InsightsInsight - Commercial Law - POSTED: April 13 2016
Commercial law – key cases
Why KPIs and a clearly drafted agreement are important
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In the recent case of BT Cornwall Ltd v Cornwall Council and others, the High Court was asked to consider whether Cornwall Council were within their rights to terminate a ten year outsourcing contract with BT worth £160 million. The contract was entered into in March 2013 and Cornwall Council notified BT that it wanted to terminate the agreement approximately two years later (i.e. 8 years early).
The facts of the case were that Cornwall Council sought to terminate the agreement on the grounds that BT had materially breached its obligations by failing to meet several KPIs. BT did not consider that Cornwall Council had a right to terminate the agreement in the circumstances, and sought an injunction preventing Cornwall Council from doing so.
In considering whether to grant the injunction, the High Court found in Cornwall Council’s favour and agreed that BT had not provided the service it had promised to the standard it had promised and BT was therefore in material breach of the agreement and had a right to terminate. Cornwall Council had tried to work with BT to resolve the issues but ultimately the actions taken by BT were not good enough.
Notably, the judge in the case was highly critical of the drafting of the outsourcing agreement. It was commented that the agreement was “very hard to work with, including by reason of its impractical length and the imprecision of some of its drafting”. Despite the length of the agreement (it ran to several lever arch files in total), it did not adequately or clearly address what should happen in the event that things went wrong.
It may seem surprising that a contract of such length and value could fail to clearly address whether Cornwall Council had a right to terminate in the circumstances. This case is a reminder to any business that is considering entering into an outsourcing agreement that, to prevent disputes arising in the future, it is extremely important to agree in advance each party’s termination rights and ensure that they are clearly and unambiguously documented in the agreement. KPIs are important tools for measuring performance in service agreements but if the consequences of failing to meet any KPIs are not clearly set out, they could be of little worth.
Trademark infringement: Glee v The Glee Club
Many people will have heard of the popular American television series, Glee, produced by Twentieth Century Fox (“Fox”). However, fewer people will have heard of The Glee Club, a live entertainment venue operated by Comic Enterprises Ltd (“Comic”) that first opened in Birmingham in 1994.
Although you may not have heard of Comic or The Glee Club, Comic has recently won a landmark ‘David versus Goliath’ ruling in the Court of Appeal against Fox, which all trademark owners should take note of.
The facts of the case are that in 1999, Comic registered two trademarks in the UK which incorporated the words “the glee CLUB.” Fox first broadcast the television show Glee in the UK in 2009 and less than two years later Comic began trademark infringement proceedings against it. In February 2014, the High Court ruled in Comic’s favour and found that Fox had infringed its UK trademarks on the basis that objectively there was some similarity between Comic’s trademarks and the Glee sign used by Fox and that there was a possibility that an average consumer would be confused by this and would assume that The Glee Club and the television show Glee were somehow connected. There was also evidence showing that some potential customers of The Glee Club were discouraged from attending because of the perceived link with the television show.
Following the High Court’s decision, Fox appealed. However, the Court of Appeal in February 2016 agreed that the evidence showed that there was a similarity between Comic’s trademarks and the Glee sign and the services provided by Fox and Comic and this had led a significant number of people into believing that the two businesses were connected.
The consequence of this judgment is that Fox may now have to rename its popular television series in the UK, although it is possible that it may submit a further appeal. Whilst this case does not lay down any new ground-breaking legal principals, it serves a reminder of the value of a registered trademark and the circumstances in which an infringement action may be brought.
The fact that “Glee” was similar to the trademarks registered by Comic and there was a similarity between the services offered by the parties was not in itself enough to win an infringement action – Comic also had to show that the use of a similar sign by Fox was in some way detrimental to it. Had Comic not been able to prove this, the infringement action would not have succeeded. The size and popularity of the television show Glee had no bearing on the judgment.
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