Ireland IP & Technology Law Blog : Dublin Lawyers & Attorneys for Intellectual Property, Communications & Information Technology Law in Ireland, U.S. & England

A recent decision (Ardis Health LLC et al. v. Nankivell)of the U.S. District Court for the Southern District of New York dated 19 October 2011, provides a good insight into the best practices for parties contracting in the social media space.

“Social media” refers to any online medium that includes community features such as user-generated content, the ability to form groups and the ability to recommend, comment on, and share the content of others. Examples include Facebook and Twitter.

The plaintiffs in the proceedings were three companies that market online herbal and beauty products. The three plaintiffs are wholly owned and collaboratively operated by Jordan Finger. The defendant was hired by one of the plaintiffs, CYC, as a “Video and Social Media Producer”. The defendant signed a Work Product Agreement that provides that work created and developed by the defendant “shall be the sole and exclusive property of CYC, in whatever stage of development or completion”, and that it ”will be prepared as ‘work-for-hire’ within the meaning of the Copyright Act”. The agreement also provided that the defendant return all confidential information to the plaintiffs upon request, and that “actual or threatened breach of the agreement will cause irreparable injury and damage”.

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The European Commission has published a proposal for a Regulation on an optional Common European Sales Law. It is envisaged that the Common European Sales Law will exist alongside each Member State’s national contract law as a second, alternative, contract law regime available to consumers in cross-border situations.  The Commission has stated that the 27 different sets of contract law rules which currently exist in the EU act as a deterrent for both businesses and consumers to shopping and trading across EU borders.   

Justification for proposal 

The Commission has justified the proposal on the grounds that companies will benefit from one (optional) uniform regime of contract law in all 27 Member States, as traders will “no longer need to wrestle with the uncertainties that arise from having to deal with multiple national contract systems”. 

The Commission believes that, if adopted, the Regulation will also cut transaction costs for companies wishing to trade cross-border, and help small and medium-sized companies to expand into new markets.

Consumers are expected to benefit from having the same level of consumer protection in all Member States, having a wider choice of products at lower prices, and from certainty about their rights in cross-border transactions.

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An interesting recent decision of the Supreme Court of England found that, although parties to a supply arrangement had not signed a final written contract, a binding agreement had come into force.

In the RTS Flexible case the English Supreme Court found that an agreement had come into effect on the basis of a letter of intent, even though it was expressed to be "subject to contract".

Lord Clarke commented in the case:

"The different decisions in the courts and the arguments in this court demonstrate the perils of beginning work without agreeing the precise basis upon which it is to be done. The moral of the story is to agree first and to start work later."

The case highlights the need to reach agreement before work commences, put interim arrangements in very clear terms, setting out what work is to be done, for what price and for what period. The Irish courts are likely to follow the principles applied by the English court, but of course, cases of this kind often turn on their facts - the important point is to be as upfront and express as possible about the non-binding nature of any pre-contract engagement.

A link to the judgment can be found here.

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The English High Court has held that the term "perpetual" has "different shades of meaning" in the context of a software licence. The parties in this case had entered into a licence agreement and a support agreement (required by the licence agreement), which were later amended by a variation agreement stating the licence would be "extended [to a] perpetual licence." The licensee terminated the support agreement but claimed the licence agreement continued, because the grant of the perpetual licence in the variation agreement meant that relevant termination clauses in the licence agreement were superseded.

The Court said that while "perpetual" can mean something that is "never ending (in the sense of incapable of being brought to an end)", it can also mean that a thing is "of indefinite duration, but subject to any contractual provisions governing termination". In this case, the Court held that the latter meaning applied.

While one might assume "perpetual" means forever, the case makes it clear that the courts may not always agree!

A link to the judgment can be found here.

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