How should an IP licence agreement be interpreted?
What happens when two parties cannot agree about the interpretation of an IP licence agreement?
This question was recently examined by Deputy Master Raeburn in a dispute between a designer, Damian Evans, and the producer of homeware products, Joseph Joseph Limited (JJL). The judgment is available here.
Evans had signed an agreement with JJL in 2007, under which he licensed to the company the IP rights in his designs for kitchenware. This was amended in 2011 to provide that he assigned all IP rights in his designs to JJL. The agreement included provisions regarding the protection and defence of registered design rights and royalties payable to Evans.
Evans brought the case to clarify certain requirements under the agreement, including regarding renewal, use of design rights and auditing of sales.
The judge said it was agreed that the Court should identify the intention of the parties in the agreement “by reference to what a reasonable person, having all the background knowledge which would have been available to the parties at the time it was concluded, would have understood them to be using the language in the contract to mean”. He also made certain findings about the factual background to the agreement, the positions of both parties and their understanding of design law at the time.
Taking all this into account, the judge rejected most of Evans’s arguments about the construction of the agreement, including the obligations on JJL regarding renewing design registration and providing accounting statements.
He did find that the “best efforts” obligation in the agreement requires LLJ to take all reasonable steps to renew the relevant design registrations – but said this is not an absolute obligation to renew all the rights.
Finally, the judge emphasised that, although the Court will make declarations to provide clarity on the interpretation of certain clauses of the agreement, it is not appropriate for the Court to grant declarations in response to open-ended questions – as sought by Evans on some points.
Apart from a limited declaration regarding renewals, and certain declarations on agreed points, therefore, he declined to make any further declarations.
Agreement not argument
As this judgment shows, judges are reluctant to (re)interpret agreements beyond providing the most basic guidance to parties from the point of view of what a reasonable person would understand.
If you want to avoid the cost and inconvenience of litigation, not to the mention the sense of ‘washing your dirty linen in public’, it is vital to consider all eventualities at the outset and set out terms in as much detail as possible when negotiating agreements.
Nobody can predict what the future will hold, but it is usually possible to anticipate the most likely possibilities and ensure that the agreement takes them into account. A bit of time spent doing that could save a lot of anxiety and argument later on. We don't know the full background but it is clear that the parties renegotiated in 2011, a similar approach to good faith negotiations a decade later could have considerably simplified matters.