9 November 2021CopyrightMuireann Bolger

Reaction: SCOTUS mulls H&M copyright dispute with Unicolors

The US Supreme Court (SCOTUS) has scrutinised a major copyright dispute between  H&M and Unicolors, after finding faults with a judgment handed down by the US Court of Appeals for the Ninth Circuit last year.

SCOTUS heard oral arguments yesterday relating to the long-running legal case between the retailers yesterday, November 8.

The suit centres on Unicolors’ allegation that H&M willfully infringed its IP by copying a design that the fabric designer first produced in 2011, an argument upheld by the US District Court for the Central District of California in 2018. The court awarded Unicolors an $800,000  damages verdict.

But H&M appealed, arguing that Unicolors’ registration for the design should never have been granted because it covered 31 unrelated designs, and was consequently inaccurate.

In May 2020, the US Court of Appeals for the Ninth Circuit reversed the district court’s decision, finding that the lower court should have sought guidance from the US Copyright Office on whether these inaccuracies would have led to a refusal of registration.

It also rejected the district court’s opinion that only evidence of fraudulent activity could lead to an invalidation of the registration.

Unicolors successfully requested that the Supreme Court revisit the case after it argued that the ruling could lead to the invalidation of thousands of copyrights, a stance supported by the US government.

Significant implications

With a ruling from the justices having the potential to make it easier for courts to invalidate copyright owner registrations due to application inaccuracies, lawyers have told WIPR that the case could have significant implications for not only the copyright space, but also the retail industry.

Lisa Ferrari co-chair of the copyright practice and Edward Weisz co-chair of the patent prosecution practice at Cozen O’Connor both described the arguments as a fascinating debate about copyright policy and statutory interpretation.

“Unicolors, the copyright registrant, had the US Solicitor General on its side, and argued that a good-faith misunderstanding of the law by copyright applicants shouldn’t invalidate their copyright registrations and bar the courthouse door,” they explained.

“Meanwhile, H&M, the alleged infringer, argued that a copyright registration conferred important litigation privileges that shouldn’t be awarded to registrants with constructive knowledge that the copyright application contained inaccuracies.”

While the justices seemed to appreciate the concerns of both sides, the arguments appeared to tilt the case in Unicolors’ favour.

Ripe for review

In particular, Justice Brett Kavanaugh questioned whether a party should “lose their ability to recover simply because they were honestly confused about a legal requirement”.

Noted Ferrari: “The justices seemed to read the statute at issue, 17 USC 411(b), as clearly encompassing both factual and legal errors, and seemed to think that more than constructive knowledge was required to invalidate a registration.”

According to Kristen McCallion, partner at Fish & Richardson, this copyright issue is ripe for review.

“Disputes about copyright registration errors are common in litigation. Registration errors stem from a number of factors—unclear guidance about registration rules, a simple misunderstanding of what the application requires and, most relevant to the issue at hand, purposeful or knowing inaccuracies,” explained McCallion.

In her view, there is certainly a need to reduce “frivolous” bases for challenging registrations, including immaterial errors, including “checking the wrong box” on the registration form.

“The difficulty here is balancing a need to reduce baseless challenges to registrations, while still preserving the ability of parties to initiate warranted challenges to registrations,” she said.

Unicolors emphasised that the mistakes in Unicolors' application were allegedly the result of its mistaken understanding of the law.

Melissa Patterson, assistant to the solicitor general at the US Department of Justice, backed this argument, holding that simply being sloppy or negligent in filling out your application should not give rise to a risk of your registration being invalidated.

But the justices also queried the standard for constructive knowledge, acknowledging that willful blindness is “a form of actual knowledge”.

A new copyright tool

According to Weisz and Ferrari, a ruling for H&M would have strong repercussions for copyright defendants, who will have a new tool in their arsenal in potentially declaring the underlying registration invalid.

Conversely, a ruling for Unicolors, would further solidify the presumptive validity of copyright registrations and vindicate the Copyright Act’s policy goal of rewarding artists and creators for their artistic contributions, they suggested.

Jason Bloom, partner and head of the copyright practice group at Haynes and Boone took a different view, arguing that any potential ruling should not result in significant numbers of copyrights being invalidated due to minor inaccuracies.

“As a backstop, the Copyright Act provides that only knowing misrepresentations that would have caused the Copyright Office to refuse registration are relevant,” he explained. “Misspelling a previous title or getting an author’s birth year wrong, even if done knowingly, would not likely cause the Copyright Office to refuse registration.”

The arguments yesterday also addressed the matter of copyright trolls and the potential impact of the court’s ruling, with Justice Stephen Breyer noting that the amici who filed briefs in support of H&M seemed to think that copyright trolls would have a field day if the court ruled in Unicolors’ favour.

“But Justice Breyer made the point that trolls may be the most sophisticated group out there, and that the concern of the amici seemed misplaced,” explained Weisz.

A hurdle for Unicolors

Deborah Greaves, partner at international law firm Withers, mulled the possibility that the Supreme Court may decide not to issue a ruling on this matter or that it could remand the case to the Ninth Circuit.

Justices Samuel Alito and Clarence Thomas both questioned whether the case should be dismissed as the arguments presented by Unicolors in its brief did not address the question on which Unicolors sought cert and that the Supreme Court agreed to review. Justice Thomas noted that Unicolors' cert petition asked the court to address whether evidence of fraud is needed for a copyright invalidation.

But after hiring new counsel at the merits stage, Unicolors then argued that it couldn’t know that information on an application was false if the only errors in the application were purely legal, and if it believed that all the information was correct.

Additionally, Greaves observed that a number of issues were raised by the justices that did not seem to be adequately addressed by counsel on either side, including whether the registered works were published as a group to the public in the manner required by the Copyright Act raises both factual and legal issues.

Even if SCOTUS does decide to deliver a ruling, Unicolors still faces a substantial hurdle in its bid to revive its earlier win at the lower district court, despite its initial traction with the justices yesterday.

“A mistake or ignorance of the law is not a defence unless a statute explicitly indicates otherwise. Section 411(b) does not explicitly state otherwise for good reason, namely, that it would remove the incentive for applicants to engage diligently with the Copyright Office,” concluded Greaves.

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