A consultation is currently underway in the UK which seeks views as to whether the UK should introduce a statutory damages regime for IP claims.

In Canada, the US and a number of other common-law countries, copyright owners who win infringement claims can elect to receive statutory damages, a pre-defined amount which applies per infringement; this avoids the need for a rightsholder to either prove the level of damage suffered, or analyse the extent to which the infringer profited from the infringement.  A reform of this kind has the potential to significantly alter the landscape for IP infringement claims in the UK; interested parties can find the consultation papers and the response form here.  In this article we focus on the prospect of statutory damages for copyright claims, although the consultation suggests that they are also under consideration for (at least) trade mark and design cases as well.  The consultation closes on 2 November.

The UK’s Intellectual Property Office (IPO) has recently launched a call for evidence in relation to the effectiveness of the UK’s IP enforcement regime.  The three headings under which views are sought (the cost of legal challenges, how accessible and effective the judicial process is, and improvements to the Small Claims Track) suggest that the consultation is focussed on procedural aspects of UK litigation.  For the most part, it is, but buried in the judicial process section is a call for views on the potential introduction of statutory damages for IP claims*.

Damages or account of profits in copyright claims

As readers will know, successful UK copyright infringement claimants can choose a financial remedy based on either an account of profits or damages.  In practice, damages are most often calculated with reference to the going rate for a licence of the works in question.  Although the UK Courts have been more willing in recent years to make awards of additional damages, in the typical case a defendant will expect to be ordered to pay an amount based on the licence fee that would have been sought at the outset.  Accounts of profits, on the other hand, requires the infringer to pay over profits made from the sale or licensing of the infringing work. Whilst potentially useful in theory where the infringer has been exploiting the works on a large commercial scale, in practice these claims can get bogged down in complex accounting arguments as to the contribution that the use of the work made to the profits earned.  This has led to concerns on the part of rightsholders that the current regime does not create sufficient financial incentives for new services to seek copyright licences prior to launch.

How would statutory damages affect media, entertainment and sport businesses?

The introduction of a new statutory damages regime would represent a significant change.  Stakeholders may be concerned at the potential for vast damages awards in particular in digital copyright cases, because of the ‘price per infringement’ approach inherent to statutory damages.  The successful claim by the major record labels and music publishers against Cox Communications in the US led to a $1 billion statutory damages award late in 2019, because of the large number of infringements that had taken place via its cable/internet services.  The consultation may also have to consider whether such a regime would comply with the Enforcement Directive’s rules in relation to damages being calculated by reference to the prejudice suffered by the rightsholder (on which EU law currently appears to be unclear).  Or, perhaps, copyright is higher up the list of post-Brexit legal reforms than anticipated, and the IPO is already planning its first post-Brexit departure from the EU’s IP rules?

*The section on statutory damages is under a heading relating to the Small Claims Track, but the IPO has confirmed that the intention is to consult on their introduction across all claims, rather than only small claims.