Satyam Computer Services Ltd v Upaid Systems Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lawrence Collins,Lord Justice Rimer,Lord Justice Waller |
| Judgment Date | 09 May 2008 |
| Neutral Citation | [2008] EWCA Civ 487 |
| Docket Number | Case No: A3/2008/0262 |
| Court | Court of Appeal (Civil Division) |
| Date | 09 May 2008 |
[2008] EWCA Civ 487
Lord Justice Waller
Vice-president Of The Court Of Appeal Civil Division
Lord Justice Lawrence Collins
Lord Justice Rimer
Case No: A3/2008/0262
CASE NO 2007 FOLIO 1040
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION COMMERCIAL COURT
MR JUSTICE FLAUX
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Geoffrey Vos QC and Ms Anna Boase (instructed by Lawrence Graham) for the Appellant
Mr David Foxton QC and Miss Emily Wood (instructed by Freshfields Bruckhaus Deringer) for the Respondent
Hearing dates : April 9 & 10, 2008
I Background
This is an appeal from a decision of Flaux J dated January 17, 2008 on some preliminary issues concerning the interpretation of three commercial agreements between the parties. It is not a case (by contrast with e.g. Chartbrook Ltd v Persimmon Homes Ltd [2008] EWCA Civ 183) in which either side suggests that there was such a consensus on the points in issue as to justify any exceptional resort to pre-contractual negotiations or as to justify a claim to rectification.
The case was most elaborately argued before the judge and before this court, with an attention to the linguistic detail of the agreements more appropriate to the interpretation of tax legislation which has received close scrutiny at all committee stages than to the interpretation of commercial contracts. The main points of interpretation on this appeal depend primarily on the ascertainment of the commercial purpose of the agreements in the light of the commercial and factual background. The main provisions involved are quoted below but all of the relevant provisions to which detailed reference was made are reproduced in an appendix.
The parties and the business
Satyam Computer Services, Ltd (“Satyam”), the appellant, is an Indian company. Satyam had a subsidiary called Satyam Enterprise Solutions Ltd (“Satyam Enterprise”), which was a party to two of the three agreements in issue in these proceedings. In 1999 Satyam Enterprise was merged with Satyam, which succeeded to all its rights and liabilities. Upaid Systems, Ltd (“Upaid”), the respondent, is a BVI company. It was formerly known as In Touch Technologies Holdings Ltd, and is the successor through merger of In Touch Technologies Ltd (which is referred to in two of the three agreements in issue as “ITTL”). For convenience I shall refer throughout to the parties to the agreements under their present names, Satyam and Upaid.
Upaid's business is the invention, development and provision of software technology and payment processing platforms and services. Satyam's business includes providing information technology services for the creation and development of software products in the telecommunications industry. Satyam employs skilled IT engineers. It is one of the largest such companies in the world and currently has some 50,000 employees.
In about 1996, Mr Simon Joyce and Mr Prafulla Gupta, the co-founders of Upaid, developed the idea of converting any telephone into a de facto pay-phone through the use of a pre-paid account associated with a caller personal identification number (PIN). In order to exploit the idea commercially, they decided to outsource the development of the computer based external platform and related software and identified Satyam as an entity which could carry out the software development work.
Assignment Agreement
The relationship between the parties was originally governed by a memorandum of understanding dated May 29, 1997. Satyam employees were involved in creating the core architecture and design of the external platform, thereby contributing to Upaid's inventions. In addition Satyam was carrying out the software product implementation work, which was an ongoing continuous process.
By June 1998, Upaid had decided to apply for a patent to the United States Patent and Trademark Office (“USPTO”). In order to do this, Upaid would have to demonstrate “unity of ownership” of the intellectual property rights in the inventions. It was therefore necessary to procure the transfer to Upaid of any rights in the inventions vested in Satyam, or in inventors working for Satyam. Satyam's practice is to transfer to its customers the intellectual property rights to the products it creates, but the memorandum of understanding dealt only briefly with the ownership of inventions and was silent as to any intellectual property rights.
Accordingly from late June 1998 there were negotiations for the formal documentation of a transfer to Upaid by Satyam of any intellectual property rights. The transfer was required for USPTO patent application filing purposes. Upaid wanted to file a provisional patent application with the USPTO by September 15, 1998, the date of a trade fair in Milan, to give it a “priority filing date” thereafter protecting it from infringement by commercial rivals. The Assignment Agreement was signed on September 11, 1998, and on September 15, 1998, Upaid filed a provisional patent application with the USPTO.
The Assignment Agreement was expressed to be governed by New York law (but without any jurisdiction clause) and contained (in paragraph 3) a covenant by Satyam that it would, on Upaid's request, provide Upaid
“… with all pertinent facts and documents relating to the applications, registrations, Letters Patent and legal equivalents in foreign countries as may be known and accessible to Satyam and will testify as to the same in any interference or litigation related thereto and will promptly execute and deliver to [Upaid] or its legal representatives any and all papers, instruments or affidavits required to apply for, obtain, maintain, issue and enforce the applications, Letters Patent and legal equivalents in foreign countries which may be necessary or desirable to carry out the purposes thereof. …”
Services Agreement
Upaid and Satyam also negotiated an agreement covering the parties' commercial relationship, which was required by the financiers with whom Upaid was dealing to raise funds via a private placement and which eventually became what is described as the “Services Agreement.”
September 15, 1998 was the date of commencement of activities of the “In Touch dedicated centre” at Satyam, a dedicated unit working exclusively on Upaid projects. It was originally contemplated that the Services Agreement would be concluded by that date, but the negotiation of the Services Agreement took longer than anticipated and it was concluded on May 19, 1999.
The effective date of the Services Agreement was expressed to be September 15, 1998 (clause 1.3). It contained (clause 11.1) an agreement to assign intellectual property in the following terms:
“… If any portion of the work or services to performed by Satyam hereunder is not eligible to be considered a work for hire under the United States Copyright Act, then Satyam shall irrevocably and unconditionally assign and transfer to [Upaid], and Satyam does hereby irrevocably and unconditionally assign and transfer to [Upaid] all rights to the Intellectual Property relating to, arising in connection with or otherwise resulting from the Services, the Software Projects or resulting Software Products. Satyam further agrees to have its employees execute necessary instruments deemed by [Upaid] and/or its attorneys or representatives to be necessary to transfer such right, title or interest in the Intellectual Property to [Upaid]. Satyam shall take all necessary initiatives to protect such Intellectual Property rights. Accordingly, [Upaid] shall own all right, title and interest in and to the Intellectual Property Satyam agrees to execute and deliver to [Upaid] any and all assignments and other documents or instruments reasonably requested by [Upaid] in furtherance of filing and maintaining the applications relating to the Intellectual Property. …”
The Services Agreement was to be governed by Virginia law (clause 14.11: but without any jurisdiction clause), and it also contained an “entire agreement” clause (clause 14.16).
Patent applications
In order to maintain the priority filing date which such a provisional application achieves a full “utility” patent application had to be filed within 12 months of the provisional application. That application had to have filed with it a full set of documentation required by the USPTO to demonstrate in particular: (a) Upaid's unity of ownership in the inventions; (b) that all individual inventors had taken on their individual enduring duties of disclosure and candour to the USPTO, by way of a formal declaration under oath.
In December 1998, a complete set of blank assignments to be signed by Satyam “inventor” employees was sent by Upaid's general counsel to Satyam. Upaid alleges that on the weekend of August 28/29, 1999 Satyam sent to Upaid's general counsel at home in Washington a package of 72 executed employee assignments (purportedly completed by 36 employees, since they were in duplicate). 20 of the employees in question were “inventor” employees. All those employee assignments are dated July 7, 1999.
Considerable parts of the text of the employee assignments closely track the wording of the Assignment Agreement, and they contain a choice of New York law in terms identical to that in the Assignment Agreement.
On September 14, 1999 Upaid filed its formal utility application with the USPTO. Accompanying the application were the Assignment Agreement and the employee...
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