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||Neutral Citation Number:  EWHC 2761 (Ch)
||Case No: Claim No. IP-2017-00141
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INTELLECTUAL PROPERTY ENTERPRISE COURT
||Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
||22 October 2018
B e f o r e :
MR JUSTICE NUGEE
|| REFORMATION PUBLISHING COMPANY LIMITED
– and –
||(1) CRUISECO LIMITED
(2) DISCOVERY TRAVEL CENTRE PTY LIMITED
Tom Richards and Tom Coates (instructed by M Law LLP) for the Claimant
Maxwell Keay (instructed by K&L Gates LLP) for the Defendants
Hearing date: 28 June 2018
HTML VERSION OF JUDGMENT APPROVED
Crown Copyright ©
Mr Justice Nugee:
- This is the hearing of an action for damages for infringement of copyright. Although most of the facts are not in dispute and the trial only took 1 day, a considerable number of points were argued and have to be resolved.
- The 1st Defendant, Cruiseco Ltd, is an English company and the 2nd Defendant, Discovery Travel Centre Pty Ltd, is a company incorporated in New South Wales which is its parent company, owning 100% of its shares. They are in the business of operating cruise holidays. One of their holidays was a music-themed cruise marketed as "Back to the 80's" and a short video or sizzle reel ("the Publicity Clip") was produced to promote the cruise. This included extracts from two well-known Spandau Ballet songs, "Gold" and "True". On 22 June 2017 the Defendants posted the Publicity Clip on their own websites, and also put it on a filesharing platform and sent a link to that platform to a large number of UK High Street travel agents, encouraging them to use it.
- The Claimant, Reformation Publishing Company Ltd ("Reformation"), as is now accepted, is the owner of the copyright in the musical works in the two songs. The Defendants had not obtained any licence for the use of the songs and, as again is now accepted, infringed Reformation's copyright.
- On being contacted by Reformation, the Defendants on 26 June 2017 took steps to take down the Publicity Clip from their websites and told the travel agents not to use it. It has very recently become apparent however that they failed to take it down from the filesharing platform where it remained live until 26 June 2018 (two days before trial).
- The effective question at trial was what damages should be paid for the infringement by the Defendants. It is agreed that these should be assessed on the basis of a reasonable licence fee. Reformation also has a claim for additional damages under s. 97(2) of the Copyright, Designs and Patents Act 1988 ("the 1988 Act").
- At a Case Management Conference before HHJ Hacon on 18 December 2017 the following issues were identified:
"The claimant's copyright infringement claim
1. Is the claimant the owner of the copyright in the Works?
2. Is copyright in the Works subsisting?
3. If the defendant infringed the claimant's copyright, what was the period of the infringement?
4. Did the defendant reasonably believe at all times that copyright licences had been obtained in respect of any copyright works featured in the Publicity Clip?
Damages in relation to the claimant's claims
5. What is the reasonable licence fee that the defendant would have paid to the claimant which would have permitted the defendant to make use of the Works as pleaded in the claimant's Particulars of Claim at paragraphs 5 and 6 and as admitted at paragraphs 4 and 5 of the defendant's Defence and/or found pursuant to issues 3 and 4 above?"
- Since then there have been the following developments:
(1) First, the 2nd Defendant was added to the claim, and it was accepted in a Re-Amended Defence dated 12 June 2018 that the 1st and 2nd Defendants carry on a single business as travel agent and organiser of cruise holidays, and that if the 1st Defendant is liable for any infringement, then the 2nd Defendant is jointly liable for that infringement. It is therefore unnecessary to distinguish between the two Defendants.
(2) Second, although the Defendants had on the pleadings put in issue the question of Reformation's ownership of copyright, by letter from their solicitors dated 22 June 2018 (that is, 6 days before trial) the Defendants conceded that Reformation owns the copyright in the musical works in the two songs.
(3) Third, until just before the trial it had been thought that what was in issue was an infringement that had lasted 5 days. As a result of the discovery that the link to the filesharing platform in fact remained live, Reformation now claim that the infringement has continued for over a year.
- The effective issues as they now are can be summarised as follows:
(1) For the purposes of assessing the damages for the Defendants' infringement, did the relevant infringement continue for 5 days or for about a year?
(2) If the answer to (1) is that the relevant infringement only continued for a period of 5 days, is the duration of the notional licence the period of infringement or the period that would have been negotiated had a licence been sought?
(3) Having regard to the answers to (1) and (2), what is a reasonable licence fee?
(4) Is this a case for additional damages? The Publicity Clip was produced for the Defendants by Artists Network Australia ("ANA"), and Reformation's case is that ANA were at least reckless as to whether they were infringing the copyright owner's rights. That therefore raises the following issues: (i) were ANA the Defendants' agents for this purpose? (ii) were ANA reckless? (iii) do these circumstances justify an award of additional damages? and (iv) if so, how much?
Facts – (i) copyright in the songs
- Reformation's claim is to copyright in the musical works consisting of the songs Gold and True. Although there is no longer any dispute in relation to this, I should briefly give some of the background. This is taken from the witness statement of Mr Stephen Dagger, the manager of Spandau Ballet and a director of Reformation, who gave evidence before me but who was not cross-examined on this part of his evidence.
- I have also had the benefit of reading the judgment of Park J in Hadley v Kemp  EMLR 589. This was a judgment given after trial of an action in which three of the other members of Spandau Ballet (Mr Tony Hadley, the band's lead singer, and two others) sued Mr Gary Kemp and claimed among other things that they were joint authors of Spandau Ballet's songs. With one minor exception (a song called "Glow"), Park J rejected that claim, finding that Mr Kemp was the sole author of all the songs in question (which included Gold and True). That judgment is not technically evidence in this case but it goes into the background in considerable detail and is a helpful introduction.
- As Park J points out at 597 (section E1), if a member of a band composes a song and the band then records it, there are in fact likely to be three copyrights created. There are two in the song: one in the music (which is a musical work) and one in the lyrics (which is a literary work). At the relevant time these copyrights subsisted by virtue of s. 2(1) of the Copyright Act 1956 which applied to original literary, dramatic or musical works. There is also a quite separate copyright in the particular performance of the song which is recorded on the master tape (which is a sound recording). This copyright subsisted by virtue of s. 12(1) of the Copyright Act 1956 which applied to sound recordings.
- In the present case both Gold and True were written by Mr Gary Kemp in the spring of 1982. He was the sole author of both the music (as found by Park J) and the lyrics. The copyright would therefore have vested in him save for the fact that he was at the time employed by Reformation for his composing and writing services. Reformation was a company wholly owned by Mr Kemp, and of which he and Mr Dagger were directors, which had been formed to employ him for that purpose: see Park J's judgment at 597 (section D) and 598 (section E1). That meant the copyright vested in Reformation. Reformation's claim in this action is in fact pleaded solely by reference to the musical works and not the literary works, but it was not suggested that this was of any practical significance.
- Mr Dagger refers to these rights as the copyright in the compositions or the publishing rights. He distinguishes them from the rights in the recording (otherwise known as the "masters") which are usually owned by the record company to which the band was signed at the time. In the present case the recording rights are owned by Warner Group.
- The practical effect is that when a song is used in advertising or the like, two licences are needed. One is from the owner of the copyright in the particular recording which is used. The other is from the owner of the publishing rights.
Facts – (ii) the cruise and the Publicity Clip
- The Defendants trade together as Cruiseco and I will refer to them as Cruiseco without distinguishing between them. I can take the background from the evidence of Mr Stephen Lloyd. Mr Lloyd was the Chief Executive of Cruiseco from 2000 to March 2017, and a consultant from April to October 2017 when he retired. He is resident in Australia and was not called to give oral evidence but the Defendants relied on his witness statement as hearsay. His evidence was therefore not tested in cross-examination but there is no reason to doubt what he says about the background.
- Cruiseco operates and markets cruise holidays in Australia and the UK. It has offices in Australia and the UK, and websites with Australian and UK domain names which it uses to advertise to Australian and UK customers.
- On a number of occasions it has chartered and managed those charters for a specialist music-themed cruise operator called Cruising Country Pty Ltd, trading as Choose Your Cruise ("Choose Your Cruise"), to hold music-themed cruises. On these ventures Cruiseco's role was to charter and manage the ship, market the cruise and take the bookings; Choose Your Cruise would find the artists to perform, manage the relationship with the artists, and create promotional material to promote the cruise.
- ANA (referred to above) is a company based in New South Wales which books and manages musical talent and operates as a promoter of shows. In around 2012-13 it began working with Choose Your Cruise to provide artists for the latter's music-themed cruises. Mr Lloyd's evidence is that in around 2014-15 ANA acquired a 50% stake in Choose Your Cruise, although to be more precise the corporate records indicate that the 50% is held by a company owned by Mr Marius Els, the Chief Executive of ANA. Mr Els became a director of Choose Your Cruise in May 2015.
- In early 2017 Cruiseco agreed to charter and manage a "Back to the 80's" music-themed cruise for Choose Your Cruise, which was due to sail, and in due course did sail, from Southampton on 6 May 2018 for 7 nights aboard a large cruise ship, the Navigator of the Seas, to Spain and Portugal and back. As in other cases, Choose Your Cruise was responsible for selecting artists and creating promotional material. Choose Your Cruise appointed ANA to do this for them.
- ANA produced a flyer which gave first billing to Mr Hadley (the former lead singer of Spandau Ballet who had been the first plaintiff in Hadley v Kemp) and featured him prominently with a half page devoted to him. The text accompanying his picture referred to Spandau Ballet having had numerous chart topping singles and albums all over the world:
"some of the most memorable being the singles "Gold" … and, of course, the international number one "True"."
- Cruiseco also paid ANA for a promotional video, namely the Publicity Clip. ANA used an Australian business called Aloha Media to produce it, and on 16 May 2017 Mr Trevor Smith of Aloha Media sent Mr Els of ANA a download link to a preliminary version of it for approval. Mr Smith had himself done the voiceover just as a guide but once it was approved would get it re-done with an English voice. On 2 June Mr Els forwarded this to Mr Lloyd, asking him to have a look at it so they could get Mr Smith to complete it, saying:
"Once u have approved the script and any vision u want changed I will get Trevor to update …"
Mr Lloyd replied to Mr Els on 3 June:
"My only comment is that BILBAO is pronounced BIL – BOW (like a dog sound) not BIL – BAY – O. Otherwise it looks fine."
- On 9 June Aloha Media sent Mr Els a link to a second version with the English voiceover. On 11 June Mr Els forwarded this to Mr John Glover of Blueprint Management, which represents a number of artists including Mr Hadley, saying:
"Can u have a look at the below promo reel and let me know if ok your end".
On 13 June Mr Glover replied that the ad looked great but there were two serious problems with it, describing the second as follows:
"The second thing is the background music of the Spandau hits. If these are the originals, you cannot use them. We can send you Tony's own version which he owns.
Matt will send these to you now.
We are currently involved in litigation regarding a US show which did the same thing so you MUST change this."
"Matt" was a reference to Mr Matt Glover of Blueprint Management and on 13 June he duly sent Ms Kim Basilio of ANA a clip of live footage of Mr Hadley performing Gold and True. Ms Basilio sent it on to Mr Smith of Aloha Media asking him:
"Can we please urgently change the audio track that is used on the Sizzle Reel for Tony Hadley? Tony doesn't own the rights to the original audio for that one. They would like us to use the below instead please?"
Mr Smith replied that he would do it on Thursday (15 June); and Mr Els e-mailed Mr Lloyd:
"I will have an updated UK sizzle reel to u on Thursday.
Tony Hadley is in a court battle with ex members of Spandau Ballet about him using the original audio tracks and they have asked us to change to the new recordings tracks [sic] that he has redone for his shows."
- On 17 June Mr Smith sent Ms Basilio of ANA a link to a third version of the Publicity Clip, and on 19 June Ms Basilio sent it on to Mr Lloyd saying among other things:
"This will also include the correct audio for Tony Hadley's Gold."
On 21 June Ms Basilio also sent it to Ms Carolyn Mackley, noting that it did not have the voiceover. Later that day Aloha Media sent Ms Basilio a link to a version with voiceover, and Ms Basilio sent it to Ms Mackley. Ms Mackley, who gave evidence by video-link before me, is Cruiseco's National Marketing Manager in Australia, and until September 2017 (when a UK Head of Marketing was appointed) also provided marketing support for the UK, working with Mr Lloyd.
- The second version sent to Ms Mackley on 21 June was the version of the Publicity Clip that was distributed by Cruiseco. Ms Mackley asked one of her colleagues to post it on Cruiseco's websites, and on 22 June 2017 it was posted on both the UK and Australian websites (www.cruising.co.uk and www.cruising.com.au).
- On the same day (Thursday 22 June) Mr Joe Lavers, Cruiseco's UK National Sales Manager, sent an e-mail timed at 08.32 (UK time) to a large number of UK travel agents. I was told that it was sent to 257 individual e-mail addresses, although in many cases there is more than one recipient with the same domain name so the number of separate businesses contacted will have been rather fewer – Mr Keay, who appeared for Cruiseco, suggested some 65. The subject-line was "Product Bog and Update – 80s Video" and the e-mail was primarily about the Back to the 80's cruise, encouraging the agents to promote it. It included reference to the Publicity Clip as follows:
"BACK TO THE 80'S VIDEO – Download the promotional video on the link below – get posting on Facebook, put on your website, send to your clients, play in the shop if you have a TV screen."
There was then a link to the Publicity Clip on Hightail, a filesharing website.
- The Publicity Clip as posted on Cruiseco's websites and Hightail was about 2 minutes 20 seconds long. The audio track featured extracts from a number of songs, the opening one being a 19-second extract from Gold, and the closing one being a 23-second extract from True. It appears to be common ground that these versions are not the replacement ones which Mr Matt Glover sent to Ms Basilio on 13 June: Mr Lloyd said he understood from subsequent discussions with Mr Els that Aloha Media had changed the vision but not the music, so that the original songs remained. That means that as well as infringing the copyright owned by Reformation in the musical and literary works (the publishing rights), the Publicity Clip no doubt also infringed the copyright in the sound recordings, but that of course forms no part of this claim. It would not in fact have made any difference to the present claim if Aloha Media had used the later versions, as although Mr Hadley no doubt owned the sound recording rights in the other versions, they would have still infringed Reformation's publishing rights.
Facts (iii) – events after distribution of the Publicity Clip
- It is not known what use was made of the Publicity Clip by the UK travel agents to whom Mr Lavers had sent the link to Hightail. There is evidence that at least one of them, Cruiseselect, put it on their website. There is also evidence that someone put it on Youtube.
- The next day (Friday 23 June 2017) one of the other members of Spandau Ballet brought the Publicity Clip to Mr Dagger's attention. He immediately instructed solicitors, M Law, and they wrote to Cruiseco in the UK that afternoon requiring among other things that they immediately procure the removal of the Publicity Clip online. On Monday 26 June Ms Karen Harold, Cruiseco's UK Reservations & Customer Service Manager forwarded this to Mr Lloyd in Australia saying she had just received it. That e-mail is timed at 8.28 pm which must I think be Australian Eastern Standard Time (UTC+10), equivalent to 11.28 am British Summer Time (UTC+1) in London. The other times given below must all I think be London time. Mr Lloyd sent it on at 12.03 to Mr Els, copying in various Cruiseco employees including Ms Harold and Ms Mackley, saying:
- Deal with this immediately
- Replace the sizzle reel with something that we can use
- Contact the lawyer and say this is entirely the fault of ANA…"
He also asked Ms Mackley and another employee to go through every piece of material and make sure it did not mention anything they might be in breach of.
Ms Harold then sent an e-mail to M Law at 12.17 apologising unreservedly for any breach of contract or artist copyright and saying:
"We will instruct all our agents to stop using the sizzle reel and any promotional material that mentions the copyright material. This has been widely distributed and we will make all attempts to withdraw this immediately but we hope they understand that we act in good faith and some of the material has been passed by our agents to sub agents and media without our direct knowledge."
She followed that up at 12.22 by e-mailing the recipients of Mr Lavers' e-mail of 22 June as follows:
"Can you please remove the 80's video from any web sites/promotional activity until further notice
We will supply a new one as soon as possible."
Ms Mackley immediately took the Publicity Clip down from Cruiseco's own websites, and then at 13.05 asked Ms Harold to:
"please contact anyone you or any of the UK team may have provided this to and ensure they pull it off-line immediately."
Ms Harold replied at 13.09 that she had sent an e-mail to all agents asking them to remove the video from any web sites etc.
On 29 June Mr Lloyd sent a further e-mail to Ms Harold in which he said:
"…I can't be guilty of leaving it up anywhere.
Karen, please get your team to call every member and look at every website."
Meanwhile Mr Els had also contacted M Law on 26 June saying that he was unaware of any breach prior to launching the promotion and that Cruiseco and Cruiseselect had taken it down from their websites.
In due course a new promotional video was produced. The audio track does not include either Gold or True, or indeed any of the other songs that were on the Publicity Clip.
Until very shortly before trial it had been assumed that what was in issue was an infringement that lasted from 22 June 2017 (when the Publicity Clip was posted on Cruiseco's own websites and the link to Hightail disseminated by Mr Lavers' e-mail) to 26 June 2017 when instructions were given to take it down, a period of 5 days. On 26 June 2018 however (2 days before trial) M Law discovered that the Publicity Clip was still available online at Hightail. The next day K&L Gates, Cruiseco's solicitors, confirmed that the link was no longer active, but Mr Keay accepted that there was prima facie evidence that the link had remained live and available until 26 June 2018, that is for a period of just over a year.
Issue (1) – How long did the infringement last?
I can now consider the issues, as summarised at paragraph 8 above. The first is whether the failure to take the link down from the Hightail website meant that Cruiseco continued to infringe Reformation's copyright in the two songs.
Reformation rely on s. 20 of the 1988 Act. This provides in its current form as follows:
"20 Infringement by communication to the public
(1) The communication to the public of the work is an act restricted by the copyright in–
(a) a literary, dramatic, musical or artistic work,
(b) a sound recording or film, or
(c) a broadcast.
(2) References in this Part to communication to the public are to communication to the public by electronic transmission, and in relation to a work include–
(a) the broadcasting of the work;
The section in this form was substituted with effect from 31 October 2003 by regulations which transposed into domestic law a European Directive known as the Information Society Directive (Directive 2001/29/EC). In particular s. 20(2)(b) derives from Art 3(1) of the Directive which provides:
(b) the making available to the public of the work by electronic transmission in such a way that members of the public may access it from a place and at a time individually chosen by them."
"Member States shall provide authors with the exclusive right to authorise or prohibit any communication to the public of their works, by wire or wireless means, including the making available to the public of their works in such a way that members of the public may access them from a place and at a time individually chosen by them."
It was not suggested that what Cruiseco did came within s. 20(2)(a) as a broadcasting of the work (for which see s. 6 of the 1988 Act and Copinger and Skone James on Copyright (17th edn, 2016) at §7-213). But it was argued for Reformation that it came within s. 20(2)(b) as the making available to the public of the work.
Mr Richards, who appeared for Reformation, submitted that the key question was whether the Publicity Clip on the Hightail site was made available to the public. He said that if it was made available to the public, then it was not time-limited and was continuing. He referred me, for a statement of the principles, to Copinger and Skone James at §7-216 where the editors state 7 principles which can be drawn from the various rulings of the CJEU, which he described as uncontroversial. That includes at principle (3) the following:
"The "public" for these purposes means an indeterminate number of potential recipients and implies a fairly large number of persons. It excludes groups which are too small or insignificant."
That principle was taken from the SGAE decision, that is Sociedad General de Autores y Editores de Espana (SGAE) v Rafael Hoteles SL (Case C-306/05)  ECDR 2. I was not taken to the decision itself, but it concerned a hotelier who, receiving broadcasts centrally, distributed those broadcasts via television sets in the guest rooms and in common parts of the hotel, and was found by the CJEU to be communicating works included in the broadcasts to the public.
Mr Richards accepted that if Cruiseco had sent the link to the 257 travel agent representatives and asked them to keep it to themselves, that might not qualify as a communication to the public. But he said that Mr Lavers in his e-mail of 22 June encouraged the recipients to send it on to their clients and disseminate it. It was only necessary, he said, to find that Cruiseco had encouraged them to disseminate it; it was not necessary to find that the travel agents had in fact done so (although he submitted that some of them probably had). By sending the link with the encouragement to pass it on, Cruiseco had made it available to the public and that continued until the Publicity Clip was taken down from the Hightail website.
Mr Keay submitted that the inadvertent leaving of the file on Hightail was not a continuing act of communication to the public. In order to access it, you needed to know the link. That was limited to the 257 recipients of Mr Lavers' e-mail and anyone to whom they had passed on the link. 257 was not an "indeterminate number of potential recipients", and there was no evidence that anyone else had been sent the link at all. The travel agents had been told not to use the video on 26 June 2017, and there was no evidence that anyone had accessed it since. To hold Cruiseco liable for a year's continuing use would be grossly unfair.
I have not found this particular point entirely straightforward, and I might have benefited from fuller submissions on it. But my conclusions are as follows:
(1) I leave on one side Mr Keay's reference to the clip being inadvertently left on the Hightail site and to it being unfair to hold Cruiseco liable. I accept that it was inadvertent (there is nothing to suggest it was deliberate, and Mr Lloyd plainly wanted the infringing material taken down from everywhere) but copyright is a property right (s. 1(1) of the 1988 Act), and if it is infringed, the infringement is actionable (s. 96(1) of the 1988 Act). This is not a question of fairness or discretion but of whether what has been done did infringe the right or not.
(2) I agree (and it was not in dispute) that the critical question is whether the clip was made available to the public. It was not suggested to me that anyone could access the clip unless they had the link, which means that putting or leaving the video on a filesharing website is not by itself making it available to anyone. But sending someone a clickable link to the filesharing site clearly does make its content available to the recipient. I also agree with Mr Richards that once a recipient has got the link, the content of the filesharing website continues to be made available to the person with the link so long as the link remains active. The critical question therefore is whether Cruiseco made the link available to sufficient recipients to count as "the public" for this purpose.
(3) I agree that the 257 travel agent representatives are not an "indeterminate" number of potential recipients, and making the link available to them was not by itself making the clip available to the public.
(4) I accept that there is no actual evidence of the link being sent on by any of the recipients to members of the public. The only potentially relevant evidence is that someone posted the clip on Youtube, but there is nothing to show that that was a member of the public rather than one of the travel agents.
(5) Further I find it impossible on the evidence before me to make a finding on the balance of probabilities that the link was sent on to members of the public. Since there was no direct evidence of this, such a case must depend on what would have been likely to happen in the normal course of events. The evidence scarcely addressed the question whether this was something that was likely to happen in the circumstances. It was suggested to Ms Mackley in cross-examination that the reason why Mr Lavers sent a link in the first place rather than attach the video itself was because the video would be a large attachment, which she accepted; and it was then suggested that if a travel agent was going to send it to a client, the natural way to do so would be to forward the link. Her response was that it would be quite silly to give them the link and that the smart way to do it would be to put the clip on the travel agent's own website, where it could be associated with their own brand. When she was asked if she knew if any of them had sent the link on, she said she did not know, and when it was suggested that the travel agents might have done, she said that would be speculative. I have no other material bearing on this question, but Ms Mackley's suggestions seem to me to be inherently plausible. In these circumstances, if it is necessary for Reformation to establish that the link had on the balance of probabilities been sent to members of the public, I would not find that this had been established.
(6) The remaining issue is whether Reformation do have to establish this or whether, as Mr Richards submitted, it is sufficient that Mr Lavers encouraged the travel agents to disseminate it. I have come to the conclusion that such encouragement is not enough. It is true that Mr Lavers encouraged the travel agents to "send to your clients" but this does not establish that any of them did so in the short time between Mr Lavers' e-mail on the morning of Thursday 22 June and the agents being told not to use it at lunchtime on Monday 26 June – it is not as if there was any evidence that that period would be a critical window for promoting the cruise, which was not due to sail until May 2018. (In fact Ms Mackley's evidence was that the cruise sold quite slowly: there were 1633 cabins available of which the first was sold on 10 June 2017, and only 13 were sold in the whole of June, the majority of cabins being sold in February to April 2018.) Nor does Mr Lavers' e-mail establish whether, if any of the travel agents did send the clip to clients, they did so by downloading the video and forwarding it, or by forwarding the link. Only the latter would be a continuing infringement within s. 20(2)(b). In those circumstances I do not consider that it is established that Cruiseco continued to make the clip available to the public.
My conclusion on this issue therefore is that the infringement lasted for 5 days from 22 to 26 June 2017 and not for the period of just over a year.
Issue (2) – Duration of notional licence
My conclusion on issue (1) makes it necessary to resolve an issue of law between the parties which can be stated as follows: in assessing a reasonable licence fee, is the duration of the notional licence to be taken as the period of infringement (5 days) or as that which would have been agreed having regard to the realities of a negotiation if Cruiseco had sought a licence?
By s. 96(2) of the 1988 Act, in an action for infringement of copyright all such relief by way of damages is available as in respect of the infringement of any other property right.
It is common ground that such damages are to be assessed by way of a reasonable licence fee. This is a standard way to assess damages for infringement of intellectual property rights. The principles underlying such an award were recently considered in detail by the Supreme Court in One Step (Support) Ltd v Morris-Garner  UKSC 20 ("One Step"), and although that was actually a case concerning the award of what were termed "negotiating damages" for breach of contract, the judgments examine the history of such awards. In the case of infringements of intellectual property rights, the award of damages by way of a reasonable licence fee is an example of damages assessed by reference to what Nicholls LJ called in Stoke-on-Trent City Council v W & J Wass Ltd  1 WLR 1406 the "user principle", that is that:
"It is an established principle concerning the assessment of damages that a person who has wrongfully used another's property without causing the latter any pecuniary loss may still be liable to that other for more than nominal damages. In general, he is liable to pay, as damages, a reasonable sum for the wrongful use he has made of the other's property."
(at 1416, cited by Lord Reed in One Step at ). Lord Reed himself summarised his conclusions as follows (at ):
"(1) Damages assessed by reference to the value of the use wrongfully made of property (sometimes termed "user damages") are readily awarded at common law for the invasion of rights to tangible moveable or immoveable property (by detinue, conversion or trespass). The rationale of such awards is that the person who makes wrongful use of property, where its use is commercially valuable, prevents the owner from exercising a valuable right to control its use, and should therefore compensate him for the loss of the value of the exercise of that right. He takes something for nothing, for which the owner was entitled to require payment.
(2) Damages are also available on a similar basis for patent infringement and breaches of other intellectual property rights."
For a summary of the applicable principles I was referred to the judgment of HHJ Hacon in Henderson v All Around the World Recordings Ltd  EWHC 3087 (IPEC) ("Henderson") at -, citing from two earlier decisions of Arnold J and Newey J respectively, as follows:
"18 In Force India Formula One Team Limited v 1 Malaysia Racing Team Sdn Bhd  EWHC 616 (Ch);  RPC 29 Arnold J considered Wrotham Park damages, i.e. of the type awarded in Wrotham Park Estate Co Ltd v Parkside Homes Ltd  1 WLR 798. In Force India damages for breach of a restrictive covenant in a contract were taken to be the amount of money which could reasonably have been demanded by the claimant for a relaxation of the covenant. Arnold J identified the following principles (at ):
"(i) The overriding principle is that the damages are compensatory: see Attorney-General v Blake at 298 (Lord Hobhouse of Woodborough, dissenting but not on this point), Hendrix v PPX at  (Mance L.J., as he then was) and WWF v World Wrestling at  (Chadwick L.J.).
(ii) The primary basis for the assessment is to consider what sum would have [been] arrived at in negotiations between the parties, had each been making reasonable use of their respective bargaining positions, bearing in mind the information available to the parties and the commercial context at the time that notional negotiation should have taken place: see PPX v Hendrix at , WWF v World Wrestling at , Lunn v Liverpool at  and Pell v Bow at –,  (Lord Walker of Gestingthorpe).
(iii) The fact that one or both parties would not in practice have agreed to make a deal is irrelevant: see Pell v Bow at .
(iv) As a general rule, the assessment is to be made as at the date of the breach: see Lunn Poly at  and Pell v Bow at .
(v) Where there has been nothing like an actual negotiation between the parties, it is reasonable for the court to look at the eventual outcome and to consider whether or not that is a useful guide to what the parties would have thought at the time of their hypothetical bargain: see Pell v Bow at .
(vi) The court can take into account other relevant factors, and in particular delay on the part of the claimant in asserting its rights: see Pell v Bow at ".
The Court of Appeal in Force India ( EWCA Civ 780;  RPC 36) did not dissent from Arnold J's summary of the law (at ).
19 Wrotham Park damages, though they are for breach of contract, are in all relevant respects the same as those I have to consider under this head, so the foregoing principles set out by Arnold J apply. In the inquiry as to damages for infringement of trade marks in 32Red OKC v WHG (International) Limited  EWHC 815 (Ch), Newey J's assessment was by consent also on the basis of willing licensor and willing licensee. Newey J endorsed the principles identified by Arnold J and expanded on them as follows:
(vii) There are limits to the extent to which the court will have regard to the parties' actual attributes when assessing user principle damages. In particular
(a) the parties' financial circumstances are not material;
(b) character traits, such as whether one or other party is easygoing or aggressive, are to be disregarded -.
(viii) In contrast, the court must have regard to the circumstances in which the parties were placed at the time of the hypothetical negotiation. The task of the court is to establish the value of the wrongful use to the defendant, not a hypothetical person. The hypothetical negotiation is between the actual parties, assumed to bargain with their respective strengths and weaknesses -.
(ix) If the defendant, at the time of the hypothetical negotiation, would have had available a non-infringing course of action, this is a matter which the parties can be expected to have taken into account -.
(x) Such an alternative need not have had all the advantages or other attributes of the infringing course of action for it to be relevant to the hypothetical negotiation .
(xi) The hypothetical licence relates solely to the right infringed -.
(xii) The hypothetical licence is for the period of the defendant's infringement -.
(xiii) Matters such as whether the hypothetical licence is exclusive or whether it would contain quality control provisions will depend on the facts and must accord with the realities of the circumstances under which the parties were hypothetically negotiating -."
As can be seen, HHJ Hacon referred to damages assessed in this way as Wrotham Park damages, a label now better avoided (see One Step at  per Lord Reed and at  per Lord Sumption). Subject to this, and subject to the point in issue between the parties, neither counsel dissented from this summary as an accurate statement of the law.
Mr Richards however takes issue with principle (xii). This is derived from the judgment of Newey J in the 32Red case at  where he said:
"My own view is that the hypothetical licence must be for the period of infringement. The hypothetical licence has to be in respect of what William Hill Online actually did."
Mr Richards' submission is that this is wrong and that the correct principle is to identify the term of the hypothetical licence that the parties would have negotiated if Cruiseco had sought a licence. He said that since the Publicity Clip was distributed on 22 June 2017 for a cruise starting on 6 May 2018 the parties would have negotiated for a licence to cover that period, a period of 10½ months; and in practice would have agreed a licence for a year.
Mr Richards had three strands to his argument. First he said that Newey J's decision on the point in 32Red was influenced by Arnold J's statement in the Force India case at , and that that passage had been qualified by Lewison LJ in the Court of Appeal (Force India Formula One Team Ltd v Aerolab SRL  EWCA Civ 780 at -). I do not propose to enter into the debate as to the extent that Lewison LJ disagreed with Arnold J on this point, as it does not seem to me that Newey J's view as to the duration of the licence was dependent on what Arnold J said in Force India.
Mr Richards' main point was his second one. For this he relied on the Court of Appeal decision in Stovin-Bradford v Volpoint Properties Ltd  Ch 1007 ("Stovin-Bradford"). This was a claim for infringement of copyright where the plaintiff architect had supplied plans to the defendants on terms that he retained the copyright, and the defendants had infringed his copyright by incorporating one distinctive feature of his drawings in the buildings they erected. The trial judge awarded £500 damages and the defendants appealed the quantum. The appeal was dismissed, Lord Denning MR saying at 1016G:
"There remains the question of damages. Mr. Lunzer submitted that £500 was excessive. He said that the defendants had only taken one feature of the plaintiff's plan. They had made many alterations in the rest. This one feature was not worth £500, he said, but only £10 or £20.
I do not agree with this submission. The defendants took the plaintiff's plan and took it as if they had a licence to use it as they pleased – to take so much of it as suited them and leave out what they did not want. They ought to pay as damages an amount equivalent to the fee which they would have had to pay for a licence. This is how Crossman J. put it in Chabot v. Davies  3 All E.R. 221, 228: "What is the remuneration which the plaintiff could fairly have got for his plan if the defendant had applied for his licence to use it?" That was approved by Uthwatt J. in Meikle v. Maufe  3 All E.R. 144.
Applying this test, I turn to the R.I.B.A. scale. Estimating the cost of the work at £90,000, the scale fee up to the stage of applying for outline planning permission would be £900, which would include a licence to use the plan. But it may be that £90,000 is too high. The judge may have thought that £60,000 would be nearer the mark, thus making the fee £600 to include a licence to use the plan. Or it may be that the judge put the total fee at £600 because the defendants did not take the whole plan but only the diamond-shaped feature. At any rate, it seems to me that the sum of £500 which the judge gave in addition to the original 100 guineas (thus making £600) was just about right. At all events, it was not a wholly erroneous estimate. I would therefore dismiss this appeal."
Salmon LJ said (at 1020E):
"The damages must be assessed on the basis of what would be fair remuneration to have paid the architect for a licence to use the copyright for the purpose for which it was used: see Chabot v. Davies  3 All E.R. 221 and Meikle v. Maufe  3 All E.R. 144. In this connection I attach importance to Graham J.'s findings that the owners took "the really important and striking features which unify the whole building and gave it its characteristic looks," and would help to sell the building at a profit. The damages are at large and cannot be precisely measured. I can find no reason to criticise Graham J.'s assessment of these damages at £500, on the basis that this would have been a fair fee for the owners to pay the architect for a licence to use the drawings for the purpose for which they did use them."
Megaw LJ said (at 1022H):
"As regards the question of damages, which Graham J. assessed at £500, I agree with what has been said by my Lords, Lord Denning M.R. and Salmon L.J. In my view the measure of damages is fair compensation to the architect having regard to the value which the licence would have had, not diminished by the fact that the owners incorporated into the building only a part of the copyright plans and drawings. The licence was for the whole and the value should be assessed accordingly."
Mr Richards said that this established that in considering the hypothetical licence, the Court was not limited to a licence covering the precise acts of infringement that had occurred, but was required to postulate what licence might reasonably have been available to Cruiseco had they respected Reformation's right to control the use of its intellectual property. He referred to the principle in One Step that user damages are not restitutionary but compensatory and represent the economic value of the owner's right to control the use of his property, which has been infringed by the person making wrongful use of it (see at  per Lord Reed).
I do not accept this submission. I accept that Stovin-Bradford is authority for the proposition that the hypothetical licence in the case of a person who treats himself as free to make such use as he wants of a copyright work is a hypothetical licence to copy the work, not just a licence to copy those parts of it that have in fact been used, even if the part used is a small fraction of the whole (the defendant's counsel in that case suggested (at 1011H) that only about 1/20th of the drawings had been used). A not dissimilar point was made by Lewison LJ in the Force India case at - where he said that if the defendant's personnel had regarded themselves as free to use certain material as they thought fit, then compensation should have been assessed on the basis of the value to the defendant of the whole corpus of information:
"After all, if A wrongfully retains B's dictionary, it does not matter that he only looked up a few definitions."
(It is noticeable however that he did not in the event disturb the assessment of damages by Arnold J). As Mr Keay said, copyright subsists in a work, and it is the copyright in the work which is infringed.
But this is all concerned with the subject-matter of the hypothetical licence. Neither Stovin-Bradford nor the Force India case was concerned with the duration of the licence, and I do not think any proposition of law in relation to the duration can be derived from them.
Mr Keay referred me to Eaton Mansions (Westminster) Ltd v Stinger Compania de Inversion SA  EWCA Civ 1308 ("Eaton Mansions"). This was not a copyright case but a case of trespass to land as between landlord and tenant. The defendant was the long lessee under underleases (for over 75 years from 1978 and so not expiring until 2053) of two flats in a block of flats. Neither lease included any part of the roof. The claimant was its landlord (itself a long lessee from the Grosvenor Estate). In 2008 the defendant trespassed on the roof by placing air conditioning units on it and then in 2010 sold the flats. The claimant sought damages for the trespass. It was common ground that the defendant's trespass only continued until the sale of the flats, and that the claimant was to be awarded damages for trespass for that period (see per Patten LJ at ). Damages were awarded on the basis of a fee for a hypothetical licence, and one issue on the appeal was whether the parties in the hypothetical negotiations for the licence were to be taken as negotiating for a licence period equivalent to the actual duration of the trespass which had occurred or some other more extensive period (see at ). The claimant's case was that the parties should have been assumed to have been negotiating for a consent which would have subsisted for the duration of the defendant's underleases because it was clear that Mr Jafar (the relevant individual who made decisions on behalf of the defendant) was not interested in a temporary permission but wanted a right to install permanent air conditioning which could be passed on to a purchaser (see at ). That proposition was rejected by Patten LJ (who gave the only reasoned judgment, Christopher Clarke and Tomlinson LJJ agreeing with him) as follows:
"20 …Mr Lundie for Stinger submits that the court has to have regard to the actual period of trespass and to treat the parties as having negotiated on that basis because to do otherwise would disconnect the licence fee and therefore the damages from the legal wrong for which they are intended to provide compensation. In this case, Stinger would be required to pay for rights which their trespass never gave them and for a loss which EML never suffered.
21 I think this is clearly right. Although the hypothetical negotiations for a licence fee have been adopted as a convenient means of valuing the benefit to the trespasser (and, in that sense, the loss to the claimant) which results from the defendant's tortious conduct, its accuracy depends upon the negotiations centering on the period and extent of the trespass which actually occurred. The nature and duration of the trespass is not a valuation event in the sense in which that term was used in Lunn Poly but rather it is what dictates and shapes the nature of the valuation exercise. It is therefore wrong to say that the parties would not have known at the commencement of the trespass how long it would last. The valuation construct is that the parties must be treated as having negotiated for a licence which covered the acts of trespass that actually occurred. The defendant is not required to pay damages for anything else."
Although Eaton Mansions is a decision in relation to trespass to land, I do not see that this is a material difference. As One Step shows, the principle by which user damages are awarded in cases of infringement of intellectual property rights is the same principle by which user damages are awarded in the case of trespass to land. Thus for example in the passage at  cited at paragraph 45 above (and a similar passage at ) Lord Reed expressly links the two.
On this basis it seems to me that Eaton Mansions is indistinguishable from the present case. There the defendant would not in fact have wanted a licence only until March 2010, and if he had negotiated for one would have negotiated for a much longer licence (to 2053), but the hypothetical licence was nevertheless one limited to the period of his actual trespass which came to an end in 2010; in the same way here Cruiseco, if it had appreciated the need for a licence, would not in fact have wanted one for only 5 days, and would have negotiated for one lasting until the cruise sailed in May 2018, but the hypothetical licence is nevertheless in my judgment limited to the period of its actual infringement which came to an end on 26 June 2017. Not only do I regard myself as bound by the decision of the Court of Appeal in Eaton Mansions to reach this conclusion, it also seems to me plainly right in principle. It should not be overlooked that the purpose of asking the question what licence fee would hypothetically have been negotiated is not an end in itself but a means of assessing damages for the infringement that has occurred. It is implicit in Reformation's contention that the same hypothetical licence fee, and hence the same damages, would have been payable whether the infringement stopped after 5 days or continued for 10½ months. That seems instinctively wrong, in circumstances where, as Patten LJ says in Eaton Mansions, the defendant is not required to pay for anything other than the acts of trespass (or here infringement) that actually occurred.
Mr Richards said that Stovin-Bradford was not cited in Eaton Mansions and the Court of Appeal in the latter case was bound to follow it; if therefore the two cases were inconsistent, I should follow the earlier. For reasons given above I do not regard Stovin-Bradford as deciding anything about the duration of the hypothetical licence and do not regard Eaton Mansions as inconsistent with it.
The third strand of Mr Richards' argument was based on the decision of HHJ Hacon in The National Guild of Removers and Storers Ltd v Statham  EWHC 3572 (IPEC). Here Mr and Mrs Statham carried on a removals business and were members of the claimant, NGRS, until October 2010. When they ceased to be members, they inadvertently failed to correct a statement on a listing website that their business was a member of NGRS. After NGRS complained, this statement was taken down in April 2013. Birss J had entered summary judgment against the defendants for passing off, and HHJ Hacon was assessing the damages. Having referred to his own summary of the principles in Henderson, he said at  that Newey J's principle (xii) in 32Red (that the hypothetical licence is for the period of the defendant's infringement) could sometimes be qualified by his principle (xiii) (that the licence might contain provisions that depended on the realities of the negotiating), and continued:
"In relation to principle (xiii) Newey J had mainly in mind matters such as quality control provisions. But in my view the realities of the negotiation might, to take an example, require the term of the licence to be fixed as a period of one or more years. In such a case the term of the hypothetical licence would not normally be deemed to expire on the very day on which the defendant stopped infringing."
HHJ Hacon found (at ) that both parties would have been willing to go ahead on the basis of 3 years, and awarded damages based on an annual fee for 3 years' membership.
This decision does not change the view I have come to. It is possible that it is explicable on the ground that Mr Statham's own evidence was directed at his willingness to negotiate full membership of the NGRS for a further 3 years, and did not suggest anything less as a realistic possibility (see at ), but if it cannot be justified on that basis, then I prefer to follow the guidance in Eaton Mansions (which accords with the view taken by Newey J in 32Red and, as I have already said, my own instinctive view).
In my judgment the duration of the hypothetical licence is to be taken as 5 days, not 10½ months or a year.
Issue (3) – What is a reasonable licence fee?
Apart from its duration most of the terms of the hypothetical licence were not in dispute:
(1) The licence would obviously be for both songs.
(2) The licence would cover usage on the internet.
(3) Reformation's case is that it would also have covered point of sale use (on the basis that Mr Lavers' e-mail encouraged the travel agents to play it in store). That seems to me to be right.
(4) Despite the fact that Mr Dagger's evidence was that Cruiseco would have wanted a licence for television use (on the basis that the replacement clip was broadcast on a television channel called Cruisetv), Mr Richards accepted that Reformation's pleaded case was confined to internet and point of sale, and did not extend to television usage. Again that seems to me to be right: whatever Cruiseco might have done with the Publicity Clip had it not been promptly challenged, it is not suggested that the clip ever was broadcast on television. For similar reasons to those given above in relation to the question of duration, I take the view that the terms of the hypothetical licence are not to be found by asking what the parties might have negotiated for had the need for a licence been appreciated, but are a tool to enable the Court to assess damages; and those damages are to be assessed by reference to the infringement that has actually occurred, not to other acts of potential infringement that have not.
That leaves only one point of substance between the parties, although it is potentially of some significance. That is whether the hypothetical licence should be taken as one for global internet usage, or as one limited to internet usage aimed at the UK and Australian markets.
Mr Richards relied on the fact that Cruiseco's websites (www.cruising.co.uk and www.cruising.com.au) were not geo-gated, which means that they could in principle have been accessed from anywhere in the world. He accepted that they were aimed at the English-speaking world, but said that it should not be assumed that only people in the UK or Australia were interested.
Mr Keay said that not only were the websites aimed at UK and Australian consumers, but the evidence of Ms Mackley was that the cruise was created for the UK market (it was sailing from Southampton and had a number of UK artists headlining); that as at 26 April 2018, 1595 cabins had been sold, of which 1565 were to customers from the UK and 30 to customers from Australia; and that no bookings had been received from outside the UK and Australia. He referred me to Merck KGAA v Merck Sharp & Dohme Corp  EWCA Civ 1834 where the Court of Appeal summarised the law in relation to the use of trade marks on websites, namely that an offer for sale of goods bearing a trade mark will amount to use of the trade mark in the territory concerned if having regard to all the circumstances it may be concluded that the activity is targeted at consumers in that territory (see at  per Kitchin LJ). That principle has been applied to a claim for infringement of copyright (see at ).
Mr Richards did not dispute that principle but said that here Cruiseco, through Mr Lavers, had encouraged the travel agents to disseminate the clip widely, including posting it on Facebook, and there was evidence that it had been put on Youtube; Facebook and Youtube are global platforms aimed at global audiences. Nor does it matter, he submitted, whether or to what extent the invitation was taken up. Cruiseco sent the link to the travel agents for them to disseminate on social media such as Facebook, and the hypothetical licence should be one that permitted Cruiseco to do that, even if in the event the travel agents did not do so. For that he referred me to Interfirm Comparison (Australia) Pty Ltd v Law Society of New South Wales (1975) 5 ALR 529. There the defendant had copied a questionnaire in breach of the plaintiff's copyright and sent it to the University of New England for use by them. In fact the University did not use it, but Bowen CJ in Eq held that damages should be assessed as fair remuneration for permission to the defendant to send it for the purpose it did, and the fact that the University did not use it did not affect the plaintiff's entitlement to the fee it would have charged (at 548).
I do not think the position is as black and white as either counsel suggested. I accept that Cruiseco's websites were aimed at the UK and Australia and there is nothing to suggest that they were targeted more widely; and that the same would be likely to be true of any of the UK travel agents who took up Mr Lavers' invitation to put the Publicity Clip on their own websites (or played it at the point of sale). To that extent I consider that the infringement was primarily in the UK and Australia, and hence the hypothetical licence should be taken as primarily for that use. But I agree with Mr Richards that by sending it to the travel agents with an encouragement to place it on social media, Cruiseco was inviting them to put it on platforms which are not necessarily targeted in the same way. It is a well-known phenomenon that postings on social media can "go viral" and spread very widely; in Mr Richards' graphic phrase, Mr Lavers blew the dandelion. The hypothetical licence permitting Cruiseco to do that would not therefore in my judgment have been limited to a licence confined to the UK and Australia but would have been one for internet use generally, although as an adjunct to a licence to use primarily on websites targeted at the UK and Australia. There is a not dissimilar precedent in one of the comparator licences in evidence (No 4a) where a licence of True to a business in the travel sector for television, radio, websites and the like was primarily confined to use in France (including French overseas territories) but recognised that websites were of their very nature worldwide.
It is now possible to assess the reasonable licence fee for the hypothetical licence. I heard expert evidence from Mr Steve McMellon for Reformation and Ms Deborah Mannis-Gardner for Cruiseco. Both were well qualified and helpful experts.
The experts agreed that the most relevant material is the actual licence fees charged by Reformation for use of either True or Gold. Indeed if there is a regular going rate for a licence (for example for a sale of articles that would otherwise infringe a patent), the measure of damages is the royalty that the infringer would have had to pay: One Step at  per Lord Sumption. In the present case there is no such regular rate, as each licence is the subject of an individual negotiation, and the experts were agreed that the negotiation of a fee is an art not a science, but the comparator licences are the best evidence of what figure would have been agreed in the hypothetical negotiation. However, every licence is different, depending on such matters as the territory to which it applies, its duration, the use permitted, and the sector in which the licensee operates, and the actual licences granted show a very wide spread of fees depending on numerous variables.
I will start with what would have been charged for a 1-year licence, both in case I am wrong on issues (1) or (2) above, and because, even assuming I am right, it is helpful in assessing the licence fee for a 5-day licence. As to this:
(1) Mr McMellon assessed the appropriate licence fee for either Gold or True, on the assumption that the licence would be (i) a global licence (ii) across television, internet and point of sale and (iii) for a term of one year, at £100,000–£125,000 per song.
(2) That seems to me to be supported by the comparables. The most useful of them seem to me to be the following (I have taken the numbers from the table annexed to Ms Mannis-Gardner's report):
6 (True, UK & Ireland, 1 year, Retail) £75,000
7 (Gold, UK, 9 mths, Food & Beverage) £80,000
17a(i) (Gold, UK & Ireland, 1 year, Food & Beverage) £100,000
18 (Gold, UK, 1 year, Gambling) £100,000
24 (True, UK, 1 year, Travel) £80,000
All of these were for television and internet. Given that licences for the UK, or the UK and Ireland, are in the range of £75-£100,000 per year, Mr McMellon's assessment does seem to me to be justified when the hypothetical licence is primarily for the UK and Australia with the addition of some wider internet use.
(3) Ms Mannis-Gardner approached this question in a different way by taking a mathematical average across 39 licences, pro-rated to a year. I have considerable doubts as to the methodology but it in fact produced a not dissimilar figure of about £105,000.
(4) In those circumstances I propose to take the figure of £120,000 as a starting point for a 1-year licence for one song for television and internet use. I take a figure at the higher end of the range to reflect the fact that the comparator licences were confined to the UK (or the UK and Ireland) whereas the hypothetical licence here would also encompass the Australian market.
(5) The next question is the appropriate fee for both songs together. That would be £240,000 subject to the question whether a discount should be applied for the licensing of both songs as a package. Mr McMellon's opinion was that a discount was inappropriate for songs of the stature of True and Gold, but Reformation's pleaded case is that it would have applied a discount, of no more than 20%, and Ms Mannis-Gardner's opinion was that a 20% discount would be a fair reflection of the fact that the licence would have covered two tracks. I propose to apply a 20% discount which brings the total down to £192,000.
(6) The next question is whether that figure should be further discounted as the licence would be for internet and point of sale use only and not for television. Reformation's pleaded case accepts that some discount for this would be appropriate but not more than 10%. Ms Mannis-Gardner considered that a 50% discount would be appropriate. That however seems to me too high. I accept the evidence of Mr Dagger that internet use has increasingly become more significant, that Reformation are now seeing some very big licence fees for internet use alone, and that licences for this area are becoming the most valuable. He pointed for example to licence 23 dated October 2017 (True, worldwide, internet only, 6 months, Technology) where the fee was $125,000 (equivalent to some £175,000 per year). Ms Mannis-Gardner agreed that internet rights are valuable, although she said they had not only become so in the last few years.
(7) I propose to adopt a further 20% discount for this factor. That brings the fee down to £153,600, which I will round up to £155,000. If I stand back from the calculation that seems to me in line with the comparables which I have referred to above, given that the hypothetical licence is for both songs, but limited to internet and point of sale use.
I conclude that a reasonable licence fee for 1 year for both songs would be £155,000.
A licence fee for 10½ months would be somewhat but not markedly reduced from the fee for 1 year. I would apply a 10% discount which means that the fee would be £139,500 which I would round up to £140,000.
The remaining question is what licence fee would have been payable for a 5-day licence. There is little direct evidence as most of the comparator licences granted by Reformation are for periods of 6 months or more. There are some examples of short extensions or add-ons to existing licences, for example licence 10c (True, worldwide, 1 day, Youtube only, Automotive), where $3,500 was charged for a 1 day add-on to an existing licence which had been charged at $125,000 for a year, but I accept that these are of no real assistance. The fee charged for extension or add-on licences where a substantive licence has already been granted is no guide to a reasonable fee for a stand-alone licence. There are very few examples of short stand-alone licences, the most notable being licence 11 (True, worldwide, 15 days, Food & Beverage, internet) charged at €15,000, but Mr Dagger said, and I accept, that that was a licence for a single website which was a very different matter from Cruiseco's active promotion of the Publicity Clip to a large number of travel agents with encouragement to disseminate it on Facebook and the like. Ms Mannis-Gardner referred to an instance where she had secured a one-day licence for a James Brown song for $4,000, but I have no other details of this and beyond establishing that there are licensors willing to grant one-day licences, I can derive little assistance from it.
Mr Dagger's evidence was that in general he did not grant licences in the key territories for short periods, and if someone asks him for a short term he prices it in such a way that a longer term is more attractive. To similar effect Mr McMellon, who has long experience of granting licences, said that he had no experience himself of granting short licences: for iconic songs such as True and Gold the minimum period he has granted licences for is 6 months, and he would always grant a licence for 6 months even if he thought it was only going to be used for a shorter period; in the present case he would have granted Cruiseco a 6-month licence. That was however in part because he would be suspicious of someone asking for a 5-day licence for internet use, as he would want to know why, and what would happen after the end of the 5-day period; it would be difficult to police and he would want the security of a 6-month licence.
I see no reason to doubt this evidence but I do not think it justifies me in basing the fee on that payable for a 6-month licence. As I have already said above, the ascertainment of a reasonable licence fee is not an end in itself but a tool for assessing the damages payable. In the present case I have held that the infringement lasted 5 days, and that the reasonable licence fee is therefore that for a 5-day licence. If the licensor is not in fact willing to grant a short licence (or, which comes to the same thing, prices it in such a way as to make it unattractive), this is an example of an unwilling licensor. But one has to assume for the purpose of the exercise that the licensor is willing, that is, in the present case, willing to grant a licence for 5 days only: see principle (iii) in Arnold J's summary of the principles in Force India (paragraph 46 above) to the effect that the fact that one or both parties would not in practice have agreed to a deal is irrelevant.
In those circumstances it seems to me that I must do my best to assess what a licensor who was willing to grant a licence for only 5 days would have agreed as a fee. The starting point seems to me to be the annual licence fee which I have assessed at £155,000. Mr Keay submitted that this should be pro-rated to find the value of a 5-day licence. But although the experts agreed that in some cases pro-rating might be appropriate (for example in pricing an extension), neither expert suggested that it would be appropriate here. Ms Mannis-Gardner herself said that where a licence is as short as 5 days, it is not appropriate to pro-rate, suggesting that a 5-day licence would not be in excess of 10% of an annual licence. That would produce a fee of £15,500.
Reformation's case however is that the value is in the initial part of the licence. Mr Keay said that was based on nothing but assertion, but I do not think that is a fair criticism. Mr McMellon explained that the immediate use is critical and the licensee would (and Cruiseco in this case did) concentrate their marketing and advertising efforts at the beginning of the campaign and he would have taken that into account in the pricing. Mr Dagger's evidence was to the same effect: the first four days of the licence are absolutely key as it was in those four days that the clip was sent out to the agents. He also said that the duration is just one of the factors relevant to the licence fee, and perhaps the most important is the price for the brand association, however brief, so that even a licence for a single day could command a hefty fee. Mr McMellon similarly said that the songs command a premium and he would only have executed a licence subject to meeting a minimum price threshold.
I accept the thrust of Mr Dagger's and Mr McMellon's evidence that there is a substantial value in being associated with two iconic songs, even for a very short period. It follows that even for a 5-day licence there is a substantial price to be paid. I have very little material on which to assess such a price but I propose to take 25% of the 1-year licence fee. That seems to me to strike a balance between the fact that the infringement only lasted 5 days, and that any significant use of iconic songs of this stature would attract a substantial fee. That amounts to £38,750.
I will therefore award Reformation £38,750 by way of ordinary damages pursuant to s. 96(2) of the 1988 Act.
Issue (4) – Additional damages?
By s. 97(2) of the 1988 Act:
"(2) The court may in an action for infringement of copyright having regard to all the circumstances, and in particular to—
(a) the flagrancy of the infringement, and
(b) any benefit accruing to the defendant by reason of the infringement,
In Ravenscroft v Herbert  RPC 193 at 208 Brightman J said (with respect to s. 17(3) of the Copyright Act 1956 which was in somewhat similar, although not identical, terms):
award such additional damages as the justice of the case may require."
"Flagrancy in my view implies the existence of scandalous conduct, deceit and such like; it includes deliberate and calculated copyright infringements."
In Nottinghamshire Healthcare NHS Trust v News Group Newspapers Ltd  EWHC 409 (Ch), Pumfrey J considered s. 97(2) at some length. For present purposes the most relevant passage is at  where he said:
"…carelessness sufficiently serious to amount to an attitude of "couldn't care less" is in my judgment capable of aggravating infringement and of founding an award of damages under section 97(2). Recklessness can be equated to deliberation for this purpose."
Reformation's pleaded case is confined to one point, which is effectively that Mr Els knew or ought reasonably to have known that permission was needed to use the songs but failed to take any reasonable steps to secure it; and that his knowledge was to be attributed to Cruiseco because ANA was acting as Cruiseco's agent.
There is no pleaded case that Cruiseco itself, as opposed to ANA, acted in such a way as to attract an award of additional damages. Mr Richards did suggest in his written opening that Mr Lloyd was on notice that Mr Els had carried out inadequate rights clearances and had made no effort to check that proper clearances had been obtained, but this was not something that was specifically pleaded and he did not press it in oral submissions. Mr Lloyd's evidence was that he believed ANA had obtained all necessary licences and consents, which is consistent with his conduct when the matter came to light, and which, although not tested in cross-examination, I accept. I proceed on the basis that Cruiseco's own conduct would not justify an award under s. 97(2), and that the only relevant question is whether ANA's conduct (and specifically that of Mr Els) justifies such an award against Cruiseco.
Three points were argued under this head: (i) whether ANA was acting as Cruiseco's agent; (ii) whether ANA was at least reckless in not obtaining the necessary clearances; and (iii) whether, if so, that justified an award of additional damages against Cruiseco.
As to (i), the most relevant facts seem to me to be these. Cruiseco chartered and managed the cruise. Although Choose Your Cruise was responsible for selecting the artists to perform and creating advertising material, Choose Your Cruise appointed ANA to perform this job (paragraph 19 above). In practice Cruiseco appears to have dealt with ANA direct. So far as the employment of the performers is concerned there is in evidence an (unsigned) Performance Contract prepared by ANA which specifies the Employer as Mr Lloyd of Cruiseco. So far as the promotional material is concerned, Mr Lloyd accepted in his evidence that Cruiseco paid ANA to produce the Publicity Clip on terms that ANA was to produce the video ready for use, and the e-mails in evidence pass directly between Cruiseco (Mr Lloyd, Ms Mackley) and ANA (Mr Els, Ms Basilio). There is no evidence that there was a written contract between Cruiseco and ANA for the production of the video, but on this material I find that there was a contract between Cruiseco and ANA under which ANA was to produce a promotional video for Cruiseco to use. Since that was to be ready for use, I find that it was implicit that ANA would obtain any necessary licences for that purpose; and since it was Cruiseco that would be selling the cruise and doing the marketing, that includes obtaining the necessary licences on behalf of Cruiseco to enable Cruiseco to do that. In those circumstances it seems to me that to that extent ANA was acting as Cruiseco's agent.
As to (ii), the question is whether ANA, that is Mr Els, was at least reckless. Mr Els was not called to give evidence and there was no witness statement from him. His stated position can however be seen from an exchange of e-mails he had with Mr Glover of Blueprint Management shortly after the event. It will be recalled that he had on 11 June 2017 asked Mr Glover whether it was "ok your end" and received back the reply that they were sending him "Tony's own version which he owns" (paragraph 22 above). On 26 June he e-mailed M Law professing ignorance as to UK requirements and saying:
"the track we used was sent to us by Tony Hadley management who said that Tony owns the copyright so I will take it up with them"
He then e-mailed Mr Glover:
"can u advise the parts we are in breach of in the attached letter We changed the music backing track as per your instruction"
Mr Glover replied:
"the tracks we sent you Tony owns the copyright in, but you would also need a license from the publisher of the songs same as with any piece of music.
Did someone do the publishing clearances for all the other tracks on the video?"
Mr Els' response was:
"Yes we used the tracks u sent us and no we did not get the licence and clearances as we understood they were fine if approved by the artist/management."
In those circumstances Mr Keay submitted that Mr Els appears to have thought that Mr Hadley was the owner of all the rights that he needed, and that once the clip had been approved by Mr Glover that was sufficient. That, he said, was obviously a misunderstanding, but it was at most a negligent one. It did not amount to recklessness in the sense that Pumfrey J used it in the Nottinghamshire case, that is an attitude of "couldn't care less".
Mr Richards asked me to reject this as a plausible explanation. Mr Els was not some novice in the music world. ANA's website introduced itself as follows:
"ARTIST NETWORK is regarded as one of Australia's leading Entertainment, Booking and Touring Agencies and represents some of the most in demand artists in the country as well as international touring acts"
and said of Mr Els himself:
"At the helm is CEO, Marius Els, an active member of numerous music industry boards and long-time supporter of the Australian music industry."
Mr Dagger's evidence was that it was absolutely standard for anyone using music in an advertisement to find out who owns the publishing rights and obtain clearance from them. Everyone in the music industry knows how to do it, and it is very easy to find out who owns the rights to music. When it was put to Ms Mannis-Gardner that it was a standard first step across the industry to find out who owns the rights, she agreed that anyone with knowledge and experience would know to do that. Mr Dagger also made the point that there are two quite different copyrights in recorded music, the rights to the recording and the rights to the publishing rights, and that it is very rare for music publishers and managers of the acts to be the same person.
In those circumstances Mr Richards invited me to conclude that there was no way that Mr Els could have thought the exchange he had with Mr Glover on 11 June was sufficient to give him the necessary clearance, and that he was simply chancing it in the hope nobody would notice. He relied in support of that submission on two other matters as well. First, although Mr Glover had made it clear that it was essential that the tracks were changed, and Mr Els duly asked Mr Smith to do so, he never checked that it had been done; and second it is clear that he did not obtain licences for the other (11 or so) tracks on the Publicity Clip either, as is shown by the fact that they were all removed from the replacement clip (and indeed as his e-mail exchange with Mr Glover on 26 June confirms). I do not consider these particular points add very much: they are consistent either with Mr Els deciding to chance it, or being both slapdash and ignorant of what was required.
Had Mr Els been called as a witness, and had he given evidence that he genuinely understood the exchange with Mr Glover on 11 June to have given him all the rights he needed, not understanding the need to obtain a clearance from the owners of the publishing rights as well as the owners of the recordings, then I might or might not have accepted his evidence. But he has not been called, and in those circumstances I am left with the evidence I have. On that evidence I find on the balance of probabilities that a man with Mr Els' experience in the music industry is likely to have understood the need to clear the publishing rights as well as the rights in the recordings (there being no suggestion that the position is any different in Australia), and that it is inherently implausible that he thought the brief exchange with Mr Glover was sufficient to entitle him to use the tracks. I am driven to the conclusion that the most likely explanation is indeed that put forward by Mr Richards, namely that he decided to chance it. That to my mind is sufficient to amount to at the lowest recklessness in the sense of an attitude of "couldn't care less". Had ANA itself been the infringer, I would have found that sufficient to amount to flagrancy and to justify an award under s. 97(2).
As to (iii), the question is whether the conclusions on the first two issues mean that such damages should be awarded against Cruiseco. Mr Richards relied on the general principle of agency law, as stated in Bowstead and Reynolds on Agency (21st edn, 2018) at §8-208, that:
"A principal is generally imputed with knowledge relating to the subject-matter of the agency which an agent acquired while acting for the principal."
Mr Richards submitted that there was no reason to draw a distinction between knowledge and recklessness such that Mr Els' (and hence ANA's) recklessness was to be imputed to Cruiseco.
Mr Keay said that that was inappropriate. The principle in Bowstead depends on the context. In the present context, only the defendant's actual knowledge was relevant to flagrancy. It would be highly unjust if an infringer who had no actual knowledge of the fact he was infringing to be judged dishonest, deceitful or reckless solely on the basis of knowledge imputed to him from a third party.
I accept Mr Richards' submission. I agree that the application of the principle in Bowstead depends on the context. But the present context is liability for a wrong committed by the principal against a third party, and it is entirely routine for the principal's liability in such a situation to be affected by the knowledge (or other state of mind) of his agent, despite the principal not himself having that state of mind. I do not regard the application of the principle in Bowstead in a case such as the present as entailing the consequence that the principal is to be regarded as personally dishonest, deceitful or reckless; rather the effect of it is that the principal is liable for the fact that his agent was reckless, it being the policy of the law that as between two innocent parties (the principal and the third party) it is in general appropriate that the principal should bear the consequences of the conduct of the agent he has engaged in his business rather than the third party. I was not taken to any authority on the point but the principle is long-standing and well established, dating back to at least the case of the fraudulent agent in Lloyd v Grace, Smith & Co  AC 716.
In those circumstances it seems to me that this is a case for an award of additional damages under s. 97(2) on the grounds that ANA acted flagrantly as Cruiseco's agent even though Cruiseco itself did not.
The remaining, and final, question is to fix a sum for additional damages. On this I was cited no authority and given very little by way of submissions, Mr Richards inviting me to make a substantial award of £50,000, and Mr Keay suggesting a modest uplift of 5% of the ordinary damages, but neither putting forward any particular analysis to justify their figures.
In those circumstances I can do nothing else than select a figure. I propose to award £25,000 which seems to me adequate to mark the seriousness of the infringement.
For the reasons I have given, I assess the damages payable by Cruiseco (that is both Defendants) to Reformation to be (i) £38,750 ordinary damages pursuant to s. 96(2) of the 1988 Act and (ii) £25,000 additional damages pursuant to s. 97(2) of the 1988 Act, making a total of £63,750.
I am very grateful to counsel on both sides for their well-argued submissions in which they covered a large amount of ground in a short time.
I add one footnote in the hope that it will be helpful to those preparing trial bundles in a case like this. As one would expect, the witness statements, both those prepared for various interlocutory steps and those prepared for trial, referred to and exhibited some of the underlying contemporaneous documents, particularly the e-mails. It is usual however for documents such as this to emerge piecemeal over the course of the proceedings, and key documents are often exhibited to more than one witness statement. The result is that if the trial bundles simply reproduce the exhibits the underlying contemporary documents will not be in any logical or chronological order, and some documents will appear twice or more. In the present case for example the result of including the exhibits was that many documents appeared twice, and Mr Lavers' e-mail at least four times, but they were not in any particular order.
It is preferable for trial to take the underlying documents and arrange them in chronological order so that the run of documents can be read without having to flit back and forth between different exhibits, and so that multiple copies of the same document are not included. References in the witness statements for trial should then be cross-referenced to the chronological bundle. This makes for a little more work in preparing bundles, but saves a great deal of time in preparing for trial, at trial itself (because submissions and cross-examination do not take place by reference to different iterations of the same document), and not least in the preparation of the judgment.
In saying this I am not saying anything new: to my personal knowledge, Knox J commended this practice as long ago as LRT Pension Fund Trustee Co Ltd v Hatt  PLR 227, and it is all to be found in the current Chancery Guide (February 2016 edition, as amended up to April 2018) at §21-34 to §21-40, especially §21-38 to §21-39. It is a practice which if adhered to should make the trial process easier and more efficient for all concerned.
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