A couple of years ago, an IP audit on
a small street furniture manufacturer
entailed a review of all IP owned and
licenced by the company.
One royalty agreement saw the company paying royalties
to the holder of copyright in the steel bell bollard design that
they were manufacturing. Our advice based on the copyright
law in force at the time was that the company was free to
manufacturer the bollards (depicted below) without having to
pay further royalties as the designer’s rights had expired by
operation of Section 52 of the Copyright, Designs and Patent
Act 1988 (CDPA).
Section 52 contained an exception to the duration of
copyright protection in certain artistic works, which have
been industrially manufactured. This means where an artistic
work had been reproduced more than 50 times, the period
of protection was limited to 25 years to bring it in line with
the limited duration of a registered design right, compared to
other artistic works which would be protected for the lifetime
of the creator plus 70 years. This applies to all works of artistic
works, which can include any graphic work, photograph,
sculpture or collage, work of architecture or work of artistic
craftsmanship, whether 2D or 3D, although the most common
articles to be put into mass production are usually works of
artistic craftsmanship.
So what has changed?
On 28 July 2016 (repeal date) Section 52 CDPA was repealed
and any articles affected by the provision could possibly have
protection again. This will have far reaching consequences
on older artistic works whose 25-year term may have already
expired under Section 25, but now have reclaimed the right to
prevent others from using the artistic for the remainder of the
much longer term. Thankfully, the amendment does not have
retrospective force and will not affect any acts done while the
article was out of copyright protection but there are some key
dates to be aware of.
To limit the overall impact of the repeal, the UKIPO carried out
a consultation in 2015, which introduced some transitional
provisions. There are three key periods to consider:
the consultation was published on 28 October 2015
(consultation date) and for all contracts that were entered
into before this date, the parties will benefit from a depletion
period until 28 January 2017 (depletion date). Any articles
already manufactured will have to be sold or destroyed by
the depletion date. After this date no one may deal with
any unauthorised copies of the protected article without
permission of the author or unless an exception applies. All
contracts that were entered after the consultation date would
have to have been depleted by the repeal date.
When we advised our client that they no longer needed to
pay royalties to the copyright holder of the bell bollard, they
were reluctant to do so as they felt that they had a good
relationship with the designer and did not believe the value of
the royalties were worth putting that relationship in jeopardy.
In order to better illustrate the above, let’s imagine that our
client had terminated the contract on 1 January 2013 and
carried on using the design. They continued to manufacture
the articles and entered into four contracts for the sale of the
goods.
-
Contract 1 was signed on April 2013 for a one off
shipment;
- Contract 2 was signed on January 2014 for the sale of
goods into mainland Europe.
- Contract 3 was signed on June 2015 for the sale of
goods into the UK; and
- Contract 4 was signed on November 2015.
The goods made under contract 1 will not be affected by the
repeal as any dealings with the goods would be during the
period when copyright no longer applied. Contact 2 may not
have been infringement in the UK but despite the repeal of
the copyright law in the UK, it is possible that copyright still
applied in other countries and it may be unlawful to offer for
sale or sell from the UK works that are protected in another
country. The goods manufactured under contract 3 would all
need to be sold or dealt with before 28 January 2017. Any
further dealings with the goods after that date may be liable
to copyright infringement. Contract 4 was signed after the
consultation date and any goods already manufactured would
have to have been sold or destroyed before 28 July 2016, any
further dealings post that date may be liable for outstanding
royalty payments.
In light of the above, what should our client be
considering now?
-
If they haven’t done so already, carry out another IP audit
as soon as possible;
- Identify all existing products that may now be protected
by copyright again and look to renegotiate the licence (if
they haven’t fallen out with the designer). The term of the
licence may be key in negotiations, depending on whether
the licence ‘terminated on expiry of the 25 year period’ or
refers to valid for the duration of the copyright;
- Identify any stock that will need to be sold or destroyed.
This may result in specific goods being completely removed
from the product range and new marketing materials will
need to be prepared;
- It is also advisable to review any current copyright licences
to ensure that the change in law does not impact on the
terms of the licence. Often in royalty agreements there
may be a reduction on percentages as the copyright
protection draws to an end and these may need to be
renegotiated;
- Review the business model or plan and consider whether
there are any alternative products or designs that can
be developed which do not copy a substantial part of the
existing article or artistic work.
Hopefully, the repeal of Section 52 will not have a significant
impact on most businesses but there certainly is a risk for
manufacturers that may have started reproducing goods
in the mistaken belief that they are no longer protected by
copyright. It is still early days but we expect a few demands for
royalty payments to come through client’s door or worse yet,
copyright infringement proceedings issued.
For general enquiries
0808 291 3524
Or we can call you back at a time of your choice
Phone lines are open 24/7, 365 days a year
