20/11/2019

When can the English court protect its jurisdiction and judgments?

SAS Institute Inc v World Programming Ltd (No. 2 – Injunction) [2019] EWHC 2481 (Comm)

Cockerill J has recently given important further judgments in the unusual litigation between the large US business software company SAS Institute and its English competitor WPL. This note focuses on her judgments relating to anti-suit injunctions, which raise questions as to when the English court can grant injunctions to protect its jurisdiction and judgments against extra-territorial foreign enforcement measures.

SAS licenses data analytics software called the SAS system, within which customers can run their own programs written in SAS programming language which is free for all to use. WPL created its own software, WPS, which has some of the same functionality as the SAS system: it can also run SAS language programs.

A decade ago, SAS sued WPL in England for copyright infringement and also for breach of contract, the latter on the basis of claims that WPL had breached click-though licence terms by observing, studying and testing software that it had licensed from SAS Institute in order to understand its underlying ideas.

The English liability phase of the litigation involved two judgments of Arnold J [2011] RPC 1, [2013] RPC 17, with an intervening trip to the Court of Justice of the European Union [2012] RPC 31, and a judgment of the Court of Appeal [2014] RPC 8. SAS lost: it was held that WPS did not infringe any SAS Institute copyright and that WPL had not breached the licence terms. The terms of the click-through licence which SAS alleged WPL had breached were void due to the pro-innovation, pro-competitive protections of the Software Directive implemented in the Copyright, Design and Patents Act 1988.

But while this was going on, in 2010 SAS sued WPL in the Eastern District Court of North Carolina (“EDNC”). Its claims included copyright infringement, the same breach of contract claim, and claims in fraud and breach of the North Carolina Unfair and Deceptive Trade Practices Act (“UDTPA”), which essentially alleged that WPL had misrepresented that it would comply with the void licence terms by “clicking-through” to accept them. Initially in 2011 the EDNC refused jurisdiction over SAS’s claims on grounds of forum non conveniens due to the prior English judgments. But this was overturned by the US 4th Circuit Court of Appeals. The EDNC then subsequently ruled that the English judgments were not res judicata in the USA and did not bar the US claims, and the claim went to trial in North Carolina where in 2016 SAS lost on copyright but succeeded on some of its other claims and was awarded US$26 million compensatory damages trebled to US$79 million. Appeals in the USA failed.

SAS then sought to enforce the US Liability Judgment in England. But on 13 December 2018 Cockerill J rejected SAS’s claims to enforce, holding that the US Liability Judgment was unenforceable because it was precluded by res judicata, Henderson v Henderson abuse of process, and public policy – the English Enforcement Judgment (which has already been discussed in a previous note on this site). SAS had not sought to enforce the breach of contract claim in England recognizing that it was caught by res judicata and was directly inconsistent with the English Liability Judgments but had sought to enforce the fraud and UDTPA claims. Cockerill J held that both those claims were caught by res judicata and Henderson v Henderson abuse of process in essence because both depended on the breach of contract claim which the English Liability Judgments had rejected. So far as concerns public policy, the US Liability Judgments also breached the policy of the Software Directive and, so far as they trebled damages, were inconsistent with the Protection of Trading Interests Act 1980. Cockerill J also upheld WPL’s PTIA counterclaim, by which WPL sought to claim sums equal to 2/3rds of any amounts received by SAS Institute in respect of its US Liability Judgment, such amounts being attributable to the trebled damages, under s.6 of the PTIA.

This Enforcement Judgment meant that WPL was safe from the enforcement of the US Liability Judgment in England by the English courts, but SAS also applied to the California District Court (“CDC”) for in personam extraterritorial enforcement relief seeking to compel WPL to make payments from England to the US to satisfy the US judgment.

WPL took the position that these Californian applications for in personam extraterritorial relief were in short an attempt to achieve by orders of the CDC essentially what SAS had failed to achieve by its attempts before Cockerill J to enforce the US Liability Judgment in England.

So WPL sought an anti-suit injunction to block the Californian Orders sought, which was granted by Knowles J without notice on 21 December 2018. This was challenged by SAS and the matter came back before Cockerill J in May 2019. In her main injunction judgment of 25 September 2019 [2019] EWHC 2481, Cockerill J decided that the injunction should not be continued.

At the core of her reasoning was her view that the Californian Orders did not interfere with her Enforcement Judgment, and did not set it at naught – the Enforcement Judgment decided only that the enforcement processes of the English courts should not be used, and she also concluded that the Californian Orders did not interfere with the Court’s jurisdiction. With respect to public policy, the Judge considered that it would be double-counting to take it into account separately to protection of the jurisdiction. And she held, further, that the injunction would not be necessary to protect the court’s jurisdiction, because it was possible that the US court might moderate the extraterritorial effect of the Orders sought (although the CDC had indicated that it would grant them in full). She treated the injunctions as “anti-enforcement” injunctions which she concluded should only be granted in exceptional circumstances.

However, the Judge also granted permission to appeal against her own judgment, observing: “this is an important point in an area with a dearth of authority. It is worthy of the Court’s consideration. The legal steps in question are not entirely straightforward. One raises a novel point of law (anti suit injunctions based on public policy)… It is fair to say that I adopted a cautious approach throughout, and I can well see a different judge (and more so the Court of Appeal) feeling free to take a more robust approach. In those circumstances the test for real prospect of success is met.” And she concluded that it might be said that the issues involved “a point of practice or procedure of significant importance or a point of general principle and importance in the development of the substantive law.”.

She added in respect of giving permission: “I do so with the less hesitation in the knowledge that the Court of Appeal cannot fail to find this case extremely interesting and that they will have the great pleasure of excellent argument on both sides, as I have done.”

Having granted permission to appeal, the Judge had to decide WPL’s application to continue Knowles J’s injunction pending the appeal. Cockerill J concluded it was appropriate in the balance of convenience to do so and because otherwise WPL might be prejudiced pending appeal. As a result the Knowles J injunction remains in force pending appeal.

The issues the Court of Appeal will have to decide include important issues in the law of anti-suit injunctions and in particular the proper operation of its powers to protect English proceedings from interference, and the appropriate thresholds for anti-suit injunctions. Their judgment, like Cockerill J’s, promises to be an interesting read.

WPL was represented by Thomas Raphael QC, Josephine Davies and John Bethell of Twenty Essex, instructed by Alexander Carter-Silk and Claire Blewett of Keystone Law.

SAS Institute was represented by Monica Carss-Frisk and Andrew Scott of Blackstone, instructed by MacFarlanes.