Independiente Ltd & Ors v Music Trading On-Line (HK) Ltd (t/a CD-WOW) & Ors

A party seeking damages within contempt proceedings must establish that the underlying claim has no tenable ground of defence, unless damages are determined after a fully pleaded trial. In a consumer sale, delivery to the carrier does not necessarily constitute delivery to the buyer. Under section 32(4) of the Sale of Goods Act 1979, delivery occurs when the goods reach the consumer. Accordingly, an overseas internet retailer may issue copies to the public in the United Kingdom when products are delivered to UK consumers, even if the retailer dispatches them from outside the EEA. Evidence of repeated breaches may justify a wider inquiry into damages than the individual transactions relied upon in the contempt application.

The claimants, recording companies and representative bodies, sought punishment for breaches of an undertaking given by Music Trading On-Line (HK) Ltd, trading as CD-WOW, in settlement of earlier copyright proceedings. They also sought damages and an inquiry into damages for copyright infringement, together with summary judgment in related contractual proceedings.

CD-WOW accepted that 33 test purchases involved breaches of the undertaking but disputed deliberate or widespread non-compliance and argued that delivery occurred in Hong Kong. The central issues were whether the evidence established contempt, whether CD-WOW had a tenable defence to primary copyright infringement, and the proper scope of any damages inquiry.

1. CD-WOW was in substantial breach of the court’s undertaking as at 24 October 2006. The claimants proved the relevant breaches beyond reasonable doubt. Following Tankaria v Morgan [2005] EWHC 3282 (Ch), post-application conduct could not itself constitute a charge, but was relevant to the extent of the breaches and to whether the evidence of inadvertence was credible. The pattern of positive test purchases showed that the breaches were widespread and were not merely accidental.

2. The court adopted the approach in Roche Products Ltd & anr v Kent Pharmaceuticals Ltd [2006] EWHC 335 (Ch): consent to the relevant transaction required actual express or implied consent, not deemed consent. Supplies from companies related to copyright owners did not establish implied consent.

3. For damages sought within contempt proceedings, the appropriate threshold was the summary judgment standard identified in Midland Marts v Hobday & anr [1989] 1 WLR 1143: the defendant must have no tenable ground of defence. The evidence satisfied that threshold for primary infringement under sections 16 and 18 of the Copyright, Designs and Patents Act 1988.

4. Section 32(4) of the Sale of Goods Act 1979 reversed the ordinary carrier-delivery rule for consumer sales. CD-WOW therefore delivered the products when they reached UK customers, not when they were handed to the Hong Kong postal authorities. The court distinguished Sabaf SpA v MFI Furniture Centres Ltd [2005] RPC 10, which concerned importation under patent legislation. The reasoning in KK Sony Computer Entertainment & anr v Pacific Game Technology (Holding) Ltd [2006] EWHC 2509 (Ch) supported the conclusion that the acts occurred in the EEA.

5. The claimants were entitled to an inquiry into damages covering breaches disclosed by the inquiry, rather than only the 33 test purchases. The court followed the disclosure practice described in Island Records Ltd v Tring International plc & anr [1995] FSR 560. Consideration of additional damages under section 97(2) of the CDPA and the contempt penalty was stood over pending disclosure.

6. The alternative claim for secondary infringement under sections 22 and 23 of the CDPA was not determined. The related summary judgment application was stood over because it would add little to the relief already available and the parties required an opportunity to reconsider the pleading.