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H&M Grilled by Justices Over Escape From Copyright Verdict (1)

Nov. 8, 2021, 7:22 PMUpdated: Nov. 8, 2021, 11:07 PM

Several U.S. Supreme Court justices appeared skeptical during oral argument Monday of the Ninth Circuit’s interpretation of when a copyright registration should be invalidated for errors.

Unicolors Inc. secured a nearly $800,000 infringement and fees award after a jury found H&M Hennes & Mauritz LP copied its fabric designs. But the U.S. Court of Appeals for the Ninth Circuit faulted the lower court for not granting H&M’s post-trial request to ask the copyright register for an opinion on whether errors in a group copyright application would have caused it to deny registration if it had known.

Unicolors argued that the law explicitly requires that to invalidate a copyright, a registrant must have had “knowledge” that what it submitted was inaccurate, and that H&M provided no evidence of such knowledge.

The justices scrutinized H&M’s position that such language didn’t impose a requirement to establish fraud, or of actual knowledge the information was wrong. They also expressed concerns at the suggested different treatment of whether an applicant knew that facts were wrong versus whether the applicant drew incorrect legal conclusions about often highly complex copyright law.

Justice Stephen Breyer, in an exchange with H&M counsel Peter K. Stris of Stris & Maher LLP, posed a hypothetical question involving a bird flying into the courtroom to get at the idea. Breyer asked Stris to suppose he called the bird a Scarlet Tanager, and Stris correctly identified it as a Northern Oriole.

Breyer said there were two reasons he could have been wrong: He saw a flash of feathers and thought they were red, when in fact they were yellow; or he didn’t know to properly label the bird. The question of the label is a question of law, he said.

“And of course my question is, who cares? And why should the fact that we call the latter thing a question of law, but not the former thing, makes any difference whatsoever to the proper resolution of this case?” Breyer said.

Stris said the analogy captures the two “buckets” of “what is it that you need to be aware of.” He cited a precedent involving the Fair Debt Collection Practicies Act, where the Supreme Court said an act may be “intentional” even if the actor lacked actual knowledge that it violated the law.

‘A Little Far-Fetched’

The dispute involves when 31 different Unicolor fabric designs were published and whether, under copyright law, they could be lumped into a single group registration. Stris said that a mistake or ignorance of law is not a defense unless a statute says otherwise.

Requiring actual knowledge or evidence of willful blindness would give plaintiffs a “powerful argument” that prevents scrutiny of their registration, Stris said. That would disincentivize exercising diligence in application and hurt the registration’s quality. It would also help copyright “trolls,” or those who systemically use copyright litigation as a revenue driver, pursue weak infringement cases, he said.

But justices pushed back on the distinction between misrepresentation and deception.

“There might be a difference between knowledge and intent to defraud in other contexts. But, in this context, I mean, how is it that a registrant knowingly misrepresents information on the application and does not intend to defraud?” Justice Elena Kagan said.

Stris said Unicolors itself had in other cases argued even if the defendant could prove it was aware, it could respond that it didn’t think it mattered. He said that indicated that Unicolors believed there was “daylight” between knowing something was wrong and intent to defraud.

But Justice Brett Kavanaugh pushed back, asking, “How is it that a registrant knowingly misrepresents and does not have the intent to defraud?” He later called the distinction “a little far-fetched.”

‘Beauty of Willful Blindness’

Justice Sonia Sotomayor asked Unicolors’ counsel, E. Joshua Rosenkranz of Orrick, Herrington & Sutcliffe LLP, about the issue of copyright trolls raised by H&M, which said Unicolors and others abuse the copyright system and litigation as a business model.

Sotomayor asked how his proposed standard to set apart a truly innocent mistake of law “from one in which a sophisticated party with the capacity to confer with lawyers makes a mistake that they could have easily checked?”

“That’s the beauty of willful blindness,” Rosenkranz said. “If H&M had evidence that our client was willfully blind to the truth about what the single unit publication rule meant,” they “can present it. But they had none.”

The U.S. government supported Unicolors’ position in the dispute. The government believes to risk invalidation, the registrant needs to have known of an error, whether legal or factual, Melissa N. Patterson of the U.S. Department of Justice said.

“And so never before could a court invalidate your registration and not even let you get in the courthouse door because they thought you should have known the law that it has now announced when you were filling out and checking boxes about publication—published or unpublished derivative work, not derivative work, works for hire, not works for hire,” Patterson said. “These are not self-evident concepts, to say the least.”

The case is Unicolors Inc. v H&M Hennes Maruitz LP, U.S., No. 20-915, oral argument 11/8/21.

(Updated with additional reporting.)

To contact the reporter on this story: Kyle Jahner in Washington at kjahner@bloomberglaw.com

To contact the editor responsible for this story: Renee Schoof at rschoof@bloombergindustry.com