13 January 2010

Patents: Molnlycke v BSN

This is another case on Regulation (EC) No. 44/2001 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters. The main issue was whether a claim in England for infringement of a European patent should be stayed while an application for a declaration of non-infringement proceeded in Sweden under art 27 (1) of that Regulation. It turned on whether the claim in England was between the same parties and involved the same subject matter as the proceedings in Sweden.

The Applications
In Mölnlycke Health Care AB and another v BSN Medical Ltd. and another [2009] EWHC 3370 (Pat) the defendants applied for a stay of the English proceedings because they had applied for declarations in the Stockholm district court that the patent in suit did not prevent them from marketing their Cutimed Siltec wound dressings in the UK. The claimants made a cross application for an interim injunction to restrain BSN from marketing that product until judgment or further order. The application and cross-application came on before Mr. Justice Floyd.

The Legislation
Art 27 (1) of the Regulation provides that "[w]here proceedings involving the same cause of action and between the same parties are brought in the courts of different Member States, any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established." The respondents. Mölnlycke Health Care AB ("the Swedish company" or "MAB") and its UK subsidiary and exclusive licensee, Mölnlycke Health Care Ltd. ("the British company" or "MUK"), opposed the application on the ground that the Swedish proceedings did not involve the same cause of action and was not between the same parties. The British company was not party to the Swedish application and they contended that the claim in England was for damages for infringement of the patent in England.

The Cases
The Court of Justice of the European Union had considered art 27 in Case 406/92 The Tatry [1995] 1 Lloyd's Rep 302, [1995] All ER (EC) 229, [1995] 1 LLR 302, [1994] ECR I-5439, [1999] 2 WLR 181, [1995] ILPr 81, [1999] QB 515, [1994] ECR I-05439, [1995] CLC 275 and Drouot Assurances [1999] Lloyd's Rep IR 338, [1998] ECR 3075, [1998] ECR I-3075, [1999] QB 497, [1998] CLC 1270, [1998] ILPr 485, [1999] 2 WLR 163, [1998] All ER (EC) 483, [1999] Lloyds Rep IR 338. These had been reviewed by the Court of Appeal in Kolden Holdings v Rodette Commerce [2008] EWCA Civ 10, [2008] Bus LR 1051. Lord Justice Lawrence Collins (as he then was) discerned the following guidance from those cases:
"The starting point is that these general propositions can be derived from The Tatry and Drouot. First, the object of article 27 is to prevent parallel proceedings in different member states and to avoid conflicts between decisions and irreconcilable judgements: The Tatry, para 32; Drouot, para 17. Second, the term between "the same parties" has an independent or autonomous meaning:The Tatry, para 47. Third, in considering whether two entities are the "same party" for the purposes of applying the regulation, the court looks to the substance, and not the form: The Tatry. Fourth, although the parties must be "identical" (the The Tatry, para 33, Drouot, para 18) this identity is not destroyed by the mere fact of there being separate legal entities involved: in The Tatry in the English proceedings the party was the sister-ship, and in the Dutch proceedings was the shipowner: in Drouot the barge owner and the hull insurer were held to be capable of being the "same parties". Fifth, whether they are identical for this purpose may depend on whether there is such a degree of identity between the interests of the entities that a judgement given against one of them would have the force of res judicata as against the other (Drouot, para 19). Sixth, it will also depend on whether the interests of the entities are identical and indissociable, and it is for the national court to ascertain whether this is in fact the case; Drouot, para 23. In the context of a subrogated claim the court also emphasised that the insured would not be in a position to influence the proceedings: Drouot, para 19."
The Decision
Applying those guidelines the judge decided that the British company's interests in the English litigation were not necessarily the same as those of the Swedish company in the Swedish proceedings:
"31.The most difficult question is whether, in the context of the present case, the interests of the parties in the two actions are identical and indissociable. At one, rather high level the interests of MAB in Sweden and MAB and MUK together in the UK are identical: an interest in preventing the infringement of MAB's patent. But Mr Purvis QC submits that MUK have, by the acquisition of the exclusive licence, acquired the right to protect its UK business from damage. There is as yet no counterclaim for infringement in Sweden, and, he submits, it may not be possible under the Convention for an additional party to counterclaim there, particularly as Article 6(3) only allows for jurisdiction to be founded for a counterclaim "arising from the same contract or facts on which the original claim was based". So, if MUK is treated as the same party as MAB, MUK may be deprived of a right to damages which is distinct from any possessed by MAB.

32. I have come, somewhat reluctantly, to the conclusion that I must accept those submissions. I think it would be wrong to treat MUK as the same party when the effect may be to deprive it of the benefit of its exclusive licence in this way. This is not a case like
Kolden where a party has acquired the whole of the benefit of a contract, leaving the assignor with nothing - MUK has been granted a specific right which is additional to the right which MAB continues to hold. Moreover it is not possible for MUK to assert its right independently of MAB, because of Section 67(3) of the Act. To put it another way, the interest of MUK which is in play in the English action is different to any interest of MAB which is in play in Sweden. Moreover, even if this were to be an answer to this point, there is no evidence before me which would justify the assumption that MUK would be able to launch a counterclaim in Sweden."
Despite his finding that the British and Swedish companies had different interests and the fact that one was an action for damages for infringement of a European patent in Britain while the other was an application for a declaration of non-infringement Mr Justice Floyd was reluctant to find that the causes of action were different.

The Injunction
The judge refused to grant an interim injunction on the grounds that the claimants had left it too late. They had been aware of the defendants' marketing plans since April and of actual sales since September 2009. They had obstructed the Swedish proceedings and had taken no steps to enforce their patents elsewhere in Europe. Had they moved more quickly the action might well have come to trial before the hearing of this application.

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