Who: Your Response Ltd (“Your Response”); Datateam Business Media Ltd (“Datateam”); The Court of Appeal (the “CoA”)
When: 14 March 2014
Law stated as at: 7 May 2014
The CoA has recently decided on a case involving an attempted lien over an electronic database. A lien is a form of security which is taken over an item of property, usually in order to secure a payment of a debt. It has been established that whereas a lien can generally be exercised over the tangible property of another, it cannot be exercised over intangible property.
In the case of Your Response Ltd v Datateam Business Media Ltd in March of this year, the CoA focused on whether a lien can be exercised over an electronic database.
The databasics of the arrangement
Datateam is a communications business which, among other things, publishes magazines disseminated to a large number of subscribers. In order to keep track of its subscribership, Datateam engaged Your Response, a company which provides data management services. The arrangement was such that Your Response held Datateam’s electronic database and made regular amendments as necessary to keep details of Datateam’s subscribers up to date.
No formal document was drafted to reflect the agreement and so the contract was partly oral and partly in writing, predominantly email.
However, the contract did not consider how the database would be dealt with upon termination of the contract.
In October 2011, Datateam purported to end the contract, but failed to pay the outstanding fees that it owed to Your Response.
Consequently, Your Response refused to release the database to Datateam (or even allow Datateam to access the information) and began proceedings in the County Court for payment of the debt.
Amongst other things, the County Court held that Your Response was entitled to exercise a lien over the database for such time as Datateam failed to pay the outstanding fees in full.
CoA disagrees with Your Response’s gambit
The CoA ultimately decided that the County Court had not interpreted the law correctly and, as such, overturned the decision in favour of Datateam. In coming to this conclusion, the CoA looked at previous case law, particularly the House of Lords judgment in OBG Ltd v Allan from 2007 which made a clear distinction between tangible and intangible property.
Given that the current protections for databases under the Copyright, Designs and Patents Act 1988 and the Copyright and Rights in Databases Regulations 1997 clearly recognise that databases are not tangible property, the CoA agreed that information on a database can only be regarded as intangible as it is not capable of physical possession independently of the medium on which it is stored.
With no previous cases having allowed a lien over intangible property, and seeing no obvious reason to significantly depart from existing law in extending the scope of liens to electronic databases, the CoA held that Your Response was not entitled to exercise the lien over Datateam’s database, despite the non-payment of fees due.
Why this matters:
The decision is good news for those organisations which outsource the collection and maintenance of information to be put on a database. In particular, business like Datateam with high numbers of subscribers, or brand owners which engage third parties to manage or work on their CRM databases now know that the entity managing their database cannot exercise a lien over it if the relationship turns sour.
Clearly this is not a reason to avoid paying outstanding fees and in particular it should be noted that the CoA’s judgment will not protect a company who enters into a contract with a database manager which contains an express provision that access to the database can be withheld by the database manager pending full payment of any outstanding fees.
The decision is also interesting insofar as it demonstrates that the law on information held on electronic databases is pretty cut and dry and the courts are not willing to extend it even in light of technological development and increased reliance on electronic media.
While the information itself may give rise to intellectual property rights, whether in the form of copyright or database rights, any rights which have traditionally been afforded over tangible property (in this case a lien) will still only be available over the physical medium on which the information is stored and not in respect of the information itself.