Magnesium Elektron Ltd v Molycorp Chemicals & Oxides (Europe) Ltd and Another

Thursday 3 rd December 2015

This is an application for permission to serve proceedings for patent infringement against a defendant based in China. The action is for infringement of patent EP (UK) 1 444 036 entitled "Process for preparing zirconium-cerium-based mixed oxides". All the claims are process claims. Claim 1 is as follows:

"A process for preparing zirconium-cerium-based mixed oxides which comprises reacting an alkali with an aqueous solution of a soluble zirconium salt containing 0.42–0.7 mole of sulphate anion (SO4 ²–) per mole of zirconium cation at a temperature of not greater than 50°C, in the presence of a soluble cerium salt to form a cerium-zirconium mixed hydroxide, and then calcining the cerium-zirconium mixed hydroxide to form a mixed oxide."

The claimant is based in Manchester and has R&D and manufacturing sites in the UK, USA and Japan. Part of its business is to make and supply rare earth mixed oxide (REMO) products. The claimant's REMO constitutes mainly zirconium-cerium-based mixed oxides made by the patented process doped with rare earth oxides such as yttrium oxide. According to the evidence of Peter Moles, an experienced chemist and technical director of the claimant, the patented process is the claimant's fourth generation process.

The first defendant (Molycorp Europe) is a UK company which supplies rare earth mixed oxide (REMO) products. The second defendant (Zibo Jia Hua Advanced Material Resources Co. Ltd ("Zamr")) of Shandong in China makes zirconium-cerium-based mixed oxides in China. Both defendants are indirect subsidiaries of Molycorp Inc., a US company. In June 2015 Molycorp Inc. petitioned the US Bankruptcy Court for relief under Chapter 11 of Title 11 USC and so, the claimant contends, it is not possible under US law to pursue legal proceedings against it.

The claimant's case is that both defendants have infringed the UK patent in relation to REMO made in China by Zamr using the patented process. I will refer to the defendants' products as Zamr REMO. The acts of infringement relied on against the first defendant are keeping, using, disposing of and offering to dispose of a product (Zamr REMO) made directly by means of the patented process. The claimant contends that one or other defendant committed the act of importing that product into the UK. The claimant's case also includes an allegation that the defendants' acts were carried out pursuant to a common design between them and that accordingly they are jointly liable for any acts of infringement of this UK patent committed by the other.

The claimant has issued and served proceedings against the first defendant. Under CPR r6.36, the claimant needs the court's permission to serve a claim form out of the jurisdiction against Zamr in China. The claimant applied for permission without notice, with the application to be dealt with without a hearing. The application was supported by evidence from Deborah Bould, the claimant's solicitor. This evidence addressed various potentially relevant "gateways" under PD 6B paragraph 3.1, which I will return to, but it did not address the underlying merits of the claim. I invited the claimant to consider this. As a result the claimant filed the witness statement of Mr Moles and the matter was dealt with at a short hearing. At the hearing the claimant was ably represented with the court's permission by its solicitor Deborah Bould and Anna Rawlings of Pinsent Masons.

The claimant submitted that there were issues to be addressed:

i) Is there a serious issue to be tried?

ii) Is there a good arguable case that whichever of the gateways in PD 6B paragraph 3.1 are relied on by the claimant are satisfied?

iii) Is England and Wales is a proper place in which to bring the claim?

This way of putting the issues provides a convenient framework within which to consider the relevant matters.

Since the application is made without notice to the defendants the claimant accepted that it had a duty of full and frank disclosure to the court.

Serious issue to be tried

Based on De Molestina v Ponton[2002] 1 Lloyds Rep 271, the claimant submitted that the serious issue to be tried test for service out of the jurisdiction on the merits ( Seaconstar v Bank Markazi Jomhouri Islam Iran [1994] 1 AC 438) was the same as the test for resisting summary judgment (CPR Part 24) or striking out ( CPR Part 3 r3.4). I accept that submission but for reasons which will emerge below, it is also necessary to consider the higher hurdle of good arguable case (see below) which is applicable to establishing jurisdiction.

Section 60(1)(c) of the Patents Act 1977 provides as follows:

"60.—Meaning of infringement.

(1) Subject to the provisions of this section, a person infringes a patent for an invention if, but only if, while the patent is in force, he does any of the following things in the United Kingdom in relation to the invention without the consent of the proprietor of the patent, that is to say—

…

(c) where the invention is a process, he disposes of, offers to dispose of, uses or imports any product obtained directly by means of that process or keeps any such product whether for disposal or otherwise."

In the light of the provisions of the Patents Act there are two distinct questions which need to be addressed. One is whether Zamr has committed any relevant acts relating to Zamr REMO. The other is whether Zamr REMO is a product made directly by the patented process. Both questions need to be answered to satisfy the relevant merits test.

Turning to the first question, the evidence in Ms Bould's witness statement sets out details of a consignment of Zamr REMO supplied by Molycorp Europe to a company in North Wales. The documents in evidence are a Zamr packing list dated 17 ^th August 2015 for a 250kg shipment from China to Heathrow bearing a Zamr stamp which includes the words "Import & Export", a Zamr certificate of analysis dated 16 ^th July 2015 and Molycorp Europe delivery note for the 250 kg consignment to the North Wales company. The batch number on the delivery note matches the lot number on the certificate. These documents link the Chinese defendant Zamr to the act of importation of the goods into London Heathrow and there is a serious issue to be tried as to the pleaded allegation that it was Zamr which committed the act of importation into the UK. However, while one or other of Zamr or Molycorp Europe must have imported the goods into the UK, there is no evidence which makes the claim that Zamr did that any better than the claim that it was Molycorp Europe. I am not satisfied on this evidence that the higher, good arguable case, test is satisfied in relation to the act of importation by Zamr.

The claimant also pleads an allegation that Zamr and Molycorp Europe are liable as joint tortfeasors on the basis of a common design.

In Sandvik v Kennametal[2010] EWHC 3417 (Pat) Arnold J considered an application to set aside service out of the jurisdiction on a foreign defendant in a patent case in which the claim against the foreign defendant was based on joint tortfeasance. In considering this question, the judge applied the higher hurdle of good arguable case which derives from the judgment of Waller LJ in Canada Trust v Stolzenberg (No 2) [1998] 1 WLR 547 (CA). He also noted the observations made by Laddie J in Napp v Asta[1999] FSR 370 about the particular considerations raised by reliance on a claim of joint tortfeasance as the basis for bringing a foreign defendant into a claim for infringement of a UK intellectual property right. The observations were:

"… but the earlier cases illustrate that the court is careful to ensure that foreign defendants are not brought unnecessarily into English proceedings, and that the courts therefore look carefully at allegations of joint tortfeasance to see whether there is anything of substance in them. In case after case it has been said that the mere fact that a company is a parent company of a subsidiary which is a primary infringer does not make the parent itself an infringer. The fact that one company owns a trade mark which another infringing company uses on infringing goods does not make the trade mark owner an infringer. At all times the courts are looking to see whether there is a credible case made out that the joint tortfeasor has really become involved in some way with the tort in the jurisdiction which is the subject of the action." ( Laddie J at 375)

I agree with those observations. Like Arnold J, it seems to me that the right approach to considering the merits of a claim to join a foreign defendant into English patent proceedings on the basis of an allegation of joint tortfeasance is to apply the good arguable case hurdle to that aspect of the claim. That is because that higher hurdle is concerned with establishing jurisdiction.

In relation to a common design between two companies in a group in which one company is a foreign company making the product overseas and the other company is a UK company selling that product in the UK, the claimant relied on Aubrey Max Sandman v Panasonic[1998] FSR 651. In that case Pumfrey J (as he then was)...