Damages for infringement of performance rights - unfair profits, moral prejudice and
heartbreak

The IPEC confirms that a Claimant can elect between an inquiry as to damages or an account
of profits, not both.

The Courts have flexibility when awarding compensation for "unfair profits".

Awards of compensation for "moral prejudice" in relation to IP infringements will be unusual.
What's it about?
This was an inquiry as to damages following the Claimant's successful claim for infringement of her
performers' rights. The Defendant record company had released the song Heartbroken (which
featured Ms Henderson's vocals) without her consent.
After initially electing for an account of profits, Ms Henderson then changed her mind and elected for
an inquiry as to damages. She claimed damages for lost royalties. She also claimed further damages
under Article 13(1)(a) of Directive 2004/48/EC on the enforcement of intellectual property rights ("the
Directive") for recovery of unfair profits made by the Defendant, moral prejudice, and additional
damages for flagrant infringement under Section 191J(2) of the Copyright, Designs and Patents Act
1988.
Article 13(1) of the Directive requires the courts of Member States to have regard to the actual
prejudice suffered by a Claimant as a result of an IP infringement by an infringer who knows or has
reason to believe that he is engaged in an infringing activity. In assessing damages, Article 13(1)(a)
requires the courts to 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".
The IPEC held that Ms Henderson was entitled to damages of:

£30,000 for loss of royalties under the "user principle"; and

£5,000 pursuant to Article 13(1)(a) for unfair profits to reflect the extent to which her name
and reputation would have been enhanced by the release of the song Heartbroken.
Judge Hacon rejected the claim that Article 13(1) entitled a Claimant to both lost profits and unfair
profits made by the Defendant. The English law position was that a Claimant is entitled to either an
inquiry as to damages, or an account of profits, and not both.
The Judge considered that damages for unfair profits under Article 13 were available "wherever the
court reaches the view that the claimant would not receive adequate compensation from the actual
prejudice he had suffered if the damages were to be assessed by reference to loss of profits, moral
prejudice and expenses, royalties under the "user principle" or an account of profits." This paves the
way for unfair profits claims where the Defendant has made no direct financial profit from the
infringement (for example because there are negligible net profits), but the Defendant's business has
expanded in volume or reputation on the back of loss-leader infringements.
The Judge made no award for "moral prejudice". He considered that damage for moral prejudice
would only arise in unusual circumstances. In particular it would arise where the Claimant suffered
little or no financial loss and would either be left with little or no compensation unless the moral
prejudice was taken into account, or the compensation would not be proportionate to the overall
DOCUMENT17
damages suffered where this includes significant moral prejudice. The Judge gave an example of a
Defendant publishing photographs of private grief in breach of copyright. There may be no profits for
the Defendant and no financial loss to the copyright owner, but the emotional stress might be acute.
Ms Henderson also claimed additional damages under s191J(2) of the CDPA. This provides that the
Court may award additional damages having regard to the flagrancy of the infringement, and any
benefit accruing to the defendant by reason of the infringement. There are similar provisions in
relation to copyright and design right.
The Judge concluded that the probable effect of Article 13 was to make s191J(2) (and equivalent
provisions) redundant. In his view (a) flagrancy as formerly understood is no longer required; (b) the
claimant's knowledge or reasonable grounds to know that he is engaged in infringing activity are
required; and (c) the matters in Article 13(1)(a) must be taken into account.
Why does it matter and now what?
It is clear that Article 13(1) does not change the English law position that a Claimant is entitled to an
inquiry as to damages or an account of profits. Further, Article 13 provides flexibility for courts to
award compensation for unfair profits claims in an inquiry as to damages. It is now clear that claims
for moral prejudice are likely to be very limited. Finally, in Judge Hacon's view, s191J(2) CDPA is now
considered redundant, which means that claims for additional damages for copyright infringement,
design right infringement and performers' right infringement should look to satisfy Article 13(1)(a).
Henderson v All Around the World Recordings Ltd [2014] EWHC 3087 (IPEC)
For further information on this or any other IP related matter please contact Charlotte Barrow on +44
(0)113 209 7776
DOCUMENT17