NSW Limit Risk for Breach of Copyright or Trademark Infringement with SPV?

[Ben K]

In a creative project, can a SPV be used to limit the risk of being sued for alleged breach of copyright or trademark infringement?

 

[Tracy B]

By SPV do you mean a special purpose entity? If so, then only if the entity is an incorporated company with limited liability and the service agreement is between the owner of the intellectual property and the company.

Another way would just be to have a written agreement that gives you right to use the intellectual property. Spell these "rights of use" very clearly in the agreement, any variations of which should be in writing with both parties' consent, and a disclosure schedule to the agreement that sets out currently, where you plan to use the intellectual property.

 

[Ivy]

In addition to what Tracy said, limited liability means that the company the liability generally falls onto the company's assets (including shares and guarantees) and not on directors' or board members' personal assets. Limited liability doesn't mean that the company can't be sued.

 

[Tim W]

In a creative project, can a SPV be used to limit the risk of being sued for alleged breach of copyright or trademark infringement?

Probably not.
In an IP action brought against you, you can be fairly certain that the plaintiff
will either lay the Statement of Claim naming the SPV and the principal as joint defendants, or
will make a joining application very early on in the matter.

 

[Tracy B]

Hi Ben,

What Tim and Ivy say are correct. You can set up an incorporated company that limits your personal liability to some extent. How much you are protected, and your company becomes at risk, depends on how you draft the service agreement with the IP owner and whether you are a director or officer of the company (if so, you owe a duty to the company to act in its best interests).

The best way to protect your personal liability is to:

• Enter the service agreement through an incorporated company (however, I would not recommend you set up a company just for this purpose, as a company comes with extra costs, complexity and accounting/reporting standards)
• Have the IP owner sign a disclosure agreement that ensures they will not sue either you (personally) or the company for "disclosed and approved uses". List out specifically what these uses are. The clearer the better so that both parties know where their rights and liabilities lie
• Not use the IP outside this agreement unless it is understood by both parties (and recorded in writing) that the additional purpose is disclosed and accepted
• Make sure you discuss with the IP owner:
  • Attribution
  • Whether you will on-sell the used product (containing the IP) to a third party
  • Whether this parties will be able to access and use your product (containing the IP)
  • Duration of IP use (and termination/withdrawal by IP owner)
  • Whether the IP will be used as a whole or you will take parts of it and mix with your own IP to make new IP (e.g. sampling music)

Just a few thoughts to get you started. As you can see, IP license agreements are quite complex and there are many issues that are important for you to agree on beforehand. These issues are often not identified by the IP owner/user and disputes arise later on because of it. Hence, best to speak with an IP/commercial lawyer about it.