IP Law Daily Evidence supported jury verdict that apparel retailer willfully infringed fabric design
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Tuesday, April 4, 2017

Evidence supported jury verdict that apparel retailer willfully infringed fabric design

Substantial evidence supported a jury’s verdict that clothing retailers Urban Outfitters, Inc., and Century 21 Department Stores, LLC (collectively, "Urban") willfully infringed a copyrighted fabric design owned by Unicolors, Inc., the U.S. Court of Appeals in San Francisco has held. The evidence showed that Urban acted with reckless disregard for the possibility that the fabric it sampled was protected by copyright. In addition, the Ninth Circuit affirmed the district court’s findings on summary judgment that the works were substantially similar as a matter of law, given that the parties’ respective works were near duplicates. The district court did not err in concluding that Unicolors had validly registered its fabric design as part of a collection (Unicolors, Inc. v. Urban Outfitters, Inc., April 3, 2017, Orrick, H.).

Asserted fabric design. Unicolors designs and sells fabrics to customers in the apparel industry. In September 2008, Unicolors purchased the IP rights to a work named "QQ-692," created by Milk Print, LLC. Using drafting utility software, Unicolors reformatted and slightly changed the QQ-692 design so that it could be printed onto bolts of fabric. Unicolors named the derivative design "PE1130" and included the design in a collection called "Flower 2008," which it registered as a collective work.

Infringement suit. In late 2010, Urban developed a women’s dress with a fabric design similar to the Unicolors design. Unicolors sued Urban for copyright infringement. The district court granted Unicolors’s motion for summary judgment on the issue of copyright infringement. After a two-day trial, a jury found Urban liable for willful infringement. The jury awarded Unicolors $164,400 in damages, and the district court granted Unicolors $366,910 in fees and costs. Urban appealed, arguing that the district court erred in its application of the subjective "intrinsic test" and in its conclusion that Unicolors had validly registered the design. Urban also argued that the jury’s verdict of willful infringement was not supported by substantial evidence.

Substantial similarity. In assessing whether works are substantially similar, or strikingly similar, for the purpose of determining the copying element of an infringement claim, the Ninth Circuit applies a two-part analysis: the extrinsic test and the intrinsic test. The extrinsic test requires a showing that concrete elements of the work overlap, based on objective criteria. The intrinsic test is subjective and asks whether an ordinary person would find the "total concept and feel" of the works to be substantially similar. Summary judgment is disfavored for the intrinsic test, except when works are so overwhelmingly identical that the possibility of independent creation is precluded.

Unicolors conceded that it could not prove that Urban had access to its copyrighted design, but it argued that the district court could grant summary judgment due to the striking similarity of the parties’ works. The district court observed that the two designs both featured nearly identical arrangements of splayed floral or feather motifs. Any slight differences between the works appeared to be artifacts from imperfect copying of the fabric, or simply minor modifications. Based on this striking similarity, the district court concluded that the accused dress was substantially similar to the asserted design.

The Ninth Circuit affirmed. This was a case in which the works at issue were so overwhelmingly identical that summary judgment of copying was warranted. "The objective similarities between the works are stark," the appellate court said. "The shapes, motifs, arrangements, spacing, and colors of the images in each design are nearly identical." No reasonable juror could conclude that the works were not substantially similar in total concept and feel. Even without proof of access, the striking similarity shown in this case gave rise to a permissible inference of copying, given the complexity of the works.

Registration. Urban contended that there were genuine factual disputes as to whether Unicolors’s asserted design was included in the "Flowers 2008" registration. The Ninth Circuit disagreed, concluding that the asserted design was registered as part of the collection. Although the list of titles in the registration included the name of Unicolors’s source artwork, QQ-692, it did not include the name of the Subject Design, PE1130. In addition, the section of the registration called "Material excluded from this claim" listed "Milk Print: QQ-692" among its entries. However, Unicolors properly submitted a copy of PE1130 with its application for the "Flowers 2008" collection. Unicolors was not required to list the names of the component works in the collection to register them as long as it held the rights to the component works. There was no dispute that Unicolors owned the rights to PE1130 and the underlying QQ-692 design. The omission of the name PE1130 on the registration certificate had no impact on the valid status of PE1130’s registration, the appellate court said.

Listing QQ-692 in the "materials excluded" section did not affect this conclusion because the infringement action was based on the derivative work, PE1130, and good-faith mistakes did not invalidate the registration of a derivative work. It was plausible that Unicolors mistakenly listed QQ-692 in the "materials excluded" section because it believed doing so was necessary to meet a statutory requirement that applicants registering a derivative work identify preexisting or already-published works on which the derivative work was based. Moreover, the Copyright Office later approved Unicolors’s request to correct the inadvertent exclusion.

Willfulness. At trial, Unicolors presented evidence that Urban had acted recklessly because it made no attempt to check or inquire into whether any of the designs it used in its apparel were subject to copyright protections. Urban kept thousands of fabric swatches that it purchased from art studios or took from vintage clothing remnants, and Urban’s designers used these swatches to create thousands of apparel designs each year. Urban had a general awareness that fabric designs may be copyrighted, but it made no effort to determine whether the designs it sampled were protected, and it did not inquire into the origin of the asserted design in this case. These facts were sufficient to support the verdict of willful infringement, the Ninth Circuit concluded.

Evidentiary and procedural matters. In a separate memorandum, the court affirmed certain rulings made by the district court on evidentiary and procedural matters. The district court did not rely on inadmissible evidence—an unauthenticated comparison exhibit—in assessing substantial similarity. The record showed that the district court relied on two other exhibits instead, which had been properly authenticated and were admissible. In addition, the district court properly excluded evidence of Unicolors’s prior infringement suits because there was no evidence that those suits were fraudulent or otherwise supported an "unclean hands" defense. Nor did the district court err in refusing to issue an instruction on the defense of estoppel; estoppel was an equitable defense to be decided by the court, not the jury.

The case is No. 15-55507.

Attorneys: Scott Alan Burroughs (Doniger / Burroughs) for Unicolors, Inc. Tara L. Martin (Gordon Rees Scully Mansukhani, LLP) for Urban Outfitters, Inc., and Century 21 Department Stores, LLC.

Companies: Unicolors, Inc.; Urban Outfitters, Inc.; Century 21 Department Stores, LLC

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