substantive rules of jurisdiction” and Article 31(2) as a “procedural rule” about which court should decide the question of jurisdiction where parallel actions are ongoing.
Contrary to the approach adopted by Hacon HHJ, the Court of Appeal first considered whether Article 31(2) was engaged. In answering this question, the Court of Appeal agreed that the test to be applied by the court first seised (here, the UK Court) was whether there was a prima facie case that there is an exclusive jurisdiction clause in favour of the court in another Member State. In addition, it was necessary to consider whether there was a prima facie case that Ablynx was bound by the exclusive jurisdiction clause and that the proceedings between Ablynx and VHsquared fell within the scope of the jurisdiction clause. Whilst it was ultimately for the Belgian court (being the court designated in the exclusive jurisdiction clause) to determine the question definitively, the Court of Appeal held that on the information before it there was a prima facie case that Article 31(2) applied.
Next, the Court of Appeal considered whether Article 25(4) was engaged. As before, this question was to be decided on a prima facie basis. In applying Article 25(4), the Court of Appeal considered the extent of the UK Court’s exclusive jurisdiction under Article 24(4). Following guidance from the CJEU in Berliner Verkehrsbetriebe v JP Morgan Chase Bank and the UK Supreme Court in Koza v Akçil in which the question of exclusive jurisdiction in Article 24 depends on whether the “principal subject matter” of the action concerns the reserved subject matter, the Court held that a number of defences intended to be raised did not involve attacking the validity of the Patents nor were they inextricably linked with such an attack. On the basis that the exclusive jurisdiction provisions of Article 24 should be narrowly interpreted and in circumstances where the dispute between Ablynx and VHsquared was an action raising multiple issues including the scope of a licence, the Court of Appeal considered that VHsquared had established a prima facie case that Article 24(4) did not pull all the issues into the exclusive jurisdiction of the UK Court. Similarly, the Court of Appeal found it to be arguable that Article 25(4) did not invalidate the exclusive choice of court clause. As in the context of Article 31(2), it was for the Belgian Court to determine these questions definitively.
Having allowed VHsquared’s appeal, the whole of the UK proceedings were stayed pending a decision from the Belgian Court on whether it has jurisdiction and, if it does, on the scope of the VHsquared Licence.