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	England and Wales High Court (Patents Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Patents Court) Decisions >> Parainen Pearl Shipping Ltd & Ors v Kristian Gerhard Jebsen Skipsrederi AS & Ors [2017] EWHC 2570 (Pat) (18 October 2017) URL: http://www.bailii.org/ew/cases/EWHC/Patents/2017/2570.html Cite as: [2017] EWHC 2570 (Pat)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT

		Rolls Building Fetter Lane, London, EC4A 1NL
		18 October 2017

MR JUSTICE ARNOLD :

Introduction

1. This is an application by the Defendants under CPR Part 11 to set aside service of the claim form on them on the ground that this Court has no jurisdiction over the claims asserted in it. The claims are for negative declarations relating to European Patent No. 2 032 426 entitled "System and method for discharge of bulk material from a ship" ("the Patent") owned by the First Defendant ("KGJS"), a company registered in Norway. The Second Defendant ("KGJSC") and the Third Defendant ("KGJC") are companies in the same group which are also registered in Norway. The First Claimant ("PPS") is a company registered in the Marshall Islands which owns a ship now known as the M/V Nordanvik ("the Vessel"), while the Second Claimant ("SMT") and the Third Claimant ("Eureka") are companies registered in Cyprus which are respectively the technical and commercial managers of the Vessel. It is common ground that the Court's jurisdiction over the Defendants is governed by the Lugano Convention. There is no dispute that the Court would have jurisdiction in respect of the Claimants' claim for a declaration of non-infringement ("DNI") of the UK designation of the Patent pursuant to Article 5(3) of the Lugano Convention. The claims asserted by the Claimants extend to 11 other designations of the Patent, however. The Defendants contend that this Court has no jurisdiction in respect of such claims.

Factual background

2. The following account of the factual background is taken from the Claimants' Particulars of Claim. For present purposes, the Claimants' factual allegations must be assumed to be correct.
3. The Defendants are members of a group of companies dealing in (amongst other things) cement and/or the shipping and delivery of cement.
4. The Patent claims priority from Norwegian Patent Application NO 20062650 filed on 9 June 2006. The Patent was designated in 32 countries on grant, but has only been validated post-grant in the following 12 countries: Denmark, Finland, France, Germany, Ireland, Iceland, Netherlands, Poland, Portugal, Spain, Sweden and the UK. The Claimants do not challenge the validity of the Patent in these proceedings.
5. The Vessel was built in about 2002 and was acquired by KGJC in about 2005. At the behest and with the consent of KGJS, KGJC installed a pneumatic cargo/cement system on the Vessel. This took place in or about 2006 in Batam, Indonesia. The Defendants brought the Vessel back into the European Economic Area, and then operated the Vessel. The Defendants engaged in some inter-company sales of the Vessel in the EEA in about 2008, from at least KGJC to KGJSC, with KGJS's knowledge and consent.
6. In late 2008, while KGJSC owned the Vessel, it was grounded and severely damaged in Norway. The Vessel was re-floated and moved to berthing. KGJSC then offered the Vessel for sale and sold it on the open market on an "as is, where is basis". The sale took place in Norway, and the contract of sale was governed by English law. The buyer ("CSCSA"), gave an undertaking not to use or re-commission the pneumatic cement system on the Vessel, with a right of first refusal to the sellers if the Vessel was to be re-sold before conversion to a bulk carrier and a right to inspect the Vessel. It is the Claimants' case that the undertaking was not passed on so as to bind any subsequent buyer of the Vessel, and that the Defendants had and took opportunities to inspect the Vessel at various times.
7. The Vessel was sold twice more, coming ultimately to be owned by PPS. At least the first sale (from KGJSC to CSCSA) had its place of closing in the EEA (Oslo or Horten), as did the third sale (from Esmenet Shipping Co SA to PPS) (Oslo). The Claimants allege that each of those sales were with the knowledge and/or consent of the Defendants.
8. The Vessel services clients of the Claimants in Finland and Sweden and elsewhere in the EEA, and the Claimants propose to bring the Vessel to the UK in order to develop a client base in the UK.
9. The Vessel is alleged by the Defendants to contain a system on board and/or to utilise a process that infringe the Patent. The Claimants contend that, even if it does contain such a system and/or use such a process, the Defendants have (1) exhausted their rights under the Patent in relation to the Vessel in the EEA and/or (2) consented to the use of the system and process on the Vessel.

The declarations claimed by the Claimants

10. The Claimants claim the following declarations pursuant to the inherent jurisdiction of the Court:

"(a) declarations of non-infringement of patent EP 2,032,426 in its UK Designation in relation to the M/V Nordanvik; and/or

(b) declarations of non-infringement of patent EP 2,032,426 in its Finnish and Swedish Designations in relation to the M/V Nordanvik; and/or

(c) declarations that the First Defendant's rights in respect of the Patent in relation to the M/V Nordanvik have been exhausted within EEA; and/or

(d) declarations that each of the Defendants has consented to the use of the System on the M/V Nordanvik."

The Lugano Convention

11. On 30 October 2007 the European Community, Denmark, Iceland, Norway and Switzerland concluded a Convention on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters ("the Lugano Convention") which replaced the Lugano Convention of 16 September 1988. The substantive provisions of the Lugano Convention are essentially the same as those of Council Regulation 44/2001/EC of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters ("the Brussels I Regulation"). While the Brussels I Regulation applied as between Member States of the European Community, the Lugano Convention applies as between the Member States of what is now the European Union on the one hand and Denmark, Iceland, Norway and Switzerland on the other hand.
12. The Lugano Convention applies to the United Kingdom by virtue of the UK's membership of the EU, and Council Decision 2007/712/EC of 15 October 2007 on its signing on behalf of the European Community.
13. Article 2(1) of the Lugano Convention embodies the fundamental principle that, subject to the specific exceptions provided in the Convention, "persons domiciled in a State bound by this Convention shall, whatever their nationality, be sued in the courts of that State".
14. Article 5(3) of the Lugano Convention provides for one such exception:

"A person domiciled in a State bound by this Convention may, in another State bound by this Convention, be sued ... in matters relating to tort … in the courts for the place where the harmful event occurred or may occur."

Interpretation of Article 5(3)

15. The following points are common ground. First, the "place where the harmful event occurred or may occur" covers both the place where the damage occurred and the place of the event giving rise to that damage. Accordingly, the defendant may be sued, at the option of the claimant, in the courts of either of those places: see Case C-523/10 Wintersteiger AG v Products 4U Sondermachinenbau GMBH [EU:C:2012:220], [2013] Bus LR 150 at [19] and the case law cited.
16. Secondly, Article 5(3) covers claims for negative declarations seeking to establish the absence of liability in tort. Accordingly, where a claimant seeks such a negative declaration, he may do so in the courts of either the place where the damage occurred or may occur or the place of the event giving rise to that damage: see Case C-133/11 Folien Fischer AG v Ritrama SpA [EU:C:2012:664], [2013] QB 523.

CPR rule 6.33(1)

17. Under CPR rule 6.33(1), the claimant may serve the claim form outside the UK on a defendant domiciled in a state which is party to the Lugano Convention "where each claim against the defendant to be served and included in the claim form is a claim which the court has power to determine under .. the Lugano Convention".

The law applicable to claims for DNIs of patents

18. The following points are common ground. First, by virtue of Article 8(1) of European Parliament and Council Regulation 864/2007/EC of 31 July 2007 on the law applicable to non-contractual regulations ("the Rome II Regulation"), the law applicable to the question of whether past acts have infringed, or proposed future acts would infringe, each designation of the Patent is the lex loci protectionis, that is, the substantive patent law of the relevant country.
19. Secondly, by virtue of Article 1(3) of the Rome II Regulation and English private international law, the law which is applicable to the other conditions which must be satisfied in order to obtain a DNI is the lex fori: see Actavis UK Ltd v Eli Lilly & Co [2015] EWCA Civ 555, [2015] Bus LR 1068.

Declaratory relief under English law

20. English law as to the grant of declaratory relief was recently summarised by Floyd LJ delivering the judgment of the Court of Appeal in Fujifilm Kyowa Kirin Biologics Co Ltd v Abbvie Biotechnology Ltd [2017] EWCA 1, [2017] RPC 9 at [59] as follows:

"The modern approach to the grant of declarations can be taken from two cases: Messier-Dowty Ltd v Sabena SA [2001] 1 All ER 275 at [41]-[42] (Lord Woolf MR) and Financial Services Authority v Rourke [2002] CP Rep 14 (Neuberger J, as he then was). In Messier-Dowty the court held that the grant or refusal of declaratory relief in relation to commercial disputes should not be constrained by artificial limits wrongly related to jurisdiction. Instead it should be kept in proper bounds by the exercise of the court's discretion. Negative declarations were an unusual remedy which can result in procedural complications resulting in unfairness to the defendant. But subject to appropriate circumspection, there should be no reluctance to grant negative declarations 'when it is useful to do so'."

Analysis

21. As noted above, there is no dispute that this Court has jurisdiction over the Defendants under Article 5(3) of the Lugano Convention with regard to declaration (a) claimed by the Claimants since it concerns acts which are proposed to be carried out by the Claimants within the territory covered by the UK designation of the Patent, namely the UK.
22. Turning to declaration (b) claimed by the Claimants, the Defendants contend that this Court has no jurisdiction under Article 5(3) since it concerns acts which have been, and are intended to be, carried out within the territories covered by the Finnish and Swedish designations of the Patent, namely Finland and Sweden respectively and since jurisdiction with respect to acts in the UK did not carry with it jurisdiction in respect of acts in those Contracting States.
23. In support of this contention, counsel for the Defendants relied upon two authorities, namely the judgment of the Court of Justice of the European Union in Case C-539/03 Roche Nederland BV v Primus [2006] ECR I-6535 and the decision of the Court of Appeal in Actavis Group hf v Eli Lilly & Company [2013] EWCA Civ 517, [2013] RPC 37.
24. In Roche v Primus the CJEU held that Article 6(1) of the Brussels Convention did not apply to European patent infringement proceedings involving a number of companies established in various Contracting States in respect of acts committed in one or more of those States even where those companies belonged to the same group and might have acted in an identical or similar manner in accordance with a common policy elaborated by one of them. The Court reasoned at [27]-[35] that there was no risk of irreconcilable judgments in such circumstances, since "the legal situation would not be the same" because actions for infringements of European patents were governed by national law in each relevant State.
25. In Actavis v Lilly the Court of Appeal held that service of the claim on the defendant pursuant to CPR rule 63.14 was permissible in respect of the UK designation of the European patent in suit, but not in respect of foreign designations. As Kitchin LJ explained at [82]:

"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."

26. To these authorities there may be added the following passage from the judgment of Lord Hodge in AMT Futures Ltd v Marzillier, Dr Meier & Dr Guntner Rechtanwaltgesellschaft mbH [2017] UKSC 13, [2017] 2 WLR 853 at [32] cited by counsel for the Claimants:

"In both [Case C-189/87 Kalfelis v Bankhaus Schröder, Münchmeyer, Hengst and Co  [1988] ECR 5565] and [Case C-51/97 Réunion Européenne SA v Spliethoff's Bevrachtingskantoor BV [1998] ECR I-6511] the CJEU has recognised that the scheme of the Judgments Regulation creates the difficulty that one jurisdiction may not be able to deal with all the related points in a dispute. This inconvenience is the price which the scheme in the Judgments Regulation imposes by setting out well-defined rules in order to achieve its primary purpose of ensuring that there shall be no clash between the jurisdictions of member states of the EU, as Lord Goff of Chieveley observed in Airbus Industrie GIE v Patel [1999] 1 AC 119, 131-132."

27. Counsel for the Claimants did not dispute that, in general, this Court does not have jurisdiction over claims for DNIs in respect of non-UK designations of European patents by virtue of Article 5(3); but he nevertheless submitted that this Court did have jurisdiction in the particular circumstances of the present case. Since his argument centred on the Claimants' contention that the Defendants' rights under the Patent have been exhausted, it is convenient to address it in the context of declaration (c) claimed by the Claimants.
28. In support of their claim for declaration (c), the Claimants rely upon the well-established principle of European law that the sale of a product anywhere within the EEA by or with the consent of the proprietor of a patent exhausts the proprietor's rights under that patent: see Case C-187/80 Merck & Co Inc v Stephar BV [1981] ECR 2063 and Joined Cases C-267/95 and C-268/95 Merck & Co Inc v Primecrown Ltd [1996] ECR I-6285. The Claimants contend that the Defendants have exhausted their rights under all designations of the Patent in relation to the Vessel by selling the Vessel. As counsel for the Claimants put it, "such exhaustion has EEA-wide effect".
29. Accordingly, the Claimants argue, if this Court decides that the Claimants' proposed acts in relation to the Vessel in the UK would not infringe the UK designation of the Patent because the Defendants' rights have been exhausted, it necessarily follows that that decision must be equally applicable to the other 11 designations of the Patent, because the doctrine of exhaustion of rights gives effect to the fundamental European principle of free circulation of goods, and hence the same law must be applied throughout the EEA. The Claimants go on to argue that it would serve a useful purpose for the Court to make a declaration to that effect, because it would avoid the need for parallel proceedings in 11 other countries.
30. In my view this argument confuses two different questions. The first is which court has jurisdiction over a defendant in respect of a claim under Article 5(3). The second is what the effect is of any decision by a court which has jurisdiction.
31. Answering the first question requires a claim-by-claim analysis: as can be seen from AMT v Marzillier and CPR rule 6.33(1), the fact that a court has jurisdiction over a defendant under the Lugano Convention in respect of one claim does not meant that it also has jurisdiction over that defendant in respect of another claim even if the two claims are closely related in fact and/or law. Even if it is assumed that the bringing of claims for DNIs under different designations of the same European patent on the ground of exhaustion of rights before the courts of different Contracting States would lead to a risk of irreconcilable judgments which would justify a stay of proceedings by courts other than the court first seised pursuant to Article 28 of the Lugano Convention, it does not follow that the court first seised would have jurisdiction over all such claims.
32. Turning to the second question, the effect of a decision of a court that a claimant is entitled to a DNI under one designation of a European patent in other Contracting States in respect of which the same patent is designated depends on, first, whether the decision of the first court is recognised by the courts of the other States and, secondly, if so, whether and to what extent it has res judicata effect. No doubt, if the system established by the Lugano Convention operates as intended, then the decision of the first court should be recognised and should be accorded res judicata effect. Nevertheless, the questions of whether to afford recognition and res judicata effect to the decision of the first court are matters for the courts of the other Contracting States.
33. Counsel for the Claimants accepted that the making of declaration (c) by this Court would amount to pre-empting the decision by the courts of other Contracting States as to whether to recognise and accord res judicata effect to this Court's decision on the issue of exhaustion. He argued that this would be unobjectionable because, on a proper application of European law, there could only be one answer as to whether or not the Defendants' rights under the Patent in respect of the Vessel had been exhausted. In my view, however, it does not follow that it would be proper for this Court to exercise jurisdiction over matters that, under the scheme of the Lugano Convention, lie within the province of the courts of other Contracting States.
34. As for the practical consequences of this Court declining jurisdiction in respect of the Claimants' claims in respect of the other 11 designations of the Patent, as counsel for the Defendants pointed out, in principle, the Claimants could bring claims for DNIs in respect of all 12 designations before the courts of Norway, where the Defendants are domiciled (cf. Actavis v Lilly). (This is unaffected by the fact that, as I was informed by counsel for the Claimants, after the claim form had been issued, but before it had been served, KGJS and KGJC brought proceedings for infringement of the Norwegian counterpart of the Patent against the Claimants, having previously brought preliminary injunction proceedings in Finland which were dismissed.)
35. Turning to declaration (d), counsel for the Claimants submitted that this raised essentially the same issue as declaration (c). As counsel for the Defendants pointed out, however, this is incorrect. Declaration (c) depends on the application of a principle of European law, whereas declaration (d) depends on the application of the relevant national laws to determine whether there has been consent amounting to a defence to patent infringement. Accordingly, even if this Court had jurisdiction in respect of the claim for declaration (c), it would not follow that it had jurisdiction in respect of the claim for declaration (d).

Conclusion

36. For the reasons given above, I conclude that this Court has jurisdiction over the Defendants in respect of the claim for declaration (a), but does not have jurisdiction over them in respect of the claims for declaration (b) or declarations (c) and (d) in so far as they extend beyond the UK designation of the Patent. Counsel for the Defendants submitted that, in that event, the Court should set aside service of the claim form and leave the Claimants to bring a fresh claim confined to declaration (a), which the Defendants' solicitors had been instructed to accept service of. I see no reason why the Claimants should have to go to the trouble and expense of issuing and serving a fresh claim form, however. In my judgment the proper course is to make a declaration that this Court has no jurisdiction over the claims for declaration (b) or declarations (c) and (d), and to strike out paragraph 35 and the prayer for relief of the Particulars of Claim, in so far as they extend beyond the UK designation of the Patent.