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Tuesday, 4 August 2015

From Robin Ray to Purple Penguin: a muddle over a commissioned logo

From Katfriend and one-time guest Kat Rebecca Gulbul, who is proving to be a very useful extra pair of paws during the summer lull, comes this post on last Thursday's decision of Judge Richard Hacon, of the Intellectual Property Enterprise Court, England and Wales, in Atelier Eighty Two Limited v Kilnworx Climbing Centre CIC & Others [2015] EWHC 2291 (IPEC). Explains Rebecca:

This was an action to establish ownership of the copyright in three commissioned logos, shown on the right.  Kilnworx commissioned the logos from Purple Penguin Design under an agreement which was made between Lionel Bunting (a director of Kilnworx) and Rik Kirk (employee and director of Purple Penguin). The payments made to Purple Penguin had been made by Lionel Bunting’s other company Atelier (of which he was the sole director and shareholder). Kilnworx agreed to reimburse Atelier for the costs, but never did. Atelier then went to court, claiming that since the payments had been made by them, they owned the copyright in the logos and that Kilnworks and the other defendants had infringed them through its use. The issue at stake was whether Kilnworx had the benefit of an assignment of the rights, had been licensed to use them or did not have any claim on the logos at all. 

The facts

Messrs Bunting, Sandhu and Shabbir thought of the idea of a climbing centre in late 2009, incorporating Kilnworx in May 2011. After they decided they needed a logo, in August 2011 Bunting emailed Mr Kirk from Purple Penguin to ask him to create the logos. He replied with a quote of £300-£500 for designing the logos. Further emails followed, in which Bunting identified himself as the director of Atelier.  Purple Penguin invoiced Kilnworx for their work on the logos in September 2011, requesting payment of £300; payment was not made by Kilnworx but by Atelier. Four other invoices followed, of which three were addressed to Kilnworx and one to Atelier. All four were paid by Atelier. Additional payments were also made by Atelier on other matters relating to the Kilnworx business. Kilnworx opened in June 2012 but by September was under financial pressure. At a shareholders' meeting in September of that year, it was agreed that Atelier would invoice Kilnworx for all the expenses it had incurred thus far, including the costs of the logos.

Bunting resigned as director of Kilnworx in November 2012, and it was around then that he emailed his previous business partners to tell them he did not believe that Kilnworx owned the copyright in the logos. His view was that Kirk owned the logos and that Atelier was the only entity licensed to use them. He offered to transfer ownership of the copyrights to Kilnworx for £5,000, but his offer was rejected. Kilnworx believed that they were entitled to use the logos. In December 2012, Kilnworx explained to Bunting that they did not have the funds to pay Atelier’s invoices.

The law

Judge Hacon cited Griggs Group Ltd v Evans [2005] EWCA (Civ) 11, an earlier case in which the copyright in the Dr Martens AirWair logo was disputed [noted by the IPKat here]. There Evans, a freelance designer, had been commissioned to design a logo for Griggs, but there was no agreement regarding the ownership of the copyright. He therefore contended that he had retained both the legal and equitable interests in the copyright and that Griggs only had a licence to use the logo. On appeal Jacob LJ referred to the principles that govern the rights of a client commissioning a copyright work and those of the contractor who carried out the work [found in Robin Ray v Classic FM plc [1998] FSR 662 at 640]. In such cases, the court had to determine whether the client under the contract had agreed to pay for the copyright and whether they had either bought the copyright, bought a copyright licence or nothing. The commission of a work implied that, at the minimum, a licence had been purchased. The conclusion in Griggs Group Ltd v Evans was that there had been no implied term regarding title to copyright, and only a limited licence.

Judge Hacon summed up the principles to be applied at paragraphs 22 and 23 of his judgment. He said that where the design of a logo is commissioned, the starting point will be as explained in Griggs, namely that, in order to give business efficacy to the contract of the commission, it will be presumed that the client can prevent others from using the logo. This will either mean that the client retains ownership of the copyright or that he has an exclusive licence to use it.

The decision 

Judge Hacon found that Bunting had entered the contract with Purple Penguin for the creation of the logos on behalf of Kilnworx and in his capacity as director of the company. An oral agreement was thus made between  Bunting and Kirk (on behalf of Purple Penguin), its express terms being that Purple Penguin would design logos for use by Kilnworx and that Kilnworx would pay Purple Penguin the going rate (between £300 and £500). A £300 payment was later made for the logos.

There was also an implied term to the contract, namely that Kilnworx would own the copyright in the logos. This is a usual term to be implied in such contracts. Purple Penguin was the owner of the legal interest in the copyrights at the time the logos were created and held the copyrights on trust for Kilnworx.  By the written agreement of 23 August 2013 between Purple Penguin and Atelier, the legal interest was assigned to Atelier. However, Atelier took the legal interest in the copyrights, subject to Kilnworx’s equitable interest, of which it was aware. Judge Hacon therefore found that Kilnworx was entitled to an assignment of the legal interest in the copyrights from Atelier and that none of the defendants had infringed the logos’ copyrights.


This decision is reasonable, as Kilnworx had commissioned the logos for their use. They therefore had an equitable entitlement to them. Purple Penguin initially owned the legal interests as they had produced the logos, but assigned these through their agreement with Atelier. Payment of the invoices by Atelier did not entitle them to the equitable interests. The principles of Robin Ray v Classic FM plc [1998] are still relevant to commissioned work and achieve a fair balance between the rights involved.

This Kat never ceases to be surprised at the number of occasions in which businesses that commission logos forget to take an assignment of the copyright and, if necessary, unregistered Community design right, in order to protect their interests in the event of  (i) a relatively small likelihood of infringement of their logos and (ii) a far greater prospect of being dragged into annoying litigation over their entitlement to them. The fault lies with those of us who fail to advise with sufficient clarity and firmness that commissioned artwork in logos does not automatically become the property of the business using the logo.


Barbara Cookson said...

To be fair, most businesses don't have legal advice at the point at which they design their logos. Even trademark agents usually see the client at a later date when he is thinking about seeking protection. Due to the success of the IPO direct filing and the Google advertising driven online trademark filing shops, less and less trademark applicants are using registered trademark agents. Therefore, we can expect to see a rising number of cases where the legal interest in the copyright remains with the designer.

In this case, the claimant was trying to hold the defendant over a barrel to recover sums of money owed to it. As Hacon rather neatly put it, the barrel wasn't there so the attempt failed. The idea had been to use equity's darling but Atelier wasn't equity's darling because they weren't ignorant.

All cases referring to equity's darling should be precious to law students. She is a lovely concept and must never be forgotten

Anonymous said...

Indeed.. I can't agree that fault lies with those who fail to advise with sufficient clarity and firmness.

You might note that Atelier paid the £300 bill from the designer made out to Kilnworx, and then sought (after purchasing the legal title from the designer) £5000 from Kilnworx (a charity) for the transfer of the rights and sued for copyright infringement.

If anything, the fault lies with the greedy ex-director.

Anonymous said...

To quote Gordon Gecko, "Greed is good."

Buy low and sell high is hardly the devious thing that my Anonymous friend at 10:45 seems to want to make it out to be.

Anonymous said...

Well I am not sure you'd necessarily worry about your own directors shafting you. I guess in this case greed is bad, as the ex director now has a costs award against them.

As Barbara says, generally this comes up a long way down the line, so advice is probably never sought at the relevant time.

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