Précis

The Court of Appeal has ruled that a service provider cannot exercise a common law lien over an electronic database pending payment of outstanding invoices.

What? 

A common law lien gives a party the right, in certain circumstances, to continue an existing, lawful possession of goods until payment of outstanding sums due is made.  Historically, this right has only been applied in respect of tangible property.

In Your Response Ltd v Datateam Business Media Ltd [2014] EWCA Civ 281, 14 March 2014, the Claimant, a database management company, denied the Defendant, a magazine publishing company, access to data held on its behalf and refused to release the database until its outstanding invoices were paid.  The matter proceeded up to the Court of Appeal, where the Court considered whether the Claimant could lawfully apply a lien over the electronic database. 

The Court ruled that this lien over the Defendant’s data was not permitted.  The decision explained that under the Copyright, Designs and Patents Act 1988 and theCopyright and Rights in Databases Regulations 1997 (SI 1997/3032) databases did not represent tangible property.  The Court did not see fit to extend the scope of the law on liens to databases because it might require Parliament’s approval and would represent a substantial deviation from existing law.

The decision further added that the Claimant did not exercise the necessary degree of control over the database to entitle it to exercise a lien. 

So What?

This decision illustrates the reluctance of the Courts to recognise intangible property as goods.  It shows that suppliers do not have the right to withhold access to customer data unless it is expressly provided for in the contract.

In light of this, if a supplier requires the right to withhold customer data pending payment then the supplier should ensure that this is expressly set out in the contract.

David Lancet