Court of Appeal hits the roof in design case
In Ultraframe UK Ltd v Fielding, the Court of Appeal has found that a designer of components for Quickfit conservatory roofs held design rights in the components "on trust" for the various companies of which he was a controlling shareholder. This is in spite of the fact that he was neither employed by, nor commissioned to create the designs for, the companies.
Gerald Davies supplied conservatory roofs, using the Quickfit system, and also designed his own components for use with Quickfit. He incorporated and dissolved a number of trading companies, and eventually went bankrupt. The appointed trustee in bankruptcy sold the design rights in Davies' components to Ultraframe UK Ltd.
Burnden Group plc, Ultraframe's main competitor, manufactured and sold the Quickfit system. Ultraframe sued Burnden for infringement of its design rights in the components.
Burnden alleged that Davies never owned the rights, and thus he could not lawfully assign them to Ultraframe. Section 215 of the Copyright, Designs and Patents Act provides that the owner of design rights in a component is (i) an employer if it is designed by an employee, or (ii) the commissioning party if designed by a commissioned third party. The issue therefore was whether Davies was employed or commissioned - or neither - by his various trading companies.
In an effort to prove that Davies was an employee of the companies, employment contracts were backdated. Justice Laddie of the High Court made it clear that it was obvious the contracts had been backdated and refused to examine them. Nevertheless, he concluded that as Davies worked in the interest of the companies, and withdrew money from them, he was in effect an employee and the design rights were not vested in him individually.
On appeal Lord Justice Waller refused to accept that Davies was an employee, on the basis that there was no employment contract. Although Davies received weekly sums of money, he did not receive payslips or pay income tax. Waller also rejected the idea that Davies had been commissioned by the companies - instead he found that Davies designed new components as and when he felt it necessary, and claimed remuneration from the companies as and when he required it.
Surprisingly however, Waller found that the design rights did belong to the companies regardless of Section 215. Waller reasoned that Davies' companies manufactured and installed conservatory roofs and Davies, as 100% shareholder in the companies, designed the components in the interests of the companies. He therefore held the design rights on trust for the companies.
The courts have provided a novel way of getting around the strict design right ownership provisions of Section 215. However, this is probably a case that largely turns on its facts and the personality of Davies, whom both the High Court and Court of Appeal seemed to have no trouble in finding against.
It is also a useful reminder that the rules on ownership of commissioned designs are different to those of copyrighted works (which provide that an author owns the copyright even if the work is commissioned and paid for by a third party). Once again it illustrates the importance of dealing with ownership issues at the outset.
Heidi Hurdle and Shima Heydari, Olswang, London
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