Design Right Infringement Case finds Managing Director jointly liable
Introduction
A recent dispute concerning a commercial collaboration in the defence sector has highlighted the importance of being aware of Design Rights and your rights and obligations when collaborating with others.
What was the case about?
Societa Esplosivi Industriali SpA ('SEI'), an Italian weapons manufacturer and an English company, Ordnance Technologies (UK) Limited ('OTL'), had been collaborating for many years to bid for defence contracts.
They entered into contractual arrangements to bid for the 'Lancer 2' multiple warhead system. These arrangements provided that OTL would not work with anyone else on Lancer 2 in return for OTL being a subcontractor for SEI and SEI putting valuable IPR into the collaboration and the subsequent joint ownership of any IP arising from the bid.
SEI issued proceedings complaining that OTL was breaching the collaborative agreement by working with a US weapons manufacturer (Raytheon) on a multi-mission missile and undertaking warhead related work for the Ministry of Defence's associate QinetetiQ. The action included claims in contract and an assertion that SEI's Design rights were being infringed.
When the matter reached trial, OTL was in liquidation so SEI focussed on its allegation that OTL's sole director/shareholder (the managing director) was jointly liable for the alleged acts of Design Right infringement.
What was the outcome of the case?
The claimant succeeded in establishing that the managing director of OTL was personally jointly liable for his company's Design Right infringement as it was found that he had been personally involved.
The court held that both OTL and the managing director had jointly infringed SEI's Design Right by making two articles when working for QinetiQ. When considering the work for Raytheon no articles or design documents were found to have been made so the claim failed. OTL was also found to have extensively breached it's contractual commitments to SEI.
Following this case Design Right claimants will need to show that the infringer not only infringed for commercial purposes but also, where they have infringed through the creation of design documents, that they did this for the purpose of enabling the articles to be made.
What is Design Right?
Design Right is sometimes referred to as 'unregistered designs right'. The type of features it covers differs from registered design. Protection is afforded to the appearance of functional items (it doesn't cover surface decoration). In very broad terms, the key features of Design Right are that it:
- can be found in the internal or external shapes or configurations of an object;
- applies to the whole or to a part of an article
- lasts for 10 to 15 years depending on the circumstances
- must be original and not commonplace
- must either be recorded in a design document or an article must be made to the design
- must be created by a qualifying person
Design Right is not intended to protect methods of construction or to cover parts of items that have to fit with another article (the 'must fit' exception) nor to articles that are dependent upon the appearance of another article (the 'must match' exception).
What can my business learn from this case?
- Check the IP clauses of your contracts carefully so that you are aware of what you can and can't do with both existing and any IP arising.
- Ensure that the company's contractual commitments are understood and adhered to within the company.
- Carry out due diligence on those you intend to contract with and then police their actions.
- Consider requesting third party indemnities and guarantees where the other party to your contract lacks sufficient financial standing.
- Remember that Design Right arises automatically and that it should be protected by robust confidentiality arrangements when dealing with third parties.
- Operate sound corporate governance policies in order to reduce the risk of directors being found personally liable for any infringements committed by the company.
If you need assistance with any technology law issue then please contact Ashfords' Intellectual Property and Technology Law Department.
We frequently visit the Tamar Science Park and would be more than happy to meet with you as needed.
The information in this article is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances. Ashfords is regulated by the Solicitors Regulation Authority.
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