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In the recent decision of Mei Fields Limited v (1) Saffron Cards and Gifts Limited and (2) Paul James Steele [2018] EWHC 1332, the Intellectual Property and Enterprise Court (IPEC) has provided a judgment regarding copyright infringement, which includes several noteworthy issues.
One of the issues to be determined was whether or not there was a valid assignment. In our experience we have come across many documents purporting to assign copyright which have been defective. Section 90 of the Copyright, Designs and Patents Act 1988 requires that an assignment of copyright is in writing, and signed by or on behalf of the assignor. It is likely that had the assignment in this case been completed effectively, the dispute could have been settled much sooner and the full 2 day trial avoided.
Mrs Fields designs high quality greetings cards. She uses a variety of designs on her cards, including fabric swatches, beads and other 3D effects.
Mrs Fields started her own card design company. She was a director and shareholder, as well as an employee, of the company. After the company struggled financially, Mrs Fields set up another company, Mei Fields Designs Limited ("MFD"). MFD was the claimant in this case. The copyright of Mrs Fields' existing and future designs was purportedly assigned by Mrs Fields to MFD.
MFD later licenced the copyright in Mrs Fields' designs to Saffron Cards ("Saffron"), allowing Saffron to sell the cards designed by Mrs Fields.
After the relationship turned sour, Saffron withheld royalties due to MFD under the licence agreement between MFD and Saffron, and the licence was then terminated shortly thereafter.
However, Saffron continued to sell MFD's cards after the licence was terminated (called "the Group A cards" by the Judge). MFD claimed that this was copyright infringement. MFD also claimed that the Defendants had separately been selling cards copying their designs (called "the Group B cards" by the Judge), and that this was also copyright infringement.
Interestingly, MFD claimed that a director of Saffron, Mr Steele, was also personally liable for these copyright infringements. These arguments were raised strategically because Saffron had no meaningful cash or assets and so, if MFD pursued a claim against Saffron and won, it would be a pyrrhic victory as MFD would be unlikely to recover any damages from Saffron.
The Court held (among other things) that:
- Mrs Fields, as a director of the first company she had set up, did not hold the copyright on trust for that company.The Judge held that Mrs Fields, as designer of the cards, owned the copyright in the designs outright. There is no rule which says that works created by a company director (as Mrs Fields was) are automatically held on trust for the benefit of that company. It depends on what was agreed. On the facts in this case, it was clear that it was intended Mrs Fields would own the copyright outright.
- Mrs Fields did not hold the copyright jointly with the first company she had set up. Saffron and Mr Steele argued that Mrs Fields owned the copyright jointly, because Mrs Fields did not have the skills to digitise the designs she had sketched on paper – this digitising was completed by junior designers at the company.
Saffron and Mr Steele argued that these junior designers had exercised their own skill, labour and judgment in helping Mrs Fields with her designs (a key aspect of copyright arising in a piece of work), so the company had a joint right to the copyright. Mrs Fields argued that the work of the junior designers was no more than a mechanical process, meaning that the company would have no interest in the copyright.
The Court agreed with Mrs Fields, finding that, on the facts, she was the sole copyright owner (mostly because Mrs Fields was noted on the back on the cards as the designer).
- There was a valid assignment. Mrs Fields had intended to assign her copyright, but had not quite used wording that was correct in law. The purported assignment stated:
"I, Mei Fields, as owner of the copyright of my designs, allow my works to be used by MEI FIELDS DESIGNS LTD, and transfer ownership of copyright.
My designs may be licensed with my permission.
These include all works dating from 1st January 2000 and future works until further notice or termination."
The Defendants argued that the document was not an assignment, and was no more than a bare non-exclusive licence which was terminable at the will of Mrs Fields.
However, the Court held that the wording of the assignment had to be interpreted in line with what a reasonable person would expect the parties to have intended at the time they entered into the contract, rather than a literal interpretation of the wording in question. The nature, formality and quality of the wording was also considered – the less polished the drafting, the more lenient the Court is when working out what effect the wording was intended to have.
On the facts, the Court found an assignment had taken place. However, this is an important reminder of the need to obtain legal advice before attempting to assign or licence any form of intellectual property, as this will save the expense and stress of arguing the point at Court.
- The Claimant's copyright claim was partly successful. In respect of the Group A cards, it was held that after the time at which the licence was terminated by MFD, Saffron infringed the copyright in those cards by continuing to sell them. Selling the cards bearing MFD's designs, without the necessary permission, clearly amounts to copyright infringement.
In respect of the Group B cards, it was held that Saffron had copied the designs by reproducing and selling the Group B cards, but that this copying was only flagrant enough to constitute copyright infringement for two of the 13 cards that MFD complained about. The Judge completed a side-by-side comparison of Mrs Fields' designs and Saffron's designs which allegedly infringed; and
- The Judge applied existing case law to find that Mr Steele, as director of Saffron, was personally and jointly liable for Saffron's infringements. This was because, as a director, he had:
a) actively co-operated to bring about the infringing acts of Saffron, and
b) he intended that his actions would bring about Saffron's infringing acts.
This meant that MFD could recover compensation from Mr Steele, considering that Saffron had no assets.
This is a reminder to ensure that the language in any IP assignment is clear and properly assigns the IP.
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