Legal Updates

Intellectual Property Law - Commercial Law - Database Rights for Sales Agencies - An Agency or Distribution Agreement should include an express Assignment of Database Rights

A ruling by the High Court has resulted in new case law governing sales agencies with regard to database rights. Where a sales agency has built up a database of customer details, they will now own a database right in that database in the event that there is not an agreement with another party as to the ownership of that database.

What this means in practice is that it is now important to ensure that agency or distribution agreements include an express assignment of any database rights to the supplier of the information (or principal), rather than relying on a general IP assignment clause.

The case was decided with regards to the EC Database Directive and its implementation in the UK through the Copyright and Rights in Databases Regulations 1997. The facts of the case involved an agent selling home insulation which the principal manufactured. The agent sold the principal's insulation to customers and used the principal's name and business cards when doing so. The agent also created a database of customers to whom it had sold the insulation, however, the principal then began using this database to sell its other products.

Once the matter came into dispute, the agent issued a counter-claim for delivery up of the database claiming to be the rightful owner of it. The court held that the database belonged to the agent.

The case was reasonably clear cut as there was no employment relationship, and there was no express agreement regarding the ownership of the intellectual property rights in the database. Consequently, the ownership of the database right was vested in the sales agent.

It means that Sales agents and distributors will be in a strong position on termination of the arrangement if ownership of the intellectual property rights including the database right has not been made expressly stated in an agency or distribution agreement. This case is consistent with the customer lists belonging to the agent, distributor or franchisee as art of their confidential information.  Here there is an issue regarding the distinction between the database right and the copyright in the content of the database.

The William Hill case made a distinction between the rights in the database itself and rights in the contents and it is unclear whether the judge took this into account in deciding that the database (which presumably included the customer information contained within it), belongs to the sales agent.

Comment: In the future, agency and distribution agreements will have to deal with the ownership of any customer database i.e. customer list as well as other intellectual property rights. Not many agents or distributors would want to give us their customer lists. If not the principal/supplier  may lose control of the customer database on termination, as well as paying potential compensation to the agent on termination to obtain the list.

Please contact us for information on how to treat personal data of individuals at [email protected] or Visit  http://www.rtcoopers.com/practice_dataprotection.php; http://www.rtcoopers.com/practice_intellectualproperty.php

© RT COOPERS, 2007. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances