|Author Bengt Nyman|
Creative Commons Licence
Judge Hacon's decision in Absolute Lofts South West London Ltd v Artisan Home Improvements Ltd and Another  EWHC 2608 (IPEC) (14 Sept 2015) is an interesting authority on how to assess damages for infringement of the copyrights subsisting in photographs. In this case His Honour considered the principles for assessing both compensatory and additional damages.
Absolute Lofts South Wset London Ltd ("Absolute Lofts") claims to be the largest loft conversion company in Greater London while Artisan Home Improvements Limited ("Artisan") offers fascias, block paving and loft conversions in Bradford. The owner of Absolute Lofts was Craig Colton ("Mr Colton") and the owner of Artisan Darren Ludbrook ("Mr Ludbrook").
At various times Mr Colton had taken photographs of loft conversions that his company has completed and posted them to its website as examples of its handiwork. Mr Ludbrook downloaded 21 of Mr Coltron's photos and arranged for them to be posted to his own company's website implying that they were examples of its work. Absolute Lofts got to hear what Artisan had done and threatened it with proceedings for copyright infringement. MrLudbrook removed the infringing items from the website and replaced them with images from a photo library called "Shutterstock" that he had bought for £300. The parties were unable to agree on damages so these proceedings were initiated.
Absolute Lofts sued Artisan and Mr Ludbrook for damages for copyright infringement including additional damages under s.97 (2) of the Copyright Designs and Patents Act 1988 and art 13 (1) of the Enforcement Directive (Directive 2004/48/EC on the enforcement of intellectual property rights). There was no dispute that copyright subsisted in the photographs or that Mr Ludbrook had copied them. The only matter that appears to have been in doubt was whether Absolute Lofts owned the copyrights. That was resolved when Judge Hacon allowed a written assignment of the copyrights in the photographs into evidence. The rest of the hearing was on the assessment of damages.
The judge referred to his earlier decision in Henderson v All Around the World Recordings Ltd  EWHC 3087 where he attempted to set out the law on the calculation of compensatory damages in accordance with the decisions of Mr Justice Arnold in Force India Formula One Team Limited v 1 Malaysia Racing Team Sdn Bhd  RPC 29,  EWHC 616 (Ch) and Mr Justice Newey in 32 Red Plc v WHG (International) Ltd and Others  EWHC 815 (Ch) (12 April 2013). I discussed those authorities at some length in my case note Inquiries as to Damages in the Intellectual Property Enterprise Court: Henderson v All Around the World Recordings Ltd. 5 Nov 2014.
Judge Hacon directed himself that the starting point was what would have been agreed by the parties had they negotiated as willing licensor and willing licensee. His Honour assumed paragraph  that
"Mr Colton and Mr Ludbrook entered the negotiations immediately before the acts of infringement, i.e. at the point when Artisan realised that images of loft conversions were needed in addition to those taken of its own loft conversions and a decision was taken to use those on Absolute Lofts' website."Even though both sides presented evidence of what a professional photographer would have charged for photographs for Artisan's website His Honour disregarded it as "unhelpful" for two reasons:
" First there is the obvious point that Mr Ludbrook was not concerned to have professional shots on his website. The hypothesis is that he would have been a willing licensee of Mr Colton's photographs and it was the common view of the experts that these, though no doubt perfectly adequate for the task they served (and looked fine to me), were not of a professional standard.It seemed to the judge that what Mr Ludbrook actually paid to Shutterstock was as good a guide as any to what would hypothetically have been agreed between the parties. He therefore awarded Absolute Lofts the sum of £300.
 More than that, I do not accept that in the hypothetical negotiations Mr Ludbrook would for a moment have contemplated paying for customised photographs of actual loft conversions. He was a man willing to represent other companies' loft conversions as having been done by Artisan. To that end, I have no doubt, he was prepared to use the cheapest images he could find that looked good enough and could pass for photos of loft conversions done by Artisan. When faced with Absolute Lofts' letter before action in May 2014, he commissioned a local website agency to replace Absolute Lofts' 21 photos with images that satisfied those criteria, sourced from a photographic library called 'Shutterstock'. This cost him £300. Mr Colton gave some evidence in cross-examination about whether one of the Shutterstock images could be of a loft in the UK. I am not convinced that it would occur to a typical observer of Artisan's website that this was a photograph of a loft located abroad. Anyway, this was just one image and collectively the 21 Shutterstock photographs were good enough for Mr Ludbrook.
 In the hypothetical negotiations Mr Ludbrook would have known that absent agreement he could obtain his images from a photographic library. As I have indicated, Mr Colton would have had it in mind that any agreed figure would be a bonus."
The judge found at paragraph  that Mr Ludbrook either knew that the copies of Absolute Lofts' photographs on Artisan's website were infringing copies or alternatively that he had reasonable grounds to know they were. That was sufficient to engage both s.97(2) of the 1988 Act and art.13 (1) of the Directive.
Although s.97 (2) of the CDPA has never been repealed or amended the judge thought it right to focus on the Enforcement Directive either because that sub-section is consistent with art 13 (3) in which case it would be pointless to apply it in parallel or it is not in which case it should not be applied at all. However, he had to take account of art 2 (1) which preserves national law where it is more favourable to the rights holder. The upshot was that
"a successful claimant is entitled to rely on either s.97 (2) of the 1988 Act or on the defendant's unfair profits under art.13 (1) of the Directive, whichever would provide for the greater damages. Pursuant to s.97 (2) (a) the court is under an express statutory duty to have regard in particular to the flagrancy of the infringement whereas flagrancy is not a compulsory factor in the assessment under art.13 (1). In some circumstances the absence of flagrancy could therefore serve as a barrier to the minimum remedies available under art.13 (1). On the other hand, if flagrancy is such and/or the benefit accruing to the defendant by reason of the infringement is such that additional damages under s.97(2) would exceed those available under art.13 (1), an award under s.97 (2) is not precluded by the Enforcement Directive."Art 13 (1) of the Enforcement Directive requires EU member states to
"ensure that the competent judicial authorities, on application of the injured party, order the infringer who knowingly, or with reasonable grounds to know, engaged in an infringing activity, to pay the rightholder damages appropriate to the actual prejudice suffered by him/her as a result of the infringement.
When the judicial authorities set the damages:Although paragraphs (a) and (b) are expressed as alternatives the judge thought it better to read the two as parts of a consistent whole. He held that Absolute Lofts was entitled to an award that took account of Artisan's unfair profits. Artisan's profits had increased from £226,000 in 2011, £478,000 in 2012 and £498,000 in 2013. His Honour concluded at paragraph  that he was
(a) they shall take into account all appropriate aspects, such as the negative economic consequences, including lost profits, which the injured party has suffered, any unfair profits made by the infringer and, in appropriate cases, elements other than economic factors, such as the moral prejudice caused to the rightholder by the infringement;
(b) as an alternative to (a), they may, in appropriate cases, set the damages as a lump sum on the basis of elements such as at least the amount of royalties or fees which would have been due if the infringer had requested authorisation to use the intellectual property right in question."
"entitled to infer that Absolute Lofts' photographs made a contribution to the company's profits in 2011 to 2013 by encouraging those who visited Artisan's website to pay Artisan to do a loft conversion and that the contribution was more than negligible."Judge Hacon found that Artisan had profited from its acts of infringement. Those profits could be characterized as particularly unfair because they were generated by a misrepresentation to Artisan's customers that Artisan was capable of, and had completed, the loft conversions actually done by Absolute Lofts.
After taking all those factors into account Judge Hacon awarded Absolute Lofts additional damages of £6,000 making a combined total of £6,300. At paragraph  the judge said he was satisfied that the infringement was "flagrant" and that the justice of the case justified an award of £6,000 by way of additional statutory damages under s,97 (2).
The Request for Reconsideration of the Compensatory Damages Award
Three days after the judgment Absolute Lofts asked Judge Hacon to reconsider his award of £300 by way of compensatory damages on the ground that it had failed to draw his attention to a provision of Shutterstock's licence that contained the following prohibitions:
"12. Use an Image in a manner that infringes upon any third party's trademark or other intellectual property, or would give rise to a claim of deceptive advertising or unfair competition. …Absolute Lofts argued that Artisan had breached those terms and would not have been entitled to a £300 licence. In Absolute Lofts South West London Ltd v Artisan Home Improvements Ltd and another (No. 2)  EWHC 2632 (IPEC) (17 Sept 2015) His Honour rejected that request partly because it did not follow that Artisan could not have obtained stock images from another library at a similar price and partly because it is always incumbent upon a claimant to present his best case at trial in accordance with his duty to further the overriding objective of the Civil Procedure Rules.
18. Use any Image (in whole or in part) as a trademark, service mark, logo or other indication of origin, or as part therefore, or to otherwise endorse or imply the endorsement of any goods and/or services.'
19. Falsely represent, expressly or by way of reasonable implication, that any Image was created by you or a person other than the copyright holder(s) of that image."
The most surprising aspect of this judgment is not the lavishness of the additional damages but the paucity of the compensatory damages resulting from the total disregard of the two expert witness. The judge took into account what Mr Ludbrook was prepared to pay rather than what was available for non-infringing use. As Mr Ludbrook's conduct was not far short of that of the defendant in Bristol Conservatories Ltd v Conservatories Custom Built Ltd. l1989] RPC 106 it could have been argued that the only photos that he was entitled to use were those of his company's handiwork and none other and that the taking of those photographs would have required the services of a professional photographer.
The additional damages award was 30 times the size of the compensatory damages award. Art 13 (1) requires member states to ensure that the competent judicial authorities order the infringing party to pay the rightholder damages "appropriate to the actual prejudice suffered by him/her as a result of the infringement". The starting point is to consider the actual prejudice suffered by the rightholder as a result of the infringement and save for the loss of the notional licence fee which was covered by the compensatory award there was none as the parties were not competitors. The defendant's profits would have been relevant if Absolute Lofts had sought an account of profts instead of damages but it did not. Moreover damages and profits have always been alternatives in our legal system. Successful claimants can enjoy one or the other but not both.
A £6,300 damages award is unlikely to be appealed but if ever there was a case for the Court of Appeal to lay down some hard and fast rules on the interpretation and application of the Enforcement Directive and indeed art 8 of Directive 2001/29/EC of the European Parliament and of the Council of the 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society to which His Honour also referred, this is it.
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