London General Holdings Ltd & Ors v USP Plc & Anor

Copyright protects the expression of an idea, not the idea itself. A claimant cannot recover copyright damages for commercial loss caused only by use of an idea embodied in a protected document, rather than by unauthorised use of its text.

The applicable causal inquiry depends on the nature and purpose of the liability. In copyright, recoverable loss is confined to loss attributable to the taking of the protected expression. A notional royalty may nevertheless be awarded for each distinct established use of an infringing copy.

USP owned copyright in a template Collections Account Agreement used in trust-based extended-warranty schemes. AON made and used infringing copies, including supplying a copy to solicitors in connection with negotiations for the Powerhouse scheme.

Master Price awarded USP a notional royalty of £15,000 and £111,720 for a reduction in USP’s price during the Powerhouse negotiations. He treated the price reduction as caused by AON’s earlier infringements. AON appealed. USP cross-appealed, seeking further damages or an increased royalty if the main award were set aside.

The central issue was whether the commercial loss resulted from use of the copyright-protected text, rather than from use of the trust-based concept which the text expressed.

1. Appeal allowed; cross-appeal allowed in part. Laws LJ, with whom Jacob and Waller LJJ agreed, held that the £111,720 award for USP’s 1 March 2000 price reduction had to be set aside. The resulting total notional royalty was increased from £15,000 to £35,000.

2. The wrong constituted by infringement of copyright in a written work is unauthorised use of its actual text. It is not the appropriation of an idea conveyed by that text. The relevant causal question must therefore be answered by reference to the nature and scope of copyright protection, not merely by applying causation, foreseeability and remoteness at a high level of abstraction.

3. The Powerhouse price reduction was caused, if at all, by the commercial usefulness of a trust-based scheme and the impression that AON could provide one. It was not caused by the particular wording of the Collections Account Agreement. The original template would in any event have required substantial development before practical use. The claimed loss consequently lay outside the scope of loss for which copyright infringement affords compensation.

4. The Master had conflated the protected text with the idea it represented. His findings on intervening conduct, foreseeability and ordinary causation could not establish liability for a loss based on the use of an unprotected idea.

5. The notional royalty did not duplicate the Powerhouse damages. A single infringing copy may be put to separate uses, each capable of attracting damages. The £15,000 royalty had compensated uses connected with Apollo, not AON’s separate 7 March 2000 supply of the document in the Powerhouse matter. A further £20,000 was a fair notional royalty for that infringement. The further claim based on the implementation-fee reduction failed for the same text-versus-idea reason.

• Court of Appeal (Civil Division): Allowed AON’s appeal against the award of £111,720 for the Powerhouse price reduction. Allowed USP’s cross-appeal only to increase the notional royalty by £20,000.

• High Court, Chancery Division (Master Price): On an inquiry as to damages, awarded USP £126,720 plus interest, comprising a £15,000 notional royalty and £111,720 for lost profit on the Powerhouse transaction.

• High Court, Chancery Division (HHJ Weeks QC): Earlier held AON liable for infringement of copyright in the Collections Account Agreement and ordered an inquiry as to damages.