Written by Loni Morrow and Catherine Holland

Edited by Jeff Van Hoosear

On April 4, 2017, the Ninth Circuit ruled that Urban Outfitters and Century 21 (collectively “Urban”) were liable for willful infringement of a copyrighted fabric design owned by Unicolors Inc. Unicolors is a Los Angeles based company that designs and sells fabric to customers in the apparel market. Urban Outfitters is a retail company with over 500 stores worldwide. Century 21 is a department store that purchases products from Urban Outfitters. Unicolors routinely obtains copyright registrations for its fabric designs to “protect its investment and maintain a competitive advantage in its artwork.” Unicolors also regularly enforces its copyright registrations, and filed over 60 lawsuits for copyright infringement in the approximately five years preceding trial.

In September, 2008, Unicolors purchased intellectual property rights to a piece of artwork designed by Milk Print, LLC. Unicolors then had one of its employees modify the size and color of the artwork to create the PE 1130 design depicted below on the left. Unicolors obtained a copyright registration for a collection of fabric designs called “flowers 2008” that included this derivative design.

Urban’s design team creates about 5,000 different garments per year. In creating clothing, Urban’s design team gets inspiration from thousands of swatches of fabric that Urban has purchased from art studios or vintage stores. One of the studios from which Urban regularly purchases art is Milk Print, LLC, the design studio that created the artwork which inspired Unicolors PE 1130 design.

The District Court in the Central District of California decided on a motion for summary judgment, before any trial took place, that Urban infringed Unicolors’ copyright in the PE1130 fabric design.

A two day trial was then held on the issues of willfulness and damages. A jury found that Urban willfully infringed Unicolors’ copyrights in the designs and awarded $164,400 in damages. The district court later granted Unicolors $366,910.17 in fees and costs.

On appeal, the Ninth Circuit upheld the district court’s ruling on infringement, explaining that the district court could find infringement on a motion for summary judgment, “when the works are so overwhelmingly similar that the possibility of independent creation is precluded.” The Court stated that no reasonable juror could conclude that the works were not substantially similar. The Ninth Circuit also agreed with the district court that the striking similarity between the works allowed the court to infer that Urban copied the design even though there was no evidence of Urban having access to the design.

Additionally, the Ninth Circuit upheld the jury’s finding of willfulness, stating that there was enough evidence for the jury to conclude that Urban had a policy of “reckless disregard” to copyright infringement because it did not inquire into whether the fabric designs it used were subject to copyright protection. Under 17 U.S.C. § 504(c), a court may increase a statutory damages award up to $150,000 if the “infringement was committed willfully.” On the other hand, a court may decrease a statutory damages award to as low as $200 if the “infringer was not aware and had no reason to believe that his or her acts constituted an infringement of copyright.” The Ninth Circuit rejected Urban’s argument that it needed “knowledge” that it was infringing a copyright, and found that Urban’s reckless behavior was a sufficient basis for an increased damages award.

This decision is useful precedent for companies trying to prove “willful” copyright infringement, and seeking a substantial damage award. It also serves as a warning for those using the work of others as an inspiration. To avoid a charge of willful infringement, they must be able to demonstrate that their actions were not reckless. In situations like the one in this case, where the prior work does not have a “© Owner Name” copyright notice, it may be difficult to determine if there is anyone claiming ownership of a copyright. It can also be very difficult to determine what works have been registered in the U.S. Copyright Office. The Copyright Office has a searchable database, but it is not very user friendly. In addition, pictures of the copyrighted works are not readily available, and it is difficult to determine what the copyrighted works look like.

In order to obtain and view the deposit of the work that was submitted to the Copyright Office, you must have one of three things: (i) written authorization from the copyright owner, (ii) a statement that the copyright registration is the subject of litigation, or (iii) a court order requesting the deposit. Obviously, it is difficult to get (i) if you do not know the name of the owner. It is also hard to comply with (ii) and (iii) until it is too late, as you may have already been sued.

This case demonstrates the importance of copyright owners using copyright notice on all of their work. It also demonstrates the caution that should be exercised by companies using the work of others as inspiration. The best practice would be to use only those works where either the author is known and permission has been received or it is clear that the work is not protected by copyright. If the author is not known, then the company should take steps to find out who the author is, or obtain indemnity from whoever has provided it with the “inspiring” work. If the company does none of these things, it may be found to be “reckless,” and proceeds at its own peril.