Jurisdiction Disputes - a Portent of Problems to come? Parainen Pearl Shipping Ltd v Kristian Gerhard Jebsen Skipsrederi AS
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Patents Court (Mr Justice Arnold) Parainen Pearl Shipping Ltd and Others v Kristian Gerhard Jebsen Skipsrederi AS and Others  EWHC 2570 (Pat) (18 Oct 2017)
This was a dispute between a company that had been incorporated in the Marshall Islands and its Cypriot subsidiaries on the one hand and three companies that had been incorporated in Norway on the other over whether the Patents Court had jurisdiction to hear an action for a declaration of non-infringement relating to the bulk discharge system of a Bahamas registered cement carrier that was alleged to infringe the British, Finnish and Swedish designations of European patent number 2 032 426 "System and method for discharge of bulk material from a ship". Particulars of the ship together with photographs of her can be found on the Marine Traffic website.
The patent had been granted to the first defendant. It was designated in 32 countries but validated after grant in only 12 of them including the UK, Finland and Sweden.
The first defendant installed a pneumatic cargo/cement system in the vessel in or about 2006 when it was in Indonesia and brought it back to European waters where it remained.
In 2008 the ship went aground and the system was damaged. Ownership of the vessel passed from one defendant to another but the ship was eventually sold to a third party which promised not to use or re-commission the pneumatic cement system without the defendants' consent and gave the defendants a right of first refusal.
The ship was resold several times. None of the subsequent owners renewed that promise. Eventually, it passed to the first claimant.
At some stage of its history, the ship was fitted with a pneumatic cargo/cement system that was alleged by the first defendant to infringe its patent.
The claimants, which wish to operate the vessel between the UK, Finland and Sweden, have sought declarations of non-infringement in relation to those countries on the ground that the defendant's rights under the patent are exhausted or that they have impliedly consented to the use of the system.
The defendants applied for service of the claim form to be set aside under CPR Part 11 on the ground that the court had no jurisdiction to hear the claims in respect of the alleged infringement of the Finnish and Swedish designations. Their application came on before Mr Justice Arnold on 16 Oct 2017.
The Lugano Convention
If the courts of the United Kingdom have any jurisdiction to hear a claim against Norwegian defendants, they must do so under the Lugano Convention. That is an agreement made on the 30 Oct 2007 between the European Union and the governments of Denmark, Iceland, Norway and Switzerland on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (see OJ 21.12.2007 L339/3). It effectively extends the provisions of Council Regulation 44/2001/EC of 22 Dec 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters ("the Brussels I Regulation") to Denmark, Iceland, Norway and Switzerland. The above map shows the countries to which the Brussels I Regulation applies in blue and the Lugano Convention countries in green. Denmark appears in red because it has a special agreement with the other Lugano countries and the rest of the EU.
Where can a Defendant be sued?
Art 2 (1) provides:
"Subject to the provisions of this Convention, persons domiciled in a State bound by this Convention shall, whatever their nationality, be sued in the courts of that State."
One of the provisions to which that article is subject is art 5 which enables a person domiciled in a state bound by the Lugano Convention to be sued in another member state in certain circumstances. One of those circumstances is "in matters relating to tort, delict or quasi-delict". S.5 (3) confers jurisdiction upon the courts of the place where a harmful event occurs or may occur to hear the claim.
The judge refused the application to set aside service of the claim form altogether as the court clearly had jurisdiction under art 5 (3) of Lugano to hear an application for a declaration of non-infringement of a Brtish patent or a European patent designating the UK. However, his lordship struck out the prayer for relief in respect of the Finnish and Swedish designations on the ground that he had no jurisdiction in relation to patent infringements in those countries.
In reaching his decision Mr Justice Arnold referred to the judgment of the Court of Appeal in Actavis Group hf v Eli Lilly & Company  RPC 37,  EWCA Civ 517. In that case, the Court had held that service of the claim on the defendant pursuant to CPR 63.14 was permissible in respect of the British designation of a European patent in suit, but not in respect of foreign designations. At para  of his judgment, Lord Justice Kitchin explained:
"Foreign designations of a UK patent are not patents under the 1977 Act and CPR 63.14 does not provide a means of service in relation to them. Nor is the position any different if the claim form also includes a claim in respect of the UK designation. In such a case the claim form must be regarded as including separate claims in respect of each designation and CPR 63.14 only provides a means for its service in so far as it relates to the UK designation. Were the position otherwise, the provisions of CPR 63 could be circumvented by, as Lilly puts it, convoying claims in respect of foreign patents with a claim in respect of a corresponding UK patent. That would be an absurd result and one which cannot have been intended."
The claimants were obliged to concede that as a general rule the English courts have no jurisdiction in respect of declarations of non-infringement in respect of foreign patents or foreign designations of European patents under art 5 (3) but contended that they did have power to determine whether the patentee had exhausted its rights in respect of the British designation. If they could decide the issue in respect of the British designation the claimants argued that the English courts could also decide that the patentee had exhausted its rights in respect of the foreign designations too. Mr Justice Arnold would have none of it. The fact that a foreign patent or foreign designation might be held not to have been infringed on the same ground as a finding of non-infringement of a British patent was irrelevant to the question of whether an English court could decide that matter. Even if the English court were to decide the issue the courts of the other contracting parties would not be bound by its decision. The claimants had argued that forcing the claimants to sue in Finland and Sweden could lead to inconsistent judgments and unnecessary expense. One answer to that argument is that there was nothing to prevent them from bringing their proceedings in Norway where the defendants were domiciled.
Effect of Brexit
Such a judgment will not be possible after 29 March 2019 unless we negotiate an agreement with the European Union, Denmark, Iceland, Norway and Switzerland that is similar to Denmark's agreement with the EU. As Mr Justice Arnold noted at paragraph  of his judgment, the Lugano Convention applies to the UK by virtue of our EU membership and Council Decision 2007/712/EC of 15 Oct 2007 whereby the EU signed that Convention upon our behalf and we shall cease to be party to that Convention when we leave the EU. That may not matter if the Unified Patent Court can be launched before the UK leaves the EU (especially if a way can be found for the UK to remain a party to the UPC Agreement) but if it cannot parties will be subjected to more uncertainty and more expense.
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