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High Court to Consider Intent Bar in H&M Copyright Escape (1)

June 1, 2021, 1:58 PMUpdated: June 1, 2021, 6:52 PM

The Supreme Court will examine whether a copyright registration accurately reflecting a work can be invalidated without fraudulent intent as it weighs reinstating an infringement award against H&M Hennes & Mauritz LP.

Unicolors Inc. secured a nearly $800,000 award for infringement and attorneys’ fees in district court after accusing H&M of using its design in jackets and skirts. The U.S. Court of Appeals for the Ninth Circuit reversed, requiring the Copyright Office to weigh in on the validity of the copyright registration.

The Supreme Court agreed to weigh whether the Ninth Circuit erred by holding copyright law requires courts to refer validity challenges to the Copyright Office even if there’s no indication of fraud or material error.

The court won’t address Unicolors’ second question: whether the appeals panel wrongly applied Copyright Office requirements not in place at the time of registration, and, if so, whether that required referral to the Copyright Office.

The appeals court ruled that Unicolors improperly registered the copyright as part of a “single-unit registration.” The court also said the district court was wrong to find intent to defraud the Copyright Office a requirement for invalidating a registration. Valid pre-infringement registration under the rules is needed to secure statutory damages or attorneys’ fees.

Unicolors pointed in its petition to the 2008 Prioritizing Resources and Organization for Intellectual Property (PRO-IP) Act, which it said was designed to expand IP protection by preventing invalidation based on immaterial registration errors. The Ninth Circuit misinterpreted the law by finding it didn’t require fraud or bad faith, effectively making it easier for courts to invalidate registrations, Unicolors said.

Unicolors also said the Ninth Circuit diverged from both law and multiple circuits’ precedent as it applied a requirement created after the design’s registration. The fabric designer said letting that stand would expose thousands of then-compliant copyright registrations to cancellation.

H&M argued in its response to the petition that the intent-to-defraud requirement had been discredited in the Ninth Circuit, and Unicolors met it anyway by trying to combine multiple batches of works into one registration.

Whether to Refer

H&M began selling jackets and skirts bearing an artwork design dubbed “Xue Xu” in 2015. Unicolors sued the next year, saying the design ripped off one of 31 designs in its 2011 group registration at the Copyright Office. A U.S. District Court for the Central District of California jury found H&M liable for willful infringement and awarded $847,000.

The court deemed that figure excessive, and Unicolors accepted a reduced amount of $266,000 rather than face a new damages trial.

The court rejected H&M’s post-trial plea to nix the registration. It said H&M didn’t produce evidence of separate publication of the 31 works or intent to defraud, and awarded $514,000 in attorneys’ fees and costs.

But the Ninth Circuit said Unicolors’ registration contained “known inaccuracies.” The 31 designs weren’t “first published” as “a collection of works in a singular, bundled collection” as required, it said. Instead it registered knowing nine designs were sold separately and exclusively to certian customers.

The district court by law should have referred the matter to the Copyright Office for advice on whether the error would have resulted in refusal of registration, the appeals court said. It rejected the lower court’s claim that fraud was necessary to invalidate the registration.

Unicolors’ petition to the Supreme Court said H&M failed to ask the district court to refer the issue to the Copyright Office before the verdict. It instead just asked the district court to invalidate the registration without a referral, which Unicolors said the law prohibits. The district court’s decision not to invalidate or refer the question was further justified by H&M’s failure to provide evidence of either separate publication or fraud, it said.

Unicolors also said the “bundling” requirement referenced by the Ninth Circuit wasn’t in the Copyright Office Compendium until a 2017 revision. When it registered the works, the compendium merely said works had to be “recognizable as self-contained” and “first published in a single unit of publication,” Unicolors said.

The 31 designs in the registration were first published in Unicolors’ showroom on the same day, Unicolors said. Nine of them were later given to one customer on an exclusive basis for a limited time, and the appeals panel found “without any evidence” that they weren’t initially put in the showroom with the others, Unicolors said. H&M said Unicolors produced no supporting evidence that the designs were on display on the day claimed.

Doniger / Burroughs represents Unicolors. Nixon Peabody LLP represented H&M in the Ninth Circuit.

The case is Unicolors Inc. v. H&M Hennes & Maruitz LP, U.S., No. 20-915, Cert Granted 6/1/21.

(Updated with additional reporting.)

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

To contact the editors responsible for this story: Renee Schoof at rschoof@bloombergindustry.com; Keith Perine at kperine@bloomberglaw.com