Case C-99/15, Liffers – wanting money for moral prejudice too [judgment 2016, ECLI:EU:C:2016:173]

If a person has had his copyright infringed, and claims damages equivalent to the money he would have received from a copyright collecting society, then does this fact stop him from bringing an extra claim in respect of the harm done to his reputation and standing? A literal understanding of the wording of the Directive suggests he cannot bring that extra claim. However, the result might go against the aim of the Directive which was ‘to approximate legislative systems so as to ensure a high, equivalent and homogeneous level of protection in the Internal Market’.

Background
Mr Liffers holds the intellectual property rights in an audiovisual work which portrayed the lives of several Cubans in Havana.

A Spanish company subsequently used several excerpts from his copyright-protected work in a documentary but it did so without his consent. This documentary was then broadcast on a major Spanish-language television channel.

Believing his rights to have been infringed by both the company that had made the documentary and the broadcasting company, Mr Liffers commenced litigation in the Spanish courts.

He sought damages for the infringements of his copyright. He claimed a level of damages which corresponded to the money he would have received from a Spanish copyright-collecting society (the EGEDA tariff system) had he but given his consent for parts of his work to be used by the Spanish companies. The amount claimed was just shy of seven thousand euro.

However, the Spanish company’s documentary was about child prostitution in Cuba. Mr Liffers also sought damages in respect of the harm suffered to his reputation and standing. This was a separate claim brought under the heading of ‘moral prejudice’ [daño moral], and he put a value on this at ten thousand euro.

At first instance, the judge awarded him half of the amount in respect of the copyright infringement (calculated on the basis of an hypothetical licence), and the full amount in respect of the moral prejudice.

On appeal, the Spanish companies claimed that there was no infringement to Mr Liffer’s copyright because the parts which had been used were too small to constitute a substantial part affecting the entire work. This argument went down like a lead balloon and was rejected outright by the appellate court.

Secondly, the Spanish companies refused to pay the damages in respect of the copyright infringement. Here the Spanish companies booked some success because the appellate court drastically reduced the amount of damages to something just shy of a thousand euro.

Thirdly, the Spanish companies objected to the basis for calculating the damages for moral prejudice. The success of their legal argument turned on how the Spanish legislature had implemented a piece of EU legislation, the EU’s ‘enforcement’ Directive 2004/48/EC on the enforcement of intellectual property rights (OJ [2004] L157/45).

The upshot was that the appellate court reduced the amount of compensation to that which had been awarded by the court at first instance for the copyright infringement, namely, the thousand euro.

Mr Liffers escalated the litigation up to the Spanish Supreme Court.

At the Spanish Supreme Court
The main ground of appeal concerned Mr Liffers’ claim in respect of moral prejudice.

The Supreme Court’s judges turned to the applicable legislation, the EU’s ‘enforcement’ Directive 2004/48/EC on the enforcement of intellectual property rights (OJ [2004] L157/45).

The salient provision of the Directive was in Section 6, on ‘Damages and legal costs’. Article 13 on ‘Damages’, stipulates:

1.Member States shall ensure that the competent judicial authorities, on application of the injured party, order the infringer who knowingly, or with reasonable grounds to know, engaged in an infringing activity, to pay the rightholder damages appropriate to the actual prejudice suffered by him/her as a result of the infringement.

When the judicial authorities set the damages:
(a) they shall take into account all appropriate aspects, such as the negative economic consequences, including lost profits, which the injured party has suffered, any unfair profits made by the infringer and, in appropriate cases, elements other than economic factors, such as the moral prejudice caused to the rightholder by the infringement;
or
(b) as an alternative to (a), they may, in appropriate cases, set the damages as a lump sum on the basis of elements such as at least the amount of royalties or fees which would have been due if the infringer had requested authorisation to use the intellectual property right in question.
…

The key problem which the Supreme Court could not resolve was whether this plank of the Directive meant that if Mr Liffers claimed damages on the basis of money he would have received from a hypothetical licence, this precluded him from claiming money in respect of the moral prejudice he had suffered too.

Although the Spanish companies and the Spanish state thought that EU law was clear and that Mr Liffers could not bring the extra claim because moral prejudice only featured in Article 13(1)(a), and Mr Liffers’ claim was based on Article 13(1)(b); the Spanish Supreme Court felt that the drafting of Article 13(1)(b) and its implementation in Spanish law were ambiguous.

Admittedly, Article 13(1)(b) was disjunctive in nature. The provision was preceded by the word ‘or’. It also opened with the words, ‘as an alternative to (a)’. Furthermore, Recital 26 of the Directive explained:

With a view to compensating for the prejudice suffered as a result of an infringement committed by an infringer who engaged in an activity in the knowledge, or with reasonable grounds for knowing, that it would give rise to such an infringement, the amount of damages awarded to the rightholder should take account of all appropriate aspects, such as loss of earnings incurred by the rightholder, or unfair profits made by the infringer and, where appropriate, any moral prejudice caused to the rightholder. As an alternative, for example where it would be difficult to determine the amount of the actual prejudice suffered, the amount of the damages might be derived from elements such as the royalties or fees which would have been due if the infringer had requested authorisation to use the intellectual property right in question. The aim is not to introduce an obligation to provide for punitive damages but to allow for compensation based on an objective criterion while taking account of the expenses incurred by the rightholder, such as the costs of identification and research.

Consequently, Article 13(1)(b) was an alternative to Article 13(1)(a), and Article 13(b) allowed a multiplicity of criteria to be taken into account but not moral prejudice for that was only expressly mentioned in Article 13(1)(a).

However, the correctness of that approach could be objected to on a number of grounds.

First, Article 13(1) was designed to ensure that the victim could be compensated for ‘the actual prejudice suffered’. Moral prejudice could arise independently of copyright infringement.

Second, several other Member States, such as France and Italy, had interpreted the various criteria listed in the Directive cumulatively such that (a) was not separated from (b) by the word ‘or’ but rather by the word ‘and’, thereby leaving the victim with the choice of whether to bring a claim for moral prejudice.

Third, if as a result of the disjunctive interpretation of the Directive, Spanish law would now offer less protection to a victim and simultaneously put Spanish law at odds with the laws of France and Italy, then this would seem to be contrary to the aim of the Directive. Recital 10 of the Directive expressly stated that:

The objective of this Directive is to approximate legislative systems so as to ensure a high, equivalent and homogeneous level of protection in the Internal Market.

Therefore, the Spanish Supreme Court decided to make a preliminary reference to the CJEU.

Questions Referred
According to the website of the UK’s Intellectual Property Office, the Spanish Supreme Court has asked:

May Article 13(1) of Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights be interpreted as meaning that the party injured by an intellectual property infringement who claims damages for pecuniary loss based on the amount of royalties or fees that would be due if the infringer had requested authorisation to use the intellectual property right in question cannot also claim damages for the moral prejudice suffered?

Update – 20 July 2015
The correct interpretation to Articles 13(1)(a) and (b) of the Enforcement Directive is now the object of a reference from the Polish Supreme Court. The case has been docketed as Case C-367/15, Stowarzyszenie “Oławska Telewizja Kablowa. The Curia website has yet to publish the official translation of the question asked by the Polish court.