Ownership of copyrights in logos: Atelier v Kilnworx

Ask just about any IP lawyer and they will probably tell you that if you sub contract the development of your logo, you will not own the copyright in the logo. You will not even have the exclusive right to use it. This is because of the general rule that, subject to a list of exceptions, the creator of an artistic work, such as a logo, is the first owner of the copyright in and to that logo and that ownership is not transferred to you, even if you pay for it. This is, unless you have agreed to have it transferred to you in writing. If you are interested in the exact wording of the South African position take a look at Section 21 and 22 (read with sections 1,3 and 4) of the Copyright Act 98/1978:

1. Ownership of copyright.

• (a) Subject to the provisions of this section which makes exceptions for only certain commissioned works, the ownership of any copyright conferred by section 3 or 4 setting out “Copyright by virtue of nationality, domicile or residence, and duration of copyright.” and “Copyright by reference to country of origin” on any work shall vest in the author or, in the case of a work of joint authorship, in the co-authors of the work.

An “author” is defined in Section 1 as meaning, in relation to— (a) a literary, musical or artistic work, the person who first makes or creates the work.

1. Assignment and licences in respect of copyright.

• No assignment of copyright and no exclusive licence to do an act which is subject to copyright shall have effect unless it is in writing signed by or on behalf of the assignor, the licenser or, in the case of an exclusive sublicence, the exclusive sublicenser, as the case may be.

The effect of this position goes beyond logos and raises a flag in every situation a copyrighted work is created outside of a business eg computer programs (where there are different but similar rules), transcripts, contracts, architectural drawings etc. Indeed, for the copyright lawyer, it’s often a wonderful occasion to horrify corporate lawyers, clients and potential clients and in doing so, remind them of just how important it is to have IP counsel. Of course it is important. On the other hand, for the affected client the position can just seem ludicrous – how can it be that I have paid for my logo, computer program etc and I do not own the copyright! In many cases the situation is realised too late, often to the detriment of the person or business that paid to have the work done. But need it be so? Could it be that there is actually an implied term when you contract out the development of a logo (in particular), for the copyright to be assigned to you on request?

Aaron Wood, a well known IP lawyer in the UK, went about arguing that position on behalf of his client recently in the case of Atelier v Kilnworx (Atelier Eighty Two Limited v Kilnworx Climbing Centre CIC & Others 2015 EWHC 2291 (IPEC)).  In short, Aaron’s client successfully argued that the commissioner of the logo, obtained an equitable interest in the copyright in the logo and was entitled to the assignment of the legal interest in that copyright.

29. “In my judgment, in August 2011 Kilnworx through Mr Bunting and Purple Penguin through Mr Kirk    entered into an agreement for the creation of the Logos as described above. There was an implied term in the contract. It was a term of the usual nature to be implied into a contract for the creation of a logo, namely that Kilnworx would own the copyrights in the Logos.“

The facts are quite specific and necessary to analyse to understand when this situation would occur although the writer suggests (as the above quote from the case at para 29 explains) that in most cases such an implied term would exist in the ordinary contract between designer and commissioner. The principles summarised in the case read:

1. In the case of any agreement by which the design of a logo is commissioned, the starting point will be the one identified by the deputy judge in Griggs, expressly approved by the Court of Appeal (at 16): where a designer is commissioned to create a logo for a client, in order to give business efficacy to the contract of commission there will in the normal course be a presumption that the client has the right to prevent others from using the logo. I would add that it is, after all, the client’s logo, intended to signal to the world that the goods or services supplied under that logo come from the client and no one else. This will mean either that the client retains ownership of the copyright or alternatively that he has the benefit of an exclusive licence. As Jacob LJ also said (at 19), it is normally to be expected that the designer will have no conceivable further interest in the work. By way of obvious expansion on this, I would point out that any use of the logo except by the client is liable to be unlawful because it would give rise to a justified allegation of passing off. It would be very unusual for the parties to be unaware of this, at least in broad terms.
2. Jacob LJ stated (at 21) that on certain facts it may be that the designer is entitled to retain rights in the work pending further payment. Plainly it cannot be ruled out as an impossibility. But it seems to me that the facts would have to point very clearly to such an arrangement having been agreed by the parties. For obvious reasons it would be unusual and commercially dangerous for the client to have his use of his logo made subject to the approval of someone else. Far less is the client likely to agree (or the designer likely to contemplate) that the designer will in certain circumstances be free to sell off the logo, possibly to a competitor of the client, and thereby give the competitor both the right to use the logo and to prevent others, including the client, from using it. There would have to be very clear evidence to support the existence of an agreement along such lines.

The question then is whether the same would be so, under South African law. This is because English contract law distinguishes between equitable rights to property (a right based essentially on principles of fairness) and legal rights, something which is not that apparent (at least not directly) in South African law.

The writer is of the view that under South African law, the situation should be no different because rules for determining the existence of tacit and/or implied terms are essentially based on the unarticulated intentions of the parties. These intentions would be no different to those set out in paras 22 and 23 of the judgement. For instance, it would be extraordinary for a logo designer to explain that his intention would be to own copyright in a logo, once he had been paid for it, for use by himself or others or to preclude (by virtue of his ownership) the commissioner from enforcing rights in copyright against third parties.

Consequently, this writer is of the view that when you commission the development of a logo in an ordinary everyday situation there would be an implied or tacit term that ownership of the copyright in that logo would be yours to request, at no additional charge.