The Intellectual Property Enterprise Court has assessed damages for copyright infringement from the use of photographs on a website without the photographer's consent.
Section 97(2) of the Copyright, Designs and Patents Act 1988 (section 97(2)) gives the court the power to award additional damages for infringement of copyright, having regard to all the circumstances; in particular, to the flagrancy of the infringement and any benefit accruing to the infringer.
Article 3(1) of the Enforcement Directive (2004/48/EC) (the Directive) obliges EU member states to provide for the measures, procedures and remedies necessary to ensure the enforcement of intellectual property rights. These should be effective, proportionate and dissuasive (Article 3(2), the Directive) (Article 3(2)).
Under Article 13 of the Directive (Article 13), infringers that knowingly, or with reasonable grounds to know, engage in an infringing activity must be ordered to pay damages appropriate to the actual prejudice suffered by the rights holder as a result of the infringement. Courts should take into account all appropriate aspects, such as: negative economic consequences, including lost profits, that the injured party has suffered; any unfair profits made by the infringer; and, in appropriate cases, other factors such as the moral prejudice caused to the rights holder by the infringement. Alternatively, courts may set the damages as a lump sum on the basis of elements such as at least the amount of royalties or fees that would have been due if the infringer had requested authorisation to use the right (the user principle).
In Henderson v All Around the World Recordings Ltd, the Intellectual Property Enterprise Court concluded that compensation for actual prejudice suffered could, where appropriate, include additional sums related to the profit that the defendant made from the knowing infringement, not just the profit itself ( EWHC 3087(IPEC)). This would occur, for example, where the defendant had made no financial profit from the infringement but its business had expanded.
AL and A were both in the business of residential loft conversions. AL would, on completion of a loft conversion, take photographs of the work done to display on its website. AL and A agreed that copyright subsisted in these photographs and that it belonged to AL.
A used 21 photographs on its website without AL's consent. Following AL's letter before action complaining of unlawful use of the photographs, A removed them from the website and replaced them with 21 licensed images of loft conversions bought from a stock photograph library for £300.
A admitted that it had infringed AL's copyright. The issues before the court were therefore limited to the quantum of compensatory damage due to AL, and whether AL was entitled to additional damages under section 97(2) or Article 13(1) and, if so, how much.
The court held that AL was entitled to damages of £300 according to the user principle. AL had not suffered any detriment from the misrepresentation of its photographs on A's website. AL and A operated in different geographical areas, so neither would expect to overlap in custom or potential customers, nor was it likely that anyone would notice the duplication of the photographs on their respective websites.
There was no evidence that A wanted to use AL's images above any other reasonable photographs of loft conversions and it was likely that A would have chosen the cheapest option available. A sensible guide as to what A would have agreed to pay for the use of AL's photographs was what it actually paid for stock photographs from a library. On this basis, the court awarded the sum of £300.
The court did not accept A's evidence that it had not known the source of the infringing photographs and, until AL's letter before action, believed that they had been legitimately obtained. A had been prepared to mislead its customers and potential customers by passing off the loft conversions shown in both the infringing photographs and those bought from the photograph library as its own work. There was evidence of commercial dishonesty.
Contrary to its view in Henderson, the court concluded that a successful claimant is entitled to rely on either section 97(2) or Article 13(1) in order to maximise recovery in respect of additional damages. The Directive does not sweep away national legislation that is more favourable to rights holders. The court therefore considered the appropriate award of damages under each provision.
AL was entitled to additional damages to take into account unfair profits accruing to A through its infringing use of the photographs. The profit generated from A's infringing use of AL's photographs was particularly unfair as it involved a misrepresentation to A's customers that the photographs depicted work carried out by A. While the benefit to A may not have adversely affected AL, AL suffered prejudice because it enjoyed no part of the unfair profit accrued to A through the exploitation of AL's photographic skills. The strictly compensatory award of £300 also lacked the dissuasive element required by Article 3(2). Although assessment of quantum was difficult on the facts, the court held that AL should receive an additional £6,000.
The court also found that the infringing use of the photographs was flagrant. Although the route to assessing additional damages under section 97(2) is different from that used under Article 13(1), the court arrived at the same figure of £6,000. As the figures that would be awarded under the alternative provisions were identical, there was no need for AL to elect which to recover additional damages under.
The awards of £6,000 of additional damages under section 97(2) and £6,000 of unfair profits under Article 13(1)(a) were not cumulative, making a total payable by A to AL of £6,300.
Despite suggesting in Henderson that additional damages under section 97(2) had effectively been made redundant in the light of Article 13(1)(a), the court has explicitly confirmed that Article 13 does not override section 97(2) but instead provides an alternative route for the recovery of additional damages. Rights holders can therefore elect for recovery on the basis of whichever provision offers the more favourable outcome.
Case: Absolute Lofts South West London Limited v Artisan Home Improvements Limited and another  EWHC 2608 (IPEC).
First published in the November 2015 issue of PLC Magazine and reproduced with the kind permission of the publishers. Subscription enquiries 020 7202 1200.