And breathe out… information is still not property

...but not my database rights

…but not my database rights

IP Draughts has reported before on cases where English courts, high and low, have confirmed that information is not property (though confidentiality “rights” may be treated as a type of intellectual property). Recent examples include Lord Neuberger’s judgment in this case, and  this Court of Appeal case where the court side-stepped the issue. The issue may seem rather academic or philosophical, but it is important for contract drafters who wish to avoid making meaningless statements such as that the “Results” belong to the “Sponsor”.

The issue has emerged again in another Court of Appeal case, Your Response Limited v Data Business Media Limited [2014] EWCA Civ 281, which was published last week. The court was asked to decide two points:

  1. Can a database service provider exercise a common law lien (sometimes referred to in the English cases as an artificer’s lien, and in the US as a mechanic’s lien) over a database, until the client has paid all outstanding fees relating to the provision of database services.
  2. In a contract that has no termination clause, and where there is an implied term allowing termination on reasonable notice (see Martin Baker v Canadian Flight Equipment Company [1955] 2QB 556 and a steady stream of subsequent cases), what is the length of reasonable notice in the present case?

ejector seatThe second point, while interesting for drafters of IP agreements (the Martin Baker case, for example, concerned the termination of a patent and know-how licence agreement), was a purely factual one.  The court decided that 3 months’ notice was appropriate.

On the first point, the main problem with applying a common law lien in the present case was that a database did not amount to goods, and common law liens have traditionally applied to goods. For example, if you have your car serviced, the garage can exercise a lien over your car until the service charge has been paid.

Moore-Bick LJ, who gave the lead judgment in the Court of Appeal in the present case, quoted extensively from Diplock LJ’s analysis of the nature of the lien in an earlier case. That analysis included the following statements:

[Common law lien] is a remedy for breach of contract which the common law confers upon an artificer to whom the possession of goods is lawfully given for the purpose of his doing work upon them in consideration of a money payment. If, pursuant to the contract, the artificer does his work, he is entitled to retain possession of the goods so long as his charges, whether agreed in advance or (if not so agreed) payable upon a quantum meruit, are satisfied.

It is a remedy in rem exercisable upon the goods, and its exercise requires no intervention by the courts, for it is exercisable only by an artificer who has actual possession of the goods subject to the lien. Since, however, the remedy is the exercise of a right to continue an existing actual possession of the goods, it necessarily involves a right of possession adverse to the right of the person who, but for the lien, would be entitled to immediate possession of the goods.

Applying this description (and in particular the phrase “actual possession of the goods”) to the present case led Moore-Bick LJ to a series of legal questions, including:

  • what at common law is understood by actual possession.
  • whether it is possible to have actual possession of an intangible thing,
  • whether it is open to this court to recognise the existence of a possessory lien over intangible property and if so,
  • whether it would be right for it to do so.

chatelaineWith liberal use of Norman French legal expressions, Moore-Bick LJ concluded that a database was a chose in action, and not a chose in possession or chattel. Put another way, the database was intangible property, to which might be attached certain rights of action, eg to sue infringers of database right, but it was not “goods” that could be possessed. Therefore the common law lien did not apply and it was not appropriate for the court to extend the scope of this law to new forms of property such as that in a database. On this last point, the judge disagreed with the views of the learned authors of a legal textbook, The Tort of Conversion, whose arguments were cited in this case.

At this point, the other two judges in the Court of Appeal weighed in, with Davis LJ muttering about the law of unintended consequences not being part of English law (he was concerned about the impact on lenders whose security would be prejudiced if a new form of charge was created), and Floyd LJ (the only intellectual property specialist on the panel) remarking:

If [counsel for the service provider] were right that the database could be possessed and could be the subject of a lien and that its possession could be withheld until payment and released or transferred upon payment, one would be coming close to treating information as property.

In Floyd LJ’s view, this would be a significant departure from established law.

Separately, there was a question of whether the service provider had exclusive control over the database (another essential element for the lien to apply), and Moore-Bick LJ concluded that it did not, in that the client had continuing access to the database during the contract term.

The narrow point from this case is that a common law lien over goods does not apply to intangible property such as a database.  The database service provider does not have any common law right to withhold access to the database until his fees are paid.  The parties can, however, agree such a right as a term of their contract.

The wider point is that a senior English court has made clear, once again, that English law does not recognise intangible property as goods, and nor does it recognise pure information as property.

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Filed under Contract drafting, Databases

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