Competence? Competence!

When international private law meets patent law, things never fail to get interestingly complex.

Today’s case pits a German plaintiff, TerraNova Energy GmbH & Co. against a French defendant, Suez International SAS, and the litigation involves a number of patents and patent applications worldwide.

The background of the case is the following (according to the summary provided by the judge in the order to be discussed).

TerraNova developed a technology for recycling organic waste recovered from sewage sludge. Suez International, originally Degrémont, is now part of the Suez group, a major actor in the water and waste treatment industry.

Between April 2011 and October 2012, TerraNova presented its so-called “Ultra” technology to Suez in a demo plant in Germany. A non-disclosure agreement (NDA) was signed in November 2012. Both companies continued to cooperate, which led to the execution of a second, partnership agreement in April 2013. According to this partnership agreement, Suez had an exclusive right to the Ultra technology in France, and had a preemption right on the technology in other countries.

In 2013 and 2014, the Ultra technology was implemented in a sewage treatment plant in Compiègne, France and then in another facility in Maribor, Slovenia. In May 2014, the parties began negotiating a license agreement. November 2014 is the point in time when things started going south, as Suez informed TerraNova that they wanted to improve the Ultra technology, and to work on this new process in China. Then, they announced that they no longer intended to get a license, having developed their own improved process.

In January 2015, Suez offered to pay royalties for the ongoing Chinese project and for a potential second one, and requested exclusive rights in China. TerraNova refused. In October 2015, Suez opened a renegotiation of the 2013 partnership agreement and mentioned the development of its own, distinct technology. TerraNova then realized that Suez had filed three PCT applications, based on three French priority applications filed respectively in May 2013, July 2013 and November 2014. A number of granted patents and pending applications were later filed from these PCT applications, in Europe, China, the U.S., Canada, Australia and Brazil.

TerraNova was of the opinion that the patent applications disclosed confidential information communicated to Suez under the 2012 NDA. They filed a complaint with the Paris Tribunal de grande instance (TGI) in October 2016, claiming damages as well as the transfer of the various patents / applications.

Patent law meets international law.

As a legal defense, Suez argued that the Paris TGI lacked jurisdiction over this dispute. As an auxiliary argument, they said that the court lacked jurisdiction at least regarding the requested transfer of patent rights deriving from Suez’ PCT applications.

This legal defense was debated in front of the case management judge, which gave rise to the order discussed today. The merits of the case are not addressed in this order.

Let’s first deal with Suez’ general argument of lack of jurisdiction. The difficulty here is that the parties were bound by two successive agreements: the 2012 NDA and the 2013 partnership agreement.

Now, the NDA contained a jurisdiction clause, per which any dispute in connection with the agreement should be tried by the Paris courts. But the partnership agreement contained an arbitration clause, per which any dispute in connection with the agreement should be brought to the Swiss Chambers’ Arbitration Institution.

Suez claimed that, according to the competence-competence principle, only the arbitral tribunal had jurisdiction to decide on which forum had jurisdiction.

The court referred to article 1448 of the Code de procédure civile. According to this provision, if a lawsuit subjected to an arbitration agreement is filed in front of a national court, the court must decline jurisdiction unless (1) the case has not yet been brought to an arbitral tribunal, and (2) the arbitration agreement is manifestly null or inapplicable. These conditions (1) and (2) are cumulative.

In this case, condition (1) was fulfilled, as the case had not been brought to an arbitral tribunal. As to to condition (2), the court came to the conclusion that it was also fulfilled. The arbitration clause of the partnership agreement was manifestly inapplicable to the dispute, said the court. If there was the slightest doubt as to whether the arbitration clause was applicable, my understanding is that the judge had no other choice but to decline jurisdiction. Yet, in this situation, there was apparently no doubt at all.

Indeed:

  • It was clear that the parties to the NDA intended to subject this agreement to the jurisdiction of the Paris court.
  • The later partnership agreement did not state (be it implicitly or explicitly) that this jurisdiction clause in the NDA was no longer applicable.
  • The NDA contained a mention that the agreement would expire 3 years after the execution date, except some provisions which would still apply for 5 years after the end of the agreement. The jurisdiction clause was not cited among the surviving provisions. But the judge held that a jurisdiction clause was autonomous with respect to the rest of the agreement and necessarily continued to apply to disputes arising from the agreement.
  • Finally, the complaint did relate to an alleged breach of the non-disclosure provisions of the NDA, and not to an alleged breach of the partnership agreement.

Therefore, the overarching competence-competence principle in this particular instance did not apply, and the judge refused to decline jurisdiction.

This leads us to the second (auxiliary) part of Suez’ legal defense, i.e. that the judge should decline jurisdiction at least over the requested transfer of patent rights stemming from Suez’ PCT applications.

Indeed, the applications were filed after the execution of the partnership agreement, so that only this later agreement was applicable to TerraNova’s claim for ownership.

It is not perfectly clear to me when reading the order whether Suez also argued that the TGI had no jurisdiction over disputes regarding the ownership of foreign patent rights (as opposed to French patent rights) as a matter of principle. Anyway, in the past, French courts did not hesitate to rule on ownership claims regarding foreign patent rights, and the trend was not reversed in this case.

It is interesting to note, though, that TerraNova did not request that the foreign patent rights should be transferred to them by the court, but rather that the court should order Suez to perform the transfer of these patent rights to their benefit. The formulation of this claim probably makes it easier to avoid any potential argument that the French courts would encroach upon the prerogatives of foreign states.

As to the merits of Suez’ argument, the judge held that TerraNova’s transfer claim was analyzed as a remedy pertaining to the alleged breach of the NDA, so that the TGI did have jurisdiction also over this aspect of the case.

To summarize, Suez’ legal defense was rejected, and the proceedings will continue on the merits.


CASE REFERENCE: Tribunal de grande instance de Paris, 3ème chambre 1ère section, ordonnance du juge de la mise en état, April 5, 2018, TerraNova Energy GmbH & Co v. Suez International SAS, RG No.16/16334.

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.