Commentary on the recent decision of the Court of Appeal in THJ Systems v Sheridan has led to widespread concern among museums, galleries and public institutions that their ability to generate revenue through digital libraries has come to an end. Identifying the limits of the implications of the case is crucial.
The current financial landscape for museums in the UK
Museums and galleries in the UK have weathered years of increasingly complex and unpredictable financial pressures as they adapt to a changing funding environment. Fluctuating austerity measures, attendance figures that remain in post-pandemic recovery, and increased scrutiny over ethical funding have put urgent pressure on museums to strengthen their revenue streams. The 2017 Mendoza Review, which focused on museums accredited by the Arts Council England (ACE) found that, taking inflation into account, overall public funding reduced by 13% between 2007 and 2017. This year, a new report published by ACE shows worsening figures: taking inflation into account, the report finds that total public investment in accredited museums has decreased by 36.7% between 2009-10 and 2022-23. The report further underlines key challenges and risks including inconsistent and uncertain local authority funding, low morale and retention rates, and an increasing concern over the loss of specialist skills. As institutions navigate the complexity of these challenges, considering all options available to generate funding can often be a matter of financial survival.
Many institutions allow individuals and commercial and not-for-profit entities to purchase high-quality reproductions of images in a museum's collection for a pre-defined use. Affordable and/or open access to such images remains critical to academic research. Museums and galleries can establish policies which balance the need for academic access and the protection of valuable revenue streams. The Court of Appeal decision in THJ Systems v Sheridan does not prevent museums and galleries from finding this balance. While the application of contract and copyright law principles is intricate, museums remain free to charge for reproductions on a contractual basis in many circumstances. Crucially, the judgment has not changed the law on copyright in the UK – it is simply a reminder of originality thresholds as they have been assimilated into English law for several years and of the need for diligence in preventing the inadvertent misuse of copyright and Creative Commons symbols and ensuring consistency in institutional policies.
THJ Systems v Sheridan
THJ Systems v Sheridan considers the subsistence of copyright in a data analysis tool for financial markets. While this is an unusual ground to create implications for the cultural sector, the Court's analysis of the 'originality' requirement for copyright subsistence is of relevance.
The litigation arose over the expulsion of Mr Sheridan, the first Defendant, from a joint venture, Optionnet LLP, the second Claimant. THJ Systems Limited, the first Claimant, is the developer of a software called OptionNET Explorer (ONE) that had been licensed to Mr Sheridan and his company, Sheridan Options Mentoring Corporation (SOM), the second defendant. In the High Court, the primary focus was on whether it was appropriate for Mr Sheridan to have been expelled from Optionnet LLP. Two of the claims put forward by the Claimants, however, were for passing off and copyright infringement in ONE as a literary work and in the graphical displays generated by ONE, as artistic works. The infringement claim was based on the Defendants' continued use of ONE after the contested termination of their licence. Although the Court dismissed the claims for passing off and copyright infringement, it confirmed that copyright subsisted in constitutive elements of ONE.
The appeal focused only on the graphical displays, specifically the risk and price charts, which the Claimants argued qualified as graphic works under s. 4(1)(a) of the Copyright, Designs and Patents Act 1988. The Defendants appealed on two grounds: first, against the judge’s use of the "skill and labour" test to determine originality in the risk and price charts, and second, against the judge's conclusion that the risk and price charts were sufficiently original to merit copyright protection. The Court of Appeal upheld the appeal finding that, despite the High Court's conclusion on originality being correct, it had used the wrong test to set the originality threshold.
Originality – creative freedom and technical constraints
The case reminds us that to be original, a work must be "the author's own intellectual creation", a threshold originating in the jurisprudence of the CJEU (including Infopaq). This test is more rigorous than the traditional "skill and labour" test originating in English law, which museums have relied on, and only required the author to have created the work using their own skill, judgment, and individual effort, and not to have copied it from other works. That said, it has been the case that, for example, a simple portrait photograph may satisfy the CJEU's test, provided that the author stamps the work with their personal touch.
In applying the correct test in THJ Systems v Sheridan, the Court re-emphasised key aspects of the test for originality. Despite being a more demanding test, it is an objective one, not one of artistic merit, and the low degree of creativity in this case meant that the corresponding scope of protection was narrow. The crux of the analysis lies in identifying a level of creative freedom exercised by the author who must have expressed "their creative abilities in the production of the work by making free and creative choices so as to stamp the work created with their personal touch." The assessment of this final criterion requires an intricate analysis and the judgment highlights two related questions: first, whether the reproduction is naturally dictated by technical considerations, rules, or constraints; and second, whether those technical constraints leave the author of the reproduction any room for creative freedom.
Originality and reproductions of works of art in which copyright has expired
For the duration of its subsistence, copyright in a work is owned by its author (or if deceased, their estate) unless or until it is otherwise assigned or licensed, e.g. to a museum. The existence and terms of an assignment or licence is the primary factor in determining whether museums can make reproductions. Any further questions regarding the museum's copyright, if any, in the reproduction, are secondary.
When copyright no longer subsists (i.e. for works that are now in the public domain), reproductions are not restricted and the primary question becomes whether the reproductions themselves present the characteristics necessary to attract their own copyright. In most cases involving reproductions of three-dimensional works in digital images, the reproduction is likely to give the author copyright due to the margin of creative freedom exercised in the positioning, composition, lighting, and angle of the shot. However, the margin for creative freedom becomes significantly narrower for two-dimensional reproductions of two-dimensional images, and this is where the application of the test summarised in THJ Systems v Sheridan becomes more complex, and context-sensitive.
Some reproductions are passively automated. This includes, for example, machine-generated scans of works on paper (such as manuscript illustrations) which are distributed without further editing or manipulation, leaving very little margin for creative freedom. Other reproductions require the creative input of photographers, graphic designers and digitisation experts to manipulate the image. The creative input may extend to editing, formatting and balancing the colour schemes of the image. It is precisely the judgment exercised in those intricate choices that explains why not all reproductions are created equal, and why the high-quality images available in museums' digital libraries are more sought-after than others. Accordingly, a 'one size fits all' approach would overlook critical nuances, making it incompatible with a comprehensive and accurate copyright analysis.
Charging for reproductions – a policy decision
Museums and galleries must carefully review the symbols attached to digital images to ensure that they do not inadvertently misrepresent or imply that copyright subsists where it does not. However, this does not preclude the sale or use of reproductions outside of intellectual property frameworks. A work entering the public domain does not, in itself, trigger a prohibition to create or charge for reproductions.
Reproductions in which no copyright subsists can be, and often are, sold on terms similar to those found in copyright licences. The terms clearly frame the purpose of the use of the image and the resulting fee reflects the scope of such use. Exceeding the agreed use then simply constitutes a breach of contract, rather than an infringement of copyright. Agreeing restrictions around the use of reproductions gives museums and galleries control and provides a means for a dialogue with the intended user. If a retail outfit applies a museum's high-resolution image to a commercial product designed for widespread distribution, this dialogue allows the museum to obtain an acknowledgement and compensation for the creation of the reproduction and, importantly, for the care invested to preserve the original artwork that in turn makes it a sought-after piece for merchandising. Charging for reproductions can also simply fund the existence of the digital library. The resources invested by museums for the production, storage, and processing of images in digital libraries are substantial and often integrated in reproduction charges.
Access to images is understandably crucial to academic research, and museums and galleries remain free to waive or discount fees for access to their digital libraries for academic use. This is a policy decision which can be guided by museums and galleries' mission.
Conclusion
THJ Systems v Sheridan, and the commentary and scrutiny it has provoked, is a powerful reminder that museums must diligently review the use of copyright and Creative Commons symbols on their websites, publications, and the products sold through their commercial entities. It is also a reminder that museums must continue to make consistent policy decisions when charging for access to high resolution images of works in their collections. THJ Systems v Sheridan provides guidance in the assessment required when making this choice, but it certainly does not prevent such charges.
Mishcon de Reya's Art Law and IP teams are experienced in negotiating licence agreements, structuring institutional policies, and advising on both contractual and intellectual property disputes and regulations. Our teams' rich experience and specialist expertise allows us to provide pragmatic advice to future-proof policies and revenue streams for museums and other institutions. Please contact the Art Law or IP team if you require any further information or assistance.