Sandisk Corporation v Koninklijke Philips Electronics NV & Ors

In this action, the Claimant (“SanDisk”) complains of breaches of the Chapter I and Chapter II prohibitions of the Competition Act 1998 and/or Articles 81 and/or 82 of the EC Treaty. The Claim Form, accompanied by Particulars of Claim, was issued as long ago as 18^th September 2006, and was followed on 19^th September 2006 by an application for interim relief. The Fifth Defendant (“Sisvel”) applied by Application Notice dated 20^th November 2006 for a declaration that this court has no jurisdiction to entertain the claim raised by SanDisk; and the First to Fourth Defendants (collectively “the Patentees”) made a corresponding application on 21^st November 2006. All applications came on for hearing before me on 6^th February 2007.

By agreement, the question of the court’s jurisdiction to entertain either the substantive claim advanced by SanDisk or SanDisk’s application for interim relief was argued first, by Mr Hoskins for the Patentees and by Mr Sharpe QC for SanDisk. Mr Currie on behalf of Sisvel adopted Mr Hoskins’ argument. The question of interim relief was then argued by Mr Sharpe QC and Mr Currie.

The Patentees are the owners of a number of European patents relevant to so-called MP3 technology, which is the technology commonly used for the transmission of music over the Internet and for its reproduction using light-weight personal players, such as the Apple iPod. These patents have been the subject of an intensive campaign of licensing carried out on behalf of the Patentees by Sisvel, an Italian company which, on the evidence, principally carries on the business of licensing patents on behalf of patentees (not just the Patentees but others as well) in the domestic electrical equipment field. Sisvel has no manufacturing interest of its own. Although the evidence is not clear on this point, I believe that the First Defendant (“Philips”), or at least one or more of the Philips Group of Companies, does manufacture MP3 players and sell them within the EU. The number of licences entered into is very impressive – in excess of 500 individual licensees including, it would seem, most of the principal manufacturers and/or sellers of MP3 players with the exception of SanDisk.

SanDisk is a US corporation, registered in Delaware, and is very well-known in the manufacture of hi-tech consumer goods, and in particular flash memory (the sort of memory that is used in digital cameras). It is in a very large way of business. It also imports and sells in the European Union unlicensed MP3 players.

SanDisk has been offered a licence by Sisvel and has refused it. On 20^th February 2006, SanDisk started proceedings in the Patents Court challenging the validity of the five patents the use of four of which is alleged by Sisvel to be essential for anybody who wants to make and/or sell an MP3 player in the EU. SanDisk also started proceedings in March 2006 for declarations relating to essentiality and non-infringement. The Patentees counterclaimed for infringement. These proceedings will ultimately all come on together for trial in the Patents Court in February 2008.

Sisvel has always contended on behalf of the Patentees that the argument of essentiality is a good one. Accordingly, Sisvel maintains that if an MP3 player complies with a particular standard, the ISO/IEC 11172-3 will necessarily infringe the four “essential” patents, namely EP0402973, EP0599824, EP0660540 and EP0400755.

Since the proceedings started in the UK, Sisvel has sought to enforce the corresponding patents elsewhere in the EU by summary means. It has applied for and obtained so-called Border Detention Orders pursuant to Council Regulation (EC) 1383/2003 (“the Border Detention Regulation”). The effect of the Border Detention Orders is that all MP3 players except those originating with a manufacturer or destined for a consignee whose name appears upon a list will be detained at the border, and Sisvel will have the opportunity to commence proceedings for infringement within ten days in order to prevent the goods detained being released and entering free circulation in the EU. The orders so obtained have been successful, and there are pending proceedings for infringement between Sisvel and/or the Patentees and SanDisk in the Landgericht Mannheim in Germany, and in the Netherlands.

In addition to the employment of the Border Detention Order pursuant to the Border Detention Regulation, Sisvel has also sought domestic remedies in Germany and in Italy. The greatest bone of contention between the parties has been the proceedings in Germany, where the Berlin Public Prosecutor, together with the local state investigation agency, carried out a search at the Internationale Funkausstellung (IFA) Exhbition, seizing 37 MP3 players from a total of nine different “Sansa” product lines exhibited on the SanDisk booth. On the evidence, this is a very important exhibition, and Sisvel was not slow to take advantage of the raid in publicity and interviews, in which their contention that the use of the patents was essential to any standards-compliant MP3 player was given a good airing.

In Italy, Sisvel has complained to the Public Prosecutor in the province of Vicenza and has obtained seizures in hypermarkets (including the international chain Auchan) at the beginning of January 2007.

Put shortly, SanDisk says that Sisvel and the Patentees enjoy a dominant position in two relevant defined markets and that the conduct I have outlined above is to be stigmatised as harassment amounting to an abuse of that dominant position which is both actionable here and justifies at least limited interlocutory relief requiring Sisvel to notify SanDisk of any further proposed complaint to the relevant administrative or prosecuting authorities. The purpose of the notice will be to enable SanDisk itself to approach those authorities and have an opportunity to explain why it says the essentiality argument is a bad one before the authorities decide whether or not to act.

SanDisk complains also of certain aspects of the licensing activities of Sisvel, which it says amounts also to abuse of a dominant position. In respect both of the “harassment” allegation and of the licensing allegation (see further below), Sisvel maintains that there is no jurisdiction either to entertain the substantive complaint or to grant any form of interim relief.

With that brief introduction, I can turn to the first question, which is whether the English court has substantive jurisdiction to entertain the complaints in this case. A claim for relief in respect of an alleged abuse of a dominant position is a civil or commercial matter. Sisvel is an Italian company, and the Patentees are registered respectively in the Netherlands, France, France and Germany. Accordingly, the question whether and in what circumstances the English court has jurisdiction is to be determined according to the provisions of the Council Regulation (EC) 44/2001 (“the Brussels Regulation”). The basic rule, as is well-known, is that a defendant is to be sued in the courts of the Member State where that person is domiciled (Article 2). The exceptions provided for by Sections 2 to 7 of Chapter II of the Brussels Regulation constitute the only exceptions to this rule; and, so far as this case is concerned, the only relevant rule is the special jurisdiction conferred by Article 5. Before embarking on this analysis, it is worth noting that Sisvel, against whom the greatest complaint is made, can certainly and without any doubt be sued in Italy, and there is little question that the Patentees could be joined to such proceedings under Article 6(1) which provides that a person domiciled in a Member State may also be sued, where he is one of a number of defendants, in the courts for the place where any one of them is domiciled, provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings. Because none of the Defendants are domiciled in England and Wales (see Article 60), this possibility is not open to SanDisk in this jurisdiction, who must establish that a special jurisdiction is available. The only arguable head of jurisdiction is found in Article 5(3), which provides that:

“A person domiciled in a Member State may, in another Member State, be sued:

…

3.

in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur.”

It should be noted that it is not suggested that this court possesses any jurisdiction in consequence of the jurisdictions asserted in the claims and counterclaims relating to the patents in England and Wales.

In paragraphs 46 to 54 of the Particulars of Claim, SanDisk alleges that Sisvel and the Patentees, or Sisvel alone, hold a dominant position in the market for the licensing of patents essential to the production, sale and importation into the EEA of MP3 players and MP3-compliant memory cards. (What exactly an MP3-compliant memory card is was not satisfactorily explained to me, but I assume that it is a memory card containing some circuitry at least relevant to the decoding of MP3-encoded audio signals.) For the purposes of this application, the Defendants do not challenge the allegation of dominance, or that the relevant market is correctly identified.

From here on, I shall refer only to Article 81 and/or Article 82 of the EC Treaty as imposing the relevant prohibitions, but it must be remembered that corresponding prohibitions extend to the domestic market by virtue of Sections 2 and 18 of the Competition Act 1998. The breaches of Articles 81 and/or 82 are alleged to fall under seven heads, set out in paragraph 59 of the Particulars of Claim. It is alleged that Sisvel, alternatively Sisvel and the Patentees, have:

“(i)

collectively boycotted or refused to deal on an individual company basis with the Claimant;

(ii)

engaged in illegal tying practices by offering patents asserted to be essential to the MPEG-1 Audio standard only in conjunction with non-essential patents;

(iii)

engaged in illegal tying practices by offering patents asserted to be essential to MPEG-1 audio layer 3 only in conjunction with patents to MPEG-1 audio layer 1, MPEG-1 audio layer 2 and the MPEG-1 Video Patents;

(iv)

demanded excessive royalties;

(v)

misused the EEA patent system to acquire and maintain a collective dominant position;

(vi)

brought sham, vexatious legal and administrative actions with a view to harassing the Claimant into paying for a licence to the entire bundle of patents in the MPEG-1 Audio Standard and MPEG-1 Video Standard; and

(vii)

sought to automatically prolong the duration of the patent licence beyond the expiry of the Essential Patents [i.e. the patents specified above].”

There follows a set of particulars of each of the breaches that are set out above. It will be observed that heads (i) to (iv) are concerned purely with the terms of the licence, and possibly the manner in which the licence is to be granted. The particulars of head (v) relate to the obtaining of patents which, it is alleged, the Patentees knew, or ought to have known, were invalid. Head (vi) relates, in effect, to the events at IFA in Berlin, to the stores in Vicenza and to the obtaining of Border Detention Orders. The seventh allegation relates to the duration of the licence: it is said that the licence on offer would endure beyond the last to expire of the patents said to be essential. Accordingly, it may be seen that the complaint so far as grounds (i) to (iv) and, probably, ground (vii) are concerned is that the only licence on offer is one that, if entered into in respect of the EEA in general or England and Wales in particular, would result in an agreement unlawful under Article 81. Little was said about head (v). Head (vi) plainly stands alone and relates to the enforcement measures that I have outlined above.

Before advancing any further into the details of the allegations made, it is probably helpful to identify the applicable legal principles.

First of all, certain of the allegations are said by the Patentees and Sisvel simply to be unarguably wrong on the facts. While any complaint about factual allegation must necessarily be approached with great caution, the scope of Sisvel’s objection is extremely narrow, relying as it does upon the last written open offer of a licence by Sisvel to SanDisk by letter dated 19^th September 2006. This letter is, unsurprisingly, nowhere referred to in the Particulars of Claim. It is said that if one reads the letter, it is just clear that the allegation of the Particulars of Claim is wrong: this contention is advanced in the evidence as long ago as 22^nd December 2006 and has received no substantive reply. Without embarking upon an illegitimate examination of disputed facts, it is possible to examine the allegations of abuse in the light of the last open offer made, to determine whether they are capable of standing against it.

Next, substantive jurisdiction under the Brussels Regulation.

If the court is to have substantive jurisdiction by virtue of Article 5(3), the harmful act either must have occurred or may occur within England and Wales. The expression “matters relating to tort, delict or quasi-delict” have an autonomous meaning and must be regarded as an independent concept covering all actions which seek to establish the liability of the defendant and which are not related to a contract within the meaning of Article 5(1). The special jurisdictions enumerated in Articles 5 and 6 of the Brussels Regulation constitute derogations from the principle that jurisdiction is vested in the courts of the state where the defendant is domiciled, and as such must be interpreted restrictively. (See generally Case 189/87 Kalfelis [1988] ECR 5565.) The idea of “place” also has the autonomous meaning that it embraces both the place where the damage occurred and the place of the event giving rise to it – see Case 21/76 Bier v. Mines de Potasse d’Alsace SA [1976] ECR 1735. The option conferred on a claimant by Bier’s case is not as wide as it may at first appear, since in general any claimant will suffer loss at its place of business caused to it by a harmful act committed abroad. To permit the court of the place of business of the claimant assuming jurisdiction in every such case and so weakening or entirely subverting the basic jurisdictional principle of Article 2 of the regulation, to which Article 5 is, as I have indicated, an exception, it is settled that the “place of damage” connotes the place where the physical damage is done or the recoverable economic loss is actually suffered. In Case C-220/88 Dumez [1990] ECR I-49, the Court of Justice said this (paragraph 20):

“It follows from foregoing considerations that although, by virtue of a previous judgment of the court (in [Bier] … ), the expression “place where the harmful event occurred” contained in Article 5(3) of the Convention may refer to the place where the damage occurred, the latter concept can be understood only as indicating the place where the event giving rise to the damage, and entailing tortious, delictual or quasi-delictual liability, directly produced its harmful effects upon the person who is the immediate victim of that event.”

An interesting illustration of the principle is to be found in Case C-364/93 Marinari [1995] ECR I-2738, in which Mr Marinari had presented promissory bank notes to the value of US $752,500,000 to the Manchester branch of Lloyds Bank, whose staff refused to return them to him. Mr Marinari sued Lloyds Bank, domiciled in England and Wales, in the Tribunale di Pisa for compensation. He failed, the court ruling that the term “place where the harmful event occurred” in Article 5(3) of the [Brussels Regulation] does not, on a proper interpretation, cover the place where the victim claims to have suffered financial damage following upon initial damage arising and suffered by him in another Member State. In paragraph 14 of the judgment, the court said this:

“Whilst it has thus been recognised that the term “place where the harmful event occurred” within the meaning of Article 5(3) of the [Brussels Regulation] may cover both the place where the damage occurred and the place of the event giving rise to it, that term cannot be construed so extensively as to encompass any place where the adverse consequences can be felt of an event which has already caused damage actually arising elsewhere.”

Finally, the present case is concerned with acts which are themselves difficult to localise. Thus, assuming that the offer of an objectionable licence is rightly characterised as an abuse of a dominant position, where does the offer take place? The letter may be written in one jurisdiction and received in another. It seems to be settled that, at least in two obvious cases in which a tortious act is not complete until a statement has been both made and understood, the relevant location is that where the statement was made. In the case of defamation, the place of the harmful act was held to be the place where the statement was put into circulation, the place of receipt being the place where immediate damage arose: see Case C-68/93 Shevill [1995] ECR I-415, paragraph 24 of the judgment. It follows from Shevill that while all damages will be recoverable in the jurisdiction where the harmful event originated, damages for the jurisdiction in which injury to reputation is suffered will determine the extent of damage in that jurisdiction only. So far as misrepresentation is concerned, the same principle is reflected in the decision of Rix J in Domicrest Ltd v. Swiss Bank Corporation [1999] QB 548 where at page 567F the learned judge said this:

“ … it seems to me that the place where the harmful event giving rise to the damage occurs in a case of negligent mis-statement is, by analogy with the tort of defamation, where the mis-statement originates. It is there that the negligence, even if not every element of the tort, is likely to take place; and for that and other reasons the place from which the mis-statement is put into circulation is as good a place in which to find jurisdiction as the place where the mis-statement is acted on, even if receipt and reliance are essential parts of the tort. For these purposes it seems to me that there is no difference between a written document and an oral or other instantaneous communication sufficient to distinguish between such cases. Although it may be argued that in the case of instantaneous communications and perhaps especially in the case of telephone conversations the mis-statement occurs as much where it is heard as where it is spoken, nevertheless it remains true, as it seems to me, that it is the representor’s negligent speech rather than the hearer’s receipt of it which best identifies the harmful event which sets the tort in motion. To prefer receipt and reliance as epitomising the harmful event giving rise to the damage in the case of negligent mis-statement is, I think, to ignore the fact that the plaintiff also has the option of suing in the courts of the place where the damage occurs – which is quite likely to be at the place of receipt and reliance.

As for the place where the damage itself occurs, that may, of course, be elsewhere than the place of the event giving rise to the damage and, as I have already suggested, is quite likely to be where the mis-statement is heard and relied on, … it has to be remembered that the remedy in negligent mis-statement is not, as it is in contract, to be put in the same position as if the contract had been performed, but depends on the answer to the question: what would have happened if the negligent mis-statement had not been made?”

Domicrest was a case in which the result of applying the rules set out in Article 5(3) to establish whether an exceptional jurisdiction existed had the effect of requiring contract and tort claims relating to a single misrepresentation to be tried in separate jurisdictions, a fact which did not perturb Rix J because, in Lord Goff of Chieveley’s words in Kleinwort Benson Ltd v. Glasgow City Council [1997] 3 WLR 923, 930:

“While disadvantages may arise from different aspects of the same dispute being adjudicated upon by different courts, the plaintiff is always entitled to bring his action in its entirety before the courts of the defendant’s domicile.”

I should note in passing that that observation applies with peculiar force in the present case, where none of the Defendants is an English company, and where none of the acts of harassment nor, so far as I can determine, any of the negotiations for licences, have taken place.

Basing himself on these authorities, Mr Hoskins submits on behalf of the Patentees that in order for the English court to possess the exceptional jurisdiction pursuant to Article 5(3) of the Brussels Regulation to adjudicate upon the alleged abuses of a dominant position in the present case, I must be satisfied that either the event setting the tort in motion was in England and Wales or, alternatively, that the claimant must show that it is the immediate victim of that abuse suffering direct harm in England and Wales. In my judgment, and on the basis of the authorities which I have endeavoured to summarise above, this submission is entirely justified. It remains merely to observe that the scope of the two jurisdictions is different: the jurisdiction based upon the place of the harmful event will be international, while the jurisdiction based upon the relevant harm will be restricted to England and Wales. I should make one other observation: it seems to me that at this stage I have to be satisfied that SanDisk has a good arguable case, in the sense in which those words are used in Canada Trust v. Stolzenberg (No. 2) [1998] 1 WLR 547 by Waller LJ at 558.

SanDisk is, as I have indicated, a Delaware corporation. Trading in SanDisk MP3 players is carried on in the way described by the two witness statements of Ed Moro. In summary, SanDisk has two subsidiaries within the United Kingdom, respectively SanDisk UK Limited and SanDisk Scotland Limited (both incorporated in Scotland). SanDisk Scotland Limited is a research and development company and does not apparently trade. SanDisk UK Limited does not trade in MP3 players but appears to provide services to support the marketing, distribution and promotion of MP3 players. Supplies are made directly to distributors and retailers, with whom the sales personnel (employed, I assume, by SanDisk UK Limited) provide contact and also manage customer accounts. The MP3 players themselves are manufactured in China. The evidence is certainly that neither of the UK companies derives a trading income from the sale of MP3 players, and I assume – although this is not entirely clear in the evidence – that payment for MP3 players is made by the distributors and/or retailers to SanDisk in the United States. I was shown the most recent filed accounts for SanDisk UK Limited, and it is clear that these do not include income derived from sale of MP3 players. It is perhaps safer to say that wherever payments for players are made, it is not to either of the SanDisk companies in the UK.

– Collective Dealing

It is accepted that the Patentees do not grant licences on an individual basis, having individually agreed with Sisvel that all licences will be granted by the latter company. The location of the allegedly harmful act is (as SanDisk accepts) not in England and Wales.

Can it be said that SanDisk is the direct victim of the allegedly abusive refusal to license individually and has suffered immediate damage thereby in England and Wales? The Patentees say obviously not, because SanDisk has done no more (I summarise) than establish a distribution network using third parties, its Scottish subsidiary being concerned with the setting up of the network and the maintenance of the accounts. Nowhere is it in fact alleged that, were SanDisk entitled to the grant of a licence upon reasonable terms from the Patentees individually, those licences would cost less than the licence currently on offer; but assuming that some loss is to be attributed to the collective licensing practices of the Patentees, in the event that this conduct is ultimately held to be abusive, it seems to me that any damage can only be suffered where royalties were payable, and that does not include England and Wales.

Mr Sharpe QC on behalf of SanDisk submits that the foregoing analysis demonstrates the weakness of the approach taken by Mr Hoskins. He observes that the whole dispute (so far as this court is concerned) concerns a patent licence which will have effect within the jurisdiction so far as the UK designations of the allegedly essential patents are concerned. He submits that whether there is a claim in England and Wales in relation to a licence under the UK patents can scarcely depend upon the precise form in which SanDisk has seen fit to construct its trading system. He further submits that, although SanDisk is in fact trading without a licence, it suffers loss in trading without the licence to which ex hypothesi it is entitled, and so has suffered loss, the loss immediately accruing in England and Wales. He submits that I should look at the substance rather than the form of the complaint.

The artificiality of all this is, in my judgment, rather emphasised by the fact that SanDisk is in fact trading in the UK with a very substantial proportion of the available market in MP3 players. On the assumption that it is legitimate to consider the damage arising in these unusual circumstances to arise from any general inhibition on trade within England and Wales caused by the fact that SanDisk does not enjoy a lawful licence, I cannot see where the damage accrues other than to SanDisk in Delaware. It follows, I think, that the first alleged abuse cannot, if established, give rise to jurisdiction under Article 5(3) in England and Wales.

– Tying Essential and Non-Essential Patents

This allegation, as well as that in the third and fourth heads, which are concerned respectively with the tying of distinct technologies and excessive royalties in respect of MP3-compliant memory cards, must fail on the facts. I have already indicated that I am conscious that it is not appropriate in an application of this description to get involved in a mini-trial. SanDisk’s Particulars of Claim and Sisvel’s letter setting out the scope of the licence which Sisvel is prepared to grant bear the same date. Written by Sisvel’s English lawyers to SanDisk’s English lawyers, the letter, so far as relevant, is as follows:

“We note that your draft Particulars of Claim advance substantially the same arguments as those contained in your letter of March 8, 2006. The basis for these allegations remains vague and unclear, and based on a number of factual misrepresentations. We therefore request that you provide further particulars of the allegations made against our client and rectify the many misrepresentations contained in your claim.

Moreover, contrary to the allegations contained in your Particulars of Claim, Sisvel has always been prepared to grant SanDisk a non-exclusive, non-discriminatory licence to use the patents essential to the production, sale and importation of MP3 players and MP3-compliant memory cards under a reasonable royalty for each distinct product type.

To confirm the above, and to avoid any doubt as to what Sisvel is prepared to offer willing licensees, Sisvel hereby formally offers to SanDisk:

(1)

a licence for SanDisk MP3 players on the following conditions:

•

the licence would relate only to the patents asserted by Sisvel/Audio MPEG to be essential (for Europe: EP0402973, EP0599824, EP0660540, and EP0400755);

•

the royalty rate applied would be the standard reasonable royalty rate as applied by Sisvel for the licensing of these patents and paid by hundreds of licensees; and

•

the licence would apply for the duration of the applicable patents.

(2)

a licence for SanDisk MP3-compliant memory cards on the same first and third conditions as those offered for MP3 players, with the availability to discuss with SanDisk the possibility of applying royalty rates for MP3-compliant memory cards that are different from those applicable to MP3 players, since they are a new product that has been offered on the market for the first time (it being understood that any such offer would also be extended to any third party manufacturing MP3-compliant memory cards).”

This letter, which followed shortly upon the events at IFA, has never been effectively replied to. It is not suggested, however, that it was made in bad faith, nor is it suggested that Sisvel is not, in fact, prepared to license SanDisk upon the terms that I have set out above. Against this background, it seems to me to be simply impossible to allege either that Sisvel insists upon including non-essential patents within the scope of the licence, or that the licence extends to MPEG-1 Video patents, or that the royalty rate for MP3-compliant memory cards is excessive. In my view, the abuses alleged in paragraphs 59(2), 59(3) and 59(4) are unarguable, at least since the receipt of this letter. In any event, for the reasons that I have given in respect of the first head of abuse, I do not think that it is possible convincingly to suggest that immediate harm is suffered by SanDisk in England and Wales in respect of its trade in MP3 players.

– Misuse of the Patent System

The nature of the misuse (see paragraphs 87 to 89 of the Particulars of Claim) has two aspects. The first is a suggestion (paragraph 87) that the Defendants have, as I understand it, widened the scope of the patent protection which they enjoy after their initial disclosure of the scope of their patents in the process of adoption of the MPEG-1 Audio Standard. This extension of scope is alleged to have been effected by certain divisional and sub-divisional patents. I believe all of these divisional and sub-divisional patents are sought to be revoked in the concurrent patent proceedings on the ground that they include “added matter”, but the addition of matter to a disclosure is not the same thing as the extension of protection. Nonetheless, assuming that these patents claim more widely than the original, I do not follow why this causes immediate loss to SanDisk in England and Wales. The best that can be said, I suppose, is that the royalty demanded might be lower if the patents did not form part of the licensing package, but it is not clearly explained why they are material if there is a real “blocking” patent remaining: after all, one blocking patent is sufficient.

The second category of abuse under this head again relates to the divisional and sub-divisional applications, and complains that these patents were applied for, the Defendants knowing them to be potentially invalid. The result is said to be that the rights are wider than that which can be derived from the “legitimate scope of the initial patent disclosure” in order to prevent competition in the market for the licensing of patents essential to the manufacture, EEA sale and EEA importation of MP3 players. Again, accepting that within the scope of this plea is a contention in relation to the impact of the patents so obtained upon trade in MP3 players (and MP3-compliant memory cards) in England and Wales, I cannot discern any grounds upon which it may be said that immediate loss is suffered by SanDisk in the jurisdiction. Again, in my judgment, the court lacks jurisdiction under Article 5(3) to entertain this claim.

– “Sham, vexatious and harassing legal and administrative actions”

I have already outlined the enforcement steps that Sisvel has taken in Germany and Italy by the use of criminal complaints, and in the Netherlands (and I believe in Germany also) by the employment of Border Detention Orders. A number of general observations need to be made about these steps. First, the Border Detention Order regime is established by a Council Regulation, and the conditions for its application are clearly set out in the Regulation. The Regulation in effect provides for ex post challenge by the consignee and contains no provision for, and no mechanism for, the entertaining of rival contentions as to infringement at the stage of obtaining and applying the order. Second, it is quite clear from the text of the Regulation itself that it is intended to apply not only to cases of counterfeiting and piracy, but to any form of infringement. Thus, the term “goods infringing an intellectual property right” is defined by Article 2 to include (a) counterfeit goods, (b) pirated goods and (c) “goods which, in the Member State in which the application for customs action is made, infringe: (i) a patent under that Member State’s law …”. The order is made upon the application of the right-holder – who includes the relevant patentee – and gives a right to detain (Article 9) where the customs office is satisfied that the relevant goods are “suspected of infringing an intellectual property right”. The condition for continued detention may include the provision of appropriate security by the right-holder (Article 6) and the right-holder must start proceedings within ten days of notice of the relevant detention (Article 13).

Assuming that it is possible to invoke these administrative actions in an abusive manner, as for example by relying upon a patent positively known to be invalid, the damage resulting from the abuse itself is plainly suffered in the Member State in which the Border Detention Order has been effected. There is no Border Detention Order in the United Kingdom. Assuming that the allegations made in the Particulars of Claim are wide enough to include the contention that the Border Detention Orders have been employed in the countries where such an order has been obtained without any belief in the validity of the underlying patent rights, and with a view to consolidating the dominant position enjoyed by Sisvel and/or the Patentees in the licensing market, the position still appears to me to be that no immediate loss is suffered by SanDisk in the United Kingdom. The effect of exercise of these orders is, however, that infringement actions are on foot in Germany and the Netherlands. Plainly, the initial stages of the tort or delict of which complaint is made took place in the jurisdictions where the Border Detention Orders were obtained.

I turn to the seizure by the Public Prosecutor in Berlin of the MP3 players on display at the SanDisk booth at IFA. Plainly, both the act itself and the harm immediately flowing from it are in Germany.

Separately, complaint is made of the statements made by Sisvel representatives in the aftermath of the seizure. One at least of these statements has been carried by the BBC and so has been published here. It appears from the reports that the statements were made either in Germany or in Italy, and accordingly the question is whether, as a result of the publication of a statement by representatives of Sisvel to the effect that any MP3 player necessarily infringes rights administered by Sisvel, such a statement can amount to an abuse of a dominant position causing immediate loss to SanDisk in England and Wales. The particular point of which SanDisk complains is that the BBC story (relating to a statement by Mr de Sanctis, the Chief Executive of a US subsidiary of Sisvel) states that Sisvel had obtained an injunction against SanDisk from the Berlin Court. In fact, the Berlin Court had issued an authorisation to search and seize the MP3 players at the IFA exhibition. I am very unimpressed by Sisvel’s contention that Mr de Sanctis was speaking not for Sisvel itself but for its US subsidiary. On the other hand, it does seem to me that the distinction between what actually happened and an injunction really does not exist. One need only imagine what Sisvel would be obliged to say in any corrective statement. In my judgment, this cannot support any suggestion that damages have been suffered by reason of these matters within the jurisdiction. The same goes for the Mannheim patent infringement proceedings, which were commenced pursuant to Sisvel’s obligations under the border detention regime. Manifestly, any loss suffered by reason of these proceedings is loss in Germany.

Generally, in relation to all the legal proceedings, I was attracted at one time by the thought that such proceedings were merely duplicative and so potentially oppressive, but on reflection, it seems to me that that cannot be the case. While all the patents in question derive from the same European patent applications, it is a consequence of the way in which European patent applications mature into domestic patents in the designated contracting states that enforcement has regrettably to be undertaken state by state. Nor is it possible to litigate infringement for all designated states in one only of them: if validity is or will come into issue, it is now settled that the only available manner of enforcement is on a country-by-country basis – see Case C-4/03 GAT v. LUK [2006] FSR 45 and Case C-539/03 Roche v. Primus [2007] FSR 5. The consequence of these cases is that if a patentee possessing a bundle of European patents granted upon a single European patent application wishes to enforce them, it must do so on a state-by-state basis. So, not only do I not consider that there is arguably an abuse in such a manner of proceeding, but any loss caused by enforcement in this matter equally affects SanDisk on a state-by-state basis, and, as I understand it, no complaint is made of the various proceedings in England and Wales.

Finally, the last head of abuse, head (vii), complains that the term of the licence on offer is longer than the remaining term of the last of the essential patents to expire. A quick reference to the terms of the offer of 19^th September 2006 set out above will show that that is not the case. This objection fails on the facts.

It will appear from the foregoing that I consider that the pleaded case, together with the material to which I have referred, establishes neither that any of the first steps of the abuses complained of took place in the United Kingdom, nor that immediate damage was caused to SanDisk in the United Kingdom by reason of the alleged abuses. As I have indicated, it is submitted that a good arguable case must be demonstrated by the Claimant before jurisdiction will be assumed under Article 5(3). Given that there are courts – at least those of the Netherlands, Germany, France and Italy – which indisputably have jurisdiction over the individual Defendants pursuant to Article 2 of the Brussels Regulation, it seems to me that in order to preserve the necessarily exceptional nature of the jurisdiction under Article 5(3), and for the purpose of ensuring the uniform application of the Regulation, something better than a case which is merely arguable is required. As Dicey, Morris & Collins (14^th ed.) explains, jurisdictional issues, although important, ought generally to be decided with due dispatch and without hearing oral evidence, and the standard to be applied in considering whether the jurisdiction of the court has been established for the purposes of the then Conventions is whether there exists a good arguable case. In my judgment, the claims which I have considered above cannot be so described.

Mr Sharpe QC maintains, however, that the analysis which I have set out fails to assemble the strands of abusive behaviour complained of in the Particulars of Claim into a proper picture, which is, he says, a sustained campaign of abusive and anti-competitive activity throughout Europe, including the UK. Since, he says, the campaign is pursued throughout Europe, so too loss is suffered by SanDisk throughout the EU and immediate damage is suffered in every country, and thus the English court has jurisdiction. It is attractive to view the activities of the Defendants globally, but shorn of the complaints about the form of the licence on offer, the substance of this action, as Mr Sharpe freely admitted, lies in the enforcement steps that have been invoked by Sisvel in the various Member States, in particular the seizures in Germany and Italy. The interim relief sought is targeted at enforcement measures. These raise a separate issue, which I have not discussed above, relating to jurisdiction both under Article 5(3) and under Article 31 – the last issue of jurisdiction with which I must concern myself. This problem can be dealt with under the heading “Enforcement of patent rights as abusive conduct”.

As I have indicated above, I do not consider that the various Border Detention Orders and seizures of goods pursuant to domestic law arguably give rise to immediate loss in England and Wales of which SanDisk can complain. There is, however, a wider objection to considering these activities as abusive conduct caught by the prohibition of Article 82 at all. In other words, assuming that the Patentees and/or Sisvel have a dominant position within a relevant market, and assuming that the effect of enforcing their intellectual property rights will consolidate that position of dominance, in what circumstances will the law recognise that enforcement through the legal channels provided for either by Community law or by domestic law of the Member States amount to abuse? A comprehensive answer to this question is, in my judgment, provided by Case T-111/96 ITT Promedia NV v. Commission [1998] ECR II-2937, a judgment of the Court of First Instance in an action for the annulment of a Commission decision rejecting a complaint by the applicant, alleging that a company called Belgacom SA had initiated vexatious litigation against it in the Belgian courts, an act which was alleged to constituted an infringement of [Article 82] of the Treaty.

In its contested decision, the Commission stated that:

“In principle the bringing of an action, which is the expression of the fundamental right of access to a judge, cannot be characterised as an abuse unless an undertaking in a dominant position brings an action (1) which cannot reasonably be considered as an attempt to establish its rights and can therefore only serve to harass the opposite party, and (2) which is conceived in the framework of a plan whose goal is to eliminate competition.”

The court repeated these findings in paragraph 55 of its judgment, referring to them as “the two cumulative criteria”. It is plain that the applicant conceded that these two criteria were compatible with Article [82] of the Treaty – see paragraph 57 of the judgment. Nevertheless, it is plain from paragraphs 60 and 61 that the court accepted the appropriateness of the criteria adopted by the Commission:

“60.

… First, as the Commission has rightly emphasised, the ability to assert one’s rights through the courts and the judicial control which that entails constitute the expression of a general principle of law which underlies the constitutional traditions common to the Member States and which is also laid down in Articles 6 and 13 of the [ECHR] (see Case 222/84 Johnston v. Chief Constable of the Royal Ulster Constabulary [1986] ECR 1651, paragraphs 17 and 18). As access to the Court is a fundamental right and a general principle ensuring the rule of law, it is only in wholly exceptional circumstances that the fact that legal proceedings are brought is capable of constituting an abuse of a dominant position within the meaning of Article [82] of the Treaty.

61.

Second, since the two cumulative criteria constitute an exception to the general principle of access to the courts, which ensures the rule of law, they must be construed and applied strictly, in a manner which does not defeat the application of the general rule … ”

The CFI explains in paragraphs 72 and 73 what it means when it speaks of an action which “cannot reasonably be considered as an attempt to establish [the rights of the dominant undertaking]” in the first of the criteria:

“72.

According to the first of the two cumulative criteria set out by the Commission in the contested decision, legal proceedings can be characterised as an abuse, within the meaning of Article [82] of the Treaty, only if they cannot reasonably be considered to be an attempt to assert the rights of the undertaking concerned and can therefore only serve to harass the opposing party. It is therefore the situation existing when the action in question is brought which must be taken into account in order to determine whether that criterion is satisfied.

73.

Furthermore, when applying that criterion, it is not a question of determining whether the rights which the undertaking concerned was asserting when it brought its action actually existed or whether that action was well founded, but rather of determining whether such an action was intended to assert what the undertaking could, at that moment, reasonably consider to be its rights. According to the second part of that criterion, as worded, it is satisfied solely when the action did not have that aim, that being the sole case in which it may be assumed that such action could only serve to harass the opposing party.”

In the context of the present case, this requirement imposes a high threshold for actionability in respect of the sixth alleged abuse. While the sixth alleged abuse relates collectively to both legal and administrative actions, invocation of the particular administrative actions concerned necessarily results in legal proceedings by the patentee. Where there is no dispute that the patents have been granted to the patentee, it seems to me that the enforcement action can be considered to be merely harassing in the sense explained above if the patent is obviously not infringed or if the patent is invalid and in either case the patentee either knows or believes that to be the case. It might be argued that reduplication of patent proceedings takes on a harassing aspect, but for the reasons I have endeavoured to explain above, enforcement must proceed, if it proceeds at all, on a country-by-country basis. It seems to me, therefore, that not only is there no arguable case for saying that immediate loss is suffered by SanDisk in England and Wales as a result of the acts complained of, but the basis upon which it can be supposed that the conduct is abusive at all is very thin indeed. In any event, the appraisal of the abusive nature of litigation or other administrative action is surely for the relevant jurisdiction to decide. With that observation in mind, I can turn to the jurisdiction under Article 31 of the Brussels Regulation.

Article 31 of the Brussels Regulation provides:

“Application may be made to the courts of a Member State for such provisional, including protective, measures as may be available under the law of that State, even if, under this Regulation, the courts of another Member State have jurisdiction as to the substance of the matter.”

The interim relief sought by SanDisk in this case is comparatively limited in extent. It is concerned only with the initiation of administrative and legal proceedings and it is formulated as follows:

“1.

Until after the final judgment in [the patent proceedings] which concern the same parties to this action, [Sisvel] is restrained from instigating and/or commencing any action without 14 days written notice to [SanDisk] based on any patent before any court, administrative body or other body (including without limitation any customs authority or police authority) in the European Economic Area, the effect of which may be to restrict the activities of [SanDisk] and/or dealing in its MP3 based products (including without limitation the seizure, detention, confiscation, removal or modification of any MP3 player).

2.

[Sisvel] shall provide forthwith and in any event before [a defined time] to [SanDisk’s] solicitors a comprehensive list of any actions instigated and/or commenced on or before the date of this order which would otherwise require notice under paragraph 1 above.”

It is thus in the context of enforcement proceedings that the question of jurisdiction must be assessed. As one might expect, it is settled that Article 31 must be interpreted strictly, given that it is an exception to the basic system of jurisdiction established by the Brussels Regulation – see Case C-104/03 St Paul Dairy [2005] ILPR 416. The first thing to note is that Article 31 only confers a jurisdiction in cases falling within the scope of the Brussels Regulation, which, by Article 1, applies in “civil and commercial matters whatever the nature of the court or tribunal. It shall not extend, in particular, to revenue, customs or administrative matters.” Accordingly, any jurisdiction in respect of the Border Detention Orders can only be derived through a domestic jurisdiction. The Regulation does not, as I understand it, apply to criminal proceedings. Nevertheless, the Patentees submit that the interim relief, on a proper interpretation, is intended to place restrictions on the enforcement of their intellectual property rights, which is within the scope of the Brussels Regulation so far as subject-matter is concerned. There is no dispute between the parties that this is so, and so I shall accept it, albeit with some doubts. It follows that the only jurisdiction relevant to the acts that the Defendants have undertaken with a view to enforcing their patent rights can, in the circumstances of this case, arise only under Article 31 of the Brussels Regulation.

In Credit Suisse Trust SA v. Cuoghi [1998] 1 QB 818, Millett LJ said this at 827:

“Where a defendant and his assets are located outside the jurisdiction of the court seised of the substantive proceedings, it is in my opinion most appropriate that protective measures should be granted by those courts best able to make their orders effective. In relation to orders taking direct effect against the assets, this means the courts of the state where the assets are located; and in relation to orders in personam, including orders for disclosure, this means the courts of the state where the person enjoined resides.”

In Case 125/79 Denilauler [1980] ECR 1553, the court said this in relation to this jurisdiction:

“15.

An analysis of the function attributed under the general scheme of the [Regulation] to Article [31], which is specifically devoted to provisional and protective measures, leads, moreover, to the conclusion that, where these types of measures are concerned, special rules were contemplated. Whilst it is true that procedures of the type in question authorizing provisional and protective measures may be found in the legal system of all the Contracting States and may be regarded, where certain conditions are fulfilled, as not infringing the rights of the defence, it should however be emphasized that the granting of this type of measure requires particular care on the part of the court and detailed knowledge of the actual circumstances in which the measure is to take effect. Depending on each case and commercial practices in particular the court must be able to place a time-limit on its order or, as regards the nature of the assets or goods subject to the measures contemplated, require bank guarantees or nominate a sequestrator and generally make its authorization subject to all conditions guaranteeing the provisional or protective character of the measure ordered.

16.

The courts of the place or, in any event, of the Contracting State, where the assets subject to the measures sought are located, are those best able to assess the circumstances which may lead to the grant or refusal of the measures sought or to the laying down of procedures and conditions which the plaintiff must observe in order to guarantee the provisional and protective character of the measures ordered. The [Brussels Regulation] has taken account of these requirements by providing in Article [31] that application may be made to the courts of a [Member State] for such provisional, including protective, measures as may be available under the law of that State, even if, under the [Regulation] the courts of another [Member State] have jurisdiction as to the substance of the matter.”

The natural inference one would draw from this is that the Court’s view is that the jurisdiction under Article 31 is to be exercised by the court best placed to be acquainted with and to understand the effects of the provisional and protective measures which are sought. So much appears from the judgment of the court in Case C-391/95 Van Uden [1998] ECR I 7091, where the following appears:

“39.

In that regard, the Court held at paragraph 16 of Denilauler that the courts of the place – or, in any event, of the [Member State] – where the assets subject to the measures sought are located are those best able to assess the circumstances which may lead to the grant or refusal of the measures sought or to the laying down of procedures and conditions which the plaintiff must observe in order to guarantee the provisional and protective character of the measures authorised.

40.

It follows that the granting of provisional or protective measures on the basis of Article [31] is conditional on, inter alia, the existence of a real connecting link between the subject-matter of the measures sought and the territorial jurisdiction of the Contracting State of the court before which those measures are sought.

41.

It further follows that a court ordering measures on the basis of Article [31] must take into consideration the need to impose conditions or stipulations such as to guarantee their provisional or protective character.”

The test thus depends upon identifying a connection between the subject-matter of the provisional or protective measures sought, on the one hand, and this jurisdiction on the other. The nature of the connection may be purely physical – there are assets within this jurisdiction – or one of control – the person the subject of the order is within this jurisdiction and immediately susceptible to such coercive measures to secure compliance as may be necessary. In any event, there is no such connection in the present case.

It will be recalled that the Patentees are not UK companies and that Sisvel is Italian. There are no Border Detention Orders in the United Kingdom and no proceedings other than the present set of patent infringement proceedings are on foot here. The courts in the Members States where Border Detention Orders have been obtained are beyond doubt in the best position to decide what, if any, measures of warning it is appropriate for Sisvel to give SanDisk, and it is plain that these courts are live to the possibility of abuse of the various measures available to Sisvel for the purpose of enforcing the patents. Indeed, one has only to read the decision of the Landgericht Berlin on appeal from the Amtsgericht to see the care with which that court approached the question of abuse in that case.

SanDisk’s main complaint is that it should have an opportunity to make representations before any such measure is undertaken. That assumes, of course, that the local jurisdiction makes provision for such representations to be made and, moreover, that to warn SanDisk in this way will not prejudice the enforcement steps which are being sought. There is some evidence on this aspect of the case, but it is clear that both Border Detention Orders and measures of the type undertaken by the Public Prosecutor at IFA necessarily entail judicial examination of the grounds of detention or seizure. I accept entirely that for this court to grant further relief of the kind sought by SanDisk in the present case is not objectionable merely because it adds additional procedural safeguards to those considered appropriate in the various Member States concerned. Nevertheless, where there is no question of freezing orders or search orders within this jurisdiction, it seems to me that one should be cautious before substituting one’s perception of what is and is not appropriate for the safeguards actually in existence in other jurisdictions.

The scope of the relief sought is not, on the face of it, very wide, and I have been tempted to approach the matter on the basis that to give notice of this sort to SanDisk cannot, or should not, cause Sisvel any difficulties. But where the existence of the jurisdiction itself depends upon the factors which I have outlined above, it seems to me that this is insufficient for the jurisdiction to exist under Article 31. So I conclude that there is no jurisdiction to grant the order sought.

It will be observed that special jurisdictional provisions are necessary in English domestic law to enable the court to make orders of the type contemplated by Article 31 because, it appears, there will be no final proceedings in this jurisdiction. This jurisdiction is conferred by Sections 24 and 25 of the Civil Jurisdiction and Judgments Act 1982. It is to be noted that where the parties accept (as they do not in the present case) that substantive proceedings are to take place in another Member State, the exercise of the court’s jurisdiction under Section 25 may be declined purely on the grounds that it is inexpedient to grant it. Were this such a case, I would certainly be of the view that this relief was inexpedient, but as it is, this is a case which at best falls within Section 24, where, if I am wrong, the question as to jurisdiction must still be tried. I consider that the factors affecting interim relief under Section 24 are the same as those that will be taken into account under Section 37 of the Supreme Court Act 1982. I would in any event refuse the interim relief sought in the present case for the reasons that follow.

Sisvel obtained its first two Border Detention Orders, it appears, in the Netherlands in November 2004, resulting in a detention of SanDisk players (among those of other manufacturers) in June and July 2005. It is clear from the decision of the District Court in Groningen, as it is clear from that of the Landgericht Berlin, that SanDisk has a full right to challenge the detention and, in fact, has already done so. So not only is the claim old, but the relief sought is intended only to improve the protections conferred on SanDisk by the domestic law of the Member States concerned. Mr Currie argued with force that in fact the underlying cause of action – abuse of a position of dominance – is bound to fail, so far as the administrative and legal proceedings are concerned, by reason of the decision of the court in ITT Promedia which I have discussed above. I agree with this submission for the reasons already given. In other words, the only part of this dispute which could conceivably support the grant of interlocutory relief is unarguably bad. For this reason, and also because of the extraordinary delay which has already taken place both before the issue of this application and this hearing, I would in any event refuse any form of interim relief.

I shall hear Counsel upon the appropriate form of order if it cannot be agreed.