Case Analysis: AstraZeneca UK Ltd V Tesaro Inc.

• Jurisdiction: United States,Federal
• Law Firm: Dehns
• Subject Matter: Intellectual Property, Food, Drugs, Healthcare, Life Sciences, Patent, Food and Drugs Law
• Author: Mr David Pountney
• Published date: 01 May 2023

Future royalty term considerations at early stage R&D licences.

Summary

This case concerned the interpretation of the scope of royalty clauses in two sub-licence agreements concerning second medical use patents sub-licensed by AstraZeneca to Tesaro for the use of a PARP inhibitor to treat cancer. Although the licensed patents only claimed use of the PARP inhibitor in cancers possessing a particular subset of cells, the royalty was stated to be payable on total net sales for all uses of the product to treat cancer.

Tesaro argued that the U.S. doctrine of patent misuse meant that the total sales royalty was not valid as it sought to extend the scope of the licensed patents beyond their claims. However, although the High Court found that the U.S. doctrine of patent misuse could have relevance in interpreting a contract governed by English law when a royalty went beyond the sales of a patented product or use, that was not the case here. In the present case the Judge found that the parties had agreed to a total sales royalty for their mutual convenience given the near impossibility in determining which sales would have been made for only the patented use.

Written by David Pountney, Senior Associate, Litigation, at Dehns.

AstraZeneca UK Limited v Tesaro Inc. [2023] EWHC 803 (Ch)

Case background

AstraZeneca is the exclusive head licensee of several second medical use patents, including U.S. patents, directed to the treatment of cancer and owned by the Institute of Cancer Research and the University of Sheffield (the 'Licensed Patents'). The Licensed Patents claimed the use of poly-ADP ribose polymerase (PARP) inhibitors in targeted treatment regimens for cancer patients in which DNA replication is blocked in cancer cells, which are classified as being homologous recombination deficient ('HRD cells').

Although the PARP inhibitor niraparib was the subject of a patent held by Merck Sharp and Dohme Corporation, as Tesaro was at an early stage of development in 2012, it obtained sub-licences of the Licensed Patents from AstraZeneca (the 'Licence Agreements') to give it 'freedom to operate'.

The Licence Agreements (governed by English law), granted Tesaro an exclusive royalty-bearing licence to exploit the 'Compound', defined as niraparib "the use of which may be claimed or covered by, or the exploitation of which may be claimed or covered by, one or more of the Licensed Patents". Royalties were to be paid on the aggregated net sales of Licensed Products, and...