MUSIC TRADING'S MUSIC TRADING IS A NO-NO

Music Trading's music trading is a no-no

The IPKat fished this little morsel out of the Lawtel subscription-only service: it's a Chancery Division decision of Mr Justice Underhill in Independiente Ltd and 14 others v Music Trading On-Line (HK) Ltd and others, from last Thursday 9 November.

Music Trading had a substantial retail business, selling CDs and DVDs through the internet. Independiente, claiming that Music Trading had infringed its copyrights in various recordings, sued for copyright infringement in both Ireland and the UK. The disputes were both settled, the settlement agreement providing that Music Trading would pay various sums to to Independiente by way of damages and costs. Annexed to the agreement were draft consent orders by which Music Trading gave various undertakings to the court: these consent orders were then made.

These proceedings arose from a claim by Independiente that Music Trading had breached its undertakings to refrain from doing certain acts, seeking damages for breach of contract. Music Trading denied liability and added that the acts complained of - even if they had done them - weren't actionable breaches of the settlement agreement. Independiente replied that the consent orders contained express terms of the binding agreement between the parties and that, by giving the undertakings, Music Trading had assumed an obligation to the court and to Independiente to observe the terms.

Embrace (above right) and Gomez (below) are among the stable of performers promoted by Independiente

The issue for Underhill J to resolve was whether Independiente was entitled to sue on the alleged breaches a breaches of contract or whether Independiente's only remedy was an application for contempt of court in the earlier settled proceedings for breach of the undertakings given to the court. Music Trading contended that the only obligations expressly undertaken by them were undertakings to the court, which meant what they said, and that if those undertakings were meant to be read as encompassing undertakings to Independiente also it would have been easy to have drafted the agreement to that effect.

Underhill J determined this preliminary point in favour of Independiente. In his opinion

* it was inconceivable that Music Trading would have been prepared to give undertakings to the court and not to give equivalent undertakings to Independiente. This was because the undertakings involved a promise to refrain from certain acts and there was no rational basis for Music Trading to say that they made the promise to the court but not to Independiente.

* the parties had reached an agreement, the commercial substance of which was that Music Trading promised not to carry out acts that Independiente asked it not to carry out.

* the outcome would would be different if the provisions of the agreement, or the surrounding circumstances, gave reason to think that the parties themselves had provided for a distinction between an undertaking to the court and an undertaking to Independiente.

Without having access to the actual decision, the IPKat would not wish to criticise a court on the basis of a Lawtel note. However, when he sees words like "inconceivable" and "no rational basis" pressed into use, he always fears that the court's decision is based upon what is reasonable rather on what is the law. He hopes that's not the case here.

More on Independiente here
Earlier litigation between Independiente and Music Trading On-Line concerning the cd-wow website here