In the European Union, questions of copyright protection and infringement are still decided on a country-bycountry basis by reference to applicable national legislation, although copyright law is broadly consistent between countries as a result of (mainly non-EU specifi c) international conventions. However, since 29 April 2006 the principles governing the enforcement of IP rights, including the bases on which damages awards should be calculated, have been harmonised by the EU IP Enforcement Directive (2004/48/EC).
Article 13 of the directive states that in awarding damages, judicial authorities in EU member states must:
“(a) take into account all appropriate aspects, such as the negative economic consequences, including lost profi ts, which the injured party has suffered, any unfair profi ts made by the infringer and, in appropriate cases, other factors.”
Alternatively, member states:
“(b) ...may, in appropriate cases, set the damages as a lump sum on the basis of the amount of royalties or fees which would have been due if the infringer had requested authorisation to use the intellectual property right in question.”
In one of the fi rst examples of a reported damages assessment under the directive, the High Court has applied the principles set out in the directive to assess the damages payable following an infringement of copyright in respect of a Jimi Hendrix concert.(1)
The legendary Jimi Hendrix Experience rock band gave a concert at the Royal Albert Hall in London on February 24 1969. The performance and sound-recording copyrights were owned by the claimants, which were Experience Hendrix LLC - a company owned and controlled by musician Jimi Hendrix’s family - and a third-party company that had produced the sound recording.
On 10 September 2006 the defendant, Times Newspapers Limited, cushioned a 20p rise in the cover price of The Sunday Times by enclosing a CD containing songs from the concert - this type of CD is known in the publishing industry as a ‘covermount’. Times Newspapers had taken a licence from a third party that had falsely claimed to own the sound-recording rights.
At a February 2008 hearing the court awarded summary judgment to the claimants and ordered Times Newspapers to pay damages. On 30 July 2010 the court considered the size of the damages award.
The claimants told the court that they had been planning to use the recordings of the concert in a feature fi lm to be released internationally in March 2007, but Times Newspapers’ infringement had caused them to delay the project and the fi lm’s release.
The claimants argued that damages amounting to $30m should be assessed on the basis of Article 13(a) of the directive, based on the worldwide losses that they had suffered through release of the covermount. Moreover, fl agrancy damages should be awarded because Times Newspapers had been reckless in proceeding with the covermount’s circulation, despite a warning letter from the claimants.
Times Newspapers argued that damages should be assessed on the basis of Article 13(b) and should be based on the amount that the claimants could legitimately have charged in September 2006 for a notional licence to make and issue the covermount, which it said would not have exceeded £100k.
The judge accepted that the fi lm’s release had been delayed (and ‘caused’, in a legal sense) by the distribution of the covermount, and that it was appropriate to base the damages award on loss suffered by the claimants, rather than a notional licence fee. The judge stated that the latter approach:
“would require the court to assess what would have been a reasonable licence fee to permit the defendant to make and distribute a vast number of CDs containing very poor quality, illicitly obtained recordings which the claimants, as I accept, would never have permitted, not least because to do so would have upset their own plans for the exploitation of the… material.”
However, it was diffi cult to assess what loss, if any, the claimants had actually suffered. The judge noted that the claimants produced no evidence to demonstrate that box-offi ce and other takings from the fi lm would be affected merely because the fi lm had been delayed by 12 months. The judge noted that:
“there was no evidence of any complaints to Experience Hendrix, the zealous guardian worldwide of the Jimi Hendrix musical legacy, by any recipient of the CD or by any Jimi Hendrix enthusiasts. There was not one single document commenting in any way on the fact or impact of the covermount distribution. There was nothing.”
If this were true, the only damage suffered by the claimants was the loss of interest on earlier receipt of the profi ts expected from the release of the fi lm. On the evidence, the judge accepted that the profi ts were likely to be around $5.8m. Damages would therefore be awarded on the basis of a complex formula that referenced merely the interest rates on that amount over the previous years - the judge deftly left the calculations to doubtless horrifi ed counsel. This would result in a damages award representing a minute proportion of the $30m or so claimed.
The judge refused to award fl agrancy damages. He held that Times Newspapers had engaged a reputable agent to obtain all necessary licences. Therefore, it could not be criticised for failing to investigate the provenance of the material in advance of receiving the letter before action.
The court was satisfi ed that the ‘notional licence fee’ approach should be adopted only in cases where the licensor might realistically have licensed that material to third parties. This sounds right in principle: either the material is sometimes licensed to third parties, in which case evidence of licence fees is useful, or the material is not licensed, in which case the debate is purely theoretical and does not help the court. Nonetheless, it seems overly dogmatic to maintain that since such poor-quality material would not be licensed, evidence of licence fees is not useful. Should evidence of licence fees for good-quality recordings not at least have been used as a backstop or minimum for considering what the proper level of damages should have been in this case? It would be regrettable if Article 13 of the directive required the court to adopt a binary approach to assessing damages, choosing either one or other of the two limbs, rather than being infl uenced by both.
Apart from this point, and for UK practitioners at least, the case appears to confi rm that the directive has no material impact on the methods of assessing damages for copyright infringement established by the House of Lords in General Tire and Rubber Company v Firestone Tyre and Rubber Company Ltd.(2)
The case also emphasises the obvious need for a claimant to advance compelling evidence to support a damages claim. The directive may well operate to harmonise the general approach to damages awards across the European Union, but without evidence of real damage being suffered, there is no reason for the damages awarded to be at all substantial.