Damages for website product catalogues in IPEC cases
The author Peter Adediran is a UK qualified and fully licensed current practising solicitor specialising in assisting businesses at the point at which intellectual property meets digital technology, namely website and mobile apps. His breadth of experience over 10 years means that he has been an important influence in supporting SMEs’ transform the intellectual property aspects of their business that have had a significant financial and reputational impact on those businesses.
IPEC is a court forum designed to make it cheaper faster and simpler to dispense with intellectual property cases for SMEs’. The costs are capped at £50,000.00 and the value of cases are capped at £500,000.00 although this can be waived. Note also that the costs cap of £50,000.00 can be waived where there is a part 36 offer – PPL v Hagan [2016] EWHC 3076 (IPEC) (30 November 2016).
The Latin word restituere or restitutio which literally means to restore the noun of which is restitution, has long been a principle of the English legal system. English justice seeks to restore a victim to the state they were before the harm was done to them or alternatively deprive the wrong doer of the gain of their unlawful activity. In the context of copyright infringement this is done by the availability of an account of profits as a remedy. The defendant if found guilty can be ordered to account for its profits because of the copyright infringement to the claimant. English law also provides the remedy of damages as an alternative to restitution. It is the remedy of damages that this article will examine briefly.
Damages
The aim of damages is compensatory in nature. It is provided in exchange for the damage or loss suffered by the victim as a recognition of the harm done to them. The damages awarded are subject to the usual hurdle of causation and remoteness of damage. Crucially the claimant must prove that the harm suffered was caused by the defendant’s actions in law and fact. The test for cause in law includes a remoteness element that decides whether the type of harm done to the claimant was foreseeable by the defendant. The final hurdle of causation and remoteness limits the damages the claimant can recover. Damages for copyright infringement are divided into compensatory damages and additional damages.
Compensatory Damages
As well as statute law, there have been several cases that are helpful in assessing what compensatory damages will be awarded for website photographs.
In the well-known case of Absolute Lofts v Artisan Home Improvements [2015] EWHC 2608 (IPEC) IPEC dealt with assessing compensatory and additional damages in relating to photographs. IPEC’s ruling in Absolute Lofts focuses on CDPA 1988, s 97(2) and how it interacts with art 13(1) of Directive 2004/48/EC, the Enforcement Directive, providing clarity on the UK’s approach to additional damages and the Enforcement Directive.
Litigants cannot simply blindly follow earlier decisions in every case involving website photographs because the facts of each case may not be comparable. In Absolute Lofts for liability was admitted immediately by the defendants which was cooperative and furthered the interests of justice.
Absolute Lofts followed earlier decisions which have awarded smaller amounts for compensatory damages and significantly larger sums for additional damages such as Nottinghamshire Healthcare NHS Trust v News Group Newspapers Ltd [2002] EWHC 409 (Ch); [2002] E.M.L.R. 33., where compensatory damages for use of a photograph of a hospital’s patient within a newspaper article were calculated as £450. The award of additional damages was £9,550.
In Absolute Lofts the dispute focused on quantum of damages for 21 photographic images. The defendant was ordered to pay Absolute Lofts £300 under the “User Principle”. The defendant was ordered to pay Absolute Lofts £6000 for additional damages under CDPA 1988, s 97(2) and for unfair profits under the Enforcement Directive, art 13(1).
User Principle
The court’s approach to the calculation of damages according to the user principle was established in the performance rights case Henderson v All Around The World Recordings Limited [2014] EWHC 3087 (IPEC), [2015] IP&T 335, at paras [18] and [19], referring to and summarising what had been said by Arnold J in Force India Formula One Team Limited v 1 Malaysia Racing Team [2012] EWHC 616 (Ch) Absolute Lofts, applied the user principle. The court assessed what the parties would have paid in hypothetical negotiations between a willing licensor and licensee and because the Defendant commissioned a website developer to replace the 21 photographs with stock photos the court awarded just £300. The court rejected estimates based on expert evidence.
However, crucially Absolute Lofts applied the User Principle in the round also considering the immediate admittance of liability; and that the photographs in that case were not of importance to the defendant because they were immediately replaced with stock photographs. The court concluded that the defendant in the Absolute Lofts case would have been satisfied with stock photographs of the products.
Clearly the importance or lack thereof of the photographs to the defendant in Absolute Lofts limited the amount of damages awarded. Had the photographs been demonstrably more important to the defendant the outcome of that case might have been different.
Additional Damages
Section CDPA 1988, s 97(2) and the Enforcement Directive, art 13(1).
In Absolute Lofts, the court took the view that either Mr Ludbrook obtained all the images complained of from Absolute Lofts’ website himself or alternatively he was aware of their source and was indifferent about it. This was enough to trigger the flagrancy element of CDPA 1988, s 97(2) (and the Enforcement Directive, art 13(1)).
The court clarified that a successful claimant is entitled to rely on either CDPA 1988, s 97(2) or on the defendant’s unfair profits under the Enforcement Directive, art 13(1), whichever would provide for the greater damages.
Article 13(1) states as follows:
Damages
1. Member States shall ensure that the competent judicial authorities, on application of the injured party, order the infringer who knowingly, or with reasonable grounds to know, engaged in an infringing activity, to pay the right-holder damages appropriate to the actual prejudice suffered by him/her as a result of the infringement.
When the judicial authorities set the damages:
(a)
they shall take into account all appropriate aspects, such as the negative economic consequences, including lost profits, which the injured party has suffered, any unfair profits made by the infringer and, in appropriate cases, elements other than economic factors, such as the moral prejudice caused to the right holder by the infringement;
or
(b)
as an alternative to (a), they may, in appropriate cases, set the damages as a lump sum on the basis of elements such as at least 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.
The courts can award an additional sum. The compensatory damages and additional damages are not cumulative so there will be a separate damages award for compensation and additional damages. The court did not say how the award of £6000 was arrived at in the Absolute Lofts case but additional damages under Article 13(1) can be calculated on an increase in the profits, it can also be calculated on reputation loss on the back of the infringements, or it can be calculated on flagrancy alone under s97(2) whichever provides for the greater damages. The court does not have to follow Article 13(1) alone.
Stowarzyszenie ‘Oławska Telewizja Kablowa
In the case of Stowarzyszenie ‘Oławska Telewizja Kablowa’ v Stowarzyszenie Filmowców Polskich which was referred to the Court of Justice whose judgments have direct effect throughout the EU including the English courts.
Judgment: Stowarzyszenie ‘Oławska Telewizja Kablowa’
C-367/15: Stowarzyszenie ‘Oławska Telewizja Kablowa’ v Stowarzyszenie Filmowców Polskich
The question the Court of Justice had to answer was whether Article 13 of Directive 2004/48 (the Enforcement Directive) must be interpreted as prohibiting national legislation which allows a right holder, whose intellectual property right has been infringed, to demand from the alleged infringer a sum corresponding to twice the appropriate fee which would have been due if the use was authorised. Focusing on the dissuasive element of the Enforcement Directive, art 3(2), the Court of Justice decided that the Enforcement Directive, art 13 (specifically art 13(1)(b)) permitted a right holder whose right has been infringed to demand from the infringer either compensation for the damage that he has suffered, taking account of all the appropriate aspects of the particular case, or, without him having to prove the actual loss, payment of a sum corresponding to twice the appropriate fee which would have been due if permission had been given for the work concerned to be used. Although the Court of Justice stopped short of saying that member States must provide for punitive damages it did not prohibit them. This supports the applicability of s97(2) flagrancy infringement damages award.
Reprehensible and Distasteful Conduct
It is worth noting that reprehensible and distasteful conduct is necessary for the award of additional damages. In the case of Flogas Britain Limited v Calor Gas Limited [2013] EWHC 3060 (Ch), Proudman J made it clear on the issue of whether Flogas could claim additional damages for infringement of its database rights pursuant to regulation 23 of the Database Regulations and section 97(2) of the Copyright Designs and Patents Act 1988, that although Flogas had argued successfully that Calor’s conduct had been ‘flagrant’ justifying additional damages, the court disagreed that such additional damages should be awarded. Although Flogas concerned database rights the same principles would apply to website photographs.
In conclusion, each case before IPEC will fall on its facts. The court will have regard to all the circumstances of each case. Although it seems that larger awards for compensatory and even additional damages may be elusive as suggested by Proudman J in the Flogas case the facts of each case need to be properly considered. Where the evidence shows scandalous and deceitful conduct on the part the defendant then higher awards of damages are far more likely.
International online marketing
Our team is delighted to continue be part of the digital technology industry which is the leading edge of business today that is transforming more peoples’ lives than any other industry. We would really enjoy using our expertise and resources to help you succeed. If you wish to contact us for legal, business and intellectual property advice please do so by email to support@pailsolicitors.co.uk.