A recent Australian Federal Court decision involving the Hells Angels Motorcycle Corporation of the United States and its efforts, via its Australian chapter, to enforce its intellectual property rights naturally grabbed my attention. Yes, I can hear you now: What, the Hells Angels is a corporate entity with an IP enforcement policy? Yep, but the surprises don’t end there.
This is a case worth reporting on. It serves as a salient reminder for online platforms of the real risks of infringing third party copyright and trade marks in respect of the goods they sell online.
The online platform involved, and the target of Hells Angels’ angst was ASX listed Redbubble.com.au.
A quick summary of the facts
Redbubble operates an online platform where artists and designers can upload creative works for sale. Customers, regular folk like you and I, select a creative work of interest and order a print of the work on an item such as a t-shirt, coffee cup, phone case, poster etc. So far, so good. Here’s a screen grab of the redbubble home page.
Hells Angels took objection to certain unauthorised uses of the Hells Angels’ Fuki death-head design on Redbubble. Here’s the Fuki Death-Head design.
Hells Angels Motorcycle Corporation of the US (HAMC) own Australian registered trade marks in the death-head design and also claim ownership of copyright in the design. The legal action was commenced by Hells Angels Australia (HAA) who claimed standing to bring the copyright and trade mark infringement proceedings against Redbubble on the basis of being an exclusive licensee of the copyright work and an authorised user of the trade marks.
HAA alleged copyright and trade mark infringement in respect of the following items being 3 t-shirts and 1 poster.
The copyright infringement claim
HAA alleged Redbubble engaged in direct infringement of the copyright by communicating the death head design online to the public. In the alternative, HAA claimed Redbubble was responsible for authorisation of copyright infringement.
Ownership of copyright in the Fuki death-head design was a key issue. Redbubble escaped a finding of infringement because HAA was unable to establish the necessary chain of title between the individual creator of the death-head design (Mr Fukushima) and HAMC – i.e. HAMC didn’t have adequate evidence that the designer had transferred copyright to HAMC. By failing to prove copyright ownership it followed that HAA was not an exclusive licensee of the work and thus had no standing to bring the copyright infringement claim.
However, and this is really important, the Court observed that, if HAA could have established ownership by HAMC, Redbubble would have been liable as a primary infringer of copyright.
The trade mark infringement claim
Better luck here for HAA with the Court positively finding that Redbubble infringed HMAC’s trade marks in respect of the three t-shirt examples, but not the poster example. The use of the trade mark on the poster was considered a parodic use, not use as a trade mark.
The Court examined the concept of ‘use’ and Redbubble’s business model. It held Redbubble was the supplier of the relevant goods because it exercised management, control and power over the chain of supply, enabling the transaction to occur. The Court was satisfied that Redbubble was more than merely a marketplace acting as an agent but rather it acts as an independent contractor because of the functionality of the platform and control exercised over user content. As such, the Court was satisfied that Redbubble was using the relevant trade marks (i.e. the Fuki death head designs) as trade marks in Australia and thus liable for trade mark infringement.
As a public listed company Redbubble considered it appropriate to make an announcement to the market about the case. This is where things get really interesting. The ASX announcement which can be found here includes a number of curious statements, each in italics below.
“The Federal Court Judge found in Redbubble’s favour and dismissed all of Hells Angels’ claims in relation to copyright …”
No mention of why Redbubble won, or that infringement would have been found if chain of title had been established.
“The Judge made findings of technical trademark infringement.”
Just as one can’t fall ‘half pregnant’, there is no such thing as a “technical” infringement and it’s certainly not the language adopted by the Court. Redbubble was held to have infringed HAMC’s trade mark. Full stop.
“[The Hells Angels case hasn’t] resulted in a material financial or operational impact on Redbubble.”
Excuse me, what was that? This case unequivocally reveals that Redbubble’s business model is an IP infringement timebomb!
”We’ve had very few instances of litigation in our history because we work to find pragmatic and low cost solutions … The outcome of this case demonstrates that collaboration is a better approach for all parties.”
In other words, Redbubble accepts the risk of infringing third party IP rights but when caught they will try and resolve via negotiation.
Lessons for online platforms
Selling goods and services online is increasingly core-business for many companies. No problem if you own the intellectual property rights (e.g. copyrights and trade marks) to the goods being sold, but a riskier proposition when you operate a platform for the sale of third party products and services.
The Hells Angels case against Redbubble highlights the importance of the functionality of an online platform in assessing IP infringement risks. If the platform is essentially one that facilitates transactions between parties (a marketplace), the risk of trade mark infringement may be less prevalent. However, and as Redbubble discovered, where the platform’s functionality involves a degree of control over the chain of supply the trade mark infringement risk becomes … well, hellish. Sorry.