Category Archives: General Commercial

Who owns a Banksy mural?

art buffA recent case in the English High Court has seen a senior IP judge, Mr Justice Arnold, deciding on the ownership of a Banksy mural that was removed from the wall of a building.

The artist known as Banksy is famous for:

(a) retaining his anonymity;

(b) creating artwork in public places that could be viewed as graffiti, and sometimes has a political message, and which tends to have a high commercial value (hundreds of thousands of pounds); and

(c) causing his works suddenly to appear in unexpected places.

In recent years, a trend has developed of removing Banksy works from the walls on which they have been painted, and selling them at auction, sometimes to raise money for good causes.

The present case, The Creative Foundation v Dreamland Leisure Limited and others [2015] EWHC 2556 (Ch) concerns a mural known as Art Buff that appeared on the wall of a building in Folkestone, a seaside town in England.

art buff 2The tenants of the building, Dreamland Leisure, removed the mural, which involved taking a layer of the wall away, and sought to sell it at auction in the United States. The Creative Foundation sought an order for delivery up of the mural on the basis that it belonged to The Creative Foundation as assignee of the landlord’s interest.

In a case like this, we need to distinguish between the work of art, the copyright in the work, and the slice of wall on which it is painted. As Arnold J said in his judgment:

I should explain before proceeding further that, when I refer to the Mural in this judgment, I am generally referring both to the physical object and to the artistic work fixed on it. For the avoidance of doubt, I am not concerned with the copyright in the artistic work, which prima facie belongs to Banksy.

Thus, Arnold J found himself deciding a case on the respective rights of a landlord (lessor)  and a tenant (lessee) to materials that originally formed part of the demised premises but, when removed from the building, “revert to the status of chattels”. This is not part of the usual legal diet of an eminent IP judge.

After reviewing the cases, and the terms that could be implied into a lease of (real) property, he concluded:

In my judgment the term which is to be implied is that the chattel becomes the property of the Lessor. My reasons are as follows.

First, I consider that the default position is that every part of the property belongs to the Lessor. The Lessee only has a tenancy for a period of time. Thus it is for the Lessee show that it is proper to imply into the Lease a term which leads to a different result.

Secondly, in my view the mere fact that the Lessee is discharging its repairing obligation does not lead to the implication that it acquires ownership of such a chattel. Dreamland’s argument is based upon the Lessee’s need to be able to remove items generated by the act of repair from the premises. But that would only justify the implication of a term dealing with permission to remove (and, where appropriate, dispose of) such items. It does not justify the implication of a term transferring ownership of the items…

Thirdly, even if a term may be implied with respect to the ownership of (i) waste or (ii) chattels with no more than scrap or salvage value, it does not follow that it should be implied with respect to the ownership of a chattel with substantial value. Such a term would not be necessary, would not go without saying and would not be one that would satisfy the officious bystander test.

Fourthly, I do not consider that it makes any difference that the value is attributable to the spontaneous actions of a third party. It is fair to say that, whatever solution is adopted, one party gets a windfall. But who has the better right to that windfall? In my view it is the Lessor. …

Accordingly, I conclude that the Foundation is correct that the defence advanced in paragraph 13 of the Defence is unsustainable as a matter of law.

For the reasons given above, I conclude that the Foundation is entitled to summary judgment on its claim against Dreamland for delivery up of the Mural.

So, now we know. Though one might have expected copyright law to feature prominently in a dispute over a valuable artwork, in fact it came down to implying terms about the ownership of builders’ rubble in a routine property lease. IP Draughts wonders whether the drafters of property leases will, in future, include standard terms to deal with the ownership of works of art that are incorporated into the leased property without the knowledge or permission of either lessor or lessee.

The back story to this dispute is also interesting. It seems that Art Buff failed to sell at auction in the USA because its authenticity as a Banksy work had not been certified by a body associated with Banksy, known as Pest Control. Thus, questions of property law and copyright law were ultimately secondary to questions of provenance.





Filed under General Commercial, Intellectual Property, Legal Updates

Commission payments: always button down the contract terms

300px-Flag_of_Kazakhstan.svgLast week’s reported judgment of the case of Stein v Chodiev & Ors [2014] EWHC 1201 (Comm) in the English Commercial Court prompts several thoughts.

  1. IP Draughts’ recent and slightly flippant comments on this blog about the English courts being happy to hear disputes involving Russian oligarchs were too limited in scope: the English courts are happy to hear disputes involving Kazakhstan oligarchs as well. The first three defendants in the above case, popularly known as the Trio, are famous as the billionaire founders of ENRC Plc, or Eurasian Natural Resources Corporation, which was listed on the London Stock Exchange on 12 December 2007, but which (in the neutral words of the judge in this case) has very recently been re-privatised. For a more controversial discussion of the de-listing, see this news item in the Guardian from last Summer.
  2. Leading counsel on each side of this dispute were from the same set of barristers’ chambers, Essex Court Chambers. The terms “Chinese walls” doesn’t seem quite apt when the parties are from Kazakhstan and the USA. Let us hope the clerks didn’t make any mistakes in delivering papers to the wrong counsel. If the head clerk, David Grief, is on a traditional percentage of fees, he must have been quite pleased with these briefs!
  3. The case concerned the payment of commission of several million dollars in relation to fund-raising activities. Leading counsel for the Applicant (plaintiff to you and me), Daniel Oudkerk QC, comes from the employment bar, which is less surprising that it might at first appear. Commission cases, and their close relative, bonus cases, often require a mixture of commercial law and employment law expertise. Until recently, IP Draughts’ firm was involved in a commission case in which we hired the excellent Stuart Ritchie, who became a QC during the time we were instructing him. Stuart’s chambers specialise in disputes that are at the interface of commercial and employment law. Choosing the right barrister for a case is one of the more important skills that a solicitor can have.
  4. Drafting commission terms is a highly-skilled task, which requires the drafter to think through scenarios and make sure the wording is clear and gives effect to the parties’ intentions. Sometimes, the parties have not thought enough about those intentions and need to be prompted with “what if” questions. For instance, what happens if the deal is done after the commission agreement is terminated, but the party was involved in securing the deal? What happens if the target was known to the principal before he was introduced by the other party? What happens if the deal is not structured in the way the parties anticipate when the commission terms are agreed? And so on.
  5. Sometimes, and as the defendants argued unsuccessfully was the arrangement in this case, payments are to be made at the discretion of the employer or principal. Court cases can turn on whether the discretion has been exercised in a reasonable way.
  6. chicken feedWhen dealing with the super-rich and super-powerful, it is very easy for the person seeking the commission to become a kind of courtier at the principal’s court. In other words, rather than rely on well-written contracts, the courtier accepts the assurances of the principal and hopes that, by keeping the principals’ goodwill, he will get the payments he was hoping for. After all, the amounts at stake are mere “chickenfeed” to the principal. Perhaps it is just the cases that IP Draughts sees, but in his experience this is a very high-risk strategy. It gives the courtier no definite protection (unless the court can be persuaded – see below) from the principal who no longer sees the value in the courtier, perhaps because his mind has been changed by the comments of others at court. IP Draughts has no knowledge of whether this happened in the present case, but notes that the commission terms were kept unwritten at the request of the defendants in this case, for reasons that were never really explained.
  7. Despite the relative lack of written evidence of the contract terms in the present case, the court found for the applicant. It seems he impressed the judge in the witness box, unlike the Trio. It is surprising to IP Draughts how many witnesses in English commercial cases fail to get the basic technique right – be consistent, don’t overstate, admit weaknesses, be reasonable, demonstrate trustworthiness. Perhaps different techniques of persuasion are needed in other countries’ courts, but IP Draughts doubts it.

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Filed under Commercial negotiation, Contract drafting, General Commercial

International IP transactions: how best to manage the differences?

shapesThe legal aspects of international IP transactions can be challenging. Do you ignore the differences in approach to drafting and interpreting contracts, treating every deal as if it were a domestic transaction between parties in your home territory? As a variant on this, do you run a late draft of the agreement by a local lawyer in the jurisdiction where the agreement is to be performed or (if it comes to that) litigated, for a ‘quick and dirty’ legal review? Or do you try to grapple with the issues yourself, and draft the agreement with one eye out for the approach that it likely to be taken by the foreign court or arbitrator? In most cases, employing an international team of lawyers to be fully involved in the drafting and negotiation of the agreement is unlikely to be acceptable to the client on cost grounds.

The third of these alternatives – keeping an eye out for the overseas laws while you draft – may be the most cost-effective, and in your client’s best interests, but you are only qualified to advise on the law in your home jurisdiction, and dabbling in another country’s laws is frowned upon by regulators and professional indemnity insurers. You also need to know your client – are they employing you to reduce their risk (as some in the banking sector may do), or are you part of their team, so that they will they appreciate whatever insights you can bring, irrespective of whether they are 100% accurate, complete or up-to-date? For obvious reasons, IP Draughts prefers to deal with the latter type of client, who will see the benefits of imperfect knowledge about overseas legal systems, rather than blame you for what you don’t know.

Those insights are learnt throughout one’s career – each international deal that you work on can bring a few snippets of useful information that can be used on later transactions. Reading up on the subject can also help – the comments of the 6 overseas contributors to our book on biotech transactions have been immensely helpful to IP Draughts’ understanding of the approach taken in civil codes jurisdictions.

In IP Draughts’ experience, these hard-won snippets of information can fall into several categories, including the following:

  1. Rummaging in the bottom of the IP cupboard. Only a small part of national IP laws tends to be concerned with transactional issues.  Those issues typically include: first ownership; problems with employees and consultants; co-ownership and associated problems; recognised types of transaction, particularly assignment, licensing and charge; quasi-IP rights, including Government walk-in rights, compulsory licences, rights for developing countries, and incentives such as orphan drug status; and implied terms in licences and assignments.
  2. Pushing a square peg into a well-worn, roundish hole. Applying long-established, national contract law principles to the facts of IP transactions, in circumstances where there may be little case law that is specific to IP transactions to guide the drafter. Examples include interpreting terminology (eg “exclusive”), implied terms (eg IP warranties, duties to exploit, reasonable royalties and rights of termination), and generally the willingness of judges in civil code countries to ‘fill in the gaps’ of the parties’ contract drafting.
  3. Escaping the deathly clutches of US legal drafting. Recognising that many ‘international’ transactions incorporate US-style contract wording. Some of that wording is sub-optimal yet rarely challenged in the US, eg the use of the terms ‘indemnify and hold harmless’, ‘successors and assigns’, or ‘sole and exclusive’. Outside the US, there is even less justification for using imperfect wording that is cosily familiar and therefore often accepted in a US context.
  4. Talking Euro-babble with confidence. Drafting IP agreements to take account of the peculiar and detailed concerns of the European Commission’s Competitition Directorate, as set out in documents such as the Technology Transfer Block Exemption Regulation and the Guidelines on Technology Transfer Agreements.
  5. discoDisco-dancing dad. Knowing enough of the moves to get by, in quirky areas of national law that affect the terms of IP agreements, including employment, insolvency, tax, and security interests, and generally having a view on which laws to choose or avoid for an international contract, if your home territory’s laws cannot be negotiated.





Filed under General Commercial

Confidentiality obligations in the parallel universe of M&A

familiarFor many technology-based companies, confidentiality agreements (CDAs) are routine documents that present few surprises.  Some of IP Draughts’ clients sign dozens, or even hundreds, of the things each year.  Often, they are signed as a first step in business discussions that may or may not lead to the parties signing a commercial agreement, such as a services agreement, research collaboration agreement, or IP licence agreement. A few issues tend to be negotiated, including duration, and law and jurisdiction, but most of the CDAs that one encounters are mostly on the right lines.

The conventions that are followed in relation to confidentiality in general business discussions do not always seem to flow through into the world of corporate mergers and investment transactions.  As an IP lawyer, IP Draughts has been surprised by some of the differences that he has seen.  They have included:

  1. Disclosure of a company’s trading contracts to potential purchasers or investors, despite the presence of provisions in those contracts that forbid the disclosure of the contracts’ terms.  Sometimes this issue is mitigated by limiting the disclosure to access in a data room, without the right to copy the agreements, but this doesn’t affect the fundamental issue  that the documents are being disclosed in breach of a confidentiality obligation.  If the transaction is consummated, perhaps the issue goes away, but in other cases …
  2. brokerBrokers and other finance professionals who refuse to sign CDAs, arguing that they must be free to do business with multiple companies in the same market sector, and CDAs would prevent them from doing this. Instead, clients should trust them to behave honourably.  Of course, this doesn’t protect the client, and sometimes highly sensitive, technical information about a client’s products in development is disclosed to these organisations.
  3. Other finance professionals who are not willing to sign CDAs whose obligations last longer than a year or two.  This may be okay if only financial information is provided but, again, technology-based companies sometimes find themselves disclosing technical information that is valuable as a secret for much longer periods.  Sometimes, those professionals can be persuaded to agree to a longer period in respect of “trade secrets” but in IP Draughts’ experience this cannot be assumed.
  4. Finance professionals who insist (as do some major companies, particularly those headquartered in the US) that if information is disclosed orally, it will only be treated as confidential if it is confirmed in writing within a period such as 28 days.  Yet in practice most of the subsequent discussions are held in meetings and by phone, and no confirmatory record is prepared.  Admittedly this problem is not unique to the financial sector.

secretsLawyers who work with the financial sector on a regular basis will no doubt be very familiar with its practices, which seem remote from the business world.  IP Draughts wonders whether these practices (of which the terms of CDAs form a very small part) will change in light of the recent upheaval in the world of finance.

What are you seeing?


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Filed under Confidentiality, General Commercial