Before you recycle that dog-eared precedent, check out this sorry tale of pinched agreements and breach of copyright claims.
Who: USP Strategies Plc and another -v- London General Holdings Limited, AON Warranty Group Limited and AON Warranty Services Limited (2002).
Where: The Chancery Division of the High Court, London
When: November 2002
USP Strategies Plc and ("USP") were trying to persuade electrical goods retailers Scottish Power to drop their current extended warranty scheme providers and appoint USP. After signing a mutual confidentiality agreement with the existing warranty service provider ("D"), USP arranged for its solicitors to draw up and supply to Scottish Power a set of papers to help the negotiations, including a draft service agreement between Scottish Power and USP and a "collections account agreement". The ensuing negotiation process involved D seeing these drafts. Later, USP and D were again in competition to provide on extended warranty scheme to an electrical goods retailer. This time it was Powerhouse. In that process, it was D which provided Powerhouse with draft service and collections account agreements, but when USP got hold of these documents, it cried "foul" and sued D for breach of confidence and breach of copyright, saying these two drafts substantially reproduced the drafts which D had been provided with in the course of the Scottish Power negotiations.
D said it had an implied licence to use the final version of the collections account agreement as a "legal precedent", and that in any event the final versions of the relevant agreements did not reproduce a substantial part of the earlier drafts. The Court disagreed. It held that D's use of the document in its final deal with Powerhouse was a breach of the USP/D confidentiality agreement. It also constituted a breach of copyright as the final version reproduced a substantial part of the earlier USP draft. The situation in relation to the service agreement was not quite the same, as there were two rival versions in existence at the relevant time and the documents had gone through so many earlier drafts that it was difficult to say that the version supplied by D to Powerhouse was a copy of a substantial part of the original USP draft. On the question of whether there was an implied licence for D to use the document as a legal precedent, the Court was not aware of any such convention. It was quite confident, however, that there was no custom in the business world which enabled one company to use the copyright in a document without the prior written consent of the company which had paid to have it drawn up.
Why this matters:
Before tweaking that earlier agreement in the precedent folder and recycling it for the next contract, the verdict in this case should be carefully considered. As the Court clearly found, contrary to D's arguments, there is no gentlemen's agreement in business whereby a draft contract is "public domain". Solicitors or their clients who are particularly concerned about this practice might even drop into their drafting deliberate mistakes, so that plagiarism can be more easily spotted. Care should be taken, however, that any such deliberate mistake does not create its own set of legal problems if it ends up in a signed contract!