SCOTUS to weigh in on Unicolors dispute with H&M
The US Supreme Court has agreed to review a copyright dispute between fabric designer Unicolors and retailer H&M, during which it will assess a pressing question of whether inaccuracies can invalidate copyright registrations.
SCOTUS confirmed its decision yesterday, Tuesday, June 1, after Unicolors asked the court to rule on its long-running legal wrangle with the Swedish fashion company.
According to Los Angeles-based Unicolors, H&M willfully infringed its IP by copying a design that Unicolors first produced in 2011, and later used on jackets and skirts.
In 2015, H&M began selling jackets and skirts bearing an artwork design dubbed ‘Xue Xu’, prompting Unicolors to sue the following year.
In 2018, the US District Court for the Central District of California sided with Unicolors and ordered H&M to pay $780,000 in damages and attorneys’ fees for willful copyright infringement.
An issue of bundling
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.
According to US copyright law, parties can register multiple works together and pay a single filing fee if the works form a “single unit”.
But in May 2020 the US Court of Appeals for the Ninth Circuit reversed the district court’s decision, finding that a “single unit” should mean a “collection of works in a singular, bundled collection”.
“It is an inaccuracy for a registrant like Unicolors to register a collection of works (such as the works identified...) as a single-unit publication when the works were not initially published as a singular, bundled collection,” the Ninth Circuit said.
The court contended 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 stance that only evidence of fraudulent activity could lead to an invalidation.
In a split decision, the Ninth Circuit affirmed H&M’s appeal and later denied Unicolors’ petition for an en banc rehearing.
A flawed decision
In January this year, Unicolors filed a petition for a writ of certiorari at the Supreme Court, arguing that this decision was flawed because no court had previously before specified a ‘bundling’ requirement.
It further argued that the ruling could threaten thousands of copyright registrations, which could now be potentially exposed to validity challenges.
This week, the Supreme Court agreed to assess whether the Ninth Circuit erred by holding that copyright law requires the referral of validity challenges to the Copyright Office, despite a lack of evidence relating to fraud or error.
A turning point in fashion
According to Margaret Esquenet, partner at Finnegan, it is unsurprising that SCOTUS opted to revisit the dispute. “This court seems to enjoy copyright issues, and a circuit split gave it a reason to visit registration again,” she said.
Esquenet noted that the case could have significant ramifications for artists and smaller brands. “Permitting defendants to invalidate registrations on the basis of knowing material misrepresentations that do not rise to the level of fraud would likely have the biggest negative impact on individual artists and small business who often file applications without the advice of counsel and may not fully understand the nuances of the application process,” she said.
But according to Deborah Greaves, partner at Withers, this case may prove a timely turning point for an industry that has been plagued with lawsuits related to infringements of textile designs for many years.
“This has created a legal eco-system for opportunistic plaintiffs’ attorneys, which is shown by the number of textile copyright infringement cases that have been filed over the past 10 years with virtually no resulting case law to date,” she said.
The outcome of this case could provide some much-needed clarity in the fashion industry, argued Greaves. “Although the H&M case is limited to the specific interpretation of the validity of the copyright registration at issue, it is encouraging to see the Supreme Court take up another copyright issue arising out of the apparel and textile industry and offers hope that there will be a greater certainty of outcome for litigants in the future,” she explained.
The Supreme Court’s decision to hear the case offers encouraging signs that the interpretation of the laws relating to copyright infringement of textile designs will be further scrutinised by the high court, insisted Greaves.
This development, she argued, could mean that small companies do not always end up in a position of feeling coerced into agreements for costly settlement sums due to the great uncertainty in outcome.
“Many of these brand owners are small companies and do not have the resources to engage in litigation over highly nuanced and complex copyright issues. As a result, most of these cases settle out of court at the detriment of small companies,” concluded Greaves.
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