Philips Domestic Appliances & Personal Care BV v Salton Europe Ltd & Ors [2004] EWHC 2092 (Ch)

Case No HC04C00732[2004] EWHC 2092 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate Friday, 30 th July 2004
B e f o r e :
THE HONOURABLE MR. JUSTICE LADDIE
Between
PHILIPS DOMESTIC APPLIANCES AND PERSONAL CARE B.V.Claimant
(Based on the computer-aided transcript of the Stenograph notes ofMarten Walsh Cherer Ltd., Midway House,27-29 Cursitor Street, London, EC4A 1LT.Telephone Number: 020-7405 5010. Fax Number: 020-7405 5026)
MR. HUGO CUDDIGAN (instructed by Messrs. Freshfields) for Philips Domestic Appliancesand Personal Care BV.MR. JAMES ST. VILLE (instructed by Messrs. Eversheds) for Salton Europe Limited.MR. ROBERT ONSLOW (instructed by Messrs. Hammonds) for Electrical & Electronics Limited.Hearing Hearing date: 26 - 28 July, 2004
JUDGMENTMr. Justice Laddie:
[1]This is the judgment on a number of interim applications in a multi-party dispute relating to coffee-making machines. To understand who the parties are and their relationship to each other, it is necessary to know something of the background.[2]In October 1997 a consortium consisting of Electrical & Electronics Limited (“EE”), a Hong Kong company which has been joined in these proceedings, Sara Lee Corporation and its subsidiaries Duowe Egberts and Martex (two Netherlands companies) started work on designing an automatic coffee maker called the Café Solo. I understand that that development went quite some distance. Multiple working prototypes were produced. Towards the end of 1998 Philips Domestic Appliances and Personal Care B.V. (“Philips”), another Netherlands company which is also a party to this action, joined the consortium. At that time, or shortly thereafter, the coffee makers themselves and the project were renamed “Café Senseo”.[3]On 22 November 2001, Philips entered into a development and purchase agreement with EE. Under this, Philips would purchase Café Senseo machines from EE and they would be supplied in accordance with call off orders to be placed by Philips. The agreement includes a clause in the following terms:
“36. Jurisdiction. This Agreement and any modification or renewal thereto shall be governed by the laws of Hong Kong. All disputes under the Agreement shall be settled in the courts of Hong Kong.”
[4]It is suggested that, in the expectation that this relationship would result in large purchase orders from Philips, EE expanded its manufacturing capacity and took on additional staff.[5]Coffee makers designed under the agreement were made by EE and supplied to Philips. However, in July 2003 Philips ceased purchasing. The reasons for that have not been canvassed before me. It appears that EE takes the view that Philips left them high and dry with large but now underutilised manufacturing capacity. Unless alternative products were ordered job losses would be caused. In any event, EE has established a relationship with another Hong Kong company, Salton Hong Kong Limited (“SHK”) which is also a party to these proceedings. They entered into an agreement (“the 2000 Agreement”) which related to a wide range of household appliances and under which EE would manufacture for supply to SHK. This contains a non-exclusive jurisdiction clause in favour of the courts of Hong Kong. As explained below, the relevance of this agreement to the issues before me is in dispute.[6]Whatever the contractual relationship between EE and SHK, they co-operated in the design and manufacture of a new coffee maker, which was intended to be a direct competitor of the Philips’ Senseo product. This machine was called the “One:One” or “Uno:Uno”, depending on the market into which it was to be sold. It appears that on a number of occasions during the development stage, EE and SHK discussed the need to avoid any possibility of Philips being able to interfere with their sales. It appears that EE were mainly responsible for the internal design of the One:One. They are said to have designed, or had designed on their behalf, the software which controls how the machine works.[7]There is a dispute between EE and SHK as to whether the 2000 Agreement is the one under which the One:One was designed, manufactured and sold. EE says that those activities were conducted under and by reference to the terms of another, unsigned agreement. Mr. Onslow, who appears for EE, does not suggest that this dispute can be resolved at this stage. For present purposes I will take it to be at least arguable that the 2000 Agreement is the one which is relevant to the One:One transactions. In that respect it is of significance that under clause 9 of the latter EE gave a warranty that “the products, including product labelling, shall not infringe any patent, copyright or other property rights of any person.”[8]On 24 May 2003, Philips started proceedings in Hong Kong under the Philips/EE development and purchase agreement in respect of the One:One machine. That litigation is proceeding very slowly due to numerous extensions of time being sought by Philips. Many of those extensions have been agreed by EE. It appears that neither party has pressed for those proceedings to speed up.[9]On 18 February 2004, Salton Inc., a sister company of SHK or its parent, applied to and was joined in those proceedings. Meanwhile, on 14 February 2004 Philips had started a second action in Hong Kong against EE for infringement of copyright. Since the allegations of copyright infringement are central to the proceedings before me, as they are to the second Hong Kong action, I should explain how they arise.[10]As mentioned above, each One:One coffee machine incorporates and is controlled by a computer programme. This controls such things as the cycle time, the water pumps and so on. Computer programmes, if original, are protected, so I understand, by all, or virtually all, national copyright laws. They are protected under the Copyright, Patents & Designs Act 1988 (the “1988 Act”) in this country, and under the copyright legislation in Hong Kong. The latter is, in major respects, the same as the Copyright Act 1956, which was replaced in the United Kingdom by the 1988 Act.[11]Philips inspected a One:One machine and analysed its computer programme. It came to the conclusion that, save in some minor respects, it was a very close copy of its own programme for controlling the Senseo coffee maker. Since Philips claimed copyright in its own programme, if its conclusions as to the degree of similarity between the two are correct, it would follow there is infringement, no argument of licence having been advanced by EE, SE or SHK.[12]The nature of Philips’ case on infringement is set out in two witness statements of Mr. de Haan and Mr. Nicolai, who were responsible for the development of the software used in the Senseo coffee maker. These witness statements were signed in late February of this year when Philips launched an application for a summary judgment in the current proceedings. For reasons which will be explained below, that application is still pending. Mr. de Haan decompiled the programs for the one:one and the Senseo and compared them. He came to the conclusion that they were almost identical. He produced a print-out of the two programs (his Exhibit TDH4) which allows one to see the two programs side-by-side. To the uninitiated they certainly look almost identical. He went on to explain:(a) that the sequence of “operators” and “operands” – that is, lines which explain what the code does and the data and its location which is to be utilised – was too similar to be coincidence.(b) He and Mr. Nicolai had chosen in which memory location to store various “flags” and “variables”. Which of these is put in which location is a matter on which the programmer has a free hand. In substance the same locations are used for the same flags and variables in the one:one software.(c) The Senseo software contains a series of commands to control a valve which was present in an early prototype. Since the valve is no longer present the retention of these commands perform no function. Indeed, it only uses up memory. In the one:one there is also no valve, yet the same functionless commands are present.(d) the Senseo software contain lines of code which perform no function in controlling the coffeemaker but act rather like notes to help a programmer to understand what the various functional parts of the program are doing. The content, number and placement of these lines of code are said to be arbitrary. The one:one software contains nearly identical code in nearly identical places(e) There are three minor errors in the Senseo software, two of which are reflected in slight malfunctioning (but in an insignificant way) of the coffeemaker itself. All three errors are to be found in the one:one software, which malfunctions in the same way.[13]As mentioned above, because it believed its copyright software had been copied, Philips commenced the second set of proceedings in Hong Kong, this time for copyright infringement. In fact, those proceedings relate to alleged infringements of other claimed copyright as well as that relating to the programs. I understand that that second set of Hong Kong proceedings is being pursued no more vigorously than the first.[14]In the meantime, because it had discovered samples of the one:one machine were being sold in the United Kingdom market, on 22 December 2003 Philips sent a threatening letter to Salton Europe Limited (“SE”), also a party to these proceedings. In that letter, among other things, it complained about the infringement of its copyright in its software.[15]That letter was followed by a letter before action from Philips’ solicitors, Freshfields Bruckhaus Deringer, dated 13 February, complaining about the copying of the Senseo software. Undertakings were sought. No undertakings having been given, on 1 March 2004 Philips commenced the current proceedings against SE for copyright infringement.[16]I should mention that there have been other proceedings relating to these coffeemakers. In particular, two sets of proceedings have been commenced in the United States where the major protagonists are Philips and another company in the Salton group, namely Salton Inc. EE has intervened in those proceedings. Apparently they have been stayed, at the suggestion of EE, because of the existence of the two sets of earlier proceedings in Hong Kong. Those stays are currently the subject of an appeal by Philips. In any event, whether by virtue of those proceedings or otherwise, Philips learnt that one or other part of the Salton Group had been involved in the development of the one:one. Because of that, in its pleadings in the United Kingdom proceedings, Philips alleges that SE knew or had reason to believe that the one:one coffeemaker comprised infringing copies of the Senseo program.[17]A week after the commencement of these proceedings, Philips launched the application for summary judgment referred to above. That has prompted a flurry of activity.[18]First, SE made a Part 20 claim against SHK. The one:one coffeemaker in suit in this country is sold and supplied by SHK to SE. SE said, and SHK does not dispute, that the coffeemaker had been delivered under the terms of a contract between SE and SHK. That contains, among other things, a warranty from SHK in favour of SE that the goods would not infringe any copyright in the United Kingdom. Although SHK is a foreign corporation, SE did not seek permission to serve out because SHK accepted service through its solicitors, who are also SE’s solicitors, and has submitted to the jurisdiction. No one has suggested that there was anything improper in that.[19]The next step was that SHK immediately applied to join EE as a Part 20 defendant to the Part 20 claim brought against it by SE. Permission to serve out was given by Master Bowman. Thus EE has been brought into these proceedings. It objects to that.[20]As originally formulated, SHK’s Part 20 claim against EE was based on the contractual warranty given by EE to SHK under the 2000 Agreement referred to above. It said that EE had promised that the products it had delivered to SHK would not infringe copyright. Those products had been sold on to SE for distribution and sale in the United Kingdom where, if Philips’ case here is right, they infringe copyright. The Part 20 claim made by SE against SHK, if successful, arises out of and is a result of the fact that the products infringe Philips’ copyright. Therefore EE is liable to SHK under the warranty. I did not understand Mr. Onslow to dispute that as between SHK and EE this is an arguable claim.[21]Very recently application has been made to amend the Part 20 claim against EE. It is argued that EE authorised SE to commit the acts which amount to infringement of Philips’ copyright (assuming, of course, that Philips’ claim is upheld). As a result, EE is a joint tortfeasor with SE. Furthermore, because of that, any claim made against SHK by SE is attributable to EE’s acts of authorisation. Therefore both SE and SHK have claims for contribution against EE. The amendment would therefore not only add a new head of claim, but it would also introduce for the first time a Part 20 claim by SE against EE. EE resists the amendment. I should mention that SE has now offered undertakings to Philips not to offer for sale or distribute one:one coffeemakers with the accused software until after disposal of Philips’ application for summary judgment.[22]This brings me to the current applications. First there are two applications by EE. One is for a declaration that EE is not subject to the jurisdiction of the English courts. Second, and in the alternative, it seeks a stay of the English proceedings pending the outcome of the Hong Kong proceedings (presumably meaning the second set of proceedings concerning copyright).[23]SE and SHK, represented before me by Mr. St. Ville, resist the first application but support the second (and apply for a like stay on their own behalf) and, as mentioned above, seek permission to amend the Part 20 claim against EE. For its part Philips, represented before me by Mr. Cuddigan, resists the application for a stay but is more or less indifferent to the other squabbles between SE, SHK and EE. This activity has had the effect of delaying determination of Philips’ application for summary judgment.[24]It seems to me that the convenient course is to consider the issues concerning the Part 20 claims first before looking at the question of a stay.[25]Mr. Onslow runs two points. In respect of the existing claim brought by SHK against EE pursuant to the warranty in the 2000 Agreement, he argues that this is not a proper Part 20 claim in the sense that, even if it is an arguable claim, it is not one which can be added by the Part 20 procedure to this action for copyright infringement between Philips and SE. Second, as regards the application by SE and SHK to amend to add authorising, he accepts that, were that an arguable claim, it could be brought under Part 20, but he says it is not arguable. He also says that even if both those points fail, the court’s discretion should be exercised against bringing his clients into the English proceedings.

Service out

[26]To obtain permission to serve out on EE, SHK has to demonstrate that giving such permission is within the powers of the court as defined by Part 6, rule 20. So far as material, this provides: “6.20 In any proceedings to which rule 6.19 does not apply, a claim form may be served out of the jurisdiction with the permission of the court if …. (3) a claim is made against someone on whom the claim form has been or will be served and -(a) there is between the claimant and that person a real issue which it is reasonable for the court to try; and(b) the claimant wishes to serve the claim form on another person who is a necessary or proper party to that claim. (3A) a claim is a Part 20 claim and the person to be served is a necessary or proper party to the claim against the Part 20 claimant.” (a) there is between the claimant and that person a real issue which it is reasonable for the court to try; and (b) the claimant wishes to serve the claim form on another person who is a necessary or proper party to that claim.[27]Mr. Onslow places particular emphasis on the words in Part 6, rule 20(3A), “to the claim against the Part 20 claimant”. He says that first one has to identify the claim against that party and then determine whether the person out of the jurisdiction is a party (whether necessary or proper) to that claim. Thus in this case on the unamended pleadings, the Part 20 claimant is SHK. The claim against it is the one brought by SE under the terms of the supply contract between those two companies. It is not the claim for copyright infringement brought by Philips against SE. There can be no doubt that EE is not a party to that contract and has no liability arising out of it. The contrary is not asserted. It follows that the court has no power to give permission to serve out of the jurisdiction. Mr. Onslow argues that the proposed foreign Part 20 defendant must be “co-liable” with the Part 20 claimant to the person making the claim against the latter. In other words, the rule should be read as if it means that the foreign Part 20 defendant must be liable to the original claimant for the same cause of action as has been brought by that claimant against the Part 20 claimant.[28]In my view, that is not what the rule means. Were it otherwise one of the cardinal principles underlying the CPR would be breached; namely the objective of preventing multiplicity of proceedings. That this is so is confirmed by the notes on page 208 at paragraph 6.21.29 of the White Book, which include the following:
“The court’s power to permit service out of the jurisdiction under rule 6.20(3) is no less wide than the court’s power to add or substitute a party under rule 19.1(2)(sic) (United Film Distribution v. Chabria, The Times, April 5, 2001 CA.)”
[29]This passage contains a typographical error. The reference should have been to rule 19(2)(2) which reads:
“The court may order a person to be added as a new party if – (a) it is desirable to add the new party so that the court can resolve all the matters in dispute in the proceedings; or (b) there is an issue involving the new party and an existing party which is connected to the matters in dispute in the proceedings, and it is desirable to add the new party so that the court can resolve that issue.”
[30]Although counsel did not take me to United Film Distribution, the reference to which is [2001] EWCA Civ. 416, it is clearly relevant. That case did not involve a Part 20 claim, but it did involve parties out of the jurisdiction who said that they should not have been served because they were not necessary and proper parties to the proceedings brought by the claimants against the other defendants.[31]The nature of the argument can be seen from the following passage. It is clearly very similar to Mr. Onslow’s submission. Blackburne J, giving a judgment with which the other two members of the court agreed, said: “33. Mr. Auld QC for the claimants submitted that the father and Fairdeal are necessary or proper parties to the claims being brought by both claimants against persons on whom the proceedings had been duly served. Put shortly, he submitted that the claims against the father and Fairdeal arise out of the same facts, transactions and arrangements as do the claimants’ claims against the other defendants. “34. Mr. Page [counsel for the party outside the jurisdiction] initially submitted that paragraph (c) only applies where the party to be served is a necessary or proper party to the very cause of action against a person who has been duly served. He later accepted that this was too narrow but submitted that it was not sufficient merely that there was a close connection between the claims against the person already duly served and the claims against the person to be served if the claims – i.e. the facts giving rise to the claims – were not the same. He submitted that the claims by UPIE against the father and Fairdeal failed to meet this requirement. “35. I consider that Mr. Page stated the position too narrowly. “36. The meaning of the expression ‘proper party’ in the phrase ‘necessary or proper party’ appearing in paragraph (c) of Order 11 rule 1(1) was explained by Lord Esher in Massey v. Heynes [1881] 21 QBD 330 at 338: ‘The question, whether a person out of the jurisdiction is a “proper party” to an action against a person who has been served within the jurisdiction, must depend on this, -- supposing both parties had been within the jurisdiction would they both have been proper parties to that action? If they would, and only one of them is in this country, then the rule says that the other may be served, just as if he had been within the jurisdiction.’ “In the same case Lindley LJ said (at 338): ‘Where the liability of several persons depends upon one investigation, I think they are all ‘proper parties’ to the same action and, if one of them is a foreigner residing out of the jurisdiction, rule 1(g) of Order XI applies.’ “That was said in reference to rule 1(g) of Order XI which was the then equivalent of what later became paragraph (c) or Order 11 rule 1(1) and what is now rule 6.20(3) of the Civil Procedure Rules. I am not aware that any doubt has ever been cast on the accuracy of that approach to the meaning of ‘proper party’ as used in Order 11 rule 1(1)(c).” ‘The question, whether a person out of the jurisdiction is a “proper party” to an action against a person who has been served within the jurisdiction, must depend on this, -- supposing both parties had been within the jurisdiction would they both have been proper parties to that action? If they would, and only one of them is in this country, then the rule says that the other may be served, just as if he had been within the jurisdiction.’ ‘Where the liability of several persons depends upon one investigation, I think they are all ‘proper parties’ to the same action and, if one of them is a foreigner residing out of the jurisdiction, rule 1(g) of Order XI applies.’[32]Then, having referred to an unreported decision of Chadwick J (as he then was), Blackburne J continued as follows:
“38. Although the Rules of the Supreme Court have been replaced by the Civil Procedure Rules, it is not suggested that the power of the court to give permission for service out under rule 6.20(3) is narrower than under Order 11 rule 1(1)(c) or that the circumstances in which a person may properly be joined as a defendant to a claim are narrower under rule 19.2(2) of Civil Procedure Rules than under its relevant predecessors, namely Order 15 rules 4(1) and 6(2)(b) of the Rules of the Supreme Court. Rule 19.1(2) of the Civil Procedure Rules provides that the court may order a person to be added as a new party if (a) it is desirable to add the new party so that the court can resolve all the matters in dispute in the proceedings or (b) there is an issue involving the new party and an existing party which is connected to the matters in dispute in the proceedings, and it is desirable to add the new party so that the court can resolve that issue. The court’s power to add or substitute a party is wide. Although the expression ‘necessary or proper party’ to the claim does not appear in that rule it can scarcely be supposed that the court would order a person to be added or substituted as a party on the ground that it is ‘desirable’ to do so if that person were not either a necessary or a proper party to the claim in question. In my judgment the court’s power to permit service out under what is now rule 6.20(3) (formerly Order 11 rule 1(1)(c)) is not less wide than the court’s wide power to add or substitute a party under rule 19.1(2).”
[33]Although that was a decision dealing with rule 6.20(3), it appears to me that it has direct application also to a case like this concerned with rule 6.20(3)(a). The critical words, namely “necessary or proper party”, are the same. Further, I can see no merit in an argument which would involve the same core issue, namely whether the one:one software is an infringing copy of the Senseo software, to be determined as between Philips, EW or SHK in one action and between SHK and Philips in another. I reject Mr. Onslow’s argument.[34]Since (subject to questions of discretion) EE must stay a party to the English proceedings, it might be thought that little point would be served by considering the application to amend the Part 20 pleadings against it. However, since Mr. Onslow has submitted that the amendment clearly does not raise an arguable claim, I must consider them.[35]The relevant pleading is in the following terms:
“5. E&E authorised Salton Europe and/or Salton Hong Kong to issue to the public in the United Kingdom copies of the said software in the said coffee makers and authorised members of the public to copy that software when the coffee makers are used. “6. Accordingly in so far as Salton Europe is liable in respect of any damage suffered by Philips, E&E is liable in respect of the same damage and Salton Europe is entitled to an indemnity, alternatively a contribution pursuant to section 1(1) of the Civil Liability (Contribution) Act 1978.”
[36]This involves a number of propositions. First, “issuing to the public” is an act of infringement of the relevant copyright. The issuer is an infringer (questions of licence, substantiality and subsistence aside). Therefore it is said SE or SHK have infringed by issuing to the public in England. In fact, as far as I can tell, there is no relevant factual basis for that allegation against SHK. If there was any basis for it SHK would have been liable as an infringer and, presumably, Philips would have sued it here. It has not. However, the allegation insofar as it relates to SE is consistent with Philips’ claim. Indeed it repeats, in effect, the allegation in paragraph 13 of Philips’ Particulars of Claim.[37]Second, there is an allegation of “authorising”. Under the 1988 Act, as with its predecessors, it is an infringement of copyright to authorise someone else to commit a primary act of infringement. So, as Mr. Onslow accepts, if EE authorised SE to issue copies of the one:one software to the public (i.e. by selling coffee makers containing that software), it will be an infringer as well – hence his acceptance that his construction of Part 6, rule 20(3A) referred to above would not help him. If this plea is good then EE is liable to Philips as an infringer just as SE is.[38]However, Mr. Onslow says it is unarguable that EE has authorised SE. He points to the fact that here EE, although involved in the original design work, plays no part in determining where the one:one coffee makers are sold. It is SHK which decides how many one:ones to buy and when and into which markets they go. None of this is disputed by Mr. St. Ville’s clients. Mr. Onslow says that “authorising” means giving authority or purported authority. He points out that there can be circumstances in which a person who commissions a manufacturer to copy a product may be liable for having authorised infringement. In relation to this he referred to Pensher Security Door Co. v. Sunderland City Council [2000] RPC 249. But he argues that this would be the first case in which a manufacturer is alleged to have authorised the commissioner. He points to the fact that EE had no power to prevent SHK from distributing the coffee makers wherever it likes. He points to the fact that, under the EE manufacturing agreement, the product has to be approved by Salton, EE has to manufacture the number of machines asked for by Salton, Salton has a right to reject the machines and all machines produced by EE belong to Salton. None of this, he says, amounts to authorising.[39]In addition to this he complains, rightly in my view, of the fact that SE and SHK’s draft pleadings amount to nothing more than bald assertion. Nothing is pleaded to support the allegation. This prompted Mr. St. Ville to produce a document entitled “Particulars of Authorisation” during the course of the hearing.[40]Before turning to that, I should mention one point which, at one stage, appeared to be a fundamental building block in Mr. St. Ville’s argument. It was said, or hinted, that because EE had purported to write the software in the one:one coffee maker, it had its own copyright in that software. EE’s rights in that copyright are not exhausted by selling them to SE in Hong Kong (a proposition for which there is ample authority). It follows therefore that any person who gets hold of a one:one coffee maker and imports it and then distributes it to the public in England is breaching EE’s copyright. The reason EE does not sue SE is because, implicitly, it has licensed and thereby authorised SE to distribute in the United Kingdom.[41]If this was the argument relied on, the repercussions would be far reaching indeed. For example, were Kodak to sell a consignment of cameras bearing its trade mark in New York, and those cameras ended up, by virtue of grey importing, in the hands of a dealer in this country and were that dealer then to distribute to the public here, then Kodak, which would have non-exhausted rights in its trade marks here, would be liable for authorising such distribution, even if the distribution here was many removed from the original sale by Kodak in New York, and even if Kodak was not supportive of the grey market. In such circumstances, if the cameras or something in them infringed English copyright, Kodak would be liable as an authoriser.[42]Although Mr. St. Ville hesitated at first, I understood him to back off from this proposition. This is reflected in the Particulars of Authorisation which read as follows:
“Particulars of Authorisation. (a) E&E developed the software for the uno:uno coffee maker and/or had that software developed for it. “(b) In particular E&E allege in paragraph 13 of the Witness Statement of Paul Harris dated 22 July 2004 that the said software was developed on its behalf by its employee Mr. Sao Min Hai. “(c) E&E was well aware that the coffee machines including the said software were to be sold by Salton Europe in the UK and therefore authorised the issue of the software used in those coffee machines to the public in the United Kingdom. “(d) In particular the machines were packaged in boxes which were branded ‘Uno:Uno’, were fitted with English plugs (which E&E was responsible for fitting) prior to being shipped to the UK, were shipped with an instruction leaflet inserted into individual boxes of the Uno:Uno which carried a UK telephone number 0845 658 9700 for customer requests for spare parts, a request for a cheque/postal order referring to pounds sterling, Salton Europe’s address in Failsworth in the UK and were shipped with other leaflets including a guarantee and customer survey leaflet which was to be completed by customers and returned, freepost, to an address in Kent, a promotional leaflet for coffee and tea pods which stated the prices of the pods in sterling and a leaflet for the ‘Uno:Uno pod brewing system’ which refers to Salton Europe’s address in Manchester. “(e) By supplying the Salton Group (including Salton Hong Kong and Salton Europe) with the software within the uno:uno coffee makers for distribution in the United Kingdom from about October 2003 onwards having designed or purported to have developed that software, E&E were authorising Salton Europe and Salton Hong Kong to issue copies of that software to the public in the United Kingdom and authorising customers who used the coffee machines to copy that software when it was used in the microcontroller in the uno:uno coffee maker.”
[43]The law on this subject was reviewed by the House of Lords in CBS Songs Ltd v. Amstrad Consumer Electronics Plc [1988] 1AC 1013. In that case Amstrad sold hi-fi equipment with twin cassette decks which could be used by the owner to make high-speed copies of recorded music. This was how they were advertised to be used by Amstrad. The owners of the copyright in popular sound recordings sued Amstrad on the basis that it was authorising its customers to make copies of copyright sound recordings. There was no doubt that Amstrad knew that many customers would use their product in this way. The significant passage in the speech of Lord Templeman starts at page 1053 of the report, as follows: “In Falcon v. Famous Players Film Co. [1926] 2KB 474, the defendants hired to a cinema a film based on the plaintiff’s play. It was held that the defendants infringed the plaintiff’s exclusive right conferred by the Copyright Act 1911 to authorise a performance of the play. Here again, the hirer sold the use which was only capable of being an infringing use. Bankes LJ at page 491, following Monckton v. Pathe Frere Pathephone Ltd. and Evans v. Hultin, accepted that for the purpose of the Act of 1911 the expression ‘authorise’ meant ‘sanction, approve and countenance.’ Atkin LJ said at page 499: ‘to “authorise” means to grant or purport to grant to a third person the right to do the act complained of, whether the intention is that the grantee shall do the act on his own account, or only on account of the grantor;….’ “In the present case, Amstrad did not sanction, approve or countenance an infringing use of their model and I respectfully agree with Atkin LJ and with Lawton LJ in the present case [1986] FSR 159, 207 that in the context of the Copyright Act 1956 an authorisation means a grant or purported grant, which may be express or implied, of the right to do the act complained of. Amstrad conferred on the purchaser the power to copy but did not grant or purport to grant the right to copy. “In Moorhouse v. University of New South Wales [1976] RPC 151 in the High Court of Australia, where the facilities of a library included a photocopying machine, Gibbs J said at page 159: ‘a person who has under his control the means by which an infringement of copyright may be committed – such as a photocopying machine – and who makes it available to other person, knowing, or having reason to suspect, that it is likely to be used for the purpose of committing an infringement, and omitting to take reasonable steps to limit its use to legitimate purposes, would authorise any infringement that resulted from its use.' “Whatever may be said about this proposition, Amstrad have no control over the use of their models once they are sold. In this country the duties of some libraries are defined by the Copyright (Libraries) Regulations 1957 (S.I. 1957 No. 868) made under section 15 of the Act of 1956. “In CBS Inc. v. Ames Records & Tapes Ltd. [1982] Ch. 91, Whitford J held that a record library which lent out records and simultaneously offered blank tapes for sale at a discount did not authorise the infringement of copyright in the records. He said, at page 106: ‘Any ordinary person would, I think, assume that an authorisation can only come from somebody having or purporting to have authority and that an act is not authorised by somebody who merely enables or possibly assists or even encourages another to do that act, but does not purport to have any authority which he can grant to justify the doing of the act.’ “This precisely describes Amstrad. In RCA Corporation v. John Fairfax & Sons Ltd. [1982] RPC 91 in the High Court of Australia, Kearney J, at page 100, approved a passage in Laddie, Prescott & Vitoria, The Modern Law of Copyright (1980), para 12.9, page 403, in these terms: ‘a person may be said to authorise another to commit an infringement if the one has some form of control over the other at the time of infringement or, if he has no such control, is responsible for placing in the other’s hands materials which by their nature are almost inevitably to be used for the purpose of infringement.’ “This proposition seems to me to be stated much too widely. As Whitford J pointed out in the Ames case, at page 107: ‘you can home tape from bought records, borrowed records, borrowed from friends or public libraries, from the playing of records over the radio, and indeed, at no expense, from records which can be obtained for trial periods on introductory offers from many record clubs who advertise in the papers, who are prepared to let you have up to three or four records for a limited period of trial, free of any charge whatsoever.’ “These borrowed records together with all recording machines and blank tapes could be said to be ‘materials which by their nature are almost inevitably to be used for the purpose of an infringement.’ But lenders and sellers do not authorise infringing use.” ‘to “authorise” means to grant or purport to grant to a third person the right to do the act complained of, whether the intention is that the grantee shall do the act on his own account, or only on account of the grantor;….’ ‘a person who has under his control the means by which an infringement of copyright may be committed – such as a photocopying machine – and who makes it available to other person, knowing, or having reason to suspect, that it is likely to be used for the purpose of committing an infringement, and omitting to take reasonable steps to limit its use to legitimate purposes, would authorise any infringement that resulted from its use.' ‘Any ordinary person would, I think, assume that an authorisation can only come from somebody having or purporting to have authority and that an act is not authorised by somebody who merely enables or possibly assists or even encourages another to do that act, but does not purport to have any authority which he can grant to justify the doing of the act.’ ‘a person may be said to authorise another to commit an infringement if the one has some form of control over the other at the time of infringement or, if he has no such control, is responsible for placing in the other’s hands materials which by their nature are almost inevitably to be used for the purpose of infringement.’ ‘you can home tape from bought records, borrowed records, borrowed from friends or public libraries, from the playing of records over the radio, and indeed, at no expense, from records which can be obtained for trial periods on introductory offers from many record clubs who advertise in the papers, who are prepared to let you have up to three or four records for a limited period of trial, free of any charge whatsoever.’[44]In my view a number of matters are apparent from this passage. First, merely passing on something which will inevitably be used for infringement is not authorising. This was the incorrect suggestion in the First Edition of The Modern Law of Copyright. Second, as Lord Templeman said, “lenders and sellers do not authorise infringing use”. You have to do more than sell. Third, a crucial factor in a case like this is whether EE had any “control over the use” of its products “once they are sold”.[45]With these factors in mind, I can look again at the particulars relied on by Mr. St. Ville. Paragraphs (a) and (b) say nothing more than that EE was the originator of the offending programme. That makes no contribution to the plea of authorisation. Paragraph (c) is important. It is said that because EE is aware that the machines with software were to be sold in the UK, “therefore” it authorised the issue of the software to the public. This is in substance the principle set out in the First Edition of The Modern Law of Copyright which was rejected as unsound in Amstrad. Paragraph (d) adds nothing of substance. It is merely further particularisation of the preceding three paragraphs. Paragraph (e) is a repetition in rather longer wording of what was in (c). They show that EE knew where these coffee makers would eventually be sold, but knowledge of subsequent use is not authorisation of that use. What is missing is any suggestion that EE had some control over where the products were distributed once they had been sold to SHK. Indeed, there is no assertion that EE even had a voice in the decision to sell in the United Kingdom.[46]Mr. St. Ville argues that whether there is authorisation is a question of fact and it is unsafe to resolve that against his clients at this stage. The matter should go to trial. I do not agree. There is no dispute as to the facts. They are before the court. Furthermore, EE has put forward those facts which it says shows an arguable case of authorising. For the reasons set out above, they fail to do so. I will not allow the amendment.[47]This only leaves the issue of discretion in relation to EE’s argument against remaining in these proceedings. Mr. Onslow argues that, even if his client is a proper or necessary party (as I have found), I have a discretion not to allow service out of the jurisdiction. Assuming that I have such a discretion, it seems to me that there would need to be compelling reasons to exercise it so as to exclude from the action someone who is, ex hypothesi, a necessary and proper party. I need not investigate this issue further because it appears to me that no reasons have been put forward other than that EE is a foreigner. That is not enough. It follows that EE stays in the proceedings but that it does not face a claim of authorising.

The application for a stay

[48]This leads to the question of a stay. This subject took up a lot of the time in this hearing and in relation to it I was taken to a considerable number of authorities. Mr. Onslow argues that the parties should be required to litigate in Hong Kong first. That was where the first allegation of copyright infringement was made. That is where at least some of the witnesses are. The cost of a disputed summary judgment application here, he says, would be disproportionate. It would be much easier and, in the medium term, cheaper to sort out all the problems in Hong Kong. If the court there were to decide that EE had infringed Chinese copyright, in substance that would determine the issue for all other countries. Furthermore, on a purely practical level, a success against EE in Hong Kong would remove the source of offending software and therefore would be likely to put an end to the cause of friction and litigation around the world. In addition to all of these factors he says that the primary objective of the litigation here was to facilitate the application for summary judgment. He points to the fact that Philips’ stated position, confirmed by Mr. Cuddigan before me, is that, were the summary judgment application to fail, his client would be content for the proceedings here to be stayed pending the outcome of the Hong Kong actions. As far as the application for summary judgment is concerned, Mr. Onslow says that there is no reason why that could not be pursued in Hong Kong in the copyright proceedings there.[49]Mr. Onslow and Mr. St. Ville also suggest that the application for summary judgment here is bound to fail. Mr. Onslow explains why, in his view, the similarities between the two pieces of software are misleading. He suggests that Mr. De Haan’s evidence should be treated with caution. The similarities, or at least some of them, were artefacts. Further, there were serious doubts as to Philips’ claim to copyright. The version of the software relied on by Philips was the 14th or 15th in a series. It will be necessary to look at previous versions, not only to see if the one relied on is original but also to determine which parts (if any) are particularly important so as to inform the decision whether the allegedly copied code is a substantial part of the copyright work.[50]In my view, these latter attacks on the substance of the summary judgment application are misconceived. As far as the question of copying is concerned, Salton and EE have known what Philips’ case was for five months. Not once in that time has any attempt been made to answer the allegations. At any time it would have been open to Mr. Onslow’s or Mr. St. Ville’s clients to put in evidence of independent creation. At any time they could have explained, for example, why the one:one software, like the Senseo software, contains instructions to a non-existent valve or why the same three bugs are to be found in each. They could have put in evidence from an independent expert. They have done none of these things. Mr. Onslow says that his clients only recently received a copy of Mr. De Haan’s exhibit TDH4 with the printed-out software comparison. However, it has never asked for a copy.[51]In relation to subsistence of copyright, the EE and Salton stance appears to be that, if they are lucky, disclosure of earlier versions of software will show that the version sued upon is too similar to its immediate predecessor to qualify as original. The copyright would then reside in an earlier version. Since, as I understand it, the earlier versions were written by Philips’ personnel, presumably the copyright in those earlier versions belongs to Philips as well. I do not understand how this would help Mr. Onslow’s or Mr. St. Ville’s clients.[52]In the end I do not need to resolve this dispute. For present purposes it is sufficient to say that I reject Mr. Onslow’s and Mr St. Ville’s suggestion that the application for summary judgment, whether brought here or in Hong Kong, is clearly doomed to failure. It appears to me to be a bona fide application, the outcome of which cannot be determined at this stage.[53]Mr. Cuddigan’s main submission in relation to the stay applications is that I have no power to stay these proceedings. He argues that the original action was between Philips and SE. They are both companies domiciled in the European Union and, for that reason, the question of jurisdiction is resolved definitively by the Judgments Regulation, EU Council Regulation No. 44/2001. The action has to be brought in the courts of the country in which the defendant is domiciled. That means, in this case, England. The fact that two other companies have been added to the proceedings under Part 20 does not in any way undermine the mandatory nature of the Regulation. He argues that what EE, SE and SHK are doing is challenging the jurisdiction of this court. The stay sought is in direct conflict with the Regulation.[54]Mr. Onslow and Mr. St. Ville say that this is to misunderstand their applications. The Regulation has two effects. First, it sets out rules which determine in which court, amongst all the courts of the Member States, an action shall be brought and secondly, and most importantly, it prohibits the other courts from accepting jurisdiction. Where there is multi-court litigation, with some of it being in a non-Member State, the Regulation cannot deprive the court of the latter State from hearing the action. The extent to which the Regulation binds in such a case is a difficult issue, at least part of which has quite recently been referred to the ECJ by the Court of Appeal.[55]Further, there is a potential trap in considering that all applications for a stay amount to a determination of a court’s jurisdiction. Although it is true that some stays do in effect terminate the litigation in a court, others do not. In the former group, a stay is like an order striking out the claim. The second is not. As Mr. St. Ville puts it, there are stays which do not terminate proceedings but which amount to exercises of the court’s case management powers and amount to no more than delaying an action. The stay sought here is, according to Mr. Onslow and Mr. St. Ville, of the latter type. Everyone agrees that the stay sought here cannot terminate this action. Even if the factual issues of originality, copying and substantial part are determined by the Hong Kong courts, those courts have no power to enforce UK copyright. Thus, even if Philips wins all points in Hong Kong, EE, SE and SHK accept that the case must return here so that the court here can grant the necessary injunction and other relief.[56]In addition to this, it is pointed out that Philips’ argument that the Regulation is mandatory is difficult to reconcile with its acceptance that if the application for summary judgment here fails it is content for these proceedings to be suspended pending the outcome of the Hong Kong action.[57]Although I have considerable sympathy for the argument that this is an application for a delay only, and that it is different in kind to an application for a stay which brings proceedings to a halt, I do not need to resolve that issue, nor analyse the case law relating to the Regulation. For present purposes I will assume that I have sufficient case management powers to order a stay of these proceedings so as to allow the Hong Kong proceedings to go to trial first. The question, on that assumption, is whether this is a case in which such a stay would be appropriate.[58]I start from the proposition that copyright is national and that, absent some provision like the Regulation or an exclusive jurisdiction clause in an agreement, has to be enforced through national courts. Notwithstanding his arguments as to the effect of the Regulation, even Mr. Cuddigan accepts that whereas English copyright has to be litigated here, Chinese copyright has to be litigated in China. He therefore accepts that there will necessarily be two sets of proceedings (or five if one counts the two US and Australian proceedings which have been commenced or threatened). Needless to say, Mr. Onslow and Mr St. Ville say the same thing. It follows that either all those proceedings progress at their own pace with the possibility of national courts giving conflicting decisions on the central and common factual issue, or some sequence is imposed on the conduct of the proceedings to reduce that possibility. Any such sequence, if it entails some cases being held back until a lead case was disposed of, could not only reduce the risk of inconsistent judgments but it could reduce the legal costs and administrative burden imposed on the parties by the litigation.[59]It appears to me that, all other things being equal, the sequential approach will frequently prove most efficient. In my view, all the parties, in substance, agree on this. No one wanted all the litigation to run simultaneously. Thus EE, SE and SHK want the Hong Kong proceedings to go first with the English proceedings put back, while in practice Philips also wants sequential cases. They want the English proceedings to go first, at least until after the summary judgment stage, and thereafter they are content, if they lose that application, for the English proceedings to be stayed pending resolution of the Hong Kong action.[60]At heart the difference between these two positions is not the desirability of a sequence being imposed but who imposes it. Philips wishes to adopt the sequence which it chooses. EE, SE and SHK wish the court to impose a sequence more to their liking.[61]It appears to me that, within fairly wide limits, a claimant can decide who he sues, where and when, and the court should be reluctant to interfere with that choice. Because of that he can select the order in which actions are pursued. In this dispute, Philips could have decided, had it wished, to sue in England first and waited to sue in the other countries later. I cannot see how the court could have interfered if it had done that.[62]Here, however, it has proceedings in two jurisdictions running simultaneously. In principle, I can see no reason why it should not be free to choose which to put first. If the court is to intervene it should only do so where there are compelling reasons for believing that some other sequence is to be preferred, particularly because some other sequence is fairer. In this dispute I have been unable to find any strong reason why the Hong Kong proceedings should be made to proceed in front of the English proceedings. The fact that the Hong Kong copyright action was commenced a few days before the English action is not significant. The fact that some of the witnesses are in China is not a major fact. The other witnesses are in Europe. Mr. St. Ville suggests that it would be easier for Dutch witnesses to fly to China than it would be for Chinese witnesses to obtain visas and fly here. Even if that is so, it is not a major point for two reasons. First, Philips is only intending to push the application for summary judgment in the English proceedings to the fore. They will not need the personal attendance of any witnesses for that application. Second, even if oral evidence were necessary the physical attendance of witnesses in court is not. The ability to take evidence by videolink allows much greater flexibility.[63]Mr. St. Ville and Mr. Onslow suggest that the costs of a summary judgment application here would be so great that they would exceed those of pursuing the trial in Hong Kong. I cannot see why that is so. If the summary judgment application succeeds here, it is quite likely that much of the substance will go out of the Hong Kong proceedings.[64]It is suggested that a major advantage of the Hong Kong proceedings is that, if successful, they would cut off the accused one:one software at source. That would render the rest of the national proceedings otiose, save in respect of damages. In my view, that is more theoretical than real. The facts here suggest that it is the Salton Group which is in the driving seat as far as distribution of one:one coffee makers is concerned. It was their product, made to their requirements, and only sold to them. Salton is as much the source as EE. The proceedings in this country are, in substance, attacking the source of these products.[65]There are, on the other hand, at least two reasons which point away from ordering a delay in the English proceedings. First, the fact that the Hong Kong proceedings have got nowhere in the 15 months since they were commenced is because it appears that no one has been interested to push them forward. I can see no reason why the court should force a party to delay proceedings he wants to prosecute with vigour in favour of proceedings which, apparently, no one wants to prosecute or at least prosecute with vigour. Second, as stated above, there are obvious potential benefits which may flow from Philips’ application for summary judgment here. In my view it would be a very strong thing for a court to prevent a litigant from trying to obtain the benefits of this useful procedure. In effect, the court would be exerting pressure on Philips to seek summary judgment in Hong Kong. However, Philips may have very good reason for not wanting to pursue such an application there.[66]I should mention that Mr. Onslow argues that the commencement of proceedings here was an attempt by Philips to circumvent the exclusive jurisdiction clause in the 2001 Development and Purchase Agreement with EE. I do not accept that. To enforce English copyright Philips has no alternative but to sue here. I have not been shown any material which suggests that Philips’ motives were as alleged by EE. I therefore do not need to consider what, if any, impact there would have been had Philips entertained such motives.[67]For the above reasons, I can see no reason why the court should force Philips to delay the English proceedings so as to allow the Hong Kong proceedings to go first. Even if I have the discretion suggested by Mr. Onslow and Mr. St. Ville, I will not exercise it in favour of a stay.

Cited in 1 later judgment