Research In Motion UK Ltd v Visto Corporation

This is the judgment of the Court to which all members have contributed.

This is Visto Corporation’s (“Visto”) appeal from a decision of Lewison J of 4^th April 2007, EWHC 900 (Ch). Visto is a Californian company. The Respondent is Research in Motion UK Ltd, a subsidiary of a Canadian company, Research in Motion Ltd. We will call the UK company RIM. RIM itself has subsidiary companies in various European countries. We call these companies RIM Germany, RIM France, and so on. Mr Henry Carr QC argued the case for Visto; Mr Robin Dicker QC that for RIM.

Formally the appeal is now only about costs, but it involves much more than that. The case is yet another illustrating the unsatisfactory state of the current arrangements for deciding European wide patent disputes. Too often one finds parties litigating as much about where and when disputes should be heard and decided as about the real underlying dispute.

The case turns the application of a number of provisions of Regulation 44/2001 “on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.” We set the relevant provisions out in an Annex.

The Regulation is substantially the same as that which it replaced, the Brussels Convention of 1968. Unfortunately neither document fully considered the problems posed by intellectual property rights. This is because at present such rights are national rather than EU rights. They are not only limited territorially, but exist in parallel. Neither the Convention nor the Regulation specifically considered how parallel claims are to be dealt with. They were constructed for the simpler and more ordinary case of a single claim (e.g. of a breach of contract or a single tort or delict) and provide a system for allocating where that single claim is to be litigated. Parallel rights cannot give rise to single claims: only a cluster of parallel, although similar, claims.

Intellectual property also adds three further complications. Firstly there is a range of potential defendants extending from the source of the allegedly infringing goods (manufacturer or importer) right down to the ultimate users. Each will generally infringe and the right holder can elect whom to sue. One crude way to achieve forum selection is to sue a consumer or dealer domiciled in the country of the IP holder’s choice (jurisdiction conferred by Art. 2.1) and then to join in his supplier – the ultimate EU manufacturer or importer into the EU if the product comes from outside. Jurisdiction for this is conferred by Art. 6. Thus there is considerable scope for forum shopping – the very thing the scheme of the Regulation is basically intended to avoid.

The second complication is that caused by a claim for a declaration of non-infringement. This remedy is necessary - a practical and sensible way for a potential defendant who wishes to ensure (normally before significant investment) that he is in the clear, is to seek a declaration that his proposed (or actual) activity does not fall within the scope of someone’s rights. It is a way of making a potential patentee “put up or shut up”.

The third complication is that the ultimate court for deciding the validity of a registered national right (most importantly a patent), is only the national court of the country of registration. Those responsible for the Convention/Regulation did consider registered intellectual property rights, providing, in what is now Art. 22:

The following courts shall have exclusive jurisdiction, regardless of domicile:

4.

in proceedings concerned with the registration or validity of patents, trade marks, designs, or other similar rights required to be deposited or registered, the courts of the Member State in which the deposit or registration has been applied for, has taken place or is under the terms of a Community instrument or an international convention deemed to have taken place.

Without prejudice to the jurisdiction of the European Patent Office under the Convention on the Grant of European Patents, signed at Munich on 5 October 1973, the courts of each Member State shall have exclusive jurisdiction, regardless of domicile, in proceedings concerned with the registration or validity of any European patent granted for that State

This provision is an incomplete way of dealing with IP: it does not cater for most of the common situations. Liability for patent infringement (we will confine our example to patents) depends on two things: the scope of the protection claimed and the validity of the patent: you can’t infringe an invalid patent. The nature of a defence involves a spectrum of possibilities. At one end the defendant may simply say “What I do is outside the scope of the patent”. If that is all, then the dispute is simply about the scope of the patent and what the defendant does. At the other he may say: “yes, I accept that what I do is within the scope of the patent. But the patent is invalid.” Then the dispute is only about validity. Or the position may be a mixture of both. The defendant may run two defences, denying that what he does is within the scope of the patent and also contending that the patent is invalid. A particular (and often important) version of this intermediate position is where the defendant says “if the scope is wide enough to cover what I do, then the patent is invalid.” (This is sometimes called in England the “Gillette defence” – though in fact the court will have to rule on invalidity and scope).

Where a potential defendant takes this last kind of position he may well go on the offensive in two, combined ways. He will seek both revocation of the patent and a declaration of non-infringement.

Art.22 confers exclusive jurisdiction on a national court where validity is challenged. Difficult questions arose about this and were referred to the ECJ; see the ruling in Roche v Primus case, C-539/03 [2007] FSR 5. They still do, despite that decision, see the ruling of the Hoge Raad (Dutch Supreme Court) on 30^th November 2007 in Roche v Primus following the ruling of the ECJ.

There is also a potential fourth complication for IP rights, particularly patents, arising or possibly arising from the Convention, now Regulation. It is known as the “Italian torpedo” – a graphic name invented (we think) by the well-known distinguished scholar Prof. Mario Franzosi (“Worldwide Patent Litigation and the Italian Torpedo” [1997] 7 EIPR 382).

It works in this way: suppose a potential defendant is worried about being sued for infringement. To prevent any immediate effective action against him he starts an action against the patent holder for a declaration of non-infringement in a country whose legal system runs very slowly. (When Prof. Franzosi wrote his article, Italy was notoriously slow, though it is our understanding that things have improved since then and are continuing to improve.) The putative defendant claims such a declaration not only in relation to the Italian patent, but also in relation to all the corresponding patents in other European countries. If sued in any of these countries he raises Art 27 of the Regulation saying: the issue of infringement and that of non-infringement are the same cause of action expressed differently. The courts of the slow member state are first seised of the action. So the courts of all other member states must, pursuant to Reg. 27, stay its proceedings.

The effectiveness of the Italian torpedo (and Belgian, for the courts of that country were once also slow) has been blunted by a number of decisions, particularly the Roche Primus case at European level, the decision of the Italian Supreme Court in Macchine Automasche v Windmoller & Holscher, 6th November 2003 and some decisions of the Belgian courts, particularly Roche v Wellcome 20 February 2001. But the torpedo is not completely spent. It still has some possibilities (or is thought to have some) in it, as this case shows. Mr Dicker explained why his clients will contend in Italy that Windmoller can be distinguished. We do not consider whether he is right or even whether he has any prospect of being right – it is not the business of this court to opine on what is obviously a matter for the Italian court.

Much ingenuity is expended on all this elaborate game playing. Despite the temptation to do otherwise, it is not easy to criticise the parties or their lawyers for this. They have to take the current system as it is and are entitled (and can only be expected) to jockey for what they conceive to be the best position from their or their client’s point of view. Of course parties could, if they agreed, decide to abide by the result in a single jurisdiction (or perhaps take best out of three). Or they could arbitrate instead of plunging their dispute into the chaotic system which Europe offers them for patent disputes. But why should a party do any of these things if it thinks it has a better prospect commercially from the chaos? In some industries for instance, a patentee with a weak patent would actually prefer to be able to litigate in a number of parallel countries in the hope that he wins in one. Winning in one member state may indeed be enough as a practical matter for the whole of Europe – some companies market products only Europe-wide. A hole, say in Germany, of a Europe-wide business in a particular product may make the whole of that business impractical.

Again a party who fires an Italian torpedo may stand to gain much commercially from it. It would be wrong to say that he is “abusing” the system just because he fires the torpedo or tries to. Things may be different if he oversteps the line (e.g. abuses the process of a court) but he cannot and should not be condemned unless he has gone that far.

This case is about an Italian torpedo, fired by RIM. Mr Dicker, on behalf of RIM, seemed shy of accepting that RIM were intending to stymie infringement actions across Europe. But they must obviously have known (and so intended) that their actions would have that effect, if they worked. As we say, we think it is difficult to criticise this.

We turn to set out the basic facts:

It is, we think, necessary to set out the major parts of the defence and counterclaim. They read:

Defence

2.

This action was started without giving the Defendant or its advisors any opportunity of considering the Product and Process Description, nor any other description of the products and software in relation to which the Claimant seeks declaratory relief.

3.

Further, this action has been started by the Claimant, relying upon statements made by representatives of the Defendant which were made before or shortly after litigation was started in the United States and which clearly relate to the issues and patents in that action, and which were made at a time before the Patent in Suit in this action was even granted. There is no reason to believe that the statements made were intended to relate to this particular patent of the Defendant and the Claimant has used them solely as an excuse to start this action as part of the concerted effort referred to below.

4.

Yet further, the action has been started and is being pursued in relation to only some of the Claimant’s offering in the United Kingdom. The Claimant has deliberately left out of the claim for a declaration of non infringement software, namely BlackBerry Mail Connector, which when used with the Claimant’s hardware and other software does infringe the Patent in suit.

5.

Moreover, this action has been started and is being pursued as part of a concerted effort to seek any kind of relief from a court with a view to counteracting the commercial uncertainty (and its publicity) that arises by virtue of the litigation between the Defendant and the Claimant’s parent company in the United States in respect of different patents owned by the Defendant.

6.

On 27 December 2006 and shortly after this action was started, and pursuant to the said concerted effort, the Claimant, together with related companies started an action in the court of Milan, Italy. In that action, the Claimants (including the Claimant in this action) seek revocation of the Italian designation of the European Patent the subject of these proceedings. They also seek a declaration of non infringement in respect of the Italian designation of the said European Patent and designations of the said European Patent in Belgium, France, Germany, Holland and Spain,, that is every commercially significant country designated other than the United Kingdom and in particular all such jurisdictions where rapid relief is available to a patentee, whether by way of final relief in an infringement only trial or preliminary measures or remedies, including procedures such as Kort Geding and saisie-contrefaçon and similar relief now available in the Courts of Spain.

7.

The Claimant knows full well that the action in Italy, insofar as it seeks to claim a declaration of non-infringement in relation to the non Italian designations, is spurious and contrary to European law on jurisdiction.

8.

However, the Claimant has started the action in Italy purporting to seek relief in respect of designations other than the Italian designation deliberately with a view to preventing any infringement action being taken in respect of the same in those other jurisdictions by virtue of the existence of the Italian proceedings. The Claimant knows and intends that the Italian proceedings will be slow moving and that it will take a considerable amount of time for the Italian court to even determine the question of jurisdiction over the non infringement claims in respect of non Italian designations.

9.

In further support of the allegation that the Italian proceedings are a stifling device, the Defendant relies upon the fact that if the Claimant had believed that European law allowed non infringement claims such as the one brought in Italy and if it had genuinely wanted such claims determined expeditiously it would have brought them in this action, which was commenced first in time and which sought a declaration in respect of the UK designation. It did not do so because it was aware that this Honourable Court would rapidly decline jurisdiction and thereby not give any significant hindrance to the ability to the Defendant to bring an infringement action in those other jurisdiction if so advised.

10.

In conclusion the Claimant has:

(i)

brought this action in a jurisdiction which is reputed to be quick and harsher on patentees than other jurisdictions;

(ii)

sought relief in respect of all its products and software apart from products configured with the BlackBerry Mail Connector software – software that does infringe when used in conjunction with the Claimant’s hardware and other software;

(iii)

without having first given the Defendant an opportunity to consider whether those products and software do infringe the Patent;

(iv)

whilst at the same time deliberately preventing any other commercially significant jurisdiction from considering the question of infringement (at least for a considerable time), by bring (sic) a spurious action for a declaration of non-infringement on non Italian designations in Italy shortly after commencing this action;

(v)

relied upon statements made by the Defendant’s representatives which were made before or shortly after the US litigation was commenced and which clearly related to the issues and patents in that US case but sought to suggest that they have something to do with the patent in suit in this action, a patent which was at that stage not even granted and was one of several pending applications of the Defendant and which just happens to be the first patent granted to the Defendant in Europe;

(vi)

accordingly, brought this action not to obtain commercial certainty and remove a threat of infringement hanging over the Claimant as alleged but to seek to quickly obtain and publicise any kind of judgment that some of its products do not infringe one patent owned by the Defendant.

(vii)

accordingly, the Court ought not to exercise is inherent jurisdiction to make declarations.

12.

Further and in any event the court ought not to exercise its discretion to make a declaration under the inherent jurisdiction or s.71 of the Patents Act 1977.

Counterclaim

31.

Paragraphs 2 to 10 above are repeated.

32.

The commencement of the aforesaid proceedings in Italy are unlawful.

33.

If the proper law of the tort is Italian the Defendant relies upon Art 96 of the Italian Civil Procedure Code which provides for damages to be payable for litigation commenced or resisted in bad faith or with gross negligence.

34.

Alternatively, if the proper law of the tort is English law the said proceedings were commenced for a purpose, alternatively a predominate purpose, other than the proper purpose for obtaining the relief formally sought. Accordingly, the commencing and pursuing the said proceedings amounts to the tort of abuse of process.

The next event was RIM’s application dated 16^th February 2007 which led to the judgment under appeal. It was for an order that the English court should decline jurisdiction or stay the proceedings in respect of Visto’s counterclaim in the English court for abuse process of the Italian court (the Art 96 claim) or the English court.

Lewison J granted such an order in respect of the Art.96 claim, declining jurisdiction and dismissing the claim for breach of Art. 96.

Prior to the hearing, given Visto’s acceptance that the BlackBerry system without Mail Connector did not infringe RIM said “it is not minded to proceed” with its application for a declaration of non-infringement. Understandably Lewison J thought that would not do, and, under appropriate judicial pressure, in his reply speech Mr Dicker for RIM undertook to discontinue the English non-infringement action. That has now been done. Presumably RIM have been ordered to pay the costs of that first action.

So the position now is that there are just two sets of proceedings – RIM’s claim in Italy for a declaration of non-infringement not only for Italy but also for a number of other countries and Visto’s English counterclaim in the original proceedings which includes the Art.96 claim. It is accepted that the Italian proceedings are first in time as between these two sets of proceedings and that the judge’s substantive order should now stand – the court to decide any Art 96 claim is the Italian court, not the English court.

What is not accepted, however, is that that was the position prior to the discontinuation of RIM’s English action. Visto say that prior to the discontinuance, the English action (including its defence) and the counterclaim was first in time, and that accordingly, if there had been no discontinuance, there should be no stay.

The argument runs like this:

Mr Carr’s argument thus focuses on the issues in the English action (including the defence) but not the counterclaim for damages for breach of Art. 96. It is these issues which he submits show (a) that the English court was first seised and (b) that there is a risk of irreconcilable decisions.

Mr Carr particularly relied on the House of Lords case Sario v Kuwait Investment Authority [1999] 1 AC 32. In that case a Spanish plaintiff had first started Spanish proceedings against the defendants and others for unpaid sums due under an exercised put option. The same plaintiff then started English proceedings for damages in respect of alleged misrepresentations alleged to have been made in the course of the sale of the company subject to the put option. The issue was whether the Spanish and English claims were “related”. If they were, then Art. 28 applied, the English proceedings were after the Spanish proceedings and should be stayed under Art.28(1) the English court should decline jurisdiction under Art.28(2).

Lord Saville gave the leading speech. He propounded a broad test for “related actions”, saying at p.40-41

In the fourth place, I take the view that to attempt to analyse actions so as to distinguish between different kinds of issues would be likely to add to the complexity of applications under article 22 and thus to the expense and delay in dealing with them. Instead of simply considering whether the actions were so closely connected that it was expedient that they should be heard and determined together to avoid the risk of conflicting decisions, the parties and the court would have to embark upon a sophisticated and difficult exercise of legal analysis, made more complicated by the fact that the court would be dealing not with actual judgments, but with what judgments yet to be given would be likely to contain. It must be borne in mind that article 22 is concerned not with the substantive rights and obligations of the parties, but with the ancillary and procedural question as to where in the Community those rights and obligations should be heard and determined.

And a little later:

For these reasons, I am of the view that there should be a broad commonsense approach to the question whether the actions in question are related, bearing in mind the objective of the article, applying the simple wide test set out in article 22 and refraining from an over-sophisticated analysis of the matter.

Applying this test Lord Saville held the two actions “related”. There was a risk of irreconcilable judgments. The same man alleged to have made misrepresentations the subject of the English case had acted in relation to the Spanish activities complained of. They were all of a piece.

It should be observed that what the House of Lords was considering in Sario were two claims, the first Spanish, the second English, each by the same plaintiff. What had to be considered is whether, if those two claims went forward in parallel there was a risk of inconsistent judgments. Here things are different. The comparison we are invited to make is between Visto’s defence in the English action and its claim in the Italian action. The defence came after the Italian proceeding – indeed relies on the taking of the Italian proceedings as part of the reason why it is said a declaration should be refused here.

So we have the topsy-turvy proposition that the English court is said to be “first seised” of a “related action” by reason of the later, Italian, action.

The position is rendered even more topsy-turvy by Mr Carr’s acceptance that the English court (which he claims is first seised of the Art.96 claim) could not proceed to decide that claim (and the defence) until the Italian court had first dismissed the Italian claim. It is condition precedent to an Art.96 claim that there should be a “losing party.” So it is Mr Carr’s submission that the Italian court, assuming it got the point of dismissing the “torpedo” claims, could not on go on decide claim Art.96 claim although it would obviously be best placed to do so. It would get to the very brink, but have to stop there and let the English court take over.

Yet another absurdity if Mr Carr is right is that it would be for the English Court to decide whether there had been abuse of process – “bad faith or gross negligence” – in Italy.

It is tolerably clear that one of the objects of the Regulation was to lay down rules for deciding which, of two or more courts, should decide a claim. Broadly the thrust is that the first seised does that, and then its judgment is to be recognised by the others. Standing back, it would at first sight seem that whole purpose would be subverted if Visto are right. The link is said to be the Italian action. The Italian courts have to be seised of their own action before the link can arise, so how can it be said as soon as it is started, the English court becomes first seised?

One answer to that potential oddity might be that it is built into the scheme of the Regulation itself. The Regulation relies on mechanical tests – the mechanical test of the court first seised, and the further largely mechanical test in Article 30 as to how one ascertains which court is first seised. In determining these matters what is important is the action, not the claim. The trouble with mechanical tests is that they are sometimes prone to yield results which do not coincide with the clear merits or even common sense.

Happily that is not the result here. The reason for that lies in the operation of Article 28. That Article deals with related actions; contrast Article 27 which deals with actions involving the same cause of action. Those two concepts are different. Article 27 involves a comparison of claim documents to see of causes of action in two documents are the same – see Lawrence Collins LJ in Kolden Holdings v Rodette Commerce Ltd [2008] EWCA Civ 10 at para 93. Article 28 involves a different concept, tested by reference to the matters referred to in Article 28(3). The exercise of seeing whether actions are related may well require one to look beyond the claim documents and into the defences. In the present case it is this feature which potentially raises the topsy-turvy situation identified above. If one can look at the Defence, and if the Defence relies on post-claim matters, then there is scope for the relationship between actions to come from post-claim matters. Where the post-claim matter is in fact the commencement of the second proceedings, then one begins to travel towards the oddity already identified. That possibility arises because of the mechanical test of first seisin.

However, that is not the result of the application of Article 28 in the present matter because its effect is not entirely mechanical. It requires an assessment of the degree of connection, and then a value judgment as to the expediency of hearing the two actions together (assuming they could be so heard) in order to avoid the risk of inconsistent judgments. It does not say that any possibility of inconsistent judgments means that they are inevitably related. It seems to us that the Article leaves it open to a court to acknowledge a connection, or a risk of inconsistent judgments, but to say that the connection is not sufficiently close, or the risk is not sufficiently great, to make the actions related for the purposes of the Article. Mechanics do not, for once, provide a complete answer.

The relevant parts of the Defence in the present case are set out above. From that the following things can be seen. (It must be remembered that for these purposes the Counterclaim, which is conceded to be a separate action for these purposes and to come second, is not relevant at this point in the argument). First, the Italian proceedings are said to be “spurious”. It does not matter whether that amounts to an allegation that they are an abuse; we assume (in favour of the Visto) that it does, though the Defence does not go further and plead Article 96. Second, commencement of those proceedings is but one item in a wider field of misconduct which is said to disentitle the claimant to the declaration it seeks. It is not the only item; it is not even the main item. It is one of the things which are thrown into the melting pot. Third, if one looks at them, and compares them with the Italian action, it does not appear at all expedient that the claims should be tried together. The English claim is differently based. The English Defence raises matters said to go to whether an English court should grant a declaration in relation to that different claim, and raises matters not raised in the Italian proceedings. It does not seem to us to be at all expedient that those actions can be heard together, not least because we do not see how they can be, whether here or in Italy. Furthermore, if one is entitled to form a value judgment of the closeness of the relationship, then it is not particularly close at all. The substance of the English proceedings is declaration about an English patent and a particular product. The substance of the Italian proceedings is other designations, but not focusing on the same product. The abuse of Italian process is a link between them, but it is the only link; it is only in relation to that point that there is a risk of inconsistent judgments. It does not seem to us that Article 28(3) requires one to find that any possibility, no matter how small the point, requires the conclusion that the actions are related. One still has to consider expediency. We consider that the area of potential conflict is not sufficiently great to lead to the conclusion that expediency would require one trial even if it were theoretically possible.

For those reasons, therefore, we do not consider that the English and the Italian proceedings are “related” within the meaning of the Regulation.

We think that broadly these are the reasons given by Lewison J, though we have dealt with them at greater length and put the matter slightly differently. In paragraph 27 of his judgment Lewison J seems (on one view) to have adopted the notion that a defence might be latent in a claim, and that in considering whether actions were “related” one should only consider “such defences as are latent in or pregnant with the claim.” If that is what he meant to say then we do not accept that the concept of “defences latent or pregnant within a claim” makes any sense. The proper course in considering the relationship is to consider the Defence as well (see above). We do, however, share the misgivings of the judge as to whether the matters pleaded in the Defence were capable of being defences to the English action, though since we did not hear full argument on that we do not decide the point on that basis.

Accordingly we dismiss this appeal.