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KC wins microchip legal battle

Issue: 05/07/2019

The Kennel Club has won a legal case worth over £100,000 but the judge did find the Club in breach of contract with regard to promotional e-mails sent out using data from the Petlog database.
At the Intellectual Property Court last week the Recorder, Douglas Campbell QC, found in the KC’s favour in a dispute with Micro ID over unpaid bills.
They brought the action for a debt in the sum of £123,843. Micro-ID did not dispute the existence of this debt but they alleged that the KC had broken the Reunification Management Agreement that was agreed between the Kennel Club and Micro ID on the 4th January 2010. This covered the management of the Petlog database and the ownership and use of that data by the KC.
It was hoped by Micro ID that with this counterclaim, the KC had breached the agreement and it  would more than cover the debt that was owed by them to the Kennel Club.
Micro ID refused to pay the KC when they felt that the Kennel Club had not kept their side of the bargain by not, in their opinion, maintaining the Petlog database. More importantly, they alleged the Kennel Club had used data from the database for marketing purposes in breach of the agreement.
They alleged the database was not being updated in time and that the KC had not prepared properly for the moment when microchipping of dogs became a legal requirement. In 2016 the Petlog website crashed which affected Micro ID’s business and they felt the KC was at fault.

Details

As part of the agreement it was stated that information should be added to the database within five days of receipt. It emerged that there were periods when it was taking 10 days to enter a dog’s details on the database. Stray dogs can be put to sleep within seven days in some animal welfare centres.
The judge said there must have been a breach of this part of the agreement but as all information was presented by the Kennel Club in terms of averages he could not be sure there had been a breach. 
Micro ID expressed ‘surprise’ when the judge said that there was no requirement for Petlog to have staff or even to have a website. 
Micro ID made three allegations about misuse of data by the Kennel Club. Vital to these disputes was whether ‘the purpose of the reunification of animals’ was covered by the use of data by KC.
The first allegation consisted of the use of emails sent to Petlog customers offering various forms of upgrade to Petlog Premium, such as a voucher for Iams dog food sold by Procter & Gamble.  It was revealed that Proctor & Gamble pay the KC £3.6 million although the Kennel Club assert that this payment is related to various other activities such as the sponsorship of Crufts.
The second allegation was about e-mails sent to Petlog customers offering 20 percent off KC dog tags.
The third allegation was about over 2,000 e-mails sent to Petlog Premium owners in 2014 offering an insurance policy from Agria Pet Insurance.
The judge found that these emails were in breach of the agreement as they have nothing to do with the ‘reunification of animals.’
In their defence the Kennel Club argued that this e-mailshot was a failure and did not lead to any contracts.
However, this argument was disputed by the judge who said the, ‘use consisted of using Petlog data for purposes of marketing insurance, or at least to explore the possibility of marketing such insurance. It was not for the purpose of reunification of animals, and it did not cease to be use of Petlog data because it was only sent to Petlog Premium customers.
‘Furthermore the fact it was sent to those who were already Petlog Premium customers underlines the fact that, unlike the first type of use, it was not done to encourage anyone to sign up to the premium service. By making this third type of use the Claimant thereby breached clause 6. Specifically the Claimant breached clause 6.2, and if (contrary to my view) clause 6.1 adds anything to clause 6.2 then it breached that too.’
Agria’s accounts reveal that the company has a five year rolling contract partnership with the Kennel Club that , ‘includes entering into collaborative development and co-promotion agreements for the development and commercialisation of our products.’ They pay the KC £3 million pounds for this licence fee.

Data

Micro ID pointed out that in the Kennel Club’s Annual Report it says that, ‘The Kennel Club’s key resources are its data.’ This point was ignored by the judge as it was brought up too late in the proceedings.
Richard Fry, CEO of Micro ID, insisted that they plan to appeal the claim. He told OUR DOGS, ‘We ran out of time really. We weren’t able to put evidence in court. The judge even offered to help us fill out the appeal form.
‘The Kennel Club has, in effect, screwed our business up. They screwed the Petlog database up. We have had to cut staff. They couldn’t have done worse damage. If we can’t win the appeal we will go bust.’
When the new microchipping legislation came in Mr Fry said that the KC had, ‘two years to prepare and the website crashed. It took them so much time to answer stuff.
‘Basically a big company crushes a little company into the ground. The KC are bullies.’
Micro ID were awarded a set-off of £1 for the late registrations and £400 for the e-mails sent out for the Agria Insurance promotion.
On top of the debt Micro ID will also have to pay costs of around £100,000. They have 28 days to make their appeal.
The Kennel Club issued a statement that said, ‘The Court action against Micro ID arose from a commercial dispute relating to a debt of c.£123k Micro ID owed to the Kennel Club. The existence and amount of the debt was not disputed, but Micro ID brought set-off Defences in response to the debt claim which alleged breach of contract and/or breach of the 1997 Database Regulations. The value of the set-off Defences brought by Micro ID was in the region of £379k, although it was not brought as a formal counterclaim.   
‘Following the trial, the Kennel Club’s debt claim succeeded. The Court dismissed most heads of Micro ID’s set-off Defences, including the set off for alleged database right infringement, save for:  
‘•  a finding that during periods of very high volumes of registrations, the Kennel Club would have, on some occasions, completed registrations after five working days. Micro ID failed to prove any specific loss or damage, but to account for the possibility that some late registrations occurred, the Court awarded Micro ID nominal damages in the sum of £1. In the overall context of twenty years serving up to 13 microchip suppliers and millions of registrations, this is a negligible fault, which was reflected by the Court’s decision; and  
‘•  awarding Micro ID a notional buy-out fee of £400 in respect of a small pilot exercise to test the interest of pet keepers in insurance offerings at a later stage than early puppyhood – which did not continue. 
‘We are not intending to ventilate or relitigate the dispute in public – the judgment speaks for itself. 
‘Micro ID were refused permission to appeal by the Judge on the ground that the appeal would have no reasonable prospect of success. The Judge found that Micro ID did not identify any new points of law or principle to justify overturning his judgment. 
‘Micro ID could still seek permission from the Court of Appeal and has currently stated that it intends to do so; there is a 28 day period from 25 June to make that application. 
‘The judgment overall is very helpful in providing an affirmation that the Kennel Club has not done anything other than run Petlog for genuine welfare considerations over the past twenty years and whilst working with some 10/13 suppliers at any one time and servicing millions of registration records with service levels which have been robust, reliable and consistent.’ 
The full judgement can be found at - http://www.bailii.org/ew/cases/EWHC/IPEC/2019/1639.html.


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