By: Pontus Sörlin
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Consultancy agreement intellectual property transfer
MRD Sell and Bygg AB (MRD) owns patents and other rights linked to the insulation system Koljern.
Koljern technology is purchased by Foamglas (Nordic) AB (Foamglas) meaning that they acquire patents, know-how, trademarks and all rights related to the system.
Upon transfer, the parties agree that MRD will assist Foamglas with consultancy services regarding the Koljern system.
The services must primarily be supplied by Å.M. who developed the system.
At the final negotiation of the transfer agreement, a lack of time arises, which leads to the deletion of the consultancy agreement that the parties originally intended to agree on.
Instead, a letter on consultancy services is inserted in point 6.1 of the transfer agreement. and the parties’ intention is to regulate the matter more carefully at a later date, which is not done, however.
The parties’ cooperation will work well in 2014 and 2015.
What you then disagree on is what happens in 2016.
Å.M. works only four days during the year and Foamglas does not pay any compensation to MRD.
According to Foamglas, no payment is made because they believe that the contract means that work should be carried out three days a week.
MrD, for its part, argues that Å.M. was available for work, which is enough for payment to be made under the agreement.
The question to be decided in court is therefore whether the MRD is entitled to compensation for 2016 under point 6.1 of the agreement even though hardly any consultancy work has been carried out.
The District Court (TR) points out that the willingness of the joint parties is the starting point for contract interpretation.
Since there is no such common will, great importance should be attached to the wording as it can be assumed to express the will of the parties, according to the Court.
MrD has the burden of proof that the agreement should be interpreted in their opinion because they are plaintiffs in the case.
The following letter constitutes the point of the contested agreement (italics added):
“At Closing, Foamglas Nordic and MRD agree to enter into a consultancy agreement for a fixed term of 3 years starting 1 January 2014, on the basis of 3 days/week and against payment of a consultancy fee of 9,000 SEK per day (equivalent of a full time day), exclusive of travel and out-of-pocket expenses.
The services provided by MRD under this consultancy agreement shall, to its Best Endeavors, be physically performed by Å.M.”
According to TR, the wording gives a clear picture that the services to be performed by MRD are provided against payment.
It is considered to provide clear support for Foamglas’s interpretation.
The Court therefore proceeds to examine whether the circumstances of the contract negotiations or the conduct of the parties after the conclusion of the agreement speak in favour of the MRD.
During the negotiations, the parties were represented by experienced lawyers and people accustomed to negotiating in English were present.
Both factors, according to the court, suggest that the agreement should be interpreted in accordance with its wording.
Furthermore, the parties intended to supplement the agreement with a consultancy agreement.
Since consultancy agreements generally include work being carried out against payment, it also indicates that the contract should be interpreted by Foamglas, according to the court.
In any event, if the parties had intended payment to be made, it could easily have been included in point 6.1.
The Court cannot therefore see that anything linked to the contract negotiations speaks for the MRD’s interpretation.
According to MRD.M. also did not work three days per week in 2014 and 2015.
Since Foamglas nevertheless paid full compensation, the agreement should be given by the MRD advocated the interpretation.
TR notes that such inaction on the part of Foamglas may lead to a change in the terms provided that they have been aware that the application of the contract departs from what has been agreed.
It is proven that Å.M. carried out some work in 2014 and 2015.
Two employees at Foamglas who worked with Å.M. say they believe that he worked according to agreement during the period.
According to the Court, it has therefore not been demonstrated that payment has been made without work being carried out.
If there has been an anomaly, it is definitely not considered that Foamglas was aware of it.
In conclusion, the MRD also fails to demonstrate that the conduct of the parties after the conclusion of the agreement supports their interpretation.
Foamglas has also had an obligation under the agreement to call off consultancy services from MRD, which was not done according to the latter company.
If the obligation has not been fulfilled, compensation shall be paid.
TR sees it as clear that Foamglas called work in 2016.
However, the MRD argues that this did not amount to work covered by the parties’ agreements.
However, some of the services requested by Foamglas are those performed by Å.M. previously under the cooperation of the parties.
The fact that some information was not covered by the agreement is therefore irrelevant according to TR as it refused to supply virtually all of them.
Foamglas is therefore deemed to have fulfilled the obligation to call off the services.
Finally, mrd is of the opinion that Foamglas has committed to pay the invoices for 2016 in one month of the same year.
However, mrd’s representatives have stated that this only applied provided that the hours worked for 2016 were accounted for, which was not done.
The court’s overall assessment is that mrd’s action should be dismissed except that Foamglas is ordered to pay compensation for the four days that Å.M. worked in 2016.
Intellectual property dispute
HovR also takes the starting point in the wording of paragraph 6.1 of the Agreement because the parties do not agree on the content.
The letter is interpreted in principle in the same way as TR, adding that the wording (italics added) “The services providedby MRD […] performed by Å.M.” would in principle be meaningless if the parties had agreed that payment would be made regardless of whether work was carried out.
Thus, HovR is also not of the opinion that the wording of the agreement speaks in favour of the MRD’s interpretation.
Furthermore, MRD invokes interviews with J.G. the lawyer who claims to have extensive experience in intellectual property disputes.
The opinion shows that it is common for intellectual property purchasers to purchase a package, meaning that the seller is available for some time after the transfer for fixed remuneration that is paid regardless of whether work is carried out or not.
The statement speaks to some extent in mrd’s favor, according to the court.
HovR goes ahead and looks at the systematics of the agreement.
The consultation is addressed under a heading on “Continued cooperation and employment”, instead of the heading on the “Technology transfer” under which the purchase price is regulated.
The system is therefore deemed to indicate that the consultation is separate from the purchase price, which indicates that it is not a “package transfer” that is common according to J.G.
The fact that Foamglas has had a great need for Å.M’s know-how is also considered to contradict the fact that they have accepted an agreement meaning that work does not have to be carried out.
The next question being examined is whether Foamglas has accepted compensation regardless of whether work is carried out by paying MRD invoices for 2014 and 2015.
According to the Court, if the party to the contract can demonstrate that contract terms have been applied in a certain way after the conclusion of the contract with the knowledge of the counterparty, it is a strong indicator that the contract should be given the applied meaning.
HovR, however, makes the same assessment as TR in the matter and thus does not see it as showing that Foamglas has accepted that payment should be paid regardless of whether work is carried out or not.
In view of the above, the court’s overall assessment is that the contract term should be interpreted in Foamglas’s favour.
No compensation shall therefore be paid for 2016 except for the four days that Å.M. worked.