The trouble with disregarding formalities, like legal agreements, is that even minor disagreements have the propensity to escalate into disputes.
An imperfect recollection of the terms of a contract is unlikely to escalate if the contentious point is answered when you consult the written agreement. However, where there is no concrete agreement in place, it is much more likely that issues turn into major disputes, leading to mess and expense. And sometimes where there is an unsigned document discussed by the parties, the court is likely to regard those terms as binding between them.
This is what happened in a case involving Fresh Trading Company (Innocent) and Deepend who had acquired the rights to the ‘Dude’ logo (the well-known Innocent halo logo) from the designers. The dispute resulted in a hotly contested series of cases around ownership of copyright.
In 2009, Deepend initiated proceedings with OHIM on the grounds that Fresh did not have the right to use the logo and that Deepend did because of the assignment of copyright to them of the Dude logo after the design company that created the brand in 1999 dissolved.
In 2012, OHIM agreed with Deepend. Fresh appealed the decision.
At the time the logo was designed, Innocent was a fledgling company who had started a business relationship with the designers. Their brief was to “develop the ‘visual identity for the product’.” Although the designers never received payment for their design work, a recent High Court decision ruled in favour of Fresh finding that the parties had been acting under the unsigned Heads of Agreement. These not only assigned the full intellectual property of any work approved by Fresh to Fresh, but also had provisions for remuneration for Deepend.
The reason the judge found in favour of Innocent was that the Heads of Agreement included a provision that required Deepend to transfer copyright to Fresh. There was an obligation on Fresh to allot shares to Deepend. However, the judge found that neither of these requirements were expressed as a conditional obligation.
He used a flipped example to make his point, saying that the obligations to allot shares could theoretically arise even if there was no transfer of copyright to Fresh. The judge also made the additional point that at the time Deepend didn’t really deal with the matter of lack of shares and this must have been a result of the perception that a shareholding in Fresh wasn’t of very much value. This therefore negates the assertion that Fresh “refused to pay.”
So when you add this together with the fact that the judge didn’t consider the remuneration in the form of shares to be a precondition for the assignment of copyright clause then it becomes easy to see how he was able to justify his conclusion that on equitable principles, copyright should vest in Fresh. This followed the approach in Griggs where the logo design created was not formally assigned by the designer, however an implied contract was found to have existed nonetheless.
This decision, more than anything, highlights the importance of explicitly stating within a contract that IP rights are conditional on remuneration.
Another important lesson that can be learnt is to explicitly agree on copyright ownership from the outset in order to avoid costly litigation further down the line. This case also underlines the continued availability of remedies in equity.
The fact that the courts are sometimes willing to interpret the details included in an unsigned agreement to achieve a just result should be a warning to ensure the finalisation and signing of your official paperwork.