Thursday 23 October 2014

How to heal a Broken-Heart … under the Enforcement Directive

Dorothea Thompson
For a select few, the recent damages assessment in Henderson v All Around The World Recordings may provide an excuse to reminisce about the ‘glory’ of late-noughties Bassline music. For everyone else, it provides the first guidance on the interpretation of the Enforcement Directive and implementing UK Regulations, with particular regard to the notion of ‘unfair profits’ and ‘moral prejudice, as 1709 Blog friend and music loving trainee solicitor Dorothea Thompson (Bray & Krais) explains in her guest contribution.

According to Dorothea, “this case confirmed that inquiry as to damages and account of profits remain available as alternatives only, and ‘additional damages’ for infringement of performance rights under the Copyright, Designs and Patents Act 1988 (CDPA) are now effectively redundant.

Here’s what Dorothea writes in more detail:


The song Heartbroken was recorded by Jodie Henderson (aka Jodie Aysha) and Tafazwa Tawonezvi (aka T2) in 2005. In 2007 Mr Tawonezvi re-mixed the track to produce a Bassline version and signed a record deal with 2NV Records Ltd (2NV). 2NV then signed a deal with All Around the World Recordings Ltd (AATW) to release Heartbroken (for those readers with an enquiring/nostalgic mind, the song in its released version can be found here). 2NV offered Ms Henderson £1,500 for her performance, but she refused. She then entered into a publishing contract with Sony ATV.
In November 2007 AATW released Heartbroken. It was a big hit, reaching No.2 in the singles charts, staying there for 5 weeks, and remaining in the Top 40 for 46 weeks.
To date Ms Henderson had received no performance royalties for AATW's release, nor been paid for her participation in the video or the use of her name.
Breach of performance rights

Back in February 2013, in the Patents County Court (as it then was) HH Judge Birss QC found that Ms Henderson had consented to the recording of her vocal, but not any future exploitation. Objectively, there were no grounds for AATW to infer consent, as they knew Ms Henderson had not signed with 2NV. 2NV had not obtained consent which could be passed on to AATW, and Ms Henderson had no contractual right to royalties.

AATW had "gone ahead at risk" in the knowledge that Ms Henderson had not signed a contract. AATW had thereby infringed the singer's rights by making copies of her performance and issuing those copies to the public without her consent, contrary to sections 182A and 182B CDPA.

Fair enough, but:
can you at least claim damages?
Assessment of damages

Ms Henderson elected for an inquiry as to damages. Aside from loss of royalties, assessed under the standard ‘user-principle’ (royalties that would have been paid had there been a licence negotiated between willing licensor and willing licensee), Ms Henderson sought damages under the Enforcement Directive and additional damages under the CDPA.

Enforcement Directive

It was not disputed that Ms Henderson was entitled to rely on reg. 3 of the 2006 Regulations, implementing art. 13(1) of the Directive, which applies where the infringer knowingly, or with reasonable grounds to know, engages in infringing activity. However, Ms Henderson argued that reg. 3 allowed a claim for both damages and defendant's profits, and required the court to consider both and make an award in relation to both as appropriate.

Judge Hacon reiterated that as a matter of English law, inquiry as to damages and account of profits are only available as alternatives. In intellectual property proceedings a claimant is free to choose between them but may not have the benefit of both.

Under art. 13(2) in respect of unknowing infringement, it is clear that there is a choice between inquiry as to damages or account of profits. Where knowledge is proved, art.13(1)(a) requires the court to take into account relevant aspects of the actual prejudice suffered, including both lost profits and unfair profits. However, the overall task is to order damages appropriate to the actual prejudice suffered, and this is usually profit lost (possibly plus expenses). Recital 26 of the Directive confirms the aim is not to impose punitive damages but to achieve objectively assessed compensation.

‘Unfair profits’

Judge Hacon considered that art. 13(1) did not mean that the court must always take into account profit made by the defendant from his knowing infringement. Instead, if the claimant would not receive adequate compensation for actual prejudice suffered where damages were assessed as lost profits, moral prejudice and expenses, or account of profits, there was flexibility to award an additional sum related to profit that the defendant has generated through the knowing infringement.

He referred to the example of a defendant making no direct financial profit from the infringement, but his business expanded in volume and/or in reputation on the back of loss-leader infringements.

What about 'moral prejudice'?
‘Moral prejudice’

Damage for 'moral prejudice' is rooted in continental civil law, but there is little guidance to a single meaning according to EU law. Judge Hacon held that art.13(1)(a) entitles recovery for three of the categories of non-economic loss on which Ms Henderson relied: mental distress, injury to feelings and humiliation.

He considered that the moral prejudice contemplated by this provision was confined to prejudice arising in limited circumstances, particularly where a claimant had suffered little or no financial loss and would otherwise either be left with no compensation, or the compensation would not be proportionate to the overall damage suffered.

For example, if a defendant were to infringe the copyright in photographs disclosing private grief by publishing them on the internet (which, unfortunately, seems like an entirely plausible situation these days), that might generate no profit for the defendant and no financial loss for the copyright owner, but the emotional stress caused might be acute. In such circumstances, the court could award compensation for moral prejudice, previously unavailable in England to copyright owners.

Additional damages under the CDPA

Section 191J(2) CDPA provides that in an claim for infringement of performer’s rights, the court may award additional damages, having regard in particular to the flagrancy of the infringement.
Judge Hacon held that art. 13 (with reg. 3(3)) now provides a lower hurdle - of knowing infringement.  Consequently, s. 191J(2) has effectively become redundant.

In conclusion, Ms Henderson was awarded damages according to the 'user principle' of £30,000 and a further £5,000 pursuant to art.13(1)(a) of the Enforcement Directive, making a total of £35,000. This might not seem like an enormous result for her, some 7 years after the infringement, but the case has provided welcome clarification on the assessment of damages post-Enforcement Directive.”

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