The Supreme Court's Decision in Unicolors, Inc. v. H&m Hennes & Mauritz, L.p. Eliminates a Trap for Unwary Copyright Applicants

• Publication year: 2022
• Author: David A. Sergenian

THE SUPREME COURT'S DECISION IN UNICOLORS, INC. V. H&M HENNES & MAURITZ, L.P. ELIMINATES A TRAP FOR UNWARY COPYRIGHT APPLICANTS

David A. Sergenian
Sergenian Law

INTRODUCTION

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On February 24, 2022, the United States Supreme Court issued an opinion addressing the standard that must be met to establish the first element of an invalidity defense based on 17 U.S.C. § 411(b). Pursuant to Section 411(b), a copyright registration may be held invalid if the copyright application contains information that the applicant knew to be inaccurate at the time of registration.¹ It is clear that a copyright registration may be invalidated pursuant to Section 411(b) if it contains factual information that an applicant knew to be inaccurate at the time of registration. However, what if a registrant submits a copyright registration that contains an inaccurate legal description of the work to be registered? Does a defendant need to show that the registrant had actual knowledge of the inaccurate legal description, or can knowledge of the law be imputed to the registrant? The Ninth Circuit essentially held that knowledge of the law under these circumstances may be imputed to the registrant. The Supreme Court, however, reversed the Ninth Circuit and held that a copyright application that contains a mistake of law can only be invalidated pursuant to Section 411(b) if the registrant had actual knowledge of the mistake of law at the time of registration.

THE ORDER OF THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA

On April 5, 2016, Unicolors, Inc. ("Unicolors") sued H&M Hennes & Mauritz L.P. ("H&M") in the United States District Court for the Central District of California, asserting claims for direct, vicarious, and contributory copyright infringement.² Unicolors, a textile converter of imported and domestic fabrications, alleged that H&M infringed Unicolors' copyrighted textile pattern titled "Floral" (aka "EH101").³

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A jury trial was held from December 5 through 7, 2017.⁴ At the close of Unicolors' case, H&M moved for judgment as a matter of law. The trial court denied H&M's motion. The jury returned a verdict in Unicolors' favor, awarding $817,920 in profit disgorgement damages and $28,800 in lost profits. H&M then renewed its motion for judgment as a matter of law. One of H&M's arguments for judgment as a matter of law was that Unicolors did not hold a valid copyright.⁵

Specifically, H&M argued that Unicolors' copyright registration was invalid under 17 U.S.C. § 411(b).⁶ As the district court observed, the Copyright Act allows multiple works to be registered in a single copyright registration in certain circumstances.⁷ A claimant can register a collection of works as a "single work."⁸ In the case of published works, however, a claimant can only register a collection of public works in a single registration if "the collection is sold, distributed or offered for sale concurrently."⁹

"A copyright registration is 'prima facie evidence of the validity of the copyright and the facts stated in the certificate.'"¹⁰ Inaccurate information in a copyright registration can invalidate a registration, but such invalidity does not occur automatically.¹¹ Instead, a registration remains effective despite containing inaccurate information unless "(A) the inaccurate information was included on the application for copyright registration with knowledge that it was inaccurate; and (B) the inaccuracy of the information, if known, would have caused the Register of Copyrights to refuse registration."¹² Inadvertent mistakes in a copyright registration therefore do not invalidate the registration "unless the alleged infringer has relied to its detriment on the mistake."¹³ According to the district court, because invalidity due to inaccuracies in a registration requires the copyright claimant to have known its application was inaccurate, a party asserting invalidity must show some indication that the claimant intended to defraud the Copyright Office.¹⁴

In its motion for judgment as a matter of law, H&M argued that Unicolors' registration of its EH101 design was invalid under 17 U.S.C. § 411(b) because it contained false material information that Unicolors knew to be false.¹⁵ Unicolors registered its EH101 design with other textile design works.¹⁶ Groups of textile designs can be registered together only under single work registrations as a "single unit."¹⁷ To qualify as a collective "single unit," it must be shown that the collection was "published" at the same time—i.e., the "collection is sold, distributed, or offered for sale concurrently."¹⁸ H&M argued that in order to satisfy this requirement, Unicolors provided the Copyright Office with a false first publication date for all designs in the collective copyright registration.¹⁹ However, according to H&M, the 31 designs were not sold, distributed, or offered to the public until after the publication date Unicolors provided in its copyright registration. Furthermore, several of the 31 designs were subject to Unicolors' exclusivity policy, requiring that the designs not be placed in Unicolors' showroom or made available to the public.²⁰ H&M argued that if Unicolors had presented to the Copyright Office correct information regarding when the 31 designs were sold, distributed, or offered to the public, the Copyright Office would have declined registration.²¹

The district court rejected H&M's argument. First, the district court found that H&M failed to show that Unicolors' copyright registration had inaccurate information that, if known to the Register of Copyrights, would have caused it to refuse registration. "37 C.F.R. § 202.3(b)(4) requires published works registered as a single unit to have been published concurrently, not to have been published concurrently on any particular date."²² The court found that H&M failed to present any evidence that the works listed in Unicolors' registration were published separately. Although Unicolors admitted that certain of the 31 designs were presented to salespeople rather than the public on the date listed in the registration, H&M failed to present evidence that any of the designs were presented to the public on separate dates.²³ Second, the trial court found that H&M failed to present evidence that Unicolors knew that it had presented false information at the time of the registration.²⁴

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THE NINTH CIRCUIT'S OPINION

H&M appealed the district court's order to the Ninth Circuit, which issued an opinion on May 29, 2020.²⁵ In that opinion, the Ninth Circuit held that the district court erred in finding that H&M failed to show that Unicolors' copyright registration was invalid under 17 U.S.C. § 411(b). First, although the Ninth Circuit acknowledged that its own precedent implied that there is an intent-to-defraud requirement for registration invalidation,²⁶ the Ninth Circuit had more recently clarified that no such intent-to-defraud requirement exists.²⁷

Second, the Ninth Circuit held that the district court had erred in concluding that Unicolor's copyright registration did not contain inaccuracies.²⁸ The Ninth Circuit observed that although Unicolors' business model is to market its fabrics to manufacturers, sometimes Unicolors designs "confined" works, meaning works created for a specific customer. The customer is granted an exclusive right to use the confined work for at least a few months, during which time Unicolor does not offer to sell the work to other customers.²⁹ According to the Ninth Circuit, Unicolors' inclusion of confined works in its copyright registration of collective works ran afoul of federal regulations. Specifically, 37 C.F.R. § 202.3(b) (4) requires that each work included in a collection of published works must have been...