Fresh Trading Ltd v Deepend Fresh Recovery Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Robert Englehart |
| Judgment Date | 26 January 2015 |
| Neutral Citation | [2015] EWHC 52 (Ch) |
| Court | Chancery Division |
| Date | 26 January 2015 |
[2015] EWHC 52 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
INTELLECTUAL PROPERTY
Robert Englehart QC
(sitting as a Deputy Judge of the Chancery Division)
Claimant
Iain Purvis QC and Anna Edwards-Stuart (instructed by HGF Law LLP) for the Claimant
Michael Silverleaf QC and Kathryn Pickard (instructed by Kempner and Partners) for the Defendants
This is the official judgment of the Court and I direct that no further note or transcript be made
INTRODUCTION
This action is concerned with the copyright in, principally, a logo which has been used for many years in the marketing material of the well-known brand of Innocent smoothies. These are blended fruit juice drinks. The logo has been used by the Claimant ("Fresh") ever since the commencement of its business. It has become the public badge of the business. Accordingly, Fresh is, in the circumstances which I shall outline, anxious to establish its title to the logo. On the other hand, the Defendants say that the First Defendant company ("Deepend Fresh") is in truth the owner of the copyright. The logo consists of a cartoon depiction of a face with a halo and has become known as "the Dude". It looks like this:
It is common ground that copyright subsists in the logo as an original artistic work. The dispute concerns the title to the copyright. Fresh puts forward a number of possible scenarios: (1) that Fresh is the legal owner of the copyright or (2) that Fresh is the owner in equity or (3) as a minimum, that Fresh has an implied exclusive licence under the copyright. The Defence and Counterclaim maintains, on the other hand, that Deepend Fresh is now by assignment the owner of the copyright in the logo as well as the owner of the copyright in other works identified in the Counterclaim. If this be correct, then Fresh says that Deepend Fresh is precluded from any relief on account of acquiescence, estoppel, laches or a general bar to injunctive relief.
THE PARTIES
Fresh is the parent company of Innocent Limited through which the business of Innocent smoothies is now conducted. The previous owner of the business was a company originally also called Fresh Trading Limited but then re-named Naked Products Limited following the incorporation of the present Fresh. Naked Products Limited was dissolved in 2010. Some months before the dissolution, all its intellectual property rights were assigned to Fresh. There is no issue between the parties over the validity of the assignment and no dispute over Fresh's title to sue. For the purposes of this judgment I shall simply refer to "Fresh" without distinguishing between the former company and the present company unless it is necessary to do so. Only where it is so necessary, I shall adopt terminology sometimes used before me, that is "old Fresh" and "new Fresh".
Deepend Fresh is, as its full name might suggest, a company formed to lay claim to intellectual property rights in work commissioned by Fresh from a design agency formerly called Deep End Design Limited ("Deepend") and then re-named Deepend London Limited. It went into liquidation along with its then parent company, Deepgroup Limited, on 1 October 2001. However, just before the final creditors' meeting was called Mr Chappell, the Second Defendant, took an assignment from the liquidator of, amongst other matters, intellectual property arising out of work which had been carried out by Deepend for Fresh for £3,000. Mr Chappell is an investment banker who thought that there might be an opportunity to turn a possible claim to the intellectual property to his financial advantage. Subsequently, he assigned all his rights, if any, in the intellectual property to Deepend Fresh.
THE BACKGROUND
Richard Reed, Adam Balon and Jon Wright had discussed from time to time, while they were students at St John's College, Cambridge in the early 1990s, the possibility of setting up in business together. But it was on a snowboarding holiday in February 1998 that they came up with the idea of establishing a company to sell smoothies. At this time, Mr Reed was working in advertising; Mr Balon and Mr Wright were each working for different management consultants.
After a period of testing of ingredients and mixtures and some rudimentary test marketing, Messrs Reed, Balon and Wright gave up their jobs in order to concentrate on the new venture. They were by September 1998 looking for office premises. Mr Reed heard that office space might be available at a design agency, Deepend. However, after the initial introduction to Deepend, discussions ensued with a view to Deepend assuming the design role for all aspects of the new business. Deepend was a young expanding company of entrepreneurs, and Mr Reed was impressed with their enthusiastic and dynamic approach to business. For their part, Deepend was also impressed with the possibilities for this new business venture. Mr Lockton, a founder and the managing director of Deepend, was clearly very keen on his company being involved, and — a factor of obvious attraction to a start-up company — Deepend was willing to work as the design agency for shares in the new company rather than for immediate payment for its design work.
In the above circumstances, Mr Reed set about drafting a contract to govern relations between the two companies. There seems to have been complete agreement from the outset that Deepend was to provide the full range of design services. In Mr Reed's words:
Yes, that was the spirit of the deal. They were going to be our one-stop shop for all design requirements in the first 18 months of the business.
The main subject of the negotiation concerned the level of shareholding for which Deepend was to work. After some discussion Mr Reed and Mr Lockton came to an agreement. That agreement, which I shall simply call "the Contract", had been drafted by Mr Reed and was agreed by Mr Lockton. No signed copy has been located. But unsigned electronic copies with attributions of 16 October 1998 in the case of Fresh and 19 October 1998 in the case of Deepend have been found in the computer records of both Fresh and Deepend.
In evidence Mr Lockton readily acknowledged that he had agreed the Contract.
The provisions of the Contract are of central importance in the present case. The Contract records that it is made between Deep End Design and Fresh and is entitled 'Heads of Agreement'. Under the heading 'Obligations' Deepend's obligations are described:
2.1 Deep End take on the role of being Fresh's marketing partner. This entails fulfilling the following roles:
2.1.1 Working with Fresh to develop and finalise the brand foundations for the new juice range. This will include running sessions to determine the exact nature of the audience, the most compelling proposition and the right tone of voice.
2.1.2 developing the visual identity for the product (including bottle and label design) and its associated marketing
2.1.3 Acting as a source of innovative ideas for all types of marketing activity.
2.1.4 Overseeing the design and implementation of all the drinks' communication material. This will include a diverse and extensive range of items, including, but not only consisting of;
the delivery vehicles
in-store promotional material
individual juice menus for bars/restaurants
the brand web-site
sampling units
branded merchandise.
2.1.5 Designing the corporate identity for Fresh Trading Ltd
Clause 3 recited that this was to be a relationship of partnership rather than a "normal client/agency" one and clause 4 was headed 'Remuneration'. It provided that Deepend was to fulfil its clause 2 responsibilities until 12 months after launch and there was to be neither reimbursement nor extra remuneration whatever the hours needed. Clause 4 continued:
4.2 Both parties agree that this work has a value of approximately £87,350, split into three phases (pre-launch, which has a value of £25,350; the first six months, which has a value of £38,000; and the second six months, which has a value of £24,000)
4.3 Deep End are prepared to receive their remuneration in three phases in the form of equity in the company, paid in shares and granted at the end of each phase.
…..
4.5 This equity will be awarded in three stages. The first 1.52% will become valid at the point when the bottle and label first go into production. The second 1.64% will become valid at the end of the first six months of trading and the third 0.59% will become valid at the end of the second six months of trading if the responsibilities outlined in Section 2 are fulfilled.
4.6 Deep End accept the risk inherent in the remuneration and acknowledge that if the company ceases trading, or fails to begin to trade, then no fee will be paid.
…..
The critical provision for the purposes of the present dispute is Clause 5. It is headed "Intellectual Property' and provides:
5.1 Fresh Trading Ltd receive full intellectual copyright of any work, creative ideas or otherwise, presented by the agency and then subsequently approved by Fresh. Work not approved by Fresh remains under the ownership of Deep End.
The Contract concludes with a space for the signatures of, respectively, Mr Lockton as managing director of Deepend and Mr Reed as a director of Fresh. This is underneath the words 'Subject to contract'. There is, as I have indicated, disagreement between the parties as to whether the Contract was ever in fact signed. There is very little relevant contemporary correspondence to shed light on the question. There is an email from Mr Reed to Mr Lockton of 21 October 1998 which concludes: "PS Don't forget to send me the signed heads of agreement as soon as possible". A further email of 28 October concludes: "And Gary, please don't forget to sent [sic] the Heads of...
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