Directors dispute: logo ownership

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Directors dispute: logo ownership

Our client with a partner conceived an original idea for an indoor play centre.  Together they set up a new company, that we’ll call Play Centre. Each director owned equal shareholdings. Concurrently, our client’s partner was also a director and shareholder of “X” Ltd, a separate company. X Ltd brought a claim  for ownership of the logo against Play Centre.

Events leading up to the infringement claim

Both directors agreed that the partner would be responsible for creating Play Centre’s logo. The partner commissioned a design company. During the design process, unknown to our client, the partner identified himself as a director of X Ltd, not Play Centre.

When the design agency completed the logo, the partner instructed the agency to issue the final invoice to Play Centre.  However, the business was new. So the partner offered to pay the invoice through X Ltd. The directors agreed that once Play Centre had sufficient funds, X ltd would be fully reimbursed. Unbeknown to our client, on the partner’s instructions, the design agency transferred copyright ownership to X Ltd.

Unfortunately, Play Centre failed to attract sufficient business, and was not profitable.  Subsequently, during a shareholders’ meeting, the partner resigned as a Play Centre director. During this meeting the directors agreed that X Ltd would invoice Play Centre for the money X Ltd had paid the Logo design company

Immediately after this shareholders meeting, the partner started demanding, through emails and letters, large amounts of money to transfer the Logos copyright ownership to Play Centre. The partner further claimed that X Ltd was the lawful owner of the Logo’s copyright.

Infringement claim

The claim against our client comprised:

  • Unauthorised use of the Logo by Play Centre; and
  • Infringement of  the logo’s copyright by Play Centre

The partner justified his claim, arguing:

  • When commissioning the work, the partner acted solely as X Ltd’s director;
  • X Ltd paid the logo design company’s invoice, where the partner was a director and shareholder;
  • The initial invoice was mistakenly addressed to Play Centre;
  • Logo ownership vested in X Ltd;  hence
  • The partner had the right to initiate proceedings to stop unauthorised use.

The issues before the judge

The dispute rested on the following:

  • Did the parties intend for the Play Centre to own the Logo copyright; and
  • Should Play Centre be a perpetual exclusive licensee to the Logo copyright?

Gannons’ arguments

We argued that:

  • In the absence of a written agreement commissioning the Logo creation, and
  • An express term dealing with Logo ownership,

The court should consider the partner’s directorship during the commissioning and after the Logo creation.

Our client gathered contemporaneous correspondence to support our arguments. The correspondence showed the payment arrangement with X Ltd was based on a relationship of trust between the parties.

The design company:

  • Was the owner of the legal interest in the copyright when the Logo was created;
  • Assigned the Logo’s ownership to X Ltd and the partner.

However the partner knowingly took ownership of the Logo when he was aware it would be detrimental to Play Centre’s interest.

Infringement claim: the Court’s decision

The judge:

  • Gave no reliance to the fact that X Ltd paid the invoices for the Logo design.
  • Agreed that X Ltd would have no interest in the Logo unless:
    • There was an agreement in place that Play Centre would reimburse X Ltd at a later date.

Accordingly, the judge:

  • Found no infringement;
  • Agreed our client should pay the invoice, to
    • Retain ownership of the Logo’s copyright.

Conclusions

If you do not have appropriate documents in place you may not be able to establish ownership of intellectual property rights.