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26 August 2008
The judge in the Star Wars Case has issued his judgment.(1) It runs to 280 paragraphs and canvasses the law on a wide range of jurisdictional and copyright issues, which includes passing off and the implication of terms about title in subcontracts in its purviwe.
The case arose from the manufacture by Andrew Ainsworth of new Star Wars character armour (mainly, but not exclusively, stormtrooper armour) from the original moulds he had used to make the armour for the first Star Wars film (for further details please see "Lucasfilm Empire Strikes Back in Star Wars Case"). Star Wars enthusiasts provide a considerable market for such armour, which LucasFilm was exploiting through licensees.
The case dealt with a large number of issues, so this update focuses on the ability of LucasFilm to enforce the judgment that it had obtained in the Californian courts and the justicability of US copyright claims in the English courts. Ainsworth did not participate in the Californian action once he lost an application for the court to refuse to hear LucasFilm's action on the grounds that the Californian courts had no jurisdiction over him. The case is important because it deals with issues of jurisdiction where cross-border online trade has occurred - internet sales being Ainsworth's route to the US market. More controversially, it also permits English courts to admit actions concerning infringements of US copyright.
The Californian action was a claim for infringement of copyright, infringement of trademark and unfair competition. The Californian court had based its jurisdiction on a number of sales and advertisements undertaken in the United States by Ainsworth. Judgment was given in default for $5 million for copyright infringement and a total of £15 million for trademark infringement and unfair competition (the damages being tripled under the Lanham Act). The awards were large for the relatively small turnover achieved in the United States (somewhere between £8,000 and £25,000), and seem to have been arrived at as a determination of the licence fee that LucasFilm would have required to grant a licence to Ainsworth.
Before the English court LucasFilm sought only to enforce the compensatory judgment (as the Protection of Trading Interests Act 1980 provides for a statutory prohibition on enforcement of multiple damages). The judge had to decide whether to allow LucasFilm to enforce the Californian judgment and, if so, how much of it could be enforced under the terms of the Protection of Trading Act.
As there is no treaty between England and the United States or any of its states allowing the reciprocal enforcement of the other's judgments, such judgments must be enforced by an action on the judgment. In England, a judgment will be enforced only if the English court is of the view that the foreign court had jurisdiction over the defendant. The leading case on this point is Cape v Adams, which concerned a Texan default judgment in asbestosis claims against Cape Industries. The Court of Appeal held that for a foreign court to have jurisdiction over a defendant sufficient in English eyes to found recovery of the judgment sum, the defendant must have:
In the case of a corporation (Ainsworth traded through a company), in place of the first alternative there had to be something that amounted to the presence of the corporation in the foreign jurisdiction.
LucasFilm sought to argue that internet trading altered the trading landscape such that the court ought to find that Ainsworth's advertising in the United States and selling into the United States via the Internet should amount to presence. LucasFilm relied on the well-known ruling of Judge Jacob in Euromarket Designs Inc v Peters and Crate & Barrel on what amounted to use of a trademark in the course of trade in the context of advertisements place by the Irish defendant (where the claimant had no trademarks registered) in a magazine that reached both English and Irish audiences. The argument run by LucasFilm sought to take the English jurisdictional rules along the US path, where in general (although each state is different), beyond a certain threshold trading contacts by an out-of-state party can be sufficient to put the out-of-state trader within the jurisdiction of the court. The judge resolutely refused to follow this argument and based his decision solidly on the Cape Case, which he found required a physical presence before an English court would find that a foreign court had jurisdiction over a defendant in a judgment action.
The judge considered the effects of his ruling on international internet trade. He seems to have been content to treat internet trade as simply trading by correspondence vastly speeded up and thus he found no need to depart from the Cape requirements for physical presence. Of course, this does not affect jurisdiction issues within the European Economic Area to which the Brussels or Lugano Convention applies.
Although he had decided that LucasFilm's Californian judgment was not enforceable, the judge went on to decide to what extent it would be enforceable if the jurisdiction point had been decided in LucasFilm's favour. The issue was whether the prohibition on recoverability by an English action of multiples of damages awarded by foreign courts applied to the whole award, including the compensatory damages which had been multiplied, or whether the compensatory damages could be recovered if severable from the multiplied damages.
Section 5 of the Protection of Trading Interests Act prevents recovery of "a judgment for an amount arrived at by doubling, trebling or otherwise multiplying a sum assessed as compensation for the loss or damage sustained by the person in whose favour the judgment is given". The point had never been directly decided before (and, strictly speaking, was obiter in this judgment). The section had been considered in the case of Elides v Lewis(2) in relation to the extent to which a whole sum judgment of the New York courts, including multiple damages, could be enforced. In that case a purposive interpretation of the Protection of Trading Interests Act had been favoured and the judge adopted the same approach. He had little difficulty in finding that, in a judgment such as that which LucasFilm had obtained, the prohibition on recovery of multiple damages prevented the recovery of damages only insofar as they were multiplied. The base figure arrived at before multiplying the damages was recoverable.
It is not unusual for US claimants to commence proceedings in IP cases in their home jurisdiction if they can find a pleadable basis on which to do so. It is as common for English lawyers to advise that Adams v Cape provides protection to English defendants, which can ignore such action. This case serves as a warning that the jurisdictional tests applied in the United States and those applied in the English courts are very different, and that judgment in the United States may not lead to recovery in England.
Justicability of US copyright
The judge then turned to the question of whether LucasFilm could sue in England to enforce the copyright claims that it asserted under US law. The main issue was the justicability of US copyright in the English courts. Traditionally, cases based on the invasion of foreign property rights have not been justicable in the English courts, with a line of authority going back to the 1893 case of British South Africa Co v Compania De Moçambique.(3) In relation to land, the rule was modified by the Civil Jurisdiction and Judgments Act 1982.
Decisions in which the courts treated the Moçambique rule as disentitling them to decide any issue relating to foreign IP rights continued into the 1990s. However, in Pearce v Ove Arup Partnership Limited(4) the Court of Appeal, in the course of deciding jurisdiction issues under the Brussels Convention, held that the Moçambique rule did not prevent the court from deciding whether the claimant's Dutch copyright had been infringed. After considering more recent cases where the Moçambique rule was in issue,(5) the judge concluded that there was no rule of English law that prevented him from deciding whether Ainsworth had infringed LucasFilm's US copyrights. He went on to consider that point and decided relatively shortly that Ainsworth had infringed the US rights.
A curious aspect of this case is that LucasFilm now has two judgments against Ainsworth for the same cause of action. In the action LucasFilm was seeking both enforcement of its Californian judgment and a judgment on the merits of the same cause of action, as insurance in case the Californian judgment was unenforceable. It is hard to see how suing in the jurisdiction of choice and obtaining judgment, and then seeking to enforce that judgment but securing one's position by suing again on the original cause of action in the enforcement action, did not render the second copyright action an abuse of process, even though there was no issue estoppel because the Californian court did not have jurisdiction. The court takes a robust approach to second actions where the first action has been lost because of a technicality (eg, failing to serve the claim form in time), even where the claim is still within its limitation period. It is hard to see that having a second attempt in the United Kingdom after choosing a jurisdiction for judgment which does not provide for enforceable rights on that judgment is any different from seeking to have a second attempt at a case when the first action is lost on a technicality. This decision seems to be a forum shopper's charter.
For further information on this topic please contact Andrew Hobson or Georgia Warren at Reynolds Porter Chamberlain LLP by telephone (+44 20 3060 6000) or by fax (+44 20 3060 7000) or by email (firstname.lastname@example.org or email@example.com).
(5) R Griggs Group Limited v Evans  EWHC 108 (Ch), the Doc Martens copyright case (the judgment considered the attempt of the defendant to put the Australian copyrights out of reach of the successful claimant), and Satyam Computer Services Ltd v Upaid Systems Ltd  EWCA 31, concerning the proper jurisdiction of a commercial dispute involving US patents.
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