Stewart v Franmara Inc no.2
[2012] NZHC 1771
•19 July 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2011-404-2584 [2012] NZHC 1771
BETWEEN BRYCE LESLIE STEWART Plaintiff
ANDFRANMARA INC Defendant
Hearing: On the Papers
Counsel: GJ Thwaite for the Plaintiff
No appearance for the Defendant
Judgment: 19 July 2012
JUDGMENT (NO. 2) OF TOOGOOD J
This judgment was delivered by me on 19 July 2012 at 4:30 pm
Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
Solicitors:
GJ Thwaite, Auckland: [email protected]
STEWART V FRANMARA INC HC AK CIV-2011-404-2584 [19 July 2012]
[1] The plaintiff designed and patented a bottle opener that extracts the complete cork component, plus the wire restraint and foil wrapping, from a champagne bottle.
[2] In this proceeding the plaintiff alleges that the defendant has distributed on its own account bottle openers based on the plaintiff ’s design. In seeking damages and other orders against the defendant the plaintiff pleaded:
(a) breach of a confidentiality agreement entered into between the plaintiff and the defendant;
(b) breach of the plaintiff ’s New Zealand patent for the device;
(c) breach of the plaintiff ’s American patent for the device; and
(d) breach of s 172OO of the Business and Professions Code of
California.
[3] In an interim judgment dated 26 March 2012,1 I found that the plaintiff had established breaches of the confidentiality agreement entered into on or about
18 December 2003 and, by marketing bottle openers based on the plaintiff’s design via the internet in New Zealand and elsewhere, the defendant had breached the plaintiff’s New Zealand patent.
[4] I also held that the plaintiff had suffered losses as a result of the defendant’s breaches. As a consequence, I entered judgment for the plaintiff in the following terms:
(a) The defendant is to pay the sum of US$864,500 by way of damages based on a reasonable royalty from 23 September 2005 to
26 March 2012, calculated at the rate of US$133,000 per annum.
1 Stewart v Franmara Inc. HC Auckland CIV-2011-404-2584 [2012] NZHC 683,
26 March 2012.
(b)The defendant is to pay interest on the damages assessed under paragraph (a) for each day of the infringement, namely from
23 September 2005 until the date of judgment, at the following rates: (i) up to and including 1 July 2008 at 7.5 per cent per annum;
(ii) from 1 July 2008 to 30 June 2011 at 8.5 per cent per annum;
(iii)from 1 July 2011 to the date of judgment at 5 per cent per annum.
(c) The defendant shall pay the plaintiff ’s costs calculated on a Category 3B basis for all steps in accordance with the High Court Rules, for a total of 10.1 days as set out in Schedule B to the draft judgment filed on behalf of the plaintiff. For enforcement purposes, this sum shall be calculated in both New Zealand and American currency at an exchange rate of 1 x USD = 1.2249 x NZD.
[5] The defendant is based in California, United States of America, and was served overseas. In the interim judgment, I expressed some doubts as to this Court’s jurisdiction to adjudicate on the third and fourth causes of action in the plaintiff’s claim, namely, an action founded on an alleged breach of the plaintiff’s American patent and the claim for a declaration that the defendant had breached the Business and Professions Code of the State of California.
[6] I reserved leave to the plaintiff to file further submissions as to the Court’s
jurisdiction to hear and determine the third and fourth causes of action.
[7] On 4 May 2012, Mr Thwaite filed on behalf of the plaintiff a memorandum of supplementary submissions which responded to reservations expressed in the interim judgment about the jurisdiction of this Court over the alleged infringement of a patent granted outside New Zealand.
[8] In the interim judgment, I referred to a judgment in the Chancery Division of the England and Wales High Court in Coin Controls Limited v Suzo International
(UK) Limited.2 Mr Thwaite correctly observed in his supplementary submissions that Coin Controls did not appear relevant to the fourth cause of action. And although he sought judgment on the fourth cause of action, he did not address the jurisdiction of this Court to grant relief for breaches of a California statute.
The jurisdiction of the New Zealand courts to enforce foreign-registered patents
[9] Although previous decisions have addressed the jurisdiction of the courts in foreign copyright cases, no New Zealand cases have considered the specific issue which arises here: whether a New Zealand court can entertain a claim for the breach, in the United States of America, of an American patent.
[10] In Atkinson Footwear Ltd v Hodgskin International Services Ltd,3 Tipping J was faced with an application to restrain the defendant from breaching the plaintiff’s copyright in Australia. He held that New Zealand copyright relates only to New Zealand and that acts done outside New Zealand do not constitute an infringement of New Zealand copyright.
[11] In Sony v Van Veen,4 MacKenzie J declined to follow Atkinson. In that case, the Judge was considering the justiciability in New Zealand courts of breaches of United Kingdom and Hong Kong copyright in those jurisdictions. He referred to a decision of the English Court of Appeal where the issue was whether the English courts had the jurisdiction to entertain a claim in respect of an alleged infringement of Dutch copyright in the Netherlands.5 Noting that the English Court of Appeal had found that there was jurisdiction in that case, MacKenzie J emphasised the distinction between claims regarding the validity or existence of rights and claims about the infringement of the unchallenged rights of the plaintiff.
[12] Finding that the claim was justiciable in New Zealand, the Judge observed that it was not clear why, when no issue of validity arose, jurisdiction should be
2 Coin Controls Limited v Suzo International (UK) Limited [1999] Ch 33, [1997] 3 All ER 45.
3 Atkinson Footwear Ltd v Hodgskin International Services Ltd (1994) 31 IPR 186.
4 Kabushiki Kaisha Sony Computer Entertainment & Ors v Van Veen & Anor (2006) 71 IPR 179.
5 Pearce v Ove Arup Partnership Ltd [1999] 1 All ER 769.
excluded simply because a question of validity would have fallen to be determined by foreign law.
[13] In Coin Controls, Laddie J held that English courts should not assume jurisdiction over patent infringements where the patents in question had been granted outside of the United Kingdom. In reaching that conclusion, the Judge drew heavily on an earlier decision of Aldous J where the plaintiff had applied for a declaration regarding patent infringement in Germany and France.6 However, Aldous J’s views on justiciability in that case were expressly obiter dicta, the action having been struck out on other grounds.
[14] Neither Plastus Kreativ nor Coin Controls was referred to by MacKenzie J in Sony. Nonetheless, MacKenzie J’s decision reflects an emerging trend towards the international enforcement of intellectual property rights, especially in cases where the validity of those rights is not challenged. That trend is demonstrated by the recent United Kingdom Supreme Court decision of Lucasfilm v Ainsworth.7
[15] The issue that arose in Lucasfilm was akin to that in Sony, the UK Supreme Court having to determine whether the English courts could exercise jurisdiction in a claim for infringement of copyright committed outside the European Union in breach of the copyright law of a non-Union state.8 The Court held that there was such jurisdiction, observing that much of the underpinning of the Moçambique rule,9 which had prohibited such actions, had been eroded.10
[16] Although the dicta in Lucasfilm do not specifically extend to the situation at hand, the reasoning of the Supreme Court is highly persuasive. The Court concluded that developments in European law reflected a similar international trend pointing
towards adjudication of foreign intellectual property rights being appropriate.
6 Plastus Kreativ AB v Minnesota Mining and Manufacturing Co [1995] RPC 438.
7 Lucasfilm Limited & Ors v Ainsworth & Anor [2011] UKSC 39
8Jurisdiction in cases involving European law must be decided according to the Brussels I Regulation
9 So named for the case of British South Africa Co v Cia de Moçambique [1893] AC 602.
10 At [105].
[17] That recognisable international trend must be weighed against the reservations of the Supreme Court in Lucasfilm that:11
All that is left of the Moçambique rule...is that there is no jurisdiction in proceedings for infringement of rights in foreign land where the proceedings are ‘principally concerned with a question of the title, or the right to possession of that property’.
...
It is possible to see how the rationale of the Moçambique rule can be applied to patents, at any rate where questions of validity are involved...
[18] Despite the fact that those comments specifically exclude the present case from the ratio in Lucasfilm, I am persuaded, for two reasons, that the New Zealand courts should have jurisdiction to determine the plaintiff’s third cause of action. First, I am influenced by the aforementioned trend towards the international enforcement of these types of rights, as demonstrated by the cases cited above. Second, I note that no issue of validity of the American patent is raised in the present case. Had the defendant taken some steps in the proceeding and raised the issue of validity of the American patent, there may have been an arguable case for this Court declining jurisdiction in favour of a court in the granting jurisdiction. That is not the case, however; the defendant has taken no step so no issue of forum non conveniens arises. I am prepared to assume, in the absence of opposition from the defendant,
that this Court has the jurisdiction to determine the plaintiff’s third cause of action.12
[19] The evidence satisfies me that the American patent was validly granted and is in force, and that it has been breached by the plaintiff. As I held in the interim judgment, the defendant arranged for the manufacture outside the United States of America of an unknown number of its bottle openers, and then imported them into the United States. There is no reason to doubt the plaintiff’s assertion that, in May
2011, the defendant was continuing to market and/or sell copies of its bottle opener
that are identical to the plaintiff’s bottle opener. Online distribution occurs in nations
11 At [105] – [106].
12 As I was in the final stages of drafting this judgment, I came upon an article analysing the potential impact of the Lucasfilm decision: Rachel Mansted “Jurisdiction over foreign
intellectual property law: The force is strong” (2012) 86 ALJ 489. That article supports my view that the trend is towards the expansion of justiciability of foreign intellectual property law, noting the difference between claims concerned with validity and those concerned with infringement and observing (at 503) that “there is nothing to prevent the awarding of damages for the infringement of a foreign patent....”
which have access to the world-wide web, including New Zealand and the United
States of America.
[20] I am also satisfied that the plaintiff has suffered loss through the breach of the
American patent, for the reasons set out at [41] – [43] of the interim judgment.
Relief
[21] The relief sought by the plaintiff in respect of the third cause of action was essentially the same as that sought in respect of the second cause of action, which I dealt with from [53] of my interim judgment. Mr Thwaite accepted in submissions that damages under the second cause of action were “likely to be minimal, and in any event duplicative of the damages under the third cause of action”.
[22] The one difference between the damages sought under the second cause of action and those sought in relation to the third cause of action was that with regard to the latter the plaintiff also sought “an increase in damages, up to three times the amount found or assessed”. He argued that American patent law allowed for an increase in damages where there had been wilful behaviour by the defendant and that consequently any damages awarded should be doubled.
[23] However, the measure or quantification of damages is generally regarded as a question of procedure governed by the law of the forum (lex fori) rather than the lex causae.13 It is, therefore, New Zealand law which should govern the quantification of damages. In those circumstances, the increase in damages sought by the plaintiff not being a recognised remedy in New Zealand, I am unable to grant the increased damages sought.
Alleged breach of the California Business Code
[24] As I have said, Mr Thwaite has not addressed the jurisdiction of this Court to grant relief for breaches of a California statute. There is not, in my view, any
established basis on which this Court can grant such relief and I decline to do so.
13 Chaplin v Boys [1971] AC 356.
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Toogood J
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