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No Lien Over Data

Written by Muhammed Poswall on 08 August 2014

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The value of data is on the increase with it forming an integral part and playing a larger role in a business. It is a valuable asset containing valuable information but whether it can be regarded as property similar to goods was consider by the Court of Appeal in Your Response Ltd v Datateam Business Media Ltd [2014] EWCA Civ 281.

Where a contract has been breached a lien entitles one party to hold the property of another as security for the work it has carried out under the contract until he receives payment. Previously a lien has only been possible on tangible property (i.e. goods) and not intangible property (i.e. data, intellectual property rights). In Your Response Limited v Datateam, the court had to decide if data could be considered property and if a lien over the data was therefore valid.

Datateam publishes a number of magazines which it distributes to a large number of subscribers. Your Response manages databases and keeps them up to data on behalf of its clients. In or around March 2010 Datateam engaged Your Response to manage its database. There was no formal contract and the contract was made partly oral and partly in writing. Around November 2011 Datateam sought to terminate the agreement. Your Response sent an invoice indicating that there were unpaid fees and refused to give Datateam control of the database it was holding until the fees had been paid. Your response filed a claim seeking the fees that were allegedly due and damages for repudiation of the contract.

Your Response was successful at the first instance and the court found they were entitled to the lien over the data. The court decision was contrary to the position previously held by the courts and would result in data being classed as property. Datateam therefore appealed.

The Court of Appeal upheld Datateam’s appeal and deemed data could not be classed as property, as a result no common law lien could be placed on the data. In particular the court highlighted the absence of any case law in which the right of lien had been exercised regarding intangible property and that data was not capable of possession. The court was also concerned with the consequences the decision would have on IT contracts.

The case highlights the importance of having a place a written contract setting out the terms agreed between the parties, the grounds of termination and the obligations of the parties in the event of termination.

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