Bristol Groundschool Ltd v Intelligent Data Capture Ltd & Ors

In construing a commercial intellectual-property agreement, the court must read related provisions together and identify the objective commercial purpose of the bargain. Where the agreement expressly allocates copyright in works supplied for inclusion in specified materials, ownership does not depend on the supplier’s undisclosed reasons for creating the works. A supplier must bring about the contractual allocation of rights, or be liable in damages if it lacks title to do so.

A long-term collaborative agreement may be a relational contract containing an implied duty of good faith. The duty is objective and prohibits conduct that reasonable and honest people would regard as commercially unacceptable in the particular context. Unauthorised self-help, including accessing another party’s computer system, may breach that duty without necessarily amounting to repudiation.

Bristol Groundschool Ltd (“BGS”) and Intelligent Data Capture Ltd (“IDC”) had collaborated under written agreements dated 1999 and 2001 to develop and distribute electronic pilot-training materials. The proceedings involved claims for copyright infringement and breach of contract, together with counterclaims alleging copyright infringement, breach of confidence, circumvention of copy protection, malicious falsehood and conspiracy.

The judgment determined a substantial group of preliminary and substantive issues. They included the construction of the 2001 Agreement, ownership of static artwork, the status of multimedia and helicopter materials, joint tortfeasorship, implied contractual terms, termination on reasonable notice, alleged repudiatory breaches, computer access and circumvention of technological measures.

1. Construction and copyright ownership. Clauses 3.1 and 7.1 of the 2001 Agreement were to be read together. Except for artwork owned by Rolls Royce plc and licensed to IDC, static artwork supplied by IDC for inclusion in BGS’s syllabus materials was to belong to BGS. “Produced for” was not confined to works created by IDC for BGS. The contractual allocation of ownership was not dependent on facts known only to IDC or on IDC’s choice of production method.
2. The same reasoning applied to artwork first produced for third parties but later supplied for inclusion in BGS materials, Air Law materials included in ATPL Digital and Tracker, and static views taken from 3D models. BGS owned copyright in a supplied 2D view where copyright subsisted in that view. If there was no separate copyright in the view, BGS did not acquire copyright in the underlying 3D model; IDC was liable in damages for failing to convey the ownership contemplated by the agreement. Copyright in third-party works could pass only to the extent IDC had acquired title capable of assignment.
3. The “Helicopter Principles of Flight” materials were subject to the parties’ special arrangement and BGS succeeded on that issue. “Helicopter Mass and Balance” and “Helicopter Performance” were not shown to be subject to the 2001 Agreement, and IDC succeeded on that issue. BGS succeeded in relation to the fixed-wing “Mass and Balance” materials.
4. Joint tortfeasorship. The corporate defendants were jointly liable for any admitted copyright infringements. Mr and Mrs Cownie were also joint tortfeasors because they controlled the companies’ relevant operations, decided which artwork could be used, and participated in a common design that the infringing operations should occur. Mere directorship alone would not have sufficed.
5. Implied terms and notice. The 2001 Agreement contained implied terms requiring IDC to incorporate material reasonably required by BGS and not to obstruct or undermine BGS’s business. Those terms remained capable of applying as the parties’ relationship continued and the MRS system developed. The agreement was terminable on reasonable notice. In the circumstances, nine months was reasonable.
6. IDC breached the technical-support obligation by refusing to activate software before payment for the relevant materials was overdue. IDC also breached contract by withholding work required under the agreement and by switching off the MRS Global database. BGS’s affirmation of the agreement did not remove its right to damages. Service of a draft Defence and Counterclaim was neither a breach nor a termination.
7. Good faith and self-help. The agreement was relational and contained an implied duty of good faith. BGS’s unauthorised downloading of IDC materials breached section 1 of the Computer Misuse Act 1990, infringed copyright and was commercially unacceptable. It did not establish breach of confidence on the pleaded case. There was no breach of section 296 of the Copyright, Designs and Patents Act 1988, but there was a breach of section 296ZA. The court declined to determine the criminal issue under section 296ZB.
8. Those breaches were not repudiatory. They were precautionary, caused little or no financial damage, and did not strike at the core obligations of the relational contract. Even if BGS’s conduct had been repudiatory, it would not have provided IDC with a defence to IDC’s later breaches. The 2001 Agreement remained in force until IDC’s breaches and was not treated as retrospectively terminated.
9. The parties were directed to agree an order reflecting the rulings, with further submissions to be made on matters expressly left open, including the inquiry as to damages.