When two parties enter in to an unwritten, informal agreement it increases the possibility for any dispute to end up in Court, where both parties can suffer an unsatisfactory outcome.

The case of Costa v DissociaDID Ltd & Anor [2022] EWHC 1934 (IPEC) (22 July 2022) serves as a stark reminder to those entering into business with others, whether through collaboration, joint venture, partnership or otherwise, of the importance of agreeing and signing a written contract confirming the terms of the collaboration at the outset.

Background

This case is a prime example of informal collaboration arising naturally. Ms Wilkinson (the ‘Defendant’) established a successful YouTube channel discussing her condition of dissociative identity disorder, DissociaDID. Mr Costa (the ‘Claimant’) initially contacted her by email with comments and suggestions for her channel.

There was a clear common purpose which developed into a collaboration over several months. Although they were co-operating remotely, they went on to produce a total of nine literary works together (the ‘Joint Works’) (the Defendant claimed sole authorship of one of these, the ‘Disclaimer’).

It was a situation which first appeared to not require the preparation of a formal written agreement. However, it became apparent that the lack of such agreement proved detrimental to both parties when the informal collaboration soured.

The case and its relevance

The Claimant brought copyright infringement proceedings against the Defendant to restrict her from continuing to use the Joint Works. The Defendant counterclaimed for breach of contract and unlawful interference.

The claim and counterclaim were both in the larger part unsuccessful. The Court held:

• The Claimant’s role in preparing the Disclaimer was too small to create any rights over it. There are no intellectual property rights for secondary contributors.
• The Claimant in bringing the takedown notices against the videos, therefore, misrepresented that the Defendant was using the Disclaimer improperly. A contributor is unable to exercise a right they don’t have.
• The Claimant asserted the existence of an implied licence; the Court found there was no contract and hence no terms, implied or express, and there would have been no implied licence even had there been a valid contract because the Claimant’s role on the facts, based on the Court’s view, seemed to be only advisory. Non-contractual evidence alone makes it hard to show implied terms exist.
• Two emails between the parties where the Defendant mentioned possible future collaboration did not validly form a contract due to a lack of binding consideration, hence there was held to be no contract to be breached. Correspondence alone is not enough to create a contract.

How could a contract have changed the claim

Each element of the claim and counterclaim which failed in this case could potentially have succeeded had there been a written contract containing the appropriate terms:

• the Claimant could have asserted some right to the Disclaimer and associated Intellectual Property (IP);
• the Claimant could have avoided misrepresentation and the resulting claim that YouTube was entitled to bring against him;
• the Claimant would have been less likely to need to assert the existence of implied terms if there were written express terms and, if it did need to, would have been more likely to succeed due to the existence of express terms; and
• the Defendant could have asserted the existence of a valid contract and, therefore, potentially have claimed for breach of contract.

The result

In reality, the positive outcomes for both parties were limited and probably not enough to justify the costs of going to Court:

• the Court acknowledged that the Defendant’s continued use of the Joint Works except the Disclaimer after an appropriate 8 month notice period as determined by the court, was improper; and
• the Court found that the Claimant had unlawfully interfered with the Defendant’s rights in respect of the Joint Works through his misrepresentations to YouTube which had seen them taken down.

Key takeaways

• Courts will be strict in implying even the existence of a contract from correspondence alone, let alone agreeing the inclusion of additional implied terms.
• Contributors to a collaborative work without a written contract will have a hard time asserting IP rights if a court considers their role to be secondary.
• Legal remedies to problems are much more limited and difficult to enforce with the absence of a written contract.

Ultimately, in this case, both the Defendant and Claimant suffered from the lack of any written contract to back up their assertions about the nature of their collaboration, and their rights under it.

If your business informally collaborates with another or is planning to, you should consider formalising the relationship in writing as soon as possible, to protect and confirm your rights. At Hamlins we can assist you with negotiating documentation to include your desired terms and can advise you of potential pitfalls and traps to avoid during this process.

If you would like a conversation to find out how we might be able to help you, please contact Matthew Pryke.