Anti-suit injunction keeps copyright suit out of the US courts

Skype Technologies SA v Joltid Ltd and others [2009] EWHC 2783 (Ch) was a Chancery Division decision of Mr Justice Lewison earlier this month on a subject which has recently generated much thought but not too many judicial decisions: anti-suit injunctions in intellectual property disputes.

Skype, an internet telephony company domiciled in Luxembourg, claimed that proceedings which Joltid brought against it in the United States were in breach of a jurisdiction clause in a licence between them and sought an anti-suit injunction. According to that agreement, Skype had offered free downloads of Joltid's software so that users could enjoy the benefits of free phone calls. Under the agreement, Skype received the worldwide right to use a compiled object code form, although control of the source code was reserved to Joltid alone. Clause 19 read as follows:

"Governing Law and Jurisdiction. Any claim arising under or relating to this Agreement shall be governed by the internal substantive laws of England and Wales and the parties submit to the exclusive jurisdiction of the English courts".

Joltid subsequently claimed that Skype had breached the licence agreement by dealing with its source code and purported to terminate the agreement. Skype, maintaining that it was still entitled to use the software, brought proceedings for a declaration that there was neither a breach by them nor a valid termination, since Joltid had supplied Skype with the source code rather than the object code. Joltid in turn sought declarations that the termination was valid, plus financial remedies, and injunctions with global effect.

After Skype commenced its proceedings, its owner agreed to sell a large part of it to investors who planned to operate Skype on much the same basis. Joltid claimed that this meant that there would be continued infringement of its copyright globally. Having registered its copyright in the source code in the United States, Joltid then brought proceedings there against Skype and its new owner, the investors and other parties. Skype was none too happy about this US action which, it alleged, was in breach of clause 19.

Mr Justice Lewison granted the injunctive relief sought. In his view,

* Whether a claim fell within an agreed jurisdiction clause was a matter of contractual interpretation, to be decided according to national law, and it had to be construed liberally in accordance with what rational businessmen would have intended.

* The decision of the Court of Justice of the European Communities in Case C-281/02 Owusu v Jackson meant that discretionary considerations such as those relating to forum non conveniens did not apply to decisions of courts in EU Member States so as to stay their own proceedings.

* In Owusu there was no ruling as to whether a Member State court could, or should, grant an injunction to prevent proceedings being taken in another jurisdiction, and the proposition that the test was the same was not borne out by authority.

* Regarding the US proceedings, there was a valid contract which Joltid had breached.

* The exclusivity agreement was itself supported by other considerations: the partieshad chosen a neutral forum, the copyright licence was worldwide and a breach somewhere must have been contemplated; accordingly witnesses and documents could be located anywhere in the world. Thus the standard considerations on forum non conveniens should have little weight against the clause; otherwise it would be deprived of its intended effect.

The 1709 Blog is relieved that the court gave effect to the intention of licensor and licensee as expressed in Clause 19. It can be frustrating for lawyers who draft clauses in plain English to watch as sundry jurisdictional issues are raised in court which appear to sink the fragile ship of contractual intent.