Universal City Studios Incorporated, Disney Enterprises Incorporated, Twentieth Century Fox Film Corporation and Warner Brothers Incorporated (plaintiffs) v Gerard Mulligan (defendant).

Copyright - Infringement by possession of and dealing in subject matter - Inquiry as to damages - Principle underlying award of damages - Level of proof required - Absence of methodology for calculating plaintiffs' loss or defendant's gain - Non-representation and non-appearance of defendant at inquiry - Damages at large - Circumstances in which it is appropriate to award additional penal damages - Copyright Act 1963, section 22(4).

The High Court (before Miss Justice Laffoy); judgment delivered 18 May 1999.

Although it is appropriate, where a defendant is found to be in possession of and dealing in counterfeit video cassettes (in the knowledge that they are counterfeit and constitute an infringement of the copyright therein), to award additional penal damages under section 22(4) of the Copyright Act 1963, given the absence of a reasonable methodology for calculating the plaintiffs' losses or the defendant's gain and where the defendant is not represented and does appear at the inquiry as to damages, such damages will be at large.

The High Court so held in awarding £75,000 damages, to include £50,000 damages under section 22(4) to the plaintiffs.

Dermot Flanagan BL for the plaintiffs; the defendant was not represented and did not appear on the inquiry as to damages.

Miss Justice Laffoy set out the facts of the case, stating that in a judgment delivered on 25 March 1998, in these proceedings, she had found that the defendant was in possession of and was dealing in counterfeit video cassettes in the knowledge that they were counterfeit and constituted an infringement of the copyright therein, which was owned by various copyright owners who were represented by the plaintiffs in these proceedings. The cassettes had been seized on 17 occasions between May 1992 and February 1997, at various locations in the State, and acquired as a result of test purchases on five occasions between February 1997 and November 1997 in Dublin City. Miss Justice Laffoy stated that she had granted a perpetual injunction in the earlier proceedings, restraining infringement of the plaintiffs' copyright in cinematographic films and pre-recorded video cassettes.

The plaintiffs also sought an inquiry as to the damages to which they were entitled as a result of the defendant's wrongdoing and this judgment arose out of that inquiry. The solicitor who had acted for the defendant in the substantive hearing had since come off record and the defendant was not represented and did not appear on the inquiry.

The plaintiffs' claim for damages had been presented on the basis that they were entitled to recover damages reflecting the actual loss they had incurred and also in respect of the damage to the video industry and the undermining of the integrity of the market caused by the defendant's involvement in video piracy. It was put forward on behalf of the plaintiffs that the total number of video cassettes seized or acquired was 2,687 and that this represented an average yield of 117 per seizure or acquisition. It was submitted that the evidence showed that the defendant was operating seven days a week. The average wholesale price of a video cassette for rental was £37.48 and for a "sale-through" was £7.85.

Three bases of assessment of the plaintiffs' damages were suggested; firstly, it was submitted that the plaintiffs had incurred a loss of £121,802 on the basis of the loss of sales of 2,687 video cassettes for rental at £37.48 each and the same number of "salethrough" cassettes at £7.85 each; secondly, on the basis of a year's trading by the defendant, the plaintiffs would have lost £1,782,013, assuming that they were deprived of 117 tapes on each of seven days of 48 weeks in the year, amounting to 39,912 tapes; thirdly, on the basis of the defendant trading over a period of five years, the loss to the plaintiffs would be five times the loss referred to above, amounting to £8,910,065.

Miss Justice Laffoy referred to Clark and Smyth on Intellectual Property Law in Ireland, in which it is stated, at page 330, that the award of damages, upon a copyright infringement, was based upon the principle of compensation. The authors went on to state, in relation to measuring the damages, that a plaintiff would normally seek to obtain the amount by which the value of its copyright had been diminished and that this was often calculated by looking at the volume of sales, made by the defendant, of the pirated work, and deducting the cost of production from the income made by the defendant by way of the unauthorised reproduction and sale. However, an award of damages, on this basis, might not compensate the plaintiff for lost volume of sales where the plaintiff could show that his work had a higher profit margin than the pirated work, and there was authority for the proposition that this disparity should be reflected in the compensation awarded. Miss Justice Laffoy also cited the decision in Columbia Pictures Industry v Robinson [1988] FSR 531, in which Mr Justice Scott commented, at page 536, that to require certainty of proof that pirate marketing caused loss of sales would be impossible and that once it was shown that pirate marketing had taken place some loss of legitimate sales might properly be assumed.

Miss Justice Laffoy stated that in this case, on the evidence before the court, it was impossible to measure the loss of the plaintiffs, either jointly or severally, arising from the defendant's unlawful activities. There was no evidence whatsoever of the defendant's volume of sales of any of the pirated works; the only evidence before the court of the defendant's trading activity was that on 22 different occasions at different locations over five years, the defendant was in possession for sale of various quantities of pirated video cassettes which included various titles. It was impossible to deduce, from the evidence, what volume of sales of pirated copies of the plaintiffs' titles the defendant achieved, thus inflicting loss on the plaintiff; nor was there any evidence from which one could deduce that the activities of the defendant affected the commercial success of any title of the plaintiff. Miss Justice Laffoy stated that the plaintiffs' methodology in calculating their losses was not reasonable, that it did not give any measure of the defendant's gain or the plaintiffs' loss, and that it would defy reason and common sense to conclude that such activities in any year would have resulted in losses of almost £2 million to the plaintiffs and the other major motion picture producers.

Miss Justice Laffoy stated that in her judgment of 25 March 1998 she had outlined the poor quality of the counterfeit copies which were seized from the defendant. She stated that it was reasonable to infer that the circulation of such poor quality copies was damaging to the plaintiffs and to legitimate rental and retail outlets. It had been put forward on behalf of the plaintiffs that it had cost £700,000 to monitor and counteract the defendant's activities.

Miss Justice Laffoy also stated that in her judgment of 25 March 1998 she had indicated that in principle she considered this to be an appropriate case in which to award additional damages under section 22(4) of the Copyright Act 1963. Such damages were penal damages, (per the then Chief Justice, Mr Justice O Dalaigh, in Folens v O Dubhghaill [1973] IR 255, at 266). The defendant had undoubtedly committed flagrant infringements of the plaintiffs' copyright, and benefits had undoubtedly accrued to him, and unless additional damages were awarded, over and above compensatory damages, which the plaintiffs were entitled to on the evidence, they would not get effective relief.

Acknowledging that this was a case in which the quantification of damages was very much at large because of the nature of the evidence adduced by the plaintiffs on the inquiry and the absence of the defendant, Miss Justice Laffoy concluded that the appropriate award of damages was £75,000 to include £50,000 damages under section 22(4).

Solicitors: Kieran A. O'Connor & Co (Dublin) for the plaintiffs.