Is the long arm of the British IP Courts only a "phantom menace"?

In the bookshelf-lined rooms of an intimate room of Lincoln's Inn, members of The Intellectual Property Lawyers Organization (TIPLO) convened on a chilly March night to debate the long arm of English justice -- or lack thereof. The Chatham House rule applied so, although the AmeriKat cannot indicate who said what, the public record does record that there were two speakers - two of the three newly appointed IP silks Andrew Lykiardopoulos (8 New Square) and Tom Mitcheson (3 New Square) - and a chair in the form of the illustrious Lord Hoffmann. The proposition being debated was whether in light of the Supreme Court's decision in Lucasfilm v Ainsworth and the ongoing Actavis v Eli Lilly case we were seeing a Dutch-style territorial grab for jurisdiction or that in the words of one clever barrister a "phantom menace"?

To remind readers of the facts, Actavis v Eli Lilly is a declaration of non-infringement action commenced by Actavis in respect of Lilly's patent covering pemetrexed disodium for the treatment of cancer (see previous AdvoKat post here) -- the rub being that Actavis sued not just in respect of the UK designation but the Spanish, French, English and Italian designations as well due to an unfortunate outcome for Lilly (and their lawyers) when, according to the High Court, they unwittingly accepted service for the other jurisdictions when accepting service for the UK proceedings. In light of Lucasfilm and Brussels I, the English and Welsh Court held that it was permitted to hear the case in respect of the foreign jurisdictions, affirmed by the Court of Appeal.

Lucasfilm was about the copyright in and the infringement of the famous Star Wars Stormtrooper helmet. Mr Ainsworth was hired by Lucasfilm to produce the military uniforms for the Star Wars, including the Stormtrooper helmet. In 2004, he started selling replicas of the models he made from the original molds. Lucasfilm commenced proceedings for copyright infringement under the US and obtained a default judgment. Mr Ainsworth did not engage in the US proceedings save as to challenge jurisdiction of the Court. Lucasfilm, now without a real effective remedy, commenced proceedings in the UK where Mr Ainsworth was domiciled. Lucasfilm sued again for copyright infringement under UK copyright law and sought to enforce the US judgment or, if the court refused, at least get the British court to determine its claims under US copyright law. Mr Justice Mann dismissed almost every part of Lucasfilm's action holding that the helmets were not protected by copyright but decided there was no absolute bar against the English court hearing an action to enforce copyright in respect of infringements that took place abroad. On appeal, in a robust judgment by the court (led by Lord Justice Jacob), the court dismissed Lucasfilm's appeal holding that Brussels did not

"create the extra-EU jurisdiction as we have defined it. The Regulation is not setting up the courts of the Member States as some kind of non-exclusive world tribunals for wrongs done outside the EU by persons who happen to be domiciled within the EU. That is the sort of thing that is done reciprocally and by an international Convention – it goes well beyond the remit of judges whose job is to interpret the law, not to legislate. "

The Court held that under the two-fold rule in Moçambique and for "sound policy reasons the supposed international jurisdiction over copyright infringement claims does not exist" and that it "was not for judges to arrogate to themselves such a jurisdiction". In support of the conclusion Lord Justice Jacob recounted a seven point list which included the fact that "[i]nfringement of an IP right (especially copyright, which is largely unharmonised) is essentially a local matter involving local policies and local public interest. It is a matter for local judges" and the danger that enforcement of foreign IP rights may involve a clash of IP policies. That is to say, why should a UK court restrain a defendant from doing acts in the UK which are lawful there just because they are not in the US?

The Supreme Court upheld the decision of Mann J that there was no copyright in the helmet, but reversed the Court of Appeal in holding that an action based on infringement of copyright in the US could be brought before an English court. They trampled across the well-argued policy considerations stating that Article 22(4) of the Brussels I Regulation provides that in proceedings concerned with the validity of registered IP rights the courts of the member States in which the registration has been applied for has exclusive jurisdiction irrespective of the defendant's domicile. This being an exception to the general domicile rule has to be construed strictly and does not apply to infringement actions in which there is no issue as to validity. Further, Rome II - which as not applicable in the present proceedings as it came into force in 2009 - also demonstrated that there was no European public policy against litigating foreign IP rights (see in particular Recital 26 and the latter added Article 8). The net result from the Supreme Court was that foreign IP rights are justiciable if infringement is the only issue and there are no points taken on subsistence or ownership. However, last night the general sentiment from those in attendance was that this decision was wrong and/or overly harsh of Lord Justice Jacob's powerful reasons why policy considerations were important.

By virtue of the Supreme Court's reasoning and in light of the pending Eli Lilly case (which goes to trial on 9 April), the live question is whether "the Empire was about to strike back" on the adjudication of foreign IP rights or whether it was just a "phantom menace". In support of the "phantom menace" view, was the fact that there are only limited circumstances when foreign IP rights are justiciable (the "phantom") and when the circumstances were met, onerous conditions are imposed during the litigation (the "menace"). The argument runs as follows:

1. A requirement of personal service. The general rule is that a defendant has the right to be sued in its home court. Following Lucasfilm, the jurisdiction is limited to defendants domiciled in the UK. This therefore already limits the class of defendants that could be brought into these extra-territorial types of claims as they have to be domiciled in the UK. It was recognized that it may often include the larger multi-national companies (CPR 6.36 and Para 31 of Practice Direction 6B). To get around this requirement, one might try and sue under the UK rights and add in the foreign IP rights later (see Article 6 of the Brussels I Regulation which permits that where there is a number of defendants as long as one is in one Member State and the proceedings are closely connected you can commence proceedings in the UK). However, the CJEU's decision in Roche v Primus rejected this strategy.

Personal service, Kat-style

Of practical note, two points were emphasized. First, when accepting service of proceedings, to avoid the trap in Eli Lilly, lawyers must be clear to specify for which jurisdiction one is accepting service (i.e. "we confirm that we will accept service on behalf of our client in respect of any claims brought in the UK in respect of the UK IP right"). If you don't, like Lilly's lawyers did, you may be unwittingly accepting service for the other IP rights (no matter how harsh). Second, parties may consider how they go about structuring their business. If they have a a UK branch, they will fall foul of CPR 6.9 and can be served. In the Lilly case, the court relied on the fact that Lilly employed UK citizens in the UK to prosecute parent company's patents. This may be a lesson for multi-national companies not to have a branch in the UK or to structure their affairs so that prosecution is undertaken by third party patent agents or that decisions about the proprietor's patents are not made in the UK or to ensure that some agency mechanism applies.

2. Validity not at issue: Article 22(4) of Brussels I makes clear that the issues of validity can only be decided in the home court where those rights are registered. Therefore if if you are sued for infringement and counterclaim for invalidity, then the claim is taken outside of Article 22(4). In light of Lucasfilm, the Supreme Court was clear that only infringement issues could be determined on an extra-territorial basis - not validity. In Eli Lilly, Actavis provided an undertaking that they would not challenge validity. It is a rare case that a defendant would voluntarily choose not to challenge validity given the benefit of squeeze arguments. This again demonstrates the very limited circumstances when a Eli Lilly/Lucasfilm type case will arise.

3. Foreign law applied under Rome II. This was the "menace". There was argument that contrary to Recital 26, Article 8 of Rome II went further then just codifying the law. Rome II provides that for the infringement of an IP right the law shall be the law where protection is claimed. This requires the parties and the court to determine the issues under foreign law. If parties chose not to plead foreign law, then the English courts will apply English law on the assumption that it is the same as the foreign law in question. Article 15 and 22 lists the issues that are to be determined under foreign law - i.e. infringement, limitation period, damages and burden of proof. It does not apply to evidence and procedure (which are unhelpfully not defined). In many cases, it was argued, there is little advantage in deciding in one court as it is burdensome to adduce expert evidence on foreign law. In the UK where the hourly rates can be higher than on the continent one would think it would be cheaper and quicker to litigate locally.

So with those reasons why the long arm of the British IP courts is only a "phantom menace", the evening concluded with the sentiment that although very interesting, the circumstances where these cases can arise are limited and will not lead to a proliferation of foreign IP rights in the British courts. We will instead have to await the impending Unified Patent Court to benefit from pan-European IP enforcement of patent rights (though how much cheaper and easier is it going to be than what the Lilly case may inevitably be is in doubt). Indeed, these types of cases may be confined only to an interesting footnote commencing "A long time ago, in a galaxy far far away..."