Pokémon receives no injunctive relief and $1 in nominal damages from Redbubble for copyright infringement and contravention of the Australian Consumer Law.

A recent Federal Court decision provides an interesting insight as to the nature and extent a Court will consider, with respect to claims of copyright infringement, the IP policy and proactive measures taken by a defendant to mitigate such claims.

Background

On 19 December 2017, and only 3 months from the September hearing, the Federal Court of Australia awarded Pokémon Company International, Inc (Pokémon) $1 in nominal damages together with a declaration of infringement and legal costs, against the online Australian retail store, Redbubble Ltd (Redbubble).

Redbubble operates an internet marketplace for a “print-on-demand” personalisation service for customers who want to purchase a product (i.e. t-shirts, mugs and other consumer items) with an image or word which has been created by an artist or designer.

With respect to the present proceeding, the Redbubble website made products available which contained words such as Pokémon, Pokémon Go and Team Mystic, and Pokémon character names and images, as set out in Schedule 1 and 2 to the orders annexed to Justice Pagone’s decision, which can be accessed here (Products). The Redbubble website also had an internal search facility such that a user who searched “Pikachu” (for example) would be directed to a page enabling the purchase of the Products because of tags and titles used by registered artists to describe their products.

Contravention of the Australian Consumer Law

Pokémon alleged that Redbubble contravened the Australian Consumer Law (ACL) on the basis that the Redbubble website and Google Shopping advertisements sponsored by Redbubble on google.com contained representations that the Products were supplied, licensed, sponsored or authorised by Pokémon.

Below is one of the screenshots used in the proceedings depicting a Google search for a Pikachu shirt. The links sponsored by Redbubble for Pikachu shirts appear on the right hand side and the ‘organic’ (i.e. non-sponsored) links appear on the left hand side. The name ‘Redbubble’ appears in both the organic research results and the sponsored links.

Above: Pokemon Company International, Inc. v Redbubble Ltd [2017] FCA 1541 – Annexure 1

The sponsored links appeared below the words ‘sponsored’ and typically contained information including the title of the artwork displayed, the Redbubble website, a brief description of the product, the price of the product and an image of the artwork. Redbubble pays for Google sponsored links to the Redbubble website and provided the information to Google. Redbubble agreed that sponsored links are an important part of Redbubble’s marketing campaign, amongst other types of marketing, because they “direct traffic to products available via” Redbubble on its website.

Infringement of Copyright

Additionally, Pokémon claimed to be the owner of the copyright in an artistic work depicting the character Pikachu and relied upon 29 image of works found on the Redbubble website as alleged infringement of its copyright in that artistic work.

Pokémon submitted that Redbubble infringed its copyright in the Pikachu work by:

  1. making the alleged infringing works available on the Redbubble website and thereby communicating the infringing works to the public;
  2. offering, exposing and exhibiting the Products to which the alleged infringing works had been applied for sale on the Redbubble website; and
  3. authorising the reproduction of the alleged infringing.

Redbubble’s IP policy

Redbubble conceded that one of the risks identified with its business plan was that artists uploading material on the Redbubble marketplace might infringe copyright or upload illegal material. Redbubble sought to mitigate those risks by implementing an IP policy which included a user agreement with artists, a content team to monitor activities on the Redbubble website and a process for owners of IP to notify Redbubble of potential infringements. The user agreement included an explicit acknowledgment that copyright protected or illegal material would not be uploaded to the Redbubble website by artists and required artists to provide an indemnity to Redbubble for any copyright infringement or other illegal activity.

The Court’s Decision

Justice Pagone held that the Redbubble website and the advertisements sponsored by Redbubble on Google contained representations in contravention of the ACL.

In coming to this decision, His Honour had regard to the Redbubble website failing to indicate to consumers that it was not authorised to sell the Products, or that it did not have a lawful association or authorisation of sponsorship.

His Honour also noted that the prices associated with the Products available through Redbubble had some significance in Pokémon’s claims because the prices were within the range of prices for like products sold by authorised licensees.

With respect to Pokémon’s claims for copyright infringement, his Honour agreed with Pokémon’s submissions (set out above). His Honour noted that whilst the alleged infringing works originated with the artist who had placed the image on the Redbubble website, Redbubble was responsible for determining the content on its website through its processes, protocols and arrangements with the artists. In this respect, his Honour noted the IP policy adopted by Redbubble.

The Court also recognised that Redbubble controlled the content of its website and the sponsored links on google.com, notwithstanding that the Redbubble website and its interface with Google were largely automated which did not involve any manual action on behalf of Redbubble. His Honour found that “Redbubble was involved in every part of the development and operation of its system and had absolute power to control or alter any aspect of it.” In this respect, the Court (again) noted Redbubble’s IP policy and the implementation of a “content team”.

His Honour stated that the business established by Redbubble carried “the inherent risk of infringement” and whilst it sought to mitigates the risk by the implementation of an IP policy, infringement was “inevitable”. His Honour stated that “there may have been a sound commercial basis for Redbubble to manage the risk of infringement as it did, but in doing so it authorised the infringements which occurred”.

Interestingly, Redbubble had the ability to automatically block registered artists from using certain trade marks or keywords and this was regarded by Redbubble staff as being “easier and cheaper and requir[ing] less effort” than the proactive measures in place but had the “undesirable and disproportionate effect of preventing artists from using such words in “legitimate, non-infringing ways and contexts”. However, Redbubble has since taken steps to block the use of words such as “Pikachu”.

Redbubble otherwise failed in making out a defence to infringement on the basis of fair dealing for the purpose of parody or satire. The Court found that whilst some of the infringing works may be humorous or even satirical, it was not sufficient to enliven the defence in circumstances where the purpose of the infringing reproduction was for commercial exploitation and a ‘work for profit’.

Remedies

Notwithstanding a finding of copyright infringement and convention of the ACL, the Court did not award injunctive relief. The Court held that the evidence in the proceeding had not established the threat of repeated infringement. The Court held that “the evidence for Redbubble was that of seeking to comply with its obligations under law and it has amended its program so that there was no evidence before the Court of a threat of further infringement.”

The Court awarded $1 nominal damages because “many, if not all, of the items sold through the Redbubble website were unlikely to be items in respect of which [Pokémon] would receive a royalty”. His Honour further stated that “[m]any of the items sold through the Redbubble website involved a “mash up” of images, such as the combination of Pikachu and Homer Simpson”. On this basis, the evidence “did not support a confident finding of damages”.

Pokémon pressed a claim for additional damages in respect of its claims for copyright infringement, which is a discretionary award. However, the Court did not regard the conduct of Redbubble as amounting to a flagrant disregard of Pokémon’s rights. This is in view of the IP policy in place by Redbubble to prevent and mitigate breaches which were “reasonable and defensible”.

The proceedings are to be relisted for submissions on the form of the declarations of infringement and on costs.

Commentary

Implementing an IP policy is regarded as good commercial and risk management practice, particularly for on-line businesses. Whilst, in this case, the proactive measures taken by Redbubble did not avoid a finding of infringement, it did assist in negating an award for additional damages. The IP policy in place by Redbubble also appears to provide Redbubble with a basis upon which to seek an indemnity against each of the artists responsible for the infringing conduct.