Heartbroken by performer’s rights damages inquiry

Posted: January 6, 2015

Jodie Aysha Henderson v All Around The World Recordings Ltd [2014] EWHC 3087

In 2013 the Patents County Court found that a record company, All Around The World (AATW), had infringed the performer’s rights of singer Jodie Aysha in the hit song Heartbroken.

The Intellectual Property Enterprise Court has since conducted a damages inquiry.  The court first assessed damages on the basis of a licence between a willing licensor and willing licensee.  Significantly, however, it also clarified that when there has been a “knowing” infringement, under article 13 of the IP Enforcement Directive, a claimant is not entitled to both lost profits and any unfair profits accrued to the defendant.  Further, the court found that additional damages under the Copyright, Designs and Patents Act 1988 (CDPA) and damages under article 13 of the Directive are not cumulative, and that additional damages under the CDPA have become redundant in light of the Directive.

Background

In 2004, when she was about 14 years old, Jodie Aysha Henderson, professionally known as Jodie Aysha, composed the lyrics for a song called Heartbroken.

The following year, Miss Henderson sang Heartbroken to a friend, Tafazwa Tawonezvi (professionally known as T2).  He made a recording of her performance on a computer-based recording system set up in a bedroom in the flat where he was living at the time.

In 2007 he produced a new, remixed version of Heartbroken, using Miss Henderson’s vocal performance, and released it on a small scale.  The new version consisted of Miss Henderson’s vocal performance mixed above a new bassline mixed by Mr Tawonezvi.  He also altered the pitch of Miss Henderson’s voice electronically and “chopped up” her vocals in certain ways.

In the summer of that year, he signed a record deal with a company called 2NV Records Ltd.  2NV attempted to finalise business matters relating to Heartbroken and tried to arrange a meeting with Miss Henderson and her manager, but they did not attend.  2NV subsequently made it clear that if they did not hear from Miss Henderson by return they would have no option but to proceed with releasing the record.

In August 2007, AATW contracted with 2NV to release Heartbroken.  Shortly afterwards, 2NV offered Miss Henderson £1,500 for her vocal performance, which she refused.

The same year, Miss Henderson signed a music publishing agreement with Sony/ATV under which she assigned her copyright in Heartbroken.

In November 2007 AATV released Heartbroken, and it was a big hit: it reached number 2 in the main singles charts, stayed there for five weeks and overall remained in the Top 40 for almost a year.  Miss Henderson, however, received no royalties.

Liability decision

In February 2013 HHJ Birss QC sitting in the Patents County Court (as it was then) found that Miss Henderson had consented to the recording of her vocals, but had not consented to the release of the recording of her performance by AATW.

Damages inquiry

In the damages inquiry that followed, Miss Henderson claimed damages under three heads:

  1. loss of royalties from an alternative record deal (under the so-called “user principle”);
  2. further damages under the Intellectual Property (Enforcement etc.) Regulations 2006, which implemented Directive 2004/48/EC on the enforcement of intellectual property rights (IP Enforcement Directive), broken down as follows:
  1. negative economic consequences;
  2. recovery of unfair profits made by AATW; and
  3. non-economic factors, including moral prejudice; and
  4. additional damages under section 191J(2) of the CDPA.

Damages ruling

“User principle”

Before the damages hearing, the first head of damages was readjusted to reflect the royalties that would have been paid had there been a licence negotiated between a willing licensor and willing licensee, i.e. the “user principle”.  So the hypothesis that HHJ Hacon had to consider was a negotiation between Miss Henderson and AATW immediately before the date on which Heartbroken was released.

After considering numerous factors, HHJ Hacon determined that AATW was in a stronger bargaining position.  Both sides are assumed to have wished to reach a settlement; to that extent both would have been conciliatory, but Miss Henderson more so than AATW.

HHJ Hacon placed significant emphasis on a record deal that had been agreed between Miss Henderson and AATW in relation to a later song, Pozer.  His impression was that the 20% figure in the Pozer agreement provided an approximate starting figure for the royalty due to an artist in Miss Henderson’s position for her performance on Heartbroken.

He deducted the producer’s royalty (said to be 3%) and packaging costs (of 5%), giving a net artist’s royalty rate of 12%.  He then halved this to 6% due to the creative contribution that Mr Tawonezvi made to the song: he had altered the pitch of Miss Henderson’s voice electronically and chopped up her vocals in certain ways.

Referring to the royalties that AATW had paid to 2NV of circa £5,000 per percentage point, he awarded Miss Henderson £30,000 under this “user principle” head of damages.

IP Enforcement Directive

Regulation 3 of the IP Enforcement Regulations implements article 13(1) of the IP Enforcement Directive.  Article 13(1) states:

“Member States shall 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:

  1. 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; or
  2. 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.”

Regulation 3(1) of the 2006 Regulations states: “Where in an action for infringement of an intellectual property right the defendant knew, or had reasonable grounds to know, that he engaged in infringing activity, the damages awarded to the claimant shall be appropriate to the actual prejudice he suffered as a result of the infringement.”  And regulation 3(2)(a) states: “When awarding such damages – (a) all appropriate aspects shall be taken into account, including in particular – (i) the negative economic consequences, including any lost profits, which the claimant has suffered, and any unfair profits made by the defendant; and (ii) elements other than economic factors, including the moral prejudice caused to the claimant by the infringement.”

Miss Henderson argued that regulation 3(2)(a)(i) meant that she was entitled to both lost profits and any unfair profits accrued to the defendant.  The unfair profits were claimed to be in excess of £500,000.

HHJ Hacon noted that under English law the remedies of an inquiry as to damages and an account of profits are alternatives (Redrow Homes Ltd v Betts Brothers plc [1998] RPC 793 (HL), at 796-7).  He did not agree that Miss Henderson could have both under article 13(1), and an interpretation as such would mean a radical change in the law on intellectual property damages generally.

Where the defendant had “knowledge” that an infringing act was being committed, article 13(1)(a) required the court to take into account relevant aspects of the actual prejudice suffered by the claimant as a result of the infringement.   Those aspects included both the claimant’s lost profits and the defendant’s unfair profits.  Nonetheless, HHJ Hacon found it hard to envisage circumstances in which an award for both damages and an account of profits would be appropriate to the actual prejudice suffered.  The aim of article 13 was to achieve objectively assessed compensation, but no more than that, as to do so would carry the risk of imposing punitive damages.  Here, Miss Henderson had elected for an inquiry as to damages, and this did not include AATW’s profits from Heartbroken.

Instead, article 13(1) meant that if the claimant would not receive adequate compensation for the actual prejudice suffered if damages were to be assessed by reference to lost profits, moral prejudice and expenses (or royalties according to the user principle or an account of profits), there was flexibility to award an additional sum relating to the profit made by the defendant from knowing infringement.

This case provided an example of such “unfair profits”.  If Miss Henderson had negotiated a licence with AATW, she would have also sought to have her name on the record and to have the sole credit for writing the song.  Miss Henderson had suffered a loss and, at the same time, AATW gained an unfair profit in the sense that Miss Henderson was not compensated for the loss of promotion of her name.  HHJ Hacon awarded a further £5,000 under this head.

He declined to award further damages for “moral prejudice” (£15,000 had been claimed) on top of the damages awarded for economic loss.  He commented that only in unusual circumstances will moral prejudice be sufficiently significant such that damages for economic loss are not proportionate to the overall actual prejudice suffered by the claimant.

Additional damages under the CDPA

Section 191J(2) of the CDPA states:

“(2)       The court may in an action for infringement of a performer’s property rights 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 damage as the justice of the case may require.”

Significantly, HHJ Hacon held the loss in question had already been covered by the award made under article 13(1), and that the two were not cumulative.  In his view the section had become redundant in light of article 13(1).

Comment

This judgment, although predictable, has helped to clarify several questions over which there was a degree of uncertainty.  Most significantly, it has clarified that when there has been a “knowing” infringement, a claimant is not entitled to both lost profits and any unfair profits accrued to the defendant.  Further, additional damages under the CDPA and damages under article 13 of the IP Enforcement Directive are not cumulative, and the former have become redundant in light of the latter.  Finally, damages for “moral prejudice” are highly unlikely to be awarded.

It is clear that one rationale behind HHJ Hacon’s decision was to interpret the wording of the IP Enforcement Directive in accordance with Recital 26 to the Directive.  Essentially, the aim of article 13(1) is to achieve compensation for the claimant based on an objective criterion, but not more than that.  More would carry the risk of imposing punitive damages, and for now and the foreseeable future that is not the European model.

Miss Henderson claimed well over half a million pounds in the damages inquiry and received only £35,000.  That may well have left her heartbroken.

Tom Iverson, Associate, Michael Simkins LLP, London