Dispute between directors over copyright infringement

Our client conceived an original idea for an indoor play centre along with the help of another partner. Together they set up a new company, that we’ll refer to as “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

Our client and his partner had both agreed that the partner would be responsible for creating Play Centre’s logo. The partner commissioned a design company. During the design process the partner had 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. The partner instructed the design agency to transfer the copyright ownership of the logo 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 logo’s 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 of two things. The first was unauthorised use of the logo by Play Centre. The second was infringement of the logo’s copyright by Play Centre.

The partner justified his claim. He argued that when he commissioned the work, he had acted solely as X Ltd’s director. X Ltd had paid the logo design company’s invoice, where the partner was a director and shareholder, and the initial invoice was mistakenly addressed to Play Centre. Therefore the ownership of the logo was vested in X Ltd, hence the partner had the right to initiate proceedings to stop unauthorised use.

The issues before the judge

The dispute hinged on answering the following questions: firstly, did the parties intend for the Play Centre to own the Logo copyright? Secondly whether Play Centre should 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 correspondence from the time 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 legally owned interest in the copyright for creating and assigning 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.

The Court’s decision

The judge gave no reliance to the fact that X Ltd paid the invoices for the Logo design. He 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 there to be no infringement. He 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.