25 February 2022Copyright

SCOTUS hands win to Unicolors in H&M dispute

The  US Supreme Court has delivered a splintered ruling against  Hennes & Mauritz (H&M) in a  major copyright case with  Unicolors over the fast-fashion company’s use of a sweater pattern.

The court issued the much anticipated 6-3  decision on Thursday, February 24, holding that a lack of knowledge of either fact or law can excuse an inaccuracy in a copyright registration.

The long-running lawsuit emerged in 2017 when Unicolors sued H&M, accusing the Swedish company of infringing its copyright by copying a design that it first produced in 2011.

Inaccurate information

In 2018, the  US District Court for the Central District of California found in favour of Unicolors, a decision that was later overturned by the  US Court of Appeals for the Ninth Circuit in 2020.

H&M had successfully argued on appeal that Unicolors could not maintain an infringement suit because the US design company included inaccurate information on its registration application, rendering its copyright registration invalid.

The alleged inaccuracy stemmed from Unicolors having 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”.

The appeals court favoured H&M’s argument that Unicolors did not meet this requirement because it had initially made some of these designs available for sale exclusively to certain customers while offering the rest to the general public.

But this week, 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’.”

In 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 majority opined that: “Inaccurate information in a registration may arise from a mistake of law or a mistake of fact. Nothing in the statutory language suggests that Congress wanted to forgive applicants—many of whom lack legal training—for factual but not (often esoteric) legal mistakes.”

Breyer added that this view was especially relevant because “many applicants include novelists, poets, painters, designers, and others without legal training”, insisting that “had Congress intended a scienter requirement other than actual knowledge, it would have said so explicitly, as it did in other parts of the Copyright Act”.

A fractured opinion

But Justice Clarence Thomas dissented, arguing that he would dismiss the writ of certiorari as “improvidently granted because Unicolors has abandoned the question presented and instead proposes novel questions of copyright law that no other court addressed before today”. He was joined in his dissension by Justices Samuel Alito and Neil Gorsuch.

The majority decision was welcomed by Kelly Klaus, litigation partner at  Munger, Tolles & Olson who filed an amicus brief supporting Unicolors on behalf of the  Copyright Alliance.

“The court’s decision confirms that Congress intended copyright registration to be a practical, easily accessible process for content creators. 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,” he said.

Unanswered questions

But Deborah Greaves, a partner at  Withers, who filed a brief of amicus curiae for the  California Fashion Association in support of H&M, noted that the decision still left many questions.

“The court leaves unaddressed the issue of those who take advantage of the loopholes in the registration, which was the crux of the dispute in the Unicolors case.

“The mistake that Unicolors made in its application was related to the publication of the textile image. The image in question was filed as part of a ‘collection’ or a group of images, which is the manner in which Unicolors always files its copyright applications,” she said.

Greaves called for more clarity on behalf of smaller fashion and design companies.

“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 argued.

“Many small companies have been caught up in questionable infringement claims and are forced to settle 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 issuance of a copyright registration, or whether the design was actually published,” concluded Greaves.

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