In brief
- UK importers and distributors of goods may be liable for IP infringement even if they were not involved in creating/designing goods and believed IP matters were their supplier's responsibility.
- While knowledge is not required for primary copyright infringement, it is for acts of secondary infringement such as importing, possessing or dealing with an infringing copy. A secondary infringer can be fixed with knowledge by putting them on notice of the claim.
- A successful claimant can elect between an account of profits and damages. Here, the profits were less than £1,000, making damages the preferred option. However, the judge gave a preliminary view that the 'innocent infringement' defence could significantly limit the claimant's recovery
Background
The Intellectual Property Enterprise Court (IPEC) has handed down its decision in a copyright infringement and passing off claim brought by Shantell Martin MBE and Found the Found LLC (Found) against an Argentinian winery (BSH), its exclusive UK importer and distributor (GM Drinks), and GM Drinks' director, Marc Patch, in relation to their use of artwork on wine labels.
Ms Martin's work has a distinctive style which has also been used in a number of collaborations and endorsement deals with brands such as Puma, North Face, Tiffany & Co., Absolut and The Financial Times. In 2017, she created the following wall drawing (around 4m x 12m in size) as part of a solo exhibition in New York, the copyright in which had been transferred to Found. A picture of her work can be found at paragraph 2 of the judgment here.
BSH produced wine under three different labels (below) in Argentina which GM Drinks imported and sold in the UK. The second and third labels were created by BSH's label designer in response to complaints from Ms Martin that the first label, and then the second label, copied her work.
| First label |
Second label |
Third label |
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Found claimed copyright infringement, and Ms Martin claimed infringement of her moral right to be identified as the author (which was not included in the IPEC List of Issues for trial and so did not progress) and passing off.
IPEC decision
Copyright infringement
The first label – clear copying
The claimants provided the court with a colour-coded side-by-side comparison (below) of Ms Martin's work and the first label to demonstrate the similarities, which the court found helpful. The judge held that the first label was clearly a copy of Ms Martin's work, with particular features that were "identically reproduced and… arranged in space identically".
| First label (the case of bottles) |
Segment of the work |
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GM Drinks was therefore liable for: (i) issuing copies of the work to the public (primary liability); and (ii) importing, possessing in the course of business and selling the first label (secondary liability). The latter arose from the point at which they knew or believed the label to be infringing i.e. shortly after April 2020 when Ms Martin first complained. Mr Patch, GM Drinks' director, gave evidence that he was unaware of Ms Martin or her work before this date. By this date, the vast majority of the first label wine had already been sold.
The second and third labels – successful redesigns
Following Ms Martin's initial complaint, BSH's label designer created new versions - the court said these had moved far enough away from the work not to include any of Ms Martin's intellectual creation, successfully navigating the line separating "… that degree of resemblance which is too general to count from that which is too close to be allowed".
In particular, the second and third labels lacked the specific elements that made Ms Martin's work distinctive – namely, the mixing of humanoid faces with geographical elements which were devoid of perspective.
Passing off
Ms Martin's passing off claim was made on the basis of false endorsement and the inherent deceptiveness of the bottles.
The first label
GM Drinks was found liable for passing off.
Ms Martin had substantial goodwill in the UK, including through showcasing her work at the Tate Modern, a significant social media following and numerous brand collaborations/endorsements targeting the UK. This goodwill existed in Ms Martin's entire artistic output and signature style.
The court also found clear misrepresentation. There were two instances of UK consumers being misled by the first label which confirmed the judge's view that it was "sufficiently close to Ms Martin's work so as to create a misrepresentation that she has endorsed the First Label".
This misrepresentation caused damage to Ms Martin's existing licensing and endorsement business and to the distinctiveness of her signature style.
The second and third labels
However, these labels were not sufficiently similar to Ms Martin's work or her artistic style to amount to misrepresentations. Many of the labels' elements, such as the barrels and cacti, were not present in Ms Martin's work at all, distinguishing them from her work and style.
Joint liability
The claimants claimed that BSH and Mr Patch were jointly liable for GM Drinks' infringing acts.
Relying on the recent Supreme Court decision in Lifestyle Equities v Ahmed (which we reported on here), the court held that BSH and Mr Patch were jointly liable for copyright infringement by the first label wines, but only after they became aware of Ms Martin's work following her notification.
Financial recovery
As this was a split trial, the court's decision was on liability only. However, the claimants indicated they would seek a damages enquiry rather than an account of profits at the quantum stage as the profits on the first label wine were only £924.
The judge gave a preliminary view that he thought the 'innocent infringement' defence for copyright infringement would significantly limit damages recovery in this case because the defendants did not know, and had no reason to believe, that copyright subsisted in the work until notification by Ms Martin, by which time the majority of the first label wine had been sold. However, he did not set out his reasoning for coming to this view.
The judge therefore proposed that the quantum proceedings be transferred to IPEC's small claims track (which typically handles damages under £10,000).
Takeaways
Liability for IP infringement can extend far beyond the original creator of the infringing material. The case establishes that ignorance of IP rights, while potentially limiting damages in certain circumstances, provides no complete defence to infringement claims. Businesses should implement robust IP clearance procedures, including understanding where designers source their inspiration and securing comprehensive indemnities from suppliers.
Establish knowledge quickly – rightsholders should fix infringers with knowledge of their rights and claims as early as possible. The knowledge-based liability distinction for some copyright infringements means that continued dealing after notification significantly increases defendants' exposure to damages claims. However, for rights other than copyright, it is important to take into account rules around making unjustified threats of IP infringement, particularly to 'downstream' infringers.
Gather comprehensive evidence early – gather trap purchases of all product variants (the claimants were criticised for not doing so) and document all instances of consumer confusion (the claimants could only rely on instances for which they had documentary evidence).
Consider early settlement – while IP law provides protection, litigation costs and potentially limited damages recovery in lower-value disputes often make early resolution preferable to protracted proceedings.