Apple Corps Ltd v Apple Computer Inc

This is the application of the defendant, Apple Computer Inc ("Computer"), disputing the jurisdiction of the court in respect of proceedings where service out of the jurisdiction has been ordered. The defendant is the well-known producer of computers and software. The claimant ("Corps") is the well-known record company formed by the Beatles. The basis of the claim made against Computer is that that corporation has broken, and intends to break, an agreement made between the two companies in October 1991 which regulated the use of their respective marks in respect of various areas of activity or proposed activity. On 7^th August 2003 Master Moncaster granted permission to serve Computer outside the jurisdiction under CPR 6.20 on two grounds – that the relevant agreement was governed by English law, and that the contract was made in England. At the hearing before me Corps sought to rely on the additional ground that Computer threatens a breach of contract within the jurisdiction which would entitle Corps to an injunction to restrain it. Computer disputes the propriety of service out on those grounds, denying the relevant factual bases, and further maintaining that England is not the appropriate forum for the dispute. In the circumstances the applications before me raise the following questions:

Those issues arise out of the wording of CPR 6.20:

The burden and level of proof in relation to those issues is common ground between the parties. It is agreed that:

In addition, it is for Corps to establish that there is a serious question to be tried on the main question in the action, namely whether there is or will be a breach of the agreement. The agreed approach on this at the hearing was that I could assume that there was, though the outline of Corps’ case on the point given by Mr Vos was not always clear to me. At a late stage and having seen a written elaboration of Corps argument on the point, Computer sought to resile from its position that there was a serious question to be tried, and to say that it had become apparent that there wasn’t but after (I confess) flirting with idea that that should be allowed, I decided that it was too late for Computer to change its stance on that.

The agreement in question, which is called the Trade Mark Agreement in the jargon of this case, was a keenly negotiated agreement, negotiated between experienced lawyers (English and US) over many months. The evidence before me showed that each of the parties was overtly adamant that it did not wish to accept the other’s jurisdiction or governing law, and could reach no agreement on any other jurisdiction or governing law. As a result it contains no governing law clause and no jurisdiction clause. In addition, neither party wanted to give the other an advantage in terms of where the agreement was finalised. If their intention in doing so was to create obscurity and difficulty for lawyers to debate in future years, they have succeeded handsomely.

As will appear in more detail when I come to set out the detailed history of this matter, the purpose of the Trade Mark Agreement was to regulate the activities of the two parties for the future. Computer was described as "Apple Computer"; Corps was described as "Apple Corps". It is dated 9^th October 1991 and its key terms are as follows:

The alleged breaches come about in the following manner. Computer has launched a web-based product in the United States called iTunes Music Store. By using that service members of the public can download songs over the internet, and store them on a computer with a view to playing them back over the computer, or via portable players such as Computer’s well-known iPod player. Computer’s mark is clearly associated with that product – it appears on all the relevant pages, and one gets to it either via the Apple website or via a website known as Applemusic.com. The content (that is to say, the music tracks) is licensed by the owner of the rights in that content. Corps’ case is that Computer’s conduct in this respect is a breach of the Trade Mark Agreement; that is the breach which is relied on in this action as currently constituted.

At the moment the content is available only in the USA. Marketing takes place in the USA, but because of the worldwide effect of the media, and particularly of the internet, some of the marketing is available elsewhere. The evidence of Computer’s witnesses is that the reason the content has not been available in Europe is that there is as yet no agreement with the owners of rights in the content which permits that. However, there have been suggestions that Computer is looking to make the site available in Europe this year (2004). Corps says that this demonstrates that a breach of the agreement is intended to be carried out in this jurisdiction – hence its alternative case for jurisdiction.

It may assist an understanding of the significance of the facts as they develop if I first outline the nature of the dispute that centres around the order of events at completion, which is what this part of the case concerns. The process of drafting ended up with drafts of the agreement being in place, signed by each party, and countersigned by one but not the other, in the offices of Frere Cholmeley, solicitors for Apple, and with Mr Lagod, counsel for Computer in California. On 9^th October 1991 there was a conversation to arrange completion. Computer says that the telephone call ended with (in effect) Mr Lagod in California proposing completion and Mr Zeffman (of Frere Cholmeley) agreeing that. If correct, that would amount to an offer from Mr Lagod, accepted by Mr Zeffman. Since Mr Zeffman’s acceptance was received in California, on an application of the principle in Entores v Miles Far East Corporation [1955] 2 QB 327 at 334, approved in Brinkibon v Stahag Stahl [1983] 2 AC 34 a 41-2 (in the case of instantaneous communications the contract is made where the acceptance is received the contract was made in California). Corps puts the final events the other way round – Mr Zeffman offered, and Mr Lagod accepted, so the acceptance was received in London and the contract was made there on the same legal basis. The inquiry is therefore as to whether there is a good arguable case that, on the facts, Corps is right. In addition to that Corps advances a largely novel case. It invites me to find that in the context of this case, and taking due account of the different ways in which contracts might now be concluded which did not exist when the traditional rules were laid down, it would be right to find in principle that a contract can be made in two places at once, and that this was such a contract. I say this is "largely" novel because a submission was made in Brinkibon to that effect by Mr Anthony Thompson QC, but it was not ruled on, or even commented on, in the speeches in that case.

That is where the parties respectively would like to end up. I must now consider and analyse the facts as they appear from the witness statements and the contemporaneous documents.

The Trade Mark Agreement had its roots in litigation in the High Court which commenced in February 1989, and in proceedings in the European Commission which had been suspended but which were re-activated 2 months later. The parties were then locked in a large and expensive dispute which turned on an agreement in 1981 which was expressly governed by English law. The High Court proceedings were heard by Ferris J, and had lasted 100 days by the time they were settled. Settlement negotiations started in the UK, and then took place in California and New York. The evidence before me shows that the parties were both adamant that the other’s jurisdiction should not be used as the basis of governing law or court jurisdiction. In addition Mr Lagod, the US attorney/negotiator for Computer said this in his witness statement evidence:

The trial of the 1990 action between Corps and Computer started on 29^th October 1990. The first meeting at which an attempt was made to settle the outstanding disputes took place on 19^th March 1991. The offer to settle made by Computer was rejected. There were then no meetings until June, when there was a flurry of activity. Meetings took place on the 5^th, 7^th and 10^th June, again all in London. On 10^th June 1991 Computer offered to pay $26.5 m. It seems that was not accepted, but drafting commenced. The figure offered was actually accepted on 21^st June 1991, again at a meeting in London. The drafting and settlement meetings then carried on. One of the structures adopted for the settlement was to have two agreements. The first was called a Settlement Agreement, and by that agreement the parties intended to settle (and ultimately did settle) the historical matters, that is to say the disputes that had existed between the two. The second agreement was the Trade Mark Agreement; that was intended to regulate their activities for the future.

Settlement meetings took place in London on the 26^th/27^th June and then negotiations took place in New York on 2^nd/3^rd August 1991 and 31^st August 1991. On 12^th September there was a meeting in San Francisco, and a further meeting in New York on 21^st September. As well as that, especially at the end of the process, certain negotiations took place over the phone in transatlantic phone calls.

At the end of the process the parties began to address their minds to settlement procedure. The best evidence of what they were doing can be seen in the contemporaneous documentation. On 26^th September 1991 Mr Zeffman wrote or faxed Mr Lagod in the following terms:

It is apparent from this that, as was ultimately the case, the parties expected both the Settlement Agreement and the Trade Mark Agreement to be completed at the same time. It is also apparent that Mr Zeffman, on behalf of Corps, was also concerned that the money should have been received by or at completion (or closing); the money in question is the $26.4 m payable under the Settlement Agreement and the $100,000 payable under the Trade Mark Agreement. The "Neil" referred to is Mr Aspinall, Manager and sole executive officer of Corps.

After that letter further amendments were made to the agreement in the course of the drafting in process. The parties returned to the theme of completion on the 4^th October when Mr Lagod faxed Mr Zeffman:

The background to this was that the parties had agreed to split up the process of drafting. Mr Lagod had the conduct of drafting the Trade Mark Agreement; he had it on his firm’s word-processor. For his part Mr Zeffman had the conduct of the drafting of the Settlement Agreement – he had it on his word-processor. The parties did not exchange electronic drafts; it is easy to forget that those facilities did not exist as recently as 1991.

Later on on the same day Mr Zeffman faxed Mr Lagod with what he hoped was a final draft of the Settlement Agreement. His letter went on to say this:

It will be noted that the arrangements involved each party signing a copy of the Agreements, with delivery being handed over to a representative of the other party, albeit that they were held to the order of the signor. The trigger for the actual completion would be Mr Zeffman informing Mr Lagod of the receipt of the bankers draft. Although the word "escrow" was used, I do not consider that the parties thought that they would be irretrievably bound by signing the documents, so that each party would, in theory, have been in a position to resile up until the time when Mr Zeffman confirmed receipt of the draft. Receipt of the draft remained the key to the completion.

Later still on the same day there was a further fax from Mr Lagod, enclosing a further revision of the Trade Mark Agreement which included a new provision that the agreement might not be varied except by written consent of the parties. The second paragraph of that letter reads:

This letter seems to be responding to the earlier letter from Mr Zeffman. It was timed at 18:20 which is presumably California time.

There was obviously a conversation on the phone the next day, because a letter from Mr Zeffman on the following Monday (7^th October 1991) starts by saying:

The letter goes on to make slightly different proposals for completion. It reads:

It is apparent that the completion arrangements have changed slightly. The signed agreements would be in the hands of the other party via courier, and the draft would accompany the agreements coming from California, the parties would then sign the Agreements, and completion would take place when the parties agreed that it would, over the telephone. Completion was no longer expressly to take place when Mr Zeffman confirmed that the draft had been received, although obviously he would need to be satisfied as to his receipt and validity for he would, for his part, agree to complete. The newly agreed feature at this stage is that Mr Lagod himself would apparently also have to agree that completion should take place. The fall back arrangement for effective completion, based on the draft clearing, does not matter for these purposes.

Later that day (7^th October) Mr Lagod faxed a photocopy of the draft (or "cashier cheque" as he called it). The fax said he was sending the actual draft by courier that day. That duly happened - on that day Mr Lagod wrote enclosing the Trade Mark Agreement and Settlement Agreement executed by Mr Graziano on behalf of Computer, as well as a letter from Mr Stead to Mr Aspinall enclosing the draft. The letter was sent by overnight courier. It closed with Mr Lagod saying: "I look forward to hearing from you when we are ready to wrap up the closing."

For his part, Mr Zeffman went to Corps’ offices at 3.45 pm to get Mr Aspinall’s signature to the two agreements; they were apparently signed in the presence of Mr Zeffman and Vanessa Marsland; the latter took the signed agreements away for couriering to Mr Lagod in accordance with the then agreed closing procedure.

A few days later, on 9^th October 1991, the events took place which led to completion, and which are at the centre of the present issue. I will have to set out the material which was placed before me, because it is on an interpretation of that material that the present question turns. It is necessary to do so verbatim.

It is common ground that a telephone conversation took place between Mr Zeffman and Mr Lagod on 9^th October 1991, as a result of which completion (or closure) of the matter took place. Mr Lagod does not have a contemporaneous record. Mr Zeffman does. He made an attendance note and it reads as follows:

In his witness statement provided for the purposes of the application before me, Mr Zeffman says that, as recorded in his attendance note, he and Mr Lagod agreed on the telephone that:

In his witness statement Mr Lagod expressly accepts that the Trade Mark and Settlement Agreements were completed:

Both parties started their analysis of this transaction by analysing it in traditional offer and acceptance terms and applying the well known rule (or at least the well known prima facia rule) that where instantaneous forms of communication are concerned a contact is made where the acceptance is received – Entores –v- Miles Far East Corporation [1955] 2Q.B. 327; Brinkibon Limited –v- Stahag Stahl [1983] 2 A.C. 34. Accordingly, each side sought to analyse the facts so that in effect, the penultimate words were uttered within their jurisdiction in order that the final words of acceptance should be uttered outside the jurisdiction and received within it. Mr Vos also put forward an alternative analysis, which was that, in the circumstances, the contract was made in the two jurisdictions simultaneously.

For Computer, Lord Grabiner Q.C. started his argument from the mechanism which was contemplated in the preceding correspondence between parties. He relies on the fact that the mechanism contemplated that the signed agreements would be in place, held in escrow, and that what was required was for Mr Zeffman in London to communicate with Mr Lagod in California that the money payable under the Settlement Agreement had been satisfactorily received. This anticipated mechanism was complied with, save that there was one additional tweak in so far as Mr Lagod had not actually procured Computer’s signatures on the engrossment that he had received from London. What happened during the relevant telephone conversation was that Mr Lagod waived the requirement for those countersignatures and indicated that, despite the fact that he did not have them, he, Mr Lagod, was ready to complete. Mr Zeffman in London confirmed that he too was content that there should be completion. If this indication was the last step in the operation, it was a statement uttered in London and received in California and amounts to a final acceptance in California. In this respect he relies on paragraph 38 of Mr Lagod’s witness statement, which I have already set out in paragraph 30 above, and in particular, the sentence:

Mr Vos seeks to analyse the evidence differently. He traces the various proposals for completing through the correspondence, and points out that by the time one gets to 9^th October three uncertainties needed to be cleared up – Mr Lagod did not know whether Mr Zeffman had had the agreements countersigned; he did not know whether the banker’s draft was satisfactory to Mr Zeffman; and Mr Zeffman did not know whether Mr Lagod had countersigned his agreements at his own end. What must have happened is that Mr Zeffman, having finally got through to Mr Lagod, must have said that he had got signatures and the money. Mr Lagod must have said that he had not got signatures but that that was alright by him. Mr Zeffman then must have said that for his part he agreed the deal could be closed and that for his part Mr Lagod then confirmed that. That last stage was an utterance by Mr Lagod in California amounting to an acceptance, which was received by Mr Zeffman in London. Accordingly, on the traditional analysis the contract was made in England.

I remind myself that, for the purposes of jurisdiction, what Mr Vos has to establish is a good arguable case – Seaconsar Limited –v- Bank Markazi [1994] 1 AC 438. He does not have to prove his case on a balance of probabilities. Can it be said that Mr Vos has established his case to that extent? At one level it has to be acknowledged that the evidence does not enable a clear view to be taken one way or the other as to who said what and in what order. What is quite clear is that immediately before the telephone conversation nothing binding was in place. The parties had agreed that the Agreements were held "in escrow", but it seems to me that both parties could have resiled from the Agreement in principle at any point of time up until both men agreed, by appropriate words, that the Agreement had become binding. While Mr Zeffman’s letter of 4^th October might be said to have suggested a mechanism under which only one act, namely Mr Zeffman’s confirmation that the money had been safely received, was sufficient to bring about a binding agreement, in his letter of 7^th October he clearly anticipated that both gentlemen would have to agree that completion should take place – see paragraph 5 – although each party would obviously not agree that unless and until he was satisfied with the engrossed agreement in his possession. Accordingly, the actively expressed consent of both men was required. Neither Mr Lagod’s evidence nor Mr Zeffman’s evidence makes it clear in what order each man spoke, or indeed what he said. A full analysis of the situation in offer and acceptance terms would require one to be able to analyse the situation in that way. The attendance note does not actually refer to the confirmation of the receipt of the draft. It refers to the fact that Mr Lagod had not got his client’s signatures on the engrossment at his end, and despite that "we agreed we were in a position to close". That could mean that they agreed to close at that point; or it could mean that they agreed subject to the matters dealt with subsequently in the attendance note. If it means the former, one cannot tell in what order the gentlemen spoke. In offer and acceptance terms, each is equally likely at present. In my view that means that Mr Vos has a good arguable case. In fact, they may not have agreed a closing at that point, because the attendance note goes on to record a discussion as to dating, and it ends "finally we agreed to close then (at around 11.40 pm) on the basis that both agreements would have 9^th October typed in as the relevant date". If completion was postponed until that point in the meeting, then one would have to have an enquiry as to the order of the events and the relevant parts of the conversation in order to determine who made final offers and who made final acceptances. It seems to me that in this respect too Corps as a good arguable case for saying that something amounting to an acceptance was uttered in California and received by Mr Zeffman in England.

I confess that, looking at the evidence in this case, the application of the "good arguable test" case has troubled me a little. That is because the evidence as such does not directly address the question of the order of events in the conversation. It is understandable that the attendance note should not do so; presumably the minds of the parties were not focused on that fact. However, neither of the principal witnesses has dealt with it in terms in his witness statement either. In my view the sentence relied on by Lord Grabiner in Mr Lagod’s statement, in which he refers to waiver, is not in terms dealing with the order in which utterances were made; the paragraph is in fact dealing with how the parties overcame something which hitherto had been a precondition to completion. By the same token, Mr Zeffman does not deal with it in terms either. It is maybe that neither witness would be wholly confident of the precise order of events, down to the very small refinements that would be necessary to analyse this issue thoroughly, at this point in time (nearly 13 years after the events in question). However, it does not seem to me that this means that I cannot determine that the Claimant has a good arguable case. The test does not require Mr Vos to establish his case to the full civil standard of proof, and I can find the test satisfied even though it may not be possible on the present evidence to predict the outcome of the case or to find that the Claimant is more likely than not to win on the point were it to be tried – see Agrafax Public Relations Limited –v- United Scottish Society Inc. [Times Law Reports, 22^nd May 1995] Court of Appeal per Henry L.J.

The conclusion that Mr Vos has established a good arguable case makes it unnecessary for me to consider the alternative way in which Mr Vos sought to establish jurisdiction by showing that the contract was made within both jurisdictions and therefore within England, but since submissions were addressed to me upon it and because it may provide an appealing approach to cases like the present, I will deal with the matter. Mr Vos made the bold and almost unprecedented submission (so far as the researches in this case have established) that the contract could be shown to have been made in both England and California, which is sufficient for CPR 6.20 (5) (a). I say "almost" unprecedented because in Brinkibon case Mr Anthony Thompson Q.C. submitted that as a matter of principle a contract may be made in two places at once – see the argument at page 37 E. The point was not adverted to in any of the speeches in that case and the case was decided by applying the traditional principle which I have already identified. So far as the authorities material put before me is concerned, nothing in terms deals with the point and Lord Grabiner, while not accepting that such an analysis was possible, was unable to identify any principle which rendered the concept heretical, a nonsense or impermissible. No academic learning was put before me, and the only learning that my own researches have thrown up is in an article by Mr Charles Lewis MA in [1990] LMCLQ at page 433, an article commenting on Brinkibon in the Court of Appeal. At the end of his article Mr Lewis says this:

Before considering whether authority compels a conclusion one way or another, it is worth considering the validity of the point as a matter of principle. I confess that I can detect no conceptual barriers to the notion of a contract being treated as having been made in two places, and some not inconsiderable attractions. In a case where the two parties to a contract are not in the same location at the time of contracting, the notion of where the contract is made is essentially a lawyer’s construct. It seldom matters of course, but where it does matter (principally for the purposes of jurisdiction under English law) the law has to provide some answers where an application of the experience of everyday life does not enable one to provide them. Hence the rule in Entores and Brinkibon to the effect that in the case of instantaneous communications (in those cases telex) the contract is made where acceptance is received. That form of approach assumes that one can analyse the formation of a contract in offer and acceptance terms, and in Brinkibon Lord Wilberforce indicated that, difficult though the exercise may be, the courts have to do their best with the evidence in order to work out, sometimes in situations of some difficulty, how the offer and acceptance analysis pans out. However, in the post-Brinkibon world, where oral telephone communications are even more common, and where such communications can involve three or more participants in three or more different jurisdictions, and where parties might even conclude a written contract by each signing, and observing each other signing, over a video-link, the law may have to move on and to recognise that there is nothing inherently wrong or heretical in allowing the notion of a contract made in two (or more) jurisdictions at the same time. This is not merely a way of avoiding an unfortunate, and perhaps difficult, evidential enquiry. It may well reflect the reality of the situation. Take the case of three parties who each agree to complete a written agreement by signing simultaneously over a three way video link – where is that contract made? The natural answer is that it is made in all three jurisdictions. Such a conclusion does not necessarily create practical difficulties. If one of those jurisdictions is England, then one of the foundations for the English courts to assume jurisdiction is present, but it does not necessarily follow that jurisdiction will be assumed, because a Claimant who seeks to sue here would still have to establish that it is the most appropriate jurisdiction in which to sue. Jurisdiction would then dealt with on the basis of a mature forum conveniens doctrine rather than what might otherwise be a very forced and artificial analysis of trying to establish in which single jurisdiction the contract was made.

Such an analysis also has the merit of reflecting the fact that it is simply not always possible to analyse a contract in offer and acceptance terms. As Lord Diplock observed in Gibson –v- Manchester CC [1979] 1 WLR 294 at page 297:

Where such a contract is brought into existence, a fortiori it will not be possible to find out where the contract is made by applying the Brinkibon test. Of course, in most cases there will be no problem, but I do not see why, in the exceptional case, the answer should not be that a contract is made in two places (or conceivably in more than two places) if the facts admit of that result and drive one to that conclusion.

As I have indicated, there is no authority which bears directly on this point. Two authorities were relied on in Brinkibon – Evans –v- Nicholson (No. 2) [1875] 32 LT 778 and Bennett –v- Cosgriff [1878] 38 LT 177, but Mr Vos accepted that neither actually supported the proposition because they deal with different points namely where a letter stating an account or ordering goods should be taken as speaking. Mr Vos did, however, rely on pointers in other cases. The first was Commission for New Towns –v- Cooper (GB) Limited [1995] Ch. 259 at p. 285 where Stuart-Smith L.J., referring to exchange of contracts, said (at page 285:

There is therefore no authority which directly supports the proposition. Is there any authority which gainsays it? Unless it is implicit in Brinkibon then it does not seem to me that there is. Brinkibon was a case in which the House of Lords had to consider a contract reached by means of a telex machine. The effect of the decision was to apply the rule as to instantaneous communications which appeared in Entores. Despite the recorded submission of Mr Thompson that a contract can be made in two places at once, the debate in the judgments is really as to the applicability of the instantaneous communication rule. True it is that Lord Wilberforce at page 40 anticipates that an offer and acceptance analysis will be appropriate, but I do not read him as saying that it would be appropriate if it cannot be done or if it is utterly artificial or inappropriate to do it. At page 42D he observed that many variations might occur in relation to the communication and receipt of a telex and that:

So far as it is necessary for me to do so, therefore, I am prepared to consider this matter on the footing that it is possible, as a matter of principle, for a contract to be made in two places at once so that if one of those two places is England the requirement of CPR 6.20 (5) (a) is made out. It is therefore necessary to consider whether on the facts of this case there is a good arguable case for saying that that is the appropriate analysis. In my view Mr Vos has succeeded. It seems to me that this sort of case is very arguably one of the class contemplated by Lord Diplock in which an analysis in terms of offer an acceptance is not appropriate. The parties had, by a long process of negotiation, arrived at agreed forms of agreement which were not to be made binding until both parties indicated that they were. If both parties had met in order to sign and complete in the same place, it might well have been extremely difficult to find anything amounting to an offer and acceptance. Where completion takes place at a distance over the telephone, it might well be possible to construct an offer and acceptance analysis (indeed, each party has sought to do so in this case) but it might equally be thought that that analysis is extremely forced and introduces a highly random element. The offer and acceptance may well depend on who speaks first and who speaks second, which is likely to be largely a matter of chance in closing an agreement of this sort. It is very arguably a much more satisfactory analysis to say that the contract was made in both places at the same time. On the facts of this particular case, that would coincide with the clearly expressed intentions of the parties that neither wished to give the other an advantage in terms of governing law and jurisdiction, and although introducing the somewhat random element of offer and acceptance into the concept might be said in one sense to coincide with their respective wishes, and although their expressed wishes did not go so far as to encompass the place of contracting, it seems to me that there is a good arguable case for saying that a dual place of contracting coincides rather more closely with the intentions of the parties.

I therefore conclude that as a matter of principle, and on the facts of this case, Corps has a good arguable case for saying that the contract was made in both England and California; since that means it was made in England that establishes one of the bases of jurisdiction in CPR 6.20, although it does not conclude the question of whether it is appropriate to litigate the matter here because I shall have to go on to consider whether this is the appropriate forum. I do so below.

The next alternative ground of jurisdiction relied on by Corps is that the contract is governed by English law. Neither the Settlement Agreement nor the Trade Mark Agreement contains an express choice of law clause (a deliberate decision of the parties, as appears above). So I have to determine the law which applies by the reference to the Rome Convention, incorporated into English law by the Contracts Applicable Law Act 1990. The relevant provisions are in Article 4 which, so far as relevant, reads as follows:

I therefore have to carry out the following exercise:

My first task is therefore to identify the characteristic performance due under this contract.

There were two principal areas of dispute between the parties on this issue, namely what factors I was entitled to take into account in determining characteristic performance, and then what the answer was. Lord Grabiner propounded a wide ranging test, entitling one to go beyond the four corners of the contract and to see how it operated in the real world and where its real "bite" was. Mr Vos propounded a narrower view, which confined itself largely to the four corners of the contract and severely limiting the factual context into which it was to be put for determining characteristic performance and who was to provide it.

It is common ground that in determining the meaning and effect of the Rome Convention I can derive assistance from the Giuliano-Lagarde Report (OJ C282/1980). Mr Vos said that the thrust of this report was to require one to work principally from the contract to ascertain characteristic performance. The purpose of the Convention in this respect was to simplify the inquiry –

I do not think that the inquiry required under this head should be confined in the manner submitted by Mr Vos. All contracts operate in their own commercial environment, and in order to understand them and how they operate they have to be placed in that environment. In many cases the position will be obvious without doing much of that; in some it will be less obvious. Accordingly, as a matter of principle it seems to me to be wrong to seek to confine the inquiry in the way suggested by Mr Vos. Obviously the contract is a starting point, and in many cases it may be obvious, without going further, what the characteristic performance is; but that does not mean that one cannot or should not put the contract into its commercial context.

This approach is also supported by authority. In Print Concept GmbH v Gew (EC) Ltd [2001] EWCA 352 Longmore LJ said:

Accordingly, I do not confine my inquiry to the terms of the contract in this case, though obviously that is a vital starting point. The principal piece of context which Lord Grabiner relies on is the fact (which he says the evidence establishes) that the "bite" of the agreement was directed at Computer and what it did and sought to do. In 1991 it was the party that was seeking to expand its product range and was introducing various new products (hardware and software). That was at least part of the genesis of the 1989 dispute which ended up before Ferris J. By contrast, Corps was not innovating at the time. The purpose of the Trademark Agreement was to move the boundaries and to permit Computer to move into new areas that Corps was not interested in moving into anyway. In this respect Lord Grabiner relied on what a Mr Tenenbaum (one of Corp’s principal negotiators) had said on deposition in other US proceedings in 1995, which he said supported this analysis of what was really going on. He also maintained that Computer was entitled to rely on events subsequent to the contract to show its bite, and pointed to the relatively recent introduction of iTunes software in January 2001. Accordingly, if one asks what the real subject of the agreement was, it was primarily directed at defining what Computer could and could not do, and not at what Corps could and could not do.

I am afraid that I do not accept this analysis. I start by considering the concept of "performance" under the contract. The concept of "performance" is an easier concept to deal with where what is required is positive acts. Although there will always be cases of difficulty, one can see how the concept applies where one can see what positive acts have to be done under the contract, identify one act or set of acts as lying at the heart of it, and identify the party that has to do those acts. That is not the case for much of the Trademark Agreement. At the heart of the agreement are, in effect, negative provisions. I have set out the recital to the agreement above. It recites its purpose as being to reserve certain fields of use to the parties respectively. There is then a provision for payment, which, while clearly "performance", is not "characteristic" for these purposes, as both parties implicitly recognised before me. The heart of the agreement lies in clause 4, which provides for the parties to use their marks in their respective defined fields of use. These are not positive obligations under which the parties undertake to do something. They are permissive, until one gets to clause 4.9 which imposes a negative obligation on both parties – they are not to use their own marks in the other’s field of use. They both perform by not doing something. Clause 5 imposes positive obligations, but it is quite clear that they are ancillary to the primary matters which are in clause 4 – they essentially provide for how the parties are to implement the fields of use which they are both to have by specifying what each is to do in various jurisdictions to leave their respective fields of use open to their owners. The remaining provisions do not contain any material items of performance; nor do they shed any further light on characterisation.

The heart, or meat, of this agreement is therefore a negative one. The parties perform it (so far as they perform it at all) by not doing something, rather than by doing something positive. However, I am prepared to assume that a negative obligation can amount to "performance" within the meaning of Convention, and that where a negative obligation lies at the heart of a contract then the fulfilment of that negative obligation is the "characteristic performance" for the same purposes. Nonetheless, in relation to the present contract, it seems to me that the mutuality of the obligations means that the central performance elements (I deliberately avoid the expression "characteristic performance" at this point of the argument) are shared between the parties. Each has to do (or refrain from doing) the same acts vis-à-vis the other. Accordingly, so far as the concept of identifying "characteristic performance" provided by one party is concerned, one cannot do it looking at the contract as such.

That one might arrive at this conclusion is not entirely unforeseen. Dicey & Morris on the Conflict of Laws at page 1240 gives barter as an example of a contract where one cannot determine characteristic performance. That is doubtless because there are, in effect, matching obligations neither of which is more characteristic than the other. That has resonsances in the present case. More presciently, the problem of identifying characteristic performance in cases of complex intellectual property rights agreements was referred to in Cheshire & North’s Private International Law (1999) at page 570 where the authors refer to the difficulty of applying the concept to complex contracts for the commercial exploitation of intellectual property rights.

Accordingly, I consider that starting from the contract itself, and looking at its nature, one cannot identify characteristic performance provided by one party or the other. However, I have already accepted that it is, or could be, appropriate to put the contract in its proper context in order to consider this point fully, and that is in effect what Lord Grabiner does when he says that whatever the contract may say as between the parties, the "real meat" of the contract lies in the fact that the purpose of this contract was to free up his clients so they could pursue their innovations into new areas and applications. I do not agree. First, while that may be how his clients saw it, that does not describe how the central parts of this contract work. Whether or not the agreement provided a more helpful commercial and intellectual property environment than had existed hitherto, it is still the case that this contract regulated the activities of both parties, in real and substantial ways. The restrictions on Corps were in no way subsidiary to those imposed on Computer, and Corps’ rights were in no real way less significant, or less central, than Computer’s. The reality of this contract was still that it divided up a potentially disputed cake, and that remained the reality even if it was the case that Computer was getting a bigger slice of the cake than it might hitherto have had. I therefore do not consider that Lord Grabiner’s factor somehow shifts the performance in favour of his client. In addition, even if he were right on the facts I do not see how the argument assists him in saying his client had become the party who provided characteristic performance. Computer undertook no obligation to carry out any activities in its newly established territory, so it was itself providing no additional performance itself. If anyone was providing additional elements of performance which somehow tilted the balance so as to create a characteristic performance, it was Corps, which had extended the area affected by its negative obligation and thus (if anyone did) had provided the characteristic performance. If that were correct then it would make the law of Corps central administration (ie England) the governing law under Article 4(2) which is not the result that Lord Grabiner seeks. In truth, however, that analysis is not the correct one. The true position is that this is not a case where one can determine characteristic performance.

Accordingly the presumption created by Article 4(2) does not apply, by virtue of the wording of Article 4(5), and I have to ascertain "the country with which [the contract] is most closely connected" in accordance with Article 4(1).

At this point in the argument the stances of the parties reversed. Lord Grabiner sought to limit the kind of factors that can be taken into account in this exercise, whereas Mr Vos sought to say they were wide. Lord Grabiner’s submission was that the sort of matters that could be used to establish the connection had to be "geographical connections" and connected with performance. They must be connections between the contract and a country, not connections between the contract and a legal system. This means that such things as considerations which might go to the question of express or inferred choice of law are irrelevant – they come in under Article 3 or not at all. The same applies to such factors as currency identified in the agreement.

Lord Grabiner said that his proposed limitation was supported by the Giuliano-Lagarde report and by the judgment of Hobouse LJ in Credit Lyonnais v New Hampshire Insurance Co [1997] 2 Lloyds Rep 1. That case concerned the question of the governing law of an insurance contract which was to be determined under the provisions of similar but not identical legislation to the Convention. In deciding the question before him Hobhouse LJ considered the Convention, and observed that the Article 4(2) test:

Mr Vos disputed this narrow view of the factors that could be taken into account. In my view he is correct, and Lord Grabiner’s approach is not correct either as a matter of principle or as a matter of authority.

Accordingly, I consider that I am entitled to take a broad approach to the question of connection, unlimited by any categorisation of the relevant factors.

This has turned out to be a very difficult question. The contract in question is a contract between two companies in different jurisdictions and which governs their respective worldwide activities. In one sense it has connections with many jurisdictions but neither Corps nor Computer has put forward any close connection other than with England and California respectively. I must determine which is correct.

Computer relies on the following connections with California:

That gives some, but it might be thought not much, connection with California. However, I have to measure this against the alleged connections with England. Those connections are said to be as follows:

This is an agreement in respect of which a close connection with either jurisdiction is very difficult to find. However, the question for me is slightly different because I have to find the country "with which it is most closely connected" (Art 4(1)). As appears above, I find that most of the connecting features are weak or neutral, and because of the essentially worldwide nature of the effect and operation of the Trade Mark Agreement the question is a very difficult one, but in the end I think that the closer connection is with England. I think that one of the weightier factors in favour of England is that the Trade Mark Agreement is part of an overall settlement of English litigation, albeit that that is litigation with worldwide impact. Taking that factor, and assessing the other admissible factors so far as they are of any significance, I consider that this contract has a closer connection with England than with California. That means that English law is the governing law.

Accordingly, Corps establish that head of jurisdiction as well.

It is common ground that the burden is on Corps to satisfy me of this. The dispute in this case is essentially one of construction of the Trade Mark Agreement. Corps say that on its true terms and effect that agreement prohibits Computer from operating the iTunes Music Store. Subject to one difference of Californian law the material for reasoning that dispute will be the contract (and argument on what it means) evidence of the surrounding circumstances, and evidence of what Computer is doing and intends to do (including evidence of how its product works, to a limited extent) in order to identify the exact breach (if any).

The parties put various factors before me in this connection, of which the main ones are as follows.

Taking into account all these considerations, and the other points advanced by the parties, I have concluded that England is the proper place for this litigation. I accept that the governing law is a key (though, as I have said, not determinative) point, and that points to England. I also think that the prospect of parol evidence and depositions are likely to lengthen a trial and make the proceedings more costly. I also give some weight, but not a lot of, to the disruption to Corps’ business arising out of Mr Aspinall’s engagement in California litigation. Taking all these factors into account, I think that this construction point arising out of this English law contract is more appropriately tried in England.

Corps advanced additional heads of jurisdiction under CPR 6.20, namely an injunction to restrain breaches of contract to be committed within the jurisdiction, and an injunction to restrain the commission of acts within the jurisdiction. These claims were based on assertions that Computer threatened to make the iTunes product available in this jurisdiction. In the light of my determination on the main point I do not have to go on to consider this alternative basis, and therefore I do not do so.

There is one further matter of procedural history that I should refer to. In October 2003, several months after the present proceedings were started, Computer started its own proceedings in California, seeking negative declaratory relief in respect of Corps’ complaints. Corps sought to have those proceedings dismissed on the basis of lack of personal jurisdiction. Judgment in that application was pending at the time of the hearing before me. Since then judgment has been given, and the application has been dismissed – I have seen a copy of the judgment of the judge (Judge Whyte). Nothing in that application or that judgment relates to anything that I have to decide, and neither party sought to say that it did.

In the circumstances I dismiss Computer’s application.