When a publisher and the firm managing its subscription database fell out over the database manager’s quality of service, the publisher gave the database manager a month’s notice to terminate the contract. In response, the database manager refused to release the publisher’s data until its outstanding invoices were paid.
The publisher refused to pay the invoices until it had regained its data and the impasse resulted in a trip to court. The database manager argued that the notice given was unreasonable and that three months’ notice should have been given. The publisher added to its claim the cost of reconstituting the database of subscribers.
In court, the judge ruled that the notice given was unreasonably short and that the database manager was within its rights to withhold the data until the invoices were settled. The withholding of the property of a debtor until payment is received is termed ‘exercising a right of lien’ over the property retained. The publisher appealed, claiming that data is not property over which a lien can be exercised.
The Court of Appeal ruled that a database is not tangible property which can be subject to a lien and that the database manager had not exercised the degree of control over the data needed to allow it to deprive the publisher of the right to access its data after the contract was terminated.
However, the appeal against the decision regarding reasonableness of the notice period failed: three months was ruled to be an appropriate notice period.
This case illustrates the potential for unnecessary litigation that exists when contractual terms are not tightly drawn at the beginning – especially as regards the termination of contracts.
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The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.