OPINION: Star Wars battle over costumes reveals value of intellectual property contracts

Aug 21 2008 by Alistair Houghton, Liverpool Daily Post

MANY companies who employ creative people and agencies to work on their behalf make assumptions about what exactly they are buying.

All too often, these beliefs are misplaced – and can prove a costly oversight. A recent case involving Star Wars merchandising illustrated the issue only too well.

In 1976, the then unknown George Lucas appointed Andrew Ainsworth to create the “Stormtrooper” costumes for the Star Wars film. No formal contract existed between Lucasfilm and Ainsworth as to the ownership of the intellectual property (IP) rights of the costumes.

By 2008, Star Wars merchandising has generated an estimated £6bn, with both Ainsworth and Lucasfilm claiming IP rights in the iconic Stormtrooper costumes.

Ainsworth had been selling replica costumes for around £1,800. Lucasfilm has already successfully sued Ainsworth for around $20m (£10.8m) in the US for copyright infringement but because Ainsworth had no assets or business presence in the US, he had not paid any of the $20m to Lucasfilm. Recently, Lucasfilm brought the case before the English High Court to have the ruling for damages enforced in the UK.

The English High Court acknowledged that the sale of “Stormtrooper” costumes in the US had been in breach of US copyright law and also rejected any claim from Ainsworth that he owned the copyright in the Stormtrooper character. However, the court chose not to enforce the $20m damages against Ainsworth.

This is because of the difference that exists between US and UK copyright laws. Ainsworth is, therefore, free to carry on selling his Stormtrooper costumes in the UK.

IP issues are often overlooked, especially when businesses use sub-contractors to create and design on their behalf. They assume that, as they are paying for creations, they automatically acquire all the rights in those designs.

The Stormtrooper case is an extreme example of contracting parties not considering and understanding their IP rights, especially those arising in foreign jurisdictions.

TOM BLACK is an adviser at Liverpool intellectual property lawyers, Shipley Solicitors.