Microsoft fails to strike out claims by ValueLicensing

19/04/22

Mr Justice Picken has refused applications by Microsoft Corporation and its UK and Irish subsidiaries aimed at preventing ValueLicensing (“VL”)’s claims against them from proceeding to trial.

VL purchases and resells pre-owned perpetual software licences in the UK and EEA (where purchasers of perpetual licences have statutory rights to resell them). It says that Microsoft, as the dominant provider of new licences and subscriptions in the same markets, has sought to stifle competition from the pre-owned sector, including by, in effect, paying customers switching to subscription not to resell their old perpetual licences. VL claims that Microsoft has thus breached UK, EU and EEA competition law. Microsoft has yet to plead a defence, but has indicated that if so required it will dispute the substance of VL’s claims.

Before Picken J, Microsoft applied for strike out of, or summary judgment dismissing, VL’s claims against Microsoft UK; and declarations that the Court had no jurisdiction over VL’s claims against Microsoft US and Microsoft Ireland.

Microsoft contended that VL’s claims against its UK subsidiary were deficient because the allegations of anti-competitive conduct were pleaded against Microsoft compendiously and did not distinguish between the different Microsoft Defendants. VL had thus failed to allege that Microsoft UK itself had (or had abused) a dominant position on any market, or was party to any anti-competitive terms. While VL had stated an intention to allege, if necessary, that Microsoft UK had implemented the infringements, an implementer’s knowledge had to be pleaded and proved. In any event, Microsoft UK’s conduct could not amount to implementation.

Picken J held that VL’s pleaded case had reasonable prospects of success. The competition rules were directed at the conduct of “undertakings”, which were economic, rather than narrowly legal, entities. VL had alleged that Microsoft formed a single undertaking for these purposes, which undertaking had infringed the competition rules; and that the three Microsoft Defendants were jointly and severally liable as a result. The Court of Justice of the EU had held in case C-882/19 Sumal SL v Mercedes Benz Trucks Espana SL [2021] Bus LR 1755 that where an undertaking infringed competition law, the legal entities of which it consisted were jointly and severally liable. As Microsoft had not suggested that the defendant legal entities did not comprise a single undertaking, or that VL’s claims against Microsoft’s US and Irish entities were amenable to strike out, it followed that VL’s claim against Microsoft UK had reasonable prospects of success.

While Microsoft had emphasised that Sumal, being a post-Brexit decision, did not bind the UK Courts, it was (the judge concluded) unrealistic to suggest that the Court should cause UK and EU competition law to diverge on a summary basis. In any event, Sumal would be determinative of VL’s post-Brexit claims insofar as governed by the laws of EU and EEA member states, and there was a complicated issue, unsuitable for summary determination, as to whether it was binding in respect of VL’s pre-Brexit claims, which relied on rights accrued under the European Communities Act 1972 before its repeal.

Even if Sumal were not in the end followed, Microsoft’s own evidence supported VL’s contention that it had reasonable prospects of proving that Microsoft UK had implemented (or even directly participated in) the alleged infringements. VL’s case in that respect could only be understood as alleging that Microsoft UK knew of the infringing conduct, and in any event whether its knowledge had to be established separately (the so-called “Provimi point”) remained unsuitable for summary determination.

As Microsoft UK’s applications had failed, the only issue on the jurisdiction challenge by Microsoft US and Microsoft Ireland was whether England and Wales was the appropriate forum for VL’s claims against them. Picken J held that it was, including because the claims against Microsoft UK would proceed in England in any event, and because English law applied to much of VL’s claims, and Microsoft’s arguments that English competition law should diverge from that of the EU should be determined by the English Court.

The judgment is here.