Copyright – when third party infringement can become your problem

Posted by Luke Mitchell on 30 August 2018
Copyright – when third party infringement can become your problem

The technological advances that have occurred over the past 25 years have opened up new markets to many businesses - both in terms of customers and suppliers. While this has no doubt resulted in many benefits to businesses, it has also broadened the risks that come with doing business.

We recently acted for a clothing retailer who had acquired a number of “onesies’ (the baby variety..) from a merchant in China. The onesies bore words and graphics that, on the face of it, did not appear to be particularly special or out of the ordinary. Our client then sold the onesies through its shops and via its online store.

A few months after it acquired the onesies, our client received a letter from a firm acting for a well known US-based baby fashion label. The US entity had apparently acquired samples of the onesies sold by our client.

In the letter received by our client, the US entity provided copies of a number of its design graphics, which were almost identical to the graphics that were contained on the onesies sold by our client. The US entity asserted that it was the owner of the copyright in those graphics and that in offering the onesies for sale, our client had infringed that copyright.

Our client was not aware that the US entity was the owner of the copyright in the relevant graphics. The onesies that were acquired by our client were ready made. The graphics were already on the onesies before they were sold to our client.

Our client did not ask for the graphics to be placed onto the onesies - all that our client did prior to selling the onesies was to add its own labels to the garments.

However, while the infringement on behalf of our client was innocent in the sense that it:

  • did not manufacture the onesies;

  • did not place the graphics onto the onesies or ask for the graphics to be placed onto the onesies; and

  • was not aware that the graphics on the onesies sold amounted to a breach of the US entity’s copyright;

our client was not absolved of responsibility for its part in the infringement.

Fortunately, our client took swift action in seeking advice as soon as it received the letter from the US entity’s lawyers. We were able to assist our client with a prompt response to that letter which:

  • explained the circumstances in which our client acquired the onesies;

  • explained that our client was not aware at the time that the onesies were acquired and then sold that the graphics were the intellectual property of the US entity; and

  • offered to account to the US entity for the modest profit made on the sale of the onesies.

The matter was then resolved on the basis that our client accounted to the US entity for that modest profit and provided an undertaking that it would not knowingly infringe the US entity’s copyright in the future.

While this outcome was a very good one for our client, the situation highlights the risks involved in acquiring and selling goods in today’s global market. 

In order to avoid these sorts of problems, we strongly recommend that businesses only acquire goods from reputable suppliers.

We have years of experience in helping businesses manage their intellectual property rights and obligations. We specialise in providing clarity and confidence to business operators in all of their legal relationships – contact us today to discuss your legal needs.