On Your Marks

08 Apr 2009

Additional Damages for Copyright Infringement – They’re 'additional to damages'

In our May 2007 issue of On Your Marks we discussed the Tiny Intelligence Ltd v Resport Ltd decision (now reported at [2007] 2 NZLR 263), in which the High Court ruled that the category of damages known as 'additional damages' are not available where a copyright owner elects an account of profits instead of compensatory damages. 

Tiny Intelligence has since appealed that decision, principally on the ground that the High Court erred in its finding that, 'because Tiny Intelligence had elected an account of profits, it was precluded from also claiming additional damages'.

Account of profits and damages

An account of profits strips an infringer of profit derived from the copyright infringement. Damages, on the other hand, compensate for losses suffered by the copyright owner, and are intended to place the owner in the position he or she would have been in 'but for' the infringement of his or her rights.

It is well established that a plaintiff copyright owner must at the finding of liability choose or 'elect' between an account of profits or damages. In practical terms, this means choosing the more lucrative remedy (for example, in one case a defendant's gains may be greater than a plaintiff's losses and in another the reverse may apply).

The subject for debate in Tiny Intelligence was a further category of damages called 'additional damages'. Additional damages are available under the Copyright Act 1994 where the flagrancy of the infringement or any benefit accruing to the infringer by reason of his or her infringement justifies higher payment. In essence, additional damages are 'exemplary' or punitive in nature and seek to punish the defendant in particularly deserving cases.

The Court of Appeal decision

The Court of Appeal succinctly summarised the issue on appeal as whether the phrase 'additional damages' is a financial award which is 'additional' to compensatory (or nominal) damages, or extends to a financial award which is 'additional' to any other relief granted.

If the former was correct, additional damages would only be available to a plaintiff who elects damages and would not be available to a plaintiff who elects an account of profits. If the latter was correct, additional damages would be available regardless of the plaintiff's basic election.

The Court of Appeal preferred the former interpretation, consistent with the approach of the High Court. In dismissing the appeal, the Court of Appeal approved of the High Court's reliance on United Kingdom and Australian interpretations of similarly worded provisions.

By their nature, however, benefits to a defendant and 'punishment' for flagrancy can go beyond what is encompassed by the term 'profits', so the result here can lead to a plaintiff who elects an account 'missing out' on amounts which could be available through additional damages.

The Court made one additional point of note relevant to this. Where there is a possibility that the plaintiff may seek additional damages, the Court considered that it is appropriate for the Judge, when determining liability, to also make a finding as to flagrancy. This allows a plaintiff to make a more informed choice between an account and damages.

This practice is well-established in the United Kingdom and takes much of the sting out of the debate over an enforced election. 

In practical terms, this means that future decisions should 'flag' any existence of flagrancy, enabling plaintiffs to better determine whether damages or an account of profits will be more lucrative in the particular circumstances of their case.

Tiny Intelligence has been granted leave to appeal to the Supreme Court, so watch this space for the last word on this issue.

Authors

Earl Gray

Partner - Intellectual Property

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John Shackleton

Partner - Dispute Resolution

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Tracey Walker

Partner - Dispute Resolution

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Richard Watts

Partner - Intellectual Property

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Sarah Chapman

Senior Associate - Intellectual Property

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Claire Foggo

Senior Associate - Intellectual Property

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