Conductive Inkjet Technology Ltd v Uni -Pixel Displays Inc

This is an application to set aside the permission granted to the claimant (“CIT”) to serve two related claims out of the jurisdiction on the defendant (“UPD”), on the basis that there is no jurisdiction for such service or that such jurisdiction should not be exercised. As regards one of the two claims, UPD alternatively submits that the proceedings should be stayed pending resolution of the case it has brought against CIT in Texas.

CIT is an English technology company. Its business, as its name suggests, is in the field of inkjet printing. More specifically, it works on the use of such printing to produce bulk conductive materials. The particular technology relevant to these proceedings allows metallic lines to be deposited onto substrates used in display and touch-screen applications. As is well-known, the market for touch-screens is substantial and is growing rapidly as a result of the popularity of smart-phones and tablet computers.

CIT was incorporated in 2002 and was originally an intellectual property (“IP”) rights holding company for the purpose of an existing joint venture between two English companies, Carlco plc (“Carlco”) and Xennia Technology Ltd (“Xennia”). Following its establishment, CIT was jointly owned by Carlco and Xennia and all IP and associated rights arising out of the joint venture were assigned to it. By subsequent acquisitions of Xennia’s shares, in 2005 Carlco became 70% owner of CIT and then in 2007 the sole owner of CIT. During the period of joint ownership, the shareholders’ agreements provided that any IP rights developed by Xennia relating to the business of CIT would be the property of CIT. From the time when CIT became a wholly owned subsidiary of Carlco, it is CIT’s case that it granted a licence to Xennia to continue to work with UPD on the project then in development, which I shall describe below, on the basis that all IP and associated rights arising out of Xennia’s work on that project would be owned by CIT.

For the purpose at least of the present application, UPD has not sought to challenge CIT’s claim that it has at all times been the owner of all IP and associated rights arising out of the work of Xennia in relation to the use of inkjet printing in the production of bulk conductive metals. That is said by CIT to include detailed techniques and product formulations developed by Xennia relating to the deposit onto substrates of metallic lines of copper for use, inter alia, in display and touch-screen applications.

UPD is a Texan company based in Texas. Its activities include the design and manufacture of films to be incorporated into touch panels. In about 2001, UPD began developing a flat panel display technology in which pixels are selectively controlled to allow light into or shutter it out of a light guidance substrate. This project was called “TMOS” (time multiplexed optimised shutter).

Following a meeting at an industry symposium in Boston in late May 2005 between senior executives of Xennia and UPD, there were discussions between those companies regarding the use of Xennia or CIT’s deposition technologies in the TMOS project. As a result, UPD, Xennia and CIT entered into a non-disclosure agreement which was stated to have effect as from 8 June 2005 (“the 2005 NDA”).

The 2005 NDA included the following provisions, insofar as material:

The 2005 NDA contained no governing law or jurisdiction clause.

There is dispute as to whether the 2005 NDA was signed in 2005 (as UPD contends) or only in July 2006 (as CIT contends). But for present purposes that is of little significance. It is not suggested that the agreement was renewed in writing and accordingly it is common ground that (a) it applies only to disclosure made in the year 8 June 2005 – 7 June 2006; and (b) it restricts use of the information up to 7 June 2010.

In July 2006, Xennia sent CIT a draft of a proposal it had prepared for UPD regarding the use of CIT technology in the TMOS project. On 22 September 2006, Xennia presented their proposal to UPD entitled “Deposition of copper onto a micro patterned substrate” (“the September 2006 Proposal”). This involved use of the “CIT Ink Process” and, as requested by Xennia, CIT wrote to UPD a ‘comfort letter’ confirming that following acceptance of the proposal and a successful outcome of the project, CIT would be prepared to negotiate a licence to UPD of CIT’s “background IPR” insofar as required.

There is dispute as to whether a contract was entered into between Xennia and UPD on the basis of the September 2006 Proposal. However, UPD accepts and contends that it did enter into a contract with Xennia on the basis of a further written proposal from Xennia dated 23 March 2007 (“the March 2007 Proposal”) which similarly involved the use of CIT technology and appears to be a variation of the September 2006 Proposal. The contract sets out in section 7 a series of “terms of business” including, at clause 7.2, an undertaking by each party to keep confidential for three years from commencement of Xennia’s supply of the contracted services (“the Services”):

“all proprietary or confidential information received from or on behalf of the other [party] whether received before or after this Agreement…”

Clause 8 concerns IP rights and includes the following provisions:

“8.3.

IP owned by either Party on the date of acceptance of the Proposal (“Background IP”) will remain the exclusive property of the owning Party.

…

8.6.

Subject to payment of all outstanding amounts owed to Xennia by [UPD], Xennia shall grant to [UPD] a worldwide non-exclusive, irrevocable, royalty-free licence to use IP developed by Xennia in the course of providing the services (“Foreground IP”) within [UPD’s] field of time multiplexed optical shutter technology "TMOS”.

8.7.

For the sake of clarity, commercial exploitation of the CIT technology by [UPD] will be subject to license of relevant Background IP by from [sic] Conductive Inkjet Technology Ltd on commercial terms to be negotiated between [UPD] and Conductive Inkjet Technology Ltd.

…

8.10.

For a period of 3 years from the commencement of the Services, Xennia agrees not to carry out work on behalf of third parties in the area of applying the CIT technology within the area of TMOS as defined above”

It is clear from the March 2007 Proposal that UPD had already received samples from Xennia.

On 17 July 2007, Xennia sent UPD a further detailed proposal entitled: “A program to develop a robust and reliable method for the production of copper plated microlens substrate” (“the July 2007 Proposal”). This also relates to the TMOS project and notes that a feasibility study had already been carried out in which a “CIT ink has been formulated which meets [UPD’s] refractive index requirement”.

On 10 September 2007, Xennia sent UPD a quotation for a work programme of development support expressly based on the July 2007 Proposal. UPD accepts that it placed an order on the basis of that quotation, thereby giving rise to a second contract between it and Xennia.

The July 2007 proposal and subsequent quotation included the same express “terms of business” as in section 7 of the March 2007 proposal which are accordingly terms of the second contract.

The two Xennia-UPD contracts do not include a governing law or jurisdiction clause.

It is appropriate to mention that a further non-disclosure agreement was entered into in September 2006 between CIT, UPD, Xennia and a company called Fusion Optix Inc, apparently based in Massachusetts (“the 2006 NDA”). The effective date of this agreement is 8 September 2006 and the preamble states its objective as being to provide appropriate protection for proprietary or confidential information being disclosed. However, the agreement does not indicate its scope as regards what disclosure would be governed by its terms. CIT’s pleaded case makes no claim under the 2006 NDA and in his evidence CIT’s CEO, Mr Chris Malley, says that the company cannot now recall the basis for the 2006 NDA being entered into, but that in any event it would only apply to any disclosure made between 8 September 2006 and the first contract between UPD and Xennia. UPD says that the 2006 NDA arose because UPD had engaged Fusion Optix to help manufacture the microstructured active layer film for TMOS. The 2006 NDA had a two year duration and is governed by Delaware law. UPD does not seek to rely on the 2006 NDA in support of its application.

Mr Daniel Van Ostrand of UPD says in his evidence that UPD continued to work with Xennia on TMOS technology under their contract into early 2008 but that around May 2008 UPD ended its contractual relationship with Xennia. However, it seems that later in 2008 there was at least one supply made by Xennia to UPD of CIT ink and of a Xenjet 5000 inkjet printer system.

Mr Van Ostrand states that in early 2010 UPD decided to sell its TMOS business. On 26 May 2010, UPD entered into an agreement to transfer the majority of the IP relating to TMOS to another American company, Rambus, Inc.

Mr Van Ostrand further states:

“Once we sold the TMOS intellectual property, Uni-Pixel employees began working on a wholly different process technology and developed a wholly different ink.”

This new process is called “UniBoss”, which Mr Van Ostrand explains as follows:

“UniBoss uses a roll-to-roll printing process rather than the inkjet technology used in relation to TMOS. It is critical for UniBoss ink to have a high viscosity in order to stay exactly where it is deposited. …the purposes and goals of the ink used in relation to TMOS and that developed for UniBoss are fundamentally different and exhibit totally different characteristics.”

In 2010, contact between UPD and CIT was renewed. Because of the way UPD put its case, I need to set out what occurred in some detail.

On 24 March 2010, Mr Ram Ramakrishnan, the director of materials and process engineering at UPD, emailed Mr Malley at CIT, stating:

“We are interested in printed conductor development and would appreciate receiving information on the following products:

1.

Inkjet catalyst

2.

Pre-coated photoimageable catalytic films

Thanks.”

UPD had evidently also contacted Xennia since at about the same time that day Mr Malley received an email from Xennia which said (insofar as material):

“Hi Chris,

It has been a long time – I hope everything is good with you and all at CIT?

…

We have had some contact recently with UPD again and they may be interested in looking at the CIT process – are you still able/interested in working with them (either directly or through Xennia), should they come back and express more serious interest?”

On 30 March 2010, Mr Malley responded to Mr Ramakrishnan stating that it would make sense to set up an NDA and a meeting or telephone call. After referring to the contact he had had with Xennia, he said that as CIT had now been separated from Xennia for several years it would be better for CIT to work directly with UPD. Mr Ramakrishnan replied on 15 April, saying that he would work on preparing an NDA and meanwhile asking for a quote for the supply of some of the catalyst ink that UPD used to obtain from Xennia.

UPD duly sent an NDA which Mr Malley returned signed by him, together with the requested quotation for CIT’s ink, which had now been renamed “CIT129”, attached to an email of 21 April.

Mr Malley says that he heard nothing further for six months, until on 20 October 2010 Mr Ramakrishnan sent Mr Malley an email as follows:

“Chris,

It has been a while since I last communicated with you. We had a re-orientation of projects and priorities. I am interested in testing CIT129 which you indicate to be the closest to DEF88 (we have used this in the past). As per previous discussions, I have attached the NDA, signed by Mr. Dan Van Ostrand, our VP.

I would like to get the current price quote for 0.5L and 1.0L and I will be able to place a PO as soon as I get the quote.

Regards,

Ram”

Mr Malley replied six days later, stating that since their last communication CIT had learnt that UPD was operating in a field not dissimilar to one of their own and had become nervous about supplying materials to a competitive business after a bad experience with another US company. He said that CIT would only be happy to proceed on the basis of UPD providing details of its applications and restricting the use of CIT’s materials.

The next day, 27 October 2010, the following email exchange took place:

“Hi Chris,

Thanks for your response. Since CIT is not in a position to supply the materials to UniPixel Displays, and as no information exchange has taken place between CIT and UniPixel, we feel that the NDA that we mutually signed is not valid.

Please take the necessary action to cancel the agreement with immediate effect and send us a response informing of the cancellation.

Regards,

Ram Ramakrishnan, Ph.D”

“Hi Ram,

There is no legal avenue to declare the NDA as "invalid" under the Agreement. If you wish to terminate the NDA then such a provision exists and you can terminate the agreement by written notice.

An email letter or fax letter will be fine to do this.

Kind Regards,

Chris.”

On 14 January 2011, Mr Van Ostrand emailed Mr Malley stating as follows:

“Chris,

I am hereby notifying you that the NDA that I signed with CIT is being terminated, effective October 21, 2010. As no confidential information was ever discussed since we signed the NDA, I believe that you should have no problem backdating this termination.

As per your email below [a reference to the 27 October e-mail], this email notification is legally binding in this regard.

Best of luck in your future business,

Dan”

The NDA signed by Mr Malley and Mr Van Ostrand, referred to in these communications (“the 2010 NDA”) provides insofar as relevant:

“1.1

Confidential Information. For the purposes [sic] of this Agreement, “Confidential Information” shall mean any information relating to UniPixel's i) active and static optical displays (including supporting and related technologies); ii) fingerprint resistant films and related technologies; iii) privacy films and related technologies; iv) optics designs and modeling relating to TIR waveguides, display backlighting, LEDs, and nano-optical materials; v) microstructure design, modeling, mastering, and replication; vi) materials properties research into unique applications materials and coatings; and vii) manufacturing techniques; and CIT's i) Inks and Coating Materials; ii) Preprinted or Coated Films; iii) Manufacturing Techniques as well as any other information labeled [sic] “Confidential" by a Party with reference to this Agreement or any information otherwise treated by the Party providing such information as confidential … which (a) may be disclosed to either of the Parties as a result of their dealings with each other, and (b) is not generally known by competitors or by the general public.

…

1.3

Authorized Use. For the purposes of this Agreement, “Authorized Use” shall mean the exchange of Confidential Information for the limited purpose of developing a potential business relationship between the parties.

2.

Obligations. The Parties acknowledge that they are to be given access to the Confidential Information solely for the purposes of Authorized Use. For the duration of this Agreement and for a period of five (5) years following termination of the Agreement, the Parties agree that each Party:

2.1

will not disclose or make available, directly or indirectly, any Confidential Information received hereunder to any third party

…

2.3

will not use for its benefit or the benefit of any third party, any of the Confidential Information …, except as expressly defined in the Authorised Use.

7.

Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCEPT FOR ITS RULES CONCERNING THE CONFLICT OF LAWS, AND VENUE SHALL LIE EXCLUSIVELY IN THE COURTS OF MONTGOMERY COUNTY TEXAS.

…

10.

Entire Agreement. This Agreement is the sole agreement between the Parties with respect to the exchange of Confidential Information divulged pursuant to the terms hereof. This Agreement supersedes any and all prior agreements….

11.

Term; Termination. This Agreement shall be effective from the Effective Date until three (3) years thereafter. Either Party may terminate this Agreement for any or no reason upon written notice to the other Party.”

On 29 October 2010, UPD filed a PCT application which was subsequently published internationally as WO 2011/066055A2 (“the 055 Application”). This primarily concerns the use of surface energy to form conductive patterns on a three-dimensional substrate surface. UPD applied for a European Patent claiming priority from the 055 Application, which was published on 3 October 2012 as EP2,505,047A2 (“the 047 Application”), and for a Korean patent also claiming priority from the 055 Application, published as KR20120082028 (“the 028 Application”).

On 29 April 2011, UPD filed a PCT application which was subsequently published internationally as WO 2011/139882A2 (“the 882 Application”). The primary invention of the 882 Application is the method of using a roll-to-roll process for transferring a pattern of catalyst ink onto a substrate. UPD applied for a European Patent claiming priority from the 882 Application, which was published on 13 March 2013 (i.e. after these proceedings were commenced) as EP2,567,603 (“the 603 Application”).

In summary, it is CIT’s case that the inventive concepts and subject matter of these two families of applications were disclosed, or substantially disclosed, by Xennia to UPD in the course of their communications and cooperation on the TMOS project and that UPD has used CIT’s proprietary information in breach of obligations of confidence owed to CIT.

By action HC12E02467 (“the EPA claim”), CIT contends that its employees along with employees of Xennia (or former employees in each case) were properly inventors or co-inventors of the inventions comprised in what are now the two European Patent applications. CIT relies on the restrictions on use or ownership of information given to UPD as set out in the 2005 NDA and arising from the dealings between Xennia and UPD, in particular clauses 8.6-8.7 of the terms of business in the Xennia-UPD contracts. CIT claims that it is entitled to be granted any resulting patents or an interest in those patents. It seeks declarations accordingly pursuant to sections 12 and 82 of the Patents Act 1977 (“the 1977 Act”) and consequential injunctions.

In action HC12F02468 (“the Breach claim”), CIT contends that the disclosure of information to UPD was in circumstances creating an equitable obligation of confidence. CIT also contends that UPD’s UniBoss process includes or has been developed using CIT’s confidential technology. CIT accordingly alleges that UPD was in breach of its equitable duty of confidence (a) by disclosing CIT’s confidential information to Rambus, pursuant to UPD’s disposal of the TMOS project to Rambus; (b) by filing and prosecuting the 055 Application, the 047 Application, the 028 Application and the 882 Application (“the Applications in Suit”) (Footnote: ¹); and (c) by developing and exploiting the UniBoss technology. CIT also alleges that UPD holds the property in the Applications in Suit (or an interest in such property), and any future property that it may own as a result of the breach of confidence, on constructive trust for CIT. Further or alternatively, CIT alleges, effectively on the same basis, that UPD has caused CIT loss by unlawful means. Thirdly, CIT alleges breach of the 2005 NDA, although the claim for breach of contract recognises that it applies only to use prior to 8 June 2010 of confidential information disclosed in the year 8 June 2005 – 7 June 2006: see para 9 above.

CIT claims declarations and damages accordingly and seeks a range of injunctive relief. Since the relief sought is relevant to the question of jurisdiction, I set out paras (5)-(11) of the prayer for relief in the Particulars of Claim:

“(5)

An injunction to restrain the Defendant, whether by its officers, servants, agents or otherwise howsoever from acting so as to prejudice the Claimant's equitable interests in the Applications in Suit.

(6)

An injunction to restrain the Defendant, whether by its officers, servants, agents or otherwise howsoever, from continuing to breach its equitable duties of confidence owed to the Claimant.

(7)

An injunction to restrain the Defendant, whether by its officers, servants, agents or otherwise howsoever, from continuing to benefit from its past breaches of its equitable and contractual duties of confidence owed to the Claimant.

(8)

An injunction to restrain the Defendant from enforcing any patents granted pursuant to the Applications in Suit against the Claimant.

(9)

An order that the Defendant does take all steps within its power or control to assign or procure the assignment to the Claimant of each of the Applications in Suit.

(10)

An order that the Defendant does take all steps within in its power or control to correct or procure the corrections of the inventorship as recorded on the corresponding registers for each of the Applications in Suit such that the said employees of the Claimant and/or Xennia be mentioned as inventors of the inventions claimed therein.

(11)

An order that the Defendant does deliver up to the Claimant at its premises in the UK all materials (documentary or otherwise, including products and prototypes for products) in the Defendant's possession or control which contain, embody, derive from, or have been produced using the confidential information of the Claimant.”

The two English actions were served on 14 December 2012 and acknowledged on 3 January 2013.

On 18 January 2013, UPD issued proceedings against CIT in Texas State court, being the District Court of Montgomery County. In that action, UPD seeks a declaration that it did not breach any obligation of confidence owed to CIT, referring expressly to the English proceedings; contends that CIT has breached the 2010 NDA by issuing the English proceedings in violation of the exclusive jurisdiction clause in that agreement; and seeks a declaration that UPD did not breach the obligations of confidence owed under the 2010 NDA or the 2005 or 2006 NDAs “which were superseded by the 2010 [NDA]”.

On 25 January 2013, CIT filed a notice removing UPD’s action from the State court to the Federal court, being the US District Court for the Southern District of Texas, on the basis of the Federal diversity jurisdiction. UPD responded with a motion of remand seeking to return the Texas proceedings to the State court.

The argument before the Texas court extensively addressed the effect of the exclusive jurisdiction clause in the 2010 NDA. On 30 April 2013, shortly after the hearing before this court, the US District Court handed down a Memorandum Opinion and Order, of which I was sent a copy along with helpful written submissions by the parties.

The Federal court granted UPD’s motion of remand, but it is clear from Judge Lake’s opinion that this was on the narrow basis that UPD’s claims in that action were based only on the 2010 NDA. The exclusive jurisdiction clause in the 2010 NDA constituted a valid waiver of the right to remove to Federal court disputes within the scope of that agreement. Since UPD’s claims in the Texas proceedings were founded on the 2010 NDA, the exclusive jurisdiction clause applied. The US District Court expressly did not decide whether UPD was correct in its assertion that the 2010 NDA superseded, in particular, the 2005 NDA or otherwise on the merits of UPD’s claims: those issues would be for the State court to determine in the proceedings.

On 24 May 2013, UPD filed a motion for “partial summary judgment” in the State court, seeking an order determining that the 2010 NDA superseded the 2005 NDA and that CIT had breached the exclusive jurisdiction clause in the 2010 NDA by commencing the two English actions. On 10 July 2013, the parties were notified of the order made by Judge Cara Wood denying the motion. In accordance with what I am told is the usual practice in the Texas State court, no reasoned judgment was given elaborating upon the order. The solicitors to CIT informed this court that accordingly there is now no reasonable prospect of the Texas State court giving a judgment in the Texas proceedings in the near future.

It is common ground that on this application CIT bears the burden of establishing that this court has and should exercise jurisdiction over UPD, such that the permission granted for service out of the jurisdiction under CPR rule 6.36 should stand.

The test for service out involves three requirements, as set out by Lord Collins JSC delivering the advice of the Privy Council in AK Investment CJSC v Kyrgyz Mobile Tel Ltd [2011] UKPC 7, [2012] 1 WLR 1804, at [71]:

Lord Collins further said, at [88]:

“The principles governing the exercise of discretion set out by Lord Goff of Chieveley in Spiliada Maritime Corp v Cansulex Ltd[1987] AC 460, at 475-484, are familiar, and it is only necessary to re-state these points: first, in both stay cases and in service out of the jurisdiction cases, the task of the court is to identify the forum in which the case can be suitably tried for the interests of all the parties and for the ends of justice; second, in service out of the jurisdiction cases the burden is on the claimant to persuade the court that England … is clearly the appropriate forum;…”

In the present case, UPD contends strongly that CIT’s underlying claim is misconceived. Since it is challenging jurisdiction, UPD has not filed defences but it is clear from the evidence of, in particular, Mr Van Ostrand, that UPD asserts that no confidential information of CIT was disclosed to it by Xennia, that much of what is relied on by CIT was common knowledge or in the public domain, and further that the UniBoss technology is fundamentally different from what was involved in TMOS and does not use the technology on which CIT relies that had been involved in the TMOS project.

Nonetheless, UPD realistically accepts that for the purpose of the present application CIT can show a serious issue to be tried in this regard and that accordingly the first requirement is satisfied.

The second requirement concerns the permissible grounds of jurisdiction or ‘gateways’ under CPR rule 6.36 and para 3.1 of the related Practice Direction 6B (“PD 6B”). As regards the EPA claim, since that is made under sections 12 and 82 of the 1977 Act, UPD accepts that ground (20)(a) in para 3.1 is satisfied: a claim made under an enactment which allows proceedings to be brought where those proceedings are not covered by any other ground.

Although Mr Alexander QC for UPD directed most of his attack towards the third requirement, he also challenged the application of any of the jurisdictional grounds to the Breach claim. In that regard, it is necessary to consider separately the three causes of action advanced in that claim.

As has been observed, the gateways are various, some relating to the defendant’s domicile, some to the cause of action, some to considerations of procedural convenience and some to the form of relief. But underlying all is the concept of a sufficient or appropriate nexus of the foreign defendant to the English forum.

The ground of jurisdiction relied on is that provided by para 3.1(2) of PD 6B:

“A claim is made for an injunction ordering the defendant to do or refrain from doing an act within the jurisdiction.”

It is worth noting that the reason why this is the sole gateway on which CIT can rely is that unlike an action for infringement of privacy, a claim for breach of a non-contractual obligation of confidence is not a tort but a claim based on the court’s equitable jurisdiction: see Douglas v Hello (No 3) [2007] UKHL 21, [2008] AC 1, per Lord Nicholls at [255], Lord Walker at [276]. Whether for the purpose of the jurisdictional gateways in para 3.1 of PD 6 it should be regarded as a claim for restitution is unclear, but in any event the gateway for restitutionary claims is where the defendant’s alleged liability arises out of acts committed within the jurisdiction: para 3.1(16). That is of no help to CIT here, since the alleged breaches of confidence substantially occurred in the United States.

On this, as on a number of other points, the present case bears a close similarity to Innovia Films v Frito-Lay North America, Inc [2012] EWHC 790 (Pat) [2012] RPC 24. There, too, an English company claimed to be the rightful owner of various European Patent applications filed by the defendant and any patents which resulted, and also that the defendant had acted in breach of confidence. The defendant was an American company with premises in Texas. There, also, the claimant commenced two actions in England, but it is only the first of those which is relevant for present purposes. That action combined both claims regarding the European Patent applications and more general claims at common law, i.e. the elements from both the two actions in the present proceedings. Part of the injunctive relief sought in the Breach claim here closely follows the prayer in the Innovia case. In his judgment, Arnold J addressed in particular the equivalent injunctions there sought to those claimed in paras (5), (9) and (10) of the prayer in the present claim: see para 38 above. Arnold J referred to GAF Corp v Amchem Products Inc [1975] Lloyd's Rep 601, which was similarly relied on by Mr Cuddigan for CIT in the present case.

GAF was also an application to set aside service out of the jurisdiction, there granted to one US company in dispute with another concerning patents which the defendant company had applied for or obtained, allegedly in breach of contractual obligations, including obligations of confidence, owed to the claimants. The defendants had obtained patents in the United States, France and Germany as well as the United Kingdom, and the claimants commenced actions in all those jurisdictions. By the time the English proceedings were commenced, the US proceedings were already quite advanced and they covered much the same ground as the English action, including the claim to be beneficial owners of the UK patent under a constructive trust and that the defendants should assign the patents to the claimant. The underlying contract there was made in the United States and was governed by either Delaware or Pennsylvania law.

In those circumstances, it is unsurprising that Megarry J held, as regards the third requirement for jurisdiction, that the US court was “overwhelmingly” more appropriately the forum conveniens than the English court, and that this conclusion was upheld by the Court of Appeal. However, Megarry J also addressed the second requirement, i.e. the application of the jurisdictional gateways (which the Court of Appeal did not find it necessary to consider). The relief sought in GAF included a declaration that the claimant was “exclusively entitled to all legal and/or equitable or beneficial interest” in the English patent and two injunctions: (i) a mandatory order that the defendants do all acts necessary to assign the UK patent to the claimants; and (ii) a prohibitory injunction to restrain the defendants from taking any action for enforcement of or amending, or abandoning or failing to maintain in force the UK patent.

In considering the jurisdictional limbs of what was then RSC Order 11, rule 1, Megarry J noted (at 605) that:

“the Court considers the substance of the matter and not merely whether the case technically falls within the letter of the limb in question. The case must be clearly within both the letter of the rule and the spirit. See Rosler v Hilbery [1925] Ch 250 at 259, 260; Mackender v Feldia AG at 599 and 456. Further, it is not enough that part of the prayer for relief falls within one of the limbs of r.1 if that part is merely incidental to the substantive relief claimed rather than part of it, as, for instance, where an injunction is claimed merely for the purpose of maintaining the status quo…. ”

However, more recently, in Sharab v Al-Saud [2009] EWCA Civ 353, [2009] 2 Lloyd’s Rep 160, Richards LJ, with whose judgment Arden and Rimer LJJ agreed, expressly rejected the submission that it was necessary for a claimant to bring himself within the spirit as well as the letter of a gateway. He held that the degree to which a claimant came within the spirit of the rule applied as regards the exercise of the court’s discretion and not as regards whether the claimant got through a gateway at all: see at [35]. It appears that neither the GAF case nor the earlier authorities relied on by Megarry J were cited to the Court of Appeal on this point. But this particular issue was not the subject of argument on the present application and I shall proceed on the basis that I am bound by the Court of Appeal’s recent holding.

Addressing the application of the equivalent provision to para 3.1(2) of PD 6B, Megarry J held that a mandatory injunction requiring assignment of the United Kingdom patent was not an injunction ordering the defendant to do anything within the jurisdiction:

“If framed as it stands, the order could be complied with by effecting an assignment anywhere in the world, and not merely within the jurisdiction. In the case of a negative injunction, the Court may be able to cut down its scope so as to convert a prohibition sought against doing some act anywhere into a prohibition against doing the act within the jurisdiction, so that it will then fall within [the jurisdictional gateway] …. Such a process converts a more burdensome claim into a less burdensome order. But I do not think the same process can apply to a mandatory order. If a claim to a mandatory order to do some act anywhere were to be converted into a mandatory order to do the act within the jurisdiction, the order would become more burdensome than the claim, and not less burdensome; for instead of being able to comply with the order by doing the act anywhere, the defendant could comply with the order only by doing the act in this particular jurisdiction. In the present case, if the defendants truly are under an obligation to assign the patent to the plaintiffs, why should they be ordered to do this within this jurisdiction instead of in the United States, where they both are?”

And as regards the prohibitory injunction there sought in para 3 of the prayer, Megarry held that it was essentially incidental or ancillary:

“The real claim is to the declaration of ownership and the order to assign; and once the order has been carried out, par. 3 would of necessity be inoperative. When judgment is given in the action, the injunction under par. 3, if granted at all, would have only a limited operation and a life that in all probability would be short. It is a form of injunction more suited for interlocutory relief. … At best, the injunction falls within the letter of [the jurisdictional gateway] and not the spirit….”

This raises a further consideration. The gateway concerns an order governing acts within the jurisdiction. If a prohibitory injunction is sought that in its terms applies world-wide, Mr Cuddigan argued that this gets through the gateway because it includes acts within the jurisdiction. And he submitted that once through the gateway, the court has personal jurisdiction over the defendant and can order the defendant to behave with equity. I do not accept that argument. The permissible ground of jurisdiction, as Megarry J indicated, can only be satisfied if the scope of the order sought is restricted to acts within the jurisdiction. That seems particularly important since the “injunction gateway” is only of practical significance if the claimant cannot get through any of the gateways based on the underlying cause of action. If jurisdiction could be founded on an injunction seeking an order governing acts all over the world on the basis that this included acts within the jurisdiction, that would in my view undermine the statutory scheme and enable jurisdiction to be grasped way beyond what is envisaged by para 3.1 of PD 6B on the back of a claim for relief that applied only in part, and perhaps in relatively small part, to England.

Further, and for similar reasons, the fact that one injunction sought falls within para 3.1(2) cannot in my view found a basis on which permission can then be granted for all other injunctions claimed although they do not fall within para 3.1(2). Permission for a claim seeking broader relief falling outside the gateway cannot be allowed, in effect, to squeeze through the gateway on the back of a narrow claim that comes within its scope. The general principle was expressed by Lord Bingham, with whom Lords Mackay, Nicholls and Hobhouse agreed, in Donohue v Armco Inc. [2001] UKHL 64, [2002] 1 All ER 749, at [21]:

“The jurisdiction of the English court is territorial. A party resident abroad may be subjected to the jurisdiction of the court to the extent (and only to the extent) that statute or rules made under statute permit. It would emasculate that salutary rule if such a party, properly served with notice of a claim falling within RSC Order 11, r 1 or CPR 6.20 (Footnote: ²) were then to be exposed to claims falling outside the relevant rule.”

Although expressed there in the context of permission for a subsequent amendment, this principle seems to me equally applicable to the grounds of claim that may be permitted in the first place.

In Innovia, Arnold J held that what was there the equivalent of para (5) in the present case was essentially a generalised form of the prohibitory injunction considered by Megarry J in GAF and that he should follow Megarry J’s reasoning; and that the equivalent of what is here para (9) was clearly not within para 3.1(2) for the reasons given by Megarry J. Perhaps for that reason, Mr Cuddigan did not specifically rely on either of those paragraphs as satisfying the jurisdictional ground. Instead, he relied on paras (6)-(7) and (8) (although he accepted that that injunction should be restricted to the European Patents and any UK Patents) and paras (10) and (11).

Para (10) is very close to the claim which Arnold J held fell within para 3.1(2) insofar as it related to (a) UK national applications stemming from the international applications and (b) any European Patents (UK) granted pursuant to the European applications. He stated (at [120]):

“In my view this is not purely incidental or ancillary: an assignment will not in itself carry with it any right to correct inventorship, and inventorship can be of significance, in particular for the inventors themselves by virtue of section 40 of the 1977 Act (which confers on employee inventors a right to compensation in respect of inventions and patents of outstanding benefit to their employer).”

Although Mr Alexander QC submitted that Arnold J was wrong in that conclusion, no good reason was advanced in support of that submission and I see no basis to differ from Arnold J’s conclusion. It follows that the injunction claimed under para (10) falls within the ground of jurisdiction in para 3.1(2) if it were restricted to comply with the limitations set out by Arnold J. The same applies, in my view, to the relief in para (8), which I consider must be limited not by reference to the patents but by reference to “enforcement in England” since that is the act which the injunction seeks to restrain.

However, as regards the relief sought in paras (6) and (7), the focus of those claims is on activity of UPD that will be primarily within the United States. If relief of that nature were to come within the gateway of para 3.1(2), it would need to be reformulated on a much more restricted basis. An exception to that is the claim for an injunction insofar as it concerns breach of contract: if the contractual claim independently meets a jurisdictional gateway, the injunction to restrain the defendant from benefiting from that breach seems to me relief ancillary to that claim. Whether such an injunction would be granted as opposed to the more usual award of damages is a matter that does not now fall for decision.

Finally, as regards the mandatory order sought in para (11), on the evidence it appears that the materials referred to are in all probability in the United States but the injunction as framed refers only to acts within the jurisdiction. It is unnecessary to decide whether that should be regarded as a mere device or as essentially ancillary, to adopt the approach of Megarry J in GAF, since UPD did not challenge that claim as falling outside the gateway. If the action proceeds in England and CIT is successful, it will be a matter for the trial judge to decide whether it is appropriate to grant an injunction in those terms.

It follows from the above that the forms of injunction claimed need to be reformulated on a much more restricted basis to satisfy the second requirement for permission to serve out. Mr Cuddigan conceded that, if necessary, CIT would volunteer such a restriction. It is for CIT to reformulate the relief claimed accordingly. But as the foundation of that restricted form of injunctive relief, the cause of action for equitable breach of confidence therefore survives.

The contract at issue is the 2005 NDA. I suspect that in the end this may be of less importance as it had a short duration and applies only to disclosure made at an early stage of relations between the parties. However, it is impossible to assess its significance at this stage of the proceedings. CIT contends that this cause of action comes within PD 6B, paras 3.1(a) and/or (b), i.e. that the contract was made within the jurisdiction and/or is governed by English law.

On the contemporary documents exhibited in evidence, the way the 2005 NDA was entered into was that Mr Van Ostrand of UPD sent the final version of the document for approval attached to an email to Mr Balon, who at the time was the CEO of Xennia and also a director of CIT. Mr Balon replied that it was fine and that they would print out three originals and sign for Xennia and CIT, and then send them to UPD by Federal Express. Mr Van Ostrand agreed and said that UPD would execute the documents on receipt and return two signed copies for CIT and Xennia. There is no reason to suppose that this was not done. Accordingly, it appears that the agreement was signed on behalf of Xennia and CIT in England and by UPD in the United States, having been agreed to by the parties by email exchange shortly beforehand.

It is notable that Mr Van Ostrand said in his email that the final version he attached incorporated all the changes requested by Xennia/CIT save as to governing law and jurisdiction, since the only alternative to Texas that UPD would accept was to omit any choice of law or jurisdiction clause. Mr Balon said that the English parties agreed to leave out any such provision. Thus it seems clear that Xennia/CIT had proposed an English law and jurisdiction clause, to which UPD would not agree.

In Apple Corps v Apple Computer [2004] EWHC 768 (Ch), [2004] 2 CLC 720, Mann J held that it is possible in principle for a contract to be made in two places at once, so that if one of those two places is England the jurisdictional requirement of what is now PD 6B, para 3.1(6)(a) is made out. He referred to Lord Diplock’s observation in Gibson v Manchester CC [1979] 1 WLR 294 that there are certain, albeit exceptional, types of contract that do not fit easily into the normal analysis of a contract being constituted by offer and acceptance. He then considered how this might apply to the facts of the case before him, involving a commercial settlement agreement between an English and an American company, following extensive negotiation between their lawyers, that was finally agreed in a telephone conversation between London and California. Mann J said (at [42]-[43]):

“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; …”

Mr Cuddigan submitted that the same reasoning applies by analogy to the present case. I agree. Here, too, the parties expressly agreed not to incorporate a choice of law or jurisdiction clause. Here, too, it would in my view be wholly artificial to determine the place of the making of the contract by applying the traditional ‘posting’ rule, dependent upon which party happened to send the fully executed document. I therefore find that CIT has a good arguable case that the 2005 NDA was made in both England and Texas. Moreover, the principle underlying the jurisdictional gateway is to establish a sufficient connection to this jurisdiction, and it would be arbitrary to do so on the basis of the order in which a document was signed.

Accordingly, it is unnecessary to consider the alternative basis of jurisdiction put forward based on the alleged proper law of the 2005 NDA.

CIT contends that jurisdiction for this tortious cause of action is founded on para 3.1(9)(a), as a claim where “damage was sustained within the jurisdiction.”

Mr Cuddigan emphasised that it is sufficient if some significant damage was sustained within the jurisdiction, even if substantial damage was suffered elsewhere: Metall & Rohstoff v Donaldson, Inc [1990] 1 QB 391 at 437. Moreover, that case was decided under RSC Ord 11, where the equivalent gateway in rule 1(1)(f) was expressed as applying when “the damage was sustained … within the jurisdiction.” The omission of the definite article in para 3.1(9)(a) in my view reinforces the application of this interpretation to PD 6B of the CPR.

Damage refers to recoverable damage, and thus in the present case to recoverable economic loss. I accept that it must be direct loss and not the mere consequential effect on the financial position of a company based in England. However, the unlawful means complained of include the filing of the patent Applications in Suit, which embraces the European Patent applications which, if granted, will lead to UK designated patents. CIT uses its technology in the UK, and it has a good arguable case that its commercial activities here will be directly harmed by the successful grant of European Patents to UPD. In my view, that is sufficient to satisfy this gateway. The fact that insofar as CIT is active or has the intention of expanding abroad, it will suffer loss also outside England does not detract from that conclusion.

The EPA claim is brought under section 82 of the 1977 Act which is intended to give effect to the relevant provisions of the Protocol on Jurisdiction and the Recognition of Decisions in respect of the Right to the Grant of a European Patent (“the Protocol”) to the European Patent Convention (“EPC”). By art 164 of the EPC, the Protocol is incorporated into the EPC. Under section 130(7) of the 1977 Act, section 82 is to be given, as nearly as practicable, the same effect as the corresponding provision of the EPC. Accordingly, it is common ground that section 82 is to be interpreted in accordance with the Protocol, and that the jurisdiction of the court as regards the EPA claim is to be determined according to the provisions of the Protocol.

The Protocol includes the following provisions:

"Section I

Jurisdiction

Article 1

(1)

The courts of the Contracting States shall, in accordance with Articles 2 to 6, have jurisdiction to decide claims, against the applicant, to the right to the grant of a European patent in respect of one or more of the Contracting States designated in the European patent application.

…

Article 2

Subject to Articles 4 and 5, if an applicant for a European patent has his residence or principal place of business within one of the Contracting States, proceedings shall be brought against him in the courts of that Contracting State.

Article 3

Subject to Articles 4 and 5, if an applicant for a European patent has his residence or principal place of business outside the Contracting States, and if the party claiming the right to the grant of the European patent has his residence or principal place of business within one of the Contracting States, the courts of the latter State shall have exclusive jurisdiction.

…

Article 5

(1)

If the parties to a dispute concerning the right to the grant of a European patent have concluded an agreement, either in writing or verbally with written confirmation, to the effect that a court or the courts of a particular Contracting State shall decide on such a dispute, the court or courts of that State shall have exclusive jurisdiction.

(2)

However, if the parties are an employee and his employer, paragraph 1 shall only apply in so far as the national law governing the contract of employment allows the agreement in question.

Article 6

In cases where neither Articles 2 to 4 nor Article 5, paragraph 1, apply, the courts of the Federal Republic of Germany shall have exclusive jurisdiction.

…

Section II

Recognition

Article 9

(1)

Subject to the provisions of Article 11, paragraph 2, final decisions given in any Contracting State on the right to the grant of a European patent in respect of one or more of the Contracting States designated in the European patent application shall be recognised without requiring a special procedure in the other Contracting States.

(2)

The jurisdiction of the court whose decision is to be recognised and the validity of such decision may not be reviewed.

…

Article 11

(1)

In relations between any Contracting States the provisions of this Protocol shall prevail over any conflicting provisions of other agreements on jurisdiction or the recognition of judgments.

(2)

This Protocol shall not affect the implementation of any agreement between a Contracting State and a State which is not bound by the Protocol."

The critical provision for present purposes is Art 3. On its wording, it applies to the situation where the applicant for a European Patent is a company based in the United States and a company based in England contends that it has the right to the grant of that patent. Art 3 expressly gives the English courts “exclusive jurisdiction” to determine such a claim.

However, UPD contended that on its proper interpretation, the exclusive jurisdiction granted by Art 3 applies only as between the EPC Contracting States, and is not exclusive as regards a non-Contracting State. Thus although the English court has jurisdiction to determine entitlement, it is not exclusive of the jurisdiction of the Texas courts. This is precisely the submission advanced by the American defendant in Innovia. It was rejected by Arnold J in a comprehensive and closely reasoned section of his judgment: see at [52]-[76]. In summary, his reasons were as follows:

Arnold J also held that an agreement between the parties to give jurisdiction to the courts of a non-Contracting State would not disturb the exclusive jurisdiction under Art. 3 because Art 5(1) in terms refers only to an agreement giving jurisdiction to the courts of a Contracting State: [55]. In Innovia the point was obiter, since no jurisdiction agreement was there relied on.

Although UPD submitted that Arnold J was wrong in this regard, it recognised that it had little realistic prospect of persuading me to reach a different conclusion. For the purpose of the hearing before me, UPD therefore proceeded on the basis that Art 3 was to be interpreted in the manner determined in Innovia, However, UPD argued that:

A similar submission was advanced by the defendant in Innovia. There, the argument focused on the application of Regulation (EC) 44/2001 (“the Brussels I Regulation). Arts 4 and 71 of the Brussels I Regulation provide, insofar as material:

“Article 4

1.

If the defendant is not domiciled in a Member State, the jurisdiction of the courts of each Member State shall, subject to Articles 22 and 23, be determined by the law of that Member State.

2.

As against such a defendant, any person domiciled in a Member State may, whatever his nationality, avail himself in that State of the rules of jurisdiction there in force, and in particular those specified in Annex I, in the same way as the nationals of that State.

Article 71

1.

This Regulation shall not affect any conventions to which the Member States are parties and which in relation to particular matters, govern jurisdiction or the recognition or enforcement of judgments.

2.

With a view to its uniform interpretation, paragraph 1 shall be applied in the following manner:

(a)

this Regulation shall not prevent a court of a Member State, which is a party to a convention on a particular matter, from assuming jurisdiction in accordance with that convention, even where the defendant is domiciled in another Member State which is not a party to that convention. The court hearing the action shall, in any event, apply Article 26 of this Regulation;

(b)

judgments given in a Member State by a court in the exercise of jurisdiction provided for in a convention on a particular matter shall be recognised and enforced in the other Member States in accordance with this Regulation.”

It is common ground, as it was in Innovia, that the EPC is a convention falling within Art 71. (Footnote: ³)

In Innovia, the issue was considered on the basis of whether when jurisdiction arises on the basis of the Brussels I Regulation, there was scope for the doctrine of forum non conveniens to apply. In that regard, it is clear that where jurisdiction is founded under Art 4 of the Regulation, i.e. against a defendant domiciled outside the EU, the English court may apply all its ordinary principles of jurisdiction, including forum non conveniens. On this issue, the claimant relied on Case C-281/02 Owusu v Jackson [2005] ECR I-1383, where the ECJ held that when jurisdiction is founded on what is now Art 2 of the Regulation (i.e. that the defendant is domiciled in the Member State of the court), the court could not decline jurisdiction on the basis of its own rules of forum non conveniens. The defendant in Innovia sought to distinguish Owusu on the basis that as against a defendant from a non-Member State, jurisdiction was founded on Art 4, in which event the doctrine of forum non conveniens did apply. Arnold J dismissed that argument as follows:

“84.

Counsel for [the claimant] submitted, however, that in the present case jurisdiction was not founded upon Article 4, but upon an Article 71 convention, as discussed above. He did not dispute that, in the absence of Article 71 and the EPC's Protocol on Recognition, Article 4 would have been applicable, but he argued in effect that Article 71 and the EPC's Protocol on Recognition overrode Article 4. I accept that argument. Article 4 is expressly subject to Articles 22 and 23, which provide for exclusive jurisdiction in certain cases. Where Articles 22 or 23 apply, the court cannot decline jurisdiction on forum non conveniens grounds. Where an Article 71 convention provides for exclusive jurisdiction, then it seems to me that the same result should follow. Furthermore, as counsel for IFL submitted, all the reasons given by the Court of Justice in Owusu in the passage quoted above apply with equal force to the Protocol on Recognition.

85.

Accordingly, I conclude that no stay can be granted of [the] action … so far as it relates to the European Applications on forum non conveniens grounds ”

On this issue, Mr Alexander at first submitted that I should not follow Arnold J’s conclusion. Extensive argument was advanced as to the proper scope of the Owusu judgment and by reference to subsequent English judgments seeking to restrict its application: see e.g. JKN v JCN [2010] EWHC 843 (Fam), [2011] 2 FCR 33. However, I think this misunderstands the basis of Arnold J’s decision. As I understand it, he did not hold that forum non conveniens did not apply in the case of jurisdiction coming under Art 71 because of Owusu.

In my view, the position is rather simpler. Art 71 of the Brussels I Regulation provides that for a convention within its scope, the rules of jurisdiction in that convention shall apply. In Case C-533/08 TNT Express Nederland v AXA Versicherung [2010] ECR I-4107, the ECJ held that this means that the jurisdictional rules of the specialised convention takes priority

“provided that they are highly predictable, facilitate the sound administration of justice and enable the risk of concurrent proceedings to be minimised and that they ensure, under conditions at least as favourable as those provided for by the regulation, the free movement of judgments in civil and commercial matters and mutual trust in the administration of justice in the European Union.”

It seems to me clear that the rule in Art 3 of the Protocol, especially when considered with Art 9, meets this requirement and is consistent with the approach of the Brussels I Regulation. No argument was advanced on the part of UPD to the contrary. The relevant jurisdictional rule is therefore Art 3 of the Protocol. Since that rule provides for exclusivejurisdiction, on the proper interpretation of Art 3 there is no scope for the court to decline jurisdiction on the basis of forum non conveniens.

The question is therefore not determined by the application or interpretation of Owusu, which concerned the approach to a jurisdictional rule set out in the Brussels I Regulation. In my view, the only relevance of Owusu, and the way I read the passage quoted from Arnold J’s judgment, is that the reasoning of the ECJ in reaching its conclusion that forum non conveniens should not apply to a jurisdiction under Art 2 of the Brussels I Regulation is equally applicable to the question of whether forum non conveniens should apply to the jurisdiction under Art 3 of the Protocol. If I differ from Arnold J at all, it is that, with respect, I go further, and consider that the fact that the jurisdiction under Art 3 is expressly exclusive, whereas the jurisdiction considered in Owusu was not, is an additional and perhaps still more powerful reason why forum non conveniens can have no application in the case of Art 3.

Mr Alexander submitted that even if forum non conveniens did not apply, the court could stay the EPA claim on case management grounds until the proceedings in Texas had been determined. On this question, the burden rested on UPD and it has been held that, in the absence of forum non conveniens, the court will only stay a claim against a defendant over whom it has jurisdiction “in rare and compelling circumstances”: Reichhold Norway ASA v Goldman Sachs [2000] 1 WLR 173 at 186C. Mr Alexander argued that if the Breach claim, to which the doctrine of forum non conveniens clearly could apply, were tried in Texas, as he submitted it should be, then that would resolve all the underlying issues that were the foundation of CIT’s alleged entitlement to the European patents. Accordingly, this court could on that basis then proceed to exercise its jurisdiction under Art 3 of the Protocol by determining the entitlement and give judgment on the EPA claim. Taking this course would therefore avoid most of the burden and expense of concurrent proceedings.

In principle, the English court can stay any action on case management grounds. However, the argument for a stay of the EPA claim on this basis amounts essentially to forum non conveniens by the backdoor. The contention is that although the court has exclusive jurisdiction under Art 3 of the Protocol actually to pronounce on the question of entitlement to a European patent, and although the doctrine of forum non conveniens has no application so as to enable the court to decline that jurisdiction, the court should nonetheless leave the determination of all the issues upon which that entitlement depends to be decided more appropriately elsewhere, so that it can then adopt those findings.

I consider that such an approach involves an artificially narrow interpretation of the exclusivity prescribed by Art 3 of the Protocol. In my judgment, the exclusive jurisdiction under Art 3 is not merely the jurisdiction formally to make a declaration of the right to the grant of a European patent, but to decide the disputed facts and matters on which that right depends. Any other interpretation would, in my view, emasculate the exclusive jurisdiction set out in the Protocol, reducing it to little more than a rubber stamping exercise.

Accordingly, I reject the submission that the EPA claim should be stayed. It can proceed to trial in this court.

The primary submission on behalf of UPD was that this action falls within the scope of the exclusive jurisdiction clause in the 2010 NDA. Alternatively, it was submitted that service out should be declined on consideration of the various factors involved in an assessment of forum non conveniens.

For convenience, I set out again the text of clauses 7 and 10 of the 2010 NDA:

“7.

Governing Law. This agreement shall be governed by and construed in accordance with the laws of the state of Texas, except for its rules concerning the conflict of laws, and venue shall lie exclusively in the courts of Montgomery County Texas.

10.

Entire Agreement. This Agreement is the sole agreement between the Parties with respect to the exchange of Confidential Information divulged pursuant to the terms hereof. This Agreement supersedes any and all prior agreements….”

On that basis, UPD argued that the 2010 NDA superceded the 2005 NDA and that all issues of breach of confidence are governed by the 2010 NDA.

This is a question of the proper interpretation of the 2010 NDA, which is governed by Texas law. Accordingly, both sides served expert evidence from retired American judges as to Texas law. CIT served a report from Judge Richard Edelman, who is currently in private practice with a law firm in Houston and was previously a judge for 13 years on an intermediate Texas State court of appeals. UPD served reports from Judge John Ward, who is also now in private practice in Texas and was previously for 12 years a Federal district judge for the Eastern District of Texas. Neither expert was called for cross-examination and the application was heard on the basis that I should assess the matter on the basis of their written reports and Counsel’s submissions.

As appears from both sides’ experts’ reports, and as is perhaps unsurprising, the approach of Texas law to the interpretation of contracts is broadly the same as that of English law. The wording of the contract is to be construed in its context and against the surrounding circumstances at the time the contract was made. Mr Alexander accepted that in this respect there was no material difference with English law.

Judge Ward concludes that the 2010 NDA is the governing agreement for the purposes of this dispute under Texas law. However, he commences his analysis with the statement:

“Having reviewed the materials provided, it is clear that Uni-Pixel, CIT, and Xennia had an ongoing relationship from at least 2005 through at least 2010 regarding the exchange of confidential information that was memorialized in the 2005 NDA, the 2006 NDA, and the 2010 NDA.”

I have to say that far from being “clear”, this statement is demonstrably incorrect. That Judge Ward should have formed that view is probably explained by the fact that, as appears from the list appended to his report, he was not shown the witness statements filed by CIT, and therefore saw neither the evidence of Mr Malley nor the contemporaneous emails surrounding the 2010 NDA set out in paras 24-31 above, that are exhibited to Mr Malley’s two witness statements. Since Judge Ward signed his expert’s report on 27 March 2013, some four months after Mr Malley’s first statement and several weeks after his second statement, the failure on the part of UPD to provide Judge Ward with this evidence is surprising.

As set out above, there had on the evidence been a complete break in the contact, let alone the “relationship”, between CIT, Xennia and UPD for some time. Indeed, Mr Van Ostrand of UPD said in his evidence (which Judge Ward did see) that UPD “ended its contractual relationship with Xennia” around May 2008. And the email from Xennia to Mr Malley of CIT at the outset of the communications leading to the 2010 NDA began with the words:

“Hi Chris,

It has been a long time – I hope everything is good with you and all at CIT?”

The 2005 NDA was entered into with a view to cooperation on the TMOS project. By the time of the 2010 NDA, UPD had already sold the TMOS business to Rambus. Mr Malley states in his second witness statement of 1 March 2013:

“[The 2010] NDA was, in my mind and, I believe, in the minds of the relevant individuals within the Defendant, directed towards a fresh collaboration between the Claimant and the Defendant, the intended subject of which was never properly discussed between the parties and, as it turned out, never agreed.”

Mr Van Ostrand, in his second witness statement, made expressly in response to Mr Malley’s second statement, does not challenge this evidence. Indeed, I regard it as significant that Mr Van Ostrand, who was of course the individual at UPD who was involved in the termination of the 2010 NDA, nowhere suggests in his evidence that it was intended to replace the 2005 NDA or to apply retrospectively to any disclosures made in the context of the TMOS project in 2005-2008. Indeed, his email of 14 January 2011 makes clear that UPD saw the 2010 NDA as applying only to any new confidential information that may be disclosed following the conclusion of that agreement, which in the event never happened.

On its language, clauses 1 and 2 of the 2010 NDA envisage that it covers confidential information which is to be provided between the parties for the purpose of “developing a potential business relationship between [them]” (an expression significantly emphasised in the original). It appears therefore to be directed at future disclosure in the context of a potential new relationship, and not concerned with disclosure that took place several years before. Given the factual background to the agreement as referred to above, I consider that this is clearly the case and that it falls to be interpreted accordingly. As is also clear, no disclosure ever was made following the 2010 NDA, which the parties regarded as at an end when they decided that further cooperation was not practicable.

I consider that the “supercession” provision in clause 10 is also to be construed in this context. Counsel for CIT submitted in their skeleton argument that it is a ‘boilerplate’ clause, noting that the same wording appears in the 2005 NDA although then there had been no preceding written agreements. They submitted that:

“the clause is intended to overwrite any informal agreements or representations made by the parties in the run up to the execution of the 2010 NDA and govern the prospective relationship of the parties in respect of its subject-matter. In other words, the parties’ full agreement in relation to this transaction is memorialised in the written document…

This construction gives a limited reflexive construction to the words “with respect to the exchange of Confidential Information divulged pursuant to the terms hereof” and the other forward-looking language of the 2010 NDA. Any information divulged immediately prior to the agreement would be caught. The clause is not, however, intended to sweep aside discrete earlier written contracts that have been executed and have run their course.”

I broadly accept that submission. Indeed, were the 2010 NDA to supercede the 2005 NDA and provide the substantive provisions governing any confidential information disclosed under the 2005 agreement, it would have the bizarre effect that whereas the obligation to keep confidential information disclosed under the terms of the earlier agreement otherwise expired on 7 June 2010, by reason of the 2010 NDA that obligation would be potentially extended to April 2018 (by reason of cls 2 and 11). Moreover, since any confidential information disclosed under the terms of the 2005 NDA was in the context of development of a business relationship between UPD and Xennia, and Xennia is not a party to the 2010 NDA and thus co-operation with Xennia is not within the definition of “Authorised Use”, if the 2010 NDA applied to the earlier disclosure it would arguably have the effect of putting UPD retrospectively in breach: see cl 2.3. In short, there are a host of reasons why the parties cannot be presumed to have intended that the language of cl 10 should be interpreted to render the 2010 NDA as replacing or superceding the tri-partite 2005 NDA between CIT, Xennia and UPD.

I do not see that this conclusion is in any way disturbed by or inconsistent with the Texas case of Yamaha Motor Corp v Motor Vehicle Div, Texas Dept of Transportation, 860 SW 2d 223 (Tex App, 1993), relied on by Judge Ward. That case concerned the termination by a Yamaha dealer (“T”) of its franchise with the appellant (“Yamaha”). The judgment records that T was an authorised Yamaha dealer from 1984 until it terminated in 1990. During that time there were two dealer agreements: the first executed in 1984, and then a new one executed in 1988. The 1988 dealer agreement contained a clause providing as follows:

“This Agreement and its Addendum(s) supersede and terminate any and all agreements or contracts written or oral, entered into between Yamaha and [T] as of the effective date of this Agreement with reference to all matters covered by this Agreement.”

On those facts, it is hardly surprising that the court held that obligations set out in the 1988 agreement governed all the parties’ responsibilities regarding their relationship, including those originating from the initial grant of the franchise in 1984. I have little doubt that an English court would have reached the same conclusion. The case is just an illustration of the interpretation of a contractual clause in the light of the surrounding circumstances, which there involved a single continuing relationship concerning the same subject-matter. I suspect that Judge Ward relied on it because of his mistaken view that there was such a continuing relationship in the present case.

In his report, Judge Edelman discusses this issue in the context of the doctrine of merger under Texas law, whereby an earlier contract may be absorbed into a subsequent contract. Judge Ward does not expressly rely on the merger doctrine as such, although I think he may do so by inference. But in any event, his report is responsive to that of Judge Edelman and he does not dissent from Judge Edelman’s statement of the governing principles:

“Under contract law, "merger" refers to the absorption of one contract into another subsequent contract. In order for one contract to be merged into another, the subsequent contract must: (1) be between the same parties as the first; (2) embrace the same subject matter; and (3) have been so intended by the parties. A subsequent agreement does not supersede a prior agreement if it is not inconsistent with the prior agreement, is made for separate consideration, or is such an agreement as might naturally be made as a separate agreement by parties situated as were the parties to the agreements under consideration.”

For the reasons set out above, I consider that the third requirement is clearly not satisfied. Accordingly, it is unnecessary to consider the other two requirements, and I find that the 2010 NDA has no application to this dispute.

I should record that Mr Alexander did not suggest that UPD had an unanswerable case under the 2010 NDA, but that it had a good arguable case that was currently pending before the Texas courts, such that this court should stay the action pending the outcome. It was submitted for UPD at the time of the hearing of this application that there was going to be a decision of the Texas courts on this point “shortly.” However, as set out above, in his judgment in the Federal court Judge Lake expressly did not decide the point, and Judge Wood in the State court subsequently dismissed UPD’s application for summary judgment. It appears that there is now no prospect of an early determination of any of these issues in Texas.

Judge Ward states in a supplementary report dated 23 May 2013 that by reason of its remand motion and the decision of the Federal court, CIT has voluntarily submitted to the jurisdiction of the Texas courts to decide the contested issues under the 2010 NDA. That may be so, and nothing in my judgment is intended to interfere with their jurisdiction in that regard. But it is not suggested that this in itself provides the Texas courts with any form of exclusive jurisdiction, and it does not preclude this court from coming to its own decision.

Following the seminal judgment of the House of Lords in The Spiliada [1987] AC 460, the question is whether England is clearly the appropriate forum for the trial of the action, i.e. that it is where the case may be tried more suitably in the interests of all the parties and the ends of justice. The burden of establishing this rests on the claimant.

As The Spiliada and many subsequent cases have made clear, this involves consideration of a range of factors that may connect the action to the jurisdiction, including (i) the places where the parties reside or carry on business; (ii) the place where the factual elements of the dispute occurred; (iii) other factors affecting convenience or expense, such as the availability of witnesses and the location of documents; (iv) the governing law to be applied; and (v) whether there is a real risk that the claimant will not receive a fair trial if the English court declines jurisdiction. This final factor does not arise in this case. I address the other considerations in turn, but it is appropriate to emphasise at the outset the caution expressed by Lord Goff in The Spiliada at 481-82:

“the importance to be attached to any particular ground invoked by the plaintiff may vary from case to case. For example, the fact that English law is the putative proper law of the contract may be of very great importance (as in B.P. Exploration Co. (Libya) Ltd. v. Hunt [1976] 1W.L.R.788, where, in my opinion, Kerr J. rightly granted leave to serve proceedings on the defendant out of the jurisdiction); or it may be of little importance as seen in the context of the whole case. In these circumstances, it is, in my judgment, necessary to include both the residence or place of business of the defendant and the relevant ground invoked by the plaintiff as factors to be considered by the court when deciding whether to exercise its discretion to grant leave; but, in so doing, the court should give to such factors the weight which, in all the circumstances of the case, it considers to be appropriate.”

CIT’s base of operations is in England and UPD is based in Texas. This factor is therefore neutral.

The disclosure of confidential information was made from England to the United States, and that is accordingly neutral. However, Mr Alexander emphasised that the wrongs complained of essentially took place in the United States. It is there that UPD allegedly used the information in its business, in order to prepare the original patent applications, further breached the obligation by the sale of the TMOS business to Rambus, and is said to be using it in the development of UniBoss. The whole focus of the case, he submitted, is on what UPD did in the United States.

Reliance was placed in that regard on what Robert Goff LJ (as he then was) said in Cordoba Shipping Co Ltd v National State Bank, Elizabeth, New Jersey (The Albaforth) [1984] 2 Lloyd's Rep 91 at 96:

“If the substance of an alleged tort is committed within a certain jurisdiction, it is not easy to imagine what other facts could displace the conclusion that the Courts of that jurisdiction are the natural forum.”

However, this dictum and the approach it encapsulates was the subject of extensive recent consideration by the Supreme Court in VTB Capital plc v Nutritek International Corp [2013] UKSC 5, [2013] 2 WLR 398. Lord Mance JSC said in his judgment at [18]:

“The Albaforth line of authority is no doubt a useful rule of thumb or a prima facie starting point, which may in many cases also prove to give a final answer on the question whether jurisdiction should appropriately be exercised. But the variety of circumstances is infinite, and the Albaforth principle cannot obviate the need to have regard to all of them in any particular case.”

And further at [51]:

“The place of commission [of the tort] is a relevant starting point when considering the appropriate forum for a tort claim. References to a presumption are in my view unhelpful. The preferable analysis is that, viewed by itself and in isolation, the place of commission will normally establish a prima facie basis for treating that place as the appropriate jurisdiction. But, especially in the context of an international transaction like the present, it is likely to be over-simplistic to view the place of commission in isolation or by itself, when considering where the appropriate forum for the resolution of any dispute is. The significance attaching to the place of commission may be dwarfed by other countervailing factors.”

And Lord Clarke JSC explained that it is important for the court to know what issues are likely to arise at the trial of the action on the merits because only then is it possible to compare the two jurisdictions: see at [192]. (Although that was a dissenting judgment on the outcome, I do not see it as differing from the majority in this regard). See one of the cases there referred to, Limit (No 3) Ltd v PDV Insurance Co [2005] 2 All ER (Comm) 347 at [73].

Here, while I accept that the alleged wrongs were largely or wholly committed in the United States, it is important in my view to have regard to the likely factual issues in the case. As explained in Mr Van Ostrand’s evidence, it appears that UPD will contend (a) that the information relied on by CIT was not confidential; (b) that no truly confidential information was disclosed by Xennia; and (c) that even if it is wrong about that, the UniBoss process is fundamentally different from the TMOS project and does not involve the use of the technology about which CIT is complaining. Only the third of these issues is particularly linked to what has taken place in the United States and both the first and third issues are likely to depend in part on expert evidence. Thus, while the place of commission of the wrong is here a factor in favour of a US forum, it is not in my view such a powerful one in the particular circumstances of this case.

Both sides have in their evidence indicated that there are a large number of witnesses they may wish to call. CIT’s witnesses are in England and UPD’s witnesses are in the United States. Some of UPD’s potential witnesses no longer work for the company.

In addition, UPD says that it may need to call witnesses who work for Fusion Optix with regard to the 2006 NDA and for Rambus because of the allegation that confidential information was disclosed to Rambus when UPD sold it the TMOS business.

On the other hand, CIT emphasises that critical evidence will be required from Xennia, since the alleged confidential information was developed, at least in part, by Xennia and the alleged disclosure to UPD was made by Xennia. The relevant employees and former employees of Xennia are in England.

As regards the parties’ employees or ex-employees, the position seems to me neutral. As regards third party witnesses, having regard to the issues at the heart of the case, I think the evidence from Xennia is very likely to be of much more significance than any evidence from Fusion Optix or Rambus, which go to only a small part of the issues. Judge Ward explains that although neither US Federal court nor the Texas State courts can compel a foreign non-party witness to attend and testify at trial, they can seek sworn deposition testimony and the production of documents by the issue of letters rogatory or any procedure under the Hague Convention. However, I think that evidence from critical witnesses given that way is much less advantageous than having them testify and be cross-examined before the trial judge.

In VTB Capital, Lord Mance regarded witnesses as “a factor at the core of the question of appropriate forum”: [62]. Although it was not pressed by Mr Cuddigan, in my view this is here a not insignificant factor in favour of England.

I should add that as regards documents, there is no basis to consider England the more appropriate forum: some are in England, some are in the United States and all are in the English language.

Much effort was devoted in argument to the question of what is the law governing the various causes of action under the conflict of law rules that would apply in England. The position is complicated:

Most of the above was common ground, although the correct position regarding breach of confidence prior to 11 January 2009 was disputed and UPD submitted that Arnold J’s conclusion at [108] in Innovia was wrong. Furthermore, the parties disputed what the result of application of the various tests set out above would be.

In VTB Capital, Lord Mance observed (at [46]) that the fact that the governing law was English law:

“… is in general terms a positive factor in favour of trial in England, because it is generally preferable, other things being equal, that a case should be tried in the country whose law applies. However, that factor is of particular force if issues of law are likely to be important and if there is evidence of relevant differences in the legal principles or rules applicable to such issues in the two countries in contention as the appropriate forum.”

And Lord Wilson JSC, agreeing with Lord Mance, emphasised that this was to be regarded in terms of practical convenience, and thus is of much less significance if the legal framework of the case is not complex or controversial. Significantly, although the Supreme Court held that the courts below had been wrong to hold that Russian law was the governing law, the majority nonetheless upheld the decision of the lower courts that England was not the appropriate forum.

In that case, Lord Neuberger PSC emphasised that applications on service out must be kept within bounds and not be allowed to get out of hand: see at [82]-[89]. In the present case, Mr Alexander submitted that the court should here avoid getting into the complexities and theoretical niceties of resolving these issues concerning governing law. I agree, and think that it is both inappropriate and unnecessary to do so to determine the present application. The choice here is as between trial in Texas and in England. There has been no suggestion that the relevant law of Texas as regards contract, tort or breach of confidence is materially different from English law. In any event, I regard it as very relevant that Texas is another Anglophone common law jurisdiction. I see no practical problem in this court receiving evidence of and applying Texas law, should Texas law govern, or conversely in the Texas court receiving evidence of and applying English law, should English law govern. Accordingly, I think that in this case the question of the governing law is neutral.

The fundamental question, as the Supreme Court stressed in VTB Capital, is a single one: is the court satisfied that England is clearly the appropriate forum; or as it is put in CPR 6.37(3), “the proper place in which to bring the claim?” Taking account of the factors discussed above, without more I would take the view that because of the question of witnesses, England was possibly the appropriate forum, but that this was not so clearly demonstrated that jurisdiction should be exercised over UPD.

However, there is another factor which I regard as very significant: the EPA claim. The EPA claim, on my holding above, can only be heard in England. It will involve determination of many of the same underlying issues as arise in the Breach claim, including in particular the question of the confidentiality of the information, its disclosure to UPD and whether use was made of it in the patent applications. I of course appreciate that the Breach claim involves some other issues, including the alleged disclosure to Rambus and the nature of UniBoss, but the overlap is nonetheless considerable. The overlap is indeed the basis on which Mr Alexander urged that the EPA claim should be stayed pending determination of the various issues in Texas. Since the EPA claim can proceed only in England and will not be stayed, I think it would cause great inconvenience and expense if CIT has to litigate many of the same issues in Texas on its Breach claim. In my view, it is strongly in the interests of both parties and of justice that both claims should be heard together. Accordingly, I find that the balance in this case is clearly in favour of England as the appropriate forum. I note that this assessment is similar to that reached by Arnold J in Innovia,although some of the considerations there were of course distinct.

In reaching that conclusion, I recognise that because I have found that some of the injunctions claimed do not come through the gateways, there are certain heads of relief sought by CIT in the Breach claim that cannot be pursued here. It follows that if CIT wishes to obtain such relief, it may well have to commence proceedings in Texas. But in my judgment that does not detract from the fact that the underlying issues which remain in the Breach claim should appropriately be tried here along with the EPA claim. Whether a determination between these parties in the English court may create any issue estoppel for any subsequent proceedings in Texas is not a matter for me to decide.

For the reasons set out above: