Supreme Court decision
On July 27 2011 the Supreme Court handed down its judgment on the long-running saga of LucasFilm v Ainsworth  UKSC 39.(1) This update considers the judgment - in particular the decision that in certain circumstances foreign litigants can rely on their national copyrights in order to bring infringement claims before the English courts, which raises concerns about a potential increase in forum shopping.
The main legal points considered by the court concerned Section 51 of the Copyright, Designs and Patents Act 1988 and jurisdictional considerations relating to the so-called 'Moçambique rule'.
Copyright subsists in artistic works under Section 1(1) of the act. Section 4(1) states that graphic works (eg, drawings and illustrations), sculptures and "works of artistic craftsmanship" are considered 'artistic works'. According to Sections 16(1) and (2), the copyright in an artistic work is infringed by a person that, for example, directly or indirectly copies all or a substantial part of a work without the copyright owner's consent.
Section 51(1) of the act states that it is not an infringement of copyright in a design document or a model that records or embodies a design (for anything other than an artistic work or a typeface) to make an article to the design or to copy an article made to the design.
Following British South Africa Co v Compania De Moçambique  AC 602 (HL), cases based on the incursion of foreign property rights have not been justiciable in the English courts.
The Moçambique rule prescribes that the English courts have no jurisdiction to entertain an action for the determination of title to foreign land or damages for trespass to such land. Until the mid-1990s the courts treated the Moçambique rule as disentitling them to decide issues relating to foreign IP rights. However, in Pearce v Ove Arup Partnership Limited  Ch 403 the Court of Appeal, in deciding jurisdictional issues under the Brussels Convention, held that the rule did not prevent the court from deciding whether the claimant's Dutch copyright had been infringed. In relation to land, the rule was modified by the Civil Jurisdiction and Judgments Act 1982, but the applicability of the Moçambique rule remained a live issue in this case.
In 1976 Andrew Ainsworth was recruited by film director George Lucas to produce, among other things, stormtrooper uniforms for the 1977 film Star Wars. LucasFilm alleged that the items were manufactured from drawings produced by Ralph McQuarrie, a costume designer who had worked alongside Lucas to create and develop costumes for the film, including the famous stormtrooper armour. Ainsworth, who claimed that he saw no such drawings, cast over 50 stormtrooper helmets and suits for LucasFilm in 1976 and received around £30,000 for his work.
Since its release in 1977, Star Wars has been vastly successful and, together with the later films in the series, has gained a worldwide following. It was the first film that fully exploited the potential for merchandise - according to figures submitted by LucasFilm, worldwide sales of licensed products have totalled over £6 billion since the release of the first film.
In 2004 Ainsworth discovered one of the original helmets in his home and, after selling it to a collector, began to manufacture more helmets from his original moulds. He sold them online to customers in the United Kingdom and the United States at a premium price through his company, Shepperton Design Studios.
In 2006 LucasFilm brought legal proceedings in the United States for copyright infringement, unfair competition and trademark infringement, arguing that Ainsworth was not authorised to manufacture or sell the outfits, as he did not hold the IP rights to them. A judge in California found in LucasFilm's favour and awarded it $20 million in damages. However, the judgment was unenforceable, as Ainsworth did not have assets in the United States. LucasFilm brought the case to the High Court in order to enforce the decision in the United Kingdom.
In the High Court, Ainsworth accepted that the drawings were 'graphic works' for the purposes of the act. He also accepted that he had taken substantial parts of what was depicted when he had created the stormtrooper helmet and armour. However, he argued that he had a defence to copyright infringement under Section 51 of the act. The claim centred on whether the helmet could be said to be an 'artistic work' under the act. If not, Ainsworth's replicas would not be infringements.
The High Court dismissed LucasFilm's action for infringement of UK copyright, holding that the helmet and armour were not artistic works, and that there was a defence under Sections 51 and 52. It also declined to enforce the US judgment. However, it considered that the US copyright claim was justiciable in the English courts and that copyright had been infringed.
The Court of Appeal upheld the High Court's decision, save in respect of its finding that the US copyright claims were justiciable, ruling that the Moçambique rule applies to claims for infringement of foreign IP rights, as well as to foreign land.
LucasFilm appealed to the Supreme Court, but did not appeal the Court of Appeal's finding that its US judgment could not be enforced in the United Kingdom. Therefore, the only issues considered were whether:
- the helmet was a 'sculpture' so as to qualify for protection as an artistic work under Section 51 of the act; and
- the English courts could exercise jurisdiction for a claim for an infringement of copyright committed outside the European Union, against a party domiciled in England and in breach of English copyright law.
The Supreme Court agreed with the lower courts that Ainsworth had a defence to the breach of English copyright under Section 51 of the act. LucasFilm had argued that the helmet's purpose was as a sculpture, and that it was wholly artistic (ie, it was intended to achieve a visual impression only) and had no functional purpose. The court rejected this argument.
In order to be a sculpture (and therefore an artistic work), an item must have been produced "for the purposes of sculpture" and there must be some element of artistic expression. However, the helmet was utilitarian - it was a prop used for a film.
On the jurisdictional point, the Supreme Court overturned the Court of Appeal decision. It held that LucasFilm could rely on its US copyright and bring a claim for breach of US copyright before the English courts where there was no dispute as to subsistence of the copyright and where the English courts had jurisdiction over the defendant. The two conditions were met in this case and, since the original finding had not been appealed, the High Court decision that Ainsworth had breached US copyright law stood.
The Moçambique rule had been modified for land by the Civil Jurisdiction and Judgments Act 1982 and the Supreme Court found that there was a parallel development under Article 22(1) of the Brussels Regulation in relation to European law. Referring to the Brussels I Regulation and the Rome II Regulation, the court recognised a modern trend in legislation in favour of enforcement of foreign IP rights, such as copyright. The rule was intended to avoid claims in relation to property where the granting of the right in such property vested in "the ruler of the country" in another jurisdiction. The court considered that the rule could still be applied to patents or trademarks, at least where questions of validity are involved. However, the Supreme Court did not consider that it could apply to copyright. The distinction may be seen as arising from the nature of the relevant rights, as copyright vests automatically and is not granted on a geographical basis in the same manner as a patent or a trademark.
The result is a small victory for both Ainsworth and LucasFilm. Ainsworth may continue to make the stormtrooper uniforms in the United Kingdom, but cannot sell his merchandise to US-based customers. However, concerns remain following the decision. The Court of Appeal's judgment on the jurisdiction issue had allayed concerns that the first instance decision had given free rein to forum shopping. The Supreme Court's reversal of that decision has raised the problem again.
The Supreme Court's decision also endorses LucasFilm's strategy of seeking a double opportunity in obtaining not only the Californian judgment, but also an English judgment on the merits on the same cause of action as 'insurance' in case the Californian judgment proved unenforceable.
The decision clears the way for increased jurisdiction for English courts in relation to foreign copyright law, and possibly other IP matters. It remains to be seen whether it will lead to the feared increase in forum shopping. However, IP owners may increasingly seek to take advantage of this potential weapon in the fight against infringement.
For further information on this topic please contact Andrew Hobson or Georgia Warren at Reynolds Porter Chamberlain LLP by telephone (+44 20 3060 6000), fax (+44 20 3060 7000) or email ([email protected] or [email protected]).
(1) For further details please see "Star Wars case: an unsatisfactory win for the empire"; "An American Judgment in London: the Star Wars case", "Star Wars: The art of film making, sculpture and copyright defences" and "Star Wars: the Court of Appeal strikes back".