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Tuesday, 23 June 2015

Hello goodbye: no estoppel as licensee gets the push

"You say stop and I say go, go, go!"
This weblog doesn't often carry notes on decisions involving contract law these days, not least because there aren't that many of them on which to report.  Also, while the subject matter of IP contract disputes by definition has something to do with IP, the case citations and arguments tend to focus on contract law and not IP principles. But that's not to say that such cases are unimportant; they are actually quite instructive. Anyone working on the transactional side of IP commercialisation should appreciate that contract law is one his or her most basic skills, and the cases that do come to light generally reflect exactly what happens if you forget your contract law or, more likely, make assumptions or business decisions that are not firmly buttoned down in writing.  An example is Motivate Publishing FZ LLC and another v Hello Ltd [2015] EWHC 1554 (Ch), a Chancery Division, England and Wales, ruling by Mr Justice Birss going back to 4 June. 

This was an application made by Motivate against the UK magazine publisher of Hello! for specific performance of a licence agreement which, Motivate claimed, had been renewed in its favour. Motivate, a publisher of books and magazines in the United Arab Emirates, entered into a five-year deal with Hello in 2005 to publish the Middle East edition of the popular Hello! celebrity lifestyle magazine for distribution in the UAE, Bahrain, Qatar, Kuwait, Oman, Saudi Arabia, Jordan and Syria. In 2010, this licence was renewed for another five years, to expire on 31 March 2015. Under this licence, Hello remained entitled to approve the physical edition specifications of the magazine and to require Motivate to modify those specifications if necessary. The licence agreement also provided that any renewal negotiations had to take place at least 12 months before the expiry of the term.

In 2015, claiming that the licence had expired and was not renewed, Hello entered into a licence with a rival publisher, APP, for publication of its Middle East edition. According to Motivate, however, an agreement had been reached through an exchange of emails back in November 2014 for the licence to be renewed for a further five years. In the first of these emails, on 10 November, Hello identified changes which it said were required of Motivate in relation to page count and local content, it being stated that these changes had to be "effective immediately"; Hello also said that it would be limiting renewal of the licence to the UAE alone. Motivate responded on 13 November, addressing the issues mentioned by Hello in terms which apparently sought to justify its existing position, adding that its ability to publish elsewhere in the territory was "vital", referring in particular to airport outlets. Motivate maintained that it had acted to its detriment in reliance on Hello's representation that the licence would be indeed renewed and that Hello was therefore estopped from denying the existence of a renewed licence.

Birss J dismissed the specific performance claim and the application to cancel the APP licence. In his view:

* although Motivate was genuinely shocked at the non-renewal of the licence, it was clear from the evidence that both parties were aware of long-standing friction in their relationship and that neither was happy with the other's performance in relation to the agreement.

* the emails themselves were not capable of amounting to a binding agreement, even if the email of 10 November was an offer capable of acceptance. What's more, the licence terms gave Hello the power to require changes to whatever page count and local content share were expressed in the agreement. For the offer to be accepted, Motivate would have had to agree to the changes requested by Hello -- but it was clear from its response of 13 November that it had not done so. Use of the words "effective immediately" did not support Motivate's interpretation the emails, and its refusal to accept Hello's terms was fatal to its case.

* Motivate had not accepted the renewal for UAE alone and had made a clear counter-proposal relating to airport outlets -- which it had described as being of "critical importance". No reasonable reader of that statement could regard it being as anything other than a clear statement that Motivate did not want to agree to renewal unless this counter-proposal was accepted. Accordingly Motivate's belief that the licence was going to be renewed was incapable of undermining the impact of Hello's message.

If you're not careful, silence or even
inertia can amount to a representation
* there was no reason in principle why proprietary estoppel should not be available to Motivate so as to prevent Hello from denying the existence of the licence and the fact that this licence related to intellectual property rights rather than an interest in land made no difference,  However, Hello's email of 10 November did not contain any representation that the licence agreement would be renewed. Motivate either knew or ought to have known that the terms set out in that email were significant, and its reply showed that no agreement had been reached about them. The existing licence did not create any binding obligation on Hello to renew. but merely to negotiate in good faith. On no occasion did Hello's words, conduct or even silence amount to a representation that further negotiations were not required or that an agreement about terms was unnecessary. It followed that there were no representations capable of giving rise to an estoppel.

While all of this was plainly in Hello's favour and against the claims of Motivate, the judge was not happy with the events that led to this dispute.  He was asked to rule that Hello's conduct was unconscionable in denying the existence of a licence. While he could not do this, since there was no licence the existence of which was being denied, he did take the time and trouble to describe Hello's behaviour as being "two faced", observing the manner in which Hello's internal emails referred to Motivate and the fact that Motivate was never given so much as an inkling of the fact that Hello was also talking to a competing publisher, APP.

Hello goodbye here and here

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