CAT TRIUMPHS OVER PARSIMONIOUS ABBOTT

Here's a coup for the LexisNexis subscription-only All England Direct service -- a very swiftly delivered note on Cambridge Antibody Technology v Abbott Biotechnology Ltd and another, [2004] EWHC 2974 (Pat), a Patents Court decision of Mr Justice Laddie yesterday.

CAT, a research-based company, was involved in the development and licensing of technology relating to the production of antibodies. Abbott were a group of pharmaceutical companies and its holding company. In 1993 CAT licensed Abbott to use its technology to produce a genetically-engineered human antibody for use in the treatment of rheumatoid arthritis. That agreement was renewed in 1995. The result of the collaboration between them was that Abbott produced a substance called HUMIRA. Under the agreements Abbott had to pay CAT royalties of just over 5% of the net sales of HUMIRA, subject to an offset or royalty-sharing provision. That provision allowed Abbott to deduct from the royalties half the royalties due under licences from third parties for certain categories of technology, subject to the payment by Abbott of a minimum royalty of 2%.

Humira: making rheum for more royalty payments

A dispute arose as to the meaning of the royalty provisions of the agreements. Abbott said they were entitled to offset 50% of the royalties it paid to third parties in respect of other patented technology used in the development of HUMIRA. As they had taken licences under a number of third party patents, Abbott argued that the offset had reduced the amount payable to CAT to the minimum payment of 2%, calculating its royalty payments accordingly. CAT accepted that the agreements contained an offset provision but contended that it applied only to royalties Abbott needed to pay: since all Abbott's licences related to patents covering parts of the HUMIRA production process but didn't involve CAT's technology, the offset provision should not be triggered. CAT therefore demanded that Abbott pay a royalty for the bulk of its sales of HUMIRA at the rate of just over 5%.

Laddie J allowed CAT's claim, holding that on the true construction of the agreements the construction argued by CAT was correct. It was, he said, the only construction which was consistent with all the other provisions of the agreements and made commercial sense in the factual matrix within which the agreements had been made. Accordingly, the royalties payable by Abbott should have been calculated on the basis of the full royalty of approximately 5%.

The IPKat looks forward to reading the full transcript of this decision: it's easy to decide the commercial sense in retrospect, but not so easy to divine it from the words the parties actually use when expressing their respective legal commitments.

The IPKat's favourite Abbot here
More treatments for rheumatoid arthritis here, here and here
Arthritic royalty here