Facts
In June 1999, the Claimant decided to launch a business
advertising and selling antiques over the Internet. During
June and July 1999, the Claimant instructed the Defendant, a design
consultancy company, to carry out design and branding consultancy
work in connection with the proposed website, business cards,
advertising literature and logos.
The materials supplied by the Defendant included a number of
icons featuring images on a banner on the website, navigation
buttons with logos traced and simplified from photographs, and a
large drawing on the 'cover' of the Claimant's 'brochure' based on
a photograph.
The Claimant commenced proceedings seeking the return of moneys
paid to the Defendant under the agreement on the grounds that the
material used infringed third-party copyright. The allegedly
infringing material was based on photographs of antiques
(furniture, works of art, glassware and the like) in the well-known
“Millers Antiques Encyclopaedia”.
The third party brought no action for infringement of copyright
against either the Claimant or the Defendant. However, the Claimant
argued that the use of the images supplied by the Defendant would
infringe the copyright of the third party in the photographs
contained in the journal. The Claimant applied for summary judgment
on the basis that the Defendant had no real prospect in defending
the claim against it.
Judgment
Neuberger J. broke the case down into a number of separate
issues and gave judgment as follows.
The first issue is whether there was an implied term in the
contract between the parties to the effect that the Defendant would
not supply material infringing the copyright of a third party. The
Defendants contended that any implied term would only be for
undisturbed use of the design work supplied.
Neuberger J. preferred an implied term based on an obligation to
use reasonable care and skill not to include material knowingly
copied from a third party, where that material might be subject to
copyright, without either obtaining a licence for the proposed use
or obtaining the consent of the Claimant to include such material
without a licence. In the alternative, Neuberger J. suggested that
the implied obligation would consist of an implied obligation to
provide the Claimant with design work that was fit for the purpose
for which it was commissioned, although he thought that the result
in most cases (and in this case) would be the same.
The second issue considered by the court is the extent to which
a photograph of a single static item (such as a jug or a sofa)
could be said to be protected by copyright.
The court proceeded in the absence of clear authority on this
particular point and so looked at the established texts on the
subject (Laddie, Prescott and Vittoria, 2nd edition, paragraph
3.56, Copinger and Skone James, 14th edition, paragraph 3.104 and
also Nimmo on Copyright at paragraph 2.130 on the position under US
Law).
Neuberger J. considered that a photograph of a three-dimensional
object would require of a photographer at least some skill and
effort in terms of positioning, angle, lighting, focus and so on.
In the cases of the photographs in Millers Antiques Encyclopaedia,
some skill had gone into exhibiting particular features, such as
the colour, and details of the items. There may have been some
skill in choosing the particular item as a good example of its
type. Neuberger J. therefore concluded that the photographs did
benefit from copyright.
The third issue
considered by the court is whether the material supplied by the
Defendant infringed the copyright in the photographs.
Neuberger J. looked first
at the photographs reproduced on the banner, in the navigation
boxes and on the website as designed and provided to the Claimant.
The icons on the banner on the website contained entire, albeit
small-scale, reproductions of the photographs from Millers Antiques
Encyclopaedia. The degree of originality in the photograph of a
single object was small (some work perhaps of selection,
positioning and lighting), and clearly much or even most of the
detail of the original photographs was missing in the miniature
reproductions. The Defendant said that the original part of the
photograph had therefore not been copied and there had not been the
copying of the “whole or a substantial part”.
However, the reproduction was of the whole photograph, and the
court found that the case of infringement had therefore been made
out as to hold that a reproduction of the whole of a photograph,
albeit on a small scale with much detail missing, would be an odd
conclusion.
The court then turned to the logos on the navigation buttons.
These seemed to be simplified tracings of the original photographs.
It appeared that even the basic originality involved in the
photographs (such as lighting, choice of object and camera angle)
did not remain in the logos. Therefore, it was held that the logos
on the navigation buttons did not infringe the third party's
copyright.
The representation on the brochure cover at first sight appeared
to be infringing as it was larger. However, there was much
additional material in terms of detail, even the drawing of more
clearly visible back legs of the antique in question. Neuberger J.
had sufficient doubt on this matter to allow it to go to trial.
In relation to the logos and the brochure, the court found that
they were supplied for publication or distribution. A more
difficult question related to the icons on the website
itself. The Defendant contended that these were just “dummy
copy”, supplied only for the purpose of filling the space with
something useful, and that it was the expectation that the Claimant
would replace them with something more to its liking.
Neuberger J. found evidence going in both directions on this
issue and declined to decide it at a summary stage.
The court then turned to the question of whether the Claimant
was entitled to reclaim the sums paid to the Defendant. For this
purpose, the Claimant had to establish either that there had been a
total failure of consideration, or that the Defendant's breach went
to the root of the contract, so that the Claimant could treat it as
repudiated.
The court held that the
Claimant failed on both counts. There was clearly some
consideration provided by the Defendant - materials of value had
been provided and had been used, such as the advertising material.
Again, the website had been used, albeit with some modifications
(not related to the infringing materials). As to repudiatory
breach, the Claimant had spent some £8,000 on modifications to the
website, including dealing with the alleged infringements, and it
could not be said that this meant that it had suffered a
repudiatory breach depriving it of “virtually the whole benefit
under the contract”.
Neuberger J. found that the Defendant was entitled to its fees
and expenses (albeit with some disputed elements to be decided by
the Master). The judge also indicated that he would consider a
substantial interim payment to be made to the Defendant.
The court also considered the Claimant's claim and the position
of set-off. The Claimant's set-off was based on the Defendant
having supplied some material which was in breach of the
Defendant's implied obligation (see the First Issue above). The
Claimant claimed as the damages for this the sum of £8,000, which
was the amount of an invoice from a third party contractor.
However, this sum was not particularised and the Defendant's
evidence was that the work of changing images in a website is
relatively simple and inexpensive.
The judge concluded that it would be wrong to allow a set-off at
this stage of the proceedings, as there was insufficient evidence
for further losses suffered by the Claimant. A further factor was
that the £8,000 was insufficiently particularised, and was not
apparently solely attributable to the work of remedying the
breaches of the Defendant.
The judge left open whether the claim for set-off might be made
later, perhaps after the master had assessed the Defendant's total
claim.
The court held that the Defendant was entitled to security for
costs. The Claimant was in poor shape financially, and although it
had been acquired by a US concern, gavel.net, the Defendant had
observed that the stock market valuation of such internet companies
did not always reflect the true state of a company's assets.
Commentary
Litigators often observe that small claims often involve the
most complex legal issues. Perhaps the seeming complexity results
from the disparity between the sums involved and the amount of
research and argument that can go into the legal issues.
In any event, this case is a good illustration of the principle.
A claim for the remedial work of deleting potentially infringing
materials from a website and marketing materials that amounted in
all probability to no more than £8,000 was met with a counterclaim
for some invoices of some £31,000. The scene was set for a contest
involving novel points of copyright law (highly relevant in the
context of e-commerce law) and complex points around total failure
of consideration, repudiatory breach and equitable set-off. Most
lawyers would agree that these issues are some of the most complex
in any case and can give rise to intractable considerations.
Firstly, the question of implied terms in agreements for website
design. Implied terms are always a vexed issue in any case, with
the law relatively easy to state, but difficult to apply. While
implied terms have to be reasonable ones, that is by no means the
only criterion. A term will only be implied if it is necessary for
business efficacy or if it passes the “officious bystander” test -
although this may be two ways of saying the same thing (Watts v
Lord Aldington 1999 LTR 578, 596-7, per Steyn LJ). An implied term
must also be the minimum necessary in the circumstances and it must
be clear (Robin Ray v Classic FM (1998) FSR 622, 641-2, per
Lightman J.).
In this case, the formulation of the implied term was the
subject of some debate. It is axiomatic that services must be
performed with reasonable care and skill (section 13 of the Supply
of Goods and Services Act 1982) but to what extent can this be the
same as an absolute warranty of fitness for purpose?
In fact, the court formulated the implied term in alternative
ways: (a) that the Defendant should use reasonable care not to
include material knowingly copied from a third party, where that
material may be subject to copyright, without getting a licence
from the third party or receiving the consent of the Claimant to
proceed in that way (presumably because the Claimant would obtain
the requisite licences); or; (b) that the Defendant should supply
design work that was fit for the purpose for which it was
commissioned.
The judge was probably right to say that either formulation
would lead to the same result in this case. The few cases on this
show the same dilemma - it is always possible to get into the
circuitous argument that if the goods/services were not fit for
purpose, then reasonable care and skill could not have been used.
The judge cited the cases of Samuels v Davis (1943) KB 526
and Greaves & Co (Contractors) Ltd v Baynham Meikle &
Partners (1975) 1 WLR 1095, but those interested might also
like to consider and compare Hawkins v Chrysler (UK) Ltd
and another (1986) 38 BLR 36 and IBA v EMI Electronics Ltd
and BICC Construction Ltd 11 BLR 29 (CA), (1980) 14 BLR 1 (HL)
and Young & Marten Limited v McManus Childs Ltd [1969] 1 AC
454, especially at 476 - but there are many other cases that
have had to consider this difficult subject.
Section 4 of the Copyright Designs and Patents Act 1988 includes
within the definition of artistic works “a graphic work,
photograph, sculpture or collage, irrespective of artistic
quality”. It is axiomatic in copyright that the required level of
originality is low, and so many ordinary items fall within the
ambit of copyright protection.
It might therefore seem strange even to question why
photographs, even of a relatively ordinary nature, should not
benefit from copyright protection. After all, if mundane and
functional texts can be “literary works”, why not ordinary
photographs?
The judge seemed prepared to accept that considerable time and
effort involving a high degree of skill on the part of the
photographer could go into the photograph of a static object. Even
the briefest consideration of the advertising industry will
demonstrate this. Vast amounts of time can be involved in the
photographing of ordinary items of merchandise, and much skill will
go into the positioning, lighting, background and subsequent
printing.
There is no direct authority on the question of the copyright
protection of photographs of three-dimensional objects such as in
this case. The judge accepted that some skill went into exhibiting
particular qualities of the objects, such as the colour of certain
items, or features of other objects, such as the glaze on pottery
and in nearly all cases the photographs demonstrated the details of
the particular object concerned. A further relevant factor was that
the photographer chose the particular object as a model of its
type.
For these reasons, the judge found that copyright did exist in
the photographs. However, looking at the matter the other way, it
means that if a minimum standard of care and skill is not used with
photographs of three-dimensional objects, then copyright will not
result. In the digital age, when so many photographs are taken,
almost casually, this threatens to deprive many photographs of
copyright protection. For example, many estate agents take
photographs of the properties on their books, but they are not
trained photographers, and in many cases the resulting photographs
are not “good” photographs - little thought has gone into the
positioning, lighting or other aspects of a “good” photograph. Are
these photographs therefore without protection - such that other
estate agents can take and use them?
Think of the fortuitous photograph of a blazing Concorde about
to crash: there was no skill in taking this shot. Is copyright to
be denied because of this, or is copyright granted just because of
the photographer’s luck in being there at the time?
This is undoubtedly an important decision and one whose
ramifications will have to be worked through. For the moment, it is
not sufficient to assume that all photographs benefit from
copyright. The apparent insistence by the judge on at least some
skill and judgment on the part of the photographer therefore might
be opening up a stricter test for photographs than has existed for
literary works.
The final point of interest here is whether a small-scale copy
of the photographs would infringe as a copy of the whole or a
substantial part. The point of interest here, which is relevant to
websites in general, is that the small copies were so small that
the buttons and icons had lost all the detail which was the
“original” (in copyright terms) part of the photographs which
merited copyright protection.
The decision here is
pragmatic and finds that it was an infringement. After all, as
Neuberger J. pointed out, it would be strange if copyright existed
in the whole photograph and a reproduction of the whole photograph
did not infringe.
Curiously, perhaps, the reproduction in very simple line drawing
form of other photographs to form miniature logos did not infringe.
The judge thought that the copyright protected the photographer's
work of origination. Therefore, if a further artist were to copy by
arranging items in a still-life picture in the same way as the
original photographer had done, then this might be infringement.
However, the infringement had to be in some way of the original
element of the photographer's work. In this case, the logos were
not in any sense a copy of the original photograph, little that was
original (lighting, focusing, angle) was carried through into a
simple line drawing.
Maybe this aspect of the decision is surprising. What if a line
drawing were made by directly tracing from the photograph? This is
surely more than inspiration, it is a direct copy. It will be a
question of fact in each case, but if enough of the detail is
carried into the line drawing, then a tracing would surely fall to
be treated differently.
There is really a lot in this case, and while the judgment is
not, as befits the value at stake, long on case-law, it is perhaps
worth emphasising one more point made in the judgment.
Many people assume that where there is a counterclaim there must
automatically be a set-off. This is not so. The Court of
Appeal in Esso Petroleum Co Ltd v Milton [1997] 1 WLR 938
recently re-stated the law of equitable set-off. Simon Brown LJ
said (at page 950):
"For equitable set-off to apply it must
therefore be established first, that the counterclaim is at least
closely connected with the same transaction as that giving rise to
the claim; and, second, that the relationship between the
respective claims is such that it would be manifestly unjust to
allow one to be in force without regard to the other.”
In this case the evidence was lacking from the Claimant that the
£8,000 it had spent was spent wholly on work of replacing the
infringing works the Defendant had supplied. For that reason, the
judge did not allow set-off at that stage. While this was a
decision on the facts, it is a useful reminder that set-off is not
allowed in every case and it is necessary to have the evidence to
show the aspect of unfairness described by Simon Brown LJ in
Esso.
