A recent case contains a number of messages for businesses entering into contracts with others to exploit intellectual property, perhaps the main one of which is to watch out who you go into business with.
The case involved a man who invented an improved latch for car doors. In 2001, his company entered into an agreement with Honeywell, a company which makes parts for cars.
He was unsatisfied with the progress Honeywell made with regard to producing a commercially viable model and in 2003 he ended the joint collaboration agreement between his company and Honeywell. His company then commenced proceedings against Honeywell for the profits that would have been earned from the successful commercial exploitation of the latch.
Many breaches of the contract by Honeywell were alleged, but mainly these related to design changes, which were alleged to be unauthorised, and failure to devote enough resources to the project. The court found as a matter of fact that whilst there had been breaches in the past, any problems had been resolved before the action was commenced and that there were no existing breaches of contract by Honeywell at the time proceedings began.
Although the claimant was extremely well prepared (a bundle of 360 pages of documents was presented in evidence), the judge found that the main cause of the action was the personal antipathy the inventor had for members of the Honeywell management team. Furthermore, the £600 million claim, which was based on the loss of the chance to profit from his invention, was described as ‘so speculative that no damages would be recoverable on the basis of the loss of a chance’. The judge summed up by saying that there was a strong element of the ‘Walter Mitty’ about the claimant. Additionally, a claim based on past breaches which had been rectified could not be justified.
Lastly, and most amazingly of all, the method by which any profits from the exploitation of the design would be split between Honeywell and the claimant had not in any event been agreed.
Says <<CONTACT DETAILS>>, “In this case, it is surprising that warning bells weren’t ringing earlier. Firstly, inventors have a reputation for being an idiosyncratic breed and for being problematic to deal with: it must have been evident that the relationship between the inventor and Honeywell was in difficulty. Having the skill to form an accurate judgment about the people you are dealing with is important – the relationship between the parties to a contract is often a crucial factor in determining whether disputes can be resolved amicably or not. It can be easy to let one’s enthusiasm for a product cause insufficient attention to be paid to the practicalities of working with the other party to the contract. It looks as though this case was a problem waiting to happen. Secondly, it is very important to get any contractual documentation in place early in the proceedings, in particular as regards the split of income arising from the exploitation of the invention.”
Partner Note
Automotive Latch Systems v Honeywell International Inc [2008] EWHC 2171 (Comm). See http://www.bailii.org/ew/cases/EWHC/Comm/2008/2171.html.