Author: Sophie Arrowsmith (Hamlins LLP)
Orvec International Limited v Linfoots Limited  EWHC 1970 (IPEC), 18 June 2014, Intellectual Property Enterprise Court (IPEC), England and Wales
Journal of Intellectual Property Law & Practice (2014) doi: 10.1093/jiplp/jpu219, first published online: November 19, 2014
The Intellectual Property Enterprise Court (IPEC) rejected Orvec's claims against Linfoots, an advertising agency, for (i) breach of an implied copyright licence for photographs of products supplied to airlines by Orvec and (ii) secondary passing-off of the products.
Where a contract does not expressly provide for the circumstance arising, it is usually inferred that nothing is to happen if that circumstance does occur and that any loss lies where it falls. However, if the reasonable reader concludes the authors intended the contract to convey that something was to happen, a term to that effect will be implied. Such implied term only goes to the contract's meaning, and is not an addition to the contract. An implied term must be (i) reasonable and equitable; (ii) necessary to give business efficacy to the contract (no term will be implied if the contract is effective without it); (iii) so obvious that ‘it goes without saying’; (iv) capable of clear expression and (v) not contradictory to any express term (BP Refinery (Westernport) Pty Ltd v Shire of Hastings (Victoria) (1977) UKPC 13).
Orvec provided textile products to airlines. Under Linfoot's standard terms and conditions Linfoots provided advertising and marketing services to Orvec which involved Linfoots taking photographs of Orvec's products. Linfoots retained ownership of copyright in the photographs. Upon the cessation of their relationship, it was agreed Linfoots would supply certain images from among the photographs for Orvec's internal use and for supply by email to Orvec's customers.
Of Orvec's products shown in the photographs, some were manufactured by Orvec but most were supplied to Orvec by another company, Intex. After Intex and Orvec had terminated their business dealings, Intex asked Linfoots to create and supply photographs of its products for use in Intex's advertising. Among the images supplied by Linfoots to Intex were photographs created for Orvec.
Orvec claimed an implied term of the contract with Linfoots gave Orvec a perpetual and exclusive licence under the copyright in the photographs. Linfoots had therefore infringed Orvec's exclusive right. Further, Orvec claimed the use of the photographs by Intex gave rise to passing off on the part of Intex and, by supplying Intex with the photographs, Linfoots both equipped Intex with the means to pass off and and procured the passing off.
Orvec's action against Linfoots failed in relation to both breach of contract and passing off.
Breach of implied licence
The parties agreed there was an implied copyright licence for Orvec to use the advertising material supplied by Linfoots. However, they disagreed as to the nature of that licence. As some of the photographs included Orvec's trade marks and/or the livery, trade marks and logos of Orvec's airline clients, Orvec argued Linfoots had no use for those photographs and, therefore, the licence must have been exclusive and perpetual, and covering all photographs, not just the photographs containing trade marks. However, the court held there was no implication that exclusive rights were granted when the photographs displayed a third party's trade mark. Using the minimalist approach which must be taken when inferring the presence of unexpressed terms in a contract, only a non-exclusive licence and no more than a non-exclusive licence was sufficient to make the relevant part of the contract consistent with the whole of the contract. If more than a non-exclusive licence was to be implied, at most the licence is exclusive only where Orvec's trade mark appears in the photographs.
The term implied was therefore one which granted Orvec a non-exclusive licence under the copyright in the photographs, although the licence was probably perpetual.
By displaying samples of products which were recognizably used in the cabins of Orvec's clients on its website, Orvec argued Intex falsely represented (i) that the products came from Intex, when in truth they came from Orvec; and (ii) that those airlines were customers of Intex, when in truth they were not. However, the court found the first misrepresentation was not supported by the evidence presented. Where the products in the photographs were made by Intex, it was true (ie it was ‘not false’) to represent the products originated from Intex. Where the products were not made by Intex, the products would be seen as nothing other than a generic product, and therefore could not have represented anything regarding products which originated from Orvec.
The court additionally found the second misrepresentation was not supported by the evidence presented, either. Of Orvec's three customers in question, the first was also an Intex customer, or at least had received samples from Intex marked with its name; the second (to which Intex had not supplied products) had stopped flying and so there could have been no inference it was a customer of Intex; and the third had never been a direct customer of Intex. While persons with knowledge of the airline industry, looking at the photograph, would know the product displayed was used in the past by Orvec's third customer, it did not follow that such persons would take from this a representation that the customer bought the product directly from Intex. Such persons were more likely to think Intex was providing examples of the products it previously supplied, and could in future supply, and there was no false representation in doing this. Also, since Orvec's third customer no longer used the product in the photograph in question, there was no reason why it could not be offered to other airlines.
Since Orvec did not establish its case for passing off by Intex, its case on Linfoots' liability could not succeed.
This case does not really establish any new legal ground. However, it does reiterate that the more complex a term required to be implied into the contract is considered to be, the less likely it is the objective, reasonable person would take it to be an implied term of the contract. Detailed terms will either be present as an express term of the contract or will not be present at all.
Orvec did not make a claim against Intex—the party alleged to have committed the primary acts of passing off—but only against Linfoots for secondary passing-off. The reasons for this were not clear from the case report.
Also of interest is the judge's discussion of the contrast between the implied licence to use the copyright in the photographs of trade marked products and the licence that might have been implied for the use of the trade mark itself (had this been the issue). It was thought that, where a designer had created a logo for a client, it would have been understood no one other than the client could have a legitimate reason to copy the work and the client would expect to be able to prevent others from copying it. A term would therefore be implied that the copyright in the logo passed to the client. This implied term is supported by the client having other rights in the logo which could be relied on to prevent other parties from using the logo (ie trade mark rights).
When drafting a contract, all the key circumstances must be clearly and expressly provided for: it should not be assumed a term will be implied into the contract. If it is necessary to rely on an implied licence, bear in mind the court will take a minimalist attitude and will imply as bare a licence as possible in order to give effect to the contract.