APPLE action governed by English law, rules High Court

In Apple Corps Ltd v Apple Computer Inc, the High Court of England and Wales has dismissed Apple Computer's application challenging whether Apple Corps's could bring its claim for breach of a settlement agreement before the courts of England and Wales. The court held that although the settlement agreement contained no choice of law or jurisdiction clauses, there was a good arguable case that it was governed by English law.

The action was the latest in a long-running dispute between Apple Corps and Apple Computer. Apple Corps is a well-known record company that was formed by The Beatles pop group. Apple Computer, based in California, is a large and equally well-known producer of computers and software. Both parties heavily use the Apple name.

The parties terminated a protracted bout of litigation in 1991 by means of a settlement agreement. The agreement, among other things, regulated the respective use of their APPLE trademarks. In particular, it spelt out the commercial areas in which the trademarks could be used. The music world was generally reserved to Apple Corps.

In 2001 Apple Computer launched a web-based music product in the United States known as iTunes Music Store, which allows members of the public to download songs over the Internet and store them on an iPod player. Apple Corps contended that this breached the terms of the 1991 settlement agreement.

Apple Corps was originally granted permission under the Civil Procedure Rules 1998 of England and Wales to serve proceedings on Apple Computer outside of the jurisdiction on the grounds that the settlement agreement was governed by English law and that it was made in England. The agreement (deliberately) contained no choice of law or jurisdiction clauses and Apple Computer brought an application before the High Court arguing that (i) it was Californian law that should prevail, and (ii) England was not an appropriate forum for the dispute.

The High Court held that to serve the claim form out of the jurisdiction, Apple Corps needed to show that there was a good arguable case that the contract was made within the jurisdiction. It noted that the evidence did not clearly establish the exact position but stated that Apple Corps had a good arguable case that the contract was made in England, even if it might also have been made in California at the same time.

On the question of choice of law, the High Court looked at the Rome Convention, which stipulates that, in the absence of choice, the governing law shall be the law of the country with which the contract is most closely connected. This is usually determined by positive acts but in this case the contract was mainly regulating what the parties could not do with regard to each other. The High Court therefore looked at other factors.

It noted that the initial 1991 settlement agreement was to settle English litigation. It also considered:

• the type of evidence permitted by the parties in England compared to California;
  
  
• the disruption to each business by a trial in the other jurisdiction; and
  
  
• the location of documents and witnesses.

The court concluded that English law governed the contract and the dispute should be tried in England.

Andrew Southam, DLA LLP, London