The recent High Court decision in Fresh Trading Limited v Deepend Fresh Recovery Limited and Andrew Thomas Robert Chappell [2015] EWHC 52 (Ch) serves as a genuinely 'fresh' reminder to all in a
The recent High Court decision in Fresh Trading Limited v Deepend Fresh Recovery Limited and Andrew Thomas Robert Chappell [2015] EWHC 52 (Ch) serves as a genuinely 'fresh' reminder to all in a contractual relationship of the importance of an accessible written agreement setting out clearly the rights and obligations of each party. In particular, when commissioning agents to design corporate branding that may qualify for IP protection, it is imperative that the agreement clearly and unambiguously states whether any assignment of IP rights is conditional on payment. In this case, the consideration for the assignment was held to be a promise to allot shares rather than the actual allotment.
Background
This case centred around the ownership of the copyright in the famous "Dude" logo below, used in relation to Innocent smoothies.
The background facts are relatively complex but for the purposes of the High Court decision, the pertinent detail included:
Existence of a contract
The Judge held that it was clear on the evidence that the contract was fully agreed by the parties on the terms set out in the unsigned draft before him. Considering the position from an objective stand-point, he attached no importance to the title "Heads of Agreement" and he found that the words "subject to contract" may have reflected the initial starting point but it was waived here. He also rejected the argument that the copyright in the Dude logo would only vest with Fresh upon issue of the agreed shares to the Agency. Upon his reading of the language of the relevant clauses, he held that the respective obligations to transfer the copyright and to allot shares were not conditional obligations. He found that all that was required was a transfer to Fresh of the copyright in any work which came to be approved by Fresh whilst the Agency was free to use any work which Fresh did not want.
Assignment
One of the key legal issues was whether the Agency had assigned (legally or in equity) its copyright in the Dude to Fresh. He held that there had been no legal assignment as no signed copy of the contract was ever found and there was no clear intent to assign a work which may be created; only an intent conditional upon Fresh's subsequent approval.
However, after noting the general principle that the consequence of a valid agreement to assign the copyright in a future work will often give rise to an equitable assignment, he found that on the facts there had been no refusal by Fresh to honour its contractual obligations; allotment of the shares was not a condition of the contract and that there had been an equitable assignment in this case. The consideration for the transfer of the copyright and the other obligations was the promise to allot shares not the actual allotment.
Conclusion
This case highlights the importance of ensuring that the operation of a contractual relationship is agreed and defined carefully in a written document, particularly in relation to the nature and purpose of the contract and the benefits each party are expecting to receive. In similar scenarios when companies commission agencies to design their branding, the contract should specifically state: (i) whether an assignment is conditional on payment; (ii) what happens when a logo is used but payment is not made. It is interesting that the judge still thought it appropriate to use its discretion to grant an equitable remedy such as assignment even though Fresh had not allotted any shares as agreed elsewhere in the contract.
Also, as a practical point, this case illustrates the importance of keeping a signed copy of an agreement accessible! Much evidence in this case was made up of the recollection of individuals who were involved in the dealings at the time and, given the passage of time, the version of events varied in crucial respects.
Background
This case centred around the ownership of the copyright in the famous "Dude" logo below, used in relation to Innocent smoothies.
The background facts are relatively complex but for the purposes of the High Court decision, the pertinent detail included:
- The "Dude" has been used by the Claimant Fresh Trading ("Fresh") in its marketing material for its brand of Innocent smoothies since the commencement of its business.
- The Defendant, Deepend Fresh was a company formed to lay claim to IP rights in work commissioned by Fresh Trading from a design agency ("the Agency") that is now in liquidation.
- The Agency created the "Dude".
- At the relevant time, the Agency was willing to work for shares in Fresh rather than for immediate payment for its design work.
- A contract was drafted for the work but no signed copy was ever located.
- The critical provision read: "[Fresh] receive full intellectual copyright of any work, creative ideas or otherwise, presented by [the Agency] and then subsequently approved by [Fresh]. Work not approved by [Fresh] remains under the ownership of [the Agency]."
- The version of the contract located was titled "Heads of Agreement" and contained the phrase "Subject to Contract".
- No shares were ever allocated to the Agency.
Existence of a contract
The Judge held that it was clear on the evidence that the contract was fully agreed by the parties on the terms set out in the unsigned draft before him. Considering the position from an objective stand-point, he attached no importance to the title "Heads of Agreement" and he found that the words "subject to contract" may have reflected the initial starting point but it was waived here. He also rejected the argument that the copyright in the Dude logo would only vest with Fresh upon issue of the agreed shares to the Agency. Upon his reading of the language of the relevant clauses, he held that the respective obligations to transfer the copyright and to allot shares were not conditional obligations. He found that all that was required was a transfer to Fresh of the copyright in any work which came to be approved by Fresh whilst the Agency was free to use any work which Fresh did not want.
Assignment
One of the key legal issues was whether the Agency had assigned (legally or in equity) its copyright in the Dude to Fresh. He held that there had been no legal assignment as no signed copy of the contract was ever found and there was no clear intent to assign a work which may be created; only an intent conditional upon Fresh's subsequent approval.
However, after noting the general principle that the consequence of a valid agreement to assign the copyright in a future work will often give rise to an equitable assignment, he found that on the facts there had been no refusal by Fresh to honour its contractual obligations; allotment of the shares was not a condition of the contract and that there had been an equitable assignment in this case. The consideration for the transfer of the copyright and the other obligations was the promise to allot shares not the actual allotment.
Conclusion
This case highlights the importance of ensuring that the operation of a contractual relationship is agreed and defined carefully in a written document, particularly in relation to the nature and purpose of the contract and the benefits each party are expecting to receive. In similar scenarios when companies commission agencies to design their branding, the contract should specifically state: (i) whether an assignment is conditional on payment; (ii) what happens when a logo is used but payment is not made. It is interesting that the judge still thought it appropriate to use its discretion to grant an equitable remedy such as assignment even though Fresh had not allotted any shares as agreed elsewhere in the contract.
Also, as a practical point, this case illustrates the importance of keeping a signed copy of an agreement accessible! Much evidence in this case was made up of the recollection of individuals who were involved in the dealings at the time and, given the passage of time, the version of events varied in crucial respects.