Offshore servers no protection in internet gambling dispute

Offshore servers no protection in internet gambling dispute

Menashe Business Mercantile Limited and Another v William Hill Organisation Limited [2002] EWCA CIV 1702

The UK Court of Appeal upheld a previous decision against William Hill, who were sued by Menashe Business Systems for infringement of a European (UK) patent relating to internet gambling. The three member bench however used different reasoning to reach their conclusion.

Menashe had alleged that William Hill were supplying means, essential for putting the invention into effect, in the UK. The means provided by William Hill consisted of a CD including software for installation on the punter's PC. The software allowed the PC to act as a terminal and thus communicate with a server system, which was located offshore in the Caribbean.

The critical issue in this case turned on whether the location of the server outside the jurisdiction of the UK courts had any effect on the infringement of the patent. It appears to have been accepted amongst the parties that if the server were located in the UK, then William Hill would indirectly infringe the patent by supplying means essential for putting the invention into effect in the UK. Their argument was that as the server was located overseas, they could not be held to be indirectly infringing as the invention was not being put into effect in the UK.

The Appeal Court judges considered that to the end user of the system, the actual location of the server was irrelevant. It was therefore of no relevance that the server was located offshore.

An important factor to determine was 'Who is using the system?' A user in the UK would be accessing, and thus, 'using' the remote server in the UK. The user was effectively using the server in the UK, even though the server was physically located elsewhere. This was illustrated with reference to the input to, and output from, the server, which both occurred in the UK.

This case shows that in the world of the Internet and other connected systems, the actual location of various parts of the system is less important than the effect they might have in a particular jurisdiction. In other words, if a claim to a system requires communication between two or more devices, infringement cannot be avoided by siting one of the devices outside the jurisdiction.

Although decided under UK law, as evolved from European treaties, this case raises issues of relevance in all jurisdictions.