What Not to Do in the First Flush of a New Business Romance
The Intellectual Property Enterprise Court case of Helme, Helme and Hidden Gem Jewellery (the “Claimants”) v Maher and Green (the “Defendants”) (2015) EWHC 3151 (IPEC) 2nd November 2015 (Bailii) is a cautionary tale about not documenting clearly the rights you do and do not want to grant to a prospective business partner.
In this case, Mrs Helme and her daughter ran a partnership called Hidden Gem Jewellery (the “Business”). There was copyright in the Business logo, the Business name “Hidden Gem Jewellery” and photographs of certain of the products for sale by the business.
The Claimants entered into discussions in late 2008 and early 2009 with the Defendants, with a view to setting up a joint venture business. In anticipation of the forthcoming joint venture, the Defendants formed a company, Hidden Gem Jewellery Limited and registered the domain, thehiddengemjewellerycompany.co.uk, from which they proceeded to offer for sale jewellery, using the Business name, the Business logo and photographs of products belonging to the Business.
There is some dispute about whether the joint venture negotiations broke down in late 2009 or early 2010, but by April 2010, the Claimants sent a notice to the Defendants accusing them of passing off and/or copyright infringement, and instructing them to stop their infringing behavior (the “Cease and Desist Notice”).
The Defendants argued that they had at all times been acting under an implied licence (a) to use the Business name, the Business logo and the Business photographs, and (b) to set up the website and the limited liability company. The judge agreed (ouch!), holding that the implied licence granted by the Claimants only terminated with the sending of the Cease and Desist Notice…..so no damages for infringing behaviour.
Lessons learned?
Set out the ground rules for any business negotiations with a prospective business partner in a memorandum of understanding (“MoU”). Make clear in that MoU matters including:
- What each party is and is not entitled to do prior to the execution of a definitive partnership agreement
- How the MoU can be terminated
- What licences (if any) are being granted and how they can be terminated
- What happens to any costs incurred by either party if the negotiations are terminated
- What happens to any items (eg domain names or limited liability company) purchased by either party arising out of those negotiations.
If you are talking to a prospective new business partner and would like help with a clearly worded MoU, contact us at [email protected]