When executives at Urban Outfitters announced that one of the reasons for their declining sales was that their clothes were no longer fashionable, it seemed like that was a low point of the week. But now it seems that the ailing clothing retailer has compounded their problems by using artist James Soares’ print design on a miniskirt without his permission. While it may seem like an easy case of copyright infringement, as you will see, deciding whether to sue is very complicated.
James Soares took to Tumblr to make his accusation known to the world, creating a potential public relations nightmare for Urban Outfitters. And while that may put pressure on Urban Outfitters, they know what hoops Soares must jump through to sue them. First, lets look at the infringing material.
While similar designs, the two are not exactly alike. So Soares must use circumstantial evidence to first, show that Urban Outfitters had access to his work. Access is usually not difficult to prove in our Internet driven world. A post to social media with lots of views, and other copying the design to Pinterest or other social media makes access easy to show.
Secondly, Soares must prove that the two designs are “strikingly similar,” that the similarity can only be explained by copying . The designs must, therefore, be so uniquely creative that it would be highly unlikely they could have been created independently. Assuming Soares can get over that high hurdle, he then has to look at the financial risk of initiating the lawsuit; finding an infringement doesn’t always mean that a lawsuit is the appropriate next step.
In this case, there is an added wrinkle; the skirt fabric is not made by Urban Outfitters but bought from a third party supplier, BamBam Cloth. Soares can sue both Urban Outfitters and BamBam. If he wins, Soares would be entitled to the profits both Urban Outfitters and BamBam received from the sales of the skirt and fabric. Remember, we are talking profits not sales. That gives Urban Outfitters and BamBam the opportunity to reduce the sales figure by deducting costs, such as production, shipping, warehousing, packaging, and marketing and a percentage of corporate operating costs. Any good accountant can get the profits down to somewhere in the range of 5%-25%. The attorneys will fight over where on that line the profit falls. The likelihood of each potential outcome will determine the risk/ reward for initiating a suit (legal costs vs. potential revenue).
Unfortunately, that figure isn’t available until after the lawsuit is initiated. So Soares’ attorneys will make an educated guess, calculating how much of the product sold, the costs of recalling the goods from stores, and the profit range, amongst other elements. Those figures will also help decide how hard the companies are likely to fight. Soares will also have to take into account the cost of litigation. If all seems positive, then the suit can go forward.
Then Soares must decide if he can afford the legal fees.
If Soares registered his work with the Copyright Office, the decision becomes easier since the defendants would be required pay Soares’ legal fees if he were to win. But since only about 2-3% of creative works are registered every year, the likelihood is low. .
Proving copyright infringement is only a small part of the analysis in deciding whether a lawsuit is a good idea.
Even if Urban and BamBam were to pay for the legal fees, Soares must still win at trial. Until then, Soares must pay the legal fees out of his pocket. Under certain circumstances, a lawyer may be willing to take the case on contingency. In that case, Soares would only pay for the “hard costs” such as court filing fees, but all the soft costs, such as the attorney’s fees are paid to the attorney from the proceeds if Soares wins. If he loses, then the attorneys don’t get anything. The reward for an attorney taking that risk can be fairly high; contingency fees are usually around 40% of the total award.
One last thing to consider; copyright infringement is a no fault law. Even though the infringement was BamBam’s fault, Urban Outfitters will still be the primary defendant. They infringed by selling the skirts and posting the skirt design on their site, even if they did it innocently, but more importantly, they have the deep pockets.
On the other hand, the merchandising contract between Urban and BamBam likely contains an indemnification clause, which usually warranties that BamBam is selling a non-infringing product amongst other things. If a lawsuit occurs that includes Urban Outfitters for actions that were purely due to BamBam, they will have to pay for Urban Outfitters legal fees along with their own. The indemnification will determine Urban Outfitter’s willingness to fight.
So while Soares is up in arms and using Social Media to flock to his side, the PR move will hold very little sway whether the case proceeds. Soares must decide whether the risk/reward his high enough to warrant legal action, and if so, whether he can marshal the necessary resources to carry it out. Even with the Internet on his side, that is still a tough call.