Issue estoppel in cross-border IP claims: when foreign law governs preclusion

Why should I read this?

For businesses with international operations wanting to enforce intellectual property rights across multiple jurisdictions, a recent English court decision warrants close attention. In Aviator LLC & Ors v Spribe Oü & Ors (Aviator), the court confirmed that when a company succeeds or fails in an intellectual property dispute in one country, each other jurisdiction will apply its own rules to determine whether that outcome forecloses further litigation. The practical consequence is clear: a favourable judgment in one forum will not necessarily preclude challenges elsewhere. As such, cross-border enforcement requires an assessment of whether further action will be precluded in each particular jurisdiction. For global organisations, this adds complexity but also creates opportunity for more deliberate strategic planning.

What happened in Aviator?

The claimants initiated copyright and trade mark infringement proceedings in Georgia concerning a logo associated with an online ‘crash game’, a form of online gambling. Following determination of these claims by the Georgian courts, they sought to pursue copyright infringement claims in the UK, both in respect of UK copyright and, significantly, copyright protection in other Berne Convention countries. The defendants contended that issue estoppel should prevent re-litigation in the English proceedings of issues already determined by the Georgian courts, namely subsistence, ownership and infringement of copyright. The central question for the judge was which legal system should govern the application of issue estoppel: Georgian law, English law, or the law of each country for which protection was claimed.

What is issue estoppel?

Issue estoppel is a legal principle designed to prevent the same issue from being litigated more than once. It applies where a particular issue formed an essential, rather than incidental, element of an earlier action between the same parties, and was the subject of a final determination by a court with proper authority to decide it.

What are the relevant laws?

For claims for intellectual property infringement (and those claims that do not arise from a contract) Rome II Regulation applies (Regulation (EC) 864/2007) (the Regulation). Article 1 of the Regulation provides that it applies to “conflict of laws” situations, but expressly excludes matters of “evidence and procedure”. The court in Aviator held that issue estoppel is not a rule of evidence but rather a rule of substantive law, and accordingly interpreted the procedural exclusion narrowly. In doing so, the court endorsed the approach in Dicey, Morris & Collins on the Conflict of Laws that the Article 1(3) exclusion should be confined to matters that are:

“an integral and indispensable feature of the forum’s legal framework for resolving disputes, such that they cannot satisfactorily be replaced by corresponding rules of the lex causae” (the law governing the underlying claim) (para 23 of Aviator).

Article 8 of the Regulation stipulates that the law applicable to a non-contractual obligation arising from an infringement of intellectual property rights is the law of the country for which protection is sought. Article 15 extends the scope of that governing law broadly, encompassing rules that determine liability and whether elements of a claim may be contested. The court observed that Article 15 employs “in particular” language, indicating a non-exhaustive list, and noted that the European Commission intended to confer a “very wide function” on the designated law.

What did the court decide?

The English court concluded that rules governing preclusive effect fall within the scope of Article 15. The consequence is that the law applicable to the IP claim also governed whether issue estoppel arises. As the judge observed:

“the prima facie effect of Articles 1, 3, 8 and 15 is that the court should apply the law of the country for which protection is claimed when deciding whether any preclusive effect arises from a prior judgment.” (para 31)

Having established this general rule, the court then considered whether English law might nonetheless override it as an “overriding mandatory provision” under Article 16 of the Regulation. It concluded that issue estoppel does not qualify as such a rule, and that only exceptional circumstances would justify displacing the applicable foreign law:

“While issue estoppel has been expressed as a rule based on the public policy of promoting finality in litigation and avoiding a party being vexed twice on the same matter, it is not universally applicable in proceedings under English law, as it is subject to a special circumstances exception (see Arnold v National Westminster Bank plc [1991] 2 AC 93 and the discussion in Virgin v Zodiac at [20]-[25]) and needs to be pleaded by one of the parties, so cannot be regarded as a mandatory rule. In my judgment it is not a rule the respect for which can be said to be regarded by England & Wales as crucial for safeguarding public interests, nor a rule which serves an interest which is judged to be essential by England & Wales.” (para 35)

The court also dismissed the argument that Article 26 of the Regulation, the public policy exception, would permit the application of English preclusion rules in place of foreign law. It held that even where foreign law affords no preclusive effect in circumstances where an English court would recognise issue estoppel, this would not be “at variance to an unacceptable degree” with the English legal order, nor would it infringe a fundamental right or principle. The court acknowledged that certain foreign preclusion rules might conceivably engage Article 26 if they infringed fundamental rights, but concluded that a narrower foreign conception of res judicata, such as that under Czech or French law, which requires identity of cause of action, would not meet that threshold.

What should I do?

Aviator has indicated that it intends to appeal the judgment, so the interpretation of the Regulation on this point may yet change. In addition, this judgment came out of interim relief hearings, and not after a full trial. In the meantime, organisations should take the following points from the decision:

• Applicable law: Whether an issue arising from a non-contractual claim can be re-litigated will be determined by the law applicable to the underlying claim, not the law of the forum where the claimant is seeking to bring the new claim where these are different

• A prior foreign judgment will therefore not automatically bind the English court: Its effect will depend on the law of each country for which IP protection is sought

• Relevance beyond England and Wales: This decision articulates the English court’s approach under Rome II, but other courts in other jurisdictions may interpret the Regulation differently

Conclusion

For businesses with a cross-jurisdictional footprint, issue estoppel is likely to become increasingly relevant. IP owners often rely on global enforcement strategies but this decision requires more tailored approaches. The decision highlights the importance of not just analysing the substantive merits and procedural rules in candidate jurisdictions prior to issuing proceedings, but also the preclusion rules applicable in each. The first judgment obtained may have significant consequences for claims in other countries but those consequences will depend on the foreign law governing preclusion.