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Jurisdictional issues over litigation in the UK

Can a Cayman company sue a German company in the UK ? A recent case from the UK's IP Enterprise Court (IPEC) says 'yes, it can' but only in certain circumstances.

Jurisdictional cases throw up thorny issues Johan Swanepoel

Jurisdiction and choice of law are thorny legal issues. They depend on many interconnected issues including where the parties are domiciled (particularly whether one of them is in the EU), the subject matter in dispute, and any contractual agreement.  IP cases also bring into play where the harmful event occurred, reciprocity, and whether and where the relevant IP right is registered.  

In the past, the UK was perceived as an expensive litigation jurisdiction because of its adversarial process and thorough approach to disclosure and cross examination of witnesses.  Consequently non-UK parties were reticent to bring proceedings in the UK. However, the High Court, which hears high value claims, is now very efficient, and the IPEC, which hears low to mid value claims, is the venue of choice for SMEs and some multi-nationals.  The IPEC’s popularity is driven by costs capping (up to £50,000 recoverable), limitation on damages (up to £500,000), limited disclosure and a pragmatic and specialist IP judge, HHJ Hacon. 

Jurisdictional issues

HHJ Hacon has recently demonstrated his willingness to hear disputes between non-UK parties in the IPEC if he can claim jurisdiction.  His judgment in Future New Developments Ltd (‘FND’) v B&S Patente Und Marken GmbH (‘B&S’) highlights many common jurisdictional issues faced by non-UK parties and is a win for the UK in the competition for IP litigation between the German and English courts.  

FND, a company domiciled in the Cayman Islands, sued B&S over ownership of a UK patent for energy saving fluorescent tube technology. The dispute arose from a purported assignment of the patent to B&S by an FND employee.  FND claimed the assignment was signed and recorded at the UK’s Intellectual Property Office (IPO) without its authorisation or knowledge. When FND found out about the assignment, it started proceedings in the IPO to recover the patent (known as ‘entitlement proceedings’). B&S disputed the IPO’s jurisdiction, firstly, on the basis that the case should have been brought before a UK court such as IPEC, and, secondly, because B&S was domiciled in Germany so the proceedings should be brought there and not the UK. The IPO agreed with the first point and directed that the claim should be dealt with by the court.

FND then commenced fresh proceedings against B&S in the IPEC. The issue of the IPEC’s jurisdiction was heard as a preliminary point. In the judgment , HHJ Hacon gives a succinct summary of the relevant legislation governing international jurisdiction where one of the parties is domiciled in a Member State. Under normal circumstances, because B&S is a German company, the German courts would have jurisdiction over the dispute under a European Regulation known as ‘Brussels I’.  FND resisted this move on three grounds.

FND was unsuccessful on two grounds. First, it argued that the harmful event was the alleged misrepresentation by the former FND employee regarding his authority to assign the patent.This harmful event happened in the UK so the UK court should have jurisdiction. This argument failed because the misrepresentation was committed by a former FND employee and not the defendant, B&S. Secondly, FND argued that by participating in the IPO proceedings, a practice or agreement had been established between the parties which enabled the UK to have jurisdiction.This was also rejected.  The judge amusingly noted that litigation is “not centred on any agreement between the parties – rather the opposite”.

More promising

FND’s final ground was more promising.  FND argued that because B&S had engaged in the IPO proceedings, it had ‘entered an appearance’ in a ‘court of a Member State’ and thus the UK had legal jurisdiction of the dispute.  While very few lawyers in the UK would regard the IPO as a ‘court’ in the traditional sense, HHJ Hacon felt that it was a relevant tribunal which could lawfully hear the proceedings.  Interestingly, B&S had reserved its position that the IPO was not an appropriate forum because it was in the UK, but this had not been their primary position.  Their primary position had been that the IPEC, not the IPO, was the appropriate forum.  This concession appears to have been B&S’s undoing.   Of even more interest (or perhaps, concern) is the fact that during the hearing, FND dropped their reliance on this particular point.  The judge nonetheless went on to base his decision on it and found that B&S had entered an appearance in the UK and therefore the IPEC had jurisdiction. 

This particular case is relatively unusual but shows that the IPEC is a robust forum for IP disputes between international parties. As the IPEC’s reputation for cost-efficient IP litigation increases, it is likely to become even more attractive to non-UK parties. The judgment is also a warning to parties who wish to avoid the UK’s jurisdiction to be mindful of making any concessions.

Arty Rajendra is a partner and Rosie Burbidge is an associate at Rouse Legal

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07 October 2014

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