Autostore v Ocado. The High Court holds not entirely convincingly on applicable law to obligations of confidence in relation to high-stake patent infringement suit.

In Autostore Technology AS v Ocado Group Plc & Ors [2023] EWHC 716 (Pat), Claimant AutoStore is a Norwegian company, pioneer in automated warehouse technology. First defendant develops automated systems for use in large scale grocery businesses.  The second defendant is a joint venture between the first defendant and Marks & Spencer. Ocado is a former customer of AutoStore’s.

Ocado’s defences include that the patents were invalid due to prior non-confidential disclosures to two parties based in Russia, including EVS, a company based in St Petersburg, and Russia’s central bank.

‘Matter made available to the public’ is part of the ‘state of the art’ condition for patents (in the UK: s.2(2) of the 1977 Act). It may affect the novelty or obviousness of a patent: Subsections 2(1) and (2) of the Patents Act 1977 (“the 1977 Act”) provide:

2. (1) An invention shall be taken to be new if it does not form part of the state of the art.

(2) The state of the art in the case of an invention shall be taken to comprise all matter (whether a product, a process, information about either, or anything else) which has at any time before the priority date of that invention been made available to the public (whether in the United Kingdom or elsewhere) by written or oral description, by use or in any other way.

In support of their case of lack of novelty and inventive step Ocado rely on alleged prior disclosures to the Russian entities which Autostore say were made in confidence and could not therefore be part of the state of the art.

The section of the judgment that is of relevance to the blog (other than the brief reference to the TRIPS agreement [256]), is the qualification of the obligation not to disclose matter to the public, as (non)contractual, and the subsequent application of Rome II.  Hacon J summarises the issues [263] ff

Where a party relies on an express contractual restriction on the foreign disclosure of information, the effect of the alleged contract will be assessed according to the applicable law.  The party asserting the contractual restriction is obliged to plead the existence, the circumstances of formation and the relevant terms of the contract.  An English court seised will apply Rome I to determine which foreign law governs the contract.  The court will then decide whether, according to that law, there was an express term of confidentiality as alleged and whether its effect was to restrict the use of the information in issue.

The position is not so straightforward where it is said that a party in a foreign context was restrained from using information under an obligation that was not contractual – what an English court would recognise as an equitable obligation.

Rome II does not expressly recognise equitable obligations as a separate category. Clearly however they may still qualify as ‘non-contractual’.

[270 ff] Hacon J justifiably rejects Ocado’s assertion that Rome I and II dovetail. It is beyond doubt that not all obligations that are not contractual, must necessarily be covered by Rome II and vice versa.  Likewise, the overall application of Rome II clearly may imply non-contractual obligations that are putative. Meaning for the purposes of the application of Rome II, one may have to pretend for the time being that there are non-contractual obligations at play and that these are covered by Rome II, only for the so identified substantive lex causae to decide that there are not, after all, any non-contractual obligations at play.

Re the alleged disclosures made by the Bank, [276 ff] AutoStore’s primary contention is that the hypothetical breach of the alleged equitable obligation of confidence is correctly categorised as a culpa in contrahendo within the meaning of A12 Rome II, seeking support ia in CJEU Ergo. [286] It argues the respective obligations of confidentiality arose in the context of negotiations (with the Russian companies) which ultimately led to the conclusion of the Distribution Agreement governed by Norwegian law.  Consequently, the same law applies to the obligations of confidentiality.

However upon consideration the judge holds [298] – with much support found in prof Dickinson’s Rome II volume and his contribution on Rome II in Dicey’s 16th ed – that A12 does not apply to the alleged disclosures by the Bank, seeing as in his view A12 does not apply to third parties to the contractual negotiations, even agents of the contracting parties. There were no negotiations between AutoStore and the Bank and AutoStore for its own reasons wanted to ensure that any agreement reached would be with EVS and not the Bank.

Instead, [324] ff, the lex causae is held to have arisen out of an act of unfair competition within the meaning of A6 of Rome II. That is important, for Article 6 does not have an escape clause like Article 4(3).

Here, the judge’s reasoning is under par.

Oddly for instance he holds A6(2) is not engaged ia [335] ‘because the Bank is not a competitor of AutoStore’s’ yet he nevertheless applies A6(1): ‘the law applicable to a putative obligation of confidence on the Bank was the law of the country where competitive relations or the collective interests of consumers are, or are likely to be, affected.’: this is not convincing.

Reference is then made by the judge to CJEU Verein für Konsumenteninformation v Amazon EU Sàrl , CJEU Volkswagen and to Celgard, and to the Mozaikbetrachtung present in particular in the latter case. However he then [351] holds that ‘attention must be paid to the hypothesis posited in this case. It is that the Bank was about to make Bank Bot Designs public or had already done so’, subsequently linking that [353] to the procedural relief Autosore would have hypothetically sought for the potential breach, in, the judge holds, Russia. Conclusion [354]: ‘Of the laws made applicable under art.6(1) of Rome II to apply to the question of confidentiality, the one that would have mattered on the hypothesis raised would have been Russian law.’ That link to procedural relief to me comes out of nowhere.

As for the relationship with EVS, [301] the question arises as to whether AutoStore and EVS contemplated a contractual relationship at the relevant times. The judge [302] holds that a theoretical possibility of the purchase of goods or services or of some other contractual relationship does not suffice to trigger A12: commercial parties are almost constantly on the look-out for such relationships. [322] after having considered the various arguments the judge holds that A12 is engaged vis-a-vis EVS, yet that the putative law of the contract cannot be determined by A12(1), hence requiring the application of A12(2)(a). The applicable law is the law of the country in which damage would hypothetically have occurred, here, it is held, Russia.

Applicable law for both claims having been held to be Russian law, the remainder of the judgment then deals with evidence of that law and the conclusion [396] that the information was disclosed without imposing any obligation of confidence on either EVS or the Bank.

As noted the A6 analysis in my view is appealable. For both the A6 and the A12 analysis it is also a pity and concern to see, once again, the English courts (chicken and egg-wise led of course by counsels’ probable absence of presentation of same) lack of engagement on issues of both acquired and retained EU conflict of laws, with scholarship outside of the UK and /or other than written in English.

Geert.

How ‘trade related’ is the Agreement on Trade-Related Aspects of Intellectual Property Rights? The ECJ in Daiichi Sankyo v Demo

In  Daiichi Sankyo v Demo (most likely ‘Demo’ in shorthand), the Court of Justice held last Thursday, 18 July. One of the main issues was the extent of Article 207 TFEU on the EU’s common commercial policy, vis-a-vis the TRIPS Agreement. Article 207 grants the EU exclusive competence (and the European Commission a very strong hand) in ‘common commercial policy’.

By its first question, the referring Greek court asked essentially whether Article 27 of the TRIPs Agreement falls within a field for which the Member States have primary competence and, if so, whether the national courts may accord that provision direct effect subject to the conditions laid down by national law. The TRIPs Agreement was concluded by the Community and its Member States by virtue of shared competence. At the time, for the EU to be able to exercise exclusive jurisdiction pre Lisbon, under the in foro interno, in foro externo principle, it would have had to have exercised its powers in the field of patents, or, more precisely, of patentability: roll-out of its internal powers on patentability, would have als led to exclusive power externally. The European Commission however suggested that the mixed agreement discussion (and the exercise, or not, of its internal powers), was no longer relevant, given that the Lisbon Treaty has now given it exclusive competence in the entire common commercial policy, including for intellectual property rights. Under the old Article 113 EC Treaty (later updated to Article 133 – many of us still speak of the ‘Article 113 Committee, which surely dates us!), intellectual property rights did not feature in the common commercial policy.

The ECJ conceded that of the rules adopted by the European Union in the field of intellectual property, only those with a specific link to international trade are capable of falling within the concept of ‘commercial aspects of intellectual property’ in Article 207(1) TFEU and hence the field of the common commercial policy. However it emphatically [and contrary to the view of Cruz Villalon AG] held that such is indeed the case for the TRIPS Agreement: ‘Although those rules do not relate to the details, as regards customs or otherwise, of operations of international trade as such, they have a specific link with international trade. The TRIPs Agreement is an integral part of the WTO system and is one of the principal multilateral agreements on which that system is based.’ (para 53).

Member States cannot therefore grant direct effect to the provisions of TRIPS, in accordance with national law. It is up to the ECJ to hold on such direct effect – or not, and in the absence of such direct effect, to interpret the provisions of EU law in line with the provisions of the TRIPS Agreement.

The judgment also reviews a number of substantial aspects of intellectual property law which I feel less entitled to comment on, I fear.

Geert.

Compulsory licensing addressed in joint WTO, WHO, WIPO report on access to medical technologies

As reported earlier, India’s  compulsory license against Bayer, for the sale of its drug Sorafenib Tosylate (marketed as Nexavar), brought the possibilities for compulsory license under the spotlight. It also highlighted the complex web of intellectual property, and international trade law rules applicable to the case. Bayer’s application for a stay of that license, with the Intellectual Property Appellate Board was dismissed (link courtesy of SpicyIP), however the Appeal on substance is, I understand, still pending, and other possibilities for review with the courts in ordinary exist, too.

WHO, WTO and WIPO have now issued a rare joint report, in which the intersections between public health, intellectual property and trade are clarified. It does not contain a roadmap for the Indian courts to settle the case at issue, however there are quite a lot of sections in the report which one suspects might be invoked by either side in the various appeals.

Geert.

Compulsory licensing – India move will test room for manoeuvre under WTO and TRIPS

India’s ‘Controller of patents’ has granted Natco a ‘compulsory license’ (‘CL’) for Bayer’s Sorafenib Tosylate (marketed as Nexavar). The drug extends the lives of terminal liver and kidney cancer patients. Put differently: the controller has forced Bayer to grant a license to Natco, to produce the drug, specifying inter alia a (low) sales price and royalties to be paid to Bayer.  Natco is an Indian pharmaceutical company (no surprise there), with an increasing portfolio in pharmaceutical R&D. In other words reportedly not a typical ‘generics’ company.

The ruling is of course subject to appeal. It is also the subject of intense debate under the WTO, in particular the TRIPS Agreement. TRIPS (Articles 30-31) leaves room for a CL system and prima facie leaves a lot of room for manoeuvre to WTO Members to grants such licenses. However underneath Article 30-31’s surface lies quite a bit more than might be assumed. Moreover, even if one takes Members’ discretion in applying these Articles at face value, the articles must not be applied stand-alone. In other words they do not give carte blanche for introducing requirements leading to CL which might otherwise be WTO inconsistent.

Watch this space: this case is a nugget for, yet again, disciplining regulatory autonomy (see here and here) under the WTO.

Geert.

Exam questions, anyone? Plain packaging regulations and domestic regulatory autonomy in WTO law

Update 10 June 2020 a lot has happened of course since this post – for the latest on the WTO front see the AB report confirming the legality of the measures under World Trade Organisation (TBT) rules.

Postscript January 2016 Reportedly the Permanent Court of Arbitration under UNCITRAL rules, has declined jurisdiction. The award is to be made public here once it has been cleared of confidential data.

Postscript June 2015: I have many other posts on the issue however I thought I”d here that in June 2015, Ukraine suspended its complaint against Australia. Simon Lester collates why. And end of May 2015, Norway Norway TBT plain packaing notification its plain packaging plans to the WTO TBT Committee, with extensive pre-emption of legal arguments against it.

Postscript 22 10 2013:  on the BIT front, see the interesting defence by the European Commission of BITs in October 2013 here. Reference is made ia to the ongoing Philip Morris and Vatenfall (Nuclear energy) issues.

Faculty everywhere have been handed a treasure trove of exam questions, courtesy of ‘plain packaging’ (students please look away now).  A variety of States are in the process of introducing ‘plain packaging’ requirements on tobacco products. Although they of course vary in detail, they generally require tobacco manufacturers to strip packaging of all tailored corporate content, resorting instead to prescribed generic packaging. The ‘plain’ packaging required is generally limited to brand name in standardised fashion (font size and lettering, colour…), joined by a number of health warnings (including, sometimes, images), excise duties requirements and ingredients listings.

Plain packaging ticks all the boxes of a classic ‘domestic regulatory autonomy’ dispute. It pitches the freedom of a sovereign State to pursue ‘regulatory’ interests (environment, public health, consumer protection, stability of the economy etc.) against the free trade commitments which the same State has voluntarily committed to. These trade commitments take the form of multilateral (such as the WTO, the EU’s Internal Market, or NAFTA) or bilateral (such as bilateral free trade agreements and customs unions) agreements. They most often do not, but sometimes do include procedural rights for private parties (as opposed to simply the States which have concluded the agreement) to launch legal proceedings should free trade (arguably) have been infringed. Such standing for private parties is the case in many BITs, i.e. Bilateral Investment Treaties, as well as for instance (subject to a number of whistles and bells), NAFTA.

Free trade agreements are not generally oblivious to the continuing desire of participating States to regulate the interests referred to above. Consequently they include room for ‘domestic regulatory autonomy’ to continue after the conclusion of the agreement, subject of course to checks and balances.

This fragile balance between free trade and regulatory autonomy is exactly what the current debate on plain packaging is all about. The issue is being fought on many fronts: At the World Trade Organisation, Ukraine have filed a complaint in March 2012 against Australia’s plain packaging laws on the basis of the TRIPS (intellectual property) and TBT (technical barriers to trade; product regulations) Agreements. Ukraine’s complaint is supported by a number of WTO Members with tobacco manufacturing interests.

Australia’s position is eagerly anticipated by other jurisdictions thinking of doing something similar.See e.g. here and here.

At a constitutional level, issues include free (commercial) speech (see here for the related issue of graphic warnings), expropriation (of the trademark), non-discrimination (why no plain packaging on alcohol, for instance).

At a level of BITs, the issue has rejuvinated the ‘regulatory takings’ debate (do new regulatory requriements of host States amount to a ‘regulatory taking’ (as compared to a straightforward expropriation) that may be incompatible with investment protection requirements. The Uruguay-Switserland (see here and enter search term ‘ICSID Case No. ARB/10/7’) and Australia-Hong Kong BITs are among those affected. One imagines that the necessity of the measure will be hotly contested, as the actual health impact of the measure is not entirely certain. See the (controversial) ruling of the European Free Trade Association’s Court on the related issue of display bans here and the excellent analysis of prof Alemanno.

One will have gathered: all of this is excellent material for those of us teaching Trade and regulatory law. Geert.

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