A stitch in time: Untangling H&M v Unicolors
Five years ago, a dispute over a geometric design pattern wove a tapestry of misaligned judgments throughout the US courts, even prompting an intervention by the US government.
But in February, the US Supreme Court bound up the case, handing down a fractured ruling against Hennes & Mauritz (H&M) over the fast-fashion company’s use of a sweater pattern.
The court issued the 6-3 decision in favour of designer Unicolors, deciding that a lack of knowledge of either fact or law can excuse an inaccuracy in a copyright registration.
Background
The legal wrangle between the two companies arose five years ago when Unicolors sued H&M, accusing the Swedish company of infringing its copyright by copying a design.
According to Los Angeles-based Unicolors, H&M had copied a design that Unicolors first produced in 2011 (copyright registration number VA 1-770-400) and featured that design on skirts and jackets sold from 2015.
In 2018, the US District Court for the Central District of California found in favour of Unicolors, a decision that was reversed by the US Court of Appeals for the Ninth Circuit in 2020.
According to the appeals court, Unicolors did not have a valid case because the US design company included inaccurate information on its registration application, which meant that its copyright registration was invalid.
This prompted a furore, with organisations such as the Copyright Alliance arguing that ruling could threaten thousands of copyright registrations that could be potentially exposed to validity challenges.
Government intervention
In October, US acting solicitor general, Brian Fletcher, waded into the dispute asking SCOTUS for permission to present in oral argument as an amicus curiae, backing Unicolors.
Last month, Justice Stephen Breyer delivered the majority opinion of the Supreme Court in favour of Unicolors, stating that: “The important point for our purposes is that a certificate of registration is valid even though it contains inaccurate information, as long as the copyright holder lacked ‘knowledge that it was inaccurate’.”
By doing so, the court disagreed with the Ninth Circuit’s finding that a copyright holder cannot benefit from a safe harbour provision and save its copyright registration from invalidation if its lack of knowledge stems from a failure to understand the law rather than a failure to understand the facts.
The decision confirms that Congress intended copyright registration to be a practical, easily accessible process for content creators, according to Kelly Klaus, a litigation partner at Munger, Tolles & Olson, who filed an amicus brief supporting Unicolors on behalf of the Copyright Alliance.
“Congress did not intend the registration system to punish unknowing mistakes, whether factual or legal, and allow infringers to escape the consequences of their conduct. As the Court said, ‘copyright applicants include novelists, poets, painters, designers, and others without legal training’,” he explained.
A win for content creators?
Lisa Ferrari, co-chair of the copyright practice at Cozen O’Connor also welcomed the judgment as a boon for content creators and copyright applicants who have a good-faith misunderstanding of copyright law, and plaintiffs in copyright infringement suits.
On the losing side may be accused infringers who were hoping to invalidate a copyright registration asserted against them by exploiting errors in the registration, she explained.
“While the accused infringer, H&M, tried to apply the old adage that ‘ignorance of the law is no excuse’, the Supreme Court said that it actually might be, at least with respect to a civil case concerning a safe harbour from ignorance of certain legal requirements.”
Copyright holders and applicants can breathe a sigh of relief with the Supreme Court’s decision in Unicolors, agreed Preetha Chakrabarti of Crowell & Moring.
“This decision is encouraging for artists and designers who rely on copyright registrations to protect their rights, but do not always have the means to hire counsel to ensure that their applications are legally and factually perfect.”
But Chakrabarti cautioned that given the court’s allusion to instances of willful blindness and actual knowledge of inaccurate information in copyright registrations, the onus is still on copyright owners and counsel to do their utmost to safeguard against validity challenges.
Jason Bloom, partner and head of the copyright practice group at Haynes Boone, agreed the court’s ruling will make it very difficult to get an action dismissed early on based on a technical error in a registration, but that the courts will still be able to determine that copyrights are invalid based on material deficiencies.
“This is because a copyright registration certificate only serves as prima facie evidence of copyrightability and ownership sufficient to state a claim,” he said.
“The court still retains the ability to invalidate a copyright on the merits if the record shows the facts stated in a registration certificate to be untrue. This is especially important given the limited legal review the Copyright Office gives most applications,” he said.
Copyright trolls
While the judgment has been broadly welcomed as a positive result for content owners, some have decried its lack of clarity and its potential to encourage spurious infringement lawsuits.
According to Deborah Greaves, a partner at Withers, the ruling failed to address the issue of those who take advantage of the loopholes in the registration.
This, she argued, leaves many fashion IP owners in murky waters when it comes to asserting their rights against opportunistic copyright trolls.
Ultimately, the mistake that Unicolors made in its application was related to publication of its textile image. The design company filed a single application seeking registration for 31 separate works despite a Copyright Office regulation that provides that a single application may cover multiple works only if they were “included in the same unit of publication.”
Under US copyright law, parties can register multiple works together and pay a single filing fee if the works form a “single unit”.
In 2020, the US Court of Appeals for the Ninth Circuit ruled that a “single unit” should be taken to mean a “collection of works in a singular, bundled collection”.
Infringers’ access
Greaves filed an amicus curiae for the California Fashion Association in support of H&M, arguing that the fashion retailer could not have infringed because it did not have access to the disputed design.
“Publication is essential to establish that the alleged infringer had access to the protected design and then copied that design. In this particular case, there was evidence that all of the designs had not been published, which made the claims on the registration false,” she said.
The ruling effectively means that an alleged infringer is precluded from arguing that the registration is invalid due to the erroneous claim of publication or potentially any other erroneous claim, she contended.
This is not just a contentious issue for major fast-fashion players such as H&M, argued Greaves but also for many start-ups and small businesses.
“What needs to be recognised is the importance of this case to the fashion industry, which has been plagued by copyright infringement suits over the past decade or longer, which are so prevalent that the plaintiffs have been coined as copyright trolls by the industry,” she insisted.
In her view, this status quo means that small companies have been caught up in questionable infringement claims and are forced to settle.
This is mainly because they do not have financial resources to put to a jury whether the designs are substantially similar, whether the design was original enough to justify the issuance of a copyright registration, or whether the design was actually published.
“In this case, the ruling is that it does not matter if the design was actually published, at least as it applies to the presumption of validity of the registration,” she argued.
Greaves conceded that a positive outcome for H&M in this case would not have totally resolved this ongoing issue, because only “one small and very nuanced issue” was before the court but that a “win would have been one small victory for the fashion industry”.
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