CJEU Judgment “Brogsitter”: Is It Possible to File an Extracontractual Action when the Parties under Litigation are Linked by an Intellectual Property License?
The years of judicial practice in our law firm have shown that it is common that a conflict between two parties linked by an intellectual property license results in a claim for breach of contract or in a claim for IPR infringement.
But, is it possible to choose? To our knowledge, in many countries it is. In Spain, most attorneys will respond on the affirmative. Evenmore the so-called “free-choice doctrine” has been sustained by the Supreme Court although to in IPR-related cases. This doctrine brings great possibilities to defend our client´s interests in view of the specific case. Let us suppose the following case: an IT service provider grants a software license to a company. The license expressly states that such company can only install the software in 10 computers. However, the software is installed in 25 computers. In this scenario the provider can choose between suing the company for breach of contract or for IPR infringement.
The IP regulation offers greater possibilities to end up with the illicit behavior if an extracontractual action (infringement) is filed – such a possibility of applying for preliminary injunctions, claiming for damages, obtaining of evidences… But sometimes contracts include interesting penalty clauses or other terms in favor of the licensor that may be appropriate to enforce. Another matter to be taken into consideration is the limitation term, which is in Spain is different depending on whether contractual (5 years, following the recent amendment of art. 1964 Civil Code by Law 42/2015) or extracontractual actions (1 year according to art. 1968) are brought.
What happens when the dispute is connected with a foreign State? In this case, there are more issues to be taken into consideration. Depending on whether we file a contractual action or an extracontractual one, the rules for the determination of the courts with jurisdiction to adjudicate and the applicable law change. With regards to jurisdiction, if we want to file a contractual action, we can choose between the courts of the defendant´s Member State domicile the courts of the place of performance of the obligation in question (art. 2 and 7.1 of Brussels I Regulation). However, if the contract includes any choice of forum clause, this shall prevail over these grounds of jurisdiction. On the contrary, if we decide to file an extracontractual action, we may opt for the defendant´s Member State courts or those of the place where the infringement occurred (art. 2 and 7.2 of Brussels I Regulation). Unless the parties have extended the scope of the choice of forum clause to extra-contractual claims, this choice would not be applicable because such clause is only intended for contractual matters. In connection with the applicable law, if we file a contractual action, Rome I Regulation would be applicable, while for the extra-contractual actions Rome II Regulation would apply.
If we maintain the “free choice of forum thesis”, the possibilities of practicing forum shopping and law shopping would be very high. Let´s go back to the previous example but under an international scope: a French IT services supplier grants a software license to one Spanish company in which it expressly states that this company can only install this software in 10 computers. However, the software is installed in 25 computers. The contract includes a choice of forum clause in favor of French Courts. The French supplier can choose between suing the Spanish company in France for breach of contract (pursuant to choice of forum clause, art. 25 of Brussels I Regulation) or in Spain for IPR infringement (art. 7.2 of Brussels I Regulation). In the first case, the supplier could choose between submitting the complaint according to French law as the law applicable to the contract (art. 4.2 of Rome I Regulation); or according to Spanish law, because this is the law of the state for which the protection of the IP rights is sought (art. 8.1 of Rome II Regulation).
But, is this possible? is the “free choice of forum thesis” applicable in international disputes? The Judgment of the Court of Justice of the European Union of 13 March 2015, C-548/12, “Brogsitter” accurately replies “no”. In the magistrates’ opinion, even when the action may constitute an infringement, this shall be considered as “matter relating to a contract” in the sense provided for in article 5.1 R. 44/2001 (currently art. 7.2 Brussels I Regulation):
- “where the interpretation of the contract which links the defendant to the applicant is indispensable to establish the lawful or, on the contrary, unlawful nature of the conduct complained of against the former by the latter”
- “whether the purpose of the claims brought by the applicant in the case in the main proceedings is to seek damages, the legal basis for which can reasonably be regarded as a breach of the rights and obligations set out in the contract which binds the parties in the main proceedings, which would make its taking into account indispensable in deciding the action”.
In this sense, going back to the previous example, the claim of the IT supplier must be considered a contractual action regardless the place of filing of the complaint (Spain or France). Consequently, the only courts with jurisdiction would be those of France (because they are designated in the choice of forum clause of the agreement), and the applicable law would be French law (law of the habitual residence of the party that performs the characteristic obligation of the contract, art. 4.2 of Rome I Regulation). The filing of the lawsuit before the Spanish courts should be (as in the referred judgment) necessarily rejected due to the lack of jurisdiction.
It might be thought that such decision impairs the protection of the holder of IPR as far as it reduces the possibilities to enforce his rights. Nevertheless, considering it in the abstract, it means a balanced weighing of all the interests involved: on the one hand, it favors legal certainty because it avoids fraudulent actions aimed, for example, at evading choice of forum clauses in the contracts; and on the other hand, the defendant´s rights to a due process is guaranteed because he is not exposed to the forum shopping that comes from the possibility of choosing among different jurisdictions.
Finally, stress should be laid on one point: the interpretation adopted by the CJEU in “Brogsitter” is applicable to determine the international jurisdiction pursuant to the Brussels I Regulation (and we understand, that it is an interpretation that can be applicable to the determination of the applicable law as well, Rome I Regulation). However, this interpretation does not affect the characterization that can be given to the action by national laws. That is: the court with jurisdiction is determined according to the contractual forum and the applicable law is determined according to the lex contractus; but if the designated national law considers that the action may be extra-contractual, it will be treated as such by the judge.
Related Posts:
- Interesting Decision of the Spanish Supreme Court Dealing with Different Issues of Copyright Contracts
- The hazards of choice of forum clauses in favor of foreign courts
- On the Different Interpretation of Forum Delicti Commissi in Relation to EU Trademarks and National Trademarks
- Trademark Coexistence Agreements and International Jurisdiction