Licence held to be exclusive despite option

In Oxford Nanopore Technologies & Anor v Pacific Biosciences of California, Inc & Anor [2017] EWHC 3190 (Pat), the court held that if a licence agreement provides that a third party has an option to take a licence under a patent but has not yet done so, that licence remains an exclusive licence for the purpose of section 67(1) of the Patents Act 1977 (Patents Act). This also entitles the first licensee to bring patent infringement proceedings in their own name.

Background

The President and Fellows of Harvard College (Harvard) is the registered proprietor of EP (UK) 1,192,453 entitled Molecular and Atomic Scale Evaluation of Biopolymers (the Patent). Oxford Nanopore Technologies Limited (ONT) is the licensee. ONT sued Pacific Biosciences of California, Inc and Pacific Biosciences UK, Limited (together, PacificBio) for infringement of the Patent. PacificBio counterclaimed for invalidity.

ONT took its standing to sue from section 67(1) of the Patents Act, which provides that an exclusive licensee may bring infringement proceedings in its own name. Section 130(1) Patents Act defines "exclusive licence" as follows:

"'exclusive licence' means a licence from the proprietor of or applicant for a patent conferring on him and persons authorised by him, to the exclusion of all other persons (including the proprietor or applicant), any right in respect of the invention to which the patent or application relates, and 'exclusive licensee' and 'non-exclusive licence' shall be construed accordingly."

The licence under which ONT claimed its right to sue and which it claimed was exclusive (the ONT Licence), provided as follows:

"Exclusively Licensed Patent Rights. Subject to the terms and conditions set forth in this Agreement, Harvard hereby grants to [ONT] an exclusive, worldwide license under the Exclusively Licensed Patent Rights, solely (a) to develop, make, have made, market, offer for sale, sell, have sold, import and export Licensed Products (which, for clarity, shall include the right to license end users to use the Licensed Products sold under this Agreement) and (b) to perform Licensed Services; provided, however, that the exclusivity of the license granted under this Section 2.1.1 shall be subject to the following limitations:..."

Amongst those limitations was clause 2.1.1.3:

"Pursuant to a collaboration agreement between Harvard and [X] ("X Collaboration Agreement"), Harvard agreed to grant X upon request by X nonexclusive, transferable, royalty-bearing license(s) under the Encumbered Exclusively Licensed Patent rights, to make, have made, use, offer for sale, sell, and import products that comprise or that incorporate any inventions covered by the Encumbered Exclusively Licensed Patent Rights, and to practice any methods that comprise or that incorporate any inventions covered by any Encumbered Exclusively Licensed Patent Rights (each, "[X] License"). … The licenses granted to [ONT] under this Agreement are subject to any [X] Licenses that may be granted to [X] (or its permitted assignee's) request in accordance with the terms of the [X] Collaboration Agreement….."

PacificBio claimed that as a result of this limitation, the ONT Licence was not an exclusive licence because it was not "to the exclusion of all other persons". The claimants argued that the ONT Licence was exclusive at that time since the option provided to the third party X had not yet been exercised.

Judgment

The Judge, David Stone, sitting as a Deputy High Court Judge, held that what is required to answer the question of whether a licence was exclusive was a question of the licence now before him. While the ONT Licence provided that there was an option for a third party (X) to call for a licence, until it did so it was exclusive within the meaning of section 130(1) Patents Act.

Were X to work the invention, it would be infringing the Patent unless and until it completed the contractual step of requesting a licence from the patentee. Although that step was not an onerous one, it was nonetheless a step which X had not yet taken, and may never take.

As a result, the ONT Licence remained an exclusive licence and ONT was entitled, as exclusive licensee, to bring the claim for infringement against PacificBio.

Analysis

The judgment is consistent with previous cases that have considered the meaning of "exclusive licence" for the purpose of the Patents Act and its predecessor the Patents Act 1949. In Dendron, Pumfrey J. (as he then was) held that the assessment of whether or not a licence is exclusive is not a "once and for all" assessment and that an exclusive licence may confer upon the patentee a power to convert the licence into a non-exclusive licence.

More recently in Illumina , Henry Carr J held that where an equitable right to call for a licence was conditional, the otherwise exclusive licence remains exclusive unless and until the contractual conditions are fulfilled that enable the grant of the licence.

Although in this case the ONT Licence provided for an absolute right to call for a licence at any time (unlike in Illumina where pre-conditions had to be fulfilled by the potential licensee before requesting the licence), the conclusion that the ONT Licence remained exclusive unless and until X called for a licence from Harvard is nonetheless consistent with the reasoning in Illumina.