COUNSEL: T. G. Roche for the plaintiffs.
Rodger Winn for the defendants.

SOLICITORS: J. W. Ridsdale; Bristows, Cooke & Carpmael.

JUDGES: Evershed M.R., Denning and Romer L.JJ.

DATES 1952 Oct. 15, 16

International law – Jurisdiction – English contract to grant patent licences – Order by foreign court directing cancellation of rights under English contract – Injunction preventing obedience to foreign court order – Extraterritorial jurisdiction.

The defendants, an English corporation, were ordered by a foreign court, to whose jurisdiction they were subject, to cancel an existing agreement with a foreign company and to reassign to that company certain patents and rights thereunder previously assigned to the defendants for registration in the United Kingdom. They were also forbidden by the same order to make any disposition of the assigned patents unless they obtained from the grantee under such disposition an undertaking to hold them subject to a condition which involved the free import into any country – including the United Kingdom – of goods manufactured in accordance with the assigned patents.

Prior to the making of the order of the foreign court, the defendants had entered into a contract in England with the plaintiffs, an independent English corporation not subject to the jurisdiction of the foreign court, to grant them licences to exercise and practise all the inventions covered by the assigned patents within defined territories. At the date of the said order, the patents had not been formally registered, and no licences had been granted under the English contract.

After the making of the said order, the plaintiffs issued a writ against the defendants, requiring specific performance of their contract, and asked for an injunction to restrain the defendants from reassigning the patents in obedience to the foreign court order. Upjohn J. granted an interlocutory injunction until judgment in the action or further order.

On appeal by the defendants:–

Held, continuing the injunction, that in so far as the foreign court order asserted an extraterritorial jurisdiction, the effect and intention of which was to destroy or qualify statutory rights under an English contract vested in an English national who was not subject to the jurisdiction of the foreign court, the courts would not, despite the comity of nations, recognize such extraterritorial jurisdiction and would intervene to restrain the defendants from obeying the order.

Decision of Upjohn J. affirmed.

INTERLOCUTORY appeal from Upjohn J.

By an agreement made on December 31, 1946, the defendants, Imperial Chemical Industries Ld. and an American corporation, du Pont de Nemours & Co. Inc., the latter agreed to assign to the [*20] defendants certain patents and applications for patents scheduled to the agreement, such assigned patents to be registered as British patents in the United Kingdom.

On March 5, 1947, the defendants entered into a contract in England with the plaintiffs, British Nylon Spinners Ld., an English corporation. The plaintiffs claimed that under this contract they had a licence or the right to be granted a licence to exercise and practise within a defined field all the inventions covered by the patents and applications for patents in the schedule to the agreement of December 31, 1946, between the defendants and the American corporation.

In June, 1952, the plaintiffs asked the defendants’ solicitors to execute formal licences under the assigned patents to enable the plaintiffs to register them, and were informed that, owing to the existence of legal proceedings in the United States, the defendants could not execute any documents relating to the patents in question.

On July 30, 1952, in the United States District Court of New York, his Honour Sylvester J. Ryan delivered a final judgment in an action brought by the United States of America against the defendants, du Pont de Nemours & Co. Inc., and others under the anti-trust law known as the Sherman Act: United States of America v. Imperial Chemical Industries Ld. and Others. 1 The plaintiffs were not parties to those proceedings.

By a clause in that judgment the United States court ordered that the agreement of December 31, 1946, between the defendants and du Pont de Nemours & Co. Inc. be cancelled, and that the defendants should reconvey within 90 days all the patent rights assigned to them under that agreement.

Other clauses in the judgment2 forbade any disposition of

1 U.S. District Court for the Southern District of New York [1952] Civil Action No. 24-13.

2 “IX. Patents and Technology. (4) Until June 30, 1977 … du Pont and ICI shall (a) grant to any person (including du Pont and ICI) making written request therefor, in consideration of a reasonable royalty, an unrestricted, non-exclusive immunity under any foreign counterpart of any existing or new patent to import into any foreign country any common chemical product lawfully manufactured in the United States. …”

(13) Du Pont and ICI shall not … (b) make any disposition of foreign patents or rights thereunder, which deprives them of the power or authority to issue the grants of immunity required by this judgment, unless the defendant requires in writing … that the purchaser, assignee of licensee agrees to receive and hold its rights subject to any grant or grants of immunity given by the defendant pursuant to the provisions of this judgment. …”

[*21] foreign patents by the defendants unless they obtained from the grantee an undertaking in writing to hold licences subject to the right of American manufacturers to import goods manufactured in accordance with the patents freely into any foreign country.

The plaintiffs thereupon issued a writ claiming declarations as to their rights to licences, and asking for an order that the defendants should execute formal grants of those licences, and for specific performance of the contract of March 5, 1947. They also asked for an injunction to restrain the defendants from assigning or dealing with or parting with any of the patent rights in question in obedience to the order of the United States court.

On August 13, 1952, Upjohn J. granted an interlocutory injunction to restrain the defendants from assigning the patents until judgment or further order.

The defendants appealed.

Rodger Winn for the defendants. The English patents assigned to the defendants by the agreement of December, 1946, would give them the right to keep out of the United Kingdom articles manufactured in accordance with the patents. The intended effect of the judgment is to forbid the defendants in personam from exercising that right; and if they do so they will be amenable to penalties for contempt of court.

[EVERSHED M.R. The American court assumes jurisdiction in personam against a party amenable to its jurisdiction to compel it by contract to modify the rights which the law of another country confers on it in that other country. Moreover, the order is to take effect notwithstanding the plaintiffs’ rights. If they have in equity a right to specific performance against the defendants, does not the order in form purport to interfere with the municipal law of England? We may have to consider to what extent we concede on grounds of the comity of nations extraterritorial jurisdiction to interfere with English patent rights.]

That puts the case very forcefully and may make my submissions irrelevant. It is submitted:

(1) It is a general principle of English law that if one man has granted or agreed to grant a right to another in respect of some particular property, whether real or personal, and is evicted by title paramount before performance, he will either be free of his obligation or at the least it cannot be specifically enforced [*22] against him; a bailee is for instance free from obligation to a bailor if goods are taken from him by title paramount.

(2) The English courts will refrain from ordering a party to a contract to do anything illegal by the proper law of the contract, which, it is submitted, is here American law. The obligation on the defendants does not arise merely ex contractu but has been imposed on them by a court of competent jurisdiction to which jurisdiction they are subject by virtue of their contract with the American company.

[DENNING L.J. But the order overrides and cancels the contract. The American court would assume jurisdiction even if the contract were governed by English law!]

Yes; it is conceded that the order tears up and abrogates the whole contract; it does not enforce a contract either specifically or by a grant of damages.

[ROMER L.J. It may be that another principle applies, namely, that these courts will pay no regard to the operation in this country of any foreign law of a confiscatory nature. The American court order has confiscated without compensation the right at present vested in the plaintiffs to come and ask for specific performance. Though they might get monetary damages, such damages might not be proper compensation.]

If the effect of the American order be that persons taking a licence under these patents will take it free from the rights already granted to the plaintiffs, it would be confiscatory to that extent: see New Ixion Tyre and Cycle Co. v. Spilsbury. 3

(3) The defendants have only contracted to grant licences and by implication not to assign the patents away before doing so. They have not contracted not to assign the patents nor to remain indefinitely entitled nor that their title as assignees would remain unassailable. No authority is needed for this submission.

[EVERSHED M.R. The court is anxious to show proper respect for a superior court of a friendly nation which is attempting to enforce its own proper legislation. It might be opportune to vary the order of Upjohn J. to apply in the event of steps being taken against the defendants in New York.]

The American courts expressed a similar desire to show respect for these courts. But if the court holds that there is here something amounting to confiscation, it would be in accordance with traditional practice not to give effect to that part of the foreign judgment. This is only an interlocutory step, and it may be that

3 [1898] 2 Ch. 137.

[*23] the status quo should be preserved, for once the patents have been reassigned the position cannot be remedied vis-à-vis the plaintiffs save by money, which, it is conceded, may not be proper compensation.

T. G. Roche for the plaintiffs. As for the purposes of this motion the existence of the contract between the parties is conceded, the plaintiffs have established a prima facie case that a breach is intended. The plaintiffs’ contract is one made between two English companies in England, and its proper law is English. Under it the plaintiffs have equitable rights in English patents enforceable against the world if there be notice of them. Indeed, there are remarks obiter by a judge of this court that they may even be legal rights, but in view of the registration provisions, and the fact that at the time of the American court’s order the patents were not registered here, that question is not clear beyond doubt. It is, however, clear that the plaintiffs have an enforceable right against the present defendants.

[EVERSHED M.R. Can the plaintiffs protect themselves by registering notice under the Patent Acts or by registering this action as a “lis pendens”?]

No; there must be an instrument to register. It was an implied term of the contract that the defendants would not put it out of their power to grant a licence. The defendants are now threatening to get rid of the legal estate and receive back a licence with conditions attached. They are thus clearly in breach, or are threatening breach, of their contractual duties. If they assign the patents to the American company the plaintiffs’ rights will be gone for ever.

An Act of a foreign legislature – here the Sherman Act of Congress – cannot have extraterritorial effect in this country so as to deprive English subjects of their rights under English contracts with other English subjects. A fortiori, an order of one of the courts of that foreign country cannot affect the plaintiffs’ rights in England.

[EVERSHED M.R. I am not satisfied that the present injunction should extend, e.g., to Australia or any other country covered by agreement between the plaintiffs and defendants. You may have to proceed in all those countries.]

The plaintiffs at present have no rights in any other country, but only a contractual right in England to specific performance by the defendants. So far as the contractual rights outside England are concerned, the court presumes that the law of those other [*24] countries is the same as that of England, until the contrary is proved.

It is submitted that, if the injunction in its present form is continued, the English courts can investigate all the relevant matters; if not, the patents will have gone to an American corporation in no way subject to the court’s jurisdiction. The only obstacle to maintaining the status quo is the order of the American court.

The provision in the judgment as to the applicability of the judgment4 was intended to cover the present eventuality. The judge there used the words “U.S. Government” as meaning “State”; an Act of the general law forbids the defendants from doing an act, and the court of competent jurisdiction in England says that they shall not forbid it. The latter is thus “an action taken in compliance with the law” of this country, and therefore it cannot be intended to proceed against the defendants for that action. The injunction should be continued without variation.

Winn replied.

EVERSHED M.R. stated the facts and continued:– This is an interlocutory matter, and, therefore, it is inappropriate for the court to say more about the case, or the merits of the case, than is necessary to make clear the grounds of the conclusion which it reaches. It is plain that there is here a question of the comity which subsists between civilized nations. In other words, it involves the extent to which the courts of one country will pay regard and give effect to the decisions and orders of the courts of another country. I certainly should be the last to indicate any lack of respect for any decision of the district courts of the United States. But I think that in this case there is raised a somewhat serious question, whether the order, in the form that it takes, does not assert an extraterritorial jurisdiction which the courts of this country cannot recognize, notwithstanding any such comity. Applied conversely, I conceive that the American courts would likewise be slow (to say the least) to recognize an assertion on the part of the British courts of jurisdiction extending (in effect) to the business affairs of persons and corporations in the United States.

4 “3. No provision of this judgment shall operate against ICI for action in compliance with any law of the United States Government or of any foreign government or instrumentality thereof to which ICI is at the time being subject and concerning matters over which under the law of the United States such foreign government or instrumentality thereof has jurisdiction.”

[*25] Having said that much, I must make one reference to a passage in the second of the opinions which his Honour delivered, dated May, 1952. It is plain that the judge considered this matter most carefully, and indeed, as Upjohn J. pointed out, expressed his own doubts whether, in giving effect, as he felt it his duty to do, to the implications of the Sherman Act, he might not be going beyond the normally recognized limits of territorial jurisdiction. He said: “It is not an intrusion on the authority of a foreign sovereign for this court to direct that steps be taken to remove the harmful effects on the trade of the United States.” If by that passage the judge intended to say (as it seems to me that he did) that it was not an intrusion on the authority of a foreign sovereign to make directions addressed to that foreign sovereign or to its courts or to nationals of that foreign Power effective to remove (as he said) “harmful effects on the trade of the United States,” I am bound to say that, as at present advised, I find myself unable to agree with it.

Questions affecting the trade of one country may well be matters proper to be considered by the government of another country. Tariffs are sometimes imposed by one country which obviously affect the trade of another country, and the imposition of such tariffs is a matter for the government of the particular country which imposes them. And if that observation of the judge were conversely applied to directions designed to remove harmful effects on the trade, say, of Great Britain or British nationals in America, I should myself be surprised to find that it was accepted as not being an intrusion on the rights and sovereign authority of the United States.

On the other hand, there is no doubt that it is competent for the court of a particular country, in a suit between persons who are either nationals or subjects of that country or are otherwise subject to its jurisdiction, to make orders in personam against one such party – directing it, for example, to do something or to refrain from doing something in another country affecting the other party to the action. As a general proposition, that would not be open to doubt. But the plaintiffs in this case (unlike Imperial Chemical Industries) are neither subjects nor nationals of the United States, nor were they parties to the proceedings before his Honour, nor are they otherwise subject to his jurisdiction.

What the precise relationship, commercially or otherwise, is between the plaintiffs and the defendants we have not at this stage of the proceedings considered at all, and I proceed on the assumption (and I am not to be taken as hinting that the contrary [*26] is the fact) that the plaintiffs are an independent trade corporation and entitled to be treated as independent of Imperial Chemical Industries Ld. Being so independent, they have beyond question, according to the laws of England, certain rights, certain choses in action, by virtue of the contract of 1947, which the courts of this country, in pursuance of the laws which the courts of this country claim to be entitled to administer, will in this country protect and enforce. Broadly, the right which they have may be described as their right under the contract, being an English contract made between English nationals and to be performed in England, to have it performed and, if necessary, to have an order made by the courts of this country for its specific performance. That is a right – it might be said, a species of property, seeing particularly that it is related to patents – which is English in character and is subject to the jurisdiction of the English courts; and it seems to me that the plaintiffs have at least established a prima facie case for saying that it is not competent for the courts of the United States or of any other country to interfere with those rights or to make orders, observance of which by our courts would require that our courts should not exercise the jurisdiction which they have and which it is their duty to exercise in regard to those rights.

But I think that the matter goes somewhat further. The subject-matter of the contract of December, 1946, is a number of English and Commonwealth patents. An English patent is a species of English property of the nature of a chose in action and peculiar in character. By English law it confers certain monopoly rights, exercisable in England, on its proprietor. A person who has an enforceable right to a licence under an English patent appears therefore to have at least some kind of proprietary interest which it is the duty of our courts to protect. And, certainly so far as the English patents are concerned, it seems to me, with all deference to his Honour’s judgment, to be an assertion of an extraterritorial jurisdiction which we do not recognize for the American courts to make orders which would destroy or qualify those statutory rights belonging to an English national who is not subject to the jurisdiction of the American courts.

As regards the patents other than the English patents – Australian, Indian, New Zealand, South African, Irish or other – a possible distinction can, of course, be drawn, since the patents in those countries are a species of property in those countries, and an effective right to use those patents would, if necessary, have [*27] to be asserted in those countries. But no special point has been made before us as regards those Australian and other non-English patents; and, indeed, for present purposes I do not understand that it is suggested, if the injunction goes as regards the English patents, that it should not go to the full extent of the patents in the schedule. We must, in the absence of some evidence to the contrary, assume that the law in these other countries is the same as it is here; and, as I have already said, apart from what I might call the particular rights quoad the particular non-English patents, there remains the general contractual right which relates to all the patents and is derived from the English contract of December, 1946.

I think it undesirable that I should say more, except to reaffirm the proposition that the courts of this country will, in the natural course, pay great respect and attention to the superior courts of the United States of America; but I conceive that it is none the less the proper province of these courts, when their jurisdiction is invoked, not to refrain from exercising that jurisdiction if they think that it is their duty so to do for the protection of rights which are peculiarly subject to the protection of the English courts. In so saying, I do not conceive that I am offending in any way against the principles of comity which apply between the two countries; and, like Upjohn J., I take some comfort from the doubts which Judge Sylvester Ryan himself entertained about the extent to which this order might, if carried to its logical conclusion, go.

One final word: I suggested to Mr. Winn that it might be right to include in the order some express reservation of the defendants’' right to apply to discharge the injunction if some change took place in the circumstances, particularly if some steps of a penal character were taken against the defendants in the American courts. But, on reflection, it seems unnecessary to make any addition to the order to that effect, for the order is (as all interlocutory orders of this kind are expressed to be) only “until judgment or further order.” It will therefore, I think, suffice to say that in dismissing this appeal (as in my judgment we should) we do not in any way prejudice the right of the defendants, if any of the events that I have indicated should occur – and there is no evidence before us as to what might happen – to apply to the judge for a discharge of the injunction, either as to the whole of the subject-matter of the agreement of December, 1946, or as to some of the patents for example, the non-English patents – or otherwise as they may be advised.

[*28] DENNING L.J. I agree. It would be a serious matter if there were a conflict between the orders of the courts of the United States and the orders of these courts. The writ of the United States does not run in this country, and, if due regard is had to the comity of nations, it will not seek to run here. But, as I read this judgment of the United States court, there is a saving clause which prevents any conflict, because although Imperial Chemical Industries has been ordered to do certain acts by the United States court, nevertheless there is a provision which says that nothing in the judgment shall operate against the company for action taken in complying with the law of any foreign government or instrumentality thereof to which the company is for the time being subject. With that saving clause, I hope that there will be no conflict between the orders.

ROMER L.J. I also agree, and there is nothing that I wish to add.

Appeal dismissed.

* Copyright duration in Canada is 50 years. This document is in the public domain in and for Canada and only the proprietary format has been removed. See “Copyright Law in Canada”. The subject matter of this judgment remains of vital political, diplomatic and juridical importance today.