Background to Enforcement of Foreign Intellectual Property
Once judgment has been obtained, the successful party needs to be able to enforce that judgment against the other party to obtain the remedy granted in the judgment. Where the legal proceedings took place outside the UK but the defendant is resident in the UK, this can be difficult. In the EU, issues of jurisdiction and enforcement are dealt with under the Brussels Regulation. For countries outside the EU, where there is no convention or treaty for the English courts to rely on, for example the US, enforcement of foreign judgments is subject to common law rules and can be difficult and costly. This is one of the reasons why parties often choose arbitration as it is generally easier to enforce against foreign counterparties under the New York Convention. However, unless the parties have chosen arbitration, for example as part of a contractual agreement, then it may not be an option.
Under common law, the English courts will generally only enforce a judgment if the foreign court had jurisdiction, which requires that the defendant was resident in the country at the relevant time. If the English court will not recognise or enforce the foreign judgment directly, then the party has to bring a fresh claim in the English courts. However, traditionally there have been some types of foreign rights which the English courts have refused to accept jurisdiction over, including property rights and potentially also intellectual property rights. In the recent case of Lucasfilm v. Ainsworth1, the Supreme Court had a rare opportunity to consider the question of enforcement and jurisdiction over foreign intellectual property rights.
In 1976, Andrew Ainsworth was commissioned by Lucasfilm to make a military style helmet to be used as part of a costume for the Star Wars films. The helmet was for the Imperial Stormtroopers, with its distinctive white design with black features. Along with many things from the film, the Stormtrooper costumes and particularly the helmet became iconic.
Ainsworth based the helmet on paintings and drawings and a clay model provided by the claimants, incorporating his own improvements and using sculpting techniques to create the final design. He produced several prototype vacuum moulds and, once George Lucas had approved the final version, he made 50 helmets for use in the film.
On the back of the sustained popularity of the Star Wars films, he began producing plastic replicas of the helmet in England for public sale and advertising them on a website. Some of the replica helmets were bought by customers in the US.
Lucasfilm brought proceedings in the US for breach of copyright. Although Ainsworth challenged the US court’s jurisdiction, he did not participate further in the proceedings. As a result, the court awarded a default judgment in favour of Lucasfilm of US$20 million. The default judgment was not satisfied in the US.
Lucasfilm then brought proceedings in the English courts seeking:
- damages for infringement of copyright on the basis that the helmet was a “sculpture” or “work of artistic craftsmanship”;
- enforcement of the US copyright; and
- recognition and enforcement of the US default judgment.
There was also a counterclaim by Ainsworth that he in fact owned the intellectual property rights in the helmet.
Copyright in the Helmet Under the CDPA
This aspect of the case is not the focus on our presentation. The High Court decided that any intellectual property rights in the helmet belonged to Lucasfilm rather than Ainsworth. However, the helmet was not protected by copyright under the Copyright, Designs and Patents Act 1988 (CDPA) because it did not fall within “artistic work” as set out in Section 4(1), being too utilitarian to be either a “sculpture” or a “work of artistic craftsmanship”.
The issue of whether it was a “sculpture” was appealed to both the Court of Appeal and the Supreme Court. Both courts declined to find that the helmet could be a sculpture and so Lucasfilm’s claims for copyright infringement under English law failed.
This meant that Lucasfilm had no remedy under English law for infringement in copyright. Its sole opportunity for a remedy relied on being able to enforce infringement of US copyright law in respect of the US sales of the helmet.
Enforcement of US Judgment
The High Court and the Court of Appeal both found that the US judgment was not enforceable. The Court of Appeal confirmed that the English court would enforce a judgment of a foreign court if the defendant was in that foreign country at the time when the proceedings were instituted. Ainsworth was never resident in the US; instead he conducted his business over the Internet with US customers.
The Court of Appeal also found that use of the Internet to sell goods to customers in another country, and in particular advertising into a foreign country, did not make the seller or advertiser present in that country for this purpose. Therefore the US judgment was not enforceable in England. This issue was not appealed to the Supreme Court.
Justiciability of US Copyright Law The ability of Lucasfilm to have a remedy therefore rested on whether a claim for infringement of US copyright could be decided and enforced in the English courts.
The key issue was whether the English courts were barred from considering a claim for infringement of foreign copyright. There was old case law, in particular British South Africa v. Companhia de Mocambique2, which prohibited justiciability of foreign property claims. The question was whether this approach applied to intellectual property law and whether it would prevent justiciability of a foreign copyright claim.
The judge reviewed the case law as well as developments under international and European law in relation to jurisdiction over intellectual property rights claims.
He drew a distinction between:
- title (for land) and validity and registration aspects (for registrable intellectual property rights); and
- trespass and infringement.
While the law prevented the English courts from accepting jurisdiction in relation to title and validity, there was no such restriction on infringement claims. Therefore there was no bar by reason of the subject matter to the English courts accepting jurisdiction relating to infringement of foreign copyright.
He therefore held that he could accept jurisdiction to decide whether the US sales infringed US copyright. This was the first time that the merits of the US copyright infringement case were considered as Ainsworth did not defend the case and Lucasfilm obtained a default judgment. The judge relied on expert witnesses from both parties and the issue turned on whether the helmet was too utilitarian to be protected by copyright (similar in essence to the English law issue although the technical test was different as it did not have to fit within the categories under the CDPA). The judge commented that the submissions on this issue were light but that on balance he found the submissions of Lucasfilm more persuasive. Therefore he ruled that the helmets were not utilitarian or functional for the purposes of the relevant infringement or subsistence tests under US copyright law and that therefore copyright existed, or was infringed, as the case may be. A further hearing would be required to decide any questions relating to relief.
Court of Appeal
The Court of Appeal fundamentally disagreed with the decision of the High Court in relation to jurisdiction. It concluded that the principles relating to a bar on jurisdiction in relation to foreign land claims were still good law and applied to intellectual property infringement claims. There should not be a distinction made between validity and infringement claims.
The Court of Appeal also put forward a number of policy reasons why the courts should not accept jurisdiction, at least in the absence of a treaty governing the issue. It believed that infringement of intellectual property rights was essentially a local matter involving local policies considerations and should be left to local judges. It also thought that, as different countries had different policies in relation to intellectual property rights, the English courts attempting to enforce foreign copyright could lead to a conflict of policies.
Finally, counsel for Lucasfilm also put forward another argument that Article 2 of the Brussels Regulation, which required residents of Member States to be sued in the courts of their own country, meant that the English courts were obliged to accept jurisdiction in this matter. This went beyond the question of whether the English courts could accept jurisdiction but actually argued that they must accept jurisdiction under the Brussels Regulation. The Court of Appeal did not accept this argument. It held that the Brussels Regulation did not change the position to give additional jurisdiction and Article 2 did not mean that the English courts had extra-territorial jurisdiction in relation to property claims. Article 2 may apply in questions between Member States but could not be stretched to apply to cases involving foreign litigation outside of the scope the Brussels Regulation.
The Court of Appeal concluded that the judge therefore had been wrong to accept jurisdiction. The English courts had no right to accept jurisdiction and so the appeal was allowed.
The Supreme Count agreed with the High Court and overturned the decision of the Court of Appeal.
In reviewing the case law, the Supreme Court found that it was not bound to follow the old property law cases and was influenced again by the approach taken to intellectual property under the Brussels Regulation and other international conventions.
The issue of jurisdiction over claims relating to title and registration of intellectual property was not in dispute but the court did agree with the distinction between title and registration of property and the infringement of property rights drawn by the High Court.
It was influenced by the fact that Article 22(4) of the Brussels Regulation only assigns exclusive jurisdiction to the country where the right originates in cases concerned with registration or validity of rights which are “required to be deposited or registered” and does not apply to infringement actions. It can rarely, if ever, apply to copyright. This supports drawing a distinction between validity and infringement.
It was also unimpressed by the policy issues put forward by the Court of Appeal. States have an interest in international recognition and enforcement of copyright and many of the policy concerns raised by the Court of Appeal, particularly in relation to potential conflicts, would apply equally to many other types of cases where there was enforcement of foreign law. There was also no problem in principle in granting an injunction restraining activity in England or an extra-territorial injunction if required to enforce the judgment.
Therefore the Supreme Court concluded that the English courts could accept jurisdiction over copyright infringement claims provided the litigant had proper standing in the English courts. This meant there was no subject-matter bar to jurisdiction and the court would just consider the normal principles of whether the English courts had sufficient connection to hear the matter.
In relation to the question whether Article 2 of the Brussels Regulation required the English courts to accept jurisdiction, the Supreme Court declined to give an opinion. In light of its conclusion on the main issue, there was no need to rule on this. It did say that, if the courts were required to decide on this point, it would probably require a reference to the ECJ. However, that is a matter for another occasion.
The High Court ruled that there was an infringement of US copyright law. The Supreme Court decision meant that the High Court had jurisdiction to make this decision so the matter would need to revert to the High Court for a final ruling and a decision on relief.
Significance of Outcome
As media companies become ever more international in their reach and distribution of content, the issue of enforcement becomes more important. Although the issue of content liability has been the main focus for enforcement of rights, the ability to enforce judgments, or at least pursue a claim in the defendant’s home country, is also essential for the claimant to obtain an effective remedy.
As seen in the Ainsworth case, the common law rules in relation to jurisdiction for foreign intellectual property claims could effectively mean that the foreign claimant had no remedy against the English defendant. The Supreme Court’s judgment opens up the possibility of pursuing such infringement claims and will be a welcome finding for media companies seeking to manage and enforce their intellectual property rights on a worldwide scale. However, where possible companies should still plan their dispute resolution strategies carefully. Although this decision opens a new possibility for enforcement it may not be the best option in every case:
- The English courts will still not accept jurisdiction in respect of validity or registration of foreign intellectual property rights. While this will generally be separate for any infringement claim, for some claims in relation to registered rights, such as patents and trademarks, it is common to challenge validity as part of the defence. In this case, it may be difficult for the court to separate the issues and the court may still decline jurisdiction over the whole matter.
- While the decision opens up the possibility of effective enforcement, it does not necessarily make it cheaper or easier to obtain. When, in drafting contracts, it is possible to choose the dispute resolution approach, the parties may still want to consider whether arbitration or alternative dispute resolution may provide a better alternative option.