UK: The IP Value of Business Plans—Protection For The Entrepreneur

The England and Wales High Court recently explained that the elements of a business plan had to be analysed to support an award of damages for professional negligence against the defendant, Mr. Ball’s former lawyers and those who failed to protect his interests in the subject matter of the business plan. Ball v. Druces & Attlee (a law firm) [2004] EWHC 1402 (QB).

A business plan is rarely thought of as being valuable because of the protectable IP rights contained and embodied in it. While such a plan is usually treated as confidential if disclosed through a non-disclosure agreement, it is usually considered as a vehicle to raise money and not as intrinsically valuable in its own right. The basis of the value of the underlying ideas in a business plan is rarely analysed.

Ball was co-founder of The Eden Project, an international award winning environmental tourist attraction near St. Austell, Cornwall England. He and his co-founder developed the concept of the project in a long business plan which was used as the basis for funding. Mr. Ball and his co-founder, Mr. Smit, were the originators of the name and logo for The Eden Project, which, at the time of the alleged breach of duty, had limited value and could have been superseded.

The business plan contained text and spreadsheets from accountants, architectural concepts from an award-winning firm of architects and a general structure from business structure advisors. The underpinning and concept originated from Mr. Ball and his co-founder Mr. Smit.

At an early stage of this project, Mr. Ball retained Druces & Attlee to protect his position and to help establish an appropriate legal entity so that funding could be received. Druces & Attlee established the Eden Trust, which was the eventual recipient of the funding, but did so without protecting Mr. Ball’s legal position. In terms of rewards from the project, as a result of the formation of the trust, Mr. Ball’s position changed from possessor of legal rights to a supplicant to the trust. See Lakeview Computers Plc v. Steadman (CA) (Unreported, November 26, 1999). Some two years earlier the High Court had specifically declared that the trademark rights belonged to the Eden Trust and not Mr. Ball personally (Jonathan Ball v. The Eden Project Limited & The Eden Trust Chancery Division – 11/04/01 – Laddie J.).

Under English trust law, on the founding of the trust, all of Mr. Ball’s rights in the business plan vested in the trust, and his position became unprotected. He was at the mercy of the trustees who were legally bound not to reward past consideration.

Mr. Ball was later removed from the project and subsequently started litigation against the Eden Trust on the grounds that he had not been properly compensated for his work since 1994. Later, Mr. Ball sued Druces & Attlee for negligence. The firm raised the issue of whether Mr. Ball had significant intellectual property rights arising out of the business plan which represented protectable intellectual property.

The defendant argued the limit of the protection was to a name and logo which Mr. Ball had devised, but which, without funding, were of no real value. The trial judge had little difficulty in rejecting that narrow assertion, holding that the intellectual property rights in the business plan consisted not merely of the name and logo, but copyright in drawings for which Mr. Ball would have obtained an exclusive licence to use for the purpose for which they were intended. These rejects extend to the intangible property and material gathered over the 15 months in which they were embarked upon the project. Their creative ideas and work embodied the business plan and in the knowledge of the design team and others were intended to be confidential.

The outlines of the idea were released for public consumption to gain support, but the details were not revealed. This very substantial amount of work and energy by the co-founders amounts to con-fidential proprietary material such as that described by Lord Greene M.R. in Saltman Engineering Company v. Campbell Engineering Company [1948] 65 RPC 203. What makes material, which may be available to everyone, proprietary is the manner in which its use and assembly has been perceived and created by its maker. Such a person has "used his brain and thus produced a result which can only be produced by somebody who goes through that same process." Saltman at 215.

Accordingly it was held that even though a great deal of the work was done by others, Mr. Ball, as the originator and co-ordinator of the business plan (with Mr. Smit), was entitled to all rights in the whole, and those who contributed were held to have given an unwritten exclusive licence to Mr. Ball (and Mr. Smit), which entitled them to benefit of the whole value of the business plan.

On this rationale, Mr. Ball was awarded about £2.1 million against his former lawyers, before credits for monies already received.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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