Discussion
Loss of opportunity 53.Mr Muir Wood submits that loss of an opportunity raises a subjective rather than an objective question. FBT’s evidence is thus critical to the assessment. Mr Martin had explained his plans, as described above; as a result of a member of his team purchasing a copy of the Work on vinyl that originated from LTEV FBT discontinued it plans to release the Work on vinyl. The court should consider only the evidence of Mr Martin and Mr Levine on this matter and not the observations of other witnesses who were not involved in that decision. FBT’s decision led to a lost opportunity to trade generally, rather than the loss of a specific benefit based on the actions of a third party. FBT was not relying on a particular third party to buy its goods but, instead, was reliant on the opportunity to market copies of singles and, subsequently, an album, to members of the public generally, using a third party as the conduit for those sales. 54.Adopting for these purposes the approach Mr Muir Wood proposes, I do not accept that LTEV’s infringing activities led to a loss of an opportunity for FBT. FBT found the LTEV copy of the Work on 4 August 2016. I accept that Mr Martin was, as he said, “astounded” and “completely blindsided” by this. Given that, I do not accept the discovery led FBT to abandon its plans, because they appear to have continued as before. Later in August Mr Martin asked Mr Levine to devise a marketing plan indicating that FBT intended to continue with a re-issue. Mr Levine was not at the time aware of the LTEV disc or the reasons for the cancellation. Plans for an issue of vinyl continued at least up to the date when Jeff Bass gave his interview to Rolling Stone. That was likely to have been in the second half of October 2016. FBT’s actions were inconsistent with a party that was not proceeding. 55.There were several unlicensed copies of the Work on the market, of which the FBT version was but one. The project Mr Martin conceived was intended to be, as Mr Levine put it, “super cool and exclusive”, and I do not accept that FBT thought LTEV’s release would affect that. Mr Jampol was clear that in the re-issue market authenticity is critical. A version such as that made by LTEV was clearly marked as coming from a third party and not FBT. 56.Applying the test set out in SDL Hair, FBT has not shown that the tort was a cause of any loss. 57.Similarly, LTEV’s acts of infringement did not cause the loss of an opportunity to make a full-length documentary. 58.I conclude that the claim for damages on the basis for a loss of opportunity in relation to vinyl copies or a documentary does not succeed. Loss of licence fees 59.FBT’s second basis for damage is losses flowing from the licence that FBT would have offered the Defendant for the exploitation of the Work. 60.This can be dealt with shortly on the basis that it was FBT’s evidence that it would not have offered a licence to LTEV because it was not an attractive potential licensee. Notional royalty 61.The third basis on which FBT puts its claim for damages is a reasonable royalty for the actual sales made by the LTEV based on the notion of a willing licensee/willing licensor negotiation. 62.Applying the principles set out in Henderson, Mr Muir Wood submitted that the notional licence must reflect the position between FBT and LTEV and the number of works LTEV produced. The agreement by which Boogie Up granted rights to LTEV was not a relevant comparable agreement. The reasons for that included that the purported licensor in fact had no rights to grant the licence and that was not for the Work alone. 63.Mr Muir Wood noted Mr Velasco’s evidence that the published to dealer price is generally half the retail price. Accordingly, the royalty figure should be based on half the proposed US$50 retail album price that FBT was aiming for (i.e. US$25) rather than the price that LTEV sold the record for (i.e. £7.75). 64.Mr Muir Wood submitted that, although the Boogie Up agreement was not a relevant comparable, the £1.50 fee which LTEV agreed to pay to Boogie Up was relevant. It amounted to a royalty rate of 37.5 per cent which was well over the 26-28per cent which Mr Velasco had suggested as a ‘general rule’. Mr Martin and Mr Jampol had given evidence that a royalty rate of 75-90 per cent would be achievable, with 90per cent seen in the digital licence for the single that was in fact released. 65.Accordingly, a royalty rate should be based on LTEV selling the records at a published to dealer price of ~US$25 and paying a royalty of 75-90 per cent to FBT after deducting manufacturing costs of £2.99 and the MCPS contribution. 66.Mr Colbey submitted that the hypothetical royalty should be applied to the price to the dealer and not the retail price. The LTEV licence from Boogie Up was comparable because even though it turned out not to confer valid rights, LTEV at least thought it did. 67.Mr Colbey said that the 37.5 per cent figure put forward by FBT as flowing from the Boogie Up agreement was a convenient basis for the proportion of the £7,227.50 profits that LTEV had made. Applying that percentage to the profits would give damages on a notional basis of £2,710.31. 68.The principles in Henderson require the court to consider the right infringed and the time over which that took place. In this case the hypothetical negotiation would have been for a licence to make 2,891 copies of the Work in the United Kingdom. 69.The licence which LTEV took from Boogie Up grants a licence for vinyl production of the Work in the UK. The licence left LTEV the determination of a price to dealer. It sets a sum to be paid per disc, which is a convenient way to account. To that extent it is a useful comparable. However, it was granted by a grantor without valid rights. and it did not apply a royalty rate on sales by LTEV. 70.The AWAL digital licence is not a helpful comparable. The revenue split does not take into account the need to manufacture vinyl discs and create profit at each stage in the chain, and the 90/10 split does not give a valid comparable. 71.The £1.50 per record fee in the Boogie Up licence is within the range which Mr Velasco’s gave for rates (26-28 per cent) of price to dealers and those prices (£4.99-£6.99). 72.I prefer Mr Velasco’s evidence on the likely rates and prices in this market over Mr Jampol’s. Mr Velasco has experience in the UK market. Mr Jampol’s comparison with the AWAL digital licence for the title track of the Work was not convincing. 73.The damages should thus be calculated for a licence to make 2,981 copies of the Work. The notional licensor would know that the licensee had experience in market with a number of re-issues of significant artists. The licence would be for the UK. 74.The licence would probably have been for a unit price per record. (If it had been a percentage of the price to dealer that would have been assumed so as to give a similar royalty.) Given the nature and reputation of the licensor (with valid rights) and the that this was a special anniversary disc which might attract higher pricing, the notional licensee would have been prepared to pay more than the £1.50 agreed with Boogie Up and would be able to set a higher price to dealer to maintain profits. The licensor would have in mind a likely retail price for the album of about US$24, which Mr Jampol said was a starting price for albums. 75.Taking all this into account, the hypothetical fee would be £2.50 per disc. 76.This is equivalent to a rate of just over 32 per cent on the price to dealer of £7.75 that LTEV in fact charged Plastic Head. It is a little higher than the rate Mr Velasco indicated, but his figures were based on a lower price to dealers.