Katy Perry received a lot of attention for the dress she wore to
the Met Ball this year, and not all of it was welcome. A Brooklyn
artist thought that the dress was an imitation of graffiti that he
painted in Detroit, and filed a copyright infringement action to
enforce his rights.
A number of copyright claims relating to clothing, prints and
patterns have been filed recently, and are not limited to designer
outfits worn by celebrities. Lilly Pulitzer filed a claim against
Old Navy alleging that her fabric prints had been copied. Last
week, H&M sued Forever 21 over the design on a tote bag.
For any retailer, being named as a defendant in a copyright
lawsuit is an unwelcome and costly distraction. There are a number
of steps that can be taken to minimize both the risk of litigation
and financial exposure.
What Retailers Should Do
Allocate Risk to Your Supplier
At the outset, it is difficult to overstate the importance of a
well-drafted supply agreement. Any supply agreement should include
a broad representation and warranty from the supplier that its
products do not and will not infringe intellectual property rights
owned by a third party. More importantly, the supply agreement
should also include a broad indemnity requiring the supplier to pay
both the legal fees associated with the defence of any lawsuit and
any damages that the parties agree to or a court orders. Control of
the defence of the lawsuit should also be clearly set out in the
agreement. Such obligations will precipitate diligence, give
suppliers an incentive to carefully consider the possibility of an
infringement claim before shipping the goods, and will mitigate the
retailer's financial exposure.
Confirm Canadian Rights to Minimize Importation Risks
When dealing with suppliers, great care should be taken to
ensure that their licenses and related agreements include Canadian
intellectual property rights. This particularly applies to
"grey goods" – genuine products that are authorized
or licensed for sale in one country but are then imported into
Canada for commercial sale. Under Canada's Copyright
Act, the importation of goods without the consent of the
Canadian copyright owner is illegal. The test is broad and does not
require actual knowledge of infringement. Even a party that
"should have known" that it imported infringing goods
into Canada for the purpose of distribution or sale is subject to
enforcement, whether at the Canadian border or afterwards. There
may also be territorial restriction clauses that either preclude
sale to Canada or require specific permission to do so.
Retailers should not rely on a supplier's promises alone.
Proactive retailers educate their buyers to identify copyright
litigation risks. A basic understanding of intellectual property
rights will assist buyers in assessing not only how well a product
will be received by consumers, but also whether there is a risk of
an infringement lawsuit from a competitor or the owner of a textile
Get Legal Advice
Copyright law is complex. Other than in cases of counterfeiting,
the line between what constitutes an infringing and non-infringing
article can be difficult to draw. If there is doubt as to whether
incoming products may infringe someone else's intellectual
property rights or whether you are sufficiently protected by a
supply agreement, get an opinion from experienced outside counsel.
Taking these proactive steps can avert resource consuming
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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A recent Saskatchewan Court of Queen's Bench decision allowed a court-appointed receiver to sell and transfer intellectual property rights free and clear of encumbrances, finding that a license to use improvements of an invention was a contractual interest and not a property interest.
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