Earlier this month, a settlement was agreed between Nike and Hackney Council when the sports clothing and equipment manufacturer agreed to pay the local authority £300k after using the council's logo without permission.

The settlement attracted much media interest, primarily because it was a small public organisation taking on a major international corporation in a dispute over intellectual property (IP).

Nike had used the council's logo on a range of merchandise that was sold around the world. The spur for doing so was the reputation of Hackney Marshes as a Mecca for amateur football. Nike wanted to associate its products with the heritage and culture of Hackney Marshes.

Hackney Marshes is a geographical location and, as a name, is in the public domain. But Nike also used the council's logo. It was this that led Hackney to threaten legal action against Nike for infringement of copyright in the logo design.

Some sections of the media have been puzzled as to why a public organisation should view lorryloads of free exposure as detrimental to its image. Many football supporters will remember the television commercial that Nike filmed on Hackney Marshes in the 1990s that featured Eric Cantona and Ian Wright. No doubt the council welcomed such a compliment to the marshes, but the use of the council's logo on merchandise that also bears the Nike logo was another matter.

The Hackney logo – a stylised 'H' – is used in various formats to promote a multitude of services, including sporting events, within the borough and the council felt that it would be misleading for it to appear on merchandise from a commercial company. Residents might think the council was endorsing the products, which is not council policy.

The council therefore felt that this use by Nike would cause confusion. Other confusion is also possible, as came to light during the case when one Hackney resident wrote to the council following a visit to Spain, where the branded goods were on sale, in the belief that retailers were selling goods that had been stolen from the local authority.

As this case was settled out of court, it sets no precedent, but it should encourage other public organisations to consider their intellectual property (IP) rights more carefully. Major sporting and music events can regenerate the image of an area rapidly, even turning it into a brand, and public organisations need to ensure that they are able to control their own IP in the face of it becoming commercially interesting.

Nobody can effectively trademark a place, but if a certain organisation has a strong identity within an area that is popular or becomes so, its logos, slogans and designs could be imitated by third parties for profit.

Promotional materials

The Hackney case centred around the threat of legal action for infringement of copyright. Public bodies should seek to establish that they hold the copyright over their logos and promotional materials. Copyright is an automatic right in the UK but it may not initially be clear who it belongs to in law.

Like any other IP, it can be bought, sold or licensed. Very often, where copyright has not been formally transferred, it will rest with the original designer. It is important, therefore, to establish that a copyright ownership really does belong to the organisation.

Securing and holding a registered trademark offers a much stronger form of protection. Applying for a trademark on a logo or advertising slogan is often straightforward and is not prohibitively costly. If it can be proved that infringement of a trademark caused a significant loss to the owner, then substantial damages may be awarded.

For a trademark to afford protection or to substantiate loss, however, the mark must be in use alongside commercial activities. Many public organisations are subject to strict legislation on trading in the UK, making it difficult to make substantial profit from merchandise. It is therefore necessary for public entities that obtain a trademark to ensure that they trade enough to maintain the validity of the mark while also adhering to the restrictions placed on them by central government.

In certain instances, where neither trademark nor copyright can be established, but a logo has been in use for a long period of time, it may be possible to prevent its use by other parties by using common law rights. An organisation can bring a claim for 'passing off' against parties imitating its IP. However, the chances of success are more limited than where clear IP rights exist.

IP is not just for the world of commerce. The public sector needs to ensure that it makes the most of the IP system as a tool to protect its hard work in establishing a brand for its services. After all, where public money is used to promote those services, organisations have some responsibility to protect such investment and prevent potential confusion in the public's mind.

Gregor Grant is a partner at Marks & Clerk and represented the London Borough of Hackney in its dispute with Nike.