Can copyright be used as a weapon in a contractual dispute?

[georgepindurka]

I'd appreciate some expert advice!

I recently had to produce an illustrated booklet for a client. The booklet is distributed for free, so it is non-profit. I subcontracted a designer, who also subcontracted his partner (partner in the relationship sense!) to do some illustration work. The project was completed, the booklet printed and distributed. The designer let me down badly by failing to produce the photographic work he had quoted for, so I refused to pay him for them (1000 pounds). The job required more illustration work than contained in the original quote and I asked the designer to invoice me for this work. He then took his phone off the hook in annoyance because of the photos. Then two months after the project was finished, having heard nothing from the designer, his partner, with whom I had NO contractual relationship whatsoever, then sent me an invoice for all the illustration work, including work already invoiced by the designer, at a very inflated rate (she basically added on the money i hadn't paid her bloke for the pictures.) I refused to pay her directly and insisted that everything go through the designer as originally agreed.

OK, that is the background, it is a contractual dispute about who should be invoicing for what. Not a copyright issue.

Except ... and this is what I want to ask about ... the designer is now saying that because the illustrator has not been paid what she is asking (she has no written contract with me), the people who commissioned the booklet are therefore in breech of her copyright. He is threatening to take them to court (or so he says) in the hope that I'll be forced to cough up. So he is using the copyright issue as a weapon in a contractual dispute about money.

My question is, should I be worried? I'm happy to go to the small claims court but defending a copyright claim would be very much more expensive I imagine. They aren't actually interested in copyright but see it as a way of exerting pressure. Thoughts anyone?

[AndyJ]

Hi George,
This kind of situation can often be messy when there are no clear written agreements all the way up and down the contractual chain. If you have written briefs and quotations involving the work you commissioned, this will greatly assist the process of unravelling who may be in default of their contractual obligations.
Yes, the subcontracted partner will own the copyright in any artwork she produced, in the absence of any written assignment of that copyright over to you or to the ultimate client. But in accepting the commission, she effectively agreed to an implied licence for your client to use her work in the brochures. OK, so the details of any such licence may be vague (for how many brochures, for what perios of time etc) but the courts will definitely accept there was a basic, non-exclusive licence for her work to be used in the way you have described. Clearly this is tied up with the payment issue, in that if she is not/was not paid for her work then the implied licence will probably not be operative. But that doesn't give her the option to charge whatever figure she chooses.
So no, I don't think you need to be woried at this stage about the copyright issue. Make sure you keep your client in the loop as they are ultimately the people against whom the illustrator would have the 'best' claim of infringement. But really if the contractual issue can be settled by arbitration or in the small claims court, such that the illustrator is paid a fair amount for the extra work - and here your are right, she should be dealing with this through the designer, not to you directly - then the copyright issue falls away. The small claims court cannot deal with straightforward copyright infringerment claims, but I think that by resolving the basic contract issues, that won't cause the copyright issues to get in the way.

If you want some extra reading over the weekend by way of background on the law, there have been two recent court cases involving issues somewhat similar to yours. The first Celebrity Pictures Ltd & Anor v B Hannah Ltd [2012] EWPCC 32 involves a chain of people and there was an absence of clear contracts, and the second Wilkinson v London Strategic Health Authority [2012] EWPCC 48 (beware, much heavier legal stuff than the first article! You may want to skim read it) looks at how the courts tackle the issue of implied licences when the contracts fail to specify such matters adequately.

[georgepindurka]

Andy, great response. Thanks!

I'm a small business and can do without the hassle. My real worry is that if they were to go to copyright court (sorry to be so unlegal in my terminology!) it will cost me an arm and a leg to defend myself. But presumably, it would cost them quite a bit to instigate proceedings. And again, showing what a liturgical virgin I am, if they were to take me to copyright court and I was to win, would they have to pay my legal fees?

Everyone who has looked at the dispute agrees that they are being profoundly unreasonable (including the people i worked for). But I'm worried that we might get burned by a kamikaze action!

[typonaut]

I'm a small business and can do without the hassle... But I'm worried that we might get burned by a kamikaze action!

We don't know what the amount in dispute here is, but what you have to weigh up is whether it is worthwhile pursuing or defending a claim for the sake of the disputed amount. What is probably clear to you is that the relationship you have had with the supplier has probably irrecoverably broken down - which is probably a big enough problem in its own right. So, having a court battle is certainly not going to damage the relationship any further, but it's not going to build any bridges either.

I have had the unfortunate opportunity to see what the inside of a court looks like in contractual disputes a couple of times. In one case we were assigned an afternoon slot, went in, came out a couple of hours later with the matter resolved. In the other case we had two hearings that were adjourned for various reasons (with nothing happening), another afternoon of evidence/argument which was adjourned, and another full day of evidence/argument to reach the conclusion of the case. All for the sake of around £3,500. There was something like six months between the first hearing and the last, and well over a year between the filing of claim and the judge's decision.

What you have to ask yourself is whether you have the time/stamina to go through that process in order to prove your point (in my case the bridges had already been burnt and the business had effectively terminated, so it was more or less the collection of business assets and winding up of the business).

I think you'd probably be better off pursuing your own business interests and looking after your existing clients. But this is dependent on the sort of money involved. Certainly the onus is on you to protect your existing client from any claim that may be pursued by your suppliers - so you don't want to sour that relationship.

Andy is probably right to say that there is an implied right to use the material, within the contract. There doesn't seem to be any scope for you to claim that the person doing the work for you was an employee (and you could therefore claim the copyright was yours), since you also say you had no relationship with them, contractual or otherwise.

Probably the moral of this story is: when you have an agreement with a supplier about the supply of artwork, etc, make sure you know what the copyright status is by having an explicit contract clause that deals with that subject matter (ie a separate agreement whereby they assign all moral/legal rights to you, or a clause in your purchase order that has the same effect).

[AndyJ]

I entirely agree with Typonaut on the soul-destroying nature of full-blown litigation, but in this case, it's up to the illustrator to decide whether that's a route she wants to go down concerning the copyright issue. Hopefully she will get some legal advice which will dissuade her. This sort of matter is ideal for mediation or arbitration.
I would however disagree with two things Typo said. Firstly although there is most likely to be an implied licence for your client to use the works, that is only a licence, and so the statement "you could therefore claim the copyright was yours" goes too far, because a court will not imply an assignment when a licence is the right thing in the circumstances, absent evidence that that was what the parties intended.
Secondly although he is right that in future you should try to resolve all these issues beforehand in the contract paperwork, you cannot include a clause in which "they assign all moral/legal rights to you" as only the copyright owner's legal rights are assignable. Moral rights are explicitly not assignable (vide section 94). However they can be waived.

[typonaut]

I entirely agree with Typonaut on the soul-destroying nature of full-blown litigation, but in this case, it's up to the illustrator to decide whether that's a route she wants to go down concerning the copyright issue.

This is true, but the consequences of that decision will have an impact on the original poster and their client in turn. So, the original poster really has to weigh up the risk of that process - and the implied contractual dispute.

So it's either pay up, against one's better judgement, or take the risk that you are going to be sued (and the consequent impact that may have on your client). I think the important part here is the impact on third parties - do you want to risk that relationship over what may be a small sum? Although, the other part of the equation is will the illustrator sue, and even if they do all you'll have to do to settle then is pay them what they have asked (if that is reasonable), plus filing costs and interest. If you thing what they have asked for is unreasonable you can make a counter offer, and if they refuse then you're going to have to battle it out in court.

Depending on the sums involved, I'm not entirely sure that arbitration offers a cheaper solution (to the process) compared to the County Court.

I would however disagree with two things Typo said. Firstly although there is most likely to be an implied licence for your client to use the works, that is only a licence, and so the statement "you could therefore claim the copyright was yours" goes too far, because a court will not imply an assignment when a licence is the right thing in the circumstances, absent evidence that that was what the parties intended.

Slight misunderstanding here, what I meant was that, in the context of an employer/employer relationship the original poster could claim the copyright as their own - but there is no chance of that, because there is no such relationship between them.

Secondly although he is right that in future you should try to resolve all these issues beforehand in the contract paperwork, you cannot include a clause in which "they assign all moral/legal rights to you" as only the copyright owner's legal rights are assignable. Moral rights are explicitly not assignable (vide section 94). However they can be waived.

Yes, sorry, my mistake, typing/thinking too fast.