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United Kingdom Unregistered Design Right - infringement and ownership

Introduction

The Act (as it does for copyright) sets out a number of restricted acts to do which without the authorisation of the design right owner is a primary infringement. Authorising another person to do the act without the consent of the design right owner is also an infringement of design right1. Secondary infringements are also provided for.

Commercial reproduction

The owner of design right has the exclusive right to reproduce the design for commercial purposes by making articles to the design. They also have the exclusive right (again, for commercial purposes) to reproduce the design by making design documents recording the design to enable such articles to be made2.

Reproduction is for commercial purposes if it is done with a view to the article in question being sold or hired in the course of a business. Infringement therefore only takes place where the reproduction is done for the purpose of selling or hiring things as part of a commercial enterprise whose business lies in those areas. The Act does not say that the business must be one in the ordinary course of which such things are sold or hired.

Reproduction other than for commercial purposes (which could include use in a commercial business but not for sale in the course of trade or business) is not an infringement. The owner of a launderette is therefore able to make a part for their washing machines without infringing the design right, notwithstanding the commercial use to which the part will be put.

Reproducing the design

Reproducing the design by making articles to it means copying the design so about produce articles exactly or substantially similar to that design3. Whether it is substancially similar is an objective test to be to be decided through the eyes of the person to whom the design is directed.4 In A Fulton Company Ltd. v Grant Barnett & Company Ltd.5 the judge, Park J, applied a ‘consumer’ test: would a purchasing member of the public, being shown the two items side by side, conclude that there were made to substantially the same design as each other?

In the Pig Fenders case6, the court emphasised the importance of substantial differences between the articles. In copyright, on the other hand, questions of infringement turn on the taking of a substantial part of the copyright work. In L Woolley Jewellers Ltd v A&A Jewellery Ltd.7 the Court of Appeal clearly distinguished the established copyright test from the appropriate test for infringement of a registered design. In doing so, it confirmed the judgement in the Pig Fenders case.

The Court of Appeal in Woolley held that it was necessary to look at whether the design, taken as a whole, had been copied. The test is not whether an item copied forms a substantial part of the design: the correct approach is to judge whether the whole design containing the element that has been copied is substantially the same design as that which enjoys design right protection. The judge at first instance, Judge Fysh in the Patents County Court, had misdirected himself by looking at the component parts of the piece of jewellery (a pendant) rather than to its overall effect, an approach which matched that taken in Mark Wilkinson Furniture and Mackie Designs but which the Court of Appeal rejected in Woolley. It may not be enough to copy only a substantial part.8

Given that unregistered design right concerns itself with the purely functional as well as the aesthetic, there may be scope, as in Jade Engineering (Coventry) Ltd v Antiference Window Systems Ltd9, to argue that the reason the defendant’s product looks like the claimant’s is that all the products in the field look similar. In the Jade case, Jacob J offered guidance about the sort of evidence that he would expect to see if such a defence was advanced. He noted in passing (it was an interim application for disclosure) that the defendants had failed to show any third party machine which looked anything like as similar to the claimant’s as theirs did.

Making a design document for the purpose of making articles to the design also amounts to reproduction. This may also, on the face of it, infringe copyright in the design document, and section 236 says that where there is double protection design right is unenforceable.

Independent creation

Reproduction does not include reproduction by independent creation. Reproduction only amounts to an infringement if it is by copying and the copy is either exactly or substantially the same as the original. In the Pig Fenders case, the judge held that:

... there will only be infringement if the design is copied so about produce articles exactly or substantially to the design. Thus the test for infringement requires the alleged infringing article or articles be compared with the document or article embodying the design. Thereafter the court must decide whether copying took place and, if so, whether the alleged infringing article is made exactly to the design or substantially to that design. Whether or not the alleged infringing article is made substantially to the plaintiff’s design must be an objective test to be decided through the eye of the person to whom the design is directed.

In that case, certain design features were similar but the overall design was not, so there was no infringement.

Indirect reproduction

Reproduction may be direct or indirect. Indirect reproduction may involve many stages; it does not matter whether the intervening acts are themselves infringements. For example, it is not an infringement of design right to make a copy of a design document except where this is for the purpose of making an article to the design. However, making a further copy from a non-infringing copy, where the further copy is made for the purpose of making without authorisation an article to the design would be an infringement notwithstanding the one or more non-infringing, intervening stages.

Infringing Article’

If making an article to the design to which it is made infringed design right in the design, then it is an infringing article. In the case of an imported article (or an article proposed to be imported) it is an infringing article if it would have infringed design right in the design to which it is made, had it been made in the UK.

Secondary infringement

Design right is also infringed by a series of acts that involve dealings of one sort or another with infringing articles. Guilty knowledge on the part of the infringer is an essential component of this sort of infringement. These secondary infringements include, first, the unauthorised importation of an infringing article into the UK for commercial purposes. In Fulton, the defendant had reason to believe that the umbrella case (but not the umbrella handle) was an infringing article.

The Act goes on to make possession of an infringing article for commercial purposes an infringement. Done for private, non-commercial purposes, it will not be actionable. Finally, selling, letting for hire or exposing for sale or hire, in the course of a business, an infringing article is also a form of secondary infringement.

There is no requirement that the defendant actually have the requisite degree of guilty knowledge. It suffices if the alleged secondary infringer has reason to believe that the article is an infringing article10. In common with other areas of intellectual property law where secondary infringements are provided for, a letter before action will usually deprive the infringer of this defence, although not of course for acts that have already taken place.

Ownership

The designer – generally, the person who creates the design, though not necessarily the person who puts pen to paper – is normally the first owner of unregistered design right: Pig Fenders11, and compare the copyright case of Kenrick v Lawrence12 where it was the person who expressed the idea rather than the originator of the idea itself who owned the copyright.

The designer (in Part III of the Act) is generally the person who creates a design, but the Act makes special provision for computer-generated designs. In such cases the designer is taken to be the person who made the arrangements necessary for the creation of the design. This is similar to the rule in Part I of the Act13 for computer generated works. The operator of the computer is unlikely to be the designer under these rules; the person responsible for providing all the necessary facilities will be the designer. It is conceivable that two or more computers could jointly generate a design in which case two or more persons (natural or legal) could be taken to be joint designers; and a human-generated design may be a joint design where it is the work of two or more designers whose contributions are not distinct.14

As in copyright law, the employer has the rights to designs made by employed designers in the course of their employment, but unlike copyright law commissioned designs are subject to special rules giving the rights to the commissioner.15

Employee designers

Rights in a design created in the course of a designer’s employment are owned by the employer, not the employee. There is no requirement that the design is created in the ordinary course of the employment, so less of a grey area that might need to be addressed in the designer’s contract of employment.

These rules only apply where the design qualifies for protection under the Act because of he designer’s connection with the UK or another EC Member State (as national, resident or employee). They do not apply where design right only arises under the first marketing rule. In that case the right belongs to the person who first markets articles made to the design.

The provisions concerning employed designers were explored in the entertaining, though ultimately not very illuminating, case of Ultraframe v Fielding.16 The complicated litigation arose when a Mr Davies, who ran a number of companies which used the ‘Quickfit’ system for assembling conservatories that he had designed, purported on behalf of his companies to transfer design rights to the Fieldings but then became bankrupt, whereupon his trustee purported to transfer the rights to Ultraframe. Which of them actually took the assets, depended on whether Mr Davies was an employee of the business that had made the purported transfer or whether he was self-employed and therefore owned the design rights himself, so that they remained available for his trustee in bankruptcy.

Evidence at trial of the action showed that Mr Davies was informal in his business arrangements, frequently carrying large amounts of cash around and paying his employees from it. Reference was made to a meeting between him and his bank manager at which he had opened a large bag he was carrying to show that it contained several thousand pounds and a large axe. This too seemed to cast some light on his business practices. Although at first instance it was held that he was not an employee, the Court of Appeal reversed this decision: but there was little of any interest in the way it reached its conclusion on the employment point.

The Act does not include any provisions like those in the Patents Act 1977 compensating the employed designer for the use of his design. The Government considered that such a provision would place a considerable regulatory burden on industry; in the patent field that burden was bearable but the volume of record keeping and claim checking if it were extended to designs would be excessive. Moreover, the process of applying for a patent already means that many of the necessary records are kept. The fact that a designer would probably go unrewarded and unpromoted where the achievements of an inventor would be more readily appreciated is not answered in the legislation. (On the other hand, the conspicuous failure of the provisions in the 1977 Act to make any impression suggests that parallel provisions for designs would have been a waste of time too.)

Commissioned designs

Commissioned designs are subject to special rules giving the rights to the commissioner. Where a design is created in pursuance of a commission for money or money’s worth, the rights belong to the commissioner. This reflects the position under the Registered Designs Act 1949 which makes the commissioner the original proprietor of the design (and differs from that under the copyright provisions, described above). The operation of the rule may be avoided by an assignment of future design right by the commissioner to the designer.

Note that this rule will change when the Intellectual Property Bill (2013) becomes law. The government has been convinced that it is appropriate for the rule to follow the copyright approach rather than the registered designs approach, and designers will benefit from the change.

Joint ownership

The legislation provides for joint ownership of designs where the contributions of two or more persons to the creation of the design are indistinguishable: see Philip Parker v Stephen Tidball17. In the Iceland case18, the court distinguished the situation where one person draws up a specification and the other produces a design to fit it: the production of the specification is not enough to create a design which will be jointly owned as the design work has all come from one of the parties.

Registered and unregistered protection will often coexist in the same design. Although the owners of the rights may deal with them separately, the complicated situation that would result is usually best avoided, and to avoid it arising through inadvertence the legislation raises a presumption that the two rights are dealt with together19. In RTK Marine v Composite Industries Ltd 20 this rule was applied so that the rights in designs for speedboats vested in the claimant, in that instance as bare trustee for a finance company.

Licences of right

Already emasculated by exceptions and its short term, unregistered design right can also be diluted by licences of right. Lest the right should be used in a way that is considered to be anticompetitive, the legislation provides for these to be available in two situations.

Adverse competition report

First, to overcome a problem encountered by the (then) Monopolies and Mergers Commission shortly before the 1988 Act was introduced21, an adverse report of the Competition Commission, which considers that certain matters may be expected to operate or have operated against the public interest, may trigger an order by the secretary of state (in the form of a statutory instrument) to the effect that licences may be had by anyone who wants them, on terms to be agreed between the parties. Given that the licensor is acting under compulsion, it is likely that there will be little agreement about the key issue, royalty rates22, and the Act provides for the matter to be referred in default of agreement to the Comptroller.

This power applies to conditions in licences granted by a design right owner restricting the use of the design by the licensee or the right of the design right owner to grant other licences, or a refusal of a design right owner to grant licences on reasonable terms.

If the Commission reports that matters which it considers may be expected to operate or have operated against the public interest include these matters then the Secretary of State’s powers under Part I of Schedule 8 to the Fair Trading Act 1973 are said by section 238(1) to include the power to cancel or modify those conditions and, instead or in addition, to provide that licences in respect of the design right shall be available as of right. In default of agreement between the parties the terms of the licence available by virtue of this provision are to be settled by the Comptroller.

If a prospective licensee of right cannot identify the owner of the design right on reasonable enquiry, the Comptroller may settle terms which provide for no payment to be made. The design right owner may apply for the terms to be varied, but only from the date on which he turns up with the application; and if it transpires that licences were not available of right at the time (and the section applies to licences of right available either in the last five years or by order following a Competition Commission Report) the licensee is not liable in damages for, or for an account of profits in respect of, anything done before he became aware of the rights owner’s claim that licences were not available.

Automatic licences

Second, licences of right will be available automatically in the last five years of the period of protection, whether this is measured from first making of the design or first marketing. During the last five years of the period for which design right subsists licences to do anything which would otherwise infringe design right are available as of right to any person. The terms of the licence, including royalties payable, are left for the parties to agree between themselves; if they are unable to agree they will be determined by the Comptroller General of Patents, Designs and Trade Marks. 23

The factors to which the Comptroller may have regard are those which the Secretary of State prescribes by order. These could include quality standards and the investment made by the owner of design right in creating the design in the first place. There is a well-developed tariff for licences of right under patents which the Patent Office has adopted for design right (and, under the now-expired transitional provision of the 1988 Act, copyright before it). For mechanical products, this starts at 5 per cent: it will be uplifted if the design is particularly useful and discounted if it is less exciting24.

The design right owner may not refuse a licence, but anyone wishing to have a licence must apply to the owner initially in order that negotiations on the terms can be undertaken. Licences will automatically cover all the acts restricted by design right so that the terms cannot prevent a licensee performing any of the acts which, but for the licence, would be infringing acts.

Even though licences are available of right to do acts which would otherwise infringe, if they are done without any attempt being made to obtain a licence they will constitute an infringement.

Undertakings to take Licences

Where a licence of right is available either in the last five years of design right or by order of the Secretary of State or the Registrar respectively, but a defendant in an infringement action has made no attempt to negotiate terms with the owner of the design right or the registered proprietor, or the parties have negotiated but they have failed to agree terms but no application has been made for the Comptroller to settle the matter, the defendant may undertake to agree to a licence.25 If he does so no injunction or order for delivery up will be granted by the court26 and the amount which the plaintiff may recover in damages or on an account of profits will be not more than twice the amount which would have been payable had the defendant taken up the licence which was available to him of right. This amounts to a restriction on the penalty which may be imposed on a defendant for his failure to take up a licence of right.

The undertaking may be given at any time before the court makes it final order in the proceedings. It is not necessary for the defendant to make any admission of liability. Consequently, a defendant who denies having infringed design right may limit his liability while still being able to defend the proceedings.

The plaintiff’s remedies for infringements committed before licences became available as of right remain unaltered.

Licensees of Right

Licensees of right under design right are prevented from claiming that they are licensed by the owner of design right, either in trade descriptions which they applied to goods or in the course of their advertising. The meaning of a trade description is the same as that used in the Trade Descriptions Act 1968; this includes any indication, direct or indirect, and by whatever means given, of the conformity of goods with a type approved by any person. This provision is necessary because the owner in fact has no choice over who may take out a licence to manufacture the goods, nor has he any control over the products produced under such a licence. Any breach of the provision is actionable by the design right owner.

Crown Use

The Crown – or more accurately government departments – has extensive powers to do anything for the purposes of defence (including foreign defence) or the health service which would otherwise infringe design right.

The owner of design right is entitled to payment for the use of the design by the Crown. He may be able to strike an agreement with the government (subject to the approval of the Treasury); if not, the terms on which the design may be used are to be determined by the court, including the County Court. If the design right owner cannot be identified upon reasonable enquiry the government department concerned may apply to the court for an order that Crown use shall be free of any payment unless and until the owner of the right subsequently claims his right to payment.

Remedies

The owner of design right may bring proceedings for damages, an injunction, an account of profits, delivery up, and any other remedy available for infringements of property rights.27 Additional damages may be awarded.28 In Claydon Architectural Metalwork Ltd v J Higgins & Sons Ltd secondary losses arising from a cash flow crisis precipitated by an infringement were not recoverable because it is not a reasonably foreseeable consequence. There was no evidence to suggest the defendant had knowledge of the claimant’s financial situation29.

Damages will not be awarded for any period during which a primary infringer does not know or has no reason to believe that the design right subsisted.30

1Section 226(4).

2Section 226(1).

3Section 226(2).

4Per Aldous J in the Pig Fenders case.

5[2000] EWCA Civ 513 (05 October 2000).

6Supra.

7 [2002] EWCA Civ 1119.

8 Judge Fysh had referred extensively to the approach taken by Lords Hoffmann and Scott in Designers’ Guild Ltd v Russell Williams Textiles Ltd [2000] 1 WLR 2416, [2000] UKHL 58, [2001] 1 All ER 700, [2001] ECDR 10, [2001] FSR 11. Lord Hoffmann put forward the interesting proposition that ‘copyright law protects foxes better than hedgehogs’. Judge Fysh, who had appeared as Leading Counsel in the Designers’ Guild case, did not explain, and Lord Hoffmann had not elaborated on this reference. The Court of Appeal solved the mystery, with Lady Justice Arden explaining that it comes from a fragment by the Greek poet Archilochus: ‘The fox knows many things, but the hedgehog knows one big thing’. This was quoted in The Hedgehog and the Fox: an essay on Tolstoy’s View of History by Isaiah Berlin (1953) as revised in 1978 (Phoenix) (1999) page 3. In remitting the case to the judge, Lady Justice Arden observed that he might find it necessary to consider whether design right law protects hedgehogs rather than foxes.

9 [1996] FSR 461.

10Section 227.

11 Supra, note 95.

12(1890) 2 QBD 99.

13 Section 9(3).

14 Section 259.

15 Section 215.

16 [2003] EWCA Civ 1805.

17 Supra, note 88.

18 Supra, Error: Reference source not found.

19 Section 224.

20 2000 WL 191163.

21Ford Motor Company, Cmnd. 9437. The manufacturer was found to be engaging in an anticompetitive practice within the meaning of the (now-repealed) Competition Act 1980 in refusing to grant licences over body panel designs, the practice being contrary to the public interest.

22Ford, asked for undertakings to deal with the problem identified by the then Monopolies and Mergers Commission, indicated a willingness to grant licences at a royalty rate of 60 per cent. BL were granting licences to make the Morris Marina exhaust pipes the subject of the Armstrong case (and other parts) at a rate that worked out at 16 per cent. The Comptroller usually starts at 5 per cent for a mechanical design (following the tariff for mechanical patents).

23 In Re Azrak-Hanway International Inc’s Licence of Right Application [1997] RPC 134, the Hearing Offices in the Patent Office declined to refer to the European Court the question of whether the licensing of right provisions were compatible with TRIPS.

24 See Roger Bance and R Bance & Co Ltd.’s Licence of Right (Copyright) Application [1996] RPC 667 (PO). See also Split Roller Bearing Co Ltd.’s Licence of Right (Copyright) Application [1996] RPC 225 (PO), Pioneer Oil Tools Ltd.’s Licence of Right (Copyright) Application [1997] RPC 573 (PO), E-UK Controls Licence of Right (Copyright) Application [1998] RPC 833 (PO), Stafford Engineering Services Ltd.’s Licence of Right (Copyright) Application [2000] RPC 797, and Sterling Fluid System’s Licence of Right (Copyright) Application [1999] RPC 775 (PO).

25 In Drylund Smith A/S v Turberville Smith Ltd [1998] FSR 135, Neuberger J considered a statement by the defendants that if they lost they would apply for a licence was not good enough.

26 In the Drylund Smith case, the Court of Appeal saw nothing in this provision to interfere with the normal principles on which a court would decide whether to award an interim injunction. [1998] FSR 774.

27 Section 229(2).

28 Section 229(3).

29 [1997] FSR 475 (Ch D) – a copyright case, although infringement of unregistered design right had been pleaded and the same principles would apply.

30 Section 233.

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