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Tuesday, 17 August 2010

It never Waynes but it Scores


Totally embarrassed to have taken his eye off the ball, the IPKat realises that he hasn't said a single word about Proactive Sports Management Ltd v Wayne Rooney, Coleen Rooney, Stoneygate 48 Ltd and Speed 9849 Ltd -- a Queen's Bench Division for England and Wales decision of Judge Hegarty QC [2010] EWHC 1807 (QB) dating back to 15 July. This was an action to recover arrears of commission which Proactive claimed from Stoneygate under an image rights representation agreement. Proactive struck a deal with English soccer star and Shrek lookalike Wayne Rooney under which it was to be his agent for both on-field and off-field activities for eight years. Since Rooney had, even in his tender years, already assigned his image rights to Stoneygate (which was acting on Rooney's behalf in negotiating sponsorship deals), a new image rights representation agreement was to be struck under which Proactive would act on behalf of Stoneygate as a sort of agent's agent for the purposes of exploiting those rights. This agreement, which was also said to be for eight years, provided that Proactive would receive 20% commission on Rooney's relevant image income. The earlier agreement between Proactive and Rooney was varied so that, in future, it would only cover on-field representation.


One of Proactive's directors, Stretford, was the main point of contact between Rooney and Proactive. He was also a director of Stoneygate and, not missing a trick was a football agent in his own right. After Stretford got into trouble with the Football Association, the relationship between Proactive and Stoneygate broke down in October 2008. Although Stretford was later dismissed by Proactive, in his capacity as a director of Stoneygate and before he had actually left Proactive, he refused to authorise payment of invoices for commission and other servicesfor which Proactive was billing Stoneygate.

The formal severance of the contractual relationship between Proactive and Stoneygate took place when Stoneygate purported to terminate the image rights agreement -- Proactive said that this was a repudiatory breach or renunciation of the contract. Stoneygate said that Proactive couldn't actually make a contract claim against it for payment of commission or for damages for breach of contract. This was because the image rights agreement was void for mistake in the first place. How was this so? Said Stoneygate, was it not the case that all the parties to the original agreement had mistakenly intended and believed that it would and did relate solely to off-field activities, on which basis it had incorporated a valid and effective provision for early termination. Just in case it was wrong on this point, Stoneygate argued that the agreement was unenforceable as being in restraint of trade, given the length of the exclusive tie, having regard to the absence of any effective right on Stoneygate's part to terminate the agreement before the end of the eight-year term, and the colossal rate of commission. Proactive disagreed: even if the image rights representation agreement was void or unenforceable, since Proactive had toiled away on Stoneygate's behalf it was at least entitled to recover remuneration for its services on a quantum meruit basis.

Judge Hegarty QC gave judgment in part to Proactive -- but he was not nearly as generous to the company as it had hoped. In his view:
* the image rights agreement was not void for mistake, since no such vitiating mistake had affected the minds of the parties at the time that agreement was made;

* the image rights agreement did however impose significant restrictions on Wayne Rooney's freedom to exploit his talents in any way he might wish: he could not, without Proactive's prior consent, negotiate or enter into contracts with any other firms or agents or representatives or persons or any other businesses which might reasonably be regarded as Proactive's competitors and who might wish to exploit his IP rights. What's more, those exclusive obligations were entered into when Rooney had only recently turned 17 and were to last for eight long years during which Proactive was entitled to 20% on all the income-producing opportunities it gave Stoneygate and Rooney -- this being a flat rate with no mechanism for limiting or reducing the rate in the light of total income received.

* the terms of the agreement were effectively dictated by Proactive and there was no meaningful negotiation on the other side: Wayne and the rest of the Rooney family had no commercial experience and had no independent legal advice;

* taking all this into account, the agreement was unenforceable as being in unreasonable restraint of trade.

* Proactive was still entitled to a restitutionary remedy in respect of those services which it had provided to Stoneygate for which it had not yet received payment.
Says the IPKat, there was once upon a time when the doctrine of unreasonable restraint of trade and considerations of undue influence and inequality of bargaining power were invoked by composers and musicians when seeking to recover something from the wreck of contracts with publishers and agents in which their rights were assigned away with often no realistic prospect of anything in return. Now it is the turn of our poor, exploited footballers. Wayne Rooney, now aged 24, is worth some £35 million and earns £760,000 a month in image rights.

More on Wayne Rooney here
Composite star: Wayne Rooney

1 comment:

Ken Moon said...

While only a mere colonial practitioner, I am surprised that neither you or the judge have expressed concern about the very existence of the “image rights” at the heart of this dispute. Despite various false starts and claims under the Data Protection Act post 2000, none of the Lords in Douglas v Hello! even in 2007 wanted to recognise image rights. Lord Hoffmann said “There is in my opinion no question of creating an “image right” or any other unorthodox form of intellectual property.” [124].

In the Rooney case Judge Hegarty QC at [188] thought it was unnecessary to set out the intellectual property rights which comprised the “Underlying Rights”. I would have thought it vital to examine what these were and how they could support the “Image Rights”. Further, even if such rights existed at law, how could they be “assigned”? Not being recognised intellectual property rights they would not constitute intangible property – any more than trade secrets or the right to restrain misuse of confidential information.

Image rights transactions seem to survive on the fact that at least in cases like this Rooney case, it is vital to the fortunes of both parties ensure the underlying legal fiction is not exposed. But this does not explain the popularity of the analogous transactions in TV show formats where legally recognised rights are again absent.

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