On January 23 2017 the Rotterdam District Court rendered its judgment in a matter between two parties that had jointly run a company.
The two parties verbally agreed to run a food truck jointly under the name 'Flippin Burgers'. Under the agreement, one party purchased the food truck and the other, Web Vloed, designed a logo and website. Under the Flippin Burgers name, the parties sold burgers and milkshakes. It was agreed that Web Vloed would have a 30% share in the profits and that the remaining profits would go to the other party.
After attending two events with the Flippin Burgers food truck, the parties went their separate ways. The food truck owner continued to operate the Flippin Burgers business. When Web Vloed continued to use the Flippin Burgers name and logo, the food truck owner demanded that it cease to do so and commenced proceedings to that effect.
In its claim, Flippin Burgers requested, among other things, that Web Vloed cease all use of the copyrighted Flippin Burgers logo, subject to forfeiture of a penalty for non-compliance with the court's verdict.
Web Vloed acknowledged in the proceedings that its former business partner was entitled to exclusive use of the Flippin Burgers trade name. It also acknowledged that it had registered the domain name 'flippinburger.nl' at the expense and request of its business partner.
Therefore, the key issue in the case was the use of the copyrighted Flippin Burgers logo.
Under the Copyright Act, rights to a work are attributed to its creator (ie, the natural person who created it). The act also acknowledges certain fictive owners in the following circumstances:
- If a party commissions a third party to create a work under its supervision, the rights to the work will be held by that third party (Article 6);
- If a person creates a work under his or her employment agreement and it is his or her job to create that type of work, the rights to the work will be held by the employer (Article 7).
- A work is presumed to be owned by the public institution, association, foundation or corporation that publishes it without reference to the actual author, unless it is proven that such publication was unlawful (Article 8).
By agreement, parties can deviate from the attribution of rights as foreseen in Articles 6 and 7 of the act.
The plaintiff was a natural person operating Flippin Burgers as a one-man-band. The plaintiff did not design the logo or conclude a transfer of rights agreement with Web Vloed and therefore based his right to the logo on Article 8 of the act – namely, that his Flippin Burgers company was the first to use the Flippin Burgers logo, and that such publication was lawful. The court considered that a 'one-man-band' does not constitute one of the parties referred to in Article 8 of the act, as it is not a corporation. As there was no agreement transferring the rights to the logo to the food truck owner, the court considered that Web Vloed was the actual creator of the logo, and that it still held the rights thereto.
The food truck owner argued that it had obtained an exclusive licence for an indefinite period. The court considered that it was likely that the parties had intended for Flippin Burgers to obtain a licence for the work. However, it argued that the parties' intention was to exploit the company jointly, and that there had therefore been no intention to grant an exclusive licence. As no written agreement existed, the court could not conclude that the parties had intended to convert the licence into an exclusive licence for the food truck owner on termination of their cooperation. The court therefore dismissed the copyright claim.
Although Web Vloed secured a victory, it was a pyrrhic one. It may no longer use the Flippin Burgers trade name and, as such, cannot use the logo, as it contains the name.
The argument that the licence was not exclusive or meant to be converted into an exclusive licence on termination was based on the parties' intention and not on statute. The Copyright Act was amended in July 2015 to implement the Copyright Contracts Act, a piece of national legislation. As a consequence, the Copyright Act contains a new Article 2(3) which is applicable to contracts concluded after March 1 2015. This section states that:
- an exclusive licence requires a written agreement; and
- that the licence grants only the rights explicitly referred to in the agreement and those that inevitably follow from its nature and intent.
An exclusive licence which is not set out in a written agreement is not considered to be void per se, but is voidable.
In the present case, there was clearly no written agreement and it would have been sufficient for the court to refer to Article 2(3) of the Copyright Act to conclude that no exclusivity could exist. The court could also have referred to this section with regard to the consequences of the termination, rather than considering the parties' intention.
Such reference is particularly relevant, as Article 2(5) of the Copyright Act provides that the second sentence of Article 2(3) does not apply in the event of fictive ownership based on Article 8 of the act. As the court concluded that Article 8 did not apply, it should have considered the applicability of Article 2, in which case there would have been no need to look at the parties' intention. Arguably, the court was unaware of Article 2(3) of the act.
This seemingly small case is noteworthy, as it demonstrates the consequences of copyright mismanagement, which is common, although not necessarily intentional. In practice, agreements (or the failure to agree properly) often escape the attention of in-house counsel. Marketing managers are in daily contact with designers and do copyright deals (sometimes unknowingly) with designers on a daily basis. This sometimes stems from believing that 'whoever pays, owns', as well as agreeing to general conditions that are not read or understood or presenting facts in a particular fashion without overseeing the consequences.
For example, the Association of Dutch Designers uses general terms and conditions which say that a client, on fulfilment of its obligations under an agreement with a contractor, will acquire an exclusive licence to use the design solely for publication and reproduction purposes, as such purposes were agreed when the work was commissioned. In the event that a party asks the association to develop a logo for use in the European Union which the party later wishes to use elsewhere, it would have no licence to do so. The party would have to go back and negotiate an additional licence for an additional fee. Should it use the design outside the European Union, the designer (under the association's general terms and conditions) would be entitled to compensation of at least three times the agreed fee due to infringement of his or her rights.
In-house counsel may be able to manage this situation by setting up an agreement framework that governs the relationship between parties and establishes the rules for any future commissioning of a designer, including with regard to the allocation or management of copyright. This will benefit not only the commissioning party, but also the designer.
Under the Copyright Contracts Act, it is questionable whether general terms and conditions fulfil the requirement of the written agreement as set out in Article 2(3) of the Copyright Act. Businesses that commission work from third parties and require exclusivity are strongly recommended to have a separate written agreement (in addition to the general terms and conditions). This is particularly relevant in the event that the rights holder is not a party as set out in Articles 7 and 8 of the Design Act. The separate agreement further provides an opportunity to consider deviation of undesirable aspects of the general terms and conditions.
In situations involving the joint ownership of rights, it is important for parties to agree on a proper management and exploitation agreement which sets out both parties' rights and obligations. By doing so, particularly in view of the implementation of the Copyright Contracts Act in 2015, they may be able to avoid surprises.
For further information on this topic please contact Huib Berendschot at AKD by telephone (+31 88 253 5915) or email ([email protected]). The AKD website can be accessed at www.akd.nl.