According to the Italian Supreme Court of Cassation, concept stores’ design plans and layouts consisting of a creative combination of design furnishings are eligible for copyright protection
On April 30, 2020, the Italian Supreme Court of Cassation (the “Supreme Court”) issued the latest installment in what has become a legal saga between two of the main Italian cosmetic manufacturers and retailers, Kiko and Wycon, concerning the layout of their concept stores. The Supreme Court confirmed the decision of the Court of Appeals of Milan that ruled Kiko’s concept store plans and layout are eligible for copyright protection and, therefore, that the minimal variations introduced by Wycon in its stores were not sufficient to exclude infringement.
Background
In 2005, Kiko hired an architectural firm to design a brand-new concept for its interiors, meaning plans and layouts for its stores (the “Plan”).
In 2013, Kiko sued Wycon before the Court of Milan, alleging that, (i) the layout of Wycon’s stores was almost identical to that of Kiko’s, and therefore it was infringing on its exclusive rights to the Plan; and (ii) Wycon had undertaken a series of commercial initiatives (e.g., the contents and style of its online commercial communication, the choice of shop salespeople’s uniforms, the shape of its shopping bags and of the cosmetic products themselves) that basically amounted to a slavish imitation of Kiko and, ultimately, to unfair, parasitic competition.
The demands advanced by Kiko were upheld by the Court of First Instance of Milan (decision No. 11416/2015), whose decision was substantially confirmed by the Court of Appeals of Milan (decision No. 1543/2018, the “Contested Decision”). Wycon was found liable for infringing Kiko’s copyright to its Plan and committing acts of unfair, parasitic competition. Wycon was forbidden from continuing to use the Plan and carry out commercial initiatives that were the same as Kiko’s. Moreover, Wycon was ordered to pay EUR 700,000 to Kiko as compensation for damages caused as a result of the above wrongdoings.
Hence, Wycon appealed the Contested Decision before the Italian Supreme Court of Cassation – which, in the Italian judiciary system, can only check whether Courts of Appeals have correctly applied the law, without the opportunity to re-examine the facts of the case.
The design and plan of a concept store as a “work of architecture”
Firstly, Wycon challenged the Contested Decision insofar as it considered the Plan “a pleasant and creative combination of elements” – which makes it a work of architecture eligible for copyright protection under Article 2(1)(5) of Law No. 633/1941 (the “Italian Copyright Law”).[1] Indeed, according to Wycon, the Plan merely represented an “idea” and as such was ineligible for protection; furthermore, it failed to meet the requirement for creativity, as it allegedly only made use of “basic information on the arrangement of furnishing elements in the shops.”[2]
However, the Supreme Court dismissed this as grounds for appeal, stating that the Contested Decision had satisfactorily argued that the Plan was not a mere “idea”: on the contrary, it was proved to be a well-defined work, consisting of a successful and creative combination of elements, such as “the open space entrance with two large backlit graphics on the sides, showcases consisting of continuous and slanted structures with transparent, perforated Plexiglas boxes in which the products are inserted, ‘islands’ on the curved edge positioned in the center of the stores, the presence of numerous TV screens embedded in the slanted showcases, combinations of the same colors (white, black, pink/purple) and disco-effect lights” (our translation). Such a combination of elements, according to the Court of Appeals, was the outcome of a creative act by its author and for this reason the Plan shall be eligible for copyright protection as a “work of architecture.”
The design and plan of the concept store as a “work of industrial design”
In further grounds for appeal, Wycon claimed that – in addition to the lack of creativity – there was yet another reason why the Plan could not qualify as a “work of architecture.” According to Wycon, this label can only apply to real estate architectural plans (such as building plans), and to furnishings that can be embedded therein (such as roofs, terraces, floors, etc.). In the case at stake, the Plan was not conceived to be realized on one specific and identified real estate site; rather, it was intended as a concept to be implemented in each of Kiko’s stores. As a consequence, Wycon argued that the Plan should not be granted copyright protection as a whole, and that (if anything) Kiko should have claimed copyright protection for each single element of the Plan as an autonomous “work of industrial design” under Article (2)(10) of the Italian Copyright Law,[3] or the whole layout as 3D trademark (more on this below).
The Supreme Court dismissed these grounds for appeal too, arguing that these are not the only possible grounds for protecting Kiko’s store layout. Rather, it stressed that the Contested Decision considered the Plan a “unified work of the author, which is the result of precise choices in the overall composition of elements,” (our translation), correctly concluding that it is eligible for copyright protection, as a whole, as a “work of architecture.” In fact, in relation this notion the Supreme Court delivered the following principle: a plan or interior design work should be construes as a work where there is a unitary design, adopting (i) a defined and visually perceptible scheme, that reveals clear “stylistic choice”, (ii) elements that have been coordinated and arranged to make the environment more functional and harmonic. In other words, a work that has the “personal touch” of the author. It is not relevant in this respect, the Supreme Court clarified, whether or not the interior elements have been inseparably incorporated into a building or real estate property, or whether or not the individual furnishings are simple or common in the field of interiors, as long as the outcome is that of an original combination. That is, it shall be the result of the “free and creative choices” of the author, and not a necessary solution to a technical problem. According to the facts and reasons underlying the Contested Decision, as reviewed by the Supreme Court, this is the case with the Plan.
Eligibility of the design and plan of the concept store for protection as a 3D trademark
As to 3D trademark protection of the store layout, Wycon noted that Kiko’s attempt to register it as EU trademark had failed (the relevant application was rejected, and Kiko’s appeal dismissed by the First Board of Appeal of the EUIPO back in 2016 for lack of distinctive character). Actually, the Supreme Court recalled a case precedent in which the Court of Justice of the European Union stated that – in principle – the distinctive design and layout of a retail store may be protected as a trademark, provided that it has a distinctive character – original or later acquired (the case concerned the layout of Apple stores) [4]. However, the fact that such condition was not met in the context of the 3D EU trademark registration is irrelevant in these proceedings – where the infringement was based on copyright – due to the different nature of the protection sought by Kiko. In this respect, the Supreme Court recalled that the Plan is still eligible for copyright protection: while a trademark’s distinctive character shall be assessed taking into account the visual impact that the elements of the trademark itself may have on the perception of consumers, the only requirement for an intellectual work to be eligible for copyright protection is its originality. Any element that brings into play a degree of subjectivity shall be avoided, as it would be prejudicial to legal certainty.
This latter principle was recently clarified by the Court of Justice of the European Union in a key decision[5], expressly mentioned by the Supreme Court for the very first time here, according to which the mere fact that a work may generate a visual impact from an aesthetic perspective is not per se relevant in the assessment of its nature as creative works, that is, of its originality.
Other issues: unfair parasitic competition and quantification of damages
Wycon appealed the Contested Decision on two other main grounds: (i) the Court of Appeals failed to provide adequate reasons why Wycon was deemed to have committed acts of unfair parasitic competition against Kiko and to consider its defensive arguments in this respect; and (ii) the Court of Appeals used incorrect criteria to calculate the amount owed by Wycon to Kiko as compensation for damages (EUR 700,000).
These were the only claims heard by the Supreme Court. In fact, the Court of Appeals provided generic reasons, failing to consider each of the elements required to establish that Wycon’s initiatives amounted to unfair competition, and therefore reassessment was needed. As to damages, the Supreme Court questioned the fact that in calculating them based on what is known as the “price of consent,” the Court of Appeals based its calculation on incorrect parameters. The Court of Appeals took as a starting point the price paid by Kiko to the architectural firm that developed the Plan (EUR 70,000) and at its own discretion multiplied that by 10, when – in fact – it should have considered the price Wycon hypothetically would have paid to obtain license to use the Plan from Kiko. Thus, the Contested Decision was partially overturned, and the case was sent back to the Court of Appeals (albeit in a different configuration), which shall examine it again with reference only to these two points.
Conclusions
The Supreme Court’s ruling is good news for companies that make significant investments in designing their concept stores: if the furnishing elements of their interiors are creatively combined, then these may well be eligible for copyright protection, irrespective of any aesthetic character.
[1] Article 2(1) of the Italian Copyright Law lists the works that are eligible for copyright protection, including “works of architecture” (No. 5).
[2] It is worth recalling that, under Italian Copyright Law, copyright belongs to the author of a creative work starting from the moment of its creation. Authors and rights holders are not subject to any obligation in terms of filing copyright for their works. The only requirement for intellectual property to be eligible for copyright protection in Italy is its creative nature – i.e., its originality. However, while no other formalities, such as filings, registrations, or applications are required, works shall be “exteriorized in an expressive form” (see, inter alia, decision of the Supreme Court No. 15496/2004). As a consequence, an idea is not per se eligible for copyright protection until its author conveys it, in whatever way or form, in the exterior world.
[3] The qualification of the Plan as a “work of industrial design” instead of a “work of architecture” would have required Kiko to prove that the Plan is endowed with “artistic value” in addition to the generally required minimum level of creativity, as provided by Article 2(1)(10) of the Italian Copyright Law. However, following the ruling issued by the EU Court of Justice on September 12, 2019 in Cofemel, C-683/17, the further requirement of “artistic value” may no longer be in compliance with directive CE/2001/29 – on this topic, see our article here.
[4] CJEU, 10 July 2014, Apple, C-421/13
[5] CJEU, 12 September 2019, Cofemel, C-683/17.
