Patents and jurisdiction 2: Innovia v Frito-Lay

The Frito-Lay patents and applications -- or are they Innovia's?

We Europeans are inordinately interested in the question of which court we sue each other in when we have a patent-related dispute.  This is not just because we are all in a state of constant curiosity bordering on suspense (or is it paranoia?) has to what will become of the current assortment of unsatisfactory devil-you-know courts with which we have grown up, now that the unified patent litigation blueprint is dancing before our eyes. It's also because the same patents get litigated in jurisdictions outside the European Union too, and the effort of fighting to sue before the court of one's choice often determines the outcome of the substantive proceedings too.

For this reason, it's worth taking a look at a recent national law decision that pits a European jurisdiction against an American one. This is the ruling of Mr Justice Arnold late last month in Innovia Films Ltd v Frito-Lay North America Inc [2012] EWHC 790 (Pat), in the Patents Court (England and Wales). The upshot of the decision was that the United Kingdom's courts had exclusive jurisdiction over claims concerning a US company's European patent applications. In consequence there was no reason either (i) to set aside the permission that had already been granted to the claimant, Innovia, for service out of the jurisdiction, or (ii) to stay Innovia's claims pending a determination of proceedings brought by the US company in the Eastern District of Texas's notorious Tyler Division.

What happened, slightly simplified, was as follows.  Innovia brought two actions against PepsiCo subsidiary Frito-Lay before the Patents Court for England and Wales, each of which concerned a European patent application for food packaging film.  According to Innovia, it made and owned the inventions which had been disclosed to Frito-Lay in confidence. On this basis, said Innovia, it and not Frito-Lay was the real owner of those applications and of any resulting patents and that, what's more, Frito-Lay had acted in breach of confidence.

After Innovia was permitted to serve the claim form in the first of these two actions outside the jurisdiction, Frito-Lay contested the court's jurisdiction and issued proceedings of its own against Innovia in Texas, seeking declarations that it was the rightful inventor and owner of all the applications and resulting patents.

In these proceedings, Arnold J had to determine, among other things, (i) whether the Patents Court had exclusive jurisdiction with respect to the European applications; (ii) whether it also had jurisdiction under the Patents Act 1977 s.12 in respect of Frito-Lay's non-European applications (particularly the US) and, if so, whether this jurisdiction was lost if an application proceeded to grant; (iii) what law applied to Innovia's breach of confidence claim; (iv) how far the jurisdiction of the Texas court actually went; (v) which court was the appropriate forum for hearing this particular dispute.

Arnold J, in another well-reasoned, highly organised judgment that can conveniently be turned into a pre-litigation check-list, rejected Frito-Lay's applications to set aside Innovia's permissions or to stay the proceedings. In his view:

Even where a claim was properly served within the jurisdiction, the court might decline to exercise its jurisdiction and grant a stay of the proceedings on the ground of forum non conveniens. However, it was for the defendant who sought to stay a claim to shift the burden of showing that an alternative forum was more appropriate, having regard to the interests of justice and of the parties themselves.

Under the Patents Act 1977, s. 82(4)(b), the Patents Court had jurisdiction to decide who was entitled to the European applications.

Although Frito-Lay was the applicant for European patents, it had neither residence or principal place of business in any country that belonged to the European Patent Convention (EPC) 1973.  Innovia, in contract, had both its residence and and its principal place of business in an EPC state, the UK. Section 82(4)(b) had to be construed consistently with the EPC Protocol on Recognition -- which gives exclusive jurisdiction to the courts of the relevant contracting state. Bearing this in mind, and on the basis that "exclusive" meant exclusive of the jurisdiction of any other state, not any other EPC contracting state, forum non conveniens could not be raised against Innovia's first claim, in so far as it related to the European applications.

The Patents Act s.12 did not give the court any jurisdiction to determine entitlement to patents which had already been granted by the date of the claims, but the Patents Court did have jurisdiction to determine entitlement to pending US applications. Jurisdiction under s.12 to deal with Frito-Lay's applications didn't vanish just because the patent applications turned into patents after that date.

The applicable law to govern Innovia's breach of confidence claim was the English law. This was because it was sensible to opt for the law with which Frito-Lay's obligation to Innovia and the consequences of its were most closely associated.

The Texas court had jurisdiction over granted US patents, but not over the pending US applications or foreign applications and patents corresponding to the pending US applications. Its jurisdiction over foreign applications and patents corresponding to granted US patents was not limited to the foreign applications with the same scope of the claims of the US patent.

The interests of justice were best served by trying as many of the claims as possible in the same court at the same time.  In this case that was the Patents Court, since it had had exclusive jurisdiction over the European applications and non-exclusive jurisdiction over the foreign applications corresponding to the pending US applications.

Well, says the IPKat, that just about wraps things up ...