Fern Computer Consultancy Ltd v Intergraph Cadworx & Analysis Solutions Inc.
| Jurisdiction | England & Wales |
| Judge | Mr Justice Mann |
| Judgment Date | 29 August 2014 |
| Neutral Citation | [2014] EWHC 2908 (Ch) |
| Docket Number | Case No: HC13E05043 |
| Court | Chancery Division |
| Date | 29 August 2014 |
2014 EWHC 2908 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Rolls Building, 7 Rolls Buildings
Fetter Lane, London EC4A 1NL
Mr Justice Mann
Case No: HC13E05043
Philip Moser QC (instructed by Shakespeares Solicitors) for the Claimant
Jasbir Dhillon QC (instructed by Olswang LLP) for the Defendant
Hearing dates: 25 th, 26 th & 27 th June 2014
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This is an application by the defendant ("Intergraph") to set aside an order giving permission to the claimant ("Fern") to serve out of the jurisdiction, made by Master Bragge on 29th October 2013. The main claim is based on The Commercial Agents (Council Directive) Regulations 1993 ("the Regulations"), but there is a lesser claim for unpaid commission. Permission to serve out of the jurisdiction (in Texas) was sought on the basis that the contract was governed by English law, and/or that the contract was breached within the jurisdiction. This is notwithstanding that the contract contains an apparently clear Texas law and Texas jurisdiction clause. Thus the application raises the tensions that arise between such clauses and the Regulations, and other associated questions. The application raises a wide variety of points as to whether or not Fern can pass through a service out gateway and, if it can, as to the merits of the claim.
Mr Jasbir Dhillon QC appeared for the defendant, and Mr Philip Moser QC appeared for the claimant.
The agreements and underlying facts
Intergraph and its corporate predecessor COADE Inc (both Texas-based companies) were the owners and or licensees of certain software products. It is unnecessary to distinguish between those two Texas companies for the purposes of this application. Since 1993 Fern has acted as their agent for selling those products. (There is a dispute in this case as to whether Fern was "selling" anything as opposed to procuring a licence. In this narrative I use the word "sale" and its derivatives without pre-judging that issue). The only agreement which has hitherto been produced as regulating that arrangement is an agreement dated 21st December 2007, and all the debate in this case centred around the effect of that document. Under it Fern was appointed to be a "partner" to solicit orders for the software throughout Europe. Any successful orders resulted in a licence which operated directly between Intergraph and the purchaser/customer. Fern was entitled to commission, and it was to collect the fees paid by end users, deduct its commission and pass the balance to Intergraph. This is the agreement with the Texas law and Texas jurisdiction clause in it.
In a little more detail the relevant clauses of the agreement were as follows. In the agreement Fern is described as "CGNP".
There are four recitals the first of which reads:
"WHEREAS COADE, Inc is the owner or licensee of the software products described in Exhibit A attached hereto (the "Software Products"); …"
Unfortunately Exhibit A has the heading "Current Price Lists". It does not specify the software products; nor does it contain a current (or any) price list, though it does indicate that pricing can be found online at COADE's website. However, there was no relevant dispute as to what products in which Fern was to deal.
The third recital reads:
"Whereas COADE, Inc desires to appoint CGNP as its non-exclusive COADE Global Network Partner to solicit orders for the Software Products and to provide such other services as described herein."
Clause 1 contains the appointment of Fern as agent:
"COADE, Inc hereby appoints CGNP as its non-exclusive "COADE Global Network Partner" to market and solicit orders for the Software Products throughout the territory defined in Exhibit B attached hereto (the "Territory"), on the terms and conditions described herein. CGNP shall only solicit orders from end users of the Software Products or from Sub-Representatives approved by COADE, Inc in accordance with the requirements of Section 1(b) hereof …."
Unfortunately the Territory is not defined either, but it is common ground that it included Western Europe, though Fern was primarily based in the UK and started its activities there before adding certain European countries over time.
Clause 2 contains Fern's duties. They include:
"(a) CGNP will use its best offers to solicit orders for the Products as provided hereunder. COADE, Inc reserves the right, at its sole discretion, to accept or reject any orders submitted by CGNP hereunder."
(d) CGNP shall immediately forward to COADE Inc in writing by registered or certified airmail, by fax, or by email, each order obtained by CGNP thereunder…
(f) CGNP shall be primarily responsible for providing technical support to all customers of the Software Products which it procures. All such customers shall be instructed to direct any requests for technical support to CGNP … CGNP shall, in any event, resolve any customer request for support to the satisfaction of the customer within one (1) business day or, if CGNP is unable to do so, shall refer the request to COADE Inc by the fastest possible means within one (1) day period.
(j) CGNP shall, at its own cost and expense, protect and defend and assist COADE, Inc with protecting and defending COADE, Inc's ownership of the Software Products and all intellectual property rights associated therewith against all claims, liens, and proceedings. CGNP acknowledges and agrees that it shall have no right to encumber in any manner and shall keep the Software Products and all intellectual property rights associated therewith free and clear of all claims, liens and encumbrances."
Clause 3 contains COADE's (subsequently Intergraph's) duties:
"(c) COADE, Inc or its licensors shall enter into a software license agreement directly with each customer to whom COADE, Inc delivers any of the Software Products in response to an order obtained by CGNP and accepted by COADE, Inc.
…
(e) COADE, Inc will provide evaluation copies of the software, with a maximum of 30 days usage allowed, at no charge to the customer or CGNP. The CGNP [sic] shall be responsible, at its sole expense, for recovering the Electronic Software Lock provided along with each item of Software Product sent for evaluation. This policy is subject to review, modification or revocation at any time by COADE, Inc."
The Electronic Software Lock (abbreviated in the jargon of the case to ESL) features in later arguments in this case and therefore needs a small amount of explanation. As will appear, the software was generally provided by a physical means (a CD-ROM), and along with those physical means there was provided a small piece of hardware (a USB dongle) with some code on it, which was needed to activate the software and without which it was locked. It was plugged into the equipment running the software product. This was a security measure to prevent piracy.
Clause 3(f) actually uses the word "sell":
"(f) COADE, Inc will provide CGNP the right to sell Global Corporate Agreements, as well as the right to sell to those companies holding Global Corporate Agreements."
Payment and commissions were dealt with in clause 4:
"(a) Payment of the licence fee relating to licences of any of the Software Products to customers procured by CGNP shall be due to COADE, Inc within sixty (60) days of COADE, Inc's shipment of the Software Product in question. CGNP shall be responsible for collecting such fee from the customer in question and, after deducting the commission payable to it hereunder with regard to the licence in question, shall remit such fee to COADE, Inc. All payments hereunder shall be made in US dollars…"
The commission was 50% of net receipts.
Clause 5 dealt with proprietary rights and, so far as relevant, said:
"(a) CGNP acknowledges that COADE, Inc is the owner or authorised licensee of all rights, title, and interest in and to the Software products and, except as set forth here in, nothing herein shall grant to CGNP any rights to any such Software Products. CGNP further acknowledges that the Software Products constitute the trade secrets of COADE, Inc or its licensor and shall be safeguarded by CGNP in the same manner as CGNP employs for its own trade secrets…"
Clause 7 dealt with the term and termination of the agreement. Sub clause (a) provided that the agreement would continue until 31st December 2008 and would thereafter be automatically renewed for one year unless terminated by either party by written notice delivered at least 60 days prior to the end of any year. The effect of that was mitigated by subclause (d):
"(d) Either COADE, Inc or CGNP may terminate this Agreement at any time with or without cause by providing sixty (60) days' prior written notice of intention to terminate to the other."
Clause 10 contains the important jurisdiction and governing law provisions:
"10. General
(a) CGNP shall comply with all applicable laws in the jurisdictions in which CGNP carries out its activities in connection with its performance hereunder.
…
(c) THIS AGREEMENT SHALL IN ALL RESPECTS BE INTERPRETED AND CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS USA (EXCLUDING ITS CHOICE OF LAW PROVISIONS) REGARDLESS OF THE PLACE OF ITS EXECUTION OR PERFORMANCE. For the benefit of COADE, Inc CGNP hereby irrevocably agrees that any legal action, suit or proceeding arising out of or relating to this Agreement shall be brought in the courts of the State of Texas sitting in Houston, Harris County, Texas, or in the United...
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