CDV Software Entertainment AG v Gamecock Media Europe Ltd & Ors [2010] EWHC 159 (Ch)

Case No HC09C00767[2010] EWHC 159 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
INTELLECTUAL PROPERTY
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 12 February 2010
Before
MRS JUSTICE GLOSTER, DBE
Between
CDV SOFTWARE ENTERTAINMENT AGClaimant
Robert Howe Esq, QC and Mark Vinall Esq(instructed by Harbottle & Lewis LLP) for ClaimantDuncan McCall Esq, QC and Benjamin Pilling(instructed by Bird & Bird) for DefendantsHearing Hearing dates: 11 December 2009;
JudgmentSupplemental judgment in relation to consequential relief and remediesMrs Justice Gloster, DBE:Introduction
[1]This judgment follows upon my judgment dated 20 November 2009 (“the first judgment”) in which I determined the principal issues of liability arising out of CDV’s claims against all four defendants. As set out in paragraph 126 of the first judgment, both parties agreed that the question of consequential remedies, quantum and further directions should be considered after I had determined the principal issues of liability. In this judgment I adopt the same definitions as those set out in the first judgment. The first judgment is necessary background reading for the purposes of this judgment.[2]I heard further argument from counsel on behalf of the parties in relation to consequential relief and remedies at a hearing on 11 December 2009. On that occasion I made various orders as to payment by one or more of the defendants, and made certain declaratory orders. I refer to my order for its full terms and effect.[3]Having heard argument from counsel on the consequential issues, I reserved judgment in respect of CDV’s claim for copyright infringement as against the Third Defendant, SouthPeak US, and in respect of CDV’s claim for inducing breach of contract against the Second Defendant, SouthPeak UK, and/or SouthPeak US. I also reserved judgment in respect of the claim that SouthPeak US should be liable to pay CDV’s costs. This supplemental judgment accordingly addresses these issues.

Claims for infringing, and/or authorising infringement of, copyright against South Peak US

[4]Mr. Robert Howe QC, on behalf of CDV, submitted that the court should grant a declaration to the effect that both SouthPeak UK and SouthPeak US were liable for infringement of copyright “by exploiting and/or authorising others to exploit” the products without CDV’s consent. Mr. Duncan McCall QC, on behalf of the defendants, did not dispute the making of a declaration as against SouthPeak UK to the effect that it was liable for infringement of copyright, on the basis that it had always admitted that it was exploiting the games, in the belief that it was entitled to do so. However he submitted that there was no justification for any declaration against SouthPeak US. He submitted that there were no findings in the first judgment to support a declaration that SouthPeak US had infringed CDV’s copyright, either by “exploiting” or “authorising others to exploit” the products.[5]As Mr. Howe pointed out, the first judgment, at the request of the parties, deliberately did not address SouthPeak US’s alleged liability for infringement of copyright (or indeed for inducing breach of contract). These are issues which I now have to decide in the light of the further submissions received from counsel, the pleadings in the case and upon the basis of the evidence given at trial.[6]It was common ground that copyright is infringed not only where an act restricted by the copyright in a work is done without consent, but also where a person authorises the doing of such an act; see section 16 (2) of the Copyright, Designs and Patents Act 1988 (“CDPA”), which provides:
“Copyright in a work is infringed by a person who without the licence of the copyright owner does, or authorises another to do, any of the acts restricted by the copyright.”
[7]The Defendants admitted in their defence and counterclaim that SouthPeak UK had marketed, licensed, distributed and/or sold the products within the Territory and that it intended to continue to do so; see paragraphs 83, 86 and 96 of the Defence. No such admission was made in relation to SouthPeak US. However there was no specific denial in the defence to the effect that, whatever the position in relation to SouthPeak UK, SouthPeak US had not been involved in, or authorised, any such infringing activity.[8]As Chadwick LJ said in MCA Records Inc v Charly Records Ltd [2001] EWCA Civ 1441, the issue is whether SouthPeak US combined with SouthPeak UK “to secure the doing of acts which constitute the infringement”. I refer also to the exposition given by Lord Justice Mustill (as he then was), in Unilever Plc V Gillette (UK) Ltd [1989] RPC 583, at 608 as to what is involved in participation with another in a copyright infringement, or in the procurement of another to commit such a breach:
“I have set out these cases in some detail in deference to the care with which they were analysed during the argument on this appeal. In truth, however, I believe that they do little more than illustrate how in various factual situations the courts have applied principles which are no longer in doubt, save perhaps as regards the relationship between indirect infringements by procuring and by participation in a common design. There may still be a question whether these are distinct ways of infringing, or different aspects of a single way. I prefer the former view, although of course a procurement may lead to a common design, and hence qualify under both heads. We need not however explore this question, since Mr. Gratwick has (rightly, in my judgment) disclaimed any reliance on that part of his clients' pleaded case which is founded on procurement, and has concentrated his arguments on the allegation of a common design. As to the authorities on this subject, if I am right in the view just expressed that they are really cases on the facts, I suggest that little is to be gained by matching the circumstances of each case against each of the allegations in the draft amended statement of claim. For my part I prefer to take the relevant part of the amendment as a whole, and to ask whether, if the allegations therein are proved to be true (and there seems no dispute that they will be), and if they are set in the context of the relationship between the companies in the Gillette Group, when that has emerged at the trial, a judge directing himself correctly could reasonably come to the conclusion that - (a) there was a common design between Boston and G.U.K. to do acts which, if the patent is upheld, amounted to infringements, and (b) Boston has acted in furtherance of that design. I use the words ‘common design’ because they are readily to hand, but there are other expressions in the cases, such as ‘concerted action’ or ‘agreed on common action’ which will serve just as well. The words are not to be construed as if they formed part of a statute. They all convey the same idea. This idea does not, as it seems to me, call for any finding that the secondary party has explicitly mapped out a plan with the primary offender. Their tacit agreement will be sufficient. Nor, as it seems to me, is there any need for a common design to infringe. It is enough if the parties combine to secure the doing of acts which in the event prove to be infringements.”
[9]I am satisfied, on the basis of the evidence before me at trial, that CDV has established on the balance of probabilities that SouthPeak US has both participated in, and authorised, the infringing activities in relation to the making, distribution, and sale of the relevant products.[10]The Particulars of Claim amongst other things alleged that: i) “SouthPeak UK and/or SouthPeak US” had made arrangements to publish, sell, promote, market, license and/or distribute the infringing products as games published, or distributed by, “SouthPeak” or “SouthPeak Interactive; ii) “SouthPeak UK and/or SouthPeak US” had advertised the product on the “SouthPeak” European website and other websites as being published, released and/or distributed by “SouthPeak”; iii) “SouthPeak UK and/or SouthPeak US” had made arrangements to distribute the products in the UK by means of an agreement with third parties, which was publicised as an agreement effectively with SouthPeak US; iv) “SouthPeak UK and/or SouthPeak US” had advertised in various trade publications the products as being published and distributed by “SouthPeak”.[11]The samples of publications and printouts from websites annexed to the Particulars of Claim showed that the references to “SouthPeak” clearly were intended to refer to SouthPeak US, as the holding company of the international group. Moreover it was clear both from the evidence at trial, and the evidence contained in the earlier witness statements in relation to the interlocutory applications for injunctive relief, that SouthPeak US itself was directly involved in the infringing acts in relation to the products, and authorised such acts.[12]All the witness statements served on behalf of the defendants referred collectively to SouthPeak US and SouthPeak UK as “SouthPeak”, although, where the deponent considered it necessary to do so, each company was referred to specifically by its separate name. Accordingly, where the collective “SouthPeak” was used, the only inference which can be drawn is that it was used deliberately. It was clear that all witness statements had been carefully drafted with the assistance of lawyers.[13]The following examples make it clear that SouthPeak US was indeed combining with SouthPeak UK to secure the doing of the infringing acts: i) In paragraph 67 of his witness statement in response to the application for interlocutory injunctive relief dated 17 February 2009, Jonathan Hales, the managing director of Gamecock and SouthPeak UK, in making his statement on behalf of those companies and SouthPeak US, said that in the course of a conversation with personnel from CDV on 11 December 2008 he:
“… informed them that, following the termination of the Agreement, SouthPeak would henceforth be distributing games in place of Gamecock”. ii) Similar references to SouthPeak and the effect on its business appear throughout his witness statement. The clear inference from the use of the specifically defined phrase is that this is intended to include a reference to SouthPeak US. iii) Likewise in paragraph 75, Mr. Hales states: “I emphasise that the current distribution and marketing activities in respect of the Games are being undertaken by SouthPeak. Gamecock has no ongoing involvement, in any respect, in relation to the Games.” iv) Similar statements were made in the witness statement dated 28 May 2009 which Mr. Hales provided for use at trial. In paragraph 144 he stated: “After SouthPeak had acquired Gamecock in October 2008 it was decided that the Gamecock operation and the SouthPeak US operations would be consolidated into one office, so that the Gamecock operations would benefit from South Peak US’s existing structure. Accordingly I put in hand moves to relocate the Gamecock offices to SouthPeak UK’s offices which were also being relocated to Leicester.”
(emphasis added) v) At trial Terry Phillips, the chairman of SouthPeak US, and a director of Deep, Gamecock and SouthPeak UK gave evidence. He was clearly the principal, and most important, executive in the SouthPeak group. Again he used the same definition of “SouthPeak” to refer to both SouthPeak US and SouthPeak UK. His witness statement and oral evidence made clear that, prior to termination of the Agreement, SouthPeak US was dictating the strategy in relation to termination of the Agreement, and that, post-termination, SouthPeak US itself was involved in development, distribution and promotion of the products. He himself was clearly involved, in his capacity as chairman of SouthPeak US, in directing the strategy in relation to termination, and thereafter in relation to distribution and promotion of the products. There was no suggestion in his affidavit or oral evidence that his participation was limited to his capacity as a mere director of Gamecock or SouthPeak UK, or that references to “SouthPeak” should be limited to SouthPeak UK. I refer in particular to paragraphs 43 to 44, 53 to 59, 60 to 61, and 66 of his witness statement which clearly demonstrate the involvement of SouthPeak US.[14]Accordingly in my judgment there should be a declaration as to the liability of SouthPeak US for infringing CDV’s copyrights in the products by exploiting and/or authorising others to exploit the products without CDV’s consent.

Claims for inducing breach of contractagainst SouthPeak UK and SouthPeak US

[15]Paragraph 27 of the Particulars of Claim alleged breaches of the Agreement on the part of Gamecock. Those breaches consisted of Gamecock causing, permitting or authorising the products to be advertised, promoted, marketed licensed, distributed and/or sold in the Territory by persons other than CDV. The Defendants admitted the factual allegations contained in that paragraph but denied that they amounted to a breach the Agreement. In paragraph 31 of the Particulars of Claim it was alleged that Gamecock’s breaches as set out in paragraph 27 were induced by SouthPeak UK and SouthPeak US, and various acts were relied upon as against both those defendants. In the defence, SouthPeak US and SouthPeak UK admitted that they were aware of the existence and relevant terms of the Agreement, and that SouthPeak UK (but not SouthPeak US) had taken the steps alleged. However they both denied that the acts alleged against them were breaches of the Agreement by Gamecock, or that any breaches by Gamecock were induced by SouthPeak US or SouthPeak UK.[16]It was effectively common ground between Counsel, in the light of the decision of the House of Lords in OBG Ltd v Allan [2008] 1 AC 1, that, in order for a person to be liable for inducing a breach of contract, he had to know that he was inducing a breach of contract and to intend to do so with knowledge of the consequences; and that it was not enough to know that one was procuring an act which, as a matter of law or construction of the contract, was, upon analysis, in fact a breach; see, in particular, paragraphs 39 to 44 in the speech of Lord Hoffmann.[17]In relation to this issue I accept Mr. McCall’s submissions that there are no findings in my judgment, nor indeed any evidence given at trial, that could support a conclusion that either SouthPeak UK or SouthPeak US had the necessary intent for the purposes of the tort of inducement. The evidence given by Mr. Hales and Mr. Phillips at trial was to the effect that they believed that they were entitled to act as they did. In the event my judgment has held them to be wrong. However, there was nothing in the evidence which they gave, whether in chief or in cross-examination, which suggested that they did not genuinely believe that Gamecock and the other defendants were entitled to act in the way which they did. Moreover the genuineness of their belief and intentions were not challenged in cross-examination.[18]Accordingly, I find against CDV in relation to this issue.

Costs of the hearing of 11 December 2009

[19]In my judgment SouthPeak US should bear the costs of and incidental to the hearing on 11 December 2009, notwithstanding CDV’s failure in relation to the issue of inducement.

Costs of the Claim and the Counterclaim

[20]Likewise, given that I have found it to be liable for copyright infringement, SouthPeak US must, jointly and severally with the other Defendants, pay the Claimant’s costs of the claim and of the counterclaim, including any reserved costs. I also order that, jointly and severally with the other defendants, SouthPeak US do make the payments on account of interest and on account of costs ordered in paragraph 8 and 9 of my order dated 11 December 2009, to the extent that these have not already been paid by any of the other defendants.