Failure to put in place a clear agreement about ownership of designs produced for Innocent Smoothies has resulted in multiple court proceedings. The case is a lesson for companies seeking a brand identity with design agencies to ensure the legal rights are crystallised fully at the beginning.
The High Court (Robert Englehart QC sitting as Deputy Judge) has resolved a dispute between Fresh Trading Limited, the ultimate owner of Innocent Smoothies and Deepend Fresh Recovery Limited, a company formed to pursue claims in intellectual property rights in work commissioned by Fresh, that was created by a design agency formerly called Deep End Design Limited.
The dispute, which was decided in Fresh’s favour, concerned title to the copyright in the distinctive logo, called “the Dude” (shown below), which has been used by Fresh to promote its Innocent Smoothies ever since it started the business. The logo was originally designed by Deep End Design.
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The Dude logo has already been the subject of proceedings between Fresh and Deepend: in 2009, Deepend commenced invalidity proceedings before OHIM in respect of Fresh’s Community Trade Mark for the logo. Deepend’s basis of challenge was that copyright in the logo was owned by Deepend (by way of assignment from Deep End Design). In 2012, OHIM upheld Deepend’s challenge and declared the mark invalid on the ground that use of the mark would infringe Deepend’s copyright in the logo (Deepend Fresh Recovery Ltd v Fresh Trading Limited, Decision No. 3555C). Fresh lodged an appeal and also commenced High Court proceedings for a declaration that it owned title to the copyright in the logo.
High Court proceedings
Fresh’s claim in the High Court proceeded on the basis that either (i) it is the legal owner of the copyright in the Dude logo; or (ii) it is the owner in equity; or (iii) as a minimum, it has an implied exclusive licence under the copyright to use the logo. Fresh also said that if it failed on these arguments, Deepend was in any event prevented from obtaining relief due to either acquiescence, estoppel, laches, or a general bar to injunctive relief.
In 1998, when the individual founders of Innocent Smoothies were just starting up their business, they entered into a business relationship with Deep End Design to provide design services to Fresh, which included developing the “visual identity for the product”. The parties purportedly entered into a contract which provided at clause 5.1 that Fresh would “receive full intellectual copyright of any work, creative ideas or otherwise, presented by the agency and then subsequently approved by Fresh.” The Dude logo was approved and used by Fresh and so would have been captured by this clause. The contract also provided that Deep End Design would receive equity in Fresh by way of the allotment of shares to be awarded in three stages. However in the event, the shares were never alloted.
The Deputy Judge’s findings
Neither party could produce a signed copy of the contract at trial, nor any evidence that it had actually been signed. Given the absence of a signature, the Deputy Judge was unable to conclude that there had been a valid legal assignment. However, he did find that there had been an express equitable assignment to Fresh of copyright in the Dude logo. On the facts and evidence before him, the Deputy Judge said that he was in no doubt that there was an agreement between the parties on the terms set out in the unsigned draft contract; and that both parties had acted in accordance with the agreement and regarded it as contractually binding on them.
Deepend’s position was that there could not be an equitable assignment of the copyright because Deep End Design had never been paid for the work, i.e. the shares in Fresh were never alloted. However, the Deputy Judge found that Fresh’s consideration for clause 5.1 was the promise to allot shares in accordance with the agreed timetable rather than actual allotment; and further, the obligation to transfer copyright to Fresh arose on Fresh’s approval of the work, whereas the obligation to allot shares arose in stages over the course of a year.
In the event, the Deputy Judge did not have to decide on the issue of the implication of an exclusive licence under the copyright, i.e. the third limb of Fresh’s claim, but indicated that he would have found this on the facts if he had needed to - the Dude logo was created specifically for Fresh and approved by Fresh and was to be used specifically for the purposes of Fresh’s business.
The Deputy Judge also indicated that even if he had found that Fresh had no legal or equitable interest, or even an implied licence to the copyright in the Dude logo, he would have found against Deepend being entitled to obtain injunctive relief against Fresh because the lapse of time since the creation of the work was considerable, during which time the Dude logo had become synonymous with Innocent Smoothies.
This case is a useful reminder that equitable remedies are available to a claimant in the right circumstances. Such a remedy is entirely discretionary, but it does allow the Court to make a finding that makes the most sense commercially, as was the case here. The parties had acted entirely in accordance with an unsigned contract and considered it to be binding on them, notwithstanding the lack of signature.
The case also highlights the difficulties that can arise when a corporate entity commissions a designer or design agency to design its corporate branding, but no clear agreement is reached as to who will ultimately own title to copyright in the work. So as to avoid a potentially costly dispute further down the line, parties should ensure that they agree at the outset what will happen to title to copyright and to contractualise this in a signed agreement. For example, in most cases it will be intended that title to the work produced will transfer to the corporate entity at a specific point in time (e.g. on approval, or on payment). Most design agencies’ standard terms and conditions will contain a clause dealing with title to copyright and so if the parties intend to engage on standard terms, the commissioning party should check this clause first to ensure that it is appropriate for their particular situation.
Fresh Trading Ltd v Deepend Fresh Recovery Ltd and another  EWHC 52 (Ch), 26 January 2015