Tuesday 16 February 2010

Let your kids make their own mistakes

On Friday Mrs Justice Gloster delivered this judgment in CDV v Gamecock on a question of authorization of copyright infringement. It is a cautionary tale for parent companies.

In 2008 Gamecock, a publisher of video games, entered into a $10-million contract with CDV, a distributor of video games, for seven games: Dementium, Insecticide, Mushroom Men, Velvet Assassin, Hail to the Chimp, Pirates vs Ninjas and Stronghold Crusader Extreme. Gamecock was in financial difficulties, got behind with paying developers and behind on its delivery schedule. CDV consequently terminated the agreement in respect of four of the games. Gamecock said the games were not late and that the termination was a repudiatory breach of the agreement. Gamecock then set about exploiting the games itself with its new parent company, SouthPeak US.

In November 2009, Mrs Justice Gloster held that CDV had been entitled to terminate the agreement in respect of three of the games and that the agreement had not been repudiated. Consequently, Gamecock found itself both in breach of contract and infringing CDV’s exclusive licence to distribute the games.

The question that arises in last week’s judgment is: was Gamecock’s parent company, SouthPeak, liable for authorizing copyright infringement under s. 16(2) CDPA. Although generally speaking it is relatively hard to find liability for authorizing infringement in English law, there is a species of liability for indirect infringement by ‘participation in a common design’. This line of authority (passing via CBS Songs v Amstrad and Unilever v Gillette) is ‘a bold step, since it applies a common law doctrine to the interpretation of a statute’ (MCA v Charly Records).

SouthPeak, it was held, was infringing by being involved in distributing Gamecock’s games. It was irrelevant that SouthPeak didn’t seem to have intended to infringe. By contrast, SouthPeak was not liable for inducing Gamecock to breach the contract, as that liability requires the offender to know he is inducing a breach.

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