Unicolors. Inc. v. H&M (9th Cir. May 29, 2020)

On May 29, 2020, the Ninth Circuit dealt a big blow to fabric designer Unicolors, reversing the district court’s judgment of a substantial damage and attorney’s fee award against mega-clothing retailer H&M.  The reversal had nothing to do with the similarity of the designs, but with inaccuracies on Unicolors’ copyright registration.  The case has important lessons for copyright owners and alleged infringers.

Background

In 2016, Unicolors sued H&M in the U.S. District Court for the Central District of California, alleging that H&M’s “Xue Xu” design infringed one of multiple Unicolors designs listed in a single copyright registration (see post image).  The case proceeded to trial and the jury found willful copyright infringement.  The district court denied H&M’s motion for judgment as a matter of law based on the alleged registration defects and (after remittitur) awarded Unicolors $266,209.33 in damages, $508,709.20 in attorney’s fees, and $5,856.27 in costs.  H&M appealed. 

Ninth Circuit Decision

The Ninth Circuit reversed, finding two problems with the district court’s analysis regarding the registration.  First, contrary to the district court’s conclusion, invalidation does not require a showing that the registrant intended to defraud the Copyright Office. 

Second, the panel held the district court had misconstrued the requirements of a “single unit” registration under 37 C.F.R. § 202.3(b)(4)(i)(A).  The Ninth Circuit held that “a collection of works does not qualify as a ‘single unit of publication’ unless all individual works of the collection were first published as a singular, bundled unit.”  Unicolors’ registration was inaccurate because, at minimum, it included thirty-one separate designs showing the same publication date when, in fact, several designs were “confined” (kept private) after that date.  Moreover, since Unicolors knew that all the designs were not released together, Unicolors knew the registration was inaccurate. 

Importantly, the Ninth Circuit did not hold these known inaccuracies entitled H&M to judgment as a matter of law.  Rather, the panel held that, once a defendant alleges:

(1) a plaintiff’s certificate of registration contains inaccurate information;

(2) the inaccurate information was included on the application for copyright registration; and

(3) the inaccurate information was included on the application with knowledge that it was inaccurate,

the district court is required to submit a request to the Register of Copyrights “to advise the court whether the inaccurate information, if known, would have caused it to refuse registration.”

The Ninth Circuit remanded the case so the district court could complete this process before deciding whether Unicolors’ registration is invalid, which would require dismissing Unicolors’ claims and entering judgment in favor of H&M.

Takeaways

There are big takeaways here for both copyright owners and alleged infringers.  

For plaintiffs, this case emphasizes the importance of submitting accurate copyright registration applications and not being pennywise, pound foolish.  The court noted that Unicolors included multiple designs on a single registration “for saving money,” but that cost-saving measure ended up backfiring here in a major way. 

The decision also highlights a critical line of defense for alleged infringers, at least for those in the courts in the Ninth Circuit.  Going after copyright registrations and applications can be detailed, technical work, but when done right, can really pay off in the end, as it did here for H&M.  This decision, with its narrow interpretation of the “single unit of publication” rule and its evisceration of the “intend to defraud” requirement for registration invalidation, adds more arrows to the quiver of the agile copyright defendant. 

Knowing what information and documents to obtain in discovery in light of their legal ramifications, and how to effectively deploy this evidence, could dictate a win or loss in high stakes copyright litigations.