Elaine Gray of Carey Olsen in Guernsey looks at how intellectual property has become an asset of critical economic importance.
Intellectual property (IP) as an asset class has seen exponential growth in recent years, from the early dot.com days to the online explosion of social media and even virtual worlds such as Farmville.
Indeed, IP has become an asset of critical economic importance. According to a report issued by the US Commerce Department in April 2012, IP-intensive industries in the US support (directly or indirectly) at least 40 million jobs and contribute more than USD5 trillion of US GDP, or 34.8% of GDP. Looking at it from another angle, in Japan it took 95 years to reach the millionth patent filing. It will take less than 15 years to reach the second millionth.
The value of IP products depends on the availability of robust protection for those products. However, rather surprisingly, the growth in IP products has not been matched by any significant development in IP law. The main IP rights have been subject to changes here and there but, since the introduction of regimes to protect inventions, designs, brands and creative output, there has been no real innovation in terms of new and distinct IP rights until now.
Guernsey's world-first in IP
That position changed in December 2012 when Guernsey led the way with the introduction of the world's first legislation creating image rights as a registered right (the IR Law).
Why would such a small jurisdiction take such an innovative step? The history goes back to a decision by Guernsey's government in 2004 to update Guernsey's IP regime. The intention was two-fold: to provide a supportive IP environment for local business by updating Guernsey's foundation IP laws and, thereafter, to take IP law to the next level by creating new IP rights which meet the needs of the commercial IP marketplace. Having updated its foundation IP laws on patents, designs, trade marks, copyright and so on, in 2012 Guernsey moved on to that next stage of its IP development.
Why image rights?
Guernsey identified several areas of IP activity where there was a significant commercial marketplace but an absence of legal provision with a resultant lack of certainty and clarity. The area of commercial activity where there was a clear and immediate need was image or personality rights. In today's increasingly celebrity centric world, images are all around us and can form a very significant part of the wealth source of a celebrity or brand.
For the famous in any field, their image, and the management of that image, can be of critical importance. It doesn't matter whether that fame stems from sporting abilities (such as David Beckham), scientific achievement (Albert Einstein), devotion to a cause (Linda McCartney), the persona of a brand (Virgin and Richard Branson) or a fleeting moment of fame from a talent show appearance. Whatever the source of fame, images of such individuals and companies can and do generate significant income streams from sponsorship deals, endorsement contracts, appearance work and the like. Despite this commercial activity, celebrities have struggled to obtain protection for their images.
There are many examples of images being used unfairly and exploited for commercial advantage by parties with no legitimate basis for so doing. However, although many jurisdictions offer some scope for protection, it is limited in extent as are the available remedies. For example, some protection may be available by reliance on registered trade marks, the common law remedy of passing-off, remedies under advertising and press regulations and arguments based on human rights considerations.
None of these remedies answer the need of the commercial marketplace in image rights for a bespoke legal right which clearly defined what is (and is not) an image right and how this can and cannot be used. It is into this gap which Guernsey has stepped. From 3 December 2012 it has been possible for personalities to register their image in Guernsey's Register of Image Rights which has been created by the Image Rights (Bailiwick of Guernsey) Ordinance, 2012. The starting point is the question of who can register under the law.
The persons entitled to register are natural persons, legal persons, joint personalities, groups and fictional characters. Examples of each of these are Roger Federer, Disney, The Rolling Stones and James Bond. The IR Law also allows registration by natural or legal persons who are alive and those who died or were dissolved in the past 100 years.
The law allows personalities to register 'images'. Don't be misled into thinking that this term limits the scope of the law to photographs and the like. In fact, an image includes any manifestation of a person's personality including their name and attributes or characteristics. The law identifies some of these key characteristics including voice, signature, likeness, appearance, silhouette, feature, face, expressions (verbal or facial), gestures and mannerisms.
It concludes with a 'sweep up' provision for any other distinctive personal attributes. The image can be recorded, and therefore registered, in many different forms including in photographs, illustrations, pictures, movies and electronic representations.
Although a personality can go along to Guernsey's Intellectual Property Office in person to register their image right, in practice this is unlikely to happen in the majority of cases. Instead, it is more likely that registration will be done through one of the registered image rights agents, all of whom have been trained by the IP Office in the new legislation.
The registration process itself is relatively straightforward requiring the completion of an application form, the filing of a representative image and of all images which the personality wishes to protect. The application must be accompanied by the appropriate fee which ranges from GBP1,000 for individuals to GBP5,000 for corporations. There are some key requirements which mean that applications should not be undertaken lightly and, in particular, should not be made without ensuring that the proposed registration will not infringe the IP rights of any third party such as the owner of the copyright in a photograph.
The application is then examined by the Registrar of IP in Guernsey and, if it passes that initial examination, it will be published in the online register of applications which gives an opportunity for interested parties to oppose or make observations on the application. Readers familiar with trade mark processes will recognize many similarities in this part of the process. Assuming there is no opposition, the application will be granted and the personality will be a registered personality and the proud owner of a registered image right(s).
It is in this respect that the benefits of registration under the law become extremely clear. Pursuant to the law, a registered image right is a right of property and, as such, can be treated as, and traded, in the same way as any other item of property. This status of a formal, legal property right is a significant step forward as it gives a right which prevails against third parties (in direct contrast to the existing and limited personal rights which may arise in relation to abuse of an image). It also means that the registered right can be assigned, disposed of by will or otherwise disposed of just as any other item of property. In real terms, this makes it easier to manage and exploit image rights, either through bespoke vehicles or indeed existing structures such as trusts, foundations or cell companies.
The law also facilitates certain key transactions such as assignments and licensing. Once registered the personality's registration lasts for ten years although this can be renewed indefinitely. For images, the duration is three years but again these are capable of being renewed indefinitely. This scope for indefinite protection is in direct contrast to the limited shelf-life of, for example, copyright in photographs. In this regard, an image rights registration offers the scope to extend the duration of rights in images which may fall out of copyright. This, in turn, enables effective succession planning of image rights for the first time as personalities are enabled to transact with their registered rights in a way previously not possible.
Another unique advantage of a registered image right is the scope it allows personalities to assert their moral rights to be identified as the personality in images and to object to derogatory treatment of their image. This offers a significant step forward in the recognition of personalities' rights and also plays into the question of damages for breach. The law also provides significantly greater comfort in the area of infringement given that the distinct lack of clarity and high degree of uncertainty which prevailed prior to the law's introduction. There are now clear remedies for infringement. These include actions for damages, orders for delivery up or disposal of goods which contain infringing images, injunctions and accounts of profits.
If infringement is proved the court can award damages, which reflect the actual prejudice suffered by the personality, and will take into account the negative economic consequences of the infringement on the personality as well as elements other than economic factors including the moral prejudice caused to the personality. The court can also award additional damages to reflect the flagrancy of a breach and any benefit which the wrongdoer has accrued by reason of the infringement. These provisions alone offer a fundamental step forward for infringement of moral rights.
It is important to note that the law only strikes at commercial exploitation of registered image rights and not, for example, private use of images. Similarly the law gives clear expression to 'fair dealing' exceptions which apply in relation to copyright matters, such as the freedom to report news, engage in parody or satire, research, education and so on.
Finally, it is worth noting that the majority of image infringements occur, or are evidenced, online which may give rise to a right of action before the Guernsey courts. In that context, reciprocal arrangements exist between Guernsey and other countries both under statute and common law so as to facilitate effective enforcement of remedies against wrongdoers. The Guernsey registered image right has been designed to offer a high value, quality product for personalities keen to ensure maximum protection for their rights. Although it has only been open for a matter of weeks, the Register already has a good number of registrations ranging from international business women, celebrity hairdressers, politicians and musicians to international DJs.
Personalities wishing to register their image rights may choose to set up an appropriate structure to hold and manage the wealth generated from the asset. Equally, the right could simply be placed into an existing structure.
The fact that Guernsey is the only jurisdiction in the world to offer registered image rights provides the jurisdiction with a unique advantage when it comes to holding and managing image right assets. It also offers a tax-neutral environment supported by excellent service providers.
A Guernsey registered image right offers a unique and valuable opportunity for personalities seeking to obtain maximum protection for their image. As such, Guernsey has created an innovative IP right which should be of interest to any investment advisor in this area. Guernsey is proud, and rightly so, of having achieved this landmark step in the IP world. However, Guernsey isn't stopping here and the future holds the scope for further innovative IP rights to be introduced in relation to green innovation and IP rights in 'the information society'.
Originally published in Offshore Investment, April 2013
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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