In the case of Absolute Lofts South West London Limited v Artisan Home Improvements Limited and another [2015] EWHC 2608 (IPEC), the Intellectual Property Enterprise Court ruled that there had been a flagrant breach of copyright as to the use of 21 photographs on the website of home improvement company, Artisan Home Improvements Limited, without the photographer’s consent. Whilst the facts of the case were not disputed, the judge Hacon J, provided clarity as to when additional damages would be available to copyright owners on top of a notional licence fee when assessing damages. Most importantly, it was found that copyright owners could decide on recovery based on whichever option has a more favourable financial outcome.

What?

This case concerned Absolute Lofts South West London Limited (“Absolute Lofts”) and Artisan Home Improvements Limited (“Artisan”). Mr Colton, the director of Absolute Lofts occasionally, with the owner’s consent, took photographs of completed loft conversions to display on the company’s website. It was confirmed that copyright subsisted in each photograph and was owned by Absolute Lofts. Mr Ludbrook, the second defendant and director of Artisan, was originally in the home improvements business. A decision was made to expand the business into the loft conversion market and a new Artisan loft conversion website was created. The new Artisan website displayed 21 of Mr Colton’s photographs, which were held out to be Artisan’s own.

Absolute Lofts issued a letter before action and as such, Mr Ludbrook removed the images and replaced them with 21 licenced stock images. Mr Ludbrook admitted that Artisan used the images without licence or consent infringing Absolute Lofts copyrights.

This case involves two issues: the first was whether Absolute Lofts were entitled to compensatory damages; and secondly whether or not Absolute Lofts were entitled to additional damages under section 97(2) of the Copyright, Design and Patents Act 1988 (the “Act”) and/or under Article 13 of the Directive on the Enforcement of Intellectual Property Rights 2004/48/EC (the “Directive”).

Compensatory damages

The starting point for copyright infringement damages is normally the licence fee that would have been agreed assuming the parties were willing to negotiate. This is known as the “user principle”. This notion is used where a willing licensor and licensee is assumed to create a hypothetical situation for the purposes of establishing what a license fee could potentially have been.

Hacon J took the view that evidence as to what a professional photographer would have charged (coming in between £700 - £9,000) was irrelevant as a person who was willing to hold out images of another company’s loft conversions as their own was likely to have paid as little as possible. Therefore, Hacon J found that what Mr Ludbrook actually paid for the licence fee in May 2014 was “as good a guide as any” to what would hypothetically have been agreed between the parties. In fact, the price Mr Ludbrook paid for the image bank of 21 new images was £300 and as such, Mr Colton was awarded that sum.

Additional Damages

Hacon J then turned to the issue of additional damages.

The difficulty when assessing additional damages is that we now have two regimes to consider:

  • Section 97(2) of the Act which allows additional damages where an infringement is flagrant; and
  • Article 13(1) of the Directive which requires the court to take into account the claimant’s lost profits, any ‘unfair profits’ made by the infringer and moral prejudice caused to the claimant, where the infringement is knowing or with reasonable grounds to know.

It was found that Mr Ludbrook knew that the photographs were infringing Mr Colton’s copyright in them, or alternatively, that he had reasonable grounds to know that they were infringing copies.

It was clear to Hacon J that Artisan had made “unfair profits” from the use of the photographs on its website and so Absolute Lofts was entitled to additional damages because of this.

Hacon J referenced his interpretation of “unfair profits” in a previous case (Aysha Henderson v All Around the World Recordings Limited [2014] EWHC 3087 (IPEC)) and Article 13 of the Directive which deals with the infringers knowledge of their actions and concluded that because Artisan’s company had three successful years and therefore profited from its acts of infringement (its turnover increasing from £226,000 to £498,000 between 2011 and 2013), these profits were “unfair” because they were generated by a misrepresentation to Artisan’s customers that it had done the conversions featured in Absolute Lofts’ photographs.

Further, it was held that Artisan’s use of the photographs was flagrant, bringing the breach of copyright into the realms of section 97(2) of the Act. Hacon J again assessed the damages once more and came to the same figure he had reached on his assessment under the Directive. Absolute Lofts were awarded a further £6,000 under both section 97(2) and Article 13(1).

So what?

This decision in this case is one to be welcomed by copyright owners. Following Hacon J’s line of reasoning that Article 13 of the Directive does not override section 97(2) of the Act but instead provides an alternative route for additional damages, copyright owners can decide which avenue to take dependant on whether the Directive or the Act has a more favourable financial outcome.

An innocent infringer will rarely pay damages higher than the licence fee, but a guilty infringer will sometimes pay a lot more. This case highlighted the importance of a defendant’s state of mind being a key element in assessing damages in infringement cases.