Blayney (t/a Aardvark Jewelry) v Clogau St. David's Gold Mines Ltd & Ors

A copyright owner may recover compensatory damages for every infringement. Lost profit is the appropriate measure for sales the owner proves would otherwise have been made by that owner. A reasonable notional royalty may compensate for other infringing sales.

The absence of an established licensing market or exact royalty evidence does not justify awarding nothing. The court must make a judicial estimate from the available material, while avoiding over-compensation where lost-profit damages and royalty damages are both awarded.

An appellate court may correct demonstrable errors in a damages calculation, but will not disturb a fact finding supported by evidence merely because another permissible assessment was available.

The claimant, a jeweller, owned copyright in the design of "Lovers Twist" jewellery. After the parties’ commercial relationship ended, the respondents continued to sell articles made to that design by another maker. They conceded copyright infringement and an inquiry was directed.

A deputy judge in the Chancery Division awarded £18,492.03 plus interest, reported at [2002] FSR 14, 233. He awarded lost-profit damages for sales which the claimant proved he would otherwise have made, but refused a notional royalty for the remaining infringements because he considered that the evidence was insufficient.

The claimant appealed the refusal of royalty damages, the treatment of additional damages, and aspects of the calculation of lost sales and profit. The central issue was whether, and on what evidence, compensation could be awarded for infringing sales which had not displaced the claimant’s own sales.

1. The appeal was allowed in part unanimously. The Vice-Chancellor gave the judgment, with which Rix LJ and Jonathan Parker LJ agreed. The damages award was increased to £36,279.48, plus interest.

2. Copyright infringement interferes with a proprietary right. A claimant’s inability to prove that every infringing sale displaced one of its own sales does not mean that no loss is compensable. Lost profits measure the loss on displaced sales. A notional royalty may compensate the owner for the remaining unauthorised exploitation. The court applied the reasoning in (1914) 31 RPC 104 and treated it as equally applicable to copyright as to patent infringement.

3. The approach in [1976] RPC 197 did not require an established royalty rate before a royalty could be assessed. The available evidence included turnover and profit figures, the commercial relationship, and the respondents’ pleaded concession that 2% would be reasonable. Applying the broad-axe approach endorsed in [2002] EWHC 881 (Ch), the court fixed a 5% royalty on the claimant’s net selling price for 2,972 remaining infringing sales. It guarded against double recovery because lost-profit damages had already been awarded for other sales.

4. The court upheld the refusal of additional damages under Copyright, Designs and Patents Act 1988 s.97(2). The pleaded case of flagrancy had failed, and the point was in any event overtaken by the award of ordinary compensatory damages for the remaining infringements.

5. The court corrected the use of one pro rata profit rate for two periods when the evidence showed different rates. It also corrected the arithmetic by which sales of a range selling half as well as the respondents’ range had been treated as one third rather than one half. It declined to interfere with findings on the relative size of the product ranges and direct sales, since they were supported by evidence and were not perverse.

• Court of Appeal (Civil Division): Allowed the claimant’s appeal in part and increased damages to £36,279.48 plus interest: [2002] EWCA Civ 1007.

• Chancery Division: Mr Kim Lewison QC, sitting as a deputy judge, assessed damages at £18,492.03 plus interest following an inquiry: [2002] FSR 14, 233.