An innocent mistake?

Late 2012, the Office for Harmonization in the Internal Market (OHIM) invalidated two similar Community trademarks (CTMs) of the “innocent” halo logo, used by Fresh Trading Ltd to market its well known “innocent” brand of smoothies and health foods. CTMs are trademarks that have protection throughout the EU, including the UK.

The decision is interesting as it acts as a reminder of the importance of ensuring ownership of the copyright subsisting in a logo design, underlying a trademark registration. It further highlights a possible difference in thinking of OHIM compared with the UK IPO and the UK courts.

Transferred right?

Deepend London Ltd were approached to create a brand for Fresh’s smoothie products in 1998. Heads of terms stated that Deepend would receive shares in Fresh as remuneration and for transfer of “intellectual copyright” to Fresh. It was unclear whether these were signed by the parties, but certainly Fresh could not produce a signed version.

The logo was designed by Deepend in 1999 and CTM applications were filed in 2000. In 2001, Deepend went into liquidation. At no point did Fresh remunerate Deepend for the work, nor did it provide Deepend with the proposed share allotment.

Deepend Recovery, a separate company, acquired the copyright in the logo, out of the liquidation, in 2009. One ground for having a CTM cancelled is that its use may be prohibited due to pre-existing copyright, and Deepend argued that the CTMs were an exact copy of the logo. In response, Fresh pointed to the unsigned heads of terms as evidence of the intention to transfer ownership of the copyright. Further, even in the absence of the heads of terms, Fresh had a beneficial interest in the logo which implied an equitable assignment or licence of the copyright in its favour.

The Cancellation Division relied on s 90 of the Copyright, Designs and Patents Act 1988, which states that an assignment of copyright is ineffective unless it is in writing and signed by or on behalf of the assignor. Consequently, its decision was that copyright in the logo remained with Deepend, in the absence of properly executed heads of terms. OHIM was not convinced by the argument for an equitable licence or assignment.

It was decided that the CTMs were an identical reproduction of the applicant’s copyright work and as such, the applicant’s request for a declaration of invalidity was well founded and the CTMs were declared invalid in their entirety.

The UK position

The decision is apparently at odds with the common law approach to the equitable assignment of copyright where a work has been commissioned. In R Griggs Group Ltd v Evans [2005] EWCA Civ 11 the court considered a logo commissioned for the Dr Martens brands. An implied term of transfer of ownership in the copyright was read into the parties’ agreement, which was silent on the issue. It was held that the term was required to give business efficacy to the contract.

However, three key issues distinguish the present case: (i) national law is deemed to be a matter of fact in OHIM proceedings, therefore the UK precedents would have required to be proved to OHIM by Fresh – in this case, Fresh failed to make out a persuasive case; (ii) there was an executed contract in Griggs, whereas none was produced by Fresh; and (iii) the commissioned artist was paid in Griggs whereas no payment of any sort was given to Deepend. Remuneration for the creation of a work has been given particular weight in UK law, and its absence may have been fatal to Fresh’s claims.

Implications

It will be interesting to see where this decision leaves Fresh and its “innocent” brand in the UK. Fresh’s trademarks for the word “innocent” and their UK registered trademark for the logo are unaffected by OHIM’s decision. The logo continues to benefit from trademark protection in Fresh’s biggest market. However, it is noted that an attack on the validity of Fresh’s UK registered trademark for the logo was made and withdrawn in 2009 (possibly the proceedings were stayed pending conclusion of the OHIM proceedings). There is also the issue of goodwill having been generated in the brand over the last 10 or so years. As this decision has now been appealed by Fresh, uncertainty for the company may continue for some time.

For brand owners, there is a lesson to be learned. Often companies adopt a lax approach to securing IP rights in design work, especially when brands are in their infancy and not yet considered key business assets. There is a belief that the company will own the brand design, or at the very least have a licence to use it.

As highlighted above, UK case law would support a different outcome and the UK IPO may well adopt a different approach to OHIM. Nevertheless, the decision of the Cancellation Division is a stark reminder that nothing should be left to chance, and it is very important to secure all IP rights in a brand and to use properly drafted and executed agreements to achieve this.