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Approved Judgment

Twentieth Century Fox Film Corporation v Harris

Neutral Citation Number: [2013] EWHC 159 (Ch)Case No: HC12F01500

IN THE HIGH COURT OF JUSTICECHANCERY DIVISION

Rolls Building, Royal Courts of Justice,7 Rolls Buildings, Fetter Lane,London, EC4A 1NLDate: 05/02/2013

Before

MR JUSTICE NEWEY

- - - - - - - - - - - - - - - - - - - - -

Between :(1) TWENTIETH CENTURY FOX FILMCORPORATION(2) UNIVERSAL CITY STUDIOS LLC(3) WARNER BROS. ENTERTAINMENT INC.(4) PARAMOUNT PICTURES CORPORATION(5) DISNEY ENTERPRISES, INC.(61) COLUMBIA PICTURES INDUSTRIES, INC.

(the members of the Motion Picture Association of America Inc., on their own behalf and on behalf of all theother companies that are controlled by, controlling of or under common control with such members (together “theGroup Companies”) that are the owners, or exclusivelicensees, of the copyright in films and television programmes)

Claimants- and -(1) DAVID HARRIS(2) KTHXBAI LIMITED(3) THE NZB FOUNDATION(4) PAYPAL (EUROPE) SARL et CIE SCA(5) CHRISTOPHER ELSWORTH(6) MOTORS FOR MOVIES LIMITED

Defendants

- - - - - - - - - - - - - - - - - - - - -

Mr Richard Spearman QC

(instructed by

Wiggin LLP

) for the

ClaimantsMiss Jane Lambert

(instructed by

JWK Solicitors

) for the

First and Second Defendants

Hearing dates: 20 December 2012- - - - - - - - - - - - - - - - - - - - -

JudgmentMr Justice Newey :

1.The question raised by this case is whether a copyright owner has a proprietary claimto money derived from infringement of the copyright.

Approved Judgment

Twentieth Century Fox Film Corporation v Harris

Background

2.The claimants (“the Studios”) are the members of the Motion Picture Association of America Inc. and are the owners or exclusive licensees of the copyright in numerousfilms and television programmes. They sue in a representative capacity, on behalf of themselves and other group companies.3.In 2008 the Studios brought proceedings against a company called Newzbin Limitedin respect of the operation of a website of the same name, the sole purpose of whichwas alleged to be to make available to its users unlawful copies of copyright worksincluding films and television programmes. The case was tried by Kitchin J in early2010. In a judgment dated 29 March 2010 ([2010] EWHC 608 (Ch)), Kitchin Jconcluded that Newzbin Limited was liable to the Studios for infringement of their copyrights. He found that Newzbin Limited had “engaged in a deliberate course of conduct well knowing that the vast majority of the materials in the Movies category of [the] Newzbin [website] are commercial and so likely to be protected by copyrightand that the users of Newzbin who download those materials are infringing thatcopyright” (paragraph 128 of the judgment).4.The Newzbin website was taken down not long after Kitchin J had given judgment, but another website with a similar name came into existence soon afterwards. TheStudios allege that this website, “Newzbin2”, operated in the same way as the original Newzbin site and that it shared that site’s purpose. The Particulars of Claimaccordingly assert:“the Newzbin2 website is the same as the Newzbin website; its purpose is the same; and the use to which it is put by itsmembers is the same”.5.The proceedings before me seek relief against individuals and companies who arealleged to have links to the Newzbin2 website. The first defendant, Mr David Harris,is said to be either the sole operator of the website or one of its operators. The seconddefendant, Kthxbai Limited (“Kthxbai”), of which Mr Harris is apparently the soledirector, is said to have received payments from the Newzbin2 website. The thirddefendant, the NZB Foundation (“NZB”), a Panamanian company for which Mr Harris was formerly a protector and now holds a power of attorney, seems to own the property in which Mr Harris lives. The other defendant of relevance for present purposes, Motors for Movies Limited (“MFM”), of which Mr Harris appears to be theonly director, owns the McLaren car that stands in the drive at Mr Harris’ home.Among others, claims for breach of copyright and unlawful means conspiracy are putforward.6.The Studios have already obtained freezing injunctions against Mr Harris, Kthxbai, NZB and MFM. Mann J granted such an order against Mr Harris, Kthxbai and NZBon 23 November 2012, and the order was continued until trial or further order byWarren J on 3 December. On 20 December, I made an order in similar terms againstMFM.7.The Studios now ask that proprietary injunctions should be granted against Mr Harris,Kthxbai, NZB and MFM. Millett LJ referred to the difference between such aninjunction and the more common freezing (or “Mareva”) injunction in

Ostrich Farming Corporation Ltd v Ketchell

(10 December 1997, unreported). He said:

Approved Judgment

Twentieth Century Fox Film Corporation v Harris

“The courts have always recognised a clear distinction betweenthe ordinary Mareva jurisdiction and proprietary claims. Theordinary Mareva injunction restricts a defendant from dealingwith his own assets. An injunction of the present kind, at leastin part, restrains the defendants from dealing with assets towhich the plaintiff asserts title. It is not designed merely to preserve the defendant's assets so as to be available to meet a judgment; it is designed to protect the plaintiff from having its property expended for the defendant's purposes”.8.To obtain proprietary injunctions, the Studios need to show that there is a seriousquestion to be tried as to whether they have proprietary rights in the assets over whichthey seek injunctive relief. That in turn depends on whether there is at least a seriousargument that a copyright owner has a proprietary claim to the proceeds of aninfringement of copyright.

The parties’ cases in summary

9.Mr Richard Spearman QC, who appeared for the Studios, argued that, where acopyright is infringed, the copyright owner has a proprietary claim to the whole proceeds of the infringement. Those proceeds, Mr Spearman submitted, are held onconstructive trust for the copyright owner, or at least it is seriously arguable that thatis the case. Passages in a variety of authorities point in that direction, so it is said.10.In contrast, Miss Jane Lambert, who appeared for Mr Harris and Kthxbai, disputedthat any proprietary claim exists. According to Miss Lambert, the Studios are arguingfor a remedy that has never been awarded by any Court in respect of any species of intellectual property. The owner of intellectual property whose rights have beeninfringed will often be entitled to an account of profits, but (so Miss Lambertsubmitted) there is no question of the fruits of infringement being subject to a trust.Were it otherwise, Miss Lambert said, there would be a chilling effect on innovationand creativity.

Discussion

11.The remedies for infringement of copyright are dealt with in chapter VI of part I of the Copyright, Designs and Patents Act 1988. Section 96(2) of the Act, which is to befound in this chapter, states that, in an action for infringement of copyright, “all suchrelief by way of damages, injunctions, accounts or otherwise is available to the plaintiff as is available in respect of the infringement of any other property right”.12.Mr Spearman stressed the words “or otherwise”. These, it is true, are capable of encompassing a proprietary claim. On the other hand, section 96 does not specificallyrefer to the existence of such a claim.13.Textbooks and case law also make no direct reference to the availability of proprietary relief for breach of copyright. More specifically, I was not taken to anytextbook or case in which it had been suggested that a copyright owner can advance a proprietary claim to the fruits of a breach of copyright. That is the more striking since,given the potency of proprietary claims, they could be expected to be assertedroutinely in breach of copyright cases were they available.14.Mr Spearman cited authorities to show that a copyright can be the subject of aconstructive trust. That is doubtless correct. As, however, Miss Lambert pointed out,