The recent decision in The Dempsey Group Pty Ltd v Spotlight Pty Ltd  FCA 2016 on what constitutes the reproduction of a substantial part of a copyright work offers a timely reminder for Australian textile merchants on how best to thread the needle when purchasing designs from third-party manufacturers. Summer Clerk Jake Boudsocq and Lawyer Edward Thien report.
- Businesses should exercise caution when purchasing products from third-party designers. Particular caution should be exercised when dealing with suppliers for the first time. In these circumstances, businesses should conduct further investigations as to any potential competing intellectual property claims in the products.
- From a practical perspective, businesses should attempt to incorporate carefully drafted warranties and indemnities in their supply agreements with third-parties, particularly concerning intellectual property rights in the goods and/or services being offered.
- If a business is put on notice that it has engaged in conduct infringing another's intellectual property rights, it should take immediate steps to address the issue and cease the infringing conduct, including contacting lawyers for clarification of the relevant legal grounds and guidance on whether to change business operations.
The Dempsey Group Pty Ltd (Dempsey Group) sued Spotlight Pty Ltd (Spotlight) claiming Spotlight infringed its copyright in three artistic works appearing in 'Morgan & Finch' quilt covers and pillow sets (the Dempsey Products).
Dempsey Group alleged that Spotlight instructed fabric manufacturer Yantai Pacific Home Fashions (Yantai), from which both parties purchased their products, to design prints that copied the Dempsey Products. Spotlight denied any infringement, arguing it had no knowledge of its products (Spotlight Products) infringing Dempsey Group's copyright.
By late-November 2016, Dempsey Group notified Spotlight of its infringement claims and requested a total recall of the Spotlight Products. Documents in support of Dempsey Group's proof of ownership were provided several days later, on 2 December. On 29 December 2016, Spotlight commenced a nationwide recall of the Spotlight Products.
Dempsey Group argued the 'look and feel' of its artistic works were protectable, and that Spotlight had copied a substantial part thereof. The court accepted this submission.
The court considered the artistic works in the Dempsey Products included 'colour, layout and shaping of the designs', which cumulatively created the desired 'look and feel'. Taken as a whole, the court was satisfied the Spotlight Products 'qualitatively' reproduced a substantial part of the 'look and feel' of the artistic works.
The court was satisfied that Spotlight did not have knowledge, nor that it ought reasonably to have assumed, it was infringing the Dempsey Products. Significantly, the court considered that the long-standing business relationship between Spotlight and Yantai meant it was reasonable for Spotlight to assume Yantai would notify it of the potential for infringement. Accordingly, Spotlight was not liable for damages relating to the infringement during the period prior to 2 December 2016.