Exclusive Jurisdiction Clause in Contract Overridden

26 April 2019

His Honour Judge Hacon has held that the High Court of England and Wales has exclusive jurisdiction over a dispute relating to the scope of a licence which included a clause granting exclusive jurisdiction to “the Court of Brussels”. The decision confirms that an exclusive jurisdiction clause in a licence cannot override the exclusive jurisdiction over patent validity of the courts of the EU Member State in which a patent was granted.

VHsquared had a non-exclusive licence to exploit the patents in a defined field called the “Reserved Sector”. Ablynx had an exclusive licence to exploit the inventions in relation to certain medical uses outside the Reserved Sector. In addition to litigation in the Netherlands and Belgium, Ablynx issued proceedings in the High Court alleging that VHsquared exploited uses of the inventions outside the Reserved Sector and in breach of Ablynx’s rights under the UK patents as exclusive licensee.

VHsquared disputed the jurisdiction of the English court, claiming that it was licensed under the licence agreement to carry out the acts complained of and that the licence agreement contained an article granting exclusive jurisdiction to the Court of Brussels. VHsquared also argued that the Dutch Court was first seised of the matter and so the High Court should decline jurisdiction under articles 29, 30 and 31 of the Brussels I Recast Regulation (1215/2012) (the “Regulation”).

Fatally for VHsquared, it also asserted that if the High Court were found to have jurisdiction over the dispute then it would allege that the UK patents were invalid. At first blush this would seem a contradictory position to take, because article 24(4) of the Regulation provides that in “proceedings concerned with the registration or validity of patents” the courts of the Member State in which the deposit or registration has been applied for shall have exclusive jurisdiction. If VHsquared attacked the validity of the patents then the proceedings would be ‘concerned with’ the validity of the UK patents, article 24(4) of the Regulation would apply and the High Court would have exclusive jurisdiction. VHsquared argued, however, that the validity of the UK patents would form only an incidental part of the action which was primarily a dispute about the scope of the licence and therefore the proceedings would not be ‘concerned with’ the validity of the UK patents and so article 24(4) of the Regulation was not engaged.

HHJ Hacon found that the High Court had jurisdiction to decide whether or not article 24(4) is engaged, not the Court of Brussels. He then held that the exclusive jurisdiction granted by article 24(4) took precedence over the other jurisdiction clauses in the Regulation. He analysed what ‘proceedings concerned with’ means in the context of article 24(4), and found that it means the same as ‘proceedings which have as their object’ in article 24(2). Lord Justice Aitken held in JP Morgan Chase Bank NA v Berliner Verkehrsbetriebe (BVG) Anstalt des Offentlichen Rechts [2010] that the test in relation to article 24(2) was whether the proceedings are ‘in substance or principally concerned with’ the ultra vires issue. HHJ Hacon applied the same test in this case and held that the proceedings were ‘concerned with’ the validity of the UK patents if, pursuant to an overall assessment, the proceedings were ‘in substance or principally concerned with’ validity, but not otherwise. He also held that, following the judgment of the Court of Justice in GAT v LuK, it was not possible to sever the issues so that the High Court would retain jurisdiction only over validity and cede jurisdiction on the other points in issue.

As VHsquared’s legal counsel gave evidence that if the High Court accepted jurisdiction then it would raise invalidity of the patents in suit as a defence, HHJ Hacon had no difficulty in finding that if the UK proceedings progressed to trial they would be concerned with the validity of the UK patents. Article 24(4) therefore was engaged. The High Court had exclusive jurisdiction over the proceedings, which the exclusive jurisdiction clause in the licence could not exclude.

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