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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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)

Cranway Ltd v Playtech Ltd & Ors [2009] EWHC 1588
Cranway Ltd v Playtech Ltd & Ors [2009] EWHC 1588 (Pat) (07 July 2009)

A patent concerning a home computer gaming system was revoked on grounds of (1) lack of novelty in light of the prior art; (2) obviousness over the common general knowledge and prior art; and (3) consisting wholly of excluded matter under s.1(2) of the Patents Act 1977, the subject matter being a computer program not claiming a technical effect. Court: High Court (Patents Court) (England and Wales)

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)

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Nanjing Automobile (Group) Corporation & Ors v MG Sports & Racing Europe Ltd
Nanjing Automobile (Group) Corporation & Ors v MG Sports & Racing Europe Ltd & Anr, Ch Div (Sir William Blackburne), 19/2/10 An action for trade mark infringement and passing off, brought by the Chinese transferees of the business and assets of the British car manufacturer MG (in administration in 2005), was successful. The defendant English company had purported to buy the “MG X POWER” trade mark from the liquidator in 2007 along with the sports car arm of the business, but on a proper construction of the 2005 agreement with the Chinese purchaser, all the trade marks including the MG X POWER mark were transferred to the Chinese in 2005. The purported agreement to sell the mark in 2007 was therefore of no effect. Court: High Court (Chancery Division) (England and Wales)

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)

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)