The recent case of Fresh Trading Limited v Deepend Fresh Recovery Limited  EWHC 52 (Ch) acts as a reminder to ensure that assignments of copyright created for a party by a third party are dealt with properly. The case concerned a very recognisable original artistic work and the dispute centred on the title to the copyright of the logo. The logo is used by Fresh Trading Limited (Fresh) for its well-known range of Innocent smoothies and juices and consists of a cartoon depiction of a face with a halo which has become known as 'the Dude'.
On 15 December 2012 OHIM upheld a challenge by Deepend Fresh Recovery Limited (Deepend) that Fresh’s community trade mark was invalid because the use of the mark would infringe Deepend’s copyright in the logo. Fresh appealed this decision and commenced proceedings in the High Court for a declaration that it was in fact the owner of the copyright.
Fresh and Deepend formed a business relationship back in 1999, in which it was agreed that Deepend (a design company) would assume the design role for all aspects of Fresh's new business. A contract setting out the terms of the agreement was drafted. The contract provided that copyright of any work presented by the agency that Fresh approved would be owned by Fresh. It also provided that Deepend would receive its remuneration in three phases in the form of equity in the company.
There was disagreement over whether or not the contract was ever signed, although both parties acknowledged that there was no reason why it would not have been. In any event, a signed copy of the contract was never found.
Deepend designed the logo in accordance with its obligations under the contract, and Fresh duly approved the logo. However, the formality of share allotment by Fresh never took place. Both parties ascribed this to the pressure of work and accelerating expansion.
It is worth noting that Deepend's potential claim for breach of contract or specific performance of the obligation to allot shares was time-barred by the time this claim was made. The case therefore only related to whether an assignment of the copyright had taken place.
Initially, the Court considered whether there could have been a legal assignment of the copyright from Deepend to Fresh. According to the evidence presented, the Court determined that the contract had not in fact been signed. It is a requirement of the Copyright Designs and Patents Act 1988 that a contract be signed in order to effect legal assignment. As a consequence, the Court found that there could not have been a legal assignment.
The Court then considered whether the agreement to assign the copyright gave rise to an equitable assignment. On this issue, the Court found that despite the absence of legal formalities there was a binding agreement between the parties that provided that the copyright would be assigned from Deepend to Fresh on its approval of the designs. On this basis, it was concluded that there had been an equitable assignment of the copyright from Deepend to Fresh.
The Court rejected Deepend's argument that an equitable assignment could not have taken place because Fresh had failed to fulfil its obligations under the contract. The Court found that not only was there no outright refusal by Fresh to perform its obligations, but also the actual allotment of shares was not a precondition for the assignment of the copyright under the contractual terms. The assignment and share allotment were concurrent not conditional obligations. The Court confirmed that even if it had not found an equitable assignment to be in place, there would have been an implied assignment. This is because, simply as a matter of commercial reality, Deepend would have been unlikely to use the artwork it created for Fresh for any other purpose. Finally, the Court also concluded that Deepend would have been denied any injunctive relief in any event - so much time had passed since the creation of the Dude logo, and Fresh had built up such a substantial business based on its use, that it was too late for Deepend to try and enforce its copyright now.
This decision has been criticised by many on the basis that equity should not have assisted Fresh because it had "unclean hands": Fresh had not fulfilled its contractual obligations, so equity should not have assisted by perfecting the relevant assignment clause of the contract.
It serves as a reminder to both parties, and not just the commissioner, to ensure that any contractual obligation to assign intellectual property is conditional on the fulfilment of the relevant payment obligation and that material details of any agreement are included in a written document which has been signed by both parties.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at March 2015. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.
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