2e's or not 2e's, that is the question

In our blog on Fitzroy Robinson Ltd -v- Mentmore Towers Ltd (Key personnel?), we noted that commercial lawyers have to keep an eye out for new case law in related areas.  Another important example is the recent Chancery Division insolvency case of Butters -v- BBC Worldwide, which addresses the common circumstances of a joint venture shareholder licensing IPR to a joint venture.

2 Entertain JV

The case involved the joint venture agreement (JVA) setting up 2 Entertain Limited, abbreviated in the judgement as “2e”.  2e had a subsidiary, BBC Video Limited, which was the licensee under a master licence agreement (MLA) that was conditional upon the JVA.  The MLA included a term that terminated the licence if, following an Insolvency Event within the Woolworths Group, BBC Worldwide served a notice in accordance with the JVA requiring the Woolworths’ shareholder in 2e (WW Realisations 8 Ltd) to sell its shares in 2e to BBC Worldwide.

As a result of this linking between licence termination and notice to sell shares, it was successfully claimed that the clause in the MLA   to terminate the licence offended the insolvency deprivation principle, being the common law principle set out in Ex p Jay; In re Harrison (1880) 14 Ch D 19.  This principle is the common law equivalent of s.107 of the Insolvency Act 1986 and r.4.181 of the Insolvency Rules 1986, which ensure that the assets of a company on insolvency are distributed in accordance with the shareholders’ and creditor’s share of their interests in the company.  It is against public policy to permit a company to contract out of this principle to favour one shareholder or creditor above all the others.

The key lesson for IT/IP and commercial lawyers is not that automatic termination of licences upon insolvency offends the principle, but that the termination cannot be linked to any mechanism that enables the licensor to benefit as a creditor/shareholder from the fall in value in the licensee as a result of the termination of the licence. 

It should be notes that a similar case, Perpetual Trustee Co Ltd -v- BNY Corporate Trustee Services, involved this principle and came to different conclusions.  As permission of this case to be appealed has already been given by the Chancellor, it is expected that both these cases will go to appeal.

First incandescent light bulbs, next cathode ray tubes

CRT Television

In our blog on incandescent light bulbs, we noted that the effect of Directive 2005/32/EC is to give the European Commission the power to regulate the ecodesign requirements of a wide range of energy-using products, without the need for further Member State intervention.

Whilst the disappearance of incandescent light bulbs has caused some stir, we expect only the potential demise of cathode ray tube (CRT) televisions and monitors under the Ecodesign Requirements for Televisions Regulations 2009 to attract attention in the recent batch of ecodesign regulations published on 22 July 2009 (the other 3 being on Electric Motors, Glandless Circulators and
Household Refrigerators).

We were tempted to try to explain squirrel cage motors (for the Electric Motors regulation) and glandless circulators, but frankly Wikipedia does a better job than we could in a short blog.

However, if you were thinking about buying a cheap fridge, we suggest you do so soon if your ‘green’ conscience will let you.  The new ecodesign requirements are likely to increase the price of compliant fridges in the short term.

Disgorgement of ill-gotten gains

Thanks to a twitter lead (HT @clarinette02), we were alerted rather late in the day to the action being taken by the Federal Trade Commission in the US against a Californian mail order company that had misused .co.uk domain names to deceive UK consumers that the company was based in the UK.  In addition, the company had claimed on its websites to be registered on the Department of Commerce Safe Harbor list, the list of US entities self-certifying compliance with the Safe Harbour scheme agreed between the FTC and EU Commision. EU entities can, under the terms of the scheme and Art 25(6) of the Data Protection Directive 95/46/EC, export personal data to Safe Harbor entities without the need to take any other adequacy steps.

The FTC has been granted a temporary injunction until 25 September 2009, pending a full hearing of the case.  The FTC has applied for a permanent injunction against the company, together with “such relief as the Court finds necessary…including…restitution and disgorgement of ill-gotten gains”.

We will keep track of the case to see what the Court decides to do in respect of the data protection/Safe Harbor breach.

Lights out for a bit of electrical history

Incandescent Light Bulb

1 September 2009 marked the beginning of the end for the incandescent light bulb in Europe, curtesy of the Ecodesign for Non-Directional Household Lamps Regulation, after 130 years.

The Regulation is not for the faint-hearted, being a heavily technical document.  So much so that a handy “translation” has been prepared for MPs by a House of Commons Library Note.

From 1 September 2009, it should not be possible to obtain an 80W or higher wattage incandescent light bulb in the UK.

What makes this Regulation slightly more interesting from a legal point of view is that it was made by the Commission under an enabling power included in Directive 2005/32/EC.  Under the Directive the European Parliament and Council have handed over power to the Commission to set ecodesign requirements for a wide range of energy-using products by way of a Commission regulation.  A Commission regulation has direct effect on member states, ie no national legislation is required for the regulation to be effective and enforceable.