A party seeking to restrict another's commercial activities must consider whether such terms are normal in similar, factual and contractual circumstances.
The charities and social businesses we work with often run into difficulties when they engage external designers to produce logos. They often fail to appreciate that where a self-employed consultant creates a copyright work for them the copyright will be owned by the consultant unless there is an agreement that copyright will be owned by the client organisation. The organisation may not own the design even though it paid for it.
In some cases, the situation is made better because although there is no express agreement about the ownership of copyright in the design, an agreement can be implied by the court. However, the scope of the implied agreement will not go further than is necessary in the circumstances. This will often leave the client organisation with no more than a licence to use the copyright work (rather than an assignment of the copyright).
Problems also arise where new opportunities for exploiting the copyright work arise after it is created. The implied licence will not extend to such new opportunities. For example, a number of charities were forced to pay their designers additional fees for the right to use logos on their websites because the design had been created before the internet was widely used, the copyright in the design had never been assigned to the charity and the charity could not prove it had the right to use the design for purposes that were not contemplated when the designer was engaged.
A number of these issues are highlighted in a recent case involving a Community Interest Company in Stoke on Trent:-
In this case, the situation was further complicated because the designer had assigned the copyright in the logos concerned in writing to another company. However, the other company was owned by a former director of Kilnworx (the CIC referred to above) and had notice of the CIC’s claim to the copyright. As a result, it took the legal interest subject to the CIC’s equitable rights to use the copyright work.
Another interesting aspect of the case is that it arose in the context of a dispute between the founders of the CIC. As is not unusual the individuals involved sought to use any available legal lever to achieve their ends or, as Judge Hacon put it (at para 31):
“I think the reality is that Atelier's current claim to the unencumbered ownership of the copyrights in the Logos is borne of the unfortunate and bad tempered split between the individuals who thought up the Kilnworx project and a wish on the part of Mr Bunting to hold Kilnworx and its remaining directors over a copyright barrel in order to recover some of what he believes to be the £45,000 or so owed to him. There is nothing intrinsically wrong in that, but the barrel has to be there. In my view it is not.”
For more information
For further information on the issues raised by this briefing note please contact Shivaji Shiva. We have produced a toolkit on Intellectual Property for charities and social businesses and Shivaji or Emma Young would be delighted to discuss that with you.
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