Copyright, Settlement and Quantum in the IPEC

Frequently only the arguments and evidence which lead to the outcome at trial are reported. It is not often possible to look in detail at those cases which settle, because the agreements which set out the settlement usually bind the parties to confidentiality. What can be reviewed and which seldom are, are the hearings in which quantum i.e. how much is paid to the winner, is assessed and awarded. Maybe they are considered less interesting as they have little bearing on the law per se, do not have the attention-grabbing headline-ability and they also tend to be less extensively reported on in the law reports.

However, the process by which quantum is assessed is an important element when considering whether to fight a case or to settle. To consider the likely damages for infringement after liability has been established, is too late.

Hacon HHJ in the matter of Absolute Lofts Ltd v Artisan Home Improvements Ltd and Anor [2015] EWHC 2608 (IPEC) ("Absolute Lofts") provided a welcome insight into assessing quantum in copyright cases, and the extent to which the UK law may be at variance with the EU Enforcement Directive (2004/48 EC) brought into force by the Intellectual Property (Enforcement etc.) Regulations 2006.

Readers should note that Hacon HHJ released an earlier judgment concerning an inquiry into damages - Henderson v All Around The World Recordings Ltd, which was a case about unpaid royalties, and performer's rights.

Absolute Lofts

Background

The defendant admitted liability at trial therefore only quantum was in issue. The claimant, Absolute Lofts, is a company which specialises in loft conversions in London and has its own website. The owner of the company takes photographs of completed work and posts them on this website. There was no dispute that he owned the copyright in these images and that he had assigned the copyright to his company.

The defendant is a company operating in the Bradford area. In around 2009, the company's owner expanded his existing small building business to include the loft conversion market and he needed images of conversions for his website to generate interest in this new area of work. Although he blamed his website designer, the court found that he either; (1) took 21 images from the website of the claimant and included them on his company's website, or (2) there were reasonable grounds for believing he knew they were infringing images. The fact that potential customers of the defendant were being misled was not at issue in the proceedings, although the judge took this into account when assessing the defendants' integrity and general approach to business.

'User Principle'

Rather unusually Hacon HHJ outlined the methodology he used to calculate the quantum. The so-called 'user principle' was followed which is based on a hypothetical negotiation between claimant and defendant before the act complained of, where each party would have been acting willingly and without duress to achieve the same state of affairs in a legal way. This differs from quantum based on presumed or provable losses suffered by the claimant, or the presumed or provable profits made by the defendant arising out of the infringement.

The Court considered the following:

The alternatives to using the Claimant's images; and
Aggravated damages under Section 97(2) of the CDPA.

Alternatives to Using the Claimant's Images

The defendant could have commissioned his own photographer, or purchased licensed images from a stock agency. Counsel for each side provided their own estimates, supported by expert testimony, of the cost of commissioning 21 similar photographs, which ranged between £9,000 (the claimant's figure) and £700 (the defendant's lowest estimate. The judge held that the best evidence was provided by what actually happened when the defendant obtained images from an agency for a total of £300.

Aggravated Damages

The claimant had also sought aggravated damages under Section 97(2) of the CDPA which says a court may award additional damages having regard to all the circumstances having particular regard to the flagrancy of the infringement and any benefit accruing to the defendant. However, the judge found that he needed to consider whether s 97(2) had been made redundant by the Enforcement Directive, specifically Art. 13(1) ("Directive"). This was because the UK Regulations which brought the Directive into force, state in Regulation 3(2) that damages may be awarded based on taking all appropriate aspects into account (this would include those factors covered in s 97(2)), or damages based royalties or fees which would have been due if the parties had agreed beforehand (the user principle outlined above).

However, this strict either/or approach was not to be found to be so rigid in the Directive (Art 13 1a and 1b). In the Directive, the wording for the second condition is: damages "such as at least the amount of royalties or fees …". The Court held that the Directive allowed the national courts to consider additional damages, such as those contemplated by s 97(2), since Art 2 of the Directive permitted national differences in the means of enforcement if they were more favourable for right holders than those provided for in the Directive. As a result the Court awarded additional damages.

The business accounts for the defendant company over the relevant period were inadequate to show the actual profits but turnover was clearly substantial (around £500,000 in 2013 for example), and it had to be assumed that this was in part due to orders won of the strength of the website. The judge awarded an extra £6,000 in damages.