Niche Products Ltd v MacDermid offshore Solutions LLC
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Birss,Judge Birss |
| Judgment Date | 07 March 2013 |
| Neutral Citation | [2013] EWPCC 11 |
| Docket Number | Case No: CC12P03715 |
| Court | Patents County Court |
| Date | 07 March 2013 |
[2013] EWPCC 11
IN THE PATENTS COUNTY COURT
Rolls Building
7 Rolls Buildings
Fetter Lane
London EC4A 1NL
His Honour Judge Birss QC
Case No: CC12P03715
Michael Hicks (instructed by Gateley) for the Claimant
Michelle Menashy (instructed by Addleshaw Goddard) for the Defendant
Hearing dates: 20th February 2013
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.
His Honour Judge Birss QC
This is an application by the defendant (MacDermid) to stay these proceedings in favour of a parallel action proceeding in the United States District Court for the Southern District of Texas, Houston Division before United States District Judge Melinda Harmon. Before me Michelle Menashy instructed by Addleshaw Goddard appears for MacDermid and Michael Hicks, instructed by Gateley, appears for the claimant (Niche).
The application arises as follows:
MacDermid and Niche are rivals in the oil business. Niche is based in Lancashire, has about 17 employees and a turnover of £5 million. MacDermid is incorporated in the USA with a turnover of between £24 million to £30 million. Both companies sell hydraulic fluids for use in subsea production control systems. These fluids are used to control the functions of oil and gas wells via remote hydraulic systems at a considerable distance, perhaps as many as tens or even hundreds of kilometres. Once installed the systems have to remain functional for a long time, perhaps in excess of 25 years. These are obviously demanding requirements.
Niche has a product called Pelagic 100 and MacDermid has a product called Oceanic HW 443. They are directly competitive products. As I understand it the main ingredients of these fluids are water and ethylene glycol but they also contain other ingredients such as lubricant and corrosion inhibitor additives.
The issue at the heart of this dispute is a new formulation of MacDermid's Oceanic HW 443 fluid. Niche says that Oceanic HW 443 has been supplied for more than 20 years but in 2009/2010 MacDermid changed the formulation of its Oceanic HW 443 product in order to comply with European Regulation No 1907/2007 concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals. This regulation is known as "REACh". I will refer to the new formulation as "Oceanic HW 443 v2".
Niche says that MacDermid was telling customers that it was appropriate to consider that Oceanic HW 443 v2 had the same characteristics as Oceanic HW 443 v1 because none of the chemical or performance properties of the product had been changed. Niche conducted comparative tests of Oceanic HW 443 v1 and v2 in April/May 2012 and produced a report setting out the results.
The Niche report contends that Oceanic HW 443 v2 is a different product from Oceanic HW 443 v1. It contends that the two products contain different lubricant and corrosion inhibitor additives, have different physical properties and perform differently in various tests. The Niche report contends that Niche considers the major cause of the changes observed was that the corrosion inhibitor has been changed. In Oceanic HW 443 v1 the corrosion inhibitor which Niche believes is present is a tertiary sulphonamide whereas in Oceanic HW 443 v2 Niche believes the corrosion inhibitor is a secondary sulphonamide. Whereas the relevant nitrogen in a tertiary sulphonamide has two alkyl groups and a sulphonyl group connected to it, the relevant nitrogen in a secondary sulphonamide has only one alkyl group in addition to the sulphonyl group bonded to it, and so has a hydrogen atom at its third bond, which, Niche contends, is a chemically active acidic hydrogen, with the potential to undergo further reaction. The original tertiary sulphonamide did not have the same potential. Niche argues that MacDermid has contended that the two corrosion inhibitors have the same chemical formula. Niche accepts that they have the same chemical composition but argues that they have different structures and therefore different chemical properties. The structures are given in the Niche report. The methyl group on the tertiary sulphonamide in the inhibitor believed to be in Oceanic HW 443 v1 is not present on the secondary sulphonamide believed to be in Oceanic HW 443 v2 but an extra methyl group is present elsewhere in the molecule. This would explain why the chemical compositions of the two inhibitors are the same but their chemical structures are distinct.
Of course even if Niche is right and there are differences in the additives in Oceanic HW 443 v2 as opposed to v1, it by no means follows that there is any material difference in the properties of these fluids. Niche contends the differences exist and they are material. MacDermid has not yet addressed whether it accepts the underlying differences exist at all but in any case, crucially, it does not accept that Oceanic HW 443 v2 has materially different properties from Oceanic HW 443 v1.
Since MacDermid did not agree with the Niche report, MacDermid issued a rebuttal letter on 18 th June 2012. The rebuttal states that MacDermid has " received notification regarding the distribution of misleading information from a specific competitor on Oceanic HW 443 Series v1 verses v2". It states that the chemical specifications and performance of Oceanic HW 443 remain unchanged and that " there has been no change in either the important chemical or the performance properties of Oceanic HW 443, the v2 merely relates to the UK environmental registrations. Further, MacDermid has been producing Oceanic HW 443 under the v2 designation for over two years in the UK and the fluid has been through the rigorous testing at leading subsea OEM's yielding the same performance results as v1, as would be expected".
Both the Niche report and the MacDermid rebuttal have been sent to customers.
The disagreement is clear and English solicitors acting for Niche and MacDermid exchanged correspondence between about June and August 2012.
One of the sub-issues arising is whether the correspondence has a bearing on the fact that MacDermid sued Niche in Texas (on 20th August 2012) four weeks before Niche sued MacDermid in the Patents County Court (PCC) in London. Niche says that when it looked like Niche was going to sue (in England) MacDermid said in correspondence that "time was not of the essence" so that Niche relaxed. Then, in the meantime, MacDermid suddenly started proceedings in Texas. So, says Niche, MacDermid tactically induced Niche to delay filing proceedings in England and its tactics are the only reason the action in Texas started a few weeks before the action here. MacDermid does not accept this characterisation of the correspondence. It says that the last message from Niche terminated the correspondence, using the phrase "see you in court" and so there was no tactically induced delay. This sub-issue is discussed at some length between the parties' US attorneys since it appears to have a bearing as far as US Federal law is concerned in dealing with jurisdiction between US states. In the USA MacDermid contends it could rely on a "first to file" rule as founding jurisdiction whereas Niche contends it could rely on an exception to the "first to file" rule when the first case was filed in anticipation of the second case.
In any event each has started proceedings against the other which are broadly equivalent, making allowances for the different laws of the USA and the UK. In the UK, Niche sued MacDermid for malicious falsehood, arguing that the MacDermid rebuttal letter is a malicious falsehood. Although MacDermid is a foreign company, no leave to serve the proceedings outside the jurisdiction was needed because MacDermid's trading name is registered as the name of a UK Establishment pursuant to the Overseas Companies Regulations 2009 with an address in Wigan and as conducting the business of the sales and marketing of offshore drilling chemicals. In Texas, MacDermid sued Niche under the Lanham Act (false and misleading advertising). MacDermid argues that the Niche report is false and misleading. In the Texas proceedings MacDermid sued both Niche itself and a US company called Niche LLC of which Niche is a part owner. I will return to Niche LLC below. Although there was a disagreement in Texas about whether Niche was duly served, that point is no longer live. The Texas proceedings are properly on foot.
At the heart of this dispute is a simple question—whether Oceanic HW 443 v2 is materially different from Oceanic HW 443 v1. If "yes" then Niche are right, if "no" then MacDermid are right. Both torts (malicious falsehood and, so far as I can see from the pleadings, infringement of the Lanham Act) have more to them than this question, such as the issue of malice in the UK, but in truth the centre of gravity of this dispute depends on that relatively simple factual question. To resolve the issue will require expert evidence, will involve a bit of chemistry and no doubt evidence about the performance of hydraulic fluids and their additives, but it is not an unduly complex technical issue. It is the kind of technical question decided in patent cases on a regular basis.
The UK proceedings also include two further claims by Niche, for copyright infringement and breach of confidence. These allegations relate to certain videos of the tests undertaken by Niche to produce the report. The videos were only available on a private part of Niche's website, accessible only to persons who had been given a username and password by Niche. Niche says that MacDermid (from an IP address in Wigan) downloaded the videos and therefore infringed...
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- Macdermid Offshore Solutions LLC v Niche Products Ltd
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Niche Products Ltd v MacDermid Offshore Solutions LLC
...malicious falsehood brought by the claimant (Niche) against the defendant (MacDermid). The action is described in my earlier judgment [2013] EWPCC 11 on 7 th March 2013 which refused MacDermid's application to stay the proceedings in favour of parallel proceedings in the United States Distr......