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Cite as: [2000] EWHC Patents 148

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British Technology Group Limited v. Boehringer Mannheim Corporation and Deputy Orthopaedics Inc [2000] EWHC Patents 148 (13th February, 2000)

1997 CH B 5768

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT

Mr Justice Pumfrey

IN THE MATTER OF AN AGREEMENT DATED 28 FEBRUARY 1989 BETWEEN NATIONAL RESEARCH DEVELOPMENT CORPORATION AND BOEHRINGER MANNHEIM CORPORATION

BETWEEN

BRITISH TECHNOLOGY GROUP LIMITED

Plaintiff

 

– and –

 

(1) BOEHRINGER MANNHEIM CORPORATION
(2) DEPUY ORTHOPAEDICS, INC

Defendant

 

Christopher Floyd QC instructed by Bird & Bird for the Plaintiff

 
 

Simon Thorley QC and David Lloyd Jones instructed by Simmons & Simmons for the Defendant

 
 

Hearing date(s): 3 February 1998

 

JUDGMENT

NOTE:
(1) This is a draft of the judgment to be handed down on 13 February 1998. It is confidential to Counsel and Solicitors but the substance may be communicated to clients two hours before judgment is given.
(2) Unless there are good reasons to the contrary, immediately after judgment is given the court will consider what consequential order should be made. Not less than one hour before judgment is given each party should provide the Judge and the other party with a draft of the order which it will suggest that the court should make, or notification that it intends to ask the court to adjourn consideration of the form of order to a later date.

1. I direct pursuant to RSC Order 68 rule 1 that no official shorthand note shall be taken of this judgment and that copies of this version as handed down may be treated as authentic.

DATED 13 February 1998

Introduction

  1. I have two Notices of Motion in this Originating summons. The first is an application by both Defendants to set aside the leave granted by Master Bowman to serve the summons on them out of the jurisdiction in the United States. The second is the plaintiff’s application for leave to amend the summons and for directions for its hearing. As a result of information disclosed in the affidavits sworn on behalf of the defendants, the plaintiff is not now concerned to obtain relief against the first defendant (see the second Affidavit of Mr Sandford, paragraph 2), and the application to set aside leave is to that extent successful by consent.
  2. British Technology Group Limited (BTG) is the successor of the National Research Development Corporation. Its business includes licensing patented inventions. On 28 February 1989, BTG entered into a licence agreement with the first defendant (Boehringer) in relation to certain pending patents and applications. I understand that the invention to which these patents and applications relate concerns artificial hip joints. It is now agreed that the second defendant (DePuy) stands in Boehringer’s shoes as licensee under this licence. The invention was made by a gentleman called Church, and I will refer to the various patents and applications to protect his invention by his name.
  3. The patents and applications licensed in 1989 covered the United Kingdom, France, West Germany (as it was then), Ireland, Switzerland and the United States. At the date of the licence, patents had been granted in all these countries except Ireland and the United States. So far as the United States was concerned, there was a special problem. In contrast to most of the Western world, patents in the United States are, subject to a number of conditions, generally granted to the first inventor to make the invention, rather than the first to file a patent application. That means that a later-filed application can affect one filed earlier in relation to the same, or a similar, invention. In the United States, Church was filed in 1983, claiming priority from 7 April 1982. In November 1983, a patent referred to in these proceedings as Noiles was filed in relation to a similar invention. Noiles was an employee of a corporation called Joint Medical Products Corporation ("JMP") which disposed of its business to Johnson & Johnson Professional Inc. ("JJP") in 1995. The problems to which this fact gave rise are complicated. I take the following account from the affidavit of Mr Artusi. It is not disputed.
  4. An artificial hip joint consists of three parts, the ball, the bearing and the cup. The bearing fits into the cup which is implanted into the patient’s pelvis. The bearing fits into the cup, and together they form a socket. The socket retains the ball which is attached to a stem which is implanted in the patient’s femur. There are certain standard dimensions in the industry, so that one manufacturer’s ball can be used with another manufacturer’s socket. There is no challenge to the suggestion that this is common medical practice. Both Noiles and Church relate to an improvement in the socket half of the joint, in which the bearing is capable of being oriented. I understand that both contain claims to both parts of the joint together, i.e. ball and socket.
  5. Between 1985 and 1990 DePuy (which is an old-established maker of prosthetic devices) had an agreement with JMP under which DePuy’s salesforce in the United States marketed JMP’s products. It seems that DePuy sold its own ball and socket components, but also sold JMP sockets. DePuy were notified of the Noiles patent when it was granted, in 1987. DePuy told JMP that DePuy had made the same invention at an earlier date, and in 1988 JMP applied to the US Patent Office for a so-called "reissue" of the Noiles patent. The reissue proceedings are still pending.
  6. In 1987, DePuy first became aware of the Church patent application in the UK. They formed the view that sales of DePuy’s product outside the United States might require a licence from BTG, and sales in the US might also require a licence if a US patent was granted on the Church application. It also appeared that Church was available as prior art against the Noiles patent. The proceedings which would decide whether and to what extent Church was available against Noiles would be determined in proceedings called an ‘interference’. This interference was initiated ("declared") on 14 January 1992.

    The Agreement

  7. The licence is in substantially standard form for an agreement of this nature, apart from clause 3, which is in the followings terms:

    3. (1) [BTG] agrees to grant to the Licensee Licences to use sell and otherwise dispose of Licence Products in the territories …

    (2) IN the event that a patent is granted pursuant to [the US Church application]:-

    (i) [BTG] shall give prompt written notification of the licensee of such fact

    (ii) the Licensee shall have the option (exercisable in writing to [BTG] within ninety days of receipt of such written notice) to be licensed under such granted patent

    (iii) if such option is exercised the Licensee shall thereafter be licensed to make, use sell and otherwise dispose of Licensed Products in the USA in accordance with the terms of this agreement and at no extra cost.

    (3) The said Licences shall be non-exclusive.

    (4) [BTG] agrees that it will not enter into any agreement to settle, compromise or terminate an Interference in the United States Patent Office involving [BTG] and Douglas Noiles or [JMP] over the reissue, amendment, continuation of [Noiles] or any present or future claim contained therein ("the Noiles patent") unless the terms of such settlement, compromise, or termination provide the licensee with a non-exclusive license to manufacture and sell products that otherwise infringe the Noiles Patent at no increase in the Licensee’s total royalty obligation as contained in this agreement.

    I should also set out the choice of law provision in clause 11(2):

    THIS agreement is to be read and construed in accordance with and governed by the Laws of England so far as the subject matter allows.

  8. The parties appear to have contemplated that BTG would be in the driving seat so far as any settlement of the interference with Noiles was concerned, so that it would be open to BTG to negotiate terms that would in effect give DePuy a free licence under Noiles. Subsequent events have, in the result, been less straightforward.

    Events subsequent to the Agreement.

  9. In April 1995 JMP sued DePuy for infringement of the Noiles patent, alleging infringement of claims 4 and 8. This action was started in the (Federal) District Court of Connecticut. The action was started although the Noiles patent had not been reissued, and although the interference with Church had not been decided. There are apparently 11 defendants in the Connecticut action, which has been stayed against all of them except DePuy. This action is proceeding in the Connecticut court, but no date has yet been set for trial. I shall return below to the steps which have been taken in it. JMP claim triple damages for wilful infringement. So far as DePuy is concerned, there is a counterclaim of breach of confidence against JMP.
  10. On 27 March 1996, BTG entered into an agreement with JMP and JJP. This agreement, which is entitled "Settlement Agreement", which is how I shall refer to it, appears from its recitals to have as its purpose the resolution of issues in the interference and to settle it on the terms set out. By clause 4.1 "it is the intention of the parties that from the Effective date BTG shall manage the J&J patents [which include Noiles] in conjunction with its management of the BTG patents [which include Church], to ensure efficient and comprehensive administration of the Patents and their licensing to third parties". For this purpose, BTG is appointed the agent of JMP and JJP. The agreement contains, in clause 9.5, the following provision:

    "The parties anticipate that nothing in this Settlement Agreement or in the [BTG Licence to DePuy] prevents the maintenance or continuation of the [Connecticut Action] or the recovery of damages therefrom. BTG agrees to indemnify JMP against any damages for inducement of BTG to breach the [BTG Licence to DePuy]."

    The Settlement Agreement contains an agreement to submit the interference proceedings to arbitration, and different revenue sharing provisions, one appropriate to a victory for the Noiles patent, and the other for a victory by the Church patent. The interference was duly referred to an arbitrator, who in an unreasoned award effectively awarded priority to Noiles.

  11. In January 1997, DePuy applied in the Connecticut proceedings to make BTG a third party. Leave was granted in Connecticut in September 1997, and service was effected on BTG in October. On 20 October 1997, these proceedings were started.

    The Connecticut Third Party Complaint

  12. The Connecticut third party complaint appears, from the Motion for leave to file second amended counterclaim and third party complaint (see exhibit SLA 9) to claim an indemnity against BTG for the amount of damages, if any, which JMP recovers against DePuy. The basis of the indemnity is put explicitly on the basis of clause 3.4 of the Licence Agreement and the Settlement Agreement. In short, DePuy say that if they are obliged to pay JMP/JJP more as a result of the infringement of Noiles than the total royalty obligation under the licence, then BTG are in breach of clause 3.4 and obliged to indemnify DePuy. DePuy say that BTG is in breach of the licence agreement by failing to obtain a free licence under Noiles. Thus, the true construction of the settlement agreement and of the the licence agreement are directly in issue in the Connecticut proceedings, by way of a third party complaint which was commenced shortly before the present proceedings. DePuy have also amended their counterlaim against JMP/JPP to claim relief for tortiously inducing a breach of the licence agreement. The breach is alleged to be entering into the settlement agreement in breach of clause 3.4 of the licence.
  13. DePuy have applied to "bifurcate" the Connecticut proceedings. This has the effect that while all the interlocutory stages in the third party proceedings are on foot, there will be no trial of those proceedings until after the principal proceedings for patent infringement are disposed of. As is said in DePuy’s motion of 19 January 1997 (SLA 9), as of that date "the case has not progressed significantly (in relation to its age)". There was then no scheduling order or other pretrial order. However, Mr Artusi deposes that the case has now proceeded through the usual stages of pleadings, discovery and so on and is likely to be ready for trial "on the issues of patent infringement, file wrapper estoppel and patent invalidity shortly after January 1998." In fact, I understand that as of the date of the hearing before me no date for the "Markman hearing" (at which the scope of the relevant claims of the patent in suit will be decided) has been fixed, and that there is no trial date. There is little doubt that any trial of the issues between BTG and DePuy is some time into the future.
  14. Finally, I should add that BTG applied on 4 December 1997 (exhibit MCS 12) to stay or dismiss the proceedings against it in Connecticut. The stay is sought pending the resolution of this originating summons. The dismissal is sought on the grounds of lack of personal jurisdiction. The District Court in Connecticut has not given its decision on either application. This application suggests (see page 2 of the brief, bundle 3.1 page 301) that the originating summons will resolve the issues between the parties. Mr Thorley QC suggests that this is incorrect, for reasons which I shall investigate below.

    The originating summons and the present application

  15. As proposed to be amended, the summons in the present case annexes a form of licence which BTG offers to DePuy. I shall deal in more detail with the nature of the offer below. The declarations sought by the summons are these:

    (1) A declaration that BTG’s obligations under the licence are satisfied by the grant of a licence for activities of the Defendants after 30 September 1996;

    (2) A declaration that its obligations under the agreement are satisfied by a licence to the Defendants in the form annexed to the summons;

    (3) A declaration that the royalty obligations of the Defendants should be quantified by reference to the appropriate percentage under the Agreement of the currently applicable international distributor price list of the cups, bearings, balls and stems of products which infringe the Noiles patent; and

    (4) A declaration that the published price lists in those countries in respect of which royalty is payable constitute "the currently applicable international distributor price list as published by the Licensee" by which the obligation of the Defendants to pay a royalty is to be calculated.

    The reference to the 30 September 1996 is a reference to the date on which the arbitrator effectively decided in favour of the Noiles patent in the interference proceedings. Mr Floyd QC formally concedes that his clients BTG are bound to grant a licence in an appropriate form to DePuy. The licence annexed to the originating summons is their proposed licence, which is offered to DePuy in discharge of BTG's obligations.

  16. Mr Thorley submits that leave to serve the summons out of the jurisdiction should be set aside on, in effect, three grounds. They may be summarised as (a) there is no good cause of action, the declarations sought being merely hypothetical, and accordingly the case is not a proper one for service out under RSC Ord 11 r 4(2), (b) alternatively, the proper law of the principal contractual obligation in question is not English law, and the case is not within RSC Ord 11 rr 1(1)(d) and 9 (which extends the grounds of r 1 to proceedings commenced by originating summons) and (c) England is not the proper forum for the dispute. I shall take these objections in turn.

    Uncertain hypothetical questions

  17. Mr Thorley submits that the court will not grant declarations in relation to academic, hypothetical or theoretical questions or about issues concerning future events which cannot be seen with any confidence, and for these propositions he relies on Re Barnato decd. Joel v Sanges [1949] 1 Ch 258. Re Barnato was a case in which the plaintiff trustees were asking for a declaration that if a particular advancement were made to a child they would not become accountable to the Crown for estate duty if the tenant for life died within 5 years of the proposed advancement. There had been no transaction, and there was no arguable existing liability to estate duty, at the date the declaration was sought. Cohen LJ said this (at page 267):

    In the present case, as I see it, there is no immediate question between the plaintiffs and the Crown and no justification for the suggestion that the Crown's rights will be affected if the advance which the plaintiffs are desirous of making to Mrs. Sanges is made. The right of the Crown will remain the same as it was before; that is, a right in a certain event (which may never occur) to make a demand for payment of duty. That right will in no way be affected by any order that is made on questions 1 and 2 of the summons. True it is that the trustees, if they make the advance, may not have the money in hard in the trust to meet the demand of the Crown if it is made against then under s. 8, sub-s. 4, of the Finance Act, 1894, and if it be held that the trustees are liable under that section, but the right of the Crown, whatever it is, will be just the same whether or not the advance is made. No order that the court can make will in any way affect the right of the Crown under the revenue statutes. … I would add that one of the cases to which the learned judge referred in the court below, In re Clay [1919] 1 Ch 66 seems to show that there would be no jurisdiction to make a declaratory order in a case of this kind as between subject and subject. In that case, the plaintiffs sought to obtain the decision of the court as to whether they were liable under a deed of indemnity to the defendant. No question of construction arose and the defendant had, in fact, made no claim; all he had done was to reserve his rights, whatever they might be. The effect of the decision is, I think, sufficiently summed up in two short passages. The first from the judgment of the Master of the Rolls, is as follows: "And it is not open to a person, certainly not to one against whom no claim in fact has been made, to cut the matter short by bringing an action at his own option, and saying: 'I wish to have it determined that you have no claim whatever against me'." The second is from the judgment of Eve J., and is as follows: "So soon as it was demonstrated that no specific right had been asserted and no claim formulated, the court had in my opinion, no jurisdiction to deal with the petition in the way in which it had been dealt with."

    In Naylor v Wrotham Park Settled Estates (unreported, 24 February 1987), the declarations sought were complex, and related to events which might occur pursuant to the terms of a lease on surrender by the plaintiff tenants. The tenants were concerned about their potential liability under the repairing covenants in the lease. Mervyn Davies J, having pointed out among other things that the landlord had asserted no claim against the tenants, but had merely reserved his rights, and that the surrender was only a possibility, said this:

    Against the background of considerations such as these [counsel] in aid of his general submissions, submitted that a party to an instrument is not entitled to issue proceedings to have it determined that the other party to the instrument does not have some specified right if such other party has never asserted that right. That submission was made in reliance on In re Clay [1919] 1 Ch 66, In re Barnato dec’d [1949] Ch 258 and Midland Bank v Laker Airways Limited [1986] 1 QB 689.

    Mervyn Davies J accepted this submission, having reviewed the authorities set out above, and considered the speech of Lord Diplock in Gouriet v Union of Post Office Workers [1978] AC 435 at page 501, where Lord Diplock said this:

    Authorities about the jurisdiction of the courts to grant declaratory relief are legion. The power to grant a declaration is discretionary; it is a useful power and over the course of the last hundred years it has become more and more extensively used - often as an alternative to the procedure by way of certiorari in cases where it is claimed that a decision of an administrative authority which purports to affect rights available to the plaintiff in private law is ultra vires and void. Nothing that I have to say is intended to discourage the exercise of judicial discretion in favour of making declarations of right in cases where the jurisdiction to do so exists. But that there are limits to the jurisdiction is inherent in the nature of the relief: a declaration of rights.

    The only kinds of rights with which courts of justice are concerned are legal rights; and a court of civil jurisdiction is concerned with legal rights only when the aid of the court is invoked by one party claiming a right against another party, to protect or enforce the right or to provide a remedy against that other party for infringement of it, or is invoked by either party to settle a dispute between them as to the existence or nature of the right claimed. So for the court to have jurisdiction to declare any legal right it must be one which is claimed by one of the parties as enforceable against an adverse party to the litigation, either as a subsisting right or as one which may come into existence in the future conditionally on the happening of an event.

    The early controversies as to whether a party applying for declaratory relief must have a subsisting cause of action or a right to some other relief as well can now be forgotten. It is clearly established that he need not. Relief in the form of a declaration of right is generally superfluous for a plaintiff who has a subsisting cause of action. It is when an infringement of the plaintiff's rights in the future is threatened or when, unaccompanied by threats, there is a dispute between parties as to what their respective rights will be if something happens in the future, that the jurisdiction to make declarations of right can be most usefully invoked. But the jurisdiction of the court is not to declare the law generally or to give advisory opinions; it is confined to declaring contested legal rights, subsisting or future, of the parties represented in the litigation before it and not those of anyone else.

    I should also mention Re Clay [1919] 1 Ch 66 on which Mervyn Davies J relied heavily. There are short quotations from the judgments in that case in Cohen LJ’s judgment which I have quoted, but I think that it may be helpful to set out a longer passage in in the judgment of Swinfen Eady LJ. The essential finding of fact was that the Defendant had never made any claim to be indemnified under the deed of indemnity in relation to which the plaintiffs sought declaratory relief:

    "That being the position the question arises: Had the Court any jurisdiction upon the petition to make an order that, under the deed, the defendant Booth had no right to obtain repayment?

    The present proceedings were taken under Order LIVA, r. 1, of the Rules of the Supreme Court, which is adopted and acted upon in the Palatine Court, and Order XXIV., r. 5, of the Palatine Rules, which corresponds with Order XXV., r. 5, of the Rules of the Supreme Court. It is claimed under those rules that although no right of the petitioners has been interfered with, and although no claim has been made against them, and although in their view they have no claim against the defendant Booth, the petitioners are nevertheless entitled to come into court and ask for a declaration that the defendant Booth has no claim against them in respect of the matter in question. I pointed out the fact that he had not made any claim. But, under those circumstances, are they entitled to come and have it determined that he has no claim? In my opinion they are not. None of the authorities to which reference has been made justify such procedure.

    … reliance was mainly placed upon what was said by Pickford L.J. in Guaranty Trust Co. of New York v. Hannay & Co. [1915] 2 KB 536 Pickford L.J. there first came to the conclusion that there was no necessity in order to invoke proceedings under the rules that we are now considering that there should be an existing cause of action. Then he went on to consider whether the rule could be invoked only by the person claiming the right and intending to assert it. And, again, he negatived that. But no inference whatever can be drawn from that in favour of the petitioners here to the effect that the proceedings can be invoked not only where there is no cause of action and the person instituting the proceedings does not assert the right, but where there is no claim at all by anyone - by the plaintiff against the defendant, or vice versa. Here the position of the parties is that no claim is made by the defendant Booth as against the petitioners, and the petitioners by their petition make no claim against the defendant Booth. The observations that were made by Cozens-Hardy M.R. in Dyson v. Attorney-General [1911] 1 K B 410, 417. may properly be referred to. He there said: "But I desire to guard myself against the supposition that I hold that a person who expects to be made defendant, and who prefers to be plaintiff, can, as a matter of right, attain his object by commencing an action to obtain a declaration that his opponent has no good cause of action against him. The Court may well say: ‘Wait until you are attacked and then raise your defence,’ and may dismiss the action with costs." This is really the position in the present case. The petitioners have not been attacked. No claim has been made against them; but they launched these proceedings to have it determined that some one who has not made a claim and who has not asserted any right has no claim and has no right. In my opinion they are not entitled to do that. As has been pointed out by Duke L.J. during the course of the argument, with regard to rights under contracts there are certain statutory limitations which fix the time during which actions may be brought, and a party to a simple contract has the full statutory period to determine whether or not he will bring an action. And it is not open to a person, certainly to one against whom no claim in fact has been made, to cut the matter short by bringing an action at his own option, and saying, "I wish to have it determined that you have no claim whatever against me." That really is the nature of the proceedings in the present case.

    I am, therefore, of opinion that the order under appeal was one that ought not to have been made, and that the Vice-Chancellor was in error in making it. I think the order cannot be supported, and should be discharged."

    Eve J's judgment is short and nearly all of it is quoted by Cohen LJ in the passage above.

  18. I think that if and to the extent Lord Diplock’s statement of principle is wider than that to be extracted from cases like Re Barnato and Re Clay, I should follow it in preference to any narrower formulation. But properly understood I do not think that it is wider. It seems to me that in every case the real question is whether the relief sought relates to contingent future events or whether there is a present right asserted the scope or nature of which may be affected by future events. In the latter case, there is jurisdiction to grant declaratory relief. What is essential is the existence of a present controversy. In Re Barnato there was no claim asserted by the Crown since the event potentially giving rise to a charge to tax had not occurred. In Naylor v Wrotham there was no claim asserted by the landlord, and there had been no surrender.
  19. In the present case, on the other hand, I believe that it could not be plainer that there is a present controversy between the parties as to the scope and extent of BTG's liabilities under the licence agreement. For example, Mr Artusi says paragraph 42 of his first affidavit that BTG has been joined to the Connecticut proceedings so as to determine the issue of whether BTG is obliged to indemnify DePuy for any damages which might be awarded in favour of JMP. In paragraph 16 he says that "the obligations of BTG under clause 3(4) of the agreement did not become a live issue until 1996." It does not matter that those obligations are contingent in the limited sense that if the allegation made in the Connecticut proceedings of infringement of Noiles fails they become of theoretical interest only. There is also the question of the scope and nature of the licence which BTG is obliged to grant for the future, come what may. DePuy has asserted that BTG are obliged to indemnify it in respect of the damages sought by JMP in the event that there is infringement, and BTG is entitled, given that assertion, to ask the court whether the right of indemnity exists. I shall now deal with the individual declarations sought.
  20. Declaration (1) is a declaration clearly challenging the assertion made in the Connecticut proceedings that BTG have an obligation to indemnify DePuy in relation to damages for infringements committed before the settlement agreement. Declaration (2) deals with the form of the licence for the future under the same clause. They are not objectionable. Declaration 3 relates to quantification of any royalty obligation. I accept, however, that Declaration 4 appears on the evidence to have been overtaken by events, and it is not clear to me that it can, or should, be sought now. I will hear counsel in relation to this declaration.
  21. For the foregoing reasons I reject Mr Thorley’s first submission.

    Proper law not English law

  22. Mr Thorley points to clause 11(3), which I have quoted above. He says that the subject matter of clause 3(4) does not allow the application of English law. He suggests that the question whether the Settlement Agreement settles, compromises or terminates an interference is essentially a question of American law. He puts his case as follows. "Reading the agreement as a whole, the only clause to which the words ‘so far as the subject-matter allows’ could have been intended to apply is clause 3(4) which raises questions pertinent only to US law and is therefore not a clause which is governed by English law."
  23. I do not believe that the agreement contains provisions which cannot be governed by English law. Of course it is true that the nature of an interference, a reissue, an amendment and a continuation in part are a question of mixed fact and American law, as is the question of infringement. But that does not mean that the subject matter of the clause is such that it cannot be construed according to English law. At most, what it means is that those words must in their context have their relevant American meaning, which I should have thought was obvious. I believe that it is clear the proper law of clause 3(4) is English law. Accordingly I am satisfied that there is a good arguable case that the relief sought by the Plaintiff is within RSC Ord 11 rules 1(1)(d) and 9.

    RSC Order 11 rule 4(2)

  24. Although the plaintiff’s claim falls within one or more of the provisions of RSC Ord 11 rule 1(1), the plaintiff must also satisfy the court that this is a proper case for service out of the jurisdiction. First, I must be satisfied there is a serious issue to be tried, a requirement that gives rise to no dispute. Mr Thorley submitted that there is a "good triable action on both sides on all issues." The only other factor affecting the exercise of my discretion, therefore, is whether this court is an appropriate forum for the trial of these issues.

    Is this court the appropriate forum for the trial of these issues?

  25. This aspect of this case has given me most concern. I take the law from the exposition in Lord Goff’s speech in Spiliada Maritime Corp v Cansulex Ltd. [1987] 460 at 480:

    It seems to me inevitable that the question in both groups of cases must be, at bottom, that expressed by Lord Kinnear in Sim v. Robinow, 19 R. 665, 668, viz. 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. That being said, it is desirable to identify the distinctions between the two groups of cases. These, as I see it, are threefold. The first is that, as Lord Wilberforce indicated, in the Order 11 cases the burden of proof rests on the plaintiff, whereas in the forum non conveniens cases that burden rests on the defendant. A second, and more fundamental, point of distinction (from which the first point of distinction in fact flows) is that in the Order 11 cases the plaintiff is seeking to persuade the court to exercise its discretionary power to permit service on the defendant outside the jurisdiction. Statutory authority has specified the particular circumstances in which that power may be exercised, but leaves it to the court to decide whether to exercise its discretionary power in a particular case, while providing that leave shall not be granted "unless it shall be made sufficiently to appear to the court that the case is a proper one for service out of the jurisdiction:" see R.S.C., Ord. 11, r.4(2).

    Third, it is at this point that special regard must be had for the fact stressed by Lord Diplock in the Amin Rasheed case [1984] A.C. 50, 65 that the jurisdiction exercised under Order 11 may be "exorbitant." This has long been the law. In Société Générale de Paris v. Dreyfus Brothers (1885) 29 ChD 239, 242-243, Pearson J. said:

    "it becomes a very serious question ... whether this court ought to put a foreigner, who owes no allegiance here, to the inconvenience and annoyance of being brought to contest his rights in this country, and I for one say, most distinctly, that I think this court ought to be exceedingly careful before it allows a writ to be served out of the jurisdiction."

    That statement was subsequently approved on many occasions, notably by Farwell L.J. in The Hagen [1908] P 189, 201, and by Lord Simonds in your Lordships' House in Tyne Improvement Commissioners v. Armement Anversois S/A (The Brabo) [1949] A.C. 326, 350. The effect is, not merely that the burden of proof rests on the plaintiff to persuade the court that England is the appropriate forum for the trial of the action, but that he has to show that this is clearly so. In other words, the burden is, quite simply, the obverse of that applicable where a stay is sought of proceedings started in this country as of right.

    Even so, a word of caution is necessary. I myself feel that the word "exorbitant" is, as used in the present context, an old-fashioned word which perhaps carries unfortunate overtones: it means no more than that the exercise of the jurisdiction is extraordinary in the sense explained by Lord Diplock in the Amin Rasheed case [1984] A.C. 50, 65. Furthermore, in Order 11 cases, the defendant's place of residence may be no more than a tax haven to which no great importance should be attached. It is also significant to observe that the circumstances specified in Order 11, r. 1(1), as those in which the court may exercise its discretion to grant leave to serve proceedings on the defendant outside the jurisdiction, are of great variety, ranging from cases where, one would have thought, the discretion would normally be exercised in favour of granting leave (e.g., where the relief sought is an injunction ordering the defendant to do or refrain from doing something within the jurisdiction) to cases where the grant of leave is far more problematical. In addition, 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] 1 W.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.

  26. Mr Thorley also referred to First National Bank of Boston v Union Bank of Switzerland [1990] 1 Ll R 32. This was a case on very unusual facts, but it concerned an application to serve a writ out of the jurisdiction in which the sole effective relief sought was a negative declaration that in certain circumstances the plaintiff was not liable to the defendants, this point already being in issue in proceedings in Switzerland. The case contains a valuable warning to beware of the use of proceedings for negative declarations to circumvent proceedings in foreign courts. It adds nothing to the statement of principle in the Spiliada.
  27. The onus of demonstrating that England is the most appropriate jurisdiction for the trial of the issues of construction lies on BTG. BTG point out that there is also an application before the Connecticut court to stay the third-party proceedings on the ground of forum non conveniens and that it is not certain that the Connecticut court will accept jurisdiction. It is inevitable in a case like the present that one court will pronounce first, and the decision of the court which speaks first may have an effect on the other. Leaving this factor aside, BTG say that the factors which should affect the exercise of the discretion are these.

    (1) The English proceedings can go ahead immediately. This is of great importance to BTG given the magnitude of the potential claim against DePuy in Connecticut. Including triple damages it is of the order of $600m. It is of immense importance to BTG to know where they stand as early as possible. The trial of the contractual issues will not take place in Connecticut until the issues of patent infringement are disposed of. Any delay caused by the Connecticut proceedings is unacceptable. At the same time, the Connecticut proceedings have not advanced at all against BTG.

    (2) The contract is governed in its terms by English law, and no expert evidence will be necessary. It is accepted that such evidence would be admissible in Connecticut, and no doubt both parties would wish to produce rival experts of English law in those proceedings. BTG say that it appears from paragraph 49 of Mr Artusi's affidavit that DePuy would wish to adduce parole evidence in England of licensing practice in the orthopaedic industry; the market for orthopaedic devices and the manner in which they are sold and used; and the law and practice of the United States Patent and Trade Mark Office in reissue proceedings and interferences. The suggestion that the Connecticut court would be able "if necessary" to interpret an English law contract without needing expert evidence from English lawyers gives BTG concern, because it appears on the face of it that a great deal of the evidence which DePuy would seek to lead in England might well be inadmissible according to English notions of construction. In any event, it appears that there would at least be an attempt to adduce evidence of licensing practice, the relevant market and the manner in which such devices were sold and used in both jurisdictions. It seems to me that expert evidence is going to be needed in both jurisdictions relating to the law of the other, and this factor is neutral.

    (3) The English court has a specialist patent jurisdiction. I regard this as a factor of little weight. The question is one of construction of an agreement. While a general familiarity with the area of patent licensing may be of some assistance, I do not believe this can affect the exercise of the my discretion.

    (4) The originating summons procedure is particularly appropriate, and it is not suggested that the Federal court has any equivalent. Furthermore, there is a prayer for a jury trial of the claim against BTG. I do not attach any importance to either of these considerations, even if they are accurate. I would be surprised if the Federal Court did not have a procedure as effective for its purposes as the construction summons.

    (5) Finally, it is apparently accepted that the judge in Connecticut would accept the English Court’s construction of the licence.

    In reality, BTG's bases its case on delay in Connecticut and the appropriateness of the English court for deciding issues of construction of English contracts.

  28. Against this, DePuy submit as follows.

    (1) It is wrong to suggest that the English proceedings will dispose of the substance of the dispute between the parties on the licence agreement. In particular, there is a claim that JMP tortiously induced BTG to breach their agreement with DePuy by entering into the settlement agreement. The question of breach will not be examined in the English proceedings. BTG will necessarily be involved in the Connecticut proceedings in any event. To this BTG say that since they formally acknowledge that they are bound to grant DePuy a licence from the date of the Arbitrator’s decision, this is irrelevant. I do not accept that this is necessarily so. It seems to me that while there is a claim for tortious interference against JJP/JMP the issue whether there was, in fact, a breach of contract remains a live issue, but the English court’s determination of the scope of clause 3.4 will affect the scope of this inquiry.

    (2) DePuy say that the Connecticut action will decide all issues between the parties. This is not true of the English proceedings. In particular, they say that JMP/JPP will not be bound in proceedings against them by the construction placed on the licence by the English court. I accept that this may be so, but I regard it as unrealistic to suggest that if the Federal judge accepts the English court’s construction of the licence he will nevertheless permit the issue to be re-litigated between JMP and DePuy.

    (3) DePuy point to the need for evidence on patent law and procedure, the need for evidence from US residents and the "need to consider the issues raised by the originating summons in their proper legal and factual context". I have considered the question of evidence above. The question of witness travel is neutral (BTG witnesses may have to go to Connecticut) and the final matter is, I hope, something the English judge would recognise as clearly as the Federal judge in Connecticut.

  29. Doing the best I can to decide whether BTG have discharged the onus on them, I have come, in the end, to the view that the two most important factors are that the agreement is an English agreement, which the parties must have accepted would prima facie be litigated in England and the question of delay, which I accept should be minimal and will probably not be in the context of the proceedings in the United States. With some hesitation, therefore, I have come to the conclusion on this aspect of the case that I should not set the leave obtained to serve this originating summons out of the jurisdiction aside.
  30. I shall hear counsel, if necessary, on the plaintiff’s application.


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