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Friday, 6 August 2010

Blackburn, Royal Albert Hall -- Hendrix, not Beatles

The Royal Albert Hall is a cultural icon, so it's strange that it so rarely gets a mention on this most cultural of weblogs. It received a plug in Experience Hendrix LLC and another v Times Newspapers Ltd, [2010] EWHC 1986 (Ch), decided earlier this week in the Chancery Division for England and Wales by Sir William Blackburne. It's good to see that the courts, however busy they are, can still find some odd jobs for retired judges -- a sort of post-occupational therapy -- and the learned judge must have had a rare old time reminiscing over the musical icons of his own younger days.

Jimi Hendrix, born in the United States, adopted the United Kingdom in 1966 when he teamed up with two British colleagues to form the Jimi Hendrix Experience. In February 1969 this band performed at the Royal Albert Hall, this being the culmination of its European concert tour. Gerald Goldstein and Steve Gold (respectively, and -- the Kat hopes -- respectably, a successful producer and songwriter based in Hollywood) popped up at this point. Gerald secured the band's merchandising rights as well as the right to film the concert tour of Europe by an exclusive recording contract while Steve made separate sound and film recordings of the concert.


Gerald and Steve were still in the middle of editing the film in September 1970 when Hendrix died. There then ensued some heavy legal proceedings in the US in which Experience Hendrix --a US company formed in Washington State, owned and controlled by Hendrix's family -- gained control of his musical legacy. Last Experience (Gerald's company) was incorporated in California: this held the legal right to the copyright in the sound recordings of the concert. In June 2003 Experience Hendrix and Last Experience struck a deal to cooperate in producing a feature-length film of the concert, for cinema release across the world, with the simultaneous (or near simultaneous) release of accompanying CDs and DVDs, merchandising bits and pieces, the costs and eventual profits being split 50-50.

Following their decision to cooperate, the footage of the concert was restored and an entertainment agency was hired to promote the project. In early 2006 the film was ready for its final mix, this being scheduled to start in October 2006. By September 2006, the two companies were poised to produce the finished film and were already dreaming about the excitement of its now-imminent launch.

In the summer of 2006 The Sunday Times newspaper decided to hike its cover price from £1.80 to £2. To make this more palatable to paying readers, its management decided to stick three covermounts (as the term suggests, free CDs or DVDs attached to the cover of each paper) on successive Sundays, starting with the 10 September 2006 issue, this being the date of the increase to £2. The covermount selected for that issue was, as luck would have it, a CD recording of materials from Hendrix's Royal Albert Hall concert. On 6 September 2006 Experience Hendrix's lawyers wrote to Times Newspapers, asserting the company's copyright and asking for confirmation that the paper was proposing to use material from the concert. A lawyer for Times confirmed this was the case and said it was licensed to do so by Charly Acquisitions Ltd which, it said, Experience Hendrix had accepted as having a good chain of title to the recordings. A second letter was then sent to the paper, reiterating the legal position and warning that any unauthorised use would infringe its rights. In further correspondence, The paper said it really did have permission via Charly, setting out its chain of title and saying it was far too late to stop the covermounting: the advertising and poly-bagging were already too far gone.

Experience Hendrix and Last Experience didn't seek an injunction to halt the covermount CD, of which over 1.3m copies were distributed in newspaper's 10 September edition. In result of this, work on the companies' project was suspended. In March 2007 both companies sued Times Newspapers. In their view, by authorising and procuring the making and free distribution of the covermount the paper had infringed their rights and caused them substantial damage. It seems that the paper's reliance on Charly's chain of title was illusory because the companies' application for summary judgment was granted in December 2007. Injunctive relief plus delivery-up was ordered, and an inquiry was ordered as to the damage suffered by the companies and/or, if the companies preferred it, an account of profits. Not surprisingly, seeing as the claimants both had the word "experience" in their names, they chose damages.

In these proceedings Sir William had to decide (i) precisely why and when the companies' cherished project was put on hold; (ii) when might the launch have occurred if it hadn't been for the newspaper spoiling the pitch for it, (iii) how far did the newspaper's use of the covermount campaign delay the launch? (iv) on what basis were damages to be assessed?

According to Sir William the companies had two reasons for suspending the project's launch. First, quite reasonably they wanted to obtain a declaratory judgment that Charly (which was not party to these proceedings) had no entitlement to license use of the concert material, this being both to stop the project sponsors worrying about the risk to their investment in it and to discourage others from using the material via the let's-ask-Charly route. The launch could not occur before this happened. Secondly, the UK market for Hendrix products needed time to recover following the huge distribution of inferior quality recordings from the concert.

As things stood, the film could have been ready for viewing by prospective distributors by January 2007, and primed for global release by 1 July 2007. However, given the relatively laid-back attitude taken towards seeing the project through, the earliest likely date for public release of the film, CDs and DVDs would have been September 2007 -- and perhaps later, but certainly not earlier given the lack of any sense of urgency. In any event, both of the reasons for delaying the launch were no longer valid by September 2008 -- assuming that the market had indeed been damages, though this had not been proved.

Sir William then moved on to one of the IPKat's favourite issues -- the calculation of damages following the adoption throughout Europe of the little-understood and much-ignored Intellectual Property Enforcement Directive (2004/48), Article 13(1) of which 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: (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; or (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".
This, said Sir William, meant that the court had to order the infringer to pay the injured party damages "appropriate to the actual prejudice suffered by him/her as a result of the infringement" [This 'prejudice' bit, with which UK lawyers are unfamiliar, has long been awaiting some explanation]. Thus the court had to do one of two things: (i) to "take into account all appropriate aspects, such as the negative economic consequences, including lost profits, which the injured party has suffered…" (the "loss sustained" approach) or (ii) "in appropriate cases" to fix loss by reference to "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" (the "notional licence" approach) [this now looks like the UK's pre-Directive approach]. Punitive damages for flagrant infringement or moral prejudice were not however appropriate here since, all things considered, the newspaper had acted responsibly, having taken what it believed to be the appropriate steps to obtain the necessary permissions.

In this case the "loss sustained" approach was right, taking account of losses sustained outside the jurisdiction as well as inside it [Ireland being an obvious case in point here]. When assessing the quantum it was impossible to forecast, so as to provide a reliable basis for computing losses, what the box-office takings were likely to be for a film which had yet to be released, which at the time of trial remained uncompleted and which none of the expert witnesses had even seen or were equipped to comment on. On a best-guess, the maximum profit the companies would receive from the release of the film and the sale of recordings would be US$3m, to which could be added the income from the usual merchandise and ringtones (US$2.8m or more). The Sunday Times' actions had delayed receipt of these profits for a year.

The companies having been deprived of the receipt of $5.8m for 12 months, it was still necessary to discount this sum to the date of infringement, then add interest to the discounted figure in order to reach an overall award of damages to the date of the judgment. In doing so, the US base rate plus 1% would be the appropriate measure since the companies would have received their profits in the US and in dollars.

Says the IPKat, this is a mammoth 229-paragraph judgment, following 11 days in court. Normally this would attract a comment along the lines of "too long" -- but in this case, given the volume of evidence for the court to consider, the quantity of conjecture offered and and the number of legal and accounting issues before it, he thinks the court did pretty well to keep it as short and sweet as it did. Merpel says, of all the judges and retired judges to be involved in a case concerning the Royal Albert Hall, there is none more aptly named than Blackburne ...

Royal Albert Hall here
Hendrix performing in the Royal Albert Hall here
Cat performing in the Royal Albert Hall here
Royal Albert Hall and 4,000 holes in Blackburn, Lancashire here and here

1 comment:

Thomas Dillon said...

Article 13 of the Enforcement Directive is a dreadful mishmash, the result of political, rather than legal, drafting, but the UK's implementation was really a disgrace. In effect it says - here's the article, and to the extent the UK law is different, the judge must work something out. I am not sure that even complies with the Community law obligation to implement the Directive. It would have been better to treat the word "damages" as having a Community meaning (as including all pecuniary relief) and say that the law already covered the field without amendment.

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