In the battle against copyright infringement in the online world, rights holders are increasingly targeting aggregators and disseminators of infringing content, rather than doing battle with individual infringers themselves. In a recent example of this, Pokémon Company International (Pokémon) won in their Federal Court pursuit of copyright infringement claims and breach of consumer protection laws against Redbubble Ltd (Redbubble), the operator of an online marketplace for “print on demand” products based on artwork submitted by independent artists or designers: Pokémon Company International, Inc. v Redbubble Ltd [2017] FCA 1541

Despite the win, however, Pokémon didn’t get all the points it wanted, with the court awarding only $1 in nominal damages.

The background

Redbubble is an online marketplace for “print on demand” products. It enables artwork to be uploaded to its servers and displayed on the Redbubble website so that consumers can place orders for products, such as a T-shirts, to which the artwork is applied. These products are manufactured and then supplied to consumers by third parties fulfillers, not by Redbubble directly.

Designs displaying the iconic Pokémon characters, such as Pikachu, often in a humorous or satirical context, were readily available on the Redbubble site.  Consumers were able to place orders for products bearing these designs.  In Pokémon v Redbubble, Pokémon alleged that Redbubble had infringed its copyright in the Pikachu artistic work and contravened the Australian Consumer Law by misleading consumers and making representations that the Pokémon works were authorised by Pokémon.

Catching consumer rights

In a judgment delivered in late December 2017, Justice Pagone of the Federal Court of Australia held that in contravention of sections 18(1), 21(g) and (h) of the Australian Consumer Law, Redbubble’s website and sponsored advertising on Google contained misleading representations that products available on Redbubble site bearing Pokémon related words, characters and images were sponsored or approved by Pokémon.

His Honour made the following key findings in coming to this conclusion:

• Pokémon has a significant reputation in Australia due to the popularity of its video games, animated television series and trading cards. Further, an important aspect of Pokémon’s commercial activities include its significant licensed sales of Pokémon products.
• Redbubble has control over the content of its sponsored links on Google. While the process of creating advertising campaigns may be automated without the involvement of any manual action by Redbubble, Redbubble controls the data feed that ultimately results in the sponsored links.
• There was nothing on the Redbubble website to inform or even suggest that there was no connection, authorised or otherwise, between Redbubble and Pokémon (or any authorised licensee).
• The prices were within range of prices for like products sold by authorised licensees. Therefore a consumer would not be suspicious that the product was being made available by an unauthorised dealer.
• A reasonable and ordinary retail consumer looking at the Google sponsored links or Redbubble website would find repeated representations that the services offered by Redbubble were licensed, authorised or sponsored by Pokémon. Redbubble’s argument that consumers may have enough knowledge of the Pokémon world and merchandising that they would not be misled or deceived was rejected as the relevant person does not include the habitually cautious or very knowledgeable.

Catching copyright

Pokémon’s copyright case relied on the Pikachu artistic work depicted below:

Pokémon submitted that Redbubble had infringed its copyright by:

1. making the infringing works available on the Redbubble website and communicating them to the public;
2. offering or exposing, or exhibiting the infringing works in public by way of trade through the Redbubble website; and
3. authorising the reproduction of the infringing works.

The court found that copyright subsisted in the relevant artistic work and that Pokémon’s was the owner of that copyright.  Pokémon successfully relied on statutory presumptions relating to both subsistence and ownership, based on a United States copyright registration certificate which stated the year and place of first publication of the Pikachu work and the person claiming ownership of copyright in that work.

Justice Pagone rejected Redbubble’s arguments that the presumption relating to ownership could not apply to United States certificates because the certificates do not state in express words that the person claiming to be the owner was the owner of copyright in the work.  His Honour noted that given the purpose of the presumption in establishing rebuttable evidence of ownership, it could not have been the intention to exclude its application to United States copyright registration certificates.

Justice Pagone further held that each of the above infringement claims was made out and made the following observations:

• Unlike internet providers, Redbubble was responsible for determining the content of its website, through its processes, and arrangements with the artists. Redbubble hosted the website containing the infringing material and therefore made the work available online, and communicated it to the public. While those responsible for uploading the artworks were also involved in the making of a communication, this did not preclude a finding that Redbubble, through its actions, was also liable for communicating the relevant works to the public.
• In relation to the second infringement claim, Redbubble submitted that its system of marketplace did not offer an article for sale in any specific sense, nor was the requisite knowledge made out. However, Justice Pagone held that regardless of the nature of the marketplace and its terms of use, Redbubble exhibited articles in public by projecting their images on its website. Further, from the time a letter was sent by Pokémon to Redbubble in November 2015, Redbubble knew or ought to have reasonably known that its exhibiting articles would constitute an infringement. While there had been previous correspondence, the November 2015 letter specified Pokémon’s conduct, and identified the relevant products.
• In relation to the third infringement claim, Redbubble authorised the infringement of copyright, as it had the ability to prevent the infringement. It was immaterial that the system including the website operated automatically as Redbubble had developed that system in the first place. Further, Redbubble had measures in place to monitor the steps taken by users of the website, and could therefore have removed any infringing content or blocked artists from using keywords for tags or descriptions of their work (which it did in fact implement after proceedings were commenced). Redbubble had actually considered having an automatic approach to remove possibly infringing conduct, however decided not to adopt this approach, as it was considered commercially undesirable.
• Justice Pagone dismissed Redbubble’s argument that its conduct attracted the defence of fair dealing for the purpose of parody and satire. Relying on Productions Avanti Cine-video v Favreau[1], his Honour held that the infringement in this case was purely for commercial exploitation, and not for the purpose of parody or satire.

The remedies scoreboard

Pokémon claimed damages of over $44,000 in respect of its Australian Consumer Law claim, calculated on a “lost sales” basis and based on its average royalty rate. Justice Pagone rejected this claim for damages, finding that as many of the items were a “mash up” (i.e. also including other artistic work such as Homer Simpson), Pokémon would not have received a royalty in respect of this work and had not therefore suffered loss or damage by reason of the misleading conduct or false representations.

In respect of the copyright claim, Justice Pagone awarded $1 in nominal damages under the compensatory damages provision of the Copyright Act. However, he declined to award additional damages for flagrancy, finding that Redbubble’s conduct to proactively block the infringing content, in circumstances where it did however respond promptly to takedown notices when issued, did not amount to a flagrant disregard of copyright.

Further, Justice Pagone did not award an injunction as his Honour did not consider that there was a risk of repeated infringement. Instead, Redbubble illustrated that it was seeking to comply with its obligations, and that it had amended its program accordingly.

Training notes

Justice Pagone commented on the inherent commercial risk that Redbubble took in conducting its business, including in his findings that it had authorised copyright infringement. While incurring this risk resulted in a finding of copyright infringement by authorisation, it did not ultimately lead to any significant monetary relief being awarded in respect of Redbubble’s conduct. In this sense, Justice Pagone’s decision may be a pyrrhic victory for Pokémon.

While damages are no doubt intended to compensate the plaintiff, they also act as a deterrent to similar cases of infringement, in which parties wish to enter into commercial activities with an inherent risk of infringing intellectual property rights. This decision therefore appears to depart from a deterrent approach – instead making a commercial decision to infringe copyright somewhat viable, as long as there are reasonable controls in place.

It is likely that both Pokémon and Redbubble parties will appeal the decision, as neither got the scores they were after.  In the meantime, Redbubble (and similar website operators) and rights holders alike will, no doubt, continue their rivalry in the attack and defence game of copyright infringement and consumer protection.

[1] (2012) 117 DLR (4^th) 568 at 594.