The “dude”
In 1998, Fresh Trading Ltd (“Fresh”) started up a new smoothie business that we all now know as Innocent. They engaged an agency called Deepend to design their brand identity. The agreement they negotiated promised Deepend three staged instalments of shares as payment for their work. It also stated that any copyright created by Deepend and approved by Fresh would be assigned to Fresh; anything not approved would remain with Deepend.
In 1999, Deepend developed the “dude” logo, shown below, which Fresh have used ever since. Fresh, however, never allotted any shares to Deepend.
In 2001, Deepend (then a limited company) went into liquidation and the liquidator enquired about the shares but took no action. In 2009, the liquidation concluded, but not before a friend of the original “dude” designer spotted a potential intellectual property claim, saw pound signs, and bought Deepend’s interest (if any) in the copyright for £3,000. He transferred this on to the claimant in this case, Deepend Fresh Recovery (“DRF”).
The litigation
DRF then applied to OHIM for Fresh’s registered Community Trade Mark for the “dude” logo to be declared invalid on the basis that it owned the relevant copyright and the use of the mark would infringe that copyright. DRF was successful.
Fresh appealed the decision but also issued proceedings in the High Court for a declaration that it owned the copyright (whether legally or in equity) or at least had an implied licence to use it. DRF counterclaimed that it was actually the owner. Fresh replied that, if that was the case, DRF was not entitled to relief for various reasons including acquiescence, delay and estoppel.
The decision
The court held that Fresh had not legally been assigned the relevant copyright. A legal assignment of copyright must be signed by an assignor for it to be effective yet neither party could produce a signed copy of the design agreement and it appeared that it had never been signed. Further, copyright yet to be created must vest automatically in the assignee on its creation without fulfilment of any condition; here Fresh had to approve the works as a condition to the assignment.
The court, however, held that Fresh was the owner of the copyright in equity. Although the design agreement was labelled “Heads of Terms” and “subject to contract”, the conduct of the parties was such that they had accepted its terms. The allotment of shares was a concurrent obligation to the assignment, not a condition to it. An equitable assignment was found to have taken place.
The judge commented that had there not been an express assignment, he would have been inclined to find an implied assignment rather than a licence. He went further to say that had there been no assignment or licence at all, he would have found it hard to grant an injunction to Deepend given the considerable lapse of time.
The lessons
If you commission an agency to create a copyright work, the agency will own the resultant copyright unless a contract states otherwise. Ensure, therefore, that you have a written, signed agreement in place that effectively assigns the relevant intellectual property rights. Try to avoid any conditions for the assignment of any future copyright (for example, payment) as this will prevent a legal assignment on its creation.
Whilst Fresh came out on top in this case, clearly an unambiguous contractual position at the outset would have been desirable to prevent a costly dispute.
Fresh Trading Ltd v Deepend Fresh Recovery Ltd and another [2015] EWHC 52 (Ch)
Charles Hylton-Potts
