In April 2017, Urban Outfitters and Century 21 were found liable for willful copyright infringement of a fabric design owned by Unicolors, Inc.  Unicolors has filed over 60 lawsuits to enforce its copyright registrations in its fabric designs.  The trial court awarded $164,400 in damages and $366,910.17 in fees and costs.  On appeal, the Ninth Circuit upheld the infringement ruling and agreed with the district court that the striking similarity between the registrations and the accused designs allowed the court to infer that Urban copied the design even thought there was no evidence of Urban having access to the design.  Importantly, the Ninth Circuit rejected Urban Outfitters' argument that knowledge is a requirement of willful infringement, holding that reckless was sufficient.

Steps Retailers Can Take That Might Reduce the Risk of Willful Copyright Infringement

The following provides some considerations retailers may take in handling disputes to potentially minimize the risk of a willful copyright infringement ruling:

1. In the fashion and fabric design industry, designers are often "inspired" by fabric swatches and material on the Internet as well as provided by third parties.  Looking for copyright notices is a good step to take to become aware of third-party copyrights.  Internal training on what is considered acceptable "inspiration" and design best practices is also a good step.  Unlike trademarks and patents, copyright registrations are difficult to search, which makes it difficult for a retailer to complete a clearance search before selling a copyrightable design or product.

2. Retailers may want to consider outsourcing fabric and product design to third parties and use agreements that include representations and warranties that the third-party designer has appropriate permission for all deliverables.  These agreements should also include uncapped indemnity provisions in the event of an infringement lawsuit.

3. If a cease and desist letter is received, the retailer should consider retaining experienced copyright litigation counsel and take appropriate action.  Due to the difficulty in searching the U.S. Copyright Office website, verifying the owner of the alleged registered work as well as a copy of the registration specimen are common first steps in resolving a copyright dispute.

Klemchuk LLP is an Intellectual Property Law, Litigation, and Transactions law firm located in Dallas, Texas.The firm offers comprehensive legal services including litigation and enforcement of all forms of IP as well as registration and licensing of patents, trademarks, trade dress, and copyrights.  The firm also provides a wide range of technology, Internet, e-commerce, and business services including business planning, formation, and financing, mergers and acquisitions, business litigation, data privacy, and domain name dispute resolution.  The firm publishes the following blogs: Intellectual Property Law, Conversations with Innovators (interviews with thought leaders), Leaders in Law (discussions on timely law topics), and Culture Counts (thoughts on law firm culture and the business of the practice of law).