INTELLECTUAL PROPERTY ENTERPRISE COURT
Fetter Lane, London, EC4A 1NL
B e f o r e :
| JODIE AYSHA HENDERSON
|- and -
|ALL AROUND THE WORLD RECORDINGS LIMITED
Gwilym Harbottle (instructed by Anthony Jayes LLP) for the Defendant
Hearing date: 10 July 2014
Crown Copyright ©
Judge Hacon :
" The claimant, Miss Henderson, is a singer, songwriter and musician. Her stage name is Jodie Aysha. In 2004, when she was about 14 years old Miss Henderson composed the lyrics for a song called Heartbroken. There is a dispute about the melody to which I will return.
 In 2005 she met with Tafazwa Tawonezvi. He is about the same age as Miss Henderson and they had been working on musical projects in Yorkshire since about 2003. At that time he was concentrating on styles of music known as Grime, Hip Hop and R&B. Mr Tawonezvi is known universally as T2. Mr Tawonezvi had a computer-based recording system set up in a bedroom in the flat where he was living at the time. The system was used to play some slow R&B beats. Miss Henderson sang Heartbroken into Mr Tawonezvi's system and a recording was made. There is a dispute about exactly what happened on that occasion and on what terms, but there is no doubt a recording of Miss Henderson's vocal performance was made.
 In mid 2005 Mr Tawonezvi's musical interest focussed on a new sound genre now called "Bassline" but then known as "Niche", stemming from a nightclub of that name in Sheffield. He started making Bassline tracks using his own equipment and by early 2006 Mr Tawonezvi had people following his music in the whole of Yorkshire. His reputation at clubs in 2006 began to grow and by the end of 2006 he was becoming a successful DJ doing 3 to 5 gigs a week.
 In January 2007 Mr Tawonezvi returned to the recording of Miss Henderson's vocal performance which he had retained. Using this recording he produced a new version of Heartbroken. The new version consists essentially of Miss Henderson's vocal performance mixed above a new "Bassline" bass-line created (or at least mixed) by Mr Tawonezvi. Mr Tawonezvi altered the pitch of Miss Henderson's voice electronically and also "chopped up" her vocals in certain ways. In addition the chorus of Heartbroken as it appears on the track more than once is the same segment of Miss Henderson's vocal, repeated.
 Mr Tawonezvi sent a copy of the track to Sean Scott, another DJ, for him to put on his January mix CD. Mr Tawonezvi released the track as "T2 — Heartbroken".
 There is a dispute about when exactly Miss Henderson discovered what Mr Tawonezvi had done. One way or another in early 2007 Miss Henderson knew that Mr Tawonezvi had produced a remix of Heartbroken. At that stage Mr Tawonezvi had started producing and selling "white label" vinyl copies of it. White label releases are on a small scale and are done on a private basis, not under the auspices of a record company. The Heartbroken track was proving to be very popular in the clubs in which Mr Tawonezvi played it.
 In February 2007 Miss Henderson and Mr Tawonezvi were communicating on the MySpace social networking site about Heartbroken. There was an issue that the entire track was available for public download on Mr Tawonezvi's Myspace page but Miss Henderson explained to him how to prevent that. They were both trying to build their careers in the music industry. Amongst other things Mr Tawonezvi was using the track as part of his DJ set and Miss Henderson was performing "personal appearances" singing Heartbroken in clubs over a bass-line track provided by Mr Tawonezvi. The relationship between Mr Tawonezvi and Miss Henderson deteriorated rapidly in that period.
 By summer 2007 Miss Henderson's elder sister Hayley was acting as her manager. They heard rumours that Mr Tawonezvi had signed Heartbroken to a record company called All Around the World Recordings Ltd, the defendant. All Around the World were and are a successful record company in the dance music scene. They are based in Blackburn. The company releases tracks individually and together with other recordings but also in compilations. The company's brand "Clubland" is a very successful brand of dance music compilation. The key individuals at All Around the World are Cris Nuttall and Matt Cadman.
 In fact the position vis à vis All Around the World was as follows.
 Phil Sagar was a consultant working in the music industry, looking for recordings and artists, particularly in the North of England. He became aware of Heartbroken in early 2007. By summer 2007 he thought all the indicators of success were in place. It was being played by a number of DJs at clubs and was heavily played on BBC Radio 1's 1Xtra station, which specialises in the latest urban music genres. Bassline was an emerging genre and Heartbroken was the biggest and most popular track in the genre. Mr Sagar met Mr Tawonezvi and had a brief discussion with him.
 Mr Sagar then approached All Around the World in about June or July 2007. At the time they were introduced to the track, All Around the World were told that the artist (Mr Tawonezvi) had released Heartbroken and it was available on 12" vinyl but had not been signed to a record company. However by the time All Around the World actually approached Mr Tawonezvi, he had signed with another company called 2NV Records Ltd, the Third Party in this case. The individuals at 2NV were Chris Nathaniel and Paul Boadi. From then on 2NV acted as Mr Tawonezvi's manager.
 There is a letter in existence from 2NV to Miss Henderson dated 30th August 2007 but which appears in fact to have been sent on 30th July. In the letter Paul Boadi says that he has made efforts to "finalise business matters" relating to Heartbroken and tried to arrange a meeting with Miss Henderson and her manager on 26th July but they did not attend. He says that if he does not hear from Miss Henderson by return he "will have no option but to proceed accordingly".
 On 13th August 2007, although they had initially wished to contract directly with Mr Tawonezvi, All Around the World signed a contract with 2NV to release Heartbroken. The contract gives or purports to give All Around the World all the rights necessary to do this. The contract names the artist as Mr Tawonezvi. The advance for Heartbroken paid by All Around the World under this contract was £30,000.
" On 21st August 2NV offered Miss Henderson £1,500 for her vocal performance. She refused.
 On 21st September 2007 Miss Henderson signed a conventional music publishing agreement with Sony/ATV Music Publishing (UK) Limited whereby she assigned her copyright in her musical works (including Heartbroken) to Sony. As a result of this agreement Miss Henderson's copyright in Heartbroken was registered with the MCPS and she is or will be entitled to royalties from Heartbroken. There is a dispute between her and Mr Tawonezvi as to their respective shares in the copyright in the track as a musical work. Miss Henderson registered Heartbroken as a musical work as 100% her own. Mr Tawonezvi claims the musical work is 50% his.
 At some point in early summer 2007 (it is not clear exactly when but it was probably before Mr Tawonezvi signed with 2NV) Miss Henderson was approached by two video directors with a view to making a video of Heartbroken. Footage was shot with Miss Henderson singing and Mr Tawonezvi acting as the DJ. On 10th September 2NV wrote to Miss Henderson objecting to the video as an unofficial promotion and threatened legal action. This video project did not go further.
 Later in the summer a second video, created under the guidance of Mr Tawonezvi and 2NV and funded by All Around the World, was made. The video was shot in two parts, in Leeds and London. As a result of links between these individuals and 2NV, certain famous footballers, Anton Ferdinand and Micah Richards were involved. Miss Henderson participated in the shooting of this video, albeit she says under protest. Miss Henderson's music publishing contract with Sony includes a deemed consent with respect to promotional videos and Sony did and were entitled to give All Around the World consent under the music copyrights to the release of the video. Sony advised Miss Henderson to participate in the video. Miss Henderson says she was told by All Around the World that if she did not participate in the video, 2NV would use footage of other girls miming her lyrics. She felt she had no choice but to appear.
 In its form as published, the video focuses primarily on Mr Tawonezvi. Miss Henderson does appear in it for a few short periods. She is singing (in fact miming) the track. Other girls appear in the video as well and they are singing/miming as well although Miss Henderson does so more prominently than them.
 There was also a dispute about the sleeve design for the single of Heartbroken to be released. Mr Tawonezvi, 2NV and Miss Henderson could not agree who should take centre stage. Miss Henderson was prepared to accept a sleeve on which both their images appeared but in the end the cover image is a plain sleeve without pictures of either Mr Tawonezvi or Miss Henderson. The single is headed "T2 featuring Jodie Aysha", which Miss Henderson accepted reluctantly. It credits the writing to "T2/Jodie Aysha" and states that the vocals are by Jodie Aysha.
 At some point in late summer 2007 Steve Wolfe became Miss Henderson's temporary manager. Mr Wolfe sought to negotiate a deal between Miss Henderson and 2NV but no contract was ever agreed. Miss Henderson says that Mr Wolfe did not tell her (or her sister) that this is what he was doing. As far as Miss Henderson is concerned, she was talking directly to All Around the World and in particular to Cris Nuttall. Miss Henderson says that Mr Nuttall assured her that he was trying to help her and that she would get the money due to her. One of the conversations between Miss Henderson and Mr Nuttall was recorded and was available in evidence.
 On 12th November 2007 All Around the World released Heartbroken. It was a big hit. It reached No.2 in the main singles charts, stayed there for 5 weeks and overall remained in the Top 40 for 46 weeks. To date Miss Henderson has received no record royalties for All Around the World's release. Nor has she been paid for her participation in the video or for the use of her name on the artwork. All Around the World registered Mr Tawonezvi with PPL and Miss Henderson says he will collect the lion's share of the income. She says that normally the performer of a track would receive the majority of this income and a remixer or a featured artist would only receive a small share. In her view Mr Tawonezvi's position in relation to the track is as a remixer.
 The key issue in this case is whether All Around the World's release was an infringement of Miss Henderson's performer's rights. This boils down to a simple question of whether Miss Henderson consented to the release. All Around the World say that she did and Miss Henderson says she did not.
 Since it was released, the Heartbroken record has been earning substantial royalties for All Around the World. Under the contract with 2NV, All Around the World is obliged to pay a share of the record royalties to 2NV. As a result of this dispute, those sums are being held by All Around the World and have not passed to 2NV. Also, as a result of Mr Tawonezvi's claim to 50% of the music copyright in Heartbroken, now made via Mr Tawonezvi's publishers' EMI, PRS for Music have suspended half the monies earned. The 50% balance for music copyright royalties has been paid to Sony/Miss Henderson.
 After Heartbroken, another song Miss Henderson had written called "So Typical" featured in discussions between her and All Around the World but those disputes do not relate to the matters I have to decide. In April 2009 Miss Henderson signed a record deal with All Around the World for a track called Pozer. She says that she now believes they were not really interested in the song but just wanted to "keep me sweet". In any case Miss Henderson contends that All Around the World breached the Pozer contract because under the contract they were obliged to procure a bona fide commercial release of the record but she contends they did not do so. It was released but only as a low ranking track on part of a Clubland compilation album."
Heads of damage claimed
(1) Loss of royalties from an alternative record dealIf All Around the World had not released Heartbroken Miss Henderson would have signed a record deal with a different label. Had that happened she would have received the following benefits:(a) A 30% artist royalty from sales of Heartbroken;(b) A 30% artist royalty from sales of a second and subsequent singles;(c) Royalties (percentage unstated) from 'interpolations' or remixes of Heartbroken.The royalty rates claimed or to be calculated were those that would have been negotiated between a willing licensor and willing licensee. In each case (i) a 3% production royalty would have to be deducted to take account of the industry standard royalty for the producer and (ii) £3,500 would also be deducted by way of a notional fee payable to the remixer.
(2) Further damages made available pursuant to the 2006 RegulationsMiss Henderson argued that regulation 3 of the Intellectual Property (Enforcement, etc.) Regulations ("the 2006 regulations") extended her entitlement to damages beyond those referred to above. Additional heads of damage claimed were as follows:(a) Negative economic consequences(i) Loss of royalties from sales of Heartbroken as a result of the injunction obtained by Miss Henderson against All Around the World by the Order of Judge Birss dated 18 March 2013;(ii) Loss of royalties from sales of new music which Miss Henderson had been unable to release;(b) Recovery of unfair profits made by All Around the WorldMiss Henderson claimed £566,897 under this head plus an independent audit of sums accrued to All Around the World to reveal income not yet accounted for.(c) Non-economic factors – moral prejudice(i) Miss Henderson's mental distress as a result of not being paid for her song for years and not being able as an artist to release any music for years;(ii) Loss of opportunity to promote herself with the release of new music so as to enhance her reputation as an artist and to advance her career;(iii) Injury to Miss Henderson's feelings at being strung along by All Around the World;(iv) Humiliation as a result of her minimal appearance in the music video for Heartbroken.
(3) Additional damages pursuant to section 191J(2) of the 1988 ActMiss Henderson argued that All Around the World's infringement was flagrant and that having regard in particular to the benefit accrued to All Around the World by reason of the infringement, pursuant to s.191J(2) of the Copyright, Designs and Patents Act 1988 ("the 1988 Act") she was entitled to additional damages.
Application to amend the Particulars of Claim
Order of 30 April 2014
The general law relating to an inquiry as to damages
" I derive the following principles from authorities in relation to an inquiry as to damages:(1) A successful claimant is entitled, by way of compensation, to that sum of money which will put him in the same position he would have been in if he had not sustained the wrong, see Livingstone v Rawyards Coal Co. (1880) 5 App.Cas., 25 per Lord Blackburn at 39.(2) The claimant has the burden of proving the loss, see General Tire and Rubber Company v Firestone Tyre and Rubber Company Limited  RPC 197, at 212.(3) The defendant being a wrongdoer, damages should be liberally assessed but the object is to compensate the claimant, not punish the defendant, see General Tire at p.212.(4) The claimant is entitled to recover loss that was (i) foreseeable, (ii) caused by the wrong and (iii) not excluded from recovery by public or social policy, see Gerber Garment Technology Inc v Lectra Systems Ltd  RPC 443, at 452.(5) In relation to causation, it is not enough for the claimant to show that the loss would not have occurred but for the tort. The tort must be, as a matter of common sense, a cause of the loss. It is not necessary for the tort to be the sole or dominant cause of the loss, see Gerber at p.452.(6) An inquiry will generally require the court to make an assessment of what would have happened had the tort not been committed and to compare that with what actually happened. It may also require the court to make a comparison between, on the one hand, future events that would have been expected to occur had the tort not been committed and, on the other hand, events that are expected to occur, the tort having been committed. Not much in the way of accuracy is to be expected bearing in mind all the uncertainties of quantification. See Gerber at first instance  RPC 383, per Jacob J, at 395-396.(7) Where the claimant has to prove a causal link between an act done by the defendant and the loss sustained by the claimant, the court must determine such causation on the balance of probabilities. If on balance the act caused the loss, the claimant is entitled to be compensated in full for the loss. It is irrelevant whether the court thinks that the balance only just tips in favour of the claimant or that the causation claimed is overwhelmingly likely, see Allied Maples Group v Simmons & Simmons  WLR 1602, at 1609-1610.(8) Where quantification of the claimant's loss depends on future uncertain events, such questions are decided not on the balance of probability but on the court's assessment, often expressed in percentage terms, of the loss eventuating. This may depend in part on the hypothetical acts of a third party, see Allied Maples at 1610.(9) Where the claim for past loss depends on the hypothetical act of a third party, i.e. the claimant's case is that if the tort had not been committed the third party would have acted to the benefit of the claimant (or would have prevented a loss) in some way, the claimant need only show that he had a substantial chance, rather than a speculative one, of enjoying the benefit conferred by the third party. Once past this hurdle, the likelihood that the benefit or opportunity would have occurred is relevant only to the quantification of damages. See Allied Maples at 1611-1614."
Notional licence agreement – willing licensor and willing licensee
"(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  (Mance L.J., as he then was) and WWF v World Wrestling at  (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 , WWF v World Wrestling at , Lunn v Liverpool at  and Pell v Bow at –,  (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 .
(iv) As a general rule, the assessment is to be made as at the date of the breach: see Lunn Poly at  and Pell v Bow at .
(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 .
(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 ".
The Court of Appeal in Force India ( EWCA Civ 780;  RPC 36) did not dissent from Arnold J's summary of the law (at ).
(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 -.
(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 -.
(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 -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 .
(xi) The hypothetical licence relates solely to the right infringed -.
(xii) The hypothetical licence is for the period of the defendant's infringement -.
(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 -.
Hypothetical licence between the parties
(1) The dominance of Miss Henderson's performance.I doubt that the relative significance of Miss Henderson's performance and Mr Tawonezvi's contribution would have counted for much, at least in All Around the World's eyes. A licence was necessary to release Heartbroken in its current form irrespective of how dominant Miss Henderson's performance was.
(2) Mr Nuttall had assured Miss Henderson, in a telephone call in the late summer of 2007, played to Judge Birss and of which I was shown a transcript, that Miss Henderson would get her just desserts, would get all the credit and money she wanted and that she was more famous than Mr Tawonezvi.I doubt that Mr Nuttall's words were treated by either party as a formal commitment on the part of All Around the World. The hypothetical negotiations between Miss Henderson and All Around the World must be taken to have involved the sober discussion of precise terms, not exchanges of soft soap.
(3) Miss Henderson was not merely a session singer.I agree. It is clear from Judge Birss's judgment, should there be any doubt, that Miss Henderson was a good deal more than just a session singer and I accept that the hypothetical negotiation would not have centred on the appropriate fee for Miss Henderson simply in that capacity. Specifically, Judge Birss rejected an offer by 2NV of £1,500 to Miss Henderson as "derisory".
The royalty rate
The Pozer Agreement
Red Skin Records
Ministry of Sound
Negotiation by Mr Wolfe
Conclusion on royalty rate
To what should the royalty rate be applied?
Total royalties received and costs
Mr Livermore's figures for income from Heartbroken
The parties' approach to calculating the sum due
Sum due under the user principle
The Enforcement Directive
1. 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:
(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.
2. Where the infringer did not knowingly, or with reasonable grounds [to] know, engage in infringing activity, Member States may lay down that the judicial authorities may order the recovery of profits or the payment of damages, which may be pre-established.
The word in square brackets is my addition; there appears to have been a typographical error in the text.
3. (1) 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
(2) 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; or
(b) where appropriate, they may be awarded on the basis of royalties or fees which would have been due had the defendant obtained a licence.
(3) This regulation does not affect the operation of any enactment or rule of law relating to remedies for the infringement of intellectual property rights except to the extent that it is inconsistent with the provisions of this regulation.
Loss of royalties from sales of Heartbroken because of the injunction
Loss of royalties on new music which Miss Henderson could not release
Whether Miss Henderson is entitled to an account of profits
"An assessment of the damage caused to the claimant forms no part of an account of the profits made by the infringer and the approach adopted by the judge constituted an illegitimate amalgamation of two quite different ways of assessing compensation."
Although the Court of Appeal in Hollister considered both art.13 of the Enforcement Directive and regulation 3 of the 2006 regulations, the circumstances contemplated by art.13(1) and regulation 3, namely knowing infringement (or with reasonable grounds to know) were not in issue. The judgment can be read as suggesting that if they had been in issue there would still be no change in the rule that an inquiry and an account are available strictly as alternatives. But I think I am obliged to consider the matter head on.
"…pay the rightholder damages appropriate to the actual prejudice suffered by him/her as a result of the infringement."
Usually the actual prejudice suffered is the profit lost to the claimant (possibly plus expenses incurred). Art.13(1) does not expressly permit the recovery of the defendant's profits by way of an alternative, but since that alternative is available where the defendant did not knowingly engage in infringing activity, it would be odd if it were not available where he did. (It may be that 'damages' in art.13(1) is to be given a broad meaning, to include restitutionary damages.) However, I find 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 is not to introduce an obligation to provide for punitive damages but to allow for compensation based on an objective criterion while taking account of the expenses incurred by the rightholder, such as the costs of identification and research.
This reinforces the idea that the aim of art.13(1) is to achieve objectively assessed compensation, but not more than that. More would carry the risk of imposing punitive damages.
Unfair profits in this case
The meaning of 'moral prejudice' in the context of IP proceedings
"…this is a case where the defendants, by stealing a march based on infringement, received benefits and inflicted humiliation and loss which are difficult to compensate and difficult to assess in the normal course." (at page 140).
"The phenomenon of counterfeiting and piracy leads to businesses losing turnover and market shares (loss of direct sales) which they have sometimes had difficulty acquiring, not mention the intangible losses and the moral prejudice they suffer because of the loss in terms of brand image with their customers (loss of future sales). The spread of counterfeit and pirated products in fact leads to a prejudicial downgrading of the reputation and originality of the genuine products particularly when businesses gear their publicity to the quality and rarity of their products. This phenomenon also involves additional costs for businesses (costs of protection, investigations, expert opinions and disputes) and in certain cases may even lead to tort actions against the de facto right holder of the products marketed by the counterfeiter or pirate where the proof of good faith cannot be brought."
Moral prejudice in this case
(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.
Whether Miss Henderson is entitled to claim additional damages
Miss Henderson's claim under s.191J(2)