Arnold J in the recent case Golden Eye (International) Ltd and others v Telefonica UK Ltd [2012] EWHC 723 (Ch) has provided some useful practical points to consider when drafting a letter of claim to ordinary consumers.

Summary

Overambitious letters of claim alleging infringement of copyright may cause the court to enforce adverse consequences against the alleging party.

Arnold J gave guidance upon Golden Eye's draft letter of claim, which alleged that certain customers of Telefonica UK had infringed the copyright in adult films through a peer-to-peer file-sharing network. However, the principles are relevant for wider application when dealing with individual defendants, particularly those likely to have no access to legal representation.

The specific points highlighted by Arnold J are that a letter of claim to ordinary consumers should: (i) demonstrate a genuine commercial desire to obtain compensation for infringement; (ii) refrain from demanding a specific sum by way of compensation; (iii) acknowledge (if relevant) that the recipient of the letter may not actually be the one who has infringed the copyright; (iv) make it clear that the court has not actually reached a decision on liability; (v) avoid threatening adverse consequences (other than litigation) if a positive reply is not received; (vi) explain all possible outcomes; (vii) give a reasonable amount of time for the recipient to reply; and (viii) avoid referring to the Code of Practice for pre-action conduct.

Business Impact

This case provides practical points that should be considered when drafting letters of claim to ordinary consumers. The court stressed that these types of letters should strike a fair balance, and the sender should be aware that recipients are unlikely to have any form of legal representation.

The Facts

This is a case brought by Golden Eye and others who applied for a Norwich Pharmacal order against Telefonica UK for the disclosure of the names and addresses of certain customers. Golden Eye alleged that these customers had infringed their copyright to certain adult films through a peer-to-peer file-sharing network.

Golden Eye required this information so it could send letters of claim to these individuals requiring them to pay compensation for the alleged infringement. The court criticised the draft letter of claim provided by Golden Eye.

Telefonica UK did not contest the claim and did not appear at the hearing.

Letters of claim – practical considerations

Before considering Arnold J's specific guidance on letters of claim, it is worth highlighting the general comment made at paragraph 123 of the judgment, which states "[one] must consider the impact of the letter of claim upon ordinary consumers who may not have access to specialised legal advice, who may be innocent of what is alleged against them and who may be embarrassed and/or distressed". The final point is more specific to this case, (since it concerns allegations regarding breaches of copyrighted pornography), however, the tone of this statement demonstrates an overall guidance when drafting similar letters. In short, the party making the allegations and drafting the letter of claim should not paint a one sided picture.

The letter of claim should demonstrate a genuine commercial desire to obtain compensation for infringement. It was contended that Golden Eye did not genuinely intend to try and seek redress. However, Arnold J confirmed in his judgment that sending numerous letters of claim is a sufficient method to obtain redress, providing that there are sufficient safeguards for the recipients, as discussed below.

To begin with, an arbitrary figure should not be offered to settle the claim. Golden Eye proposed to each recipient that the figure be £700. Arnold J found this unsupportable for various reasons, including (i) those who have not in fact committed any infringement are not liable for any sum at all; and (ii) even if the recipient has infringed the claimant's copyright, the extent of infringement can vary from case to case and accordingly, would require varying amounts. It is therefore advisable to require those recipients who do not deny liability to disclose information that demonstrates the degree of infringement, and from this negotiate a subsequent amount on an individual basis. That being said, Arnold J conceded, "[i]n my view it would be acceptable for the Claimants to indicate that they are prepared to accept a lump sum in settlement of their claims."

In addition, the letter should also acknowledge the possibility that not all recipients may be culpable of infringement. For example, it may not be the case that all recipients copied the information or data, even though the recipient was associated with an IP address. Certain sentences in Golden Eye's draft letter undermined the implicit acknowledgement that the recipient may not have been the person who was responsible for the infringing acts. It is therefore advisable that this possibility be made clear in the letter of claim.

It should be taken into account that when a disclosure order has been made, the merits of the case may not have been fully considered. This should be fully explained to the recipient in the letter of claim. Furthermore, the letter of demands should explain all possible outcomes. Golden Eye failed to set out what the consequences would be of an unsuccessful claim. It is unreasonable to expect an ordinary consumer without legal representation to envisage all possible scenarios themselves.

Moreover, threatening adverse consequences in the event that the recipient does not respond to the letter could be unreasonable. In its draft letter, Golden Eye threatened to make "an application to [the recipient’s] ISP to slow down or terminate [their] internet connection" if no reply was received. Arnold J criticised this heavily, stating that threats of this nature were unjustified.

Golden Eye were criticized for providing only 14 days for a reply. Arnold J found that a reasonable amount of time in these circumstances would be 28 days, and that "requiring a response within 14 days is unreasonable given that the [recipients] are consumers and that there is no urgency in the matter". They were also discredited for referring to the Code of Practice for pre-action conduct in intellectual property disputes. Arnold J found that this was not required and was inappropriate when used with "ordinary consumers". Finally, Arnold J made it clear that third parties should not be involved in the management of seeking redress via letters of claim.

Norwich Pharmacal Orders - unique points

In his judgment, Arnold J provided a useful review of Norwich Pharmacal Orders in the context of file-sharing cases. One particular point, to which Arnold J gave lengthy consideration, was how the court should resolve the balance of copyright owners’ and consumers’ rights. After reviewing the protection of intellectual property rights guaranteed by Article 17(2) of the Charter of Fundamental Rights of the European Union , the protection of the fundamental rights of individuals and, in particular, the rights safeguarded by Articles 7 [Respect for private and family life] and 8 [Protection of personal data], Arnold J found, inter alia, that neither Article had precedence over the other and that a 'balancing test' must be applied. Arnold J considered both sides, and found that the claimant’s interest in enforcing and protecting their copyright outweighed the individuals’ interests in protecting their privacy.

On a separate note, Arnold J found that the party applying for Norwich Pharmacal relief was subject to a duty of full and frank disclosure, including revenue-sharing arrangements. Golden Eye were criticized for not disclosing their agreements with other parties in this regard.