Cartt obtained WBD’s filing in non-compete case
By Ahmad Hathout
Bell announced Tuesday it has ended its legal battle with Warner Bros. Discovery, which was accused of violating non-compete covenants when it signed a multi-year deal with Rogers for the rights to the U.S. company’s brands and trademarks.
Simultaneously, Bell announced that the two companies have agreed to “expand” their partnership in Canada by extending Bell’s rights on Crave to HBO and Max Originals – which are not part of the Discovery portfolio Rogers purchased – and inking a new agreement on a co-production commitment to original Canadian content “with global appeal, licensing of Bell Media original content for use on Warner Bros. Discovery platforms outside of Canada, and extended access to French-language content for use on Bell Media platforms,” a Bell press release said.
The deal extends the agreement announced in May 2023.
“We are strengthening and deepening our relationship with Warner Bros. Discovery, marking a significant milestone as we move forward together,” said Stewart Johnston, Bell Media’s senior vice president of content and sales. “With our commitment to develop co-productions, and the extended pipeline of extremely valuable content for subscribers, we’ve ensured Crave is well-positioned for continued growth and success.”
The “expanded content pact” with the U.S. content company includes The Last of Us, House of Dragon, The White Lotus, The Penguin, And Just Like That …, The Sopranos, Sex and the City, Game of Thrones, Succession, The Wire, the DC Universe, The Harry Potter Franchise, Friends, The Big Bang Theory, and films such as Barbie, Dune, Wonka, and Furiosa: A Mad Max Saga.
Bell also said it would be announcing “in the coming weeks” changes related to Bell Media-owned Discovery channels after losing the rights to Rogers, which announced a multi-year deal with WBD in June that secured some of the rights previously held by Bell and Corus.
In one of the more recent filings, Bell removed fault from Rogers for not knowing that there was a two-year non-compete convenant that allegedly prevented a competitor, such as Rogers, from negotiating with WBD on those rights for a two-year period after the previous deal’s expiry.
“Bell acknowledged all claims against Rogers were unfounded and abandoned its legal efforts,” Rogers said in a press release Tuesday, reaffirming that it will be “home of Warner Bros. Discovery’s suite of English-language U.S. lifestyle and factual brands starting January 1, 2025.
“As the exclusive English-language content rights holder, distributor, and advertising representative for the Discovery brands in Canada, Rogers will launch TV channels for Discovery ID and Discovery and will work with Canadian distribution partners to make the content widely available,” Rogers added in the release. “In addition, content from Cooking, OWN, MotorTrend, Animal Planet, and Discovery Science will be available on demand and via Citytv+ on Amazon Prime Video Channels.”
WBD’s full legal defense against Bell suit
The end of the legal fight also means Cartt was able to get WBD’s full legal defense against Bell Media’s non-compete claim. In the highly complex filing, WBD alleges Bell interpreted a paragraph of the two parties’ joint venture (JV) agreement without other parts of the contract, first signed 30 years ago, that dealt separately with the trademarks, some of which were freshly leased to Rogers this summer.
When the case was still ongoing, Cartt obtained the full record, which didn’t include a public version of WBD’s filing. So, it previously reported from Bell’s filing that the American firm may delay or just not exercise a put right to force a sale of the 20 per cent it had in their JV, thus avoiding triggering a two-year non-compete provision that starts when their agreement ends, on January 1, 2025.
The plain meaning of the non-compete provision, according to WBD, is that WBD cannot supply its programming to a service that is the same or substantially similar to the service (WBD programming inside JV) on the date WBD ceases to be a shareholder of the JV.
In other words, Bell pointed to the non-compete paragraph to argue that if WBD ceases to be a shareholder of the joint venture, WBD cannot supply its programming to Rogers for two years starting January 1, 2025 because the cable company will be providing a similar service with those WBD trademarks.
Here’s the non-compete paragraph again:
“Neither [Bell Media] nor [WBD], nor any of their respective Affiliates, shall directly or indirectly file, or support or participate in the filing of, an application to the CRTC for a licence for Canada for a programming service (a “Similar Service”) which is the same as or substantially similar to the Service (as it exists on the date such party ceases to be a Shareholder), or be engaged directly or indirectly in operating a Similar Service in Canada, or directly or indirectly supply programming to a Similar Service in Canada, for as long as such party or any of its Affiliates is a Shareholder in the Corporation and for a period of two years following the date on which such party or its Affiliate ceases to be a Shareholder, unless such Shareholder, or an Affiliate of such Shareholder, acquires all of the Shares of the other Shareholder or purchases all of the assets of the Corporation…”
But Bell’s interpretation, according to WBD, assumed the trademarks in question would still be in the JV.
Because, according to the American firm, the interpretation of the non-compete provision changes when you consider that the JV is a licensee of the Discovery US content and trademarks through sub-agreements called the Programme Supply and Consulting Agreement (PSA) and the Trademark License Agreement (TLA). Both of those were renewed on December 31, 2019 until December 31, 2024 – one day before Rogers’s rights to the Discovery programming and trademarks kick in.
Article 5 of the TLA, according to WBD’s filing, stipulates that the “licensee [Bell Media] agrees that its use of the Licensed Marks and Licensed Domain Names, and all associated goodwill generated thereby, shall insure to the sole benefit of Licensor [WBD] … Licensee specifically acknowledges that the rights granted to it pursuant to this Agreement shall not prevent or prohibit Licensor or any licensee or Licensor from commercializing or otherwise utilizing (and retaining all profits from) the Licensed Marks in any endeavor, except for any restrictions on Licensor expressly set forth herein … Nothing contained in this Agreement shall be construed to confer upon Licensee or to vest in Licensee any right of ownership to the Licensed Marks …”
In other words, while the PSA and the TLA provided exclusivity to Bell, that protection is only valid until December 31, 2024, which is when the JV would no longer have the U.S. trademarks that may have otherwise made Rogers’s WBD programming “similar,” thereby rendering the “similar service” part of the non-compete provision moot, according to WBD.
“Accordingly, the ‘Service’ which Rogers intends to deliver will not be the same as or substantially similar to the JV ‘Service’ as of January 1, 2025, because the JV Service will have neither the Discovery US programming (which includes the Discovery US primetime programming) nor the Discovery trademarks,” WBD said in its filing.
“In addition, Rogers does not have the rights to any of the Canadian content produced by Bell Media or any scripted programming (e.g., CSI and Criminal Minds) that is currently aired on Discovery Canada,” WBD continued. “Therefore, the Rogers-planned Discovery Canada channel will not be the ‘same as or substantially similar to the [JV] Service (as it exists on the date [WBD] ceases to be a Shareholder).’”
This would mean, according to the filing, that the service could only be defined when WBD exits the JV because the non-compete paragraph defines the service “as it exists on the date [WBD] ceases to be a shareholder” – i.e. after the JV no longer has the Discovery US programming or the Discovery trademark.
Bell argued that if this were true, it would give no effect to and make meaningless the part of the non-compete provision related to WBD remaining as a shareholder in the JV because it would be impossible to determine the “similar service” during the life of the JV.
WBD responded to that by saying Bell was protected the entire time by the TLA and PSA that are now about to expire. It also said it told Bell in June it intended to leave the JV, but here was yet another wrinkle: WBD allegedly agreed to suspend, on Bell’s request, the American firm’s ability to force a sale of its stake in and exit the JV when it came to renew the TLA in December 2019 because Bell allegedly didn’t want to be at the mercy of paying too high of a price.
“Importantly, had WBD been able to trigger the put right at will, the put right could have been exercised two years (or more) before the expiry of the PSA and TLA,” WBD said. “In that scenario, the two-year non-competition period expires at the same time as (or even before) the PSA and TLA. WBD could have then licensed its content and trademarks to another party without being concerned about running afoul of the non-competition provision.
“Suspending the put right was a substantial give by WBD,” it said in its filing. “By agreeing to suspend the put right, WBD relinquished this arrangement for the benefit and at the request of Bell Media.”
WBD further argued that the definition of “service” has been transferred throughout the 30-year-old JV with no modification to keep up with today’s standard of what a “service” is.
“If ‘Similar Service’ means that the Court should compare the Rogers-planned service against the Service as defined in the 1994 JV Agreement, then any such service will be markedly different,” WBD said in the filing. “Discovery US content no longer focuses on certain traditional genres identified in the 1994 JV Agreement nor does it focus on educational documentaries.
“However, this interpretation would still read out the clause which defines the Service ‘as it exists on the date [WBD] ceases to be a Shareholder.’ The only other alternative is that there are two different definitions of Service in the provision, but neither the words of the provision nor anything else in the JV Agreement support that conclusion.”
All possible interpretations as to what is prohibited by the non-compete clause, WBD further argued, is not clear. In the case of ambiguity, WBD argued, “the non-competition provision is unenforceable.”
