The EU torpedoes itself in cross-border patent disputes

Briefing

In patent matters at least, the EU's reluctance to approve UK accession to the Lugano Convention may have further empowered the English courts to make cross-border declarations of non-infringement against EU defendants. This could be a potentially useful tool in European litigation strategy.

The UK has been locked out of European jurisdictional rules

When the UK was a member of the EU it was subject to the Brussels I Regulation on jurisdiction and the recognition of judgments. Having left the EU, this Regulation no longer applies and neither does the Lugano Convention 2007, which had – for patent litigation purposes – the same effect as Brussels I, but extended it to the EFTA countries.

As part of its Brexit plans, the UK applied to rejoin Lugano, which is not limited to EU Member States. But accession to Lugano needed EU consent, and this was opposed come the deadline of 14 April 2021. This means that only national law currently applies to matters of jurisdiction and recognition.

Why does this matter to patent disputes?

This may have an important effect on the jurisdiction of the English courts to grant cross-border declarations of non-infringement in patent disputes – a strategic tool.

Cross-border declarations of non-infringement have typically been filed in one jurisdiction, by a party with the intention of preventing, or at least slowing down, anticipated national infringement actions in other jurisdictions. This explains the shorthand 'torpedo': because it is deployed to hole a national action below the waterline.

In particular, jurisdictions have been favoured in the past that are slow to determine whether there is jurisdiction to hear the matter. This has allowed the torpedo to exploit the lis pendens provisions of Brussels I, which stay an action in another country for which jurisdiction has already been seized by the cross-border action (regardless of whether the jurisdiction for the action is later held to be unfounded).

A cross-border torpedo of this kind does not, however, have to be slow.

UK 'torpedo' jurisdiction for non-EU defendants under Brussels I

Long before the case famously reached the Supreme Court, and resulted in the UK doctrine of equivalents, Arnold J (as he was) had to decide at first instance in Actavis Group HF v Eli Lilly and Company whether the English Patents Court had jurisdiction to hear an action for declarations of non-infringement concerning the UK, French, German, Italian and Spanish counterparts of a patent.

At that time, when the UK was still an EU Member participating in Brussels I, it was accepted that jurisdiction for foreign patents could not be founded in the UK under Article 4(1) – the principle that jurisdiction is generally based on the defendant’s domicile – or Article 7(2) – the right to sue in the courts for the place where the harmful event occurred or may occur – of Brussels I.

This was because of Lilly’s domicile in the State of Indiana, USA, with only a subsidiary registered in the UK. Even if Lilly had been domiciled in the EU, under Brussels I the English court would have been likely to say that the declarations for foreign countries should be sought in the country of the defendant's domicile.

It was also accepted that because Actavis had undertaken not to contend patent validity, the rule on exclusivity of the court of domicile in Article 24(4) did not apply.

Jurisdiction becomes a matter of English law

Having first determined that the claim had been validly served, this meant the Patents Court had to establish that the matter was justiciable in the English jurisdiction. It also had to determine whether it was the appropriate forum under forum non conveniens rules: that there is not some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of the action.

In an attempt to prevent a cross-border declaration concerning all five countries at issue, Lilly submitted that the natural forum for determining an issue of patent infringement is the country in which the patent is registered.

As the court pointed out, however, this case had to be determined in light of the Supreme Court decision in Lucasfilm Ltd & Ors v Ainsworth & Anor. In that case, the court held that claims for infringement of foreign copyright were justiciable in the UK and that it was the appropriate forum. In particular, the judge observed:

"There is no doubt that the modern trend is in favour of the enforcement of foreign intellectual property rights."

(An observation also embodied later by the Supreme Court, when determining global FRAND terms in Unwired Planet).

The defendant in Lucasfilm was domiciled in the UK. However, Arnold J didn't think this prevented the same reasoning applying to facts of the Actavis v Eli Lilly kind, in which the defendant is domiciled abroad but with a UK subsidiary and validly served in England. The judge could also see no reason why patents should be different to copyright for the purposes of justiciability, and held that the national courts of other countries were not clearly and distinctly the more appropriate forum than the Patents Court.

The cross-border declarations of non-infringement sought by Actavis were ultimately ordered.

Under the Lugano Convention

Similar considerations to those raised in Actavis v Eli Lilly will also apply if the UK eventually accedes to the Lugano Convention, as illustrated by Parainen Pearl Shipping Limited. This case concerned a claim for declarations of non-infringement in countries where the Lugano Convention applied (because the countries concerned were in EFTA).

In the case, the Patents Court would not hear a claim for a declaration of non-infringement concerning the Finnish and Swedish counterparts of a European patent in circumstances where the defendant was domiciled in Norway.

What now that Brussels I and Lugano do not apply?

In the current situation, Brussels I no longer applies, including Articles 4(1) and 7(2). And the UK is not permitted to accede to the Lugano Convention. Therefore, the English courts no longer have to defer to the respective courts of EU or EFTA domiciled defendants when granting patent 'torpedoes' against their patents, as they would previously have been (in cases where patent validity is not raised).

Furthermore, the courts may, in suitable cases, take the opportunity to extend the jurisdiction in Actavis v Eli Lilly to cross-border declarations of non-infringement jurisdiction to defendant's domiciled in these states, in addition to those outside the EU.

Whether these declarations are respected in those jurisdictions is then a matter of the national rules of the countries concerned.