IP rights: Lycatel
18 March 2011 | By Andrew Pugh
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Think back to 4 October 2010 at the Royal Courts of Justice in London. The battle over the ownership of Liverpool FC is raging on after owners Tom Hicks and George Gillett are awarded a temporary restraining order by a Texas court, preventing the club’s sale.
While the members of the press jostle their way into a packed courtroom, the hearing next door attracts far less attention. It is a High Court hearing under EC Judgment Regulation 44/2001, arising from a patent infringement claim brought in Germany against calling card company Lycatel by Prepaid Cards BVBA, the Belgian affiliate of US telecoms company IDT.
At the hearing Lycatel was defended by legal head Mohammed Malique. “I recall my brother, an avid Reds fan, texting me throughout the morning,” says Malique.
It might have lacked the drama of the Liverpool FC hearing, but the case potentially had big implications for how patent infringements are enforced in Europe.
“As it turns out, there was a greater coincidence between the two matters beyond the fact they were being heard on the same day,” says Malique. “Both concerned cross-border issues and both had an element of ’grey law’ - quite simply, one could not say at the outset which way things would go.”
The matter dates back to the patent infringement case brought against Lycatel at the Düsseldorf District Court. In a first instance judgment handed down on 30 July 2008, the court found in favour of Prepaid Cards, which alleged Lycatel had infringed on the German part of a European patent relating to a procedure for processing prepaid telephone calls.
On 17 November 2008 Lycatel and one of its directors were each fined e30,000 (£35,000) for violating a court injunction imposed after the judgment, amid claims that it was continuing to infringe the patent.
“After the first instance judgment the patent holder secured a further judgment imposed effectively as a sanction under German law, in what are referred to as ’Ordnungsgeld’ proceedings,” explains Malique.
Prepaid Cards then sought to enforce the fine in the UK under the Judgment Regulation, which regulates the enforcement of judgments in civil and commercial matters in Europe.
The High Court granted an order recognising the enforcement order, a decision Lycatel appealed immediately. Crucially, Lycatel had already lodged an appeal with the Düsseldorf Appeal Court and a nullity complaint with the German Federal Patent Court before the High Court proceedings had commenced.
At the High Court hearing Prepaid Cards asserted a distinction between the ongoing appeals in Germany and the judgment it sought to enforce in the UK via the Ordnungsgeld proceedings.
The company essentially wanted to isolate the Ordnungsgeld proceedings from the appeals in Germany, claiming they could not be appealed any further and that Lycatel had no remit to request a stay of the proceedings pending the determination of the infringement and nullity appeals - and neither did the High Court.
Lycatel countered that there was a clear connection between the German appeals and the Ordnungsgeld decision, in that its enforcement depended on the outcome of the appeals. Lycatel argued that, given this dependency, the judgment being enforced under the Judgments Regulation was not final.
“In the event, the High Court noted that what had initially appeared as a relatively routine enforcement hearing, on appeal instead carried greater potential significance to other parties including public policy issues, since effectively the enforcement sought was one that could be construed as the enforcement of a state sanction cross-border, and adjourned the matter to be relisted for a substantive hearing,” says Malique.
Glad to be grey
While a date is yet to be fixed, Malique believes the case already has important implications.
“One of the lessons is that when the law appears grey, don’t be afraid to argue your point,” he says. “The patent holder had secured an order of the High Court to enforce the Ordnungsgeld judgment. At first glance such orders may seem correct. Also, there’s the first instance judgment in Germany upon which enforcement is being sought.
“Meanwhile, the Judgments Regulation appears to give little room to dispute, but when the team received the matter the circumstances just didn’t seem logical given that appeals on the heart of the matter remained to be determined, and if successful the judgment being enforced would need to be undone.
“That’s why the appeal against the High Court order was filed - and given the view of the court on examination of the issue, in hindsight that course of action was worthwhile. Since the matter now proceeds to substantive consideration that will clarify matters for others, hopefully. The message here perhaps is that despite all appearing to be in order, it serves well to constantly question if it is felt that an argument exists.”
Malique chose not to instruct external counsel and was granted audience. “Our department considered whether to outsource the matter, but after preparing the case we realised that nobody knew it better at that stage than our own team of solicitors,” he says.
“If the court permits you, why not act as advocate? A nice touch at the end of the hearing was the court granting permission to act as advocate at the substantive hearing, without the need to request permission again. Solicitors should not be worried about appearing before the High Court - they probably know the case better than anyone. I’d say take the plunge.”