A recent decision concerning ownership of copyright has served as a stark reminder to businesses to ensure they consider and clearly capture ownership of intellectual property at the outset when commissioning works.
The case concerned rights in the well-known “Dude” mark and found, Fresh Trading Ltd (“Fresh”) (owners of the Innocent business) to be the owner of the copyright in that mark.
When Fresh was just starting out in 1998 with the Innocent business, it engaged a third party, Deepend Fresh Recovery (“Deepend”) to do all the design work for the brand. The two companies negotiated an agreement whereby Deepend was to receive three instalments of shares as payment for the design work.
The agreement prepared in 1998 stated the following in relation to ownership of IP created:
“Fresh Trading Ltd receive full intellectual copyright of any work, creative ideas or otherwise presented by the agency and then subsequently approved by Fresh. Work not approved by Fresh remains under the ownership of Deepend”.
Deepend presented the Dude mark and Fresh wholeheartedly adopted it, using it as the main emblem for the Innocent range and it has been used by Fresh ever since.
Deepend however never actually received any shares and this was never flagged by either Fresh or Deepend at the time or for many years later. The parties continued with what was a harmonious and friendly relationship.
Deepend hit trouble in 2001 and went into liquidation. This wasn’t finalised until 2009. At this time Deepend sold its interest in the works it created for Fresh (including the Dude mark) to a holding company (“Deepend Two”). Deepend Two immediately sought to enforce its rights, purporting to own the copyright in the mark, and had the Community trade mark for the Dude mark owned by Fresh, declared invalid.
Fresh appealed this decision but also at the same time sought relief from the Court asking that Fresh be declared legal owner of the copyright in the Dude mark.
The Court found in favour of Fresh and declared that it was the equitable owner of the copyright in the Dude mark.
Neither party could produce a physical copy of the 1998 agreement and it transpired the agreement had not been signed by the parties in the first place. Despite this fact, and it being labelled “Heads of Terms”/“subject to contract”, the Court found that the agreement was legally binding. Both Fresh and Deepend’s conduct had accepted the terms and both had been operating under them.
As no signed agreement existed, the Court found that Fresh could not be the legal owner of the copyright in the Dude mark, as any transfer must be signed in writing by the assigning party.
Deepend contended that the assignment of rights in the Dude mark was conditional upon it being allotted shares, and as this didn’t happen there had been no assignment. It was found that the obligation to allot shares was concurrent to the obligation to transfer the copyright, one was not a condition of the other. Fresh hadn’t refused to allot shares, it just simply hadn’t happened and it was the promise to allot the shares that was the consideration for any assignment of IP.
The fact that Deepend failed to do anything about enforcing its rights for many years was noted by the Court. The undeniable detriment which would be caused to the Fresh business if it was only granted a licence was also a factor, as arguably Deepend could terminate this at any time having a massive effect on the business.
Early consideration of IP ownership is therefore key…
This case serves as a strong reminder that businesses must be prudent and ensure that clear and unambiguous terms are agreed between parties in the early stages when it comes to intellectual property ownership. Such considerations should not be viewed as an administrative burden and could in fact save a major headache, or the loss of rights in valuable intellectual property, if the ownership of such rights comes into question at a later stage.
In drafting future assignment provisions, care should be taken not to make such transfers dependent on future conditions (e.g. payment in the future for works or a later approval) for risk of the transfer not being legally effective.
Designers should also note the importance of not acquiescing in taking any action and should ensure that any payment conditions are clearly expressed when contracting with companies.