Monday, 23 August 2010

Database rights: a reader asks

A reader has posed the following question, to see what the readers of this blog might think:
"Company A purchases the majority share of Company B; a share purchase agreement is signed. The IP clause in the agreement states that Company A has the use of the IP rights of Company B, including Company B's database (a customer list, updated from time to time). After the purchase, Company A merges the information in the database with its own data (with the approval of Company B).

Company B subsequently goes into liquidation. There has been no assignment of the rights in the database, but the database has been substantially changed due to the merging of the data with Company A's own data. I know that, if the merging with the data was a "substantial change" to the contents which would be sufficient to satisfy the requirement for a "substantial new investment", then the amended database would qualify for a new 15 year term of protection. If this is the case, I would think that Company A is the author of the new database, and is entitled to keep using it (and entitled to tell the administrator they can't sell the new database).

However, I don't think Company A can do anything about the database in the form it was in when Company B initially created it, because at that time, Company B was the author of that database".
Do you agree? Please post your comments below.


Ben said...

The database sui generis rights are widely recognized as a failed right. Even the Commission says so. It has little practical importance. So I would presume them to be abolished within the next 5 years.

Peter Groves said...

Subject to Ben's comments about the inherent worthlessness of DB right - A has a licence to use B's DB, including a licence to incorporate the contents into its own DB. No terms and conditions have been reduced to writing, and presumably there are no oral terms either. The licence will not terminate on the liquidation of B if there is no express term that says it will. Would a court take the view that the licence could be terminated by reasonable notice? I think not - because A was entitled under the licence to merge databases, and apart from anything else it would be a big job to divide them again.

Crosbie Fitch said...

1) Company A has a perpetual license to B's database.
2) The merge is not a result of B accepting A's changes, but A creating a derivative database (permitted by B's license).

If databases could be treated as literary works, then A would obtain copyright to its derivative database (derivative of B's). But that doesn't mean A's database can be used contrary to the license it has from B. B's copyright (whoever's hands it ends up in) remains.

A only has a problem if they wish to do more with their database than permitted by the original license from B.

Tamara Quinn said...

If there was no assignment, B must have granted A a licence to use B's database (call it DBB).

It would be unusual for a licence to have an express provision that it would terminate on the insolvency/liquidation of the licensor, and it is unlikely to be implied here.

A cannot prevent the administrator selling the IP rights in the DBB part of the merged database.

However, if the administrator sells these IP rights, and the purchaser has actual or constructive notice of A's licence to use DBB, then the purchaser will be
bound by the licence to A. This is because CDPA section 90(4) applies to both licences of copyright and sui generis rights in databases. This fact might significantly reduce the amount that a purchaser would be willing to pay for the DBB, perhaps allowing A to acquire it at a knock down price.