The Battle of David and Goliath: A Textile Company Loses a Lawsuit against H&M on Appeal

*** The writing does not, and is not intended to, constitute legal advice by any means***

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Two weeks ago, the 9th Circuit sided with H&M, a fast fashion Goliath of international stature, in a copyright infringement lawsuit brought by Unicolors, a Californian textile design company. In doing so, the 9th Circuit reversed the decision of the District Court of the Central District of California that found H&M liable for infringing Unicolor's EH101 artwork (shown in the picture above) by manufacturing and selling jackets and skirts that incorporated the artwork. The jury found the two works in question were "substantially similar", thereby delivering the verdict against H&M. So you'd naturally wonder why the verdict was reversed on appeal. The answer: technicality (at least, in my opinion).

It's always a good habit to start from the district court ruling because he or she relatively has better access to the facts of the case by virtue of having heard the oral arguments (including the testimonies) and read mountains of evidence submitted in the affidavits by the both sides. (In this case, the appeals court reviewed on paper only.)  The judge first explained to the jury the relevant legal standard for establishing an act of infringement. "Generally, a plaintiff [Unicolors] asserting copyright infringement can establish copying by showing 1) a substantial similarity between the alleged infringing work and the copyrighted work, and 2) that the defendant [H&M] had access to the copyrighted work. However, a plaintiff can overcome an insufficient showing of access if the two works are "strikingly similar"". Unicolors, Inc. v. H&M Hennes & Mauritz L.P., No. 16-CV-02322-AB (SKX), 2018 WL 10307045, at *4 (C.D. Cal. Aug. 1, 2018). The jury rightly concluded, based on the jury instruction, that, despite the evidence that tend to prove the possibility that H&M did not have access (or "a reasonable opportunity to view" in the copyright law language) to EH101, the striking similarity between the two works warranted an inference of copying.

H&M, of course, did not give up the legal battle. On appeal, it elaborated one of the theories it had put forth at the district court level: that Unicolors "fraudulently obtained" its registration certificate from the Copyright Office. Why bother with the certificate? Because the registration certificate serves as the prima facie evidence of the validity of the copyright. See 17. U.S.C. § 410. H&M's core argument on appeal was that Unicolors submitted a "single-unit registration" application by bundling together confined works (works that are held from the public view for a limited period of time) and public works. The single-unit registration allows an applicant to group together works from the same collection under one application, which helps the applicant save time and money. The president of Unicolors testified during the district court trial that the company submits collections of works in a single copyright registration "for saving money". Id. at *2. On this point, the district court judge ruled that, given the practice of the industry, what Unicolors did amounts only to an "inadvertent mistake" and therefore does not invalidate the registration unless it acted with the manifest intent to defraud the Copyright Office. 

The 9th Circuit judge apparently disagreed. The judge emphasized that the single-unit registration allows the grouping if items in the collection are "sold, distributed, or offered for sale concurrently". See Compendium of Copyright Office Practices § 1103. Based on the language of the rule, the judge reasoned that the items in the collection were not "offered for sale concurrently" because some were purposefully not for public viewing. The Compendium enjoys the Skidmore deference. (I don't want to go into details of the administrative law. Here, it suffices to say that a judge defers to the interpretation of a rule by the administrative agency in charge unless the given interpretation is unreasonable and unpersuasive.) According to the 9th Circuit, the mere fact that that all works identified in the application were published on the same date has little, if zero, bearing on the issue of concurrence. The judge even consulted the Merriam-Webster dictionary to see the definition of the word "single", and all law school students can instantly sense that things are not going well when a judge opens a dictionary. The judge had to explain that the word's plain meaning "commands a sense of singularity". Unicolors, Inc. v. H&M Hennes & Mauritz, L.P., No. 18-56253, 2020 WL 2781317, at *4 (9th Cir. May 29, 2020). Although the judge correctly acknowledged that the validity of a copyright registration certificate is normally undisputed, the story is different here because Unicolors cannot initiate a lawsuit in the first place if its registration certificate was obtained fraudulently by including "known inaccuracies" that might suggest the fraudulent intent on the part of Unicolors. The judge ultimately remanded the case, further instructing the Copyright Office to make an inquiry on the question of whether it would have denied the registration had it known the inaccuracies in the application. So the ball is in the hands of the Copyright Office.

So what's the lesson here? Is this simply a story of a technicality of the law getting in the way of administering justice? To be fair, Unicolors, over the years, has earned a reputation for being a copyright troll, a party that brings copyright lawsuits for the sole purpose of making money in an extortionate manner. However, one cannot turn a blind eye at the fact that H&M engaged in a behavior that needs to be condemned from the standpoint of commercial morality. Maybe, a better lesson for lawyers might be the following. Unicolors would have avoided this reversal of fortune if it had one lawyer telling the company that the manner in which it had been filing applications could be wrong on the face of the law and reached out to the Copyright Office for guidance.