Rooney scores the winner in image rights contract dispute

Rooney: more skill ...
IPKat: more hair ...
And now for something completely different to all those debates on the proposed Unified Patent Court ...

Knowing how much many of this weblogs would give various parts of their anatomy to play soccer like Manchester United's Wayne Rooney,  this Kat brings you the latest on the follically- (and occasionally behaviourally-) challenged star and his IP disputes.

Most readers will be as familiar with the term 'image rights' as they are with Rooney himself. 'Image rights' is a term used to describe rights that individuals have in their personality, which enables them to control the exploitation of their name or picture. Rooney is an extremely successful English footballer with many accolades, such as youngest representative for England in 2003 and the youngest goalscorer for England in 2003 (and, depending on your football preferences, most red-carded player for England, together with David Beckham).

Rooney sought to exploit his image rights (as did his wife, Coleen).
To that end, when he was a teenager, he set up a company, Stoneygate 48 Ltd (Stoneygate) and he assigned his image rights to it. Stoneygate appointed Proactive Sports Management Ltd (Proactive) to act as its agent under an Image Rights Representation Agreement (IRRA). Under the IRRA, Proactive became responsible for, among other things, negotiating contracts with third parties for exploiting those rights (for example, by allowing Rooney's picture to be used for advertising sportswear). The IRRA was secured by Rooney's agent Paul Stretford and, under the agreement, Proactive would levy a 20% commission on all sums received by Stoneygate for an 8 year period (commencing in early 2003). Significantly, Rooney was only 17 when the IRRA was signed and relatively new to the world of professional football. No written agreement was ever signed between Proactive and Coleen or her company Speed 9849 Ltd ('Speed') although for a time Proactive performed a similar role on similar terms for her.

Things progressed well until 2008, by which time Mr Stretford had left Proactive and sought to take the Rooneys with him as clients. Stoneygate terminated the IRRA with Proactive and did not make payments on deals after Mr Stretford had left. Since October 2008, Stoneygate and Proactive have been in a bitter dispute as to the financial implications of that termination (and the termination of any contract to supply services to Speed), with Proactive claiming that at one stage that it was owed £4million in damages and £3-4 million in future commissions.

In the Manchester Mercentile Court, Judge Hegarty QC held (at [818]) that the
IRRA was unenforceable on the grounds of restraint of trade: it imposed very substantial restraints upon Rooney's freedom to exploit his earning capacity over a very lengthy period which was well in excess of anything which was to be found elsewhere in the market and not the outcome of a process of negotiation between equals. Therefore the onus was on Proactive, as the party seeking to enforce the IRRA, to demonstrate that the restrictions were reasonable having regard to the legitimate interests of the parties. In this regard, Proactive sought to rely the alleged commercial risk it had undertaken in agreeing to act as agent for such a young player, its contractual obligation to use its best endeavours to promote his commercial interests and the need to adopt a long-term strategy in order to develop the value of the player's brand. Judge Hegarty QC concluded that these factors were of little weight and that Proactive had failed to justify the restraints imposed on Stoneygate and Rooney under the IRRA. He further held that Proactive could not pursue any contractual claim under the IRRA and could not recover any commission which would otherwise have fallen due from Stoneygate or would have become due in the future. Nor could Proactive pursue a claim for damages for breach of the IRRA.

However the judge held that, for the period between the breakdown of relations in October 2008 and the acceptance of Stoneygate's repudiatory breach of contract in December 2009, Proactive would have been entitled to damages or a restitutionary remedy (which would have taken into account the loss of commission and any savings accruing to it as a result of not having to provide any further services under the IRRA). In respect of the period from December 2009 to the end of the eight-year term, it would likewise have been entitled to damages for the premature determination of the agreement. This assessment would take place at a later hearing, but Judge Hegarty stated that compensation would not be measured by reference to the 20% commission rate payable under the IRRA.

As for Mrs Rooney/Speed, Judge Hegarty QC held (at [819]) that an agreement could be inferred from conduct under which Proactive was to provide services similar on essentially the same terms to those which it provided for Stoneygate/Rooney (but without the fixed term). Accordingly, concluded that Proactive was entitled to judgment against Speed for approximately £80,000.

In relation to unpaid accountancy invoices, Judge Hegarty QC (at [821]) held that Proactive was entitled to recover £5,000 from Stoneygate and £10,000 from Speed.

Proactive appealed the decision to the Court of Appeal (Arden, Sullivan and Gross LJJ), which unanimously allowed Proactive's appeal in part (at [136]). Proactive was successful in its claim that (a) it was entitled to to commission on payments made by third parties to Stoneygate after termination of the IRRA in respect of contracts negotiated by it prior to termination; and (b) judgment against Speed should be increased on the basis that Judge Hegarty QC was wrong to conclude that the implied contract between her and Proactive on the same 20% commission rate as the IRRA. However, in relation to Proactive's other claims, the Court of Appeal held that (a) the IRRA was unenforceable as being an unreasonable restraint of trade; (b) Proactive was not entitled to receive commission under the IRRA on sums which were actually received by or after the date of termination in respect of contracts negotiated by Proactive; and (c) in determining the amount payable on a quantum meruit, Judge Hegarty QC should not have simply applied the 20% commission rate.

After the decision, Rooney has been reported as saying: "I am delighted ...  I was stunned when Proactive claimed the amounts they did. Coleen and I have always been happy to pay proper commissions to the people who are owed them. But Proactive's claims for money after we left the company were a joke."

The IPKat thinks Wayne Rooney must have an intuitive feel for IP exploitation since his middle name is 'Mark' (as in 'trade'). Merpel wonders whether she needs to have her own IRRA in place ...
Rooney scores the winner in image rights contract dispute Rooney scores the winner in image rights contract dispute Reviewed by Catherine Lee on Tuesday, December 06, 2011 Rating: 5

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