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Paint my Ride – contextual interpretation favoured over a literal one

Andrzej O'Leary

In Paintshield Ltd v XPEL Technologies Corp, the High Court favoured a contextual interpretation over a literal one to find that XPEL had not breached an IP licence agreement.

Paintshield had licensed to XPEL patterns for paint protection films for the bodywork of cars. These patterns were uploaded by Paintshield to a database owned by XPEL for the use by royalty paying subscribers. A central issue was whether XPEL had breached the licence by giving a third party access to Paintshield’s patterns without permission.

When construing the provision relating to the scope of the licence, the court held that it had two possible meanings. On the literal meaning, ignoring the factual matrix, the licence granted XPEL the right to cut paint films from Paintshield’s patterns but prohibited it from licensing others to do so without Paintshield’s consent. This literal interpretation meant that the licence did not permit having Paintshield’s patterns on the database in the first place.

The court held that this was “implausible”, as the parties’ business relationship, dating back to before the licence, was built around the database. The parties therefore could not have meant to rely merely on an implied licence each time Paintshield uploaded a new pattern. Instead, the “factual matrix and commercial common sense” favoured an interpretation that gave an express licence to XPEL to have the patterns on the database and grant third parties access without permission. This finding was further bolstered by the fact that Paintshield’s need for protection against competition (by having some control over whether its UK competitors were granted access to its patterns) was addressed by a provision in a share purchase agreement made on the same date as the licence.

In reaching its decision the court emphasised that while it was not its function to achieve its own “notion of what is fair and reasonable”, the rival meanings of a clause must be tested against commercial sense where there is ambiguity.

Comments published on Compact Contract do not necessarily reflect the views of Allen & Overy or its clients.

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