Thursday, 15 November 2012

Director jointly liable for copyright infringement

It is not unknown for directors of companies to be held personally liable for copyright infringements committed by their companies. One can be jointly liable for an infringement if one has acted in concert with another infringer, or other infringers, for a common purpose, but it is rare for directors of a company to be jointly liable with their company. In a recent Scottish case, Naxos Rights International Ltd v Project Management (Borders) Ltd and Salmon [2012] CSOH 158 the Outer House of the Court of Session ruled that the defendant and its sole director were jointly liable for infringing copyright.


Naxos is the largest independent classical music record label in the world, and certainly when it was new it was widely disliked in the industry. It developed its catalogue by using eastern European orchestras and performers which it could hire for much less than it would have to pay British ones. It also had a spot of copyright trouble in the US, in Capitol Records, Inc. v Naxos of America, Inc. 2005 NYSlipOp 02570, arising from its issuing of CDs made from old shellac discs which it turned into digital recordings and cleaned up. But that was then, and this is now: Naxos seems now to be regarded as a respectable player in the classical music industry, with a fantastic repertoire at budget prices.

The defendant company offered classical music through its website, which ominously could be found at the address Naxos sued the company and Dr. Salmon, its sole director and shareholder (don't get your fish mixed up) for unpaid royalties stemming from sale and resale of two Naxos recordings, one Vivaldi's "The Four Seasons" performed by Cappella Istropolitana, which was based in Bratislava, with Takako Nishizaki (violin), conducted by Stephen Gunzenhauser - a classic Naxos mix, I think; and the other the Christmas carol "Joy to the World" performed by the Choir of Worcester Cathedral under Donald Hunt, which fits the Naxos mould less well - indeed, not at all. A total of 14 tracks were in issue, and there was no doubt that the files offered by the defenders were indeed copies of the Naxos recordings. The court found the company liable for infringement with no difficulty, but what about the director, Mr. Salmon? On the principle that there is joint liability where a party "intends and procures and shares a common design that the infringement takes place", the court ruled that he was liable in his own right. He had, along with the company, put together and operated the website through which the infringing tracks were sold, and he could not hide behind the corporate veil. Ironically, of course, Mr. Salmond's defence was based on the principle in Saloman v Saloman and Co. Ltd. [1897] AC 22, but more important was the less ancient (English) precedent  MCA Records v Charly Records Ltd [2002] FSR 26 (CA), in which Chadwick LJ identified the four principles which deal with a director's liability, which I think bear repeating here:

49 First, a director will not be treated as liable with the company as a joint tortfeasor if he does no more than carry out his constitutional role in the governance of the company - that is to say, by voting at board meetings. That, I think, is what policy requires if a proper recognition is to be given to the identity of the company as a separate legal person. Nor, as it seems to me, will it be right to hold a controlling shareholder liable as a joint tortfeasor if he does no more than exercise his power of control through the constitutional organs of the company - for example by voting at general meetings and by exercising the powers to appoint directors. ... I would hesitate to use the word 'never' in this field; but I would accept that, if all that a director is doing is carrying out the duties entrusted to him as such by the company under its constitution, the circumstances in which it would be right to hold him liable as a joint tortfeasor with the company would be rare indeed. ...

50 Second, there is no reason why a person who happens to be a director or controlling shareholder of a company should not be liable with the company as a joint tortfeasor if he is not exercising control through the constitutional organs of the company and the circumstances are such that he would be so liable if he were not a director or controlling shareholder. In other words, if, in relation to the wrongful acts which are the subject of complaint, the liability of the individual as a joint tortfeasor with the company arises from his participation or involvement in ways which go beyond the exercise of constitutional control, then there is no reason why the individual should escape liability because he could have procured those same acts through the exercise of constitutional control. ...

51 Third, the question whether the individual is liable with the company as a joint tortfeasor - at least in the field of intellectual property - is to be determined under principles identified in CBS Songs Ltd v Amstrad Consumer Electronics Plc [1988] AC 1013 and Unilever Plc v Gillette (UK) Limited [1989] RPC 583. In particular, liability as a joint tortfeasor may arise where, in the words of Lord Templeman in CBS Songs v Amstrad at page 1058E to which I have already referred, the individual 'intends and procures and shares a common design that the infringement takes place'.

52 Fourth, whether or not there is a separate tort of procuring an infringement of a statutory right, actionable at common law, an individual who does 'intend, procure and share a common design' that the infringement should take place may be liable as a joint tortfeasor. As Lord Justice Mustill pointed out in Unilever v Gillette, procurement may lead to a common design and so give rise to liability under both heads.


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