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Policing Costs
(This article was first published in Issue 51 of Copyright World, June 2005)
The case
Phonographic Performance Ltd v Stephen Russell Reader
E&W High Court
22 March 2005
The recent decision of Mr Justice Pumfrey in Phonographic Performance Ltd v Stephen Russell Reader provides further guidance on what constitutes "flagrant" copyright infringement and the nature and extent of additional damages to be awarded under s.97(2) of the Copyright, Designs and Patents Act 1988 (CDPA).
The Claimant, Phonographic Performance Limited (PPL), exists for the purposes of enforcing and protecting the exclusive right to play sound recordings in the UK and is the UK record industry collection society, representing over 3,000 record companies, 13,000 labels and 23,000 performers. PPL is assigned copyright in substantially all sound recordings in the UK, and in exchange for a fee, grants users of sound recordings, such as pubs, clubs and radio stations, licenses to play sound recordings in public.
In 1999, Mr Reader, the proprietor of a Brighton night club, applied for a licence from PPL. Having not received any fee from Mr Reader, PPL obtained a Court Order against Mr Reader, which restricted him from playing any sound recording in which the PPL owned copyright. Mr Reader subsequently obtained a licence from the PPL but failed to renew this licence in 2001.
In March 2004, enquiry agents visited Mr Reader's premises and obtained evidence that he was playing sound recordings in breach of the Court Order; and in July 2004, Mr Justice Pumfrey found Mr Reader guilty of contempt of Court. Mr Reader said that he intended to pay off the unpaid licence fees and would take a licence for the future. Notwithstanding this, Mr Reader was ordered to pay PPL's costs on an indemnity basis and directed that PPL's application for an Order for additional damages under s.97(2) CDPA (in respect of the admitted copyright infringement) be heard at a later date.
Additional damages
When infringements complained of are committed in breach of a Court Order, either an enquiry as to additional damages or, in the proper case, a summary award of additional damages to the copyright owner is appropriate.
It appears that Mr Justice Pumfrey considered there to be two ingredients in such a damages award. The first being those damages recoverable as a head of damages for infringement and those damages recoverable under s97(2) with particular regard to those factors listed in s.97(2)(a) and (b) CDPA.
Section 97 (2) of the CDPA provides that::
"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."
PPL argued they had incurred substantial expense both in seeking to induce Mr Reader to take a further licence and in policing his activities. Such expense was detailed in the form of a "statement of additional costs" covering the period when Mr Reader was unlicensed. PPL contented that such additional expenses were recoverable as additional damages within the scope of s.97(2), and gave the following reasons:
1) Mr Reader's deliberate refusal to obtain a licence caused PPL to incur the expenditure.
2) The expenditure represents the costs of employing enquiry agents and of pursuing Mr Reader to take a licence. It is therefore expenditure of the kind which can be recoverable as additional damages: such losses are a foreseeable consequence of playing PPL repertoire in public without a licence.
3) Furthermore, there should be an award of additional damages reflecting the benefit to the defendant of running the club without a licence.
Mr Justice Pumfrey found that: Mr Reader was aware of the need for a PPL licence; he had in the past only obtained such a licence under the threat of legal proceedings; he knew that a licence for the public performance of the PPL repertoire was necessary; and he has been able to find no excuse for his failure to seek the appropriate licence accordingly. Consequently, it was held that there was a deliberate and flagrant infringement.
Mr Justice Pumfrey acknowledged that Mr Reader had failed to make any serious disclosure relating to the financial circumstances of the club and considered briefly whether a full damages enquiry was necessary to assess the contribution of the infringements to the profitability of the club. In the event, Mr Justice Pumfrey decided that a "broad brush" approach was more appropriate and awarded a sum equal to the unpaid licence fees to the date of the application to commit, in addition to the costs of the enquiry agents and PPL's costs of the application.
Policing costs
This case provides further guidance on the extent of additional damages recoverable under s.97(2) CPDA, and makes it clear that the costs of policing compliance with a Court Order are recoverable in the event that a defendant flagrantly breaches its terms. In the light of this, it is anticipated that such policing costs will also be recoverable in the event that a defendant breaches written undertakings in a similar manner.
If a defendant is compliant with a Court Order (or undertakings) between the date of the Order (or undertakings) and any subsequent damages or account of profits hearing, it remains unclear whether the costs of policing such compliance may be recoverable as additional damages. This case could indicate that such costs might be recoverable, albeit that this may depend on certain factors, such as the extent and reasonableness of the policing, the flagrancy of the underlying infringement, the benefit accruing to the defendant by reason of such infringement and any other relevant factors, such as threats made by the defendant to the claimant that the infringements would continue.
Policing undertakings and injunctions can be costly. Therefore, this decision is a positive step towards copyright owners being able to recoup, in the case of persistent copyright infringers, substantially all of their policing costs, and in the case of ‘compliant' copyright infringers, perhaps a greater percentage of their policing costs than may have previously been thought possible.
This decision provides another useful tool for UK copyright owners in their fight to be properly compensated for their work
Rachel Bunn & Juliet Nutland
Waterfront Solicitors LLP
© Waterfront Solicitors LLP 2005