Arbitrating licence agreements: interim relief

The mysteriously-named  AB v CD [2014] EWHC 1 (QB) (03 January 2014)  concerns not, as one might expect, a badly-behaved professional footballer or television presenter but two businesses with a licensing agreement. The agreement concerned an electronic marketplace, but no software was supplied. The claimant faced big problems when threatened with termination the licence to use a facility which was an essential part of their business, and sought an interim injunction to stop the termination until arbitration had been completed. Because the dispute was subject to arbitration, and there were obligations of confidence in addition to what one would normally expect to be inherent in arbitration proceedings, the names of the parties were not disclosed.

Why was the agreement going to be terminated? First, because in breach (it was alleged) of the licence the claimant had failed to stick to a sales and marketing plan which the licence required it to agree with the defendant (the licensor). But no such plan had actually been agreed, so there was at least an issue to be tried there. Likewise the second ground, that the claimant's business had developed in a different direction from that of the defendant, because the judge (Stuart-Smith J) thought it was arguable that the core business remained the same.

Would damages be an adequate remedy? The judge, perhaps slightly surprisingly, thought so. It looks like a clear case of a situation in which the claimant will suffer too much damage if the defendant is allowed to do what they propose to do. The situation is further complicated by the fact that the parties had agreed to limit the damages available for breach. The case-law left the judge feeling somewhat uneasy with the result, and consequently have gave leave to appeal. So, an interesting case which highlights a legal issue that's novel to me, but not, I suspect, the last word on it.

Destra Software Ltd v Comada (UK) LLP & Ors [2013] EWHC 1575 (Pat) (11 June 2013)

Destra Software Ltd v Comada (UK) LLP & Ors [2013] EWHC 1575 (Pat) (11 June 2013)  is a decision of Norris J in the Patents Court, concerning that old favourite ownership of copyright in computer programs. At 53 paragraphs, it feels short, and the impression is reinforced by the fact that it has no table of contents as so many judgments have these days. The question, as so often happens, was whether copyright in the software had been assigned to the commissioner, or whether the commissioner only had a licence to use it in certain ways (including, in this case, allowing customers to instal it on their servers, which is a bit of a novel issue).

The recorder held (highlights added to make it more comprehensible, but really you have to read the whole thing to get it):

1. I am in no doubt that under the contract that predated the Consultancy Agreement it was implicit that the copyright belonged to the commissioning entity and not to the contractor. I so conclude for the following reasons:-



a) The very foundation of the venture conducted by Comada (later Comada Cayman) was the MAT:ware software. The idea that the actual copyright in the MAT:ware software should not belong to Comada/Comada Cayman makes no more commercial sense than it did in IBCOS. MAT:ware is not a tool that is deployed in Comada's business: it is the very business itself. It is what the whole enterprise was about.

b) The object of the business was that MAT:ware should be exploited in whatever way proved to be beneficial. If an informed bystander had been asked "Does anyone have a veto over the way in which Comada Cayman exploits the software?" he or she would have said "Of course not: it is up to the company through its directors and shareholders what they do. Everyone's efforts in establishing the enterprise are reflected in their shareholdings and their individual contractual arrangements".

c) One of the principal means of exploiting the software was by licensing: it was necessary for Comada Cayman to have full rights of enforcement in multiple jurisdictions. That is secured by assignment but not by licensing.

d) The ultimate aim of the project was to dispose of the enterprise to the maximum advantage of the participants: it is necessary to the attainment of that goal that Comada Cayman should own the intellectual property rights and be able to dispose of them freely without requiring any purchaser of the business to negotiate with multiple Claimants to the copyright in the core product in order to gain complete control.

e) The MAT:ware software was a collaborative effort: it makes no sense for individual team members to retain property rights of any sort in what that member produced.

f) There cannot be any special implied term relating to what Mr Hughes produced because Mr Hughes never disclosed to any other participator either that he was creating something called "the Destra platform" or that he was incorporating part of it in the work that he was doing on the MAT:ware software. Implied terms are based on what is obvious given the common knowledge of the parties. You cannot create an implied term out of secret knowledge held by one party alone. That was the view I expressed in Burrows v Smith [2010] EWHC 22 (Ch) at paragraph [44]: and I adhere to it. That is why the actual decision in Clearsprings does not assist in this case: in Clearsprings it was common knowledge that in performing the commission the contractor would be using software that already existed.