05 May, 2016

It's Better than That! - CJEU Allows Compensation for Moral Prejudice for IP Infringement

As many people can imagine, the soul of an artist can be a fragile one, and uses of their works (in what ever particular way they are used in a derivative sense) can be a sensitive topic. Even so, especially in an era where technology has enabled us to use material as we please in a myriad of ways, these uses can be objectionable if used for a contrary purpose or otherwise smear the reputation of the work or the author themselves. Although fair dealing/fair use do allow for some uses of works without infringing them, in the event that the use does infringe, can the owner of the work possibly sue for more than just damages, but also for compensation for moral prejudice? The CJEU set out to answer this question in March this year.

The case of Christian Liffers v Producciones Mandarina SL and Mediaset EspaƱa ComunicaciĆ³n SA dealt with Christian Liffers' movie "Dos patrias, Cuba y la noche" (Two Homelands: Cuba and the Night), which he directed, wrote and produced, discussing six intimate stories about homosexual or transsexual individuals living in Cuba. Mandarina, one of the defendants in the case, produced a documentary on child prostitution in Cuba, utilizing hidden cameras to film candid footage of criminal activity around the topic. Some parts of Mr. Liffers' movie were included in the Mandarina production without any authorization being sought from him to use the material. He subsequently sued the production company and the TV channel for copyright infringement.

Mr. Liffers' action succeeded partially at first instance in Spain, seeking damages for both lost licensing fees (had he done so voluntarily for the purposes of the documentary) and for moral prejudice suffered as a result. On appeal damages were reduced, with payments for moral prejudice being excluded entirely. The Supreme Court of Spain, upon further appeal, referred the matter to the CJEU on the question of damages for moral prejudice under Article 13(1) of the Enforcement Directive.

Moral prejudice is very relative, and painful (Source: SMBC)
The Court summarized the question asked by the Supreme Court concisely: "...whether Article 13(1) of [the] Directive... must be interpreted as not permitting a person injured by an intellectual property infringement, who claims compensation for the material damage suffered as calculated, in accordance with heading (b) of the second subparagraph of Article 13(1) of that directive, on the basis of hypothetical royalties, also to claim compensation for his moral prejudice as provided for under heading (a) of the second subparagraph of Article 13(1) of that directive".

The Court first considered subsection b (which allows for the payment of a lump sum of damages, for, e.g. royalties or other fees due to the owner), and saw that the wording does not exclude the possibility of including other harm as a part of the damages awarded, even if not expressly mentioned. This would, in certain instances, include moral prejudice suffered. However, it has to be "...appropriate to the actual prejudice suffered... as a result of the infringement" (including damage to the reputation of the work, as set out by the Advocate General in his opinion).

They then moved onto subsection a (expressly setting out criteria to consider when affording damages, including moral prejudice), and determined that "In the light of the objectives of [the] Directive... [subsection a] of that directive must be interpreted as establishing the principle that the calculation of the amount of damages to be paid to the holder of the intellectual property right must seek to ensure that the latter is compensated in full for the ‘actual prejudice suffered’ by him, which also includes any moral prejudice". This would, by this writer's assessment, be proved through evidence adduced of actual prejudice, and without such would be difficult to attain, as this would not necessarily qualify as 'actual prejudice'.

What the Court sets is a double-whammy of damages, as one can claim for a lump sum under subsection b for lost royalties and fees (and other factors deemed relevant), and also moral prejudice under subsection a, provided it is actual prejudice.

This is slightly different to the position in the UK, where, according to the decision in Henderson v All Around the World Recordings Ltd, damages for moral prejudice can only be afforded in limited circumstances, where financial loss is minimal (or was not suffered at all), or if the damages would otherwise not be proportionate to the actual damage suffered. The UK position would clearly have to change in subsequent case law to reflect the CJEU's decision.

All in all the case is a peculiar one, and arms IP enforcers with the possibility of claiming for moral prejudice irrespective of the financial damage suffered (provided there is actual prejudice suffered through the copying of the work). This writer sees this as a common sense approach, since financial loss does not in itself encapsulate all possible losses suffered, with future losses possibly suffered through the prejudice to the work or its reputation. The decision will potentially act as a deterrent against those who seek to (wrongfully) exploit works and/or attack their reputation.

Source: IPKat

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