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Copyright damages - primary or secondary infringement

 
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twentieth
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PostPosted: Thu Aug 13, 2015 1:30 am    Post subject: Copyright damages - primary or secondary infringement Reply with quote

Hi,

I'm a partner in a small firm that uses my artwork and designs on the products we make. Towards the end of 2013, I finished a set of 6 designs which we reproduced on our own products, which went on sale at that time. I have evidence of the time of creation of my designs, along with materials that support provenance and we have sales records.

Those 6 designs have been copied by another firm. The merchandise that the designs appear on are made overseas (99% sure in India). I have trawled through 1000's of product/manufacturer catalogues and listings on Alibaba, but cannot find my designs on open sale - I suspect that the infringing (UK) firm has had the products custom made with my designs on them, but it is only a suspicion and may be difficult to prove.

I understand that if a firm imports infringing goods unwittingly, they are only secondary infringers. It is also my understanding that once the other firm is made aware of the infringement, they become primary infringers.

A Letter in Claim was sent to the firm a while back - we've had no response and the infringing items are still for sale. So it looks as though we'll have to go to court.

My query regards damages. As the firm are now primary infringers (i.e. they are aware of our copyright from the Letter in Claim), from when are damages calculated? Is it from the time they started selling my designs, or from the time that they received notice of copyright (the Letter in Claim)?

The firm in question are doing well from my designs - they sell at half the price we do... and sell on the same sales platforms we sell on too (ouch!). The infringement has had a detrimental effect on our sales and credibility - we're in the ridiculous position where we cannot compete with our own (infringed) designs.

I'd be grateful if anyone can advise on how I calculate damages?
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AndyJ
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PostPosted: Thu Aug 13, 2015 8:23 am    Post subject: Reply with quote

Hi twentieth,
You are not quite correct about the distinction between primary and secondary infringement and the liability consequences of them.

But before I cover that issue, I am not entirely clear about whether you wish to pursue this as copyright infringement or design infringement. I'm assuming it's the former as it doesn't sound as if you've registered the designs of your products, and unregistered design right does not apply to the surface decoration of an article. I am also assuming that your artwork has been exactly copied and that it is not a case of something which looks a lot like you designs. As an aside, in future you should consider registering your designs as this will make enforcement quite a lot easier, since with design right infringement, the other party cannot claim ignorance of the fact a design was registered as a defence.

Secondary infringement occurs in the following circumstances:
Quote:
22 Secondary infringement: importing infringing copy.

The copyright in a work is infringed by a person who, without the licence of the copyright owner, imports into the United Kingdom, otherwise than for his private and domestic use, an article which is, and which he knows or has reason to believe is, an infringing copy of the work.

23 Secondary infringement: possessing or dealing with infringing copy.

The copyright in a work is infringed by a person who, without the licence of the copyright owner—
    (a) possesses in the course of a business,

    (b) sells or lets for hire, or offers or exposes for sale or hire,

    (c) in the course of a business exhibits in public or distributes, or

    (d) distributes otherwise than in the course of a business to such an extent as to affect prejudicially the owner of the copyright,
an article which is, and which he knows or has reason to believe is, an infringing copy of the work.

24 Secondary infringement: providing means for making infringing copies.
    (1) Copyright in a work is infringed by a person who, without the licence of the copyright owner—

      (a) makes,

      (b) imports into the United Kingdom,

      (c) possesses in the course of a business, or

      (d) sells or lets for hire, or offers or exposes for sale or hire,

    an article specifically designed or adapted for making copies of that work, knowing or having reason to believe that it is to be used to make infringing copies.

    (2) Copyright in a work is infringed by a person who without the licence of the copyright owner transmits the work by means of a telecommunications system (otherwise than by communication to the public), knowing or having reason to believe that infringing copies of the work will be made by means of the reception of the transmission in the United Kingdom or elsewhere.


The key part is, as you have identified, the knowledge of the alleged secondary infringer. Now that you have informed them of the fact that copyright exists in the artwork, they become liable for secondary infringement. It doesn't make them liable for primary infringement unless you can show that they authorised the making of the articles concerned (see Section 16(2) of the Copyright Designs and Patents Act). For instance if they sent an example of your product to India or where ever and asked for copies to be made, then not only would they be liable for primary infringement, it is possible that this would amount to criminal infringement.

Turning to damages and the other remedies, you will probably need to seek an injunction to prevent your rival from continuing to import and sell these copies, and an order for any current stocks to be seized and destroyed. In view of the fact that their sales are causing you financial damage which could affect the viability of your business, you could apply for an interim injunction pending the full trial, although this would need to be strongly argued to be successful as the courts are reluctant to grant interim injunctions if the losses you are currently sustaining can be recouped at the end of the trial as part of the damages order. As far as damages are concerned, unless you can show that the other company did have reason to believe copyright existed (because they were the ones who authorised the manufacturing) then their liability for damages only started from when they received your letter. You have two options for calculating the damages you wish to claim: the losses you have sustained as a result of lost sales and any licence fees you might have earned, or an account of profits. An account of profits means the profits the other company have made as a result of selling the copies of your goods. I imagine at this stage you will not have any data on how many sales they have made and so you cannot quantify the damages. Therefore one of the other things you may want to consider is to ask the court is for something called an Anton Piller order if you think the other company is likely to destroy or conceal the records of sales and correspondence with their supplier which might show that primary infringement was involved. Also if they continue to ignore your letter then you may well be entitled to aggravated damages due to flagrancy. And if they are selling their products through websites such as Ebay or Amazon, use the site's takedown procedures to get the listings removed.

All of this suggests that you need get a solicitor with IP experience on board. But before you do that, I suggest that you speak to either your local trading standards office, or the trading standards for the area where the other company is based. They can advise you if this might constitute criminal infringement, and if so they have the powers to obtain a search and seizure order and carry out a prosecution on your behalf, and of course this will not cost you anything. A criminal prosecution would not automatically entitle you to damages, but it is possible that as it has been a relatively short time since you sent the letter of notification, the amount of damages could be quite small any way.

And finally if this all sounds like a lot of hassle and expense (which it probably will be) another alternative is to try and negotiate a licensing deal with the other company, under which they pay you a royalty for every sale they make. Since they would remain competitors, you would need to consider how to divide up the market place. For instance you might have exclusive rights to sales in the UK and they have the rest of Europe, or worldwide less UK, or some other formula. However clearly for this option to be possible, they need to acknowledge your intellectual property rights in the first place!

Good luck.
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twentieth
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PostPosted: Fri Aug 14, 2015 12:31 am    Post subject: Reply with quote

Thank you for your detailed response, it is very much appreciated.

It looks as though we will have to delve a little further to support our belief that the infringement is primary. I think we have a reasonable chance of doing so, but further evidence would certainly help. We will discover more at disclosure I presume.

Yes the items in question are copies, not just similar. The quality isn't as good as ours, but it seldom is with copies. The designs are quite distinct, so there can be no defence of coincidence. At first glance the infringing items look the same as ours.

Thank you again, your opinions have been taken on board.

I'll update if and when...
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twentieth
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PostPosted: Fri Aug 28, 2015 10:22 pm    Post subject: Reply with quote

Just a little update:

The infringing firm have decided to make a fight of it and are denying that copyright exists in the designs, or if it does I'm not the owner. *sigh*

So it does look like things will go to court. I have been in contact with an IP lawyer and will probably bring them on board at a later date, as we can't afford them 'from cradle to grave' in the case.

The lawyer for the other side is asking for proof of my copyright, but I am reluctant to give too much away at this point. I can show when my goods went on sale (which was 18 months before the infringer) and also have sales invoices from that time. I'm happy to provide evidence of these, but don't want to go into detail as to how I created the designs at this point, particularly when I've had absolutely no explanation as to how the infringer came about my designs and is selling goods with my designs on them.

Would my reluctance to show how I created the designs at this point be seen as an unwillingness to negotiate/settle? To be clear, I'm happy to provide detailed evidence if matters to proceed to court, or if there seems a willingness to negotiate, but giving away the nuts and bolts of my designs at this point could prove detrimental as currently only I have that knowledge.

The case will be heard in the IPEC as I'm doubtful damages would exceed £10k. Clearly I've got to be sensible about this and not throw thousands at the case, but the infringements are affecting my sales of those designs quite significantly.

I do not want to enter into a licence agreement as our goods are unique and quite niche - there's not enough mileage in them to split 2 ways, particularly when the infringing firm sell on the same sites as me.

We do not sell flashing badges, but our scenario is similar to that case.

Thanks in advance.
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AndyJ
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PostPosted: Sat Aug 29, 2015 5:16 pm    Post subject: Reply with quote

Hi twentieth,
I don't think your reluctance to reveal the evidence for your assertion that you own the copyright in this artwork indicates unwillingness to settle the matter, but it may encourage the other side to think you are buffing. I am concerned that they should be saying that copyright doesn't exist. I think it is very clear that copyright exists, but obviously while the matter of the rightful owner remains in limbo, they are clearly able to avoid addressing the issue head on.
If you are going to handle things without a lawyer, at least initially, then it is important that you don't damage your case by failing to follow the pre-action protocol to be found in the Civil Procedure Rules. These rules require you to provide sufficient information to allow the other party to make a sensible assessment of their position, and thus decide whether to seek a settlement or deny your claim. Establishing that you have the authority to bring the claim (because only the owner of the copyright can do this) is thus fairly fundamental to this process.
That said, you do not need to provide the actual evidence at this stage if you don't want to. It is sufficient to say "I am the owner of the copyright and I will produce x, y and z to support this assertion". Exactly what x, y and z are will depend on the circumstances, so it might be computer graphics files, drawings, sketches, photographs etc. The invoices you mention will help to establish a priority date, but obviously don't prove ownership.
While I entirely understand your reluctance to spend lots of money on lawyers, getting a lawyer involved in the early stages may make the other side see sense a bit more quickly, and agree to settle, thus avoiding the later costs. Ironically taking the claim through the small claims system of the IPEC is well within the capability of a litigant in person (ie someone not represented by a lawyer) because the judge will ensure that your inexperience does not place you at a disadvantage.
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twentieth
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PostPosted: Sat Aug 29, 2015 8:26 pm    Post subject: Reply with quote

Thank you Andy, your comments are really helpful.

I do think ultimately I'm being strung along by the other side - they have offered no explanation as to why/how they are in possession of my designs and it is very cheeky of them to continue. I may be bias, but it's quite obvious, looking at the originals and the copies, which are the real thing and I have provided photographs of my products to the other side's lawyer to demonstrate this. The copies look like poor quality photocopies with too much carbon used, so the fine detail is blurred and there are typographical errors.

The designs are graphic designs, which I created, although I do work as a traditional artist too and have original artworks for sale alongside the graphically designed goods. Whilst I'm/we're not 'famous' in the real sense of the word, we've been in business a few years and have a following through social media, so I guess it comes as a shock to have my 'credentials' questioned by the other side's lawyer.

I shall have a think about how best to respond to the other side. I have been offered an initial conference with an IP barrister, so shall perhaps have to bring them on board sooner and go it alone if/when it comes to court.

Thanks again.
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