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Intellectual Property streaming out of the door
20 July 2015

The High Court's decision in FilmFlex Movies Limited v Piksel Limited [2015] EWHC is a reminder to ensure that intellectual property contractual provisions are clearly drafted and accurately reflect the parties' intentions otherwise businesses risk losing a valuable asset, which for many could be their "crown jewels". Clarity and long term thinking are paramount.

In 2012, FilmFlex and Piksel had entered into a contract in which Piksel would develop the software for an online platform to stream FilmFlex's video-on-demand content services. Piksel agreed to deposit the platform's source code in escrow and to grant FilmFlex access to it upon request. The contract set out a number of contractual trigger events under which the escrow agent would release the source code to FilmFlex, including FilmFlex appointing a third party to develop the platform. The contract also provided for FilmFlex to have "access" to the source code at its request. The parties later signed a separate standard NCC escrow agreement, which contained less trigger events than the contract and in particular, didn't include release of the source code in the event of Filmflex's appointment of a third party to carry on with the platform.

Two years later, FilmFlex appointed someone else to replace Piksel in developing the platform. Piksel refused Filmflex's request for a copy of the source code arguing that this was no longer a trigger event due to the later escrow agreement which did not contain such a trigger event. Piksel also argued that "access" did not mean a right to a copy but just a right to inspect the source code.

The court disagreed with Piksel and ruled that the narrower set of trigger events under the escrow agreement didn't supersede the trigger events set out in the contract, especially as the parties had envisaged in the contract that FilmFlex could appoint a third party to continue on with the platform's development. There was no conflict between the contract and the escrow agreement and parties are free to agree additional terms of release outside of an escrow agreement. The court also ruled that the commercially reasonable interpretation of "access" meant that Piksel should deliver up a copy of the source code to FilmFlex.

The case is one of very few regarding source code escrow. It is not however, just of note to escrow agreements but a warning to look at all agreements entered into between parties and ensure that they all reflect the parties' intentions and don't include any inconsistencies.

For more information on anything in this article or to find out more about what the Brand Guardianship Team can offer please contact Bill Gornall-King on 0118 952 7131 or email [email protected].

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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