DANGEROUS LETTERS OF INTENT

Oct 2010: Müller supplies dairy products and RTS supplies and installs machinery for packaging food products. Müller selected RTS to supply it with a system to package yoghurt pots and start was agreed under a letter of intent that set out the full contract sum and it also stated that the final contract would be based on Müller’s amended form of MF1 and for a limited four-week “initial” period. Negotiations dragged and the initial period came and went and the letter of intent was not issued. RTS worked and Müller paid until a dispute aose. RTS refused to finish installing the equipment. Mr Justice Clarke of Technology and Construction Court found that the letter of intent had expired at the end of the initial period and did not govern the relationship between the parties thereafter. It also decided that as the parties continued to carry out works after the letter of intent had expired, they intended to create legal relations and enter into a contract but was not the MF1 terms but one that excluded some of the MF/1 terms (limited contract). RTS now argued that no contract was concluded after the letter of intent expired and as there was no formal contract RTS was entitled to bring a quantum meruit claim. The Court of Appeal decided that there was no contract between the parties because the MF1 terms included a “subject to contract” clause and therefore that no contract was formed. The Supreme Court confirmed that the letter of intent had expired at the end of the initial period; and conduct thereafter suggested that parties intended to enter into a contract and amounted to a waiver of the “subject to contract” clause and that therefore the full MF1 had been entered into. Comment: Three separate court proceedings! Three different decisions! Make sure letters of intent are for (i) a limited scope of works and (ii) a limited period of time and (iii) for a limited maximum sum and (iv) must specify what will happen when the letter expires and the default position if the expected position does not occur. RTS Flexible Systems Limited v Molkerei Alois Müller Gmbh & Company KG (UK Production) (2010). (The Müller case)

Europe-wide Contract Law Proposed

On 1 July 2010 the European Commission published a Green Paper setting out policy options for introducing a European contract law for consumers and businesses.

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The German BGH decided on 12 May 2010 that a private individual left his home WiFi router unsecured (on factory default settings) could be forced to close his router. An unknown 3rd party downloaded a copyright protected piece of music using the unsecured WiFi spot and the owner could show that he was, at the time of the download, on vacation. The owner of the copyright in the song sued for copyright infringement, asking for an injunction and financial damages. The first instance court both issued an injunction and found the owner of the WiFi spot liable to pay damges. The second instance court reversed and dismissed the claim of the copyright holder. The German Supreme Court (BGH) distinguished between the injunction and the financial damages: the owner of the WiFi spot could be enjoined to secure his WiFi, but was not liable for financial damages. The BGH decided that the owner was not required to use the latest, state of the art security technology to secure his WiFi router, but at the time of the installation common precautions against the use of the WiFi spot by unknown third parties had to be taken (i.e. some form of security must be put into place) and therefore defendant could be forced to take the necessary precautions. The Court also discussed that if a password was used but was defeated, the owner was not liable. GBH held the WiFi owner liable for the legal costs for the lawyer's letter from the copyright owner as a "Störer", but not a "Täter" (i.e. as a facilitator but not an infringer, i.e. not personally committing the infringement) and found that the WiFi owner did not aid or abet copyright infringement, because he lacked the necessary intent to support the infringement and therefore, he could not be held liable for financial damages.

Research in Motion UK Ltd v Motorola Inc, Ch Div (Arnold J), 3/2/10
Motorola’s European patent concerning a messaging gateway system was invalid as lacking an inventive step, and was not infringed by two systems operated by the claimant under the well-known BlackBerry trade mark. Court: High Court (Patents Court) (England and Wales)

New Data Protection Fines
New £500,000 Data Protection Fines come into play.
From 6th April 2010, the Information Commissioner (ICO) will be able to order organisations to pay up to £500,000 as a penalty for serious breaches of the Data Protection Act. The ICO has produced statutory guidance about how it proposes to use this new power, which has been approved by the Secretary of State for Justice, and was laid before Parliament in January.

Bailey & Anor v Haynes & Ors [2006] EWPCC 5 (02 October 2006)
Bailey & Anor v Haynes & Ors [2006] EWPCC 5 (02 October 2006)

The claimants alleged infringement of UK and Community unregistered design rights (UDR) in a polyvinyl alcohol warp knitted ladder-resistant micromesh bait bag used to catch freshwater fish. It was held that the 3D structure was excluded from UK UDR protection under the ‘method or principle of construction’ exclusion. A challenge to subsistence of Community UDR based on functionality failed because the design was not the only design which was capable of achieving the function of containing fine bait in proscribed circumstances. However, there was no infringement because on the evidence the defendants had designed their own product independently. Court: Patents County Court (England and Wales)

Quads 4 Kids v Campbell, Ch Div (Pumfrey J), 13/10/06
Quads 4 Kids v Campbell, Ch Div (Pumfrey J), 13/10/06

An injunction was granted, based on an action for statutory threats of proceedings for infringement of a sequence of Community registered designs for a child’s dirt bike. Quads 4 Kids had been offering children’s quad bikes for sale on eBay. Campbell alleged the bikes infringed his design rights, and he availed himself of eBay’s VeRO system to prevent Q from selling them. This involved merely completing an online form recording the registration number of the designs. Publication of the registered designs had been deferred and C did not disclose the design file. Q argued that the registered designs were likely not to be valid. It was seriously triable that the use of the VeRO system amounted to an actionable threat, taking a wider view than previously as a result of the clear potential for abuse of registered rights which this system was open to. Substantial damage was being caused, which C was unlikely to be able to compensate. Court: High Court (Chancery Division) (England and Wales)

Tate & Lyle Technology Ltd v Freres [2009] EWHC 1312 (Pat) (16 June 2009)
Tate & Lyle Technology Ltd v Freres [2009] EWHC 1312 (Pat) (16 June 2009) A patent concerning the crystallization of a sugar substitute, malitol, was invalid for lack of novelty and because the claim was a discovery and not an invention. The patent claimed the use of a by-product of the malitol production process to modify the form which the malitol crystals took. However, a skilled person following the teaching of a number of prior art papers would infringe the patent, since in reality the industry had been using the by-product to control malitol crystal habit without knowing it. The patent merely informed of a property of the by-product which had been discovered, and explained why malitol crystals took the form they did. Court: High Court (Patents Court) (England and Wales)

Far Out Productions Inc v Unilever UK & CN Holdings Ltd & Ors, Ch Div (N Strauss QC), (16 December 2009)
Far Out Productions Inc v Unilever UK & CN Holdings Ltd & Ors, Ch Div (N Strauss QC), (16 December 2009)

Where an action for copyright infringement against four defendants had been settled as against the first three and discontinued as against the fourth, the claimant was liable for the costs the fourth defendant had incurred until the date the notice of discontinuance was served. Costs were awarded on an indemnity basis because of the claimant’s unreasonable behaviour in joining the fourth defendant, delaying progress and refusing to negotiate. The action had concerned infringement of copyright in a sound recording used in an advertisement. Court: High Court (Chancery Division) (England and Wales)