Court refuses to grant declaration of ownership in "unusual" case

United Kingdom

In Bruhn Newtech Ltd v Datanetex Ltd ([2012] EWPCC 17, April 18 2012), the Patents County Court has considered the circumstances in which a design can be said to have been commissioned in order that the commissioning party is the first owner of any design right in it.

This case was a dispute about the ownership of UK unregistered design rights and Community unregistered design rights. The dispute concerned three products, referred to as V2, V2A/2.2 and V3 in the judgment, which related to an incident management system marketed by the claimant, Bruhn Newtech Limited. The products were made by the first defendant, Datanetex Limited, and supplied to the claimant. The second defendant was the sole director and shareholder of the first defendant.

The claimant alleged that it was the owner of any IP rights arising in the products, as the products were designed and made pursuant to a commission for money’s worth. Where such rights were UK unregistered design rights, the claimant asserted ownership by virtue of Section 215(2) of the Copyright Designs and Patents Act 1988 (CDPA), which provides that a commissioner is the first owner of the design right in a commissioned design. Where such rights were Community unregistered design rights, for which there is no equivalent of Section 215(2) of the CDPA, or where the rights were created prior to the commission, the claimant relied on a “commission in equity”. The first defendant denied that the relationship between the parties constituted a commission.

Mr John Baldwin QC, sitting as a deputy judge, prefaced his decision by highlighting the unusual position taken by the claimant in relation to the rights it sought to claim. The claimant did not set out to establish whether any rights actually existed in relation to the products or identify the designs in which these rights might subsist. Instead, the claimant’s approach was that, should any rights be considered to exist in the products, then the rights should vest in the claimant. The judge’s response was to suggest that it would be dangerous to grant a declaration of ownership for IP rights which had not been shown to subsist. He was concerned in particular by the effect this could have on third parties.

The judge examined the history of the dealings between the parties to establish which party would be the first owner of any design rights in each of the products. On the facts, the judge found that the defendant had not been commissioned by the claimant. In particular, with regard to the V2A/2.2 product, the judge found that the design work was clearly done prior to the contract and, therefore, Section 215(2) of the CDPA could not take effect. The judge interpreted Section 215(2) as requiring some fact or matter from which an inference can be drawn that an order was in reality a commission. In this case, the judge considered that there was an order for supply of a product that needed to be designed. There was nothing to suggest that the first defendant was not free to deal with the designs subsequently.

The judge then addressed the so-called “commission in equity”. The claimant asserted this to argue that the ownership of any Community unregistered design right should mirror the ownership of UK unregistered design rights to account for a lack of an equivalent provision to Section 215(2) of the CDPA and also to cover a situation where the creation of a design preceded the obligation to pay for it. Both approaches were rejected by the judge. 

In relation to the Community unregistered design rights, he noted that the two unregistered design rights had a different provenance and should be considered separately. Regarding the latter argument, the judge referred to it as “an interesting concept”, but stated that there was nothing on the facts to suggest that equity should intervene.  In particular, he noted that there was nothing affecting the conscience of the first defendant such that it would be inequitable for the claimant not to succeed. 

As the judge noted at the outset, this case was peculiar in that the claimant made no attempt to establish that any rights actually existed. This would seem to be the most fundamental of starting points for any such claim to ownership. 

Ultimately, this did not affect the outcome; the judge neatly summed up the case when he described the supply of the products as an ordinary commercial contract for the supply of certain goods. It would have been interesting to see how the judge would have dealt with the issue of the existence of the rights if he had considered that the relationship between the parties constituted a commission. In any event, the case serves is a reminder of the importance of clearly defining the ownership of rights between two parties at the outset of a business relationship.

Leigh Smith, McDermott Will & Emery UK LLP, London

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