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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Reformation Publishing Company Ltd v Cruiseco Ltd & Anor [2018] EWHC 2761 (Ch) (22 October 2018) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2018/2761.html Cite as: [2018] EWHC 2761 (Ch), [2019] Bus LR 78, [2018] WLR(D) 657 |
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INTELLECTUAL PROPERTY ENTERPRISE COURT
Fetter Lane, London, EC4A 1NL |
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B e f o r e :
____________________
REFORMATION PUBLISHING COMPANY LIMITED |
Claimant |
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– and – |
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| (1) CRUISECO LIMITED (2) DISCOVERY TRAVEL CENTRE PTY LIMITED |
Defendants |
____________________
Maxwell Keay (instructed by K&L Gates LLP) for the Defendants
Hearing date: 28 June 2018
____________________
Crown Copyright ©
Mr Justice Nugee:
Introduction
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.
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).
Reformation
also has a claim for additional damages under s. 97(2) of the Copyright, Designs and Patents Act 1988 ("the 1988 Act").
Issues
"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?"
(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.
(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.
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.
Facts – (ii) the cruise and the Publicity Clip
"some of the most memorable being the singles "Gold" … and, of course, the international number one "True"."
"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."
"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."
"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.
"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.
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
"Please
- 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.
"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."
"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.
"…I can't be guilty of leaving it up anywhere.
Karen, please get your team to call every member and look at every website."
Issue (1) – How long did the infringement last?
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;
(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.
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) [2007] 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.
(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.
Issue (2) – Duration of notional licence
"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 [29]). Lord Reed himself summarised his conclusions as follows (at [95]):
"(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."
"18 In Force India Formula One Team Limited v 1 Malaysia Racing Team Sdn Bhd [2012] EWHC 616 (Ch); [2012] RPC 29 Arnold J considered Wrotham Park damages, i.e. of the type awarded in Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 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 [386]):
"(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 [26] (Mance L.J., as he then was) and WWF v World Wrestling at [56] (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 [45], WWF v World Wrestling at [55], Lunn v Liverpool at [25] and Pell v Bow at [48]–[49], [51] (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 [49].
(iv) As a general rule, the assessment is to be made as at the date of the breach: see Lunn Poly at [29] and Pell v Bow at [50].
(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 [51].
(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 [54]".
The Court of Appeal in Force India ([2013] EWCA Civ 780; [2013] RPC 36) did not dissent from Arnold J's summary of the law (at [97]).
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 [2013] 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 [29]-[31].
(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 [32]-[33].
(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 [34]-[42].
(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 [42].
(xi) The hypothetical licence relates solely to the right infringed [47]-[50].
(xii) The hypothetical licence is for the period of the defendant's infringement [51]-[52].
(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 [56]-[58]."
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 [3] per Lord Reed and at [109] 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.
"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.
"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 [1936] 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 [1941] 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 [1936] 3 All E.R. 221 and Meikle v. Maufe [1941] 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."
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 [30] per Lord Reed).
"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.
"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."
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.
"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 [34]) 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.
Issue (3) – What is a reasonable licence fee?
(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.
Reformation
and Ms Deborah Mannis-Gardner for Cruiseco. Both were well qualified and helpful experts.
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 [116] 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.
(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.
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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.
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.
Reformation
£38,750 by way of ordinary damages pursuant to s. 96(2) of the 1988 Act.
Issue (4) – Additional damages?
"(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,
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 [2002] EWHC 409 (Ch), Pumfrey J considered s. 97(2) at some length. For present purposes the most relevant passage is at [52] 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.
"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."
"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.
"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.
Conclusion
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.
Postcript