06 February 2013

Twentieth Century Fox v Harris - very interesting but what exactly was that case about?





















I have had this conversation several times since Mr. Justice Newey handed down his judgment in Twentieth Century Fox Film Corp and Others v Harris and others [2013] EWHC 159 (Ch) (5 Feb 2013). As this is only an interim injunction application in an action that is still to be tried and as this judgment may be appealed it would not be right to for me to analyse it in a way that I would a case in which I had not been briefed..   However, as this was quite an unusual case. the judgment does need to be interpreted if it is to be understood.   So here are some FAQ style questions and answers.

So what was this case all about?
This was an application by members of the Motion Picture Association of America Inc, the trade association of the second largest film industry .in the world, for a proprietary injunction to restrain a Mr. David Harris and a number of companies with which he is connected from dealing with, or disposing of, a McLaren high performance sports car and a number of other assets.   If you want to know what a McLaren looks like there is a picture of one above from Wikipedia.  Very posh and very expensive. Boys can get more information here.

Come again. What exactly is a "proprietary injunction"?
This is an order occasionally used in trust law to prevent a trustee or other fiduciary from dealing in or disposing of trust property. Mr. Justice Harman explained it very well in Chandler v Church (unreported, 31 Dec 1997) which I cribbed for my skelly:
"There is a long-established Chancery jurisdiction that a trust fund will be preserved, in whomsoever hands it may come, provided the holder is a volunteer or has notice for the trust ..... The ground for this exercise of jurisdiction is that preventative justice is better than punitive or retributory justice, and that 'if the trust fund had disappeared entirely, equity will have been invoked in vain.'"
Essentially, the law says to the fiduciary: "Oy-oy sonny! 'Ands orf.  That don't belong to you Sunshine even if it is in your name.   So don't even dream of trousering it or you could end up as a guest of 'er Majesty, Gawd bless 'er."

Sounds like a freezing injunction or Mareva. So what's the difference?
Oh no. A freezing injunction (or, as we used to call it before 23 April 1999, and fossils like me still do, a "Mareva") is a very different animal.   The crucial difference, my son, is that the assets that are caught by a freezing injunction or Mareva remain the respondent's property.  He or she can still use them to pay solicitors or carry out normal business transactions.   The point of a freezing injunction is to stop a respondent from transferring his assets abroad or running them down so that the bailiffs can seize them if the applicant is awarded damages against the respondent.   In his judgment in Harris the judge quoted  from the unreported judgment or Lord Justice Millett in Ostrich Farming Corporation Ltd v Ketchell (10 Dec 1997) at paragraph [7]:
"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".
If you want to know more about freezing injunctions it is worth having a butcher's at para 6.1 of PD25A - Interim Injunctions and the Annex to that practice direction which actually contains a precedent or template for such an order.

So what's that got to do with copyright?
The claimants alleged that Mr. Harris had made a lot of money out of infringing their copyrights which he had spent on a fancy motor, a house in Brighton and a number of other things.   It was their case that he held those assets on constructive trust for them.   As Mr. Justice Newey put it at paragraph [9]:
"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."
I've never heard that argument before
Neither had I.  His Lordship summarized my argument at paragraph [10] as follows:
"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."
The judge added at paragraph [13]:
"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."
Having said that the genius of the common law is that it evolves by claimants making bold applications of this kind.   As the judge said at the end of his judgment, Mr. Richard Spearman QC did argue very persuasively and there were a number of cases from Australia and elsewhere that supported his argument.   Although Mr. Justice Newey did not give the trade association permission to appeal, a single judge of the Court of Appeal might.   It is also possible that the Lord Justices may take quite a different view from Mr. Justice Newey.

The point that seems to have persuaded the judge on this occasion is that infringement is a bit like trespass.   Someone who parks a van on your  drive or commits some other trespass is not actually claiming title to your property.   At least, not unless he does it long enough and persistently enough to gain adverse possession.   You can put up a fence, seek an injunction or damages from the county court but a trespasser is not your constructive trustee.   Similarly, the remedy against a pirate or counterfeiter is damages or an account of profits but not the entire proceeds of the infringement.   The nearest that the law ever came to that were the old conversion damages under s.18 of the Copyright Act 1956 which has now been repealed.

So what happens next?
The judge gave case management directions and ordered a trial for later in the year.   The claimants can apply to the Court of Appeal for permission to appeal.   Beyond that, who knows?

Further Information
If anybody wants to know more about freezing or proprietary injunctions, how to get them and how to resist them or about copyright generally, he or she can call me on on 0161 850 0080 or send me a message through my contact form. You can also follow me on Facebook, Linkedin, twitter and Xing.

Other Articles

K Aziz "UK judge denies movie studios' demand for money from Newzbin2" Intellectual Property Magazine 7 Feb 213
Look Essers "Movie industry not entitled to Usenet piracy profits, UK high court rules" IT World 6 Feb 2013
Nick Farrell "Movie Industry can't profit  form Piracy" Techeye 7 Feb 2013
Cyrus Favriar  "Judge denies MPAA attempt to seize profits from copyright infringement"  Ars Technica 7 Feb 2013
E Gardner  "U.K. Judge Denies Hollywood's Demand for Money From File-Sharing Site's Operators"  The Hollywood Reporter 5 Feb 2013
Cathy Gellis "More like trespass than theft" Digital Defense 9 Feb 2013
Jeremy Phillips "Proprietary damages for copyright infringement? This judge is not converted" IPKat 7 Feb 2013
Judgment Call, The Lawter, 4 March 2013
Law360 "Movie Studios lose Bid for Funds of shuttered UK Website" 5 Feb 213
Graeme McMillan "British court denies Hollywood repayment from Online Piracy" Digital Trends 6 Feb 2013
Mike Masnick  "UK Judge: Giving Hollywood Money From Newzbin2 Would Create Chilling Effects On Innovation"  Techdirt 6 Feb 2013
TorrentFreak  "Hollywood Won’t Get Piracy Profits From Usenet Site, High Court Rules" 6 Feb 2013