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Sunday, 15 November 2015

Diamonds are forever, but joint ventures are more fragile: court helps exorcise ghost of business failure

Claims of copyright infringement can often result from a business relationship that has gone sour. So observes Katfriend and occasional contributor Kevin Winters, pointing to a recent Intellectual Property Enterprise Court, England and Wales, decision of Judge Hacon in Helme & Others v Maher & Another [2015] EWHC 3151 (IPEC) .  What happened in this case? Kevin explains:.
Mrs Janet and Laura Helme operated a jewellery business as a partnership. The majority of their stock was originally sold in hair and beauty salons in the North West of England. In 2008, Janet Helme commissioned the creation of the ‘Hidden Gem Jewellery Company’ logo (above, right), to be used in the promotion of their business. She also organised the taking of photographs of jewellery which they offered to customers, including one of a double heart pendant set. At some point between 2008 and 2009, the Helmes began negotiations with Richard Maher and Michael Green (the defendants) to begin a joint venture (JV). 
The idea was that the  JV was to operate in conjunction with the Helmes's business, which would grant franchises to conduct other businesses elsewhere in the UK under the ‘Hidden Gem’ trade name. The idea progressed: the defendants created a company called ‘Hidden Gem Jewellery Company Limited’ and registered a domain name that they owned, thehiddengemjewellerycompany.co.uk [don't look: it's not operative], which was used to create a website. The defendants also advertised jewellery in print and on the website, using the ‘Hidden Gem’ trade name and logo and the photographed double heart pendant. 
After the JV fell apart some time between 2009 and 2010, the Helmes sued the defendants for copyright infringement. It was never in dispute between the parties that Mrs Helme owned the copyright in the ‘Hidden Gem’ logo and the photographs of the double heart pendant set, or that there was goodwill in the business. However, the defendants argued that they were licensed by her to do all of the acts complained of. Further, they said, even if there had been a sustainable copyright infringement claim, any dispute had been settled through a meeting between the parties on 8 September 2010, thereby barring the Helmes from pursuing their copyright infringement claim.

Judge Hacon dismissed the claim for copyright infringement. In doing so, he had to answer two questions:

1. Did Mrs Helme license the defendants?

Said the defendants, from late 2008 Mrs Helme had licensed them to use the ‘Hidden Gem’ trade name, logo and photograph in any way they deemed necessary, for the betterment of the business; this licence was limited in scope to cover what which a reasonable person would have believed to have been in Mrs Helme’s contemplation.

"What's the point of gems
if they're hidden?"
Judge Hacon had little difficulty in finding that a licence had indeed been granted, as evidenced by the presence of the trade name, logo and photograph on the website that had been created for Hidden Gem Co, and in some of the advertisements that had been put in the national press. Reviewing the timeline of events, the court found that, for the most part, the opposing parties enjoyed a harmonious relationship in which Mrs Helme endorsed the activities of the defendants to promote their joint venture. Over the course of the latter part of 2008, and for much of 2009, the parties appeared to enjoy a relationship of ‘friendship and trust’. While he acknowledged that Janet Helme’s relationship with the defendants may have changed, he pointed out that “…it cannot retrospectively affect the nature of the licence granted to [the defendants] at the time.”

While the licence was admittedly terminable, Judge Hacon could find nothing in the evidence shown that demonstrated that Janet Helme had communicated her dissatisfaction with the defendants’ activities to them with sufficient clarity to require their activities to change. The licence was deemed to exist until 9 April 2010 (the date of the Helme's letter before action). 
The court then turned to deal with each of the individual acts complained of:

a. The website

Mrs Helme was involved in developing the website for Hidden Gem Co. She complained that the website was ‘hijacked’ by the defendants when she found that the password which she had been using to access it had been changed: the website was claimed to promote only online sales, as opposed to the franchise business which had originally been agreed.

Mrs Helme admitted that she did provide Mr Maher with the password for the website in July 2009, in order that he could modify it as he continued his activities to develop the business. Judge Hacon conceded that this may have been a ground for complaint in November 2009, but pointed out that she had not notified the defendants that their use of her copyright was either being brought to an end or varied in some way. Judge Hacon noted that, albeit reluctantly, in cross-examination Mrs Helme accepted the promotion of direct sales under the ‘Hidden Gem’ name, and by extension, the logo, to promote the business’ brand. He concluded that the defendants' activities with the website were licensed.

b. Distributing a flyer with the trade name and logo

A friend of Mr Maher’s, a Mr Maudsley, had been recruited to make a contribution – unpaid – to the promotion of the jewellery franchise business. He volunteered to run a pilot scheme to recruit potential franchisees, which was carried out at his own expense at Macclesfield rugby club in September 2009. No interest was shown in the franchise business. The flyer that was the subject of the complaint bore a contact email address which was owned by Mr Maudsley. Judge Hacon could not find any evidence to suggest that Mrs Helme was aware in advance of the pilot. However he took the view that the use of the trade name and logo fell within the licence to promote the joint enterprise, as did their featuring on flyers distributed at the pilot.

c. Advertisements in the press or online

Mr Green approached Timscris Readers Offers Ltd to assist in the promotion of Hidden Gem. He informed both Mrs Helme and Mr Maher, at a meeting in March 2009, that Timscris was to be used as a means to advertise and market Hidden Gem goods in order to get free advertising for the business – it would also deal with sales gained from the advertising. There was no recorded dissent. Mrs Helme complained that the advertisements infringed her copyright.

Judge Hacon noted that three of the advertisements complained of occurred before 9 April 2010. Further, he pointed out that Mrs Helme was aware of some them: she admitted that she was aware advertisements in the Daily Mail and OK! Magazine and regularly contributed to discussions about planned advertising. Judge Hacon acknowledged that Mrs Helme may not have been told about every planned advertisement, but he could not see how any one of them was materially distinct from the advertisements of which she was aware.

Judge Hacon concluded that the defendants had no direct involvement in the placing of advertising of Hidden Gem goods. He pointed out that any sale of Hidden Gem goods to Timscris before April 2010 was under licence and, by extension, any advertising and sale of the goods by Timscris also fell under the licence. There was no evidence that the Helmes's case was that, upon receiving the letter before action, the defendants were to terminate what was a sub-licence to Timscris, or that Mrs Helme had made this clear to them. Ultimately, Judge Hacon deemed the granting of the sublicence to Timscris as having been “…within the scope of the broad licence granted by Mrs Helme to the defendants…”

2. Had the claims of copyright infringement been settled at the September meeting?

Judge Hacon accepted the evidence of the defendants that they believed that they had addressed the risk of litigation in a meeting with Mrs Helme on 8 September 2010. However, he also accepted Mrs Helme’s evidence that she did not understand that any settlement had been reached. He did however highlight that Mrs Helme was comfortable with the defendant’s guarantee that the company website would be transferred to her and that the company name would be changed – both of which had already happened. Ultimately, Judge Hacon ruled that there was no settlement reached at the September meeting, since there had plainly been no meeting of minds.

In concluding his judgment, Judge Hacon observed that the real issue may have been that Mrs Helme had trusted the defendants to lead in developing their joint venture to their mutual benefit, but she felt that her trust had somehow been misplaced. However, this was not a question for the court to answer.
Says this Kat, the decision is a sad one, really, which looks as though it should never have gone to court. The judgment contains no law; there are no citations of cases or recitals of statutory provisions. Rather, the judge seems to have been called upon to exorcise a feeling of grievance over the failure of a business relationship which, whether reasonable or not, was miscategorised as a copyright infringement dispute. Merpel adds the hope that the Helmes, now that they have had their day in court, will be able to put the failed JV behind them and get back to their business by looking forward to a better future rather than raking over the embers of the past.

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