Skype not Joltid from its licence

The IPKat is playing catch-up at the moment, since so many big decisions have popped out of the courts without his having had the chance to savour them. One such decision is Skype Technologies SA v Joltid Ltd and others [2009] EWHC 2783 (Ch), a Chancery Division (England and Wales) ruling of Mr Justice Lewison on 6 November, which takes a little thinking about. Avid readers will notice that this dispute has fortunately already been picked up by the AmeriKat here, here and here, but the Kat doesn't feel that this has absolved him from having to get his head around it too.

The story goes like this: Skype Technologies was a member of a group of companies that offered free software downloads that let users communicate through free voice and video calls, by sending instant messages, SMSes or files, and by making or receiving low-cost calls to and from landline and mobile numbers. Joltid owned the copyright in a piece of software called the Global Index, which lay at the very heart of Skype's business.

Back in November 2003, Joltid granted Skype a worldwide licence to use a form of its software. Under this licence, Joltid kept sole control over the source code (that's the bit that most humans can read and some can even understand). Under clause 19 of the licence, the United Kingdom was given exclusive jurisdiction to determine issues that arose under it:
"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".
In March 2009 Joltid purported to terminate the agreement on the ground that Skype had wrongfully kept, used, accessed and modified the source code. Skype instantly sought a declaration that the purported termination of the agreement was invalid and that the licence therefore continued in force. Naturally, Skype kept on using the source code.

In May Joltid served its defence and counterclaim. According to Joltid, Skype had repudiated the agreement and infringed its Estonian and UK copyright in the source code as well as misusing its confidential information. What's more, it said, the licence had been validly terminated. In September Skype's owner said it agreed to sell a 65% stake in the group to investors. In response Joltid registered its copyright in the source code with the US copyright office and then sued Skype, the whole group of companies, its owner and the new investors. None too happy about the prospect of US litigation, Skype sought an anti-suit injunction to restrain any further steps being taken against it in the US, plus discontinuance of those proceedings themselves.

According to Skype, applying (i) clause 19 of the agreement and (ii) Article 23 of Council Regulation 44/2001 on jurisdiction and the recognition and enforcement of judgements in civil and commercial matters, it was entitled on the balance of convenience to the relief it sought. What's more, since Joltid had actually supplied it with the source code, either Joltid was estopped from alleging a breach of the licence or it had waived its right to demand compliance with the strict terms of the licence.

Lewison J allowed Skype's application. In his view:
* Whether a claim fell within an agreed jurisdiction clause was a question of interpretation of the clause in question, which had to be decided according to national law. In this regard there was no distinction to be drawn between interpreting (i) a clause in an agreement that conferred jurisdiction on the courts of a particular territory and (ii) a clause in an agreement that conferred jurisdiction on a particular tribunal, such as an arbitrator.

* The standard considerations that arose in arguments about forum non conveniens should be given little weight in the face of an exclusive jurisdiction clause, where the parties had chosen the courts of a neutral territory in the context of an agreement with worldwide application. If this were not so, the exclusive jurisdiction clause would be deprived of its intended effect since those standard considerations would almost always trump the parties' deliberate selection of a neutral forum.

* In this case, the counterclaims against Skype in the US fell within the scope of clause 19. Since the validity of the licence agreement was not in dispute, even if it had been terminated the US proceedings were themselves a breach of contract.

* In any event, the balance of convenience favoured granting the anti-suit injunction.
The big point to note here, says the IPKat, is that Skype's operations, and therefore the chances of something going wrong, were pretty well global, which meant that in the absence of a fairly serious attempt to pin all the litigation on one bunch of laws and one jurisdiction, Skype and Joltid could end up doing a Budweiser and litigating everywhere. Merpel adds, this consideration would still apply even if the procedural and substantive contract and IP laws of all the likely jurisdictions were far more closely harmonised than they are at present.

More about Skype here
How to pronounce Skype, Adobe and Linux here
Skype not Joltid from its licence Skype not Joltid from its licence Reviewed by Jeremy on Tuesday, December 01, 2009 Rating: 5

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