Artcrafts International SpA v MOU Limited

For an interim injunction, the court applies the American Cyanamid principles. It asks whether there is a serious issue to be tried, whether damages are adequate for either party, and where the balance of convenience lies. The court may consider admitted and continuing breaches, especially where the defendant’s stance gives little confidence that contractual obligations will be observed.

A carefully drafted fixed-term commercial agreement containing detailed and comprehensive termination provisions will not ordinarily be construed as terminable on reasonable notice. Nor will such a term be implied where it contradicts express provisions, undermines the agreed duration, or is unnecessary for business efficacy. A declaration is appropriate where there is a real and present dispute and the declaration will usefully resolve it.

Artcrafts sought continuation until trial of an interim injunction restraining MOU from breaching an exclusive licence concerning MOU footwear. It also sought summary judgment on MOU’s contention that the licence was terminable without cause on reasonable notice, strike out of parts of MOU’s Defence and Counterclaim, and a declaration that the USA formed part of the exclusive territory from 1 January 2015.

The applications arose from alleged sales through SSENSE, the MOU website and Google advertisements. MOU admitted breaches concerning those matters during the hearing and admitted that the USA had remained within the exclusive territory. The central issues were the proper construction of the licence, the availability of an implied termination term, the continuation and scope of injunctive relief, and the appropriate declaratory and procedural orders.

1. Interim injunction. Applying section 37 of the Senior Courts Act 1981 and American Cyanamid, there was at least a serious issue to be tried, and in several respects an admitted breach. The claimant’s allegations were not fanciful. MOU’s continuing denial of breaches and its stated refusal to notify commercial purchasers of the exclusive licence justified concern about future breaches.
2. Damages would not adequately compensate Artcrafts. Lost sales, customer confusion, reputational harm and damage to commercial relationships were difficult to quantify. There was also doubt about MOU’s ability to satisfy a substantial damages award. MOU would be adequately protected by Artcrafts’ cross-undertaking in damages. The balance of convenience therefore favoured continuation of the injunction and preservation of the contractual status quo.
3. Clause 2.1.1 was properly capable of operating as an exclusive licence which prevented MOU, directly or indirectly, from manufacturing, distributing, selling, advertising or promoting the Products in the Territory. Clause 7.1.1 imposed a general obligation to use all reasonable endeavours to safeguard the licence. The specific obligation to cease supplying known infringers did not exhaust or limit that wider obligation. The injunction was no wider than necessary and was granted until trial or further order.
4. Termination on notice. The licence contained a fixed initial term, automatic renewal provisions and a detailed, comprehensive regime governing termination by either party, including termination without breach in specified circumstances. Clause 29.3 preserved rights and remedies provided by law but did not support termination on reasonable notice. MOU’s express-construction case was unarguable and had no real prospect of success.
5. No term permitting unilateral termination on reasonable notice could be implied. It contradicted the express termination regime, would undermine the fixed-term and renewal provisions, and would render specified termination procedures otiose. It was neither necessary for business efficacy nor so obvious that it went without saying. Summary judgment was therefore granted on both the express-construction and implied-term pleas.
6. Strike out and declaration. The plea that MOU wished to end the licence at the earliest moment disclosed no material fact supporting a remedy and was struck out. Other proposed amendments were left for consideration on a properly formulated application. Under section 19 of the Senior Courts Act 1981 and CPR 40.20, the court declared that the USA formed part of Artcrafts’ exclusive Territory on a permanent basis from 1 January 2015.