Copyright – ownership of key designs

Copyright – ownership of key designs

Many businesses will have key copyright works that are central to their operations. Perhaps the most central is a logo that identifies their brand or is otherwise a key part of their business.  Think the Nike swoosh logo or the coca-cola stylised name.

A very large amount of these business’ marketing expenditure and brand awareness are built around these key pieces of intellectual property.

It is critical that the business owns, and can demonstrate that it owns, copyright in these logos.  The key logos may also get registered as trademarks, but at the beginning, if they are an original artistic work, then copyright will subsist first.

Initially, the copyright in any artistic work will be owned by the artist/designer who created the work.

If an employee creates the copyright work in the usual course of their duties, then the employer automatically becomes the owner of the copyright (Copyright Act s35(6)).  For employees who create copyright, it is prudent to have a term in their employment contract recognising this too.  The business should track which employees created what copyright and when.  If this is a common part of their business, such as a fashion brand, then it is recommended that a register of copyright be maintained.

However, if a business engages an outsider person, a contractor, to create the artistic work, copyright is not automatically transferred to the business.  That sounds counter-intuitive, because that is what the outside person is being engaged, and paid, to do.  But to transfer copyright a written assignment is required.[1]  It is therefore critical that whenever a business engages a contractor who is involved in developing IP, for the business to enter into a written and signed agreement with the contractor which provides that all IP developed by the contractor is the contractor’s own original work and is transferred to the business.[2]

Two recent cases demonstrate the necessity to do this (but in the second case saved ay an ironic twist.

In the first, the Hells Angels motorcycle club in San Francisco engaged a tattoo artist known as “Sundown” in 1954 to create a skull image used on membership cards. The tattoo artist apparently frequented the pool hall where the San Francisco chapter met.  The tattoo artist came up with the death head design.

Pool halls and characters like the Hells Angels and Sundown are not the type of people who worry about the niceties of a legal assignment in writing.  Indeed, there was none.  So when the Hells Angels sought to sue Redbubble who allowed people to print various images onto various products (such as coffee mugs), the Hells Angels could not establish that they owned copyright in the death head logo and lost their case on this basis (but succeeded based on trademarks).

In the second case, Racing Victoria wanted commemorative medals based on famous jockeys or trainers struck for annual awards.  Racing Victoria provided historical photographs of the jockeys and trainers and a Melbourne jeweller provided sketches of proposed medals.  Mr Douglas was engaged to make the medals and was paid accordingly.  Mr Douglas then engaged a die maker Mr Forwood to create the actual medals based on Mr Douglas’ sketch, but gave to the die maker the original photographs.  Over time, Racing Victoria moved away from Mr Douglas in providing the medals and appointed a new supplier.  Mr Douglas claimed that he was the owner of the copyright in the medals, that his copyright had not been assigned to Racing Victoria and that Racing Victoria was breaching his copyright by continuing to strike the commemorative medals.  Although Douglas had been paid for his work, arguably he was being opportunistic and was just seeking another pay day.  It was true that there was no assignment from Douglas to Racing Victoria.  But in an ironic twist, the person who ultimately created the medals, Mr Forwood, had not assigned his copyright to Mr Douglas.  So, the court held Mr Douglas did not own the copyright which he alleged Racing Victoria had breached!

The bottom line is that, particularly if a business engages a graphic designer to create their key logo, ensure that the contract with the graphic designer includes an express assignment of copyright in the work created.  But the same principle applies to a business engaging:

  • photographers, whether for an advertising shoot or a model/action/athlete shoot;
  • filmmakers;
  • designers for products;
  • graphic design studios who design point of sale catalogues, etc.; and
  • IT software writers.

 In all situations, written contracts with appropriate IP assignment and indemnity clauses should always be used.

[1] Robin Ray v Classic FM (1998) 41 IPR 235; Douglas v Racing Victoria [2019] FCCA 49 at [116].

[2] Copyright Act s196(3).

Her Fashion Box – an ethical, legal and commercial disaster

Her Fashion Box – an ethical, legal and commercial disaster

The tale of Her Fashion Box Pty Ltd (HFB) is a 101 about how not to operate a fashion start-up, and, how not to treat employees.

Her Fashion Box Pty Ltd sold fashion and beauty accessories to consumers via an on-line subscription model.  Early in its life it received an investment of $200,000 via the TV program Shark Tank.

HFB had three employees, all of which it underpaid by a total of $40,543.  That underpayment no doubt helped its cash-flow and bottom line, at the expense of those employees.  One of the employees was a graphic design graduate.

Young university graduates often face a job market where supply of graduates far outstrip available opportunities.  These graduates are very motivated to get their foot in a door and gain some experience.  That first step into their chosen industry and profession can often be the hardest to secure, but once obtained their career is off and running.  Some may accept a sub-optimal role in order to do this. 

Some employers, well aware of market dynamic, will blatantly take advantage of young graduates.  This is true across many sectors, including the fashion industry.  It was certainly true of HFB and its founder and sole director, Kath Purkis.

HFB offered the graduate an internship and she worked 2 days a week.  She was not paid anything (but ultimately a $1,000 “Christmas bonus” was paid to her).  The graduate did meaningful work for HFB.

The purpose of an internship is to provide an inexperienced, unemployed person an opportunity to learn, observe and develop skills, gain some experience and get a foot in the door to their industry.  The hope is the internship will lead to a job, either with that or another brand.  Internships are unpaid.  An unpaid internship is only legitimate if either (1) when undertaken as part of a vocational placement related to the individual’s course of study or (2) in circumstances where an employment relationship does not exist.  (This is elaborated on in my book Fashion Law: The Complete Guide at chapter 10).  Here, the graphic designer had already graduated from her course of study.  Also, she wasn’t just receiving training and exposure to real life work but doing what graphic designers do in their day to day jobs.

The Federal Circuit Court held that the graphic designer was an employee and had therefore been underpaid (as had the other two employees).  The court ordered that all underpayments be paid to all three employees.  The court also penalised HFB $274,278 pursuant to the Fair Work Act, finding its flagrant disregard of award rates particularly egregious.  So, the fine was ultimately six times the original underpayment and was set because of the flagrant nature of the breaches and to act as a deterrent for others.

People typically trade via a company structure so that the risk of trading (and risk of breach of law) is the company’s, not the individuals behind it.  However, the Court in HFB also issued a penalty order of $54,855against Kath Purkis personally.

Under the Fair Work Act (FW Act), a person who:

  • has actual knowledge of, and was an intentional participant in;
  • aids, abets, counsels or procures; or
  • was, directly or indirectly, knowingly concerned in or a party to,

the breach of the FW Act by the employer, is a person involved in the employer’s contraventions of the FW Act and, therefore, is taken to have themselves engaged in the conduct that constituted the employer’s contravention of the FW Act.

So, Kath Purkis was personally liable for this fine. Carful structuring by trading as a company will not protect individuals who cause their company to deliberately breach such laws.

In keeping with this general approach of neither acting ethically or legally, HFB also failed to deliver subscriptions on time or at all and failed to respond to customers’ requests (including to cancel their subscription).  HFB was ultimately the subject of a public warning to consumers not to deal with HFB by the NSW Office of Fair Trading.

With such an unethical and illegal approach to business, it is not surprising that HFB has gone out of business.  It is also in the process of being struck off the register of companies by ASIC.