Morritt L.J.:
[1] This is the appeal of N., brought with the leave of Aldous L.J., from
the orders of Laddie J. made on 12 and 26 October 1998. By those orders
he refused to stay or dismiss the proceedings brought in England by
writ issued by the plaintiff, E. and Company, on 8 July 1998, seeking
rectification of a licence agreement dated 3 June 1993 and made between
E. of the one part and N. of the other.
[2] The circumstances in which that claim arose are briefly as follows. E.
and Company is a company incorporated in the State of Indiana in the
United States and is a manufacturer and distributor of human growth
hormone ("hGH") produced by recombinant DNA technology. N. is a
company incorporated in Denmark and is a manufacturer and distributor
of pharmaceutical products.
[3] From 9 December 1983 onwards N. filed a number of international
and national patent applications relating to the synthesis of hGH and
other proteins by means of a process called "enzyme cleavage". On 16
May 1990 N. was granted European Patent No. '814 in respect of the
protein hGH and the enzyme DAP-1.
[4] There were a number of consequential applications in the light of
the patents granted and applied for, including a number in the United
States. They are set out in detail in the evidence, and I do not think it is
necessary to go through the numbers of the various continuations and
the dates on which they were filed. The important point to note is that,
whereas continuation '783 depended on continuation '230, continuation
'856 depended on continuation '602 which (and this is the important
point) extended to proteins other than hGH, though limited to an enzyme
cleavage by DAP-1.
[5] The evidence indicates that on 11 July 1992 continuation application
'783 was abandoned, but in accordance with the local law in the United
States was revivable within a period of 12 months. The evidence
also indicates that on 31 August 1992 a draft of a licence agreement
proposed between N. on the one hand and E. on the other had, in the
schedule to it, a reference to continuation application '602 which was
specifically deleted from the draft which was then being considered by
representatives of N. On 3 June 1993 two licences were entered into
between E. on the one hand and N. on the other. The split of what was
intended as one licence into two was solely for tax reasons. One licence
related to the Untied States patent rights and applications and the other
related to other international and national patent rights of N.
[6] The United States licence, which is the licence with which the appeal is
concerned, contained the following material provisions. In the definitions
it was provided in paragraph 1.1:
The term 'Patent Rights', shall mean the patents and the patent
applications listed in Exhibit 1 attached hereto, any patents maturing from
the said applications, and any divisions, continuations, continuation in
parts, reissues, renewals, or extensions thereof.
1.2 The term 'Licensed Product' shall mean any human growth hormone
preparations, the manufacture, use or sale of which is covered by at least
one valid and granted claim of Patent Rights.
In clause 2 it was provided that:
N. grants to E. a non-exclusive right and license in the United States
under Patent Rights to make, use or sell Licensed Product during the term
of this agreement.
The schedule, which was described as Exhibit 1, referred only to the
continuation application in the United States '783 filed on 7 September
1990.
[7] The important provision is contained in clause 14.1 which is in these
terms:
This agreement shall be construed in accordance with English law. In
the event of any controversy or claim arising out of or in relation to or
in connection with any provision of this agreement, including breach
hereof, the parties hereto shall try to settle the problem amicably between
themselves. Should the parties hereto fail to agree, the matter in dispute
may be finally settled by arbitration in London, in accordance with the
arbitration rules of the International Chamber of Commerce, unless
otherwise can be agreed to by the parties. In the event that the parties
hereto cannot agree to final settlement by arbitration, the dispute shall be
referred to the courts of London, England.
[8] Clause 14.4 contains a provision that that agreement constituted the
entire understanding between the parties in the usual form. As I have
indicated, that licence specified in Exhibit 1 only continuation '783, which
had by then been abandoned and did not include continuation '856, which
was then the only subsisting patent or application concerning hGH and
other proteins, though it was limited to the enzyme DAP-1.
[9] On 6 October 1997 N. and various associated companies commenced
proceedings in the District Court in New Jersey against, amongst others,
E., claiming infringement of three of its five United States patents,
depending on the various applications to which I have referred, in
particular’602 relating to hGH. The relevant patent numbers, for future
reference if necessary, are '352, '697 and '604.
[10] In accordance with the procedure of the New Jersey District Court,
on 3 April 1998 E. filed a defence in the New Jersey proceedings. By its
defence it admitted selling a product called H. but denied that in doing
so, it had infringed any of the patents relied upon by N., and claimed,
amongst other things, a licence under the patent in suit.
[11] The relevant parts of the defence and counterclaim are the following.
Under the heading "Affirmative Defences", it is averred:
Even if any claim of the '352, '697, and '604 patents is valid and
enforceable, E. is licensed to make, use, sell, and offer to sell human-
growth hormone preparations to the extent they may be covered by such
claim.
Under the heading "Counterclaims":
[E. alleges] Even if any claim of the '352, '697 and '604 patents is valid
and enforceable, E. is licensed to make, use, sell, and offer to sell human-
growth hormone preparations to the extent they may be covered by such
claim.
In the prayer for relief:
[E. prays this court to] Enter a judgment declaring that even if any claim
of the '352, '697, and '604 patents is valid and enforceable, E. is licensed
to make, use, sell, and offer to sell human-growth hormone preparations
to the extent they may be covered by such claim.
There are of course a number of other defences and allegations, both
negative and affirmative.
[12] As is apparent from the passages from the defence and counterclaim
to which I have referred, E. has raised an affirmative counterclaim
asserting a licence to do that of which complaint of infringement is made
in the claim itself. On 8 July 1998 E. issued a writ in England seeking the
rectification of the licence relating to N. United States patent rights by the
inclusion of the reference to '856 in substitution for the reference to '783
in Exhibit 1. The relief claimed by the endorsement on the writ is in the
following form:
AND THE PLAINTIFF CLAIMS:
1. Rectification of a licence agreement between the plaintiff and the
defendant dated 3 June 1993 and entitled 'Licence Agreement (USA)'
by the substitution of U.S. patent application No. '856 for U.S. patent
application No. '783 in Exhibit 1 thereof.
2. A declaration that U.S. patents '604, '352, '697, '169 and '552 all are
within the definition of 'Patent Rights' in the said licence agreement and
are all licensed to the plaintiff on the terms thereof.
[13] On 7 September 1998 N. issued the summons that came before
Laddie J. seeking orders under RSC, Ord. 12, r.8 setting aside service of
the writ for want of jurisdiction and under the inherent jurisdiction of the
court and/or section 49 of the Supreme Court Act and in section 49 of the
Civil Jurisdiction and Judgments Act 1982 staying all further proceedings
in the action in England.
[14] By his orders of 12 and 26 October 1998 Laddie J. refused those
applications. His judgment falls into a number of parts. First, he
considered that the defence of E. of a licence raised in the New Jersey
proceedings did not constitute a variation of the exclusive jurisdiction
clause contained in clause 14 of the licence. Secondly, he considered that
the application should therefore be approached on the basis that there
was a choice of law clause and a choice of jurisdiction clause in favour of
England. Thirdly, he considered that the factors to which the court was to
have regard in accordance with the test in Spiliada Maritime Corporation
v. Cansulex pointed heavily in favour of the proceedings continuing in
England, so that leave to serve out, if necessary, would be granted. In
due course leave to appeal was given by Aldous L.J. and the notice of
appeal was served. Well after that and only a few days before the appeal
came on for hearing, that is to say on 4 March 1999, N. offered to submit
to judgment in the proceedings in England. The offer is made on the
basis that the most E. seek in those proceedings is the inclusion of '856,
but (this is the point) limited to the protein hGH and the enzyme DAP-1.
Thus, as '856 was a continuation of '602 and included proteins other than
hGH, the relief sought in the action in England is wider than the judgment
to which N. is prepared to submit.
[15] As a matter of history, it is to be recorded that the hearing in
England is due to start on 26 April 1999, estimated for a duration of
two to three days, but the proceedings in New Jersey will not take place
before the final pretrial conference which is fixed for 1 March 2000.
[16] In those circumstances, the case for N. raises three issues. First,
it is submitted that Article 17 and the other provisions of the Brussels
Convention have no application to competition between the jurisdiction
of the courts of a Contracting State and the courts of a non-Contracting
State. Secondly, N. submits that the New Jersey defence and counterclaim
raise the same question as the rectification proceedings in England,
thereby giving rise to a lis alibi pendens and a variation of clause 14 of
the licence agreement. That leads to the third issue, to the effect that
E. has, it is submitted, elected for or submitted to the jurisdiction of the
New Jersey court and is not therefore now entitled to rely on the choice of
jurisdiction clause contained in clause 14 of the licence. I propose to deal
with those three submissions in turn.
[17] The first is the question of the applicability of the Brussels
Convention incorporated into the domestic law of England by the Civil
Jurisdiction and Judgments Act 1982. At one stage in the course of the
oral argument, it appeared that the parties had discerned some important
points of principle as to the order and manner in which the Convention
was to be applied as against the background of the domestic conflict of
law principles. In the end, I did not discern any difference of substance
between them. For my part, I think the position is straightforward. First,
it is established by the decision of this court in In Re Harrods (Buenos
Aires) Ltd that the Brussels Convention does not apply so as to regulate
jurisdictional issues between the courts of Contracting States and the
courts of non-Contracting States. This appears clearly from the judgment
of Dillon L.J., with whom Stocker L.J. agreed, and the judgment of
Bingham L.J. (as he then was). The relevant passage in the judgment of
Dillon L.J. is at page 97G-H where he said this:
Since the Convention is merely an agreement between the Contracting
States among themselves, I do not agree with Hobhouse J. that the
framework of the Convention would be destroyed if there were available
to the English court a discretion to refuse jurisdiction, on the ground that
the courts of a non-Contracting State were the appropriate forum, in a
case with which no other Contracting State is in any way concerned. I
do not accept that Article 2 had the very wide mandatory effect which
Hobhouse J. would ascribe to it where the only conflict is between the
courts of a single Contracting State and the courts of a non-Contracting
State. Respectfully differing, therefore, from the rulings of Hobhouse J.
and Potter J. in [Berisford Plc v. Arkwright] I would reject the preliminary
issue raised by Ladenimor, and I would hold that the English court has
jurisdiction to stay or dismiss the petition on the grounds of forum non
conveniens if the English court holds that the courts of Argentina are the
more appropriate forum to decide the issues.
[18] Bingham L.J. adopted as part of his conclusion what he described as
"the critical note bearing the very considerable authority of Mr Lawrence
Collins in (1990) 106 L.Q.R. 535":
When the European Court comes to consider the application of the
Convention to non-Contracting States, it should seek the answer in treaty
interpretation, and ultimately in public international law. The Convention
was intended to regulate jurisdiction as between the Contracting
States. Thus the Convention provides that in principle domiciliaries of a
Contracting State should be sued in that State, subject to important and
far-reaching exceptions, and not in other Contracting States. Once a court
in a Contracting State has jurisdiction it is entitled, vis-a-vis other States,
to exercise that jurisdiction and other courts cannot. But the States which
were parties to the Convention had no interest in requiring a Contracting
State to exercise a jurisdiction where the competing jurisdiction was in a
non-Contracting State. The Contracting States were setting up an intra-
Convention mandatory system of jurisdiction. They were not regulating
relations with non-Contracting States.
[19] It follows, in my view, that the power to stay proceedings in
England, conferred on this court by section 49 of the Civil Jurisdiction and
Judgments Act 1982, is unimpaired because it would not be inconsistent
with the Convention to conclude that the courts of New Jersey are the
appropriate forum for the resolution of the disputes between the parties.
[20] I turn to the second issue raised by N. Are the claims made by E.
in England the same as those made by E. in New Jersey? I agree with
the judge that they are not. One only has to compare the endorsement
on the writ, to which I have referred, with the claims made in the New
Jersey defence and counterclaim, to which I have also referred, to see
that they are different. It is not uncommon in disputed contractual claims
for a party to contend that, on its proper construction, the contract means
what he says it means, but, alternatively, if it does not, it fails to record
the true agreement between the parties and ought to be rectified so that
it does. Those claims are not the same. By the first the party seeks to
enforce the contract as it is. By the second he seeks to have the contract
altered so that it provides for something different. In this case, the first
claim is made in New Jersey and the second in England. In regard to the
first claim, it is clear from the expert evidence that the New Jersey court
had subject-matter jurisdiction over the patent infringement claim and
that E. was obliged to plead its affirmative defence of a licence to avoid
losing it. But as the claims are different, it is irrelevant whether E. was
also obliged to raise its counterclaim in addition to the defence.
[21] It is also the case that the defence of a licence will not succeed in
New Jersey unless the claim for rectification is successful in England. This
was conceded by counsel for E., but such a concession does not require
a conclusion that the claims are for that reason the same, only that the
success of one of them is a necessary condition to the success of the
[22] At a late stage in the argument it was contended on behalf of N.
that the fact that the claims were the same was demonstrated by the
fact that in the proceedings in New Jersey E. had, apparently contrary to
the undertaking given to Laddie J., sought to depose witnesses in New
Jersey whose only knowledge was confined to the licence issue. For my
part, I do not accept the submission. Given the timing, it was readily
understandable why, as explained by counsel for E., it was necessary
to take those procedural steps in New Jersey lest this court come to a
different conclusion on the appeal to that arrived at by Laddie J. The
attempt to depose such witnesses was a sensible precaution lest the
licence rectification issue had to be tried in New Jersey.
[23] This conclusion on the second issue leads me on to the third. Given
that the claims are not the same, it must follow that the defence and
counterclaim in New Jersey cannot give rise to either a lis alibi pendens
in New Jersey, nor to a waiver or variation of clause 14.1 of the licence.
It follows that, in determining which of the competing courts satisfies
the Spiliada test, the existence of the choice of jurisdiction clause is of
considerable importance. This is apparent from Spiliada, The El Amria,
Continental Bank v. Aeakos Compania Naviera, and The Angelic Grace.
Added to this are the considerations that the trial is due to take place
here in April 1999 compared to some time after March 2000 in New
Jersey. The law to be applied in accordance with clause 14.1 is English
law but that would not be applied in New Jersey if the court considered
that the claim was procedural rather than substantive, and the fact that
the issue here is self-contained and confined to E. but in New Jersey is
inevitably intermingled with the other issues of validity and infringement
as between N. and E. and such other parties as now remain in those
proceedings.
[24] But N. relies on the effect of the offer it made on 4 March 1999 to
submit to judgment in the proceedings in England in the limited form
to which I have referred. The consequence, so it is said, is that there
is nothing left to litigate here, so that any further relief must be sought
by E. in New Jersey so as to avoid split proceedings to the advantage of
no one. Counsel for E. disputed the claim that N. had offered to submit
to all that E. might expect to achieve in the proceedings in England. He
pointed out that the scope of the licence depended on the width of the
expression "licensed product" which referred in terms to "any human
growth hormone preparations". For my part, I am not satisfied that it
has been adequately established that E. might not obtain more in the
proceedings here than N. has offered. The issue is whether the licence in
its rectified form should or should not include a licence to do what was
included in the continuation in part effected by '602. This involves the
question whether the licence is limited to making only hGH with DAP-1 or
extends to the making of other proteins covered by '602 also with DAP-1.
It seems to me that that is a point susceptible of argument even on the
basis of the limited witness statements we have been shown. Accordingly,
I do not think that the offer made as late as 4 March 1999 should lead
this court to reach any conclusion different to what it would reach if such
an offer had not been made.
[25] For all these reasons, I consider that the judge came to the right
conclusion, and I would dismiss the appeal.
Henry L.J.:
[26]
I agree.
Peter Gibson L.J.:
[27]
I also agree.
Appeal dismissed with costs.