Why creative people and organisations need terms and conditions

A recent Federal Court case shows why it’s important for creative people and organisations to develop standard terms and conditions that apply to their services.

The case is Hardingham v RP Data Pty Limited [2019] FCA 2075.

Facts

Briefly, the facts of the case were:

• Mr Hardingham is a professional photographer.  He is the sole director of Real Estate Marketing Australia Pty Ltd (REMA).
• REMA is commissioned by real estate agencies to take photographs and produce floor plans for use in marketing properties for sale or lease.
• The real estate agencies uploaded the photos and floor plans to realestate.com.au.  REMA and Mr Hardingham agreed that this was permitted.  Most real estate agencies in Australia use realestate.com.au to advertise properties.
• realestate.com.au Pty Ltd (REA) passed the photos and floor plans on to RP Data Pty Ltd (RP Data) which provides the RP Data Professional product to its subscribers.
• REMA and Mr Hardingham claimed that RP Data infringed the copyright in the photos and floor plans, as REMA and Mr Hardingham did not license RP Data to reproduce those works.

Decision

The judge, Thawley J of the Federal Court of Australia, decided that there was no copyright infringement because:

• REMA and Mr Hardingham knew, for at least some years, that REA had an agreement with RP Data under which REA provided RP Data with the content uploaded to the realestate.com.au platform.  They also knew that RP Data made that content available to paying subscribers to RP Data Professional.
• There was no evidence that REMA or Mr Hardingham had ever told the agencies they were not authorised to grant a sub-licence to REA (or not authorised to grant a sub-licence that allowed REA in turn to grant a sub-licence to RP Data).
• REMA and Mr Hardingham were aware of the arrangements between REA and RP Data when they set their fees.
• In these circumstances it was to be inferred from the conduct of REMA/Mr Hardingham and the real estate agencies, or implied into the agreements between them, that the agencies were licensed to upload the works to realestate.com.au subject to REA’s usual terms and conditions, which included authorising REA to grant a sub-licence.  The sub-licence REA granted to RP Data was consistent with those terms.

Discussion

We agree that on the basis of the factual situation found by the Court to exist, no copyright infringement occurred.

REMA and Mr Hardingham had a good understanding of the way the photos and floor plans were being disseminated and had, in effect, agreed to it.

Perhaps the real downfall of REMA and Mr Hardingham in this case was their apparent failure to put in place a written agreement with the real estate agents.

It appears that an agency would ask Mr Hardingham to attend a property and take photos and sometimes, prepare a floor plan.  REMA would issue an invoice which the agency would pay.  It seems there was no other documentation about the terms of the transaction.

The parties agreed that the agencies had a licence over the copyright in the photos and floor plans, and that the licence allowed the agencies to grant a sub-licence.  However the terms of the licence were not express and as a result, there was room for debate about the scope of the licence (particularly what sub-licensing was permitted).

The lesson for creative people and organisations

It probably would have been desirable for REMA to prepare standard terms and conditions under which it would provide its services.  In the terms and conditions REMA could have included a clear statement as to who owned the intellectual property rights in the photos and floor plans (presumably this would be REMA), and the exact scope of the agency’s licence to use those rights.

The relatively small cost of preparing a set of standard terms and conditions for REMA to use might well have prevented the no doubt very large costs of this litigation.

There is a lesson here for many advertising and marketing agencies, artists, writers and other creators of intellectual property.  In our experience, “creative” people and organisations often trade without having carefully-considered standard terms and conditions in place.

Since digital content such as the photos and floor plans produced by Mr Hardingham can be so readily reproduced and distributed, now more than ever is the time for creative individuals and organisations to understand the fundamentals of intellectual property law and establish clear contractual terms with their customers.  It’s important to ensure all parties share the same understanding as to how the customer may use, reproduce, sub-license and otherwise exploit the IP rights in the created works.  The creative individual or organisation can then set their prices according to the scope of the licence they grant.

Authored by:

David Smith, Partner