Damages

Henderson v All Around the World Recordings Ltd: Intellectual Property Enterprise Court: 3 October 2014

Copyright – Rights – Performance rights and sound recordings – Claimant claiming to be owner of performer’s rights in respect of song Heartbroken – Claimant alleging defendant recording company infringing her performer’s rights by copying recording of her performance and issuing to public copies of recording

The claimant was a singer, songwriter and musician. A dispute arose concerning the rights to a track called ‘Heartbroken’. In earlier proceedings (see [2013] All ER (D) 299 (Mar)), a judge had held that the performer’s rights relating to the vocal at the centre of the dispute belonged to the claimant, that she had not consented to the creation and release of Heartbroken by the defendant and that the defendant’s copying of the recording of her vocal performance and the issue to the public of copies of the recording were infringements of her performer’s rights.

The court held, accordingly, that the claimant was entitled to damages for that infringement. The present proceedings concerned the inquiry as to damages.

The claimant submitted first, that she was entitled to damages for loss to be calculated by reference to the royalties that would have been paid by the defendant to her if they had entered into a contract for the release of Heartbroken (the user principle). Secondly, she claimed further damages, pursuant to regulation 3 of the Intellectual Property (Enforcement, etc) Regulations, SI 2006/1028 (the Regulations), which provided that a person who engaged in infringing activity should pay damages flowing from such infringement appropriate to the actual prejudice suffered by a claimant as a result of the infringement.

The claimant submitted that regulation 3(2)(a)(i), and, by implication, article 13(1)(a) of Council Directive (EC) 2004/48 (on the enforcement of intellectual property rights) (the Directive) which implemented regulation 3, should be interpreted to mean that, where those provisions applied, the claimant was entitled cumulatively to both lost profits and any unfair profits accrued to the defendant.

The court ruled: (1) Applying settled law, the hypothetical negotiations with the defendant would have resulted in a royalty rate of 6% to be paid by the defendant to the claimant. Approaching the royalty calculation by reference to total sums received or receivable from sales of ‘Heartbroken’, less costs. The sum due to H under the first head of her claim, the user principle, was £30,000 (see [51], [53], [62] of the judgment).

The claimant was entitled to damages, according to the ‘user principle’ of £30,000 (see [104] of the judgment).

Force India Formula One Team Ltd v 1 Malaysia Racing Team SDN BHD [2012] All ER (D) 198 (Mar) applied; 32Red plc v WHG [2013] All ER (D) 93 (Apr) applied; SDL Hair Ltd v Next Row Ltd [2014] All ER (D) 58 (Jul) applied.

(2) As a matter of English law, the remedies of an inquiry as to damages on the one hand, and an account of profits on the other, were only available as alternatives. In intellectual property proceedings, a claimant was free to choose between them, but he might not have the benefit of both. It was hard to envisage circumstances in which an award for both damages and an account of profits would be appropriate to the actual prejudice suffered.

Article 13(1) of the Directive was not to be interpreted to mean that a claimant was entitled cumulatively to both lost profits and any unfair profits accrued to the defendant. It was not right to interpret article 13(1)(a) of the Directive as requiring the court always to take into account the profit made by a defendant from his knowing infringement and to make an award commensurate with that profit. 

Article 13(1)(a) of the Directive had to contemplate something else, namely that, wherever the court reached the view that the claimant would not receive adequate compensation for the actual prejudice he had suffered if damages were to be assessed by reference to lost profits, moral prejudice and expenses or royalties according to the ‘user principle’, or an account of profits, there was flexibility, under article 13(1)(a) of the Directive, to award an additional sum related to the profit the defendant had made from knowing infringement.

The moral prejudice contemplated by article 13(1)(a) was confined to prejudice arising in limited circumstances. Only in unusual circumstances would moral prejudice be sufficiently significant such that damages for economic loss were not proportionate to the overall actual prejudice suffered by the claimant (see [73], [74], [76], [80], [81], [94], [95] of the judgment).

It was clear from article 13(2) of the Directive that the claimant had retained the right to elect between an inquiry as to damages or an account of profits in the usual way. She had re-elected for an inquiry as to damages. Those did not include the defendant’s profits from Heartbroken. The present case did not fall into the category of where the moral prejudice had been sufficiently significant such that damages for economic loss were not proportionate to the overall actual prejudice suffered by the claimant.

Accordingly, no award would be for moral prejudice.

However, the present case provided an example of unfair profits as contemplated by article 13(1)(a) of the Directive. In addition to losing the appropriate royalty, the defendant had suffered a loss regarding the extent to which her name and reputation would have been enhanced by the release of Heartbroken, which at the same time provided unfair profit to the defendant, in the sense that she had not been compensated by the defendant for the loss of promotion of her name (see [75], [76], [78], [83], [84], [95] of the judgment).

The sum of £5,000 would be awarded (see [84] of the judgment).

Redrow Homes Ltd v Bett Bros plc [1998] 1 All ER 385 applied; Hollister Incorporated v Medik Ostomy Supplies Ltd [2012] All ER (D) 114 (Nov) applied.

Chris Pearson (instructed by Keystone Law) for the claimant; Gwilym Harbottle (instructed by Anthony Jayes LLP) for the defendant.