Innocent or Not?

As a fan of Innocent smoothies, I was interested to read the recently reported case of Fresh Trading Limited v Deepend Fresh Recovery Limited and Andrew Thomas Robert Chappell [2015] EWHC 52 (Ch), reported on by the IPKat here.

Fresh, the present holding company of the Innocent smoothie company, sought a declaration from the High Court that it owned the copyright in the “Dude” logo (the sketch of a face with a halo on the labels of its drinks), after OHIM had invalidated its Community Trade Marks on the basis that it didn’t own the copyright in the logo.  The logo had been designed by an employee of the Deepend design agency in 1999 when Innocent was a start up.  The deal was that:

• “Fresh Trading Ltd receive full intellectual copyright of any work, creative ideas or otherwise, presented by the agency and then subsequently approved by Fresh. Work not approved by Fresh remains under the ownership of Deep End”
• Deep End would be remunerated by shares in Innocent’s then company, to vest in 3 stages.

The receipt of the copyright was not made conditional on Deep End being paid (which are the normal terms on which design agencies agree to assign copyright).  A written agreement to this effect had been reached by email, but was marked “subject to contract” and nobody could find a signed copy.

The judge decided that the parties had acted as if it had been signed, but there was not enough evidence for him to conclude that it had actually been signed, but lost.  So there was a binding contract, but the requirement of the Copyright Designs and Patents Act 1988 that an assignment of copyright be in writing and signed by or on behalf of the assignor was not satisfied.

If there was no legal assignment of copyright, there could still be an equitable assignment of copyright, or a licence to Fresh to use the logo could be implied.  But as Deep End had never been issued the shares, it might be able to terminate the licence for non payment.

The further twist here was that Deep End had gone into liquidation in 2001 as a result of the dot com bubble bursting.  The defendant to these proceedings, Deepend Fresh Recovery Limited, had been formed by the second defendant, Mr Chappell (a corporate financier and friend of the original designer) to acquire the copyright from the liquidator (or, no doubt, such rights as Deep End might have in it) for £3,000.

The decision of the Court was that the unsigned agreement took effect as an equitable assignment of the copyright.  Richard Kempner (the defendant’s solicitor), writing for the IPKat, criticises this on the basis of the old legal maxim “he who comes to equity should do equity” and, essentially, Fresh weren’t innocent because they hadn’t issued the shares to Deep End.  But on reading the full judgment on BAILII, I have to say I respectfully agree with the judge.  He found as facts that discussions about issuing the shares continued in a desultory fashion at a time when the parties saw no great value in them and that Innocent’s founder never intended not to issue the shares.  It seems it all got overtaken by events.  Deep End’s liquidator was interested in a cash recovery rather than shares, and eventually took the £3k from Mr Chappell before finally winding up the company.  Mr Chappell and his company now had no right to call for an issue of the shares under the original contract, which was with a different company to the present Fresh as a result of a corporate reorganisation.  So, whilst Mr Chappell appears to have been helping a personal friend get some recompense for his original work rather than being some sort of corporate vulture, Fresh were nevertheless innocent and so came to equity with clean hands (to use another old maxim).

The lesson is of course to get your contracts for the creation of IP signed, and to be clear in them about who will own the copyright and (if you’re a designer) that assignment is conditional on your being paid.