Shady's back: Quantifying damages for copyright infringement of Eminem's album

The calculation of damages for copyright infringement is something that this Kat finds to be curious, sometimes sending her into a fuurrry, and other times she's left wondering why the parties wasted their time over such a small recovery. She'll let readers decide for themselves where this case falls... 

In 2019, IPKat reported that Funky Bass Team Productions successfully sued Let Them Eat Vinyl Distribution for copyright infringement for creating vinyl copies of Eminem's first album, Infinite. Although neither of the defendants were liable for secondary infringement (importing, offering for sale and selling copies of the Infinite album) as there was found to be no knowledge. In this latest hearing, parties disputed the damages for the primary infringement. 

Background

His palms are sweaty...
Image: Kate Beckinsale

Funky Bass Team Productions (FBT), a record company based in Detroit, brought an action of copyright infringement against the defendants; Let Them Eat Vinyl Distribution (LTEV), a record company and Plastic Head Music Distribution (PHM) [related companies operating from the same address in Oxfordshire, UK], after LTEV made vinyl copies of the Infinite album and supplied them to PHM who sold them, together with CD copies supplied by David Temkin (Boogie Up Productions).

In 2014, PHM decided to approach the Mechanical Copyright Protection Society (MCPS) for a licence to make vinyl copies of Infinite. MCPS responded that it had no claim in relation to Infinite, but approved the manufacture of a maximum of 2,931 vinyl copies. The copies were made by LTEV, all of which were supplied to and distributed by PHM who distributed them until 9 October 2016. In 2019, LTEV were found liable for primary copyright infringement by making vinyl copies of Infinite. 

Inquiry into damages

FBT claimed damages on three bases:

1. The loss of an opportunity to license a third party to exploit the Work (and various tracks comprised in the Work);

2. The losses flowing from the licence the Claimant would have offered the Defendant for the exploitation of the Work; or

3.  A reasonable royalty for the actual sales made by the Defendant based on the notion of a willing licensee/willing licensor negotiation.

FBT argued that their claims were made in respect of 2,000 copies of the album, which they say would have sold for US$50, for a 20th anniversary re-release of the Infinite album in 2016. Followed by the release of a series of 12-inch vinyl singles of re-mastered tracks from the album. Each of the singles would, FBT claimed, have sold for US$20.16, saying that they intended to license a third party to manufacture and sell the new vinyl copies of the album, retaining 90% of the revenue. They also claimed that they had lost the opportunity to be involved in the making of a full-length documentary about the re-issue of Infinite and in total claimed £288,209.00.

LTEV sold 2,891 copies of the Infinite to the dealer for £7.75 per unit, giving a profit of around £2.50 per unit. LTEV's total profit was thus £7,227.50. 

Loss of opportunity

Damages for loss of opportunity are assessed under the principle of damages in England and Wales; to put the person back in the position they were in if the infringement had not occurred. The object is to compensate the claimant, not punish the defendant. [See SDL Hair Ltd v. Next Row Ltd [2014] EWHC 2084 (IPEC) HHJ Hacon at 31 and Livingstone v Rawyards Coal Co. (1880) 5 App.Cas., 25, Lord Blackburn at 39.] 

To infinity and beyond!
Image: Michigan Humane Society

In the present case FBT claimed loss is of the type identified by Nugee J in Wellesley Partners LLP v. Withers LLP [2014] EWHC 556 (Ch) - the loss of a chance to trade generally, rather than the loss of a particular chance.

However, the Judge did not accept FBT's arguments because they found out about LTEV's copy on 4th August 2016 and FBT's plan for the 20th anniversary re-release continued - as evidenced by publicity of the project in a Rolling Stone magazine interview with Jeff Bass of FBT on 17 November 2016. [You can see the interview here.]

There were also several other unlicensed copies of Infinite on the market. The expert witness for FBT Jeff Jimpol, explained that fans would want authentic copies, and so LTEV's version that was clearly marked as coming from a third party and not FBT, would not have disrupted FBT's plans for a "super cool and exclusive" re-release. 

Therefore, the Judge concluded that the claim for damages on the basis of loss of opportunity failed - including that of the documentary. A YouTube video was released in Nov 2016 [see here], and the expert for LTEV, Adam Velasco, told the court that if a documentary had new material it would appeal to fans. 

Loss of licence fees

FBT's evidence was that it would not have offered a licence to LTEV because it was not an attractive potential licensee, so there was no loss of licence fee.

Notional Royalty & final damages

For damages on the basis of notional licence, the overriding principle is that the damages are compensatory; essentially deciding what the sum would have been after negotiations between the parties. It doesn't matter if the parties would not have agreed in practice. [see Henderson v. All Around the World Recordings Ltd [2014] EWHC 3087 (IPEC) for full summary of the factors.]

In this case the hypothetical negotiation would have been for a licence to make 2,891 copies of Infinite in the UK. The Judge stated that the licence would probably have been for a unit price per record and given the nature and reputation of the licensor (with valid rights) and that this was a special anniversary disc which might attract higher pricing, the notional licensee would be able to set a higher price to dealer to maintain profits. The licensor would have in mind a likely retail price for the album of about US$24, taking Mr Jampol's evidence that this was a starting price for albums.

As such, the hypothetical fee was deemed to be £2.50 per disc, equivalent to just over 32% on the price to dealer of £7.75 that LTEV in fact charged PHM. Damages were therefore assessed on the basis of a fee for a notional licence to make 2,981 infringing copies, which Deputy High Court Judge Ian Karet determined to be £7,452.50, including interest.

The total damages, therefore, were a little over LTEV's profits, and very far from what FBT sought. FBT wouldn't have been successful in applying for additional damages, because there was clearly no flagrant behaviour on behalf of LTEV - who had paid a licence to MCPS and believed therefore that their use was legitimate, as determined in the secondary infringement investigation at the previous trial.