Twentieth Century Fox Film Corporation and Others v David Harris and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Newey: |
| Judgment Date | 05 February 2013 |
| Neutral Citation | [2013] EWHC 159 (Ch) |
| Docket Number | Case No: HC12F01500 |
| Court | Chancery Division |
| Date | 05 February 2013 |
[2013] EWHC 159 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Rolls Building, Royal Courts of Justice,
7 Rolls Buildings, Fetter Lane,
London, EC4A 1NL
Mr Justice Newey
Case No: HC12F01500
Mr Richard Spearman QC (instructed by Wiggin LLP) for the Claimants
Miss Jane Lambert (instructed by JWK Solicitors) for the First and Second Defendants
Hearing dates: 20 December 2012
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The question raised by this case is whether a copyright owner has a proprietary claim to money derived from infringement of the copyright.
Background
The claimants ("the Studios") are the members of the Motion Picture Association of America Inc. and are the owners or exclusive licensees of the copyright in numerous films and television programmes. They sue in a representative capacity, on behalf of themselves and other group companies.
In 2008 the Studios brought proceedings against a company called Newzbin Limited in respect of the operation of a website of the same name, the sole purpose of which was alleged to be to make available to its users unlawful copies of copyright works including films and television programmes. The case was tried by Kitchin J in early 2010. In a judgment dated 29 March 2010 ( [2010] EWHC 608 (Ch)), Kitchin J concluded that Newzbin Limited was liable to the Studios for infringement of their copyrights. He found that Newzbin Limited had "engaged in a deliberate course of conduct well knowing that the vast majority of the materials in the Movies category of [the] Newzbin [website] are commercial and so likely to be protected by copyright and that the users of Newzbin who download those materials are infringing that copyright" (paragraph 128 of the judgment).
The Newzbin website was taken down not long after Kitchin J had given judgment, but another website with a similar name came into existence soon afterwards. The Studios allege that this website, "Newzbin2", operated in the same way as the original Newzbin site and that it shared that site's purpose. The Particulars of Claim accordingly assert:
"the Newzbin2 website is the same as the Newzbin website; its purpose is the same; and the use to which it is put by its members is the same".
The proceedings before me seek relief against individuals and companies who are alleged to have links to the Newzbin2 website. The first defendant, Mr David Harris, is said to be either the sole operator of the website or one of its operators. The second defendant, Kthxbai Limited ("Kthxbai"), of which Mr Harris is apparently the sole director, is said to have received payments from the Newzbin2 website. The third defendant, the NZB Foundation ("NZB"), a Panamanian company for which Mr Harris was formerly a protector and now holds a power of attorney, seems to own the property in which Mr Harris lives. The other defendant of relevance for present purposes, Motors for Movies Limited ("MFM"), of which Mr Harris appears to be the only director, owns the McLaren car that stands in the drive at Mr Harris' home. Among others, claims for breach of copyright and unlawful means conspiracy are put forward.
The Studios have already obtained freezing injunctions against Mr Harris, Kthxbai, NZB and MFM. Mann J granted such an order against Mr Harris, Kthxbai and NZB on 23 November 2012, and the order was continued until trial or further order by Warren J on 3 December. On 20 December, I made an order in similar terms against MFM.
The Studios now ask that proprietary injunctions should be granted against Mr Harris, Kthxbai, NZB and MFM. Millett LJ referred to the difference between such an injunction and the more common freezing (or "Mareva") injunction in Ostrich Farming Corporation Ltd v Ketchell (10 December 1997, unreported). He said:
"The courts have always recognised a clear distinction between the ordinary Mareva jurisdiction and proprietary claims. The ordinary Mareva injunction restricts a defendant from dealing with his own assets. An injunction of the present kind, at least in part, restrains the defendants from dealing with assets to which the plaintiff asserts title. It is not designed merely to preserve the defendant's assets so as to be available to meet a judgment; it is designed to protect the plaintiff from having its property expended for the defendant's purposes".
To obtain proprietary injunctions, the Studios need to show that there is a serious question to be tried as to whether they have proprietary rights in the assets over which they seek injunctive relief. That in turn depends on whether there is at least a serious argument that a copyright owner has a proprietary claim to the proceeds of an infringement of copyright.
The parties' cases in summary
Mr Richard Spearman QC, who appeared for the Studios, argued that, where a copyright is infringed, the copyright owner has a proprietary claim to the whole proceeds of the infringement. Those proceeds, Mr Spearman submitted, are held on constructive trust for the copyright owner, or at least it is seriously arguable that that is the case. Passages in a variety of authorities point in that direction, so it is said.
In contrast, Miss Jane Lambert, who appeared for Mr Harris and Kthxbai, disputed that any proprietary claim exists. According to Miss Lambert, the Studios are arguing for a remedy that has never been awarded by any Court in respect of any species of intellectual property. The owner of intellectual property whose rights have been infringed will often be entitled to an account of profits, but (so Miss Lambert submitted) there is no question of the fruits of infringement being subject to a trust. Were it otherwise, Miss Lambert said, there would be a chilling effect on innovation and creativity.
Discussion
The remedies for infringement of copyright are dealt with in chapter VI of part I of the Copyright, Designs and Patents Act 1988. Section 96(2) of the Act, which is to be found in this chapter, states that, in an action for infringement of copyright, "all such relief by way of damages, injunctions, accounts or otherwise is available to the plaintiff as is available in respect of the infringement of any other property right".
Mr Spearman stressed the words "or otherwise". These, it is true, are capable of encompassing a proprietary claim. On the other hand, section 96 does not specifically refer to the existence of such a claim.
Textbooks and case law also make no direct reference to the availability of proprietary relief for breach of copyright. More specifically, I was not taken to any textbook or case in which it had been suggested that a copyright owner can advance a proprietary claim to the fruits of a breach of copyright. That is the more striking since, given the potency of proprietary claims, they could be expected to be asserted routinely in breach of copyright cases were they available.
Mr Spearman cited authorities to show that a copyright can be the subject of a constructive trust. That is doubtless correct. As, however, Miss Lambert pointed out, that is very different from saying that the fruits of a breach of copyright are held on trust for the copyright owner.
Mr Spearman likened copyright infringement to theft. Support for the analogy can be found in R v Carter [1993] FSR 303, where Jowitt J, delivering the judgment of the Court of Appeal Criminal Division in a video piracy case, said:
"[I]t has to be borne in mind that counterfeiting of video films is a serious offence. In effect to make and distribute pirate copies of films is to steal from the true owner of the copyright, the property for which he has to expend money in order to possess it. It is an offence really of dishonesty".
Building on the analogy, Mr Spearman invoked Westdeutsche Landesbank Girozentrale v Islington LBC [1996] AC 669, dicta in which indicate that a constructive trust can arise in relation to stolen property. At 715–716, Lord Browne-Wilkinson said:
"The argument for a resulting trust was said to be supported by the case of a thief who steals a bag of coins. At law those coins remain traceable only so long as they are kept separate: as soon as they are mixed with other coins or paid into a mixed bank account they cease to be traceable at law. Can it really be the case, it is asked, that in such circumstances the thief cannot be required to disgorge the property which, in equity, represents the stolen coins? Moneys can only be traced in equity if there has been at some stage a breach of fiduciary duty, i.e. if either before the theft there was an equitable proprietary interest (e.g. the coins were stolen trust moneys) or such interest arises under a resulting trust at the time of the theft or the mixing of the moneys. Therefore, it is said, a resulting trust must arise either at the time of the theft or when the moneys are subsequently mixed. Unless this is the law, there will be no right to recover the assets...
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