Implied IP licences: don't get 'court'

8 minute read  28.06.2022 Lisa Jarrett, Belinda Alcock, Lachlan McNamara

A recent case illustrates the importance of contracts being clearly expressed in writing in regards to IP ownership and licensing conditions. We explore Hardingham v RP Data and what lessons can be applied.

 


Key takeouts


  • This decision shows that even reliable informal engagements can quickly sour, requiring the courts to imply terms into the original agreement.
  • Implied terms will be limited to what is necessary for both parties, so it benefits both customer and creative agency to enter a written agreement which addresses the permitted scope of future use (including sublicensing).
  • Publishing third party content is risky. Undertaking due diligence is important and, where possible, obtain a licence directly from the content creator (rather than via an intermediary).

The recent case of Hardingham and Another v RP Data Pty Ltd and Another (Hardingham v RP Data) – now appealed to the High Court – considers the scope of an implied IP licence where the parties have a purely oral agreement.

Background facts

A summary of this case is as follows:

  • James Hardingham is a professional photographer, and the sole director and employee of his business, Real Estate Marketing Australia Pty Ltd (REMA), which specialises in commercial and residential real estate marketing photography (Hardingham).
  • A number of real estate agencies (Agencies) engaged Hardingham to produce photographs and create floor plans for upcoming sales and lease campaigns – with approximately 20 such transactions submitted by Hardingham in evidence.
  • Realestate.com.au Pty Ltd (REA) operated the well-known website, realestate.com.au (REA Website), through which the Agencies published their listings under REA's standard-form subscription terms (REA Terms).
  • RP Data Pty Ltd (RP Data) operated a separate subscription website, corelogic.com.au (Core Logic Website), providing current and historical sale and leasing data. RP Data had a licence arrangement with REA, under which it would download material from the REA Website, and republish it on the Core Logic Website, including Hardingham's photographs and floor plans (Materials).

Hardingham brought proceedings against RP Data for breaching section 115 of the Copyright Act 1968 (Cth) – alleging that RP Data had no right to re-publish the Materials on the Core Logic Website. Specifically, Hardingham alleged that the Agencies' original licence to use the Materials was limited to use 'for the marketing campaign' which terminated when each campaign was complete (i.e. when the property was successfully sold or leased). This meant that subsequent use of the Materials by RP Data fell outside the scope of this licence.

A key issue in this case was that the contractual arrangements between Hardingham and the Agencies were never formalised in writing. Instead, the Agencies would give Hardingham brief, verbal instructions regarding property campaigns, and Hardingham invoiced the various Agencies for his work, with no further terms provided on his invoice.

Additionally, there were no direct contractual relationships between key parties in the dispute. Hardingham did not contract directly with REA or RP Data, and RP Data did not deal directly with the various Agencies. As such, the legal question to be determined was in a purely oral agreement between Hardingham and the Agencies, what was the scope of the Agencies' implied licence to use the Materials?

Judges' split on scope of implied licence

First instance decision:

The matter was initially heard before Justice Thawley in the Federal Court in 2019. Hardingham initially brought proceedings against RP Data only.

RP Data argued it had not infringed copyright in Hardingham's Materials, as:

  • the Materials had been licensed by RP Data from REA via a data licence agreement;
  • the Materials had been licensed by REA from the Agencies, under the REA Terms, which expressly provided REA with "an irrevocable, perpetual, world-wide, royalty free licence to publish, copy, licence to other persons to use and adapt for any purpose related to [REA's] business any content [the Agencies] provided during the Term, and … survives termination"; and
  • the Materials had been licensed, on the inferred or implied term that they would be uploaded to the REA Website and subject to the REA Terms. RP Data submitted that this term could either be inferred from the parties' intentions and overall circumstances surrounding the business relationship between Hardingham and the Agencies, or implied by the Court because it was necessary to give business efficacy to the contract.

Thawley J accepted RP Data's submissions, finding that:

  • Hardingham was commissioned to produce the Materials, specifically so they could be uploaded on the REA Website, which is standard practice in the real estate industry;
  • publishing the Materials on the REA Website was necessary for the effective operation of the contract between Hardingham and the Agencies, as it greatly increased the prospect of selling or leasing those properties (given it is the largest real estate marketing website in Australia);
  • the Agencies were required to accept the REA Terms "as is", upon uploading the content to the REA Website;
  • Hardingham was aware. from as early as 2014, that Materials uploaded by the Agencies on the REA Website continued to be displayed after the campaign ended on both the REA Website and Core Logic Website, but continued to accept further engagements from the Agencies.

Accordingly, the Court accepted there was an implied term that the Materials were provided to the Agencies in accordance with the requirements of the REA Terms – meaning that REA would have a perpetual right to sublicense the Materials to third parties like RP Data.

Second instance decision:

Hardingham appealed the primary decision to the full Federal Court, comprising Justices Greenwood, Rares and Jackson. RP Data was granted leave to file a cross-claim against REA, and REA was joined to the proceedings on appeal (RP Data and REA together, the Respondents).

The Court was ultimately split in its decision – with a majority judgment written by Greenwood J (Rares J agreeing), and a dissenting judgment from Jackson J. In his decision, Greenwood J reasoned that:

  • the burden of proof was on the Respondents to show that a very broad licence to use the Materials should be inferred or implied into their oral agreement with Hardingham;
  • the broad licence contended by the Respondents could not be 'inferred lightly', and the evidence of surrounding circumstances did not demonstrate that Hardingham and the Agencies were aware of the precise scope of the REA Terms or the subsequent grant of rights to REA in respect of the Materials. In particular, the scope of licence contended by the Respondents was so broad as to, at [98], 'effectively expropriate ownership' of the Materials to REA;
  • the broad licence contended by the Respondents could not be implied, as it was not, in the words of Greenwood J at [103], ‘so obvious that it would go without saying’ nor was it necessary for the business efficacy of the contract for both parties. Whilst the Agencies would definitely have agreed to the broad licence, it was not clear that Hardingham would have, had the parties turned their minds to it at the outset.

The majority of the Court also found that Hardingham's acceptance of further engagements by the Agencies was irrelevant to the proceedings (notwithstanding that he knew the Materials were being published on the REA Website and Core Logic Website, for historical purposes). In particular, they noted that the Respondents had not pleaded estoppel by conduct nor any claim based upon laches.

As a result, RP Data was found to have infringed Hardingham's copyright in the Materials.

The Respondents have recently been granted an appeal to the High Court, however no date has been set. We await the High Court's decision on this and will post a further update in due course.

Practical tips

For engagements between creative agencies and businesses

Ensuring contracts are clearly expressed in writing will avoid many of the issues encountered in this case.

Even if fulsome or tailored agreements are not practical (i.e. because of time constraints or low contract value), it can be helpful have a template, short-form agreement on hand (e.g. a 'Terms of Trade', 'Purchase Terms' or 'Invoice Terms') that your organisation can provide to the counterparty or publish on your organisation's website. This template should include a default position with respect to IP ownership and licensing conditions.

While templates may not be suitable for every transaction or accepted by every customer or supplier, they will provide a baseline for negotiations, and encourage both parties to turn their mind to contractual issues. If one party seeks more favourable terms, this may also be an opportunity to adjust the contract price.

If your organisation proceeds without a written contract, ensure there is a 'paper trail' of the key terms (e.g. emails, letters and/or file notes of telephone conversations). This may help if any dispute arises in future and the parties need to provide evidence of the their intention at the time, or seek to rely on the doctrine of estoppel.

For website operators publishing third party content:

This case demonstrates that publishing third party content on a website is a risky business. To mitigate and manage these risks, where possible, an express licence or consent from the original creator of the content should be sought.

If this is not a practical option, and if third party content is published on the authority of an intermediary (e.g. a website user), steps should be taken to proactively verify that the intermediary has the original creator's permission to do so. This may involve asking additional questions of the intermediary, or requesting copies of any consents or upstream contracts with the creator.

Additionally, a written contract should be agreed with the intermediary (e.g. End User Licence Agreement or Services Agreement). This should include an express warranty and an indemnity against infringement of any third party IP. It should also address who will have control over the conduct of the defence or settlement negotiations of any such infringement claims. Absent these provisions, a website operator may face significant financial liability – even though the alleged copyright infringement may have been unintentional and outside of its direct control.

The full decision is Hardingham and Another v RP Data Pty Ltd and Another (2021) 395 ALR 644; [2021] FCAFC 148.

MinterEllison advises on a range of Intellectual Property related issues, with extensive experience in all facets of Intellectual Property rights and underlying contractual arrangements. Please contact us if you would like assistance in any intellectual property related work.

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