SAS Institute Inc. v World Programming Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Flaux,Lord Justice Males,Lord Justice Popplewell |
| Judgment Date | 12 May 2020 |
| Neutral Citation | [2020] EWCA Civ 599 |
| Date | 12 May 2020 |
| Docket Number | Case No: A4/2019/2516 & A4/2019/2516(A) |
| Court | Court of Appeal (Civil Division) |
[2020] EWCA Civ 599
Lord Justice Flaux
Lord Justice Males
and
Lord Justice Popplewell
Case No: A4/2019/2516 & A4/2019/2516(A)
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Mrs Justice Cockerill
Royal Courts of Justice
Strand, London, WC2A 2LL
Thomas Raphael QC & Josephine Davies (instructed by Keystone Law LLP) for the Appellant
Monica Carss-Frisk QC & Andrew Scott (instructed by Macfarlanes LLP) for the Respondent
Remote hearing dates: 22 nd & 23 rd April 2020
Approved Judgment
Introduction
By an order sealed on 27 th September 2019 Cockerill J (“the judge”) declined to continue an anti-suit injunction granted by Robin Knowles J at a hearing on 21 st December 2018 held without notice to the respondent, SAS Institute Inc (“SAS”). However, she gave permission to appeal to this court and continued the injunction pending appeal. On this appeal the appellant, World Programming Limited (“WPL”), contends that the judge was wrong and that the injunction ought to be continued.
The injunction granted by Robin Knowles J restrains SAS, in outline, from taking steps to obtain orders from courts in the United States requiring WPL (a) to assign debts owed to WPL from its customers either now or in the future (“the Assignment Order”) and (b) to turn over to a United States Marshal payments from customers which it has already received (“the Turnover Order”). Those are orders which the United States District Court for the Central District of California (“the California court”) has indicated that it is minded to make by way of enforcement of a judgment for US $79,129,905 (being compensatory damages of US $26,376,645, tripled pursuant to the North Carolina Unfair and Deceptive Trade Practices Act (“UDTPA”)). That judgment was obtained by SAS in an action before the United States District Court for the Eastern District of North Carolina (“the North Carolina court”).
The Assignment Order, if made in the terms currently proposed, would apply to debts owed from WPL customers anywhere in the world except the United Kingdom, although SAS has reserved the right to seek an order which would extend to United Kingdom customers (albeit that, as explained below, it has offered an undertaking to give 14 days' notice in the event that it forms the intention to do so). The Turnover Order would apply to payments received from WPL customers anywhere in the world including the United Kingdom, wherever those payments were received, although in practice it appears that all payments by WPL customers are made to a bank or banks in the United Kingdom.
The dispute between the parties has a long history. It includes an action brought by SAS against WPL in this country in which SAS's claims were dismissed; a decision by WPL, following an unsuccessful challenge on forum non conveniens grounds, to submit to the jurisdiction of the North Carolina court and to fight the action there on the merits; a judgment in favour of SAS from the North Carolina court for some US $79 million; an attempt by SAS to enforce the North Carolina judgment in this jurisdiction which failed on the grounds that enforcement here would be (a) an abuse of process, (b) contrary to public policy and (c) prohibited by section 5 of the Protection of Trading Interests Act 1980 (“the PTIA”); and a judgment from the English court in favour of WPL for over US $5.4 million, which SAS has chosen to ignore.
The background
The circumstances in which this appeal arises are set out in detail in the judgment below and in previous judgments. For present purposes I can summarise them as follows.
The parties
SAS, a North Carolina corporation, is a developer of analytical software known as the SAS System which enables users to carry out a wide range of data processing and analysis tasks, including statistical analysis. The software enables users to write and run applications written in a language known as the SAS Language. SAS licenses its software to customers in the United States and elsewhere. Until WPL developed an alternative product, SAS customers wishing to run their existing applications or to create new ones had no alternative to continuing to license use of the SAS System.
WPL, a United Kingdom company, perceived that there would be a market demand for alternative software which would be able to execute applications written in the SAS Language. It therefore created a product called World Programming System (“WPS”). In doing so, it sought to emulate the functionality of the SAS System as closely as possible, so that its customers' application programs would execute in the same way when run on WPS as on the SAS System. For this purpose it took a licence of the SAS Learning Edition from SAS on terms which (in effect) purported to prohibit the use of the software to produce a competing product. 1 Contrary to these terms, WPL studied the functionality of the SAS System in order to replicate it in its own software, although it did not have access to or copy the source code of the SAS System or its structural design.
Having developed WPS, WPL licensed it to customers in the United Kingdom, the United States and elsewhere. In most cases (but not including United States customers) it did so on terms which provided for arbitration of any dispute in London or (since December 2018) for the exclusive jurisdiction of the English court. From December 2018 its standard terms for non-US customers have also included terms which provide that debts owed by customers are situated in England and a provision that all payments are to be recovered by collection against a deposit in England.
The English liability proceedings
SAS sought to prevent WPL from licensing or selling its competing product. It sued WPL in England for copyright infringement and breach of contract, alleging that WPL used the SAS software in breach of its “click-through” licence terms. Both claims were eventually rejected by Arnold J in a judgment of 25 th January 2013 (the “English liability judgment” [2013] EWHC 69 (Ch), [2013] RPC 17) after a reference to the CJEU in Luxembourg.
Arnold J concluded that although WPL's use of the SAS software in developing WPS was contrary to the terms of its licence, those terms were null and void pursuant to Article 5(3) of Council Directive 91/250/EEC (“the Software Directive”), enshrined in English law in the Copyright, Designs and Patents Act 1988. The Directive permits a licensee to observe, study and test the functioning of a licensed computer program in order to ascertain the ideas which underlie it, which are not protected by copyright, and renders null and void any contract terms to the contrary. This promotes competition and benefits consumers.
SAS appealed to this court against the dismissal of its claims, but its appeal was dismissed on the basis of the Software Directive (see [2013] EWCA Civ 1482, [2014] RPC 8).
The North Carolina liability proceedings
In January 2010, before the English liability proceedings had concluded, SAS brought proceedings against WPL in the North Carolina court. The claims brought included copyright infringement, breach of contract, fraudulent inducement to contract, and a statutory claim for contravention of the UDTPA, which was itself based on the fraud claim.
WPL challenged the jurisdiction of the North Carolina court on forum conveniens grounds and that challenge was initially successful. However, the decision of the District Court was reversed on appeal to the Court of Appeals for the Fourth Circuit which held that a defendant bears a heavy burden to overcome a presumption that a United States plaintiff is entitled to litigate in its home court, and that WPL had failed to overcome this presumption.
WPL then submitted to the jurisdiction of the North Carolina court and defended the action on the merits. Commercially, WPL may have had no choice. In order to do business in the United States, WPL could not sensibly ignore the jurisdiction of the United States courts. Nevertheless WPL did undoubtedly submit to the jurisdiction and made no attempt at that stage to obtain an anti-suit injunction from the English courts to prevent SAS from pursuing the North Carolina proceedings.
Both parties sought summary judgment on certain issues, relying on the findings made in the English liability proceedings. The North Carolina court held as follows: (1) the English court had found that what WPL had done in developing WPS was contrary to the terms of its licence agreement with SAS; (2) as a matter of comity and collateral estoppel, WPL was precluded from arguing otherwise; but (3) a United States court was under no obligation to apply the Software Directive because the licence was governed by an express choice of North Carolina law; and (4) accordingly the North Carolina court was not bound by the English court's decision that terms of the licence prohibiting what WPL had done were null and void. The result was that summary judgment was granted to SAS on its breach of contract claim. However, its claims for copyright infringement were dismissed. Subsequently the North Carolina court decided that it would determine the first of these issues for itself rather than treating the decision of Arnold J as giving rise to an issue estoppel. Having done so, however, it reached the same conclusion.
There followed a...
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