Court rules on copyright and breach of contract in aviation training materials case

Posted by Ben Evans on
This, somewhat complicated case concerns the issues of copyright and reasonable notice.

The Claimant (BGS) sought remedies against five defendants namely:

  • Intelligent Data Capture Limited (IDC);
  • Allan Graham Hugh Cownie (Mr Cownie);
  • Propilot Limited;
  • Slate-Ed Limited and;
  • Jill Valerie Cownie (Mrs Cownie)

for copyright infringement. BGS also sought a further remedy from IDC for breach of contract. Mr and Mrs Cownie were the directors of the corporate defendants.

By a counterclaim, the Defendants, with the exception of Jill Cownie, sought remedial action from BGS and its managing director Mr Whittingham in relation to: copyright infringement, breach of confidence, circumventing copy protection, malicious falsehood, and conspiracy to injure by unlawful means.

Background

This dispute manifested from two written agreements between BGS and IDC. The first agreement was back in 1999 and was in relation to materials for the UK Civil Aviation Authority's training course for pilots. The second agreement was entered into between the parties in 2001 in relation to the EU Joint Aviation Authority's training course

Mr Whittingham and Mr Cownie were former RAF officers. Mr Whittingham left the RAF in 1990 and re-trained as a Ground Instructor. Mr Cownie was a Pilot and later a Flight Instructor and left the RAF in 1998.

In 1992 BGS was incorporated. It subsequently became a highly regarded company specialising in the training of commercial pilots for the Airline Transport Pilots Licence (ATPL) then under the auspices of the UK Civil Aviation Authority (CAA).

In 1996 IDC was incorporated. Mr Cownie attempted to negotiate a contract with the RAF to convert their training materials into an electronic format however he was unsuccessful.

In 1997 Mr Cownie and Mr Whittingham met for the first time at a training course. Mr Cownie suggested to Mr Whittingham that BGS's training manuals could be converted into an electronic format. The two companies began working together, subsequently entering into the first contract in 1999 which simply formalised their relationship. The agreement stipulated that BGS would commission IDC to create artwork for the training materials the copyright for which would be vested in BGS. The result of their collaboration was a technical manual which was sold to BGS's students. IDC received £50 per sold copy.

In 2000 changes to the training of commercial airline pilots were enacted in order to abide by European standards. The Joint Aviation Authority (JAA) was the requisite body responsible for ensuring such changes were made. BGS therefore produced material for the new JAA course and IDC began work on a computer program for the course . Both works contained JAA material.

In 2001 BGS and IDC entered into a second written agreement with regard to these new materials. The end result of BGS and IDC's work was the  'JAA Multimedia Revision Aid' which was then sold by BGS with IDC receiving £200 per copy sold. IDC did not make any further charge to BGS for the supply of static artwork.

In 2004, BGS acquired the copyright in a work entitled "Helicopter Principles of Flight" from the author, Mr A.W. Mathieson. Thereafter, IDC and BGS agreed to produce a new volume with BGS being responsible for updating the text and IDC being responsible for producing static artwork.

Between 2001 to 2009 IDC continued to supply static artwork to BGS.

In June 2009, Mr Cownie's Wife visited Mr Whittingham at BGS's premises. Her intention was to negotiate an increase in the licence fee for the revision aid from £200 to £300 per copy. She stated this was to compensate for an anticipated fall in sales and to allow IDC to develop multimedia aspects of the course. This visit was followed by an email from Mr Cownie which stated that he had stopped work on the multimedia content until this issue was resolved. Mr Cownie did not provide Mr Whittingham with any notice of this halt in work. Correspondence continued between IDC and BGS resulting in the relationship breaking down beyond repair. In response to IDC's conduct Mr Whittingham downloaded materials from  IDC's system some of which BGS was entitled to and others which it not.

At this point BGS could, arguably, have treated the contract as repudiated as a result of the breach of contract by IDC (in refusing to work on the multimedia content) however BGS failed to notify IDC of its intentions in this regard thus the contract remained in force.

Since 2009 the parties have been competing, publishing rival electronic and printed training materials using the works that they had created whilst working together. As such, ambiguity arose as to whom had copyright in the works under the agreement, as both parties contended that by carrying out these activities, the other was committing copyright infringement.  

Proceedings began in 2011.

Richard Spearman QC, sitting in the High Court provided a. methodical decision despite the large quantities of evidence and correspondence between the parties in respect of their claims for copyright infringement, breaches of confidence and breaches of contract. The Judge had to exercise commercial common sense when considering the following main issues:

  1. Who owner the copyright;
  2. Whether Mr and Mrs Cownie of IDC were personally liable, with the companies, as joint tortfeasors;
  3. Whether IDC was in breach of contract for failing to provide technical support to BSG's students;
  4. Whether the 2001 agreement had contained certain implied terms, including for termination on reasonable notice, and if so whether IDC breached these terms;  
  5. Whether BGS had been in repudiatory breach by secretly copying data from IDC's system and, if so, whether IDC had a defence to the counterclaim in respect of this; and
  6. Whether BGS had infringed IDC's copyright or misused confidential information by downloading materials from IDC's system.

The Decision

  • It was held that the correct interpretation of the contracts is that, in exchange for paying IDC to produce static artworks which are included in the syllabus document, BGS obtained not only those artworks but also copyright in them. This was because the words the parties used demonstrate no concern in relation to how IDC would set about producing the artworks. Instead they were concerned with achieving the result that the copyright in the static artworks in the syllabus document, 2D views of 3D models, the air law module, one of the helicopter materials, and fixed wing mass and balance artworks should be vested in BGS. This assertion was supported by the fact that in receipt of the artworks BGS were obliged to pay IDC.
  • In reproducing the artwork for their own business purpose the corporate defendants had therefore breached BGS's copyright.
  • IDC was liable for breach of contract by failing to provide technical support to students to whom BGS had supplied the training materials and that IDC had further had acted in breach of contract by threatening not to fulfil its obligations under the existing agreement unless BGS agreed to the new terms proposed by IDC. At this point the contract had not been terminated.
  • These breaches therefore entitled BGS to treat the contract as repudiated. However to bring the contract to an end BGS had to have communicated clearly and unequivocally its intention to treat the contract as discharged. Accordingly, the contract remained in force meaning that IDC was liable for all the breaches complained of.
  • The Judge found Mr and Mrs Cownie to be joint tortfeasors with the corporate Defendants in respect of all copyright infringement suffered by BGS because they were responsible for the day to day operations of those companies. The judge held that "in all material respects they masterminded and directed the actions of the corporate Defendants, and accordingly they did indeed 'intend, procure and share a common design' that those operations should take place and "make those acts their own".
  • IDC's counterclaim that BGS had breached the contract and IDC's confidence by secretly copying its materials and for repudiating the contract without proper notification were held not to  constitute a defence to BGS's claim for breach of contract.
  • The court found in BGS's favour in respect of the allegation by IDC that BGS had embarked on a concerted scheme to set up a system that did not depend on IDC in order to enable it to terminate the agreement and withhold licence fees owed to IDC.
  • The Judge held that the agreement contained an implied duty of good faith therefore BGS's acts in secretly downloading materials from IDC's computers I was commercially unacceptable and amounted to an infringement of copyright. However, these acts caused IDC only minimal damage.
  • It was further held that the other breaches did not amount to a repudiatory breach of the 2001 agreement as there were extenuating circumstances, namely: Mr Whittingham had concerns for his business; his acts in downloading the material were precautionary and used for a limited purpose; and that his acts caused minimal damage to IDC.
  • The Judge's view was that the position from 2009 onwards was unpleasant. Both parties were preparing to carry out future business without the other whilst trying to get as much out of the relationship in pursuit of their own interests while the relationship lasted. The Judge considered this to have led to a mixture of justifiable and less justifiable behaviour by both sides.
  • Furthermore, with regard to reasonable notice the Judge held that "what is material is not the state of affairs that prevailed at the time when the 2001 Agreement was made but that which prevailed at the time when notice was given" . The 2001 Agreement did not include any provision for continuation after the initial 5 year term. In these circumstances it was held that there was an implied term of reasonable notice of termination and in these circumstances 9 months would provide both parties adequate time to make other arrangements without tying them together for an unnecessary long period once they had decided to go their separate ways. Thus 9 months was a reasonable period and as such IDC were in breach.

In conclusion this case was ruled in favour of BGS as it was found that IDC was in breach of its contractual obligations. Damages were awarded.

This case highlights the importance of being vigilant when drafting agreements and making sure that contingency plans are set in place so that in the event of a dispute both parties are aware of their contractual obligations and thus can act accordingly.

If you would like advice about copyright law and licensing agreements please contact Blake Morgan's intellectual property team.

Click the here for the official transcript.

 

About the Author

Ben is a dual-qualified Solicitor and chartered trade mark attorney and advises clients on both contentious and non-contentious intellectual property matters.

Ben Evans
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