How agreements lead to disagreements; Schlumming it

Mr Justice Flaux is not a judge known to the IPKat, but he popped up in a recent IP-related dispute before the Commercial Court for England and Wales in Satyam Computer Services Ltd v Upaid Systems Ltd [2008] EWHC 31 (Comm) in which he gave judgment yesterday. You can read it in full here on BAILII.

Upaid developed software and payment processing technologies. In about 1996, Upaid's founders developed the idea of converting any telephone into a de facto pay-phone through the use of a pre-paid account associated with a caller personal identification number (PIN). Opting to outsource its development, they identified Satyam -- an Indian IT company -- as being suitable to do that work. In May 1997 Upaid and Satyam concluded a short and relatively informal memorandum of understanding.

All went well till June 1998 when Upaid, seeking a US patent, had to demonstrate 'unity of ownership' of the intellectual property rights in its invention. This meant that Satyam would have to assign any rights in the work to Upaid. In fact Satyam normally did this -- but the memorandum of understanding said nothing about it having to do so. Following three months of negotiation the parties entered into an assignment agreement, under which all Satyam's IP would be transferred to Upaid in return for a cash payment. The assignment agreement also referred to a service agreement which, as it turned out, was not concluded until May of the following year. Under the service agreement Satyam would pick a dedicated team to work exclusively on Upaid's projects.

By 2002 the relationship had deteriorated. Upaid complained about Satyam's work. Satyam complained at not being paid and said that the IP rights reverted to it. Upaid said Saytam was infringing its IP rights etc etc etc... Fortunately, at the end of that year the parties struck a settlement agreement, this being subject to the exclusive jurisdiction of the English courts. In June 2005 Upaid commenced patent infringement proceedings in Texas against two third parties and sought Satyam's assistance, which was fothcoming. Having settled that action on unfavourable terms, Upaid then applied to the Texas courts for a declaration of validity of its patents, damages for Satyam's alleged fraud in providing Upaid with forged documents in the earlier Texas proceedings, plus damages for an alleged breach of the assignment agreement back in 1999.

In these English proceedings Satyam argued that either (i) Upaid's claims against it in Texas had been brought in breach of the settlement agreement, which compromised all such claims, or (ii) the exclusive jurisdiction clause in the settlement agreement required the claims to be brought in England. Flaux J had to rule in this instance on three issues: (i) which, if any, of Upaid's claims had been finally compromised by the settlement agreement; (ii) did any (and, if so, which) claim fall within the scope of the English jurisdiction clause contained in the settlement agreement and (iii) was Satyam entitled to a final injunction?

Flaux J refused injunctive relief and ruled that, on its true construction, the settlement agreement did not deprive Upaid of the future right to claim damages for breach of the assignment agreement or for alleged fraud in relation to documentation produced pursuant to that agreement. Nor was there anything in the relevant agreements that required these actions to be pursued in England.

Says the IPKat, it's the same old story. If more attention had been paid to the conversion of the parties' shared understanding at the very beginning into a cohesive form of words, there would have been no need for the assignment agreement which contained the service agreement which led to the settlement agreement which led to a four-day hearing in the High Court. Merpel agrees, adding "It's much easier to settle disputes before they have arisen and when the parties are still fond of each other, rather than trying to hit upon the commercial and legal means of bridging an ever-widening gap between them after the relationship has gone sour". Tufty adds: "I can't help it: I just keep reading the name 'Upaid' as 'Unpaid'".


A more familiar judicial name in patent circles is that of Mr Justice Floyd, who gave a ruling yesterday in Schlumberger Holdings Ltd v Electromagnetic Geoservices ASA, an application to the Patents Court for England and Wales for the disclosure of documents relating to an invalidity action. The IPKat found this on LexisNexis Butterworths' subscription-only service but (as yet) nowhere else.

Schlumberger was the holding company for other companies which comprised the world's largest oilfield services operation, covering some 80 countries. EG filed for three patents relating to controlled sonar electromagnetic surveying equipment that could be used when detecting subterranean reservoirs. It was expected that such technology would become a key part of the future of surveying and, over a period of years, revenue deriving from such technology would reach $1 billion a year. Before EG's patents came along, Schlumberger had expressed no interest in investigating EG's technologies but, once it spotted EG's patents, Schlumberger sought to have them declared invalid on the ground that they lacked an inventive step. After EG sought disclosure of documents from Schlumberger and its group on which it based its contention that its patents were obvious, Schlumberger disclosed a single document relating to documents it held but added that it had no obligation to supply documents of relevance held by companies within the group, since the duty to disclose was limited to documents that were, or had been, in its control. EG was not happy about this, to put it mildly, and sought the wider disclosure.

Floyd J allowed EG's application. In his view, on the evidence the relevant documents had been within the control of Schlumberger and it could be considered that Schlumberger had the general consent of the companies within its group. Further, such documents would be of relevance to the parties in the case.

Says the IPKat, without being in possession of the facts and without having seen the decision it is unwise to comment, but it's difficult to see how Schlumberger could have seriously expected the court to rule in its favour on this point. Any billion-dollar business is entitled to spend its money as it pleases, but this looks like a waste of money for the sake of spite, in order to cause inconvenience and annoyance for its own sake.

Background to Schlumberger here. Little-known fact: the company was founded by a pair of Alsatians.