[1] The claimants in this action are D. BV, which is a Dutch corporation,
which, amongst other things, sells ingredients for pharmaceutical
products. Before the merger between R. G.-B. NV and D. NV in 1998, the
first claimant was called G.-B. BV.
[2] The second claimant, D. Sweden AB, is a Swedish corporation which
manufactures ingredients for pharmaceutical products at its plant in
Sweden. Before the merger between RGB and D., the second claimant
was called G.-B. AB. I will refer to them together as "D.."
[3] The first defendant, SKB Plc, is an English corporation which also
manufactures ingredients for pharmaceutical products. The proposed
second defendant, SKB Corporation, is a Pennsylvanian corporation
which manufactures and sells pharmaceutical products using ingredients
including those supplied by SKB Plc. SKB Corporation has not been served
with these proceedings and is not yet a party to them.
[4] Both the first defendant and the proposed second defendant are
subsidiaries of G.S.K. plc, an English corporation listed on the London
Stock Exchange. I shall refer to the defendant as "GSK."
[5] The scientific background to the current application is described by
Dr Giddings in paras 8 to 12 of his witness statement as follows. He
begins by saying that GSK sells an antibiotic called co-amoxiclav under
the registered trade mark AUGMENTIN. He continues as follows:
"There are two active ingredients in co-amoxiclav: potassium clavulanate,
the potassium sale of an organic compound called clavulanate acid, and
amoxicillin, a well known antibiotic. For many years, amoxicillin had
not been effective against certain highly resistant strains of bacteria
as it was destroyed by an enzyme, B-lactamase, which these bacteria
produce. However, in the 1970s, scientists at GSK discovered that, by
combining potassium clavulanate with amoxicillin, they could inhibit the
activity of B-lactamase and therefore create an antibiotic which is more
effective against a broader range of bacteria than amoxicillin alone. This
discovery led to extensive clinical testing after which SB manufactured a
composite product, co-amoxiclav, under the name AUGMENTIN. Since its
introduction on the market, AUGMENTIN has proved to be highly effective
in treating a variety of bacterial infections and has been widely prescribed
by physicians throughout the world.
Clavulanic acid, from which potassium clavulanate is made, is
produced by a strain of bacteria known as Steptomyces clavuligerus ('S
Clavuligerus'). However, the strain of S clavuligerus found in nature (the
'wild type strain') does not produce clavulanic acid in sufficient quantities
for commercial production. For that reason, GSK spent millions of pounds
developing a strain of S clavuligerus bacteria which would be capable of
producing clavulanic acid in commercially viable quantity. More than £ 225
million was spent by GSK on research and development of the technology
to produce clavulanic acid for AUGMENTIN products, much of which was
spent on developing this new strain."
[6] He goes on to describe that the developing of the strain was done by
"growing and harvesting new strains of the bacterium, exposing them
to mutagenic agents, allowing the surviving mutated spores to grow
into individual colonies until sufficient stock was available and then
analysing each mutated colony for its clavulanic acid productivity. The
most productive strains were selected for further development and the
process was repeated over and over. This was a long and time-consuming
process with several thousand mutated strains being tested each weeks
and hundreds of thousands of mutated strains being tested over the
entire development process.
The development process finally came to fruition in 1981, when SB
isolated a strain of S clavuligerus denominated SM1879 that produced
significantly improved quantities of clavulanic acid. The first production
strain derived from SM1879 was denominated SC7."
[7] Mr de Haas, giving evidence on behalf of the defendant, agrees with
this technical explanation, but he explains that D. conducted its own
independent development of similar strains. He says this in para 10 of his
witness statement:
"The procedure is demanding in terms of time and staff. It involves the
analysis of thousands of strain mutants per cycle. P. was and is a well-
respected research organisation for the pharmaceutical and biotechnology
industries and had successfully carried out previous penicillin and other
development work for D.. It had the staff and other resources to screen
large quantities of samples quickly and could undertake that part of the
project more economically than D..
Between 1993 and 1999 the project generated in excess of 19,000 million
strains which were screened. P. would suggest to D. which strains should
be carried forward to the next round of mutugenesis. D. would review the
results of each round, carry out evaluations itself and indicate to P. what
the next step would be. In 1999 the project was moved entirely in-house
to D. where further strain improvement was carried out in conjunction
with refinements of the production process. D.'s current production strain
is a direct descendent of the strains developed during the project with P.,
which were themselves direct descendents of...a particular strain, which
was a publicly available strain."
[8] However, in 1988, GSK discovered that a competitor might have
acquired the sample of SC7 and it took the view that the sample had been
stolen by one of its former employees and subsequently sold to a Spanish
company. It began legal proceedings.
[9] Following those legal proceedings, it believed that all samples of SC7
had been destroyed. However later, it learnt that SC7 came into the hands
of another competitor, a Slovenian company called LEK DD. It threatened
to begin further proceedings against other pharmaceutical companies and,
in the course of those investigations, it approached D. suspecting that D.
was also using SC7.
[10] On 23 October 1996, GSK's solicitors wrote to the managing director
of D. making certain enquiries about the provenance of the strains being
used by D.. It drew D.'s attention to its concerns that there had been
infringements of certain patents of which GSK was the patentee and also
misuse of confidential information. That letter produced correspondence
which resulted in a number of meetings and ultimately in the entry into a
settlement agreement dated 24 April 1997.
[11] The settlement agreement recited proceedings which GSK had begun
in the Netherlands for alleged infringement of certain patents. It was cited
that GSK was of the opinion that D. had infringed those patents while also
reciting that D. was of the opinion that it had not. The recital continued:
"In any event, D. is convinced that it has developed new alternative
manufacturing processes which do not infringe any of GSK's patents. D.
has no intention to infringe any such patents."
[12] The agreement went on to recite that the parties wished to settle
the litigation begun in The Hague and had agreed to settle provided that
GSK obtained adequate redress and compensation for what it believed
to be an unfair and illegal advantage taken by D. in allegedly infringing
certain of the patents. The agreement also recited that the parties did not
intend the agreement to affect any of GSK's rights concerning potassium
clavulanate in the United States of America.
[13] At the time, D. had developed a process called the Diamine Ether
Process for processing the various strains. Clause 2(a) of the Agreement
contained an acceptance by GSK that that process did not infringe its
rights. It went on to state D. reserved the right to develop improvements
to the Diamine Ether Process and further non-infringing processes for the
manufacture of Potassium Clavulanate.
[14] Clause 2(e) provided as follows:
"SB agrees that it shall not object to any future use, anywhere in the
world, by GB of any information generated by GB through use of the
Disputed Process prior to the date of this Agreement."
SB is, of course, what I have called GSK and GB is D..
[15] Clause 5(i) provided as follows:
"SB will not take action in any Court or Patent Office against GB or any
third party with respect to the Diamine Ether Process as developed by
or for or used by GB or against GB's use of the Disputed Process prior
to the date of signature of this Agreement or the use by GB of the strain
with the genealogy and development details shown in Annex VII. SB's
obligation in this Clause 5(i) is subject to GB not being in breach of any of
its obligations under this Agreement."
[16] Clause 14 provided as follows:
"Except only as otherwise specifically provided in Clause 2(e) nothing
herein contained shall be construed as a grant of any rights to GB under
SB's rights with respect of Potassium Clavulanate in the United States
of America. Further, SB expressly reserves all its rights with respect to
Potassium Clavulanate in the United States of America and in particular its
rights to defend and enforce such rights in the United States of America
against any infringement."
[17] Clause 15 provided:
"This Agreement shall be governed in all respects by the laws of England
and exclusive jurisdiction with respect to all disputes in connection with
this Agreement shall be given to the English Courts."
[18] In late 2001, GSK developed a new chemical test to identify whether
potassium clavulanate had been produced using SC7. GSK believes that
this test has an accuracy in excess of 99%. In February 2002, GSK carried
out these tests on co-amoxiclav tablets produced by a German group
called H.. These tests, it is said, indicated that the potassium clavulanate
in those tablets had been produced using SC7. In addition, the tests
revealed that the H. tablets also contained traces of another compound,
namely, Diamine Ether. D. used the Diamine Ether Process for producing
potassium clavulanate.
[19] In early 2002, GSK became aware that two generic pharmaceutical
companies called T. and R. were preparing to sell co-amoxiclav in the
United States. GSK also believed that D. was the supplier of potassium
clavulanate to Teva and Ranbaxy and that D. was using SC7 to produce
that potassium clavulanate. Accordingly, in August 2002, GSK began
proceedings in Philadelphia against T. and R.. D. were joined to those
proceedings in June 2003 or September 2003 once certain deficiencies in
service had been rectified.
[20] In the Philadelphia proceedings, the plaintiffs (as they are still
called), the GSK companies, claimed against D., firstly, damages in an
injunction for the misappropriation of a trade secret (count 1); secondly,
knowingly obtaining an unfair competitive advantage over GSK (count
4); thirdly, conversion of certain strains of SC7 (count 7); and, fourthly,
unjust enrichment on the basis of a constructive trust of the stolen SC7
(count 10).
[21] D. have disputed the jurisdiction of the Pennsylvanian court. Papers
on jurisdictional issues have been submitted to the court. GSK's response
to the dispute was filed on 19 May 2004. Those applications have not yet
been ruled on.
[22] In December 2003, D. began proceedings in this court claiming
certain declarations against GSK. The claim is based on various provisions
of the Settlement Agreement. On 30 January 2004, GSK, by application
notice, sought a stay of those proceedings. The application seeks a
permanent stay but, in the alternative, GSK seek a stay until either the
United States' court has determined its own jurisdiction or, alternatively,
as I shall describe, until the European Court of Justice rules on a
particular point. The application is made under both Pt 11 and Pt 3.1 of
the Civil Procedure Rules.
[23] The first question, as it seems to me, is to decide the scope of Clause
15. Clause 15 gives the English courts exclusive jurisdiction with respect
to "all disputes in connection with this Agreement". Mr Jarvis, QC, who
appears on behalf of GSK, says that there is no dispute in connection
with the Agreement. GSK does not dispute D.'s right to use a strain of
the genealogy described in Annex VII to the Agreement. The sole issue,
he says, is whether D. is using SC7. If it is, then the Agreement is not in
point. If it is not, GSK will withdraw its claims.
[24] Mr Thorley QC., who appears for D., submits that, in its context,
the Agreement must have been intended to settle all the disputes then
pending between the parties, both for the alleged patent infringement
and for the alleged misuse of confidential information. This, as it seems to
me, is borne out by the correspondence to which I was referred, and also
by the way in which the case is pleaded in the amended complaint in the
Pennsylvania proceedings. Viewed in this light, it seems to me that the
scope of Cl 5(i) becomes clearer.
[25] Clause 5(i) obliges GSK not to object to the use by D. of the
strain with the genealogy and development details in Annex VII. D.
says that that is precisely what it is doing. GSK disputes this. In my
judgment, that dispute is a dispute "in connection with" the Agreement.
The question is whether D. has kept to the Agreement. It may also be
that there is a further dispute whether the Agreement was induced by
misrepresentation, which is alleged in para 24 of the amended complaint
in the Pennsylvania proceedings. If so, that is also a dispute in connection
with the Agreement. As I said, the amended particulars of claim, in
particular paras 4.6 and 4.7, based D.'s claims in this action on the
Agreement.
[26] Clause 14 allows GSK the right to enforce its rights with respect
to potassium clavulanate in the United States of America. Mr Thorley
submits that this is limited to territorial rights, that is to say, patents.
He says that it cannot have been the intention of the parties to allow
GSK to obtain in the United States an injunction which would effectively
shut down GSK's plant in Sweden. Mr Jarvis points out, however, that the
United States proceedings do not claim any injunction against D.'s plant in
Sweden.
[27] Mr Thorley's second point is that any wrongful act by D. must have
taken place in Sweden where the confidential information was misused
and, he submits, it is a misuse of Clause 14 to use it as a springboard for
worldwide relief.
[28] In my judgment, that latter submission is well-founded and I
approach this case, therefore, on the basis that the exclusive jurisdiction
clause applies to the subject-matter of the United States dispute so far as
it affects D..
[29] Mr Thorley also took the point based on the regulation governing
jurisdiction, which is reg 44 of 2001 of the Council Regulation of the
European Community. Article 2 of that regulation states as follows:
"Subject to this Regulation, persons domiciled in a Member State shall,
whatever their nationality, be sued in the courts of that Member State."
[30] Article 23 states as follows:
"If the parties, one or more of whom is domiciled in a Member State,
have agreed that a court or the courts of a Member State are to have
jurisdiction to settle any disputes which have arisen or which may arise in
connection with a particular legal relationship, that court or those courts,
shall have jurisdiction. Such jurisdiction shall be exclusive unless the
parties have agreed otherwise. Such an agreement conferring jurisdiction
shall be either:
(a) in writing or evidenced in writing; or
(b) in a form which accords with practices which the parties have
established between themselves; or
(c) in international trade or commerce in a form which accords with the
usage of which the parties are or ought to have been aware, which in
such trade or commerce is widely known to, and regularly observed
by, parties to contracts of the type involved in the particular trade or
commerce concerned.."
[31] As I have said, the first defendant is domiciled in England. The
second defendant is not, but has not been served. D. say that because of
art 2, this court has no jurisdiction to grant a stay on the ground of forum
non conveniens. This, they say, follows from the decision of the European
Court of Justice in Universal General Insurance Company v Group Josi
Reinsurance Co [2001] QB 68, [2000] 3 WLR 1625.
[32] That submission was accepted by Judge Bentley QC., sitting as a
Judge of the High Court, in a case called Owusu v Jackson, reported in
the Court of Appeal at [2003] PIQR 186. That was a case involving an
accident sustained by an English claimant on holiday in Jamaica. The
claimant sued a number of defendants, one of whom was domiciled in
England, the remainder of whom were Jamaican. The judge held that
he had no jurisdiction to stay the action because one of the defendants
was domiciled in England. On appeal to the Court of Appeal, the Court of
Appeal referred that question to the European Court of Justice. Reference
was made on 16 June 2002 and registered with the European Court of
Justice on 31 July 2002.
[33] Despite the Court of Appeal's request for expedition, the hearing did
not take place until 4 May 2004 and no date has yet been set for delivery
of the Advocate General's opinion. The Court of Appeal, of course, stayed
the action until the decision of the European Court in accordance with CPR
Pt 68.4.
[34] Mr Jarvis submits that I should follow suit and stay these
proceedings until the European Court has ruled. However, the Court of
Appeal was applying the provisions of the CPR designed for a case in
which there was a reference to the ECJ. That is not this case. Whether the
court has jurisdiction to grant the stay is the subject of a decision by a
High Court judge. That decision has not been reversed. It seems to me
that the ordinary rules of precedent require me to follow that decision
unless I am clearly convinced that it is wrong. The Court of Appeal were
plainly not convinced the judge was wrong. If they had been, they would
not have made a reference to the ECJ on the basis that the question at
issue was acte clair. I hold, therefore, that I do not have jurisdiction to
order these proceedings to be stayed.
[35] Mr Jarvis submitted in the alternative that even if I did not decline
jurisdiction, I have the power to stay the proceedings temporarily under
the case management powers contained in CPR 3.1. He submitted that
I should at least stay the proceedings until the United States court has
determined its own jurisdiction and that the same case management
powers will enable me to grant a stay until the European Court of Justice
has ruled.
[36] As I have said, I approach this case on the basis that a dispute
between the parties falls within Clause 15. Thus, I am being asked to
stay an action brought in accordance with an exclusive jurisdiction clause.
There must be strong reasons for a court to do that since it deprives the
claimant of his contractual bargain, see Donohue v Armco [2001] UKHL
64, [2002] 1 All ER 749, para 24.
[37] GSK rely on the following:
(1) The action concerns the wrongful sale of products by two Delaware
corporations in the United States. That is true as regards T. and R., but
not D.. Anything D. did was done in Sweden.
(2) T. and R. are not before the court in England and there is no means
of enforcing any judgment against them. That is true, but it was known
at the date of the Agreement that D. was not itself a retailer and that it
inevitably supplied products to third parties. If, unusually, GSK chose to
sue purchasers of the product from D., it must have realised that there
was a risk of concurrent proceedings.
(3) The United States proceedings had been on foot for a considerable
time and discovery has already taken place. A United States based expert
has already been engaged to conduct extensive and expensive testing of
samples. So far as the US expert is concerned, there is nothing to prevent
GSK from instructing him as expert in the English proceedings. As far as
disclosure is concerned, the principal disclosure will come from D. since
it is the origin of the D. strain that it is in issue. In addition, I do not see
why the court cannot order that discovery in the United States' action
should stand as disclosure in the English action.
There has been some delay on both sides, it is true, but delay by D. has
not, in my judgment, been culpable. They took the jurisdiction point in
accordance with the Pennsylvanian Procedural Code and more or less
simultaneously began these proceedings.
(4) The presence will be required of witnesses on behalf of T. and R..
They will have to travel wherever the action is heard. I do not regard the
travelling of witnesses as being of any real significance. Once a witness
has had to get on a plane and stay in a hotel, it does not seem to me to
matter very much where he has to travel.
(5) There is the potential risk of inconsistent findings. This seems to me
to be GSK's best point, but it has to be evaluated against their claim that
their testing is such that it would produce scientific certainty.
[38] The force of all these factors is, of course, only provisional since
they all assumed that United States' courts will reject D.'s objections
to jurisdiction. At this stage, it seems to me, I should not make any
assumption about the outcome of that objection.
[39] In Spiliada Martime Corpn v Cansulex Ltd [1987] AC 460, [1986] 3
All ER 843, Lord Goff said at page 476:
"The basic principle is that a stay will only be granted on the ground of
forum non conveniens where the court is satisfied that there is some
other available forum, having competent jurisdiction, which is the
appropriate forum for the trial of the action, ie in which the case may be
tried more suitably for the interests of all the parties and in the ends of
justice."
[40] In view of the challenge to the United States' court's jurisdiction
and my own view about the scope of the exclusive jurisdiction clause, I
am not satisfied that there is another available forum having competent
jurisdiction over D.. Other factors mentioned by Lord Goff include the law
governing the transaction (in this case English law) and the places where
the parties reside or carry on business which, in the case of D., do not
include the United States of America. In addition, GSK's witnesses, apart
from their expert, appear to be based in the United Kingdom, as is their
strain bank.
[41] There is no doubt that the court has the power to exercise case
management powers to grant a temporary stay. This has been done
in a number of cases. In Reichhold Norway ASA v Goldman Sachs
International [2001] 1 WLR 173, Lord Bingham, LCJ., said that this power
would be exercised only in rare and compelling circumstances.
[42] In BP International Ltd v Energy Infrastructure Group Ltd [2003]
EWHC 2924, Morison J. ordered a stay of proceedings pending resolution
of a challenge to the jurisdiction to the Dallas County Court on the
ground of forum non conveniens. Two particular features led him to his
conclusion: First, the agreement in question contained a non-exclusive
jurisdiction clause rather than an exclusive jurisdiction clause; and,
secondly, the claimant in England had submitted to the jurisdiction of the
Dallas court. Neither feature was present in this case.
[43] I was referred to the decision of Neuberger J in Lederer Fisheries
Ltd v Turner [2003] EWHC 1049 (Ch). He held that if a party fails in a
challenge under Pt 11 of the Civil Procedure Rules, the court should be
very slow to stay proceedings under case management powers. I add
that in practical terms, if I were to order a stay pending reference to the
European Court, that would be tantamount to granting a permanent stay.
[44] My conclusion is that the factors upon which GSK rely do not
outweigh the force of the exclusive jurisdiction clause. I decline to order a
stay and dismiss the application.
MR THORLEY: [45] Would your Lordship dismiss it with costs?
MR JARVIS: [46] I cannot oppose that.
MR JUSTICE LEWISON: [47] That must follow.
MR JARVIS: [48] I have instructions to ask for permission to appeal.
A number of grounds occur immediately. First of all, there is the
interpretation of Cls 14 and 15 and art 2 is going to be a live point.
MR JUSTICE LEWISON: [49] I will hear Mr Thorley on why I should not
grant permission to appeal.
MR THORLEY: [50] The point I would make is that in effect when your
Lordship has come to deal with case management issues, you have
gone back to Spiliada. You have reached the conclusion that you are not
satisfied that there is a forum. You have in fact decided this case on the
issue of discretion even if you were to be wrong on the conclusion that
you were bound by Judge Bentley. In fact, although it is a very interesting
debate in the light of the way your Lordship has approached the matter,
this has been a discretionary matter. In those circumstances, I think it
should be for the Court of Appeal to decide whether they feel this is a
case which merits further attention or whether they will say, as they often
do say, that the judge has approached the matters with regard to the
question of discretion and has not been obviously wrong.
MR JUSTICE LEWISON: [51] It seems to me that my approach to
discretion was predicated on my construction of Cls 14 and 15. If I am
wrong about that, then my discretion may well have been vitiated. I can
well see that other people might take a different view of Cls 14 and 15
than the view I have taken. It seems to me, therefore, that this is an
appropriate case for permission to appeal.
MR JARVIS: [52] I think that one has 14 days to put in the appeal. Can
I ask for an extension to 21 days? There are quite complex matters of
drafting.
MR THORLEY: [53] If he is going to take 21 days to draft a document
which I suspect will not take him that long, so be it. I make it plain that
we will continue with this action in the meantime and if he delays his
appeal then so be it.
MR JUSTICE LEWISON: [54] Quite. I will extend time to 21 days for the
notice of appeal. Costs to be subject to detailed assessment if not agreed?
MR THORLEY: [55] Yes. This is more than a one-day approach so detailed
assessment.
MR JUSTICE LEWISON: [56] Thank you both very much.
DISPOSITION:
Application dismissed.